australia's next csl?

PRODUCT

VitroGro is a patented synthetic protein formulation that substantially accelerates skin cell growth and migration, the essential elements of tissue repair and wound healing;

There is no comparable technology available for wound healing and therefore a substantial unmet need;

As a synthetic product not derived from human or animal tissue, there is no risk of transmitting animal diseases to humans.

VitroGro has already been classified as a medical device in Canada and Europe, thus avoiding any need for multiple phase human trials there. Approval is based on only one clinical trial. One trial has already been completed successfully in US and Australia. A second trial is under way and is due for completion by June 2011.The US classification as a device is also expected by June 2011.

The TIS Board believes VitroGro offers attractive price/performance to patients and health care providers, at substantial profit to TIS and its future partners.

Only a few micrograms is required for each dressing, meaning relatively small scale production capacity (and cost) to meet market needs.

MARKET

The TIS Board estimates that by the end of 2014, the global market for the treatment of diabetic, venous and pressure ulcers could potentially exceed US$30 billion.

This market is expected to grow by approximately 25% per annum in the future.

Diabetic ulcers alone result in more than 1 million lower limb amputations each year. Clinical trial results from Canada and Australia found that VitroGro can substantially increase the incidence of complete healing and reduce treatment time for diabetic and venous ulcers, as well as being more cost effective than currently available treatments.

There are not many Australian companies that will ever have the profitability and beneficial impact that TIS will if they achieve their plans. They are within 12 months of starting to prevent hundreds of thousands of lower limb amputations!

TIS is also targeting other markets, including the treatment of acute wounds such as burns, surgical incisions and skin graft donor sites. Pharmacy and consumer applications including minor wound dressings, creams and lotions are also targeted.

TRIALS

Clinical trial results from Canada and Australia confirm that VitroGro can substantially increase the incidence of complete healing and reduce treatment time for diabetic and venous ulcers, as well as being more cost effective than currently available treatments.

Another trial is currently under way, and is being conducted at 5 sites; two in Wales and three in Australia. This is expected to be completed by June 2011, with results soon after. The results will be used for applications for approval for sale in the EU as well as the rest of the world. Expectations are for >50% complete healing rate.

PARTNERSHIP AND SALES

TIS is in negotiations with a shortlist of prospective large, international commercial partners for the world wide launch of VitroGro wound healing products for ulcers. These include a number of the largest wound and healthcare companies in the world. (TIS originally planned to complete a partnership deal in the first quarter of this year, but decided to strengthen its bargaining position by not rushing such a deal. Its bargaining position should be strengthened by a recent capital raising, and imminent completion of the final trial and US classification as a medical device.)

TIS is targeting sales launch in Europe (>25% of the world market) within one year, and in the US by 2013 for venous ulcers and 2014 for diabetic and pressure ulcers. The rest of world will be staged from late 2012.

My view is that TIS will conclude a partnership agreement by Sept/Oct 2011, to fit with their sales plan. Prospective partners have a strong incentive to not let this product escape them (based on the market size for ulcers and product effectiveness).

PROFITABILITY

TIS will own the patents and approvals, and will undertake manufacturing. It will use partners for marketing and sales, bringing in milestone payments and royalties.

TIS's total equity is only $19M post capital raising, and approximately 171 million shares on issue. Its market cap is currently just under $90M.

Assuming it can arrange 10% royalties and capture 25% of the December 2014 market (not a stretch considering VitroGro's competitive position), potential revenues just from ulcers are $750 million at a likely very high margin. Assuming 50% NPAT margin, EPS of $2.20 from 2015 relate to the existing 50c share price.

The upside is huge considering the potential for higher market share, market growth rate of 25%, higher margins, and other large markets for the product.

Having invested in and followed TIS for five years now I believe it has one of the best Biotech products to ever originate in Australia. Its product is within one year of launch in Europe and will have major benefits, preventing hundreds of thousands of sufferers of presently incurable ulcers having their limbs amputated.

Above is a brief outline of some of the key characteristics which make TIS so compelling as an investment on a short, medium and long-term outlook. I trust that you will then see enough potential to research it yourself and make your own decision. There is only a short window of opportunity before milestone after milestone occurs over the next 12 months.