six reasons by baillieu holst

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Attached is the latest healthcare research from the team at Baillieu Holst in Australia, the country which has some of the most undervalued healthcare and biotech stocks on the planet.



Admedus (ASX: AHZ) has CE Mark and FDA approval for its first product, a cardiovascular tissue patch called CardioCel. The product was created using the company’s ADAPT technology, which allows animal tissue to be prepared for human use without calcification issues.



Beyond tissue repair, Admedus is seeking to be a player in the emerging field of DNA vaccines. It is the largest shareholder in Admedus Vaccines (formerly Coridon), which is developing DNA vaccine technology from the lab of Professor Ian Frazer at the University of Queensland



For investors who know Inovio (NYSE MKT: INO), market cap US$872m, our report is a must-read

Six reasons to buy Admedus
? Admedus has something new in soft tissue repair. Traditionally animal tissue used for
soft tissue repair in humans has quickly undergone calcium deposition, thereby limiting the
usefulness of the tissue as it hardens and loses its flexibility. Admedus’ ADAPT technology
allows animal tissue to be prepared with about the same level of calcification as regular
human tissue. The first product from this technology, CardioCel for the repair and
reconstruction of heart defects, gained CE Mark approval in August 2013 and 510(k)
approval from the FDA in February 2014. This followed on from favourable long-term (ie
multi-year) clinical data on the acceptability, functionality and durability of ADAPT patches.
Admedus has launched the product in the paediatric congenital heart disease market and
will widen it out to serve the adult market for coronary heart disease.
? There are many commercial opportunities coming for ADAPT. Perhaps ~US$1bn pa
gets spent in the US on tissue repair solutions for hernia and pelvic floor repair alone, and
ADAPT represents one of the few potential biological alternatives to existing products.
Admedus will seek to target these markets as well as the orthopaedic market down the
track. The company believes that ADAPT makes an ideal delivery system for therapeutic
stem cells, an area of medicine expected to loom large over the next decade.
? Admedus is a player in DNA vaccines. Various companies and academic groups around
the world have been working on DNA vaccines in both therapeutic and prophylactic
indications for over two decades. There have been a number of technical hurdles that have
prevented a DNA vaccine from proving successful in late stage clinical trials. However,
many of these hurdles have been overcome, raising the prospect of approval for a DNA
vaccine sometime in the next ten years. It is reasonable to expect the stock of Admedus, as
a committed DNA vaccine player, to benefit from progress by the leading groups in the field,
including listed companies, Inovio (NYSE: INO, market capitalisation US$872m) and Vical
(Nasdaq: VICL, US$117m)1. While its work in the field is still at an early stage, Admedus
Vaccines (formerly Coridon), ~57%-owned by Admedus, has generated encouraging data.
? Admedus is backing Ian Frazer. Professor Ian Frazer, who was Australian of the Year in
2006, is the world-famous inventor of Gardasil, a prophylactic vaccine for the Human
Papilloma Virus (HPV), which is the causative agent in cervical cancer. Merck & Co. gained
FDA approval for this Australian invention in mid-2006. The Frazer lab’s track record of
success suggests the potential for favourable outcomes from its work on DNA vaccines.
? Admedus Vaccines has generated impressive pre-clinical and clinical results.
Admedus Vaccines has created a DNA vaccine for HSV-2 infection with both prophylactic
and therapeutic potential in genital herpes. There is also a therapeutic vaccine in the works,
to treat HPV infection. In October 2011, Admedus reported that the HSV-2 vaccine had
generated a remarkable 90-100% survival rate for rabbits in a challenge study at 500 times
the LD50 (the amount of virus that would kill half the rabbits). Importantly, this study
showed that both arms of the murine immune system were being activated. The
commercial value of the vaccine lies in the fact that there is currently no genital herpes
vaccine, infection is life-long, and at least 25 million Americans aged 14-49 are infected2.
Admedus Vaccines reported interim data from an HSV-2 Phase I clinical study in early
2014, which showed the vaccine’s ability to generate a T cell response in healthy
volunteers. Full data is expected later in 2014. Positive preclinical results for the HPV
vaccine were reported in late 2012.
? Admedus is undervalued on our numbers. We value Admedus at $0.25 per share base
case and $0.56 per share optimistic case. Our target price of $0.25 sits in the low point of
our valuation range. We expect the market to re-rate Admedus as