re: wilson $2.03 val'n RecommendationWe maintain our BUY...

re: wilson $2.03 val'n Recommendation
We maintain our BUY recommendation, and increase our valuation from
$1.94 to $2.03 as we become increasingly comfortable with the ability of
management to successfully market Aridol and Bronchitol. We expect
significant news flow over the next 4-8 weeks will re-rate the share price.
This news includes orphan drug status of Bronchitol for the treatment of
cystic fibrosis, positive results in the interim announcement of Phase II
clinical trials of Bronchitol for the treatment of cystic fibrosis, filing of a
marketing approval application with the European authorities for Aridol,
and possibly a distribution agreement with a European player for Aridol.
Security/Capital Details
ASX Code PXS
Market Cap $157 M
Issued Shares 124.2 M
Avg Mth T’over 3.36 M
12 Mth High – Low $1.29 - $0.42
Key Data/Ratios – FY 2005
Cash (M) $39
Cash Burn (M) $12
Tech. Value (M) $118
Interest Cover x
ROE -41.4%
EPS Growth -105.8%
PEG Ratio 0.12 x
NTA / Share $ 0.26
DCF $ 2.03
12 Mth Price Target $ 2.33
Key Points
�� We expect a large amount of positive news flow to lead to a further re-rating
of PXS’s share price in the short term. We expect this news to increase the
credibility of the company’s products, as well as reduce the risk profile facing
the company. The news includes:
o Announcement of interim Phase II clinical trials of Bronchitol for
the treatment of cystic fibrosis. Currently cystic fibrosis is mainly
treated with Pulmozyme, and yet is only effective in 20% of
cases. Bronchitol is expected to be far more effective than
Pulmozyme.
o Imminent filing of a marketing approval application with the
European authorities for Aridol, the asthma diagnostic and
management product PXS has developed. We believe approval
will take 6-9 months, allowing sales to begin in Europe in 2006.
o Possible announcement of a distribution deal with a European
player to distribute Aridol. Such an announcement would be a
powerful endorsement of the likelihood of PXS generating
revenues from 2006.
o Granting of orphan drug status to Bronchitol for the treatment of
cystic fibrosis. This would also be a strong endorsement of the
company’s technology, and possibly open the way for Fast
Track approval by the US FDA resulting in a more rapid path to
market than currently contemplated.
�� The company has already filed a marketing approval application with the
TGA for Aridol, and we therefore expect PXS to begin generating revenues
towards the end of calendar 2005 in Australia. Revenues should begin
ramping up significantly in 2006 once approval is also obtained from
European authorities.
�� We expect rapid uptake for both Aridol and Bronchitol given the
effectiveness of these products and the manner in which investigator trials
have targeted key opinion players in the global respiratory disease market.
As we are more comfortable with our forecasts we have increased our valuation
from $1.94 to $2.03, with significant upside potential.