biotech ventracor on life support , page-18

some decent volume buying today compared to past days. cant be ABN AMRO clients.


latest from ABN AMRO..


Ventracor (VCR, $0.073) Sell

VCR has not raised sufficient funds to ensure the business can continue as a going concern. Therefore,we move to a Sell recommendation. Despite a concerted effort over a number of months, VCR has been unable to raise sufficient funds to operate the business as a going concern. In a number of recent releases VCR noted that it required about $10m to fund its operations until June 2009.

As a result, VCR has very few options remaining and could be a forced seller of the business. The cash reserves were
$11.4m as at 31 October 2008. Given the current situation, forecasting revenue and costs has become difficult, if not meaningless. We have removed the funding assumptions from our forecasts and reduced unit sales, particularly post 2012. Unit and profit forecasts are contained overpage.

We move to a Sell recommendation (from Hold). Our DCF valuation for VCR has reduced to $0.02 (from $0.40) as a result of the failure to source the sufficient funding to operate the business. The key assumptions in deriving
our DCF include a WACC of 16.6%, risk-free rate of 6.5% and a terminal growth rate of 2.5%. We have set our target price at the same level as our DCF valuation of $0.02 (was $0.28).

The key upside risk to our target price is that a strategic investor is secured to maintain the momentum of the current clinical program. The downside risk is that no buyer is found for the business and administrators are appointed.