Respected Wall Street analyst Dr Raghuram Selvaraju has published new research on Cynata: “Raising price target—anticipating further milestones near-term. We believe that Cynata is entering a catalyst-rich period, with the possible option exercise near-term in its arrangement with Fujifilm...”
With 11 reasons to consider Cynata Therapeutics and an expected total share holder return of 331%, NDF sees a price target of $2.00 per share based on a probability-weighted valuation model.
Based on NPV based valuation, we believe that Cynata Therapeutics is substantially undervalued at the current share price of AUD 0.57. Using our valuation model and taking into account the future revenues from its Cymerus™ platform, the company’s current total value should be AUD 150-175 million, or AUD 1.67-1.95 per share
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Cynata Therapeutics Limited
Market Cap (MM): A$37.8
A unique production method. CYP’s CymerusTM technology is the only likely viable production method for generating medicinal mesenchymal stem cells (MSC) for large scale clinical applications. We are not aware of any competing technology under development that is a scalable method of growing MSCs which don’t lose potency as successive generations of cells are produced and do not rely on multiple cell donors. Trial data and third party validation of CYP’s MSCs and the opportunity for them continues to build. Fujifilm has taken an 8.9% equity position in CYP and optioned the global rights for use in graft-versus-host disease (GvHD). apceth Biopharma GmbH has conducted due diligence on the production method and found the characteristics of the cells produced using Cymerus were highly satisfactory. The UK regulator has approved a first trial in humans validating safety and manufacturing procedure. CYPs pre-clinical trials have shown the MSCs produced performed very favourably and independent studies have provided further verification.
Cynata Therapeutics Limited
Market Cap (MM): A$45
Price Target: A$1.00
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Cymerus™ Technology Advances in Asthma; Reiterate Buy
Cynata reports favorable preclinical asthma data. This morning, Cynata Therapeutics Ltd. reported that it had received the final report on a preclinical study assessing the therapeutic potential of its proprietary Cymerus™ mesenchymal stem cells (MSCs) in an animal model of asthma, a chronic inflammatory lung condition afflicting hundreds of millions of people worldwide. The preclinical data indicated that the Cymerus™ MSCs could exert significant benefit on all three crucial components of asthma pathophysiology: airway hyper-responsiveness, inflammation and airway remodeling. In the wake of these preliminary but intriguing findings, we reiterate our Buy rating and 12-month target of A$1.00 per share on Cynata.
Research collaboration in place—large commercial opportunity. Cynata Therapeutics Ltd (CYP.AX), has signed an agreement with the Monash Lung Biology Network, a consortium involving researchers from the Monash Biomedicine Discovery Institute and Department of Pharmacology at Monash University, Melbourne, to conduct a further preclinical study to support the use of Cymerus™ MSCs for the treatment of asthma, a chronic lung condition recognized by the World Health Organization (WHO) as a disease of major public health importance due to its global prevalence. Patients who suffer from chronic asthma manage the disease primarily through the use of steroid drugs, which can have significant side effects and impact on patients' quality of life. The global market for asthma drugs is expected to reach US$25.6 billion by 2024, according to a July 2016 market analytics report from Grand View Research; accordingly, we believe that this challenging disease represents a highly valuable commercial opportunity for Cynata.
Manuscript preparation and further experiments ongoing. In October 2016, Cynata announced intriguing initial data from a proof-of-concept study of Cymerus™ MSCs in an experimental model of asthma, conducted under the supervision of Associate Professor Chrishan Samuel and Dr. Simon Royce at Monash University. Those data showed that Cymerus™ MSCs have a significant effect on improving airway hyper-responsiveness. Cynata recently received the final study report, indicating that Cymerus™ MSCs also consistently reduced markers of airway inflammation and airway remodeling. Cynata management anticipate that a manuscript describing these findings should be submitted to a peer-reviewed journal in the near future. A further study to focus on the effects of Cymerus™ MSCs in combination with and in comparison to corticosteroids is being planned. This has direct clinical relevance, as corticosteroids currently constitute the most widely-used class of drugs currently used to control and/or prevent asthma exacerbations.
Valuation methodology and risks. We have used a discounted cash flow (DCF)-based approach that assigns a value of A$81M to Cynata's technology platform, based only on collaboration-based revenue, with a 10 - 16% royalty rate range, 12% discount rate and 70% likelihood of occurrence. Our peak sales estimate for stem cell products on which Cynata would receive royalties via collaborations is $510M, attainable by 2030. Our valuation translates into a price of A$1.00 per share, based on 90M fully-diluted shares outstanding as of end-2017. Risks include, but are not limited to: (1) delays in clinical trial enrollment; (2) inability of Cynata to consummate further strategic partnerships; and (3) adverse results from clinical studies with Cynata's candidates.
Raghuram Selvaraju, Ph.D.