Alseres Pharmaceuticals Undervalued in Conservative DCF Calculation

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Alseres Phararmaceuticals (OTCPK:ALSE) is undervalued by DCF calculation.

Development of Altropane

It has been a long road for Alseres Phararmaceuticals (AKA Boston Life Sciences; AKA Greenwich Pharmaceuticals) but Altropane appears to be emerging as the only definitive diagnosis available for Parkinson's disease. The dirty secret of neurology is that diagnosis of Parkinson's disease by a skilled neurologist is wrong 30 percent of the time, 50 percent by a general practitioner and 15 percent by a movement disorder specialist, if you're lucky enough to see one of 300 in the nation. Several millions of people are misdiagnosed! Altropane has been winding its way through the system for 12 years and appears to be on its way to approval through initiating a final phase 3 SPA with the FDA in the 4 the quarter of this year, with an NDA to be filed by 2009 and a partnership expected in the first half of 2008.

DCF Altropane

Peak Altropane sales: 250,000,000.00X .90= 225.00/16= $14.00

Five clinical studies testing nearly 500 individuals have been completed using ALTROPANE as a molecular imaging agent. Results from the completed studies-including a Phase III trial designed to confirm the utility of ALTROPANE imaging to differentiate Parkinsonian Syndrome[PS] movement disorder from non-PS movement disorders-met their endpoints with statistical significance.

In March 2006, we concluded the Phase III trial known as "Parkinson's or Essential Tremor" (POET-1), the first of two expected Phase III clinical trials. The goal of POET -1 was to assess whether ALTROPANE imaging is more effective than the subjective methods used by general practitioners (GP) to distinguish between tremors caused by Parkinsonian Syndrome and those associated with other disorders.

In September 2006, we announced the results of the Phase III POET-1 clinical trial. The results demonstrate that the diagnosis from ALTROPANE scans had statistically significant superiority over the diagnosis of GPs on measures of both specificity and sensitivity. Alseres expects to begin the Phase III, POET-2 program in 4Q

Regenerative Therapeutics Program

ALSE has a second compound (Cethrin) preparing for a phase 2b study for spinal cord injury. A phase I/Iia study showed efficacy in treatment of complete SCI injury.

Clinical Development

Phase I/IIa clinical trial of Cethrin

This trial is a multi-center, open-label, dose-escalation study designed to evaluate the safety, tolerability and pharmacokinetics of Cethrin in two types of spinal cord injury patients: those with a complete cervical injury or a complete thoracic injury. Dose levels from 0.3 mg - 6 mg have been tested. The first patient was enrolled in February 2005, and by June 2006, 37 patients from nine centers in the US and Canada had been enrolled. A 9mg dose extension arm was authorized by Health Canada and the USFDA. The trial is ongoing.

Interim Post-treatment Results

To date, Cethrin was found to be safe and well-tolerated with no-adverse events attributable to the drug. The interim efficacy analyses in these groups indicates that Cethrin treated patients experience a frequency of post-treatment conversions from ASIA A to ASIA B or greater which is four times the conversion rate seen with the standard of care reported in the literature (6.7%, Burns, J. Neurotrauma, 2003). When subgroups of patients treated with Cethrin are analyzed, patients with cervical injuries exhibit a more pronounced response compared to patients with thoracic injuries, showing a conversion rate that is six to seven times greater than the full patient group treated with the standard of care reported in the publication above. In patients with cervical injuries, the interim efficacy data also suggest that the response rate observed is dose dependent at the doses treated to date.

These are unprecedented results in SCI.

DAT Blocker or potential blockbuster?

The final platform is the DAT blocker program which is still in preclinical stage development. The DAT blocker program uses technology similar to the Altropane molecule to block the reuptake of dopamine by the neuro thereby mitigating the symptoms of Parkinson's disease. The proof of principal work for the DAT blocker technology has been verified by the gold standard or chemically induced parkinsonism disorder in primates.

This is the model I used to calculate the DCF valuation of ALSE. I used fairly optimistic peak sales projections for Altropane, cethrin SCI platform and DAT blocker.

  • Peak Altropane sales: 250,000,000.00X .90= 225.00
  • Peak Cethrin SCI injury platform sales: 1.4 bil. x .60= 600.0 Total estimated risk adjusted cash flow for all three platforms=975,000,000.0
  • DAT blocker estimated sales: 1.0 bil. x .15 = 150.00

Discounted cash flow calculation

RF+ Beta (equity market risk premium)

4.5 + 1.73(.11)= 0.6853

DCF: 975x.6853= 668,000,000.00

ALSE has a pure discounted cash flow valuation of 668,000,000.00.

Another valuation parameter is the people, places and things calculation. This includes; management team, quality of capital, availability, property rights protection, possible competition, technology platform, ease of entry, pipeline status, collaboration agreements and alliances.

I am going to give ALSE a %51.00 discount on all the intangibles so 00.49 x 668.0= 327.00.

ALSE is worth 327,000,000.00 in a rough DCF calculation. I think that is a low ball number; at 16 million shares out, that's 20 bucks a share DCF figure.

Disclosure: Author has a long position in ALSE