potential +

I thought I'd throw up some potential figures with TIS, ones plucked out of the sky as we don't yet know what the commercial deals to be done will entail. So I will try to keep the expectation down rather low, enough room for surprises, but jeez they still look mighty good to me. I'm in this stock for the long haul, I want to ride this all the way along as they steal market share and become the gold standard in the treatment of diabetic,venous and pressure ulcers.

My calculations come from this specific piece of information in the latest Annual Report:

"Worldwide, it is estimated that patients suffering diabetic, venous and pressure ulcers spent US$4 billion in 2007 on wound dressings, with a compound annual growth rate of 1115%.(1, 2) World market growth is being driven by an aging population, an increased incidence of diabetes and the increasing affordability of health care in developing countries.(1, 2) The potential for consumer, retail and acute wound care products offers an additional and substantially larger opportunity."

"Up to 70% of all lower limb amputations in the world are related to diabetic ulcers. A lower limb is lost to diabetic ulcers every 30 seconds. This represents more than one million amputations globally each year(5)."

Now while they state here "the potential for consumer, retail and acute wound care products offers an additional and substantially larger opportunity" I will just consentrate on the US$4bn market that we look to enter in the nearer term. Even though this market is said to be growing at 11 - 15% annually I wont factor this in to negate the cheaper price VitroGro may enter the market with, evening this out.

A few calculations that I have done for myself, please note that these are just assumptions and should be treated as such, I am not qualified to do this sort of thing. I am going to low ball the situation and use only 20% of revenue earnt will be returned to TIS as profits. One stock I know of, some here do also, ACL is about to earn 35% of revenue as profit for a generic drug they have partnered with Dr Reddy's, these guys wont even be manufacturing the drug and still earning 35% of revenue as profit so I think using 20% for TIS could be at the lower end of the scale.

I am going to look at the "what if" we get 10%, 20% and 40% of that US$4bn market. Considering that the existing treatment of these ulcers, compression therapy,(Compression therapy is the current best practice treatment for venous ulcers), had not healed the patients for up to 24months and in recent trials TIS (VitroGro) had reduction of ulcer area of 40% in 24 days, one would have to think that penetrating only 20% of the market should be a walk in the park.

So here we go (US$4bn Market as above, I'll keep it in USD):

10% Market Share = US$400m Revenue
20% of Revenue = US$80m profit
Take US$5m cash burn (higher than current) = US$75m
Take 30% tax = US$52.5m
Divide $US52.5m by 140m shares issued (rounded up) = US 37.5 EPS

8 x PE = US$3.00
10 x PE = US$3.75
15 x PE = US$5.62


20% Market Share = US$800m Revenue
20% of Revenue = US$160m profit
Take US$5m cash burn (higher than current) = US$155m
Take 30% tax = US$108.5m
Divide $US108.5m by 140m shares issued (rounded up) = US 77.5 EPS

8 x PE = US$6.20
10 x PE = US$7.75
15 x PE = US$11.62


40% Market Share = US$1.6bn Revenue
20% of Revenue = US$320m profit
Take US$5m cash burn (higher than current) = US$315m
Take 30% tax = US$220.5m
Divide $US220.5m by 140m shares issued (rounded up) = US$1.57 EPS

8 x PE = US$12.56
10 x PE = US$15.70
15 x PE = US$23.55

It's not hard to like what we see. A few bits and pieces from the company reports that I also like for the future of TIS are:



Classification of VitroGro as a Device

VitroGro, used as a topical wound healing treatment, has been classified as a device by Health Canada and also by a UK notified body and an EU regulatory consultant. This means that it is only necessary for VitroGro to
successfully complete a device clinical test regime instead of the Phase trials that apply to pharmaceutical candidates. Only a single, small clinical trial of new formulation VitroGro should be required to gain approval for the sale
of new VitroGro wound healing products. Device classification also allows future sales through a far broader range of outlets and partners than would be possible if VitroGro were classified as a pharmaceutical.



Outlook

The commercially significant progress of the last financial year has positioned Tissue Therapies well to capitalise on the opportunity to transform the lives of millions of people suffering from non-healing skin wounds and to potentially provide shareholders with excellent returns. Negotiations with a short list of commercialisation partners for wound care products are progressing well and over the coming months, the Board anticipates that these negotiations will be complete. While the advanced wound care market is the key short- to medium-term strategic focus of the Company, Tissue
Therapies is proceeding with developing other commercial applications for VitroGro and other technologies, for the treatment of psoriasis, scar prevention, and treatment and potential treatments for various cancers including those of the breast, colon and prostate.

We look forward to providing further updates on these activities and particularly future revenue streams from commercial products using VitroGro and other technologies.



Highlights

1. During the 2009 - 2010 financial year additional exceptional clinical results were released from the Australian clinical study of VitroGro for the treatment of chronic venous ulcers. Further excellent results for the final cohort of patients were released on 13 July 2010.

Some of the exceptional results from this 24-day VitroGro human venous ulcer trial include:
Complete healing of 4 ulcers out of 22.
Average reduction of ulcer area of 40% in 24 days (p < 0.0001).
This study also found that VitroGro is safe and well tolerated in humans.
These results were obtained in patients who had not healed despite expert compression therapy for up to 24 months. (Compression therapy is the current best practice treatment for venous ulcers).
Average age of the patients was 68 years,
Average duration of venous ulcer prior to VitroGro treatment was 13 months.
Average duration of compression therapy (the current gold standard of care) prior to joining the VitroGro trial was 12 months.

These clinical results are in addition to the positive results achieved in the previously announced Canadian human VitroGro trial of 10 patients all of whom were extremely medically challenging and were in the most difficult hard-to-heal category. (Please see ASX: TIS CEO AGM Presentation 27 November 2009.)

2. During January 2010 Tissue Therapies executed a contract with Cardiff University for Professor Keith Harding to conduct a human trial of VitroGro for completion at the end of December 2010.

This clinical trial will be used to produce the final data necessary for the approval of VitroGro for sale in Europe, Britian, Canada, Australia and New Zealand, with subsequent rollout planned for the rest of the world.

3. Lead product VitroGro addresses a significant and growing unmet medical need:
VitroGro has been designed to provide simple, cost effective new treatments for diabetic, venous and pressure ulcers. This is backed by ten years of substantial laboratory and preclinical data, including multiple publications in peer-reviewed, scientific journals.
Current treatments for diabetic, venous and pressure ulcers are costly and are only moderately effective. These include compression dressings, moist wound healing products, vacuum dressings and antimicrobial dressings to
limit infection. Complete healing rates for diabetic, venous and pressure ulcers remain at approximately 25 50% following up to 20 weeks of treatment. (9, 10) Our target is to increase the incidence of complete healing
and substantially reduce healing time with VitroGro.
Worldwide, it is estimated that patients suffering diabetic, venous and pressure ulcers spent USD$4 billion in 2007 on wound dressings, with a compound annual growth rate of 11% 15%. (1, 2) World market growth is
being driven by an aging population, increased incidence of diabetes and increasing affordability of health care in developing countries. (1, 2) Consumer, retail and acute wound care products offer a substantially larger
opportunity.
Up to 70% of all lower limb amputations in the world are related to diabetic ulcers. A lower limb is lost to diabetic ulcers every 30 seconds. This represents more than 1 million amputations globally each year. (5)

4. Commercialisation Strategy
Tissue Therapies:
Is already using the exceptional clinical trial data in formal negotiations with identified potential healthcare partners.
Has successfully completed commercial scale GMP manufacturing.
Is proceeding with the final clinical trial necessary for approval for sale in most territorities outside the United States.
Is proceeding with development of other commercial applications for VitroGro and other technologies for the treatment of psoriasis, scar prevention and treatment and potential treatments for various cancers including those of the breast, colon and prostate.