##{"id":58876,"date":"2011-09-21T14:56:59","date_gmt":"2011-09-21T04:56:59","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2011\/09\/21\/phosphagenics-gets-under-the-skin\/"},"modified":"2011-09-21T14:56:59","modified_gmt":"2011-09-21T04:56:59","slug":"phosphagenics-gets-under-the-skin","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2011\/09\/21\/phosphagenics-gets-under-the-skin\/","title":{"rendered":"Phosphagenics Gets Under The Skin"},"content":{"rendered":"

\n\t– Potential entry of new delivery technology in drug markets
\n\t– Phosphagenics<\/span> also has other growth options
\n\t– Bell Potter retains Spec Buy rating<\/strong><\/p>\n

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

\n\tJunior biotech play Phosphagenics<\/span> ((POH<\/span>)) is attempting to commercialise<\/span> a transdermal<\/span> drug delivery technology called TPM<\/span>. TPM<\/span> uses patches and gels to deliver therapeutic doses of medication across the skin.<\/p>\n

\n\tThis is a growing market according to Bell Potter, as Big Pharma<\/span> continue to look for ways to boost the therapeutic power of their drugs and extend their commercial life. <\/p>\n

\n\tWhat sets Phosphagenics<\/span> apart in the view of Bell Potter is the TPM<\/span> technology, which is based on phosphorylated<\/span> Vitamin E, which can transdermally<\/span> deliver doses for drugs that until now have had no such delivery option.<\/p>\n

\n\tThe other positive is the TPM<\/span> patches work efficiently and without skin irritation or inflammation, as evidenced by 13 trials of the technology conducted since early in 2006. This opens up the potential for Phosphagenics<\/span> to develop the world's first patches for the analgesic drug oxycodone<\/span> and for insulin.<\/p>\n

\n\tAs Bell Potter notes these markets offer significant potential, as the US market alone for oxycodone<\/span> is estimated to be worth more than US$3 billion, while the global market for insulin is worth around US$14-$15 billion.<\/p>\n

\n\tAt present Phosphagenics<\/span> is working on preparing for a pivotal trial of TPM<\/span> for oxycodone<\/span> delivery as development of a new, improved patch has been completed. In the December quarter of this year a small pharmacokinetic<\/span> study will be undertaken, before a larger Phase II\/III clinical trial around the middle of next year.<\/p>\n

\n\tAccording to Bell Potter this would put Phosphagenics<\/span> on track for data to be made available early in 2013, allowing for an FDA filing later that year and approval in 2014. This potential for strong news flow over the coming year or so implies scope for a re-rating, so Bell Potter retains a Speculative Buy rating on Phosphagenics<\/span>.<\/p>\n

\n\tWhat supports Bell Potter's positive view is the fact Phosphagenics<\/span> has other products related to its technology. As an example, the group's BodyShaper<\/span> anti-cellulite cream was launched in Myer department stores in May of this year. <\/p>\n

\n\tTotal development costs for BodyShaper<\/span> were only around $100,000, but Bell Potter suggests the market potential is large given around US$3 billion annually is spent on cosmetic products worldwide that are 'firming' or 'anti-cellulite' in nature.<\/p>\n

\n\tAs well, Phosphagenics<\/span> has started selling its Elixia<\/span> brand cosmetics in the Asian market, which complements the launches in Australia through Terry White Chemists and Priceline health and beauty retail chains. This could add as many as 7,000 stores to the retail reach of the Elixia<\/span> range.<\/p>\n

\n\tFurther upside could come from a major cosmetics collaboration Phosphagenics<\/span> has secured with a leading global cosmetic and dermatology company. In Bell Potter's view this offers scope for a major licensing deal to emerge.<\/p>\n

\n\tAlso, previous trials have shown TPM<\/span> can deliver the active ingredient in Voltaren<\/span> Gel faster than the original, which implies another significant market opportunity of as much as US$800 million annually.<\/p>\n

\n\tBell Potter's model for Phosphagenics<\/span> suggests a base case valuation of $0.43, rising to $0.85 using more optimistic assumptions. This factors in the dilutionary<\/span> impact of a potential $15 million capital injection. To take a conservative approach Bell Potter has set its price target at $0.40, which is broadly in line with its base case assumptions.<\/p>\n

\n\tThese assumptions include cosmetics revenue rising from around $4 million in 2011 to $22 million in 2014 and the potential for licensing deals to yield upfront milestones of as much as US$100-$200 million. First year royalty payments for TPM<\/span>\/oxycodone<\/span> are estimated at $16 million in 2014.<\/p>\n

\n\tA price target of $0.40 implies significant upside potential for Phosphagenics<\/span>, as the share price is currently trading at around $0.15. The share price has ranged between $0.088 and $0.185 over the past 12 months.<\/p>\n

\n\tAt current levels Phosphagenics<\/span> has a market capitalisation<\/span> of around $123 million, meaning the company receives little coverage on the broader market. As evidence, the FNArena<\/span> database shows no coverage of Phosphagenics<\/span> by the either brokers within the database.<\/p>\n

\n\tPhosphagenics<\/span> shares today are stronger, trading up 1.5c<\/span> at $0.165 as at 1.40pm<\/span>.<\/p>\n

\n\t
\n\tFind out why FNArena<\/span> subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"