##{"id":58776,"date":"2011-09-01T13:12:04","date_gmt":"2011-09-01T03:12:04","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2011\/09\/01\/reva-upside-opportunity\/"},"modified":"2011-09-01T13:12:04","modified_gmt":"2011-09-01T03:12:04","slug":"reva-upside-opportunity","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2011\/09\/01\/reva-upside-opportunity\/","title":{"rendered":"REVA Upside Opportunity"},"content":{"rendered":"

\n\t– Timeline slips for REVA's<\/span> bioresorbable<\/span> stent trial
\n\t– Any associated share price weakness a buying opportunity says Bell Potter
\n\t– Broker retains a Spec Buy rating on REVA<\/span><\/strong><\/p>\n

\n\tBy Chris Shaw<\/p>\n

\n\tWhen listing last year, biotech play REVA<\/span> Medical ((RVA<\/span>) raised $85 million but as Bell Potter notes there has been little in the way of news from the company since that time apart from a slipping of the timeline for a pilot trial of the company's bioresorbable<\/span> stents, called ReZolve<\/span>.<\/p>\n

\n\tA stent is an artificial tube inserted to prevent or counteract a disease-induced, localised<\/span> flow constriction. Most common use is in coronary arteries, Bell Potter noting the stent market at present is worth US$4-$5 billion annually and is currently dominated by the likes of Boston Scientific and Medtronic.<\/p>\n

\n\tBoth companies have given financial support to REVA<\/span> as it has developed its stent technology, which Bell Potter notes keeps the door open to a possible acquisition if early clinical trials prove to be successful.<\/p>\n

\n\tWhat also makes REVA<\/span> attractive to the likes of Boston Scientific and Medtronic is both companies need a bioresorbable<\/span> stent alternative to compete more effectively against Abbott Laboratories in that part of the stent market.<\/p>\n

\n\tBoston Scientific appears well placed in this regard, having an option over worldwide distribution in place with REVA<\/span>.<\/p>\n

\n\tAn initial product validation clinical study of 50 subjects should commence later this year, while enrolment<\/span> of a further 350 patients in Europe and Australia will be undertaken in 2012. While the timeline for REVA's<\/span> trial has slipped, Bell Potter notes management still expects to complete its pivotal trials for CE Marking late in 2013. <\/p>\n

\n\tIn Bell Potter's view, any share price slippage as a result of a fall in investor sentiment due to slippage in the trial timeline represents a good buying opportunity, as the potential upside from ReZolve<\/span> remains significant.<\/p>\n

\n\tThis is because the product has been shown to work though a three year pilot clinical study and because, as Bell Potter notes, the ReZolve<\/span> stent could ultimately eliminate the use of anti-clotting drugs associated with current metal stents.<\/p>\n

\n\tAs well, ReZolve<\/span> has the potential to transform the stent market given it has been engineered to dissolve at the correct pace to allow for successful artery remodelling<\/span>. The other factor in support of ReZolve<\/span> according to bell Potter is the stent can be deployed without damage to the stent itself.<\/p>\n

\n\tTo value REVA<\/span> Bell Potter has factored in an additional equity raising of $85 million to partly fund the FDA trial of ReZolve<\/span>, the result being a base case valuation of $1.66 and an optimistic case of $2.35. The valuation process assumes REVA<\/span> brings ReZolve<\/span> to market on its own and factors in sales in the US and Europe only.<\/p>\n

\n\tBell Potter's price target for REVA<\/span> has been set at $2.10, roughly the mid-point of its two valuations. This sees Bell Potter retain a Speculative Buy rating on the stock. Much of the market is yet to pick up on the REVA<\/span> Medical story, as the FNArena<\/span> database shows no other coverage on the stock.<\/p>\n

\n\tShares in REVA<\/span> today are stronger and as at 1.00pm<\/span> the stock was up 9c<\/span> or 13% at $0.78. This compares to a trading range over the past year of $0.57 to $1.38.<\/p>\n

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