Here is the Bells report after the Mastitis announcement - if it...

Here is the Bells report after the Mastitis announcement - if it has already been posted I apologise.

Highlights:

"Bovine Mastitis is a multi-billion dollar opportunity

POH collaborates with USDA’s Agricultural Research Service for Bovine Mastitis treatment
Phosphagenics announced today that it has entered into a research agreement with the U.S. Department of Agriculture’s (USDA’s) chief scientific research agency, Agricultural Research Service (ARS) to develop a treatment for mastitis in dairy cows. Under the agreement, the ARS will evaluate two TPM formulations to treat bovine mastitis a) an earlier formulation developed by POH which was the basis for its 2011 agreement with Mastitis Management Australia (MMA) for Australia and New Zealand markets and b) a new TPM formulation containing a natural form of vitamin D ‘prehormone 25-hydroxyvitamin D’, which scientists at ARS in a study conducted in June 2012, found to be effective in significantly reducing bacterial counts and clinical infection symptoms of mastitis in treated cattle. The trials to evaluate the TPM formulations are expected to start in CY3Q13 and will be conducted and fully funded by the ARS. We believe results from the trials could be released by end 2013/early 2014, potentially placing POH in a position to launch the first TPM/bovine product in CY14, subject to clinical success.

Bovine Mastitis market is a lucrative opportunity for POH
Mastitis is one of the most common and costly diseases affecting dairy cattle in the US. It is estimated that mastitis costs the US dairy industry ~US$1.7-2bn each year or 11% of the total U.S. milk production. Mastitis is a disease which occurs in cows when the mammary gland, or udder in cows becomes inflamed in response to the body’s immune response to a bacteria, which causes injury to the milk producing tissues and ducts. The disease reduces the milk production, changes the composition of the milk, thereby adversely affecting both the quantity and quality of milk. In some instances, it leads to culling/removal of the infected cows from the herd. This leads to reduced income for cattle owners. It is estimated that ~15% of dairy cows in the world at any given time have mastitis. Globally there were ~265m dairy cows in 2010, with US accounting for ~3.4% with 9.1m cows, Australia and New Zealand together accounting for ~2.4% of the market with 6.2m cows. US is the 7th largest holder of dairy cattle in the world. We believe the mastitis treatment market for dairy cattle could prove to be a very lucrative opportunity for POH.

POH’s TPM technology offers a natural treatment option for Mastitis
Currently mastitis is treated with conventional antibiotics like Penicillin. However these are expensive and also not effective in all cases since some bacteria are resistant to antibiotic treatments. There is also growing concern that using antibiotics in livestock contributes to the spread of antibiotic resistance in humans via the food chain. This is leading to pressure by policy makers to reduce use of antibiotics in animals. Antibiotics have also been found to be less effective in cows with severe mastitis infections and in older cows. There are also food security concerns with the use of antibiotics with residues of antibiotics found in the milk from treated cows. Use of antibiotics also brings with it a milk withholding period, which is the minimum time required to lapse between the last use of a drug in an animal and sale of any animal product from the treated animal for human consumption. The farmer loses more income during this period since he cannot sell milk from the treated cow for human consumption. POH with its all-natural vitamin formulation incorporating the TPM technology potentially offers an alternative to antibiotic treatment for mastitis and will potentially avoid all the concerns with antibiotic treatment mentioned earlier. A small dosing trial conducted by POH earlier as proof-of-concept with its earlier TPM formulation for mastitis, demonstrated that POH’s formulation was able to lower the somatic cell count (SCC) in milk by up to 90% in four weeks. Somatic cells -mainly consisting of white blood cells- are an important indicator of the quality of the milk and the health of the cow. Infected cows with mastitis have elevated somatic cell count (SCC).

Investment view – Multiple opportunities emerging
In view of the near term opportunity of POH’s Oxycodone and Oxymorphone products, coupled with the potential revenue streams ensuing from successful commercialization of its cosmeceutical product range, animal health range and the TPM/diclofenac product, we re-iterate our positive outlook on POH and expect it to be re-rated by the market as it moves towards commercializing and licensing of its TPM technology. We value POH at 42 cents base case and 79 cents optimistic case. Our target price of 40 cents sits around the low point of our base case valuation. We see the next value driver and significant milestone for POH as the results from the multi-dosing component of the PK study for its lead TPM/Oxycodone patch early next quarter and the initiation of the multi-dose trial of its new candidate TPM/Oxymorphone patch by mid-2013."