VRAL Research 2.0 Update
Here are the highlights from the first page:
It has been a long and winding road for Viral Genetics, as a major lawsuit threatened the company’s very existence. A recent litigation settlement has cleared the way for the company to move back into clinical testing on its core drug compounds after a five year hiatus. Additionally, a new dynamic has been introduced into the value-creation equation for Viral Genetics with the launch of its majority owned subsidiary, VG Energy.
Viral Genetics is developing drugs based on its patented and proprietary Targeted Peptide and Metabolic Disruption technologies aimed at large end markets, including HIV/AIDs, drug-resistant cancer and Lyme disease. The year ahead promises to be a busy one, with Viral planning on beginning Phase 1 testing of its APi1177 drug for HIV/AIDS and VGV-L drug for Lyme. In addition, the company expects to begin an investigators study on its MDT drug-resistant cancer drug at Scott & White Hospital in Temple, Texas.
Over the past year, we’ve seen growing interest among established companies and investors in companies such as Solazyme (SZYM) who are able to profitably produce oils from algae for use as fuels, chemicals, nutritionals and skin and personal care products. VG Energy’s Metabolic Disruption technology has demonstrated impressive results in the lab with an improvement in oil yields in algae of at least 300%. Preliminary analysis shows that its additives offer the ability to knock down the cost of algal oil production by almost a factor of ten as a result of productivity improvements. This cost improvement is on a par with what Solazyme has done over the past several years with its unique “indirect photosynthesis” technology process.
VG Energy is working with alternative energy producer BioProcess Algae to verify lab results on a large scale for the development of commercial production of its potential biofuel process in closed bioreactors. Initial test results are favorable and further testing is planned this summer. VG Energy is aggressively exploring commercial licensing opportunities of its technology with established and emerging energy, chemicals, and food companies.
Our base case financial model of Viral Genetics, excluding VG Energy, values the shares at $0.50 in 2012. The base case scenario assumes Viral is successful in raising the $2 to $3 million in funding this year necessary for clinical testing of its core drugs and VG Energy products. We have also developed a base case valuation model for VG Energy, which we expect to become a larger and more important source of value creation for Viral Genetics in the months ahead.Our financial analysis of VG Energy shows significant value-creating potential given the large target markets that collectively exceed over one trillion dollars. Our base case estimate of the value of VG Energy boosts the intrinsic value of Viral Genetics in 2012 to $1.30/share.
