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Acuvax Receives Speculative Buy From RM Capital

Acuvax Limited (ASX:ACU) is in the process of acquiring Biolife Science Qld Ltd, (and soon to be renamed Biolife Science Limited), and recently received a Speculative Buy from Perth-brokers RM Capital.

Acuvax currently has a prospectus offering of 25 million shares at $0.20 to raise up to $5 million, which can be ACCESSED HERE.

The following is an extract from the RM Capital report.

New Start:

Acuvax has recently announced a decision to acquire 100% of the issued capital of Biolife Science Limited. Biolife is developing Her-VAXX, an immunotherapy for Her2 positive cancers, including gastric cancer and breast cancer.

In our view, Her-VAXX represents a great investment as it combines two modern therapeutic approaches that are currently generating a lot of interest within the medical community and large pharma players. Her-VAXX is a targeted immunotherapy. Targeted indicates that the vaccine is designed for a subset of cancer patients whose tumors express a unique biomedical marker (e.g. Her2), allowing precise attack of tumor cells.

Immunotherapy indicates a treatment that uses patients' own immune system and thus could have a more robust and sustained clinical benefit (e.g. when Her-VAXX introduced to the body it induces a polyclonal antibody response similar to that of Herceptin, the leading cancer drug).

We believe that Her-VAXX will be among the most visible new cancer therapies in development throughout the next couple years attracting significant interest from large pharma companies (i.e. potential licensing deals) and new investors.

Why Buy? Post-money Valuation is Well Below Comps:

Biolife acquisition will involve 200:1 consolidation of the issued shares reducing company's issued capital to approx. 11.5M shares and subsequent issue of 20M shares to complete the acquisition.

This brings post-money value of the company to approx. A$6.3M (not including 20M of performance shares and 25M shares used for capital raising). This value is well below peer group companies that have products in a similar stage of clinical development (Phase I-II).

Why Buy Now? Multiple Value-Creating Milestones in 2013 and 2014:

Phase I trial of Her-VAXX in breast cancer patients was successfully completed demonstrating that the vaccine is safe and could offer a significant clinical benefit to patients with Her2 positive cancers.

A Phase II trial in Her2 positive gastric cancer patients (n=68) is currently in preparation and is expected to enrol first patient in 4Q 2013. Updates on Phase II development and news on TGA and IND applications will support the momentum in share price and could offer upside to investors.

Additionally, with post-money value well below peer group we see limited downside risk in case there is a delay in clinical development.

What's the Company Worth? Our Range is A$22.7M - A$30.4M:

Using our revenue model, industry average cost assumptions and probability adjusted 10-year DCF method (15% discounting) we have valued the company at different stages of clinical development during the next 10 years (see table below).

While Biolife is still at an early stage of clinical development (Phase I completed), we believe this method reflects the long term potential of the company for value investors. Using this methodology we estimate the current value of the company at A$30.4M.

The enterprise value could grow to A$610.8M in Y2022 (we estimate Y2022 as the first full year of commercial sales of Her-VAXX) if the company is successful in clinical development of the vaccine. Alternatively, we value Biolife at A$22.7M using comparative company analysis.


The prospectus offering of 25 million shares at $0.20 to raise up to $5 million can be ACCESSED HERE.

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