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Allied Healthcare Rated ‘Outperform' By RBS Morgans As Big Milestone Looms

Allied Healthcare Group's (ASX: AHZ) recent news flow merits a continued "outperform" rating and an increased price target of $0.09, more than 80% higher than its currently traded share price of $0.048, from RBS Morgans.

The Brisbane-based stockbroker said the increase from its previous target of $0.06 was due to Coridon (Allied 46.58%) receiving approval to start the Phase 1 trial for its Herpes Simplex Virus vaccine.

It added that Allied had done well with the clear and timely communication of its milestones.

The following is an extract from the report:

We have made no changes to our forecasts for FY13, FY14 or FY15. However, we have introduced a contribution from Coridon (owned 46.8%) from FY16 given that the Phase 1 trial for Herpes Simplex
Virus (HSV-2) vaccine has received approval to start.

Our recommendation remains outperform for investors with a higher risk profile.

CardioCel - next big thing

European approval for AHZ's cardiovascular patch CardioCel® is expected next quarter. In our modelling we currently assume a probability of success of 80%.

Assuming approval is achieved this increases our valuation by A$0.01.

We are confident that the application will be approved given the strong clinical support received so far, and note the product has already been authorised for early access via the Authorised Prescriber Scheme in Australia.

Notably, data has shown no calcification of the tissue, a major issue with existing tissue products that in many cases results in the need for additional surgeries.

Herpes trial to start

AHZ Herpes Simplex Virus (HSV-2) vaccine has received ethical approval to commence a Phase I, dose ranging, clinical trial.

The Phase I study will vaccinate twenty healthy volunteers via intradermal injection into the forearms with a goal to examine the safety of the vaccine, as well as detect if an antibody and T-cell response can be generated by people.

Results are due 1QCY14 and we assume that a Phase 2 proof of concept study will be conducted before licensing.

Investment is compelling

AHZ is in a sound cash position with A$3.8m at 31 March and grant funding of A$1.9m over 18 months.

The components of our valuation of A$0.09 are: medical devices A$0.04; CardioCel A$0.02 and Coridon A$0.03.

The key risk is a delay in European approval for CardioCel.

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