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Bullish comnentary on CDY leading into quarterlies:

Cellmid's multi-pronged business model to pay off
Friday, October 02, 2015 by Proactive Investors

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Fast growth in Cellmid’s revenue-generating consumer health division is synergising with progress toward commercialisation of company products in the massive cancer, ischemia and inflammatory disease sectors

Fast growth in Cellmid’s (ASX:CDY) revenue-generating consumer health division is synergising with progress toward commercialisation of company products in the massive cancer, ischemia and inflammatory disease sectors.

Recent traction in bothCellmid’s consumer health and disease treatment divisions has illustrated that the diversity of the company’s portfolio may be a key advantage as a strategy of global customer outreach rolls out.

In consumer health, the latest advances have included the launch of a national advertising and media campaign for the company’s évolis® branded FGF5 inhibitor hair growth products in Australia. FGF5 is a protein associated with hair loss.

The 12-month campaign, which started late last month, is the third component of its three-pillar strategy to maximise market penetration. Cellmid will target men over 25 and women over 35 with promotional materials on major media channels including YouTube, channel 7 and Foxtel.

This followed a successful initiative in July to raise A$4 million with new investors for leveraging hair growth product sales growth.

The évolis® push is accelerating at the same as new research report from Netherlands and New York life sciences research firm Van Leeuwenhoeck highlights Cellmid’s new milestones in developing its intellectual property in disease treatment.

Earlier this year, the company entered into a research and development loan agreement to receive A$1 million for its first-in-class antibodies program. This work includes development of the drug CAB102, which formal tests have demonstrated to be a groundbreaking method of targeting midkine.  Midkine is a protein that is emerging as an important new target for drug development in the treatment of a number of diseases.

Cellmid recently signed a deal with Complutense University in Spain to assess the efficacy of CAB102 in brain cancer studies.


A bullish review

The Van Leeuwenhoeck report, released earlier this month, identified that Cellmid was deeply undervalued at the current share price of $0.03. It instead calculated the company’s current total value at $80 million, or $0.086 per share.

This is based on the current value of évolis® and the further rollout of consumer care business in Australia, Asia and North America.

The report also indicated that Cellmid’s status as a world leader in anti-midkine research made the company a potential partner for a large pharma or biotech company.


Growing opportunities

Cellmid is targeting évolis® sales in the U.S., Brazil, China, Japan and Germany, citing these countries as making up half of the total global hair care market, which was valued at $90 billion in 2014.

Market growth for the anti-aging hair care segment alone is forecast at over 20% between 2014 and 2018.

Hair loss is an underlying issue with half of all men and women experiencing some degree of hair loss by the age of 50. Anti-aging hair care is the fastest growing segment in hair care.

Marketing by the company on the disease treatment end has included the signing of three diagnostic licenses to date. This has included the signing of a license for patents for the use in their bladder cancer diagnostic test to Pacific Edge Biotechnology Limited in 2010.

Pacific Edge has since developed and successfully launched a test in the U.S. for the early diagnosis of reoccurring bladder cancer. This has precipitated $1 million in licensing revenue for Cellmid and a royalty of $68,000 for the first part year of sales.

Van Leeuwenhoeck notes that if Pacific Edge is targeting sales of $100 million in year 5 for the bladder cancer test, this would represent annual revenue of about $4 million for Cellmid under the 4% royalty.


Analysis
Cellmid is the first and still the only company globally with an FGF5 inhibitor hair loss product. FGF5 inhibition represents the only novel science in topical hair loss treatments for 30 years.

The recent capital raising is expected to fund Australian marketing and entry into the biggest global markets, including the U.S. and Europe.

The company has already started the process with the appointment of EAS Advisors, who have a track record in assisting Australian companies transitioning into the U.S. market.

Pharmacy évolis® was carried in 230 active doors in 2014 for revenue of $400,000. By 2016, Pharmacy 2000+ doors by 30 June 2016 could carry the brand and revenue could top $4 million.

The U.S. is still the largest and most sophisticated cosmetic and pharma market and Cellmid’s consumer health products are suitable for multiple channels there such pharmacies, cosmetics retail, online and television shopping.

So, the big picture for Cellmid is how effectively it can capture some of the biggest markets outside of Australia.

The company’s recent clinical study showed that the new évolis® ONE formulation reduces hair loss by 80%, increases growing follicles by 44% and improves hair volume and quality by 135%.

These are very strong numbers and place Cellmid into a product leadership position in this segment globally which will see launch of the product in one of the key overseas markets first.

Cellmid’s revenue generating consumer health division is an undervalued asset, resulting in substantial upside from the current share price.

Added to this, Cellmid holds the largest and most comprehensive portfolio of intellectual property related to midkine and midkine antagonists globally.