OncoSil Medical (ASX:OSL) has been the recipient of research coverage from broker Wilson HTM. The price target is more than double the company's last trading price of $0.15.
The broker said: We initiate coverage on OncoSil Medical with a Speculative Buy rating and a risked price target of 35 cps (un-risked 100 cps).
The following is an extract from the report.
A great time to be developing new brachytherapy devices
We initiate coverage on OncoSil Medical with a SPECULATIVE BUY rating and a risked price target of 35 cps (un-risked 100 cps). A new initiative at the US Food and Drug Administration could potentially ease the path to initial approvals for medical devices in areas as desperate as pancreatic cancer. Oncosil’s medical device fits the profile: a radioactive implant designed to ablate aggressive, primary pancreatic tumours, in a single procedure with good safety.
Nothing on the market does that well enough and the prognosis for people diagnosed with this disease is poor. We assess early clinical interest in Oncosil, which is designing a pivotal trial in the US. A modest launch in Europe is planned for 2016, but the explosive catalyst for this stock will be the FDA’s review and potential approval of Oncosil’s proposed pivotal US trial plan, later this year.
Key points
Introducing OncoSil Medical – this Australian medical device company is responding to one of the most pressing problems in solid tumour oncology today – how to rapidly “de-escalate” aggressive pancreatic cancers. Current radiological methods are inadequate, which is why they have been relegated, over the past decade or so, to a largely palliative role. Oncosil has developed an implantable, radioactive device which can deliver a large, potentially decisive dose of radiation in one sitting, to shrink tumours with good safety.
The company is readying a modest European launch and a pivotal Phase III trial in the US next year. We assess peak sales in the order of A$350-400m for the treatment of locally advanced and metastatic pancreatic cancer.
The drive towards Level 1 clinical evidence – Oncosil’s current data comprises four Phase II trials conducted in small numbers of patients. Its development plan is adequate to generate higher level evidence, on which marketing approvals and widespread reimbursement will ultimately depend.
Valuation – our risked DCF model implies a 35 cps target price on a fully diluted basis. The key variables in the valuation are the choice of commercial pathway in major markets (direct sales versus distribution). Equity value could re-rate as the company passes quality and evidence gates: CE Mark in Q4; US pivotal trial design approval by the FDA in Q4; first commercial sales to EMEA in 2016. Our de-risked valuation for Oncosil is approximately 100 cps (upside case).
Risks and catalysts
Catalysts: a) CE Mark; b) FDA trial guidance; c) EU marketing approval and first sales. Risks: a) access to capital; b) clinical trial design risk; c) regulatory risks; d) product safety/quality/logistics risks; e) sector sentiment.
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