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Cellmid: Independent Report Values Advangen At $5.37M

Cellmid (ASX: CDY) has received an independent report valuing subsidiary Advangen Inc., Japan at an equity value of $5.37 million, validating its May 2013 acquisition of the hair growth technology for $2.89 million.

Further value upside is available with the valuation report by independent corporate advisory firm SLM Corporate estimating a high case equity value of $8.76 million.

Cellmid had acquired 100% of Advangen shares for $1.2 million in cash and the issue of 55,737,624 Cellmid shares at a nominal issue price of $0.05 each to 12 Advangen Inc. shareholders for total fair value of $2.89 million.

Advangen owned the FGF-5 inhibitor hair growth technology that is used in Cellmid's évolis® hair growth product range.


SLM calculated an Enterprise Value for Advangen in the Base Case of $4.86 million. It also holds a cash balance of $515,130, bringing the equity value up to $5.37 million.

In valuing Advangen on an earnings multiple basis, it had calculated a 5-year earnings average based on Cellmid's financial projections to account for the initial ramp up period.

A private company discount of 50% was applied to the listed peers' trading multiples to reflect Advangen's lack of liquidity and scale as well as its earlier stage of development and greater risk relative to the global peers.


Advangen was originally set up to commercialise the FGF-5 inhibitor hair growth technology developed at Japan's National Institute of Advanced Industrial Science & Technology.

In 2007, Advangen commenced sales of its first product in Japan after developing a range of hair loss prevention lotions and shampoos based on the company's FGF-5 inhibition technology.

Advangen has also been active in the research and development of additional hair growth products. Advangen has collaborations with research institutes and has been generating new intellectual property with the view to filing new patents.

It has the exclusive right to manufacture, market and distribute its products in Japan, China, Taiwan, South Korea, Singapore and Malaysia.

During 2012, Advangen secured Chinese import permits for its Jo-Ju® and Lexilis® branded lotions and shampoos. The Chinese market is anticipated to be the most significant for Advangen products

Hair Regrowth Market

SLM Corporate estimated that the number of hair loss sufferers, world-wide, seeking professional treatment more than doubled between 2004 and 2008 from 361,077 to 811,363. With an ageing population, especially in Australia, this trend is likely to continue.

In the US, an estimated US$1.8 billion is reportedly spent on invasive hair transplant procedures and another US$1.2 billion on topical treatments. The Washington Post reports Americans spend more than US$3.5 billion a year in attempting to treat their hair loss.

Since the first sales of Advangen's products based on their FGF-5 inhibition technology, more than 700,000 bottles of the product have been sold in the established Japanese hair growth market alone.

China is expected to be the most significant market for Advangen and the securing of import permits in 2012 will enable Advangen to penetrate this market though no sales have been made to date.


The report values Advangen at $5.37 million, which is close to double the $2.89 million Cellmid paid in cash and scrip in May this year.

This points to Advangen being an attractive investment for Cellmid.

There is the potential for further value to be realised if Advangen penetrates the hair regrowth market in China, and other Asian countries.

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