SPL AGM wrap, page-19

Looking at our share price and its volatility on albeit small volumes.

I attribute about 60% of the current price as the market's assessment of the future value of Vivagel BV outside the U.S. This is the known Aspen and Betadine markets for an approved product, because it is cheap to manufacture and is the only known treatment and preventative. for bacterial vaginosis. I think the market is heavily discounting the U.S. BV treatment because of the lack of FDA approval and an unknown distributor.

The FDA decision will open what is the largest market and certainly most lucrative for this product and I think we could easily see a doubling on the basis of FDA approval and appointment of a distributor in that market. I think $3 on this announcement and perhaps more if closely coupled with the Aspen product on pharmacy shelves in ANZ and Betadine product beginning to be available in other markets.

It will then reflect future value of a de-risked and UNIQUE product with a huge market.

Commercial success will see further increases based less on futures more on performance. Oh how the money will roll in. I have said before that Vivagel alone should be worth in excess of $10 within five years.

I do not yet attribute a great part of the share price to the DEP program. I would guess this to be about 40% today. Certainly we get enthusiastic blips from research announcements but they do not last. The DEP program is, in my opinion the greatest source of future value.

As this program gains strength (from measures like AZ DEP products entering the clinic, positive results of in house clinical trials, additional licensees) we should start to see the beginning of a long term growth in the price. Here there are two sorts of revenue, the sort of revenue coming from licensees like Astrazeneca which will follow the progress and eventual market sales for DEP drugs. These will take three to five years. The SPL internal program will I think be much more heavily front end loaded to cover the recovery of the research costs for these drugs. We could see a license/sale of a drug like DEP Docetaxel quite soon on the results of the current Phase 2 clinical trial and this I suggest could exceed $100M.

This is as long as we get good trial results. Bionomics showed how an encouraging series of Phase 2 trials could be disrupted massively by a failure of one which wasn't even the drug's sweet spot.

I do, however, have a concern over the sort of license revenue being predicted for AZD0466which could exceed $2BN (JF at 2018 AGM). AZD0466 would have to yield profits of several times the license amount for it to be commercially viable. Is this possibly the cause of the delay? Because, even if it works the SPL license fee might be a sticking point?

The ability of the DEP dendrimer molecule to combine targeting and treatments and to change factors like solubility is its greatest strength. It is one of the reasons we got all that cash for the Agricultural chemical IP. And that was on a very much smaller research program.

I just wonder why the number of licensees has not increased for several years. With the DEP technology applicable to about 70% of oncology drugs (JF at 2018 AGM) then firms with drugs which black bottle warnings or drugs going out of patent should be beating a path to SPL's door. And they do not seem to be, why?