This was back in 2016, H C Wainright.
CytoDyn, Inc.
CYDY: Price: $0.67; Market Cap (M): $93
Rating: Buy; Price Target: $1.60
Raghuram Selvaraju, Ph.D.
Yi Chen, Ph.D., CFA
Potential Best-in-Class Anti-HIV Antibody Candidate; Initiating at Buy with $1.60 Price Target
Click here for complete report and disclosures
https://hcwco.bluematrix.com/sellside/EmailDo...ource=mail
Next-generation anti-retroviral antibody-based therapy for HIV. We are initiating coverage on CytoDyn, Inc., an emerging biotechnology company developing a novel antibody-based drug for the treatment of human immunodeficiency virus (HIV) infection, at Buy with a price target of $1.60 per share. CytoDyn's lead candidate, PRO 140, is a monoclonal antibody targeting the CCR5 chemokine receptor. Through "masking" the receptor on the surfaces of T cells in the bodies of patients, PRO 140 interferes with HIV's ability to gain entry into the T cells of the patients' immune systems. In addition to significant potency seen in Phase 2 testing, PRO 140 also has a benign safety profile, making it a solid addition to existing anti-retroviral drug regimens that are known to be associated with severe and chronic side effects. Finally, PRO 140 can be dosed relatively conveniently for an antibody drug, using subcutaneous injection rather than via infusion. Accordingly, we believe that positive data from pivotal ongoing studies could position PRO 140 as a best-in-class anti-HIV agent that could be broadly utilized alongside existing drug cocktails and that may effectively combat the rising problem of viral resistance to existing regimens.
Lengthy development timeline belies market potential. We believe that the lengthy period of time that PRO 140 has been in development does not reflect its effectiveness in clinical trials. The original developer, Progenics Pharmaceuticals, licensed PRO 140 to CytoDyn for only $3.5M upfront and $7.5M in total subsequent milestones. In our view, the current market cap of only $100M substantially underrates PRO 140's potential in HIV infection alone, where we believe the drug could generate peak annual sales of $2.4B by 2027, assuming launch in 2018, solely modeling revenues in the U.S. We estimate that PRO 140 should be worth roughly $300M based on a 60% probability to launch and a royalty range of 24 - 32% from a potential partner. Our valuation assessment also does not include the potential utilization of PRO 140 in other disease areas, including prophylaxis of acute graft-vs.-host disease (GvHD).
Rolling BLA submission could facilitate market entry in 2018. In our view, CytoDyn could complete a currently-ongoing Phase 3 trial of PRO 140 next year, with positive data allowing for a regulatory submission in early 2018. The initial label would be as combination therapy; PRO 140 has Fast Track designation. CytoDyn could also report long-term data from a maintenance monotherapy pivotal trial of PRO 140 in late 2018, with the ability under a rolling BLA submission to file for approval of the drug as a monotherapy regimen before the end of 2018.
Valuation methodology. We have utilized a discounted cash flow-based approach to value CytoDyn shares. Our assessment yields a probability-adjusted net present value (NPV) of $300M for PRO 140 in the HIV indication alone, based on peak royalty-based revenue of $760M in 2029, a 60% likelihood of success, a 15% discount rate and 2% terminal growth rate. Assuming roughly 193M shares outstanding as of end-November 2017, which factors in the exercise of 20M warrants and the sale of 10M shares in fiscal 3Q17, we derive a price target of $1.60 per share.
Raghuram Selvaraju, Ph.D.
212-916-3966
rselvaraju@rodm.com
Yi Chen, Ph.D., CFA
212-916-3971
ychen@rodm.com
CytoDyn, Inc.
CYDY: Price: $0.67; Market Cap (M): $93
Rating: Buy; Price Target: $1.60
Raghuram Selvaraju, Ph.D.
Yi Chen, Ph.D., CFA
Potential Best-in-Class Anti-HIV Antibody Candidate; Initiating at Buy with $1.60 Price Target
Click here for complete report and disclosures
https://hcwco.bluematrix.com/sellside/EmailDo...ource=mail
Next-generation anti-retroviral antibody-based therapy for HIV. We are initiating coverage on CytoDyn, Inc., an emerging biotechnology company developing a novel antibody-based drug for the treatment of human immunodeficiency virus (HIV) infection, at Buy with a price target of $1.60 per share. CytoDyn's lead candidate, PRO 140, is a monoclonal antibody targeting the CCR5 chemokine receptor. Through "masking" the receptor on the surfaces of T cells in the bodies of patients, PRO 140 interferes with HIV's ability to gain entry into the T cells of the patients' immune systems. In addition to significant potency seen in Phase 2 testing, PRO 140 also has a benign safety profile, making it a solid addition to existing anti-retroviral drug regimens that are known to be associated with severe and chronic side effects. Finally, PRO 140 can be dosed relatively conveniently for an antibody drug, using subcutaneous injection rather than via infusion. Accordingly, we believe that positive data from pivotal ongoing studies could position PRO 140 as a best-in-class anti-HIV agent that could be broadly utilized alongside existing drug cocktails and that may effectively combat the rising problem of viral resistance to existing regimens.
Lengthy development timeline belies market potential. We believe that the lengthy period of time that PRO 140 has been in development does not reflect its effectiveness in clinical trials. The original developer, Progenics Pharmaceuticals, licensed PRO 140 to CytoDyn for only $3.5M upfront and $7.5M in total subsequent milestones. In our view, the current market cap of only $100M substantially underrates PRO 140's potential in HIV infection alone, where we believe the drug could generate peak annual sales of $2.4B by 2027, assuming launch in 2018, solely modeling revenues in the U.S. We estimate that PRO 140 should be worth roughly $300M based on a 60% probability to launch and a royalty range of 24 - 32% from a potential partner. Our valuation assessment also does not include the potential utilization of PRO 140 in other disease areas, including prophylaxis of acute graft-vs.-host disease (GvHD).
Rolling BLA submission could facilitate market entry in 2018. In our view, CytoDyn could complete a currently-ongoing Phase 3 trial of PRO 140 next year, with positive data allowing for a regulatory submission in early 2018. The initial label would be as combination therapy; PRO 140 has Fast Track designation. CytoDyn could also report long-term data from a maintenance monotherapy pivotal trial of PRO 140 in late 2018, with the ability under a rolling BLA submission to file for approval of the drug as a monotherapy regimen before the end of 2018.
Valuation methodology. We have utilized a discounted cash flow-based approach to value CytoDyn shares. Our assessment yields a probability-adjusted net present value (NPV) of $300M for PRO 140 in the HIV indication alone, based on peak royalty-based revenue of $760M in 2029, a 60% likelihood of success, a 15% discount rate and 2% terminal growth rate. Assuming roughly 193M shares outstanding as of end-November 2017, which factors in the exercise of 20M warrants and the sale of 10M shares in fiscal 3Q17, we derive a price target of $1.60 per share.
Raghuram Selvaraju, Ph.D.
212-916-3966
rselvaraju@rodm.com
Yi Chen, Ph.D., CFA
212-916-3971
ychen@rodm.com
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