sce valuation for aod9604

SCE has today released an updated Buy Recomendation for POH. Analyst Stuart Roberts from SCE has maintained his Value of POH base case at 41 cents and 81 cents optimistic. He says in his report that AOD9604 represents a near-term payoff for POH.

"When we initiated coverage on Phosphagenics on 12 May 2010 we took only cursory notice of the company?s AOD9604 project, which it has been working on since
August 2009. Phosphagenics is exploring the potential to reprofile AOD9604, a failed anti-obesity drug, as an over-the-counter cosmeceutical that can reduce cellulite and subcutaneous fat. The company hopes to bring this product to the market early in 2011. In this note we look at the commercial potential of the AOD9604 project, which suggests further upside in the POH share price beyond
our current 41 cents base case / 81 cents optimistic case probability-weighted DCF valuation."

"Phosphagenics having disclosed no data on its work AOD9604, we chose not to include any value for AOD9604 in our overall valuation of the stock at this stage. However, a tentative DCF indicates some upside in the order of 8 to 21 cents per share. ..... As the near-term nature of TPM
becomes apparent, helped by the emergence of further clinical and pre-clinical data on various products including AOD9604, we expect POH to be re-rated
by the market."

His specirfic comments on AOD9604 are very encouraging:

"Phosphagenics (POH) has been working on adapting its TPM transdermal drug delivery technology to delivery of AOD9604, an anti-fat peptide. We think success in this effort can unlock an OTC market worth hundreds of millions pa by early 2012, with considerable upside for Phosphagenics given the lack of clinically validated competition. "

And this:
" Over the last six years POH has demonstrated clinically that its TPM technology, based on phosphorylated Vitamin E, can transdermally deliver therapeutic doses of drugs that until now have had no transdermal option. While the major focus of POH is on using this technology to develop the world?s first patch for oxycodone, there is also potential in a project to develop an OTC anti-fat cream using AOD9604, a failed anti-obesity drug.

While AOD9604 performed poorly in the clinic as an anti-obesity therapeutic, POH believes that oral delivery of the drug was the key issue rather than the drug?s efficacy. Consequently the company has licensed compound and is seeking to develop it as topical anti-fat cream delivered using TPM.


"With overweight and obesity representing a rising global epidemic, there is strong demand for all sorts of products, prescription and over-the-counter,that can combat excess fat tissue. We think that POH?s anti-fat cream can be taken to market in early 2012 and can tap into a global market worth potentially hundreds of millions of dollars. We expect the development costs
to be only $100,000 and the regulatory issues to be minimal.

KC