AmVac AG:
Company Valuation
January 30, 2014
Summary
Starting point and
Strategy
AmVac will generate its first sales in 2014 with the launch of AMV100 in Eastern Europe.
The phase III/IV study for AMV100 and the phase III study for AMV110 will begin shortly. The launch
in Europe will be postponed to 2015 (before: 2014) and 2016 (before: 2015), respectively.
The acquisition of Vakcina and thus the licences and patents of the Gynevac platform is an important and value-creating step. It thus is possible to achieve an out-licencing agreement in the US.
The expected upfront and milestone payments should leave AmVac room for further R&D activities.
Forecasts and Valuation
Due to the out-licencing of AMV100 and AMV110 we expect upfront and milestone payments of
cumulated CHF180m (as of 2015). We anticipate net margins of 50% to 60% in the mid term.
We calculate a fair value of equity of CHF431.0m to CHF514.8m (valuation as of October 8, 2012:
301.4 to 377.4). The higher value is owed to the out-licencing agreement in North America (earlier
cash flows). The progressing discount period compensates for the delayed product launch. The fair
value per share is up about 15% despite the dilutive effects (capital increases).
Strengths and
Opportunities
Far advanced product pipeline: AMV100 about to enter phase III/IV and AMV110 enters phase III
Control of all levels of the Gynevac platform after acquisition of licences/patents from Vakcina
Immediate monetisation of the Gynevac platform due to the planned out-licencing in North America
High potential of RSV vaccine - no vaccines on the market, high licence income
Platforms Gynevac, Sendai and MALP-2 as a basis to develop vaccines for other indications
Advantages compared to competitive products (among others sustainable treatment of the disease)
Weaknesses and Threats
R&D risks especially with AMV602 (many RSV studies failed)
Delays of studies and R&D projects (for example with AMV100 and AMV110 in North America)
Delayed out-licencing in North America (resulting in need for capital due to the lack of cash inflows)
Market for AMV110 (BPH/prostatitis) characterised by generics - can also be an advantage because
major pharma companies need new products (treatment-naive groups respond to AMV110)
Success mainly depends on acquisiton of a potent distribution partner
January 30, 2014
Valuation Memorandum
2
Profile and Strategic Perspectives (I)
Overview of the
technology
AmVac specialises in vaccines against urogenital diseases in males and females as well as
diseases of the respiratory system and seasonal/pandemic flu.
These are based on licences acquired for platform technologies Gynevac (Vakcina), Sendai (MaxPlanck-Institut) and MALP-2 (Helmholtz-Zentrum fГјr Infektionsforschung/ Ascenion).
AmVac now holds the product, manufacturing and worldwide marketing rights for the Gynevac
platform (AMV100, AMV110). For the Sendai and MALP-2 platforms AmVac also holds all rights.
AMV100 and AMV110 are already in advanced development stages.
The advantage of the AmVac technology is its broad range of application (several indications
possible). Some vaccines can further be used for prophylaxis (high market potential).
An important step was the latest identification of the mode of action of the Gynevac platform. This is
essential for potential partners and licensees. Furthermore, AmVac now can better identify new
potential product candidates.
Platforms and products licenced to AmVac
Platform
Uses
Licensor
Licence rights
Products
Gynevac
Therapeutic vaccines against the most
common urogenital diseases
Vakcina AG, Switzerland
Worldwide exclusive rights for further
development and commercialisation
AMV100: vaginal infections, above all
bacterial vaginosis and trichomoniasis
potential for use against premature birth
and infertility
AMV110: benign hyperplasia of the
prostate (BPH)/prostatitis
Sendai
Prophylactic and therapeutic vaccines
against diseases in high-risk population
groups
Max-Planck-Institut
Worldwide exclusive rights for further
development and commercialisation
AMV602: diseases of the airways
(respiratory syncytial virus; RSV)
AMV611: human parainfluenza virus
type 3 (PIV3) and RSV
MALP-2
Adjuvants that can be combined with
almost every vaccine to improve the
cost/benefit ratio
Ascenion (Helmholtz research
center for infectious diseases)
Worldwide exclusive rights for further
development and commercialisation
AMV411: pandemic influenza
AMV401: seasonal influenza
Source: AmVac
January 30, 2014
Valuation Memorandum
3
Profile and Strategic Perspectives (II)
Status of product pipeline
AMV100
The product has passed a phase III study in Hungary and has a regional licence since 1997.
200,000 patients have been treated so far.
A multicentric phase III/IV study for indications bacterial vaginosis/trichomoniasis and infertility will
start shortly (400 patients; costs: about CHF5.0m; completion: 2014/2015). The newly developed
vaccine that is free of all preservative agents is also tested (also for AMV110).
This study is of highest priority as the product candidate AMV100 promises the highest probability of
success. It is planned to receive market approval in the EU (marketing starts in 2015 (before: 2014);
starting in 2014 (before: 2013) in non-regulated markets; first agreements among others in Georgia).
We identify additional potential in further indications (for example against premature birth).
AmVac product pipeline
Preclinical
Proof of
concept
Phase I
Phase II
Phase III
Regulatory
approval
Marketing/phase IV
Gynevac platform*
AMV100
AMV110
AMV100 has already been approved in Hungary**
Phase III in preparation***
Sendai platform
AMV602
AMV611
MALP-2 platform
AMV401
AMV411
*
Gynevac has already been approved in Hungary and is commercially available for certain gynaecological inflammations since 1997.
AmVac has exclusive rights for the vaccine worldwide
** Phase III/IV will start soon; preparation of documentation for regulatory approval in the rest of the world
*** Preparation for phase III in the EU
Source: AmVac
January 30, 2014
Valuation Memorandum
4
Profile and Strategic Perspectives (III)
Status of product pipeline
(continued)
AMV110
AmVac successfully concluded a phase II study for the indication BPH.
It is planned to start a clinical phase III study in H1 2014 to obtain market approval in the EU (about
400 patients; costs: about CHF5.0m). Further developments of the AMV100 product candidate
(vaccine free of preservative agents) resulted in some delays regarding the planed clinical trials.
The market launch in the EMA region is now scheduled for 2016 (before: 2015). As of 2015 (before:
2014) the product is planned to be marketed in non-regulated markets.
AMV602
The proof-of-concept for the indication RSV was successful (with tests on mice).
AMV602 was meanwhile identified as the most efficient agent.
The phase I study in humans will begin shortly (primary end point: safety and tolerability). It is
planned to achieve an out-licencing agreement after completion of the phase I study (the costs for
further studies would be too high for AmVac, we think).
MALP-2
The production candidates are tested with different antigens in internal preclinical studies with mice
to identify the best combination of flu antigen and MALP-2 as the precondition for clinical studies
with humans.
An Asian partner was won. The target is to show the effectiveness and tolerability of MALP-2 in
pandemic influenza and achieve the proof-of-concept.
An European partner was won for the indication seasonal influenza.
Production
Production will take place at the site of Hungarian pharmaceutical company Omnivest. Its facilities
can now be used for six months per year (so far: two weeks).
We estimate annual production at over 1.0m packages so that AmVac can meet own demand until
and including 2016.
The Vakcina plant will serve as backup. Production in the own plant has proven (at least right now)
to be too costly and time-consuming due to the complicated procedures for production approval.
January 30, 2014
Valuation Memorandum
5
Market Environment - BV/Trichomoniasis (I)
Product pipeline for BV
and trichomoniasis
The WHO registered 276m (2005: 248) cases of trichomoniasis worldwide in 2008. About 45% of
those affected are women. Trichomoniasis thus is the most common sexually transmitted disease.
Bacterial vaginosis occurs twice as often as trichomoniasis.
GlobalData estimates the worldwide market for vaginitis therapeutics at USD511m in 2011 (CAGR
until 2019: +2.5%). Starpharma calculated a market volume of USD300m to USD350m and of up to
USD1bn when accounting for the long-term treatment of relapses.
Vaginal infections are currently treated mostly with antibiotics and antiseptics (Metronidazole,
Clindamycin and Tinidazole). However, a new infection occurs in about 80% of all cases.
We consider Starpharma with its VivaGel a potential competitor (in phase III; also for prophylaxis),
although the product does not counteract the inflammation in the whole body as does AMV100.
The small number of newly developed drugs (seven in total) in the pipeline can be seen as an
indicator for the high demand of potential licensees. Only the Starpharma product candidate
Astodrimer/VivaGel already reached phase III.
Trichomoniasis: Incidences per 1,000 females (2008)
Product pipeline: BV and trichomoniasis (selection)
200
Substance/
active substance
175
Manufacturer
Phase
150
Astodrimer (VivaGel)
CTV 05
Biomolecular Research Institute/
Starpharma
GyneLogix
75
Cellulose Sulfate
Polydex Pharmaceuticals
50
Clindamycin Controlled Release
Controlled Therapeutics
Peptide Therapeutics
Issar Pharma
PC
Silver Dihydrogen Citrate
PURE Bioscience
PC
Topical Microbicides*
Osel
PC
125
100
25
0
Af rica
Source: WHO (2008)
January 30, 2014
Americas
South-East
Asia
Europe
Eastern
Mediterranean
Western
Pacif ic
Source: Company information; Bloomberg
Valuation Memorandum
III
II
II
II
* research programme
6
Market Environment - BV/Trichomoniasis (II)
Product ppipeline for BV
and trichomoniasis
(continued)
The number of licenced drugsis limited. For many deals there are no financial details on
upfront/milestone payments and royalties.
The deal made between Valeant and Actavis for a BV drug after the successful phase III study in
2013 is noteworthy. Actavis paid USD55m in upfront and milestone payments (in addition to further
non-specified royalties). However, agent Metronidazol is an usual antibiotic.
On the other hand, AMV100 is an innovative vaccine (immune therapy) that really counteracts the
disease (only relief of symptoms with antibiotics/antiseptics; relapses in about 80% of all cases).
Bacterial vaginosis and trichomoniasis: Drugs and licences
Substance/
Target company/
active substance licensor
Acquirer/
licensee
Clindesse
KV Pharmaceuticals
CTV 05
GyneLogix
Gedeon Richter, MedPharm Corporation,
Theramex etc.
The Medicines Company
Metronidazole
Valeant Pharmaceutical
Actavis
Silver Dihydrogen Citrate
Tinidazole
PURE Bioscience
Therapeutics Inc.
Presutti Laboratories
Mission Pharmacal
VivaGel
Starpharma
SSL International/Reckitt
Benckiser
Phase
Comments on price, licencing out, transfer price
Market
launch
2005 and subsequent years: marketing agreement for Europe, the CIS countries, Africa, China
etc.; upfront/milestone payments not disclosed
Final stages
of phase II
Final stages
of phase III
n/a
1999 acquisition of worldwide rights; upfront/milestone payments not disclosed
2013 licence agreement for a vaginal gel based on metronidazole; upfront and milestone
payments of USD55m; in addition royalties and participation in sales of potential generics
2004 product specific licence granted in the area of women's health
Final stages 2006 acquisition of marketing rights in the US and production rights
of phase III
I
2008 agreement for the development of condoms (brand: Durex) using VivaGel
Source: Company information; Bloomberg
January 30, 2014
Valuation Memorandum
7
Market Environment - BPH and Prostatitis (I)
Market for BPH and
prostatitis
According to Decision Resources (2007) about 28m men are affected by BPH in AmVacВґs European
core markets (Germany, France, Italy, Spain and UK). In the US there are about 20m patients.
GlobalData calculated the volume of the BPH market at USD3.2bn in 2010. The CAGR until 2018 is
estimated at 6.4%.
Mostly older men are affected, increasing with age (51-60 years: 50%; 81-90 years: 90%). The
number of cases should increase along with the ageing population by 1.1% to 1.6% p.a.
14% to 30% of patients report moderate to severe symptoms. According to Internal Medicine News
(2007) BPH is diagnosed and thus treated too seldom (only 25% of the really affected patients are
diagnosed with BPH in the US).
BPH in Germany
Prevalence above age of 40
Increase in prevalence p.a.
Age of retirement (years)
Life expectancy (years)
BPH in France
424 per 1,000
1.1%
as of 2029: 67 (2012: 65)
79
Prevalence above age of 40
Increase in prevalence p.a.
Age of retirement (years)
Life expectancy (years)
BPH in Italy
421 per 1,000
1.6%
62
81
Source: Decision Resources; Guardian; The Independent;
CountryReports.org
Source: Decision Resources; Guardian; The Independent;
CountryReports.org
BPH in Spain
BPH in UK
Prevalence above age of 40
Increase in prevalence p.a.
Age of retirement (years)
Life expectancy (years)
270 per 1,000
1.3%
prob. increase to 67 (65)
80
Source: Decision Resources; Guardian; The Independent;
CountryReports.org
January 30, 2014
Prevalence above age of 40
Increase in prevalence p.a.
Age of retirement (years)
Life expectancy (years)
Prevalence above age of 40
Increase in prevalence p.a.
Age of retirement
Life expectancy (years)
433 per 1,000
1.4%
increase of 3 or 6 months
80
Source: Decision Resources; Guardian; The Independent;
CountryReports.org
423 per 1,000
1.4%
66 (2020), 67 (2050)
79
Source: Decision Resources; Guardian; The Independent;
CountryReports.org
Valuation Memorandum
8
Market Environment - BPH and Prostatitis (II)
BPH is mainly treated with alphablockers, 5a reductase inhibitors and anticholinergics. Due to the
side effects about 40% of patients chose not to be treated (AmVac target group).
Market for BPH and
prostatitis (continued)
Generic Tamsulosin and brand products Cialis (Eli Lilly; sales 2012: USD1.9bn) and Avodart (GSK;
USD1.2bn) dominate the market. Competition is high but new products are needed due to the expiry
of patents (Rapaflo by Watson in 2013: Avodart in 2015).
However, we think the R&D pipeline is well-filled. According to Bloomberg, there currently are
eleven agents in the preclinical phase, eight in phase I and II and five in phase III.
Product pipeline: BPH and prostatitis (selection)
Sales with drugs against BPH (selection)
Substance/
active substance
Manufacturer
Phase
Drug
Company
Dutasteride/Tamsulosin
GL PharmTech
III
Cialis
IN ALRN 001
Intas Pharmaceuticals
III
NX 1207
Nymox Pharmaceutical
III
OM 8980
OM Pharma
III
Solifenacin / Tamsulosin
Astellas Pharma
Besins International
III
II
Astellas Pharma
II
AUS 131
Ausio Pharmaceuticals
II
Topsalysin
Johns Hopkins University
Udenafil
AKP 002
ASP 6432, ASP 0306
Androgen Replacement
Therapy
ASP 3652
Sales 2012
(USDm*)
Sales 2011
(USDm*)
Eli Lilly
1.930
1.880
Also for treatment of
erectile dysfunction
Avodart
GlaxoSmithKline
1.225
1.197
Patent expiry in 2015
Flomax
Boehringer
Ingelheim
<883
<876
Estimate; patent
expired in 2009
Omnic Ocas
(Japan: Harnal)
Astellas Pharma
586
770
FY April 1 to March 31
II
Cardura
Pfizer
338
380
-
Dong-A Pharmaceutical
II
Xatral/Uroxatral
Sanofi
168
278
-
ASKA Pharmaceutical
I
Proscar
Merck & Co.
217
223
-
Astellas Pharma
I
Androgen Receptor Antagonists* Endoceutics
PC
BPH Therapeutics*
Recordati
PC
D 3263
Dendreon Corporation
PC
Source: Company information; Bloomberg
January 30, 2014
Comments
* Sales converted to USD at mean exchange rates (for companies with sales not denominated in USD)
Source: Company information; Bloomberg
* research programme
Valuation Memorandum
9
Market Environment - BPH and Prostatitis (III)
Market for BPH and
prostatitis (continued)
Due to the size of the market there is a relatively high number of licenced BPH/prostitis drugs.
We think the upfront and milestone payments are quite high given the fact that some agreements
are pure marketing/distribution contracts (e.g. Udenafil/Udzire in the CIS region with USD50m).
The upfront and milestone payments are even higher for complete licence agreements (see
Topsalysin for Japan after phase II with USD75m; Trp-p8 platform worldwide for USD113m).
We assume upfront and milestone payments of CHF100m for the out-licencing agreement in North
America. The royalty rate is 12.5% (26% to 40% for NX 1207).
BPH and prostatitis: Drugs and licences (selection)
Substance/
active substance
Target company/
licensor
Acquirer/
Licensee
Phase
Trp-p8 platform
Dendreon
Genentech
n/a
NX 1207
Nymox Pharmaceutical
Recordati
III
Topsalysin
Kissei Pharmaceutical
(licenced from Johns
Hopkins University)
Dong-A Pharmaceutical
Protox Therapeutics
II
2010 licencing out of the development of Topsalysin for the indications BPH and prostate cancer for Japan;
upfront payment of USD3m and milestone payments of USD72m; double digit royalty rate
Otechestvennye Lekarstva
II
2007 mark eting agreement for five years for Russia and later on all CIS countries; upfront USD50m (upfront
and milestone payments)
Dong-A Pharmaceutical
B.L. Hua and Hikma
Pharma of Jordan
II
2008 mark eting agreement for Thailand and the Middle East; contract value of USD15m and USD23m,
respectively
Degarelix
Ferring Pharmaceuticals
Astellas Pharma
II
2006 licence agreement for Japan: upfront/milestone payments or royalties not disclosed
AKP 002
ASKA Pharmaceutical
Astellas Pharma
I
Silodosin
Kissei Pharmaceutical
n/a
Kissei Pharmaceutical
Watson Pharmaceuticals/Actavis
Daiichi Sankyo
Aeterna Zentaris
Solvay/Abbott Laboratories
PC
Udenafil/Udzire
LHRH
Antagonists
Comments on price, licencing out, transfer price
2002 licencing out of Trp-p8 platform with upfront payment of USD1m, acquisition of Dendreon shares of over
USD2m and milestone payments of USD110m
2010 licencing out of the development of NX 1207 for Europe, the CIS countries, the Middle East and Africa;
upfront payment of USD10m, additional milestone and royalty payments (between 26% and 40% of net sales)
2010 worldwide licence agreement: upfront/milestone payments or royalties not disclosed
2004 licence agreement for the US, Canada and Mexico
2006 licence and cooperation agreement for Japan; licence agreement for China
2004 R&D cooperation: upfront payment of USD5m and payment of R&D costs incurred so far
Source: Company information; Bloomberg
January 30, 2014
Valuation Memorandum
10
Market Environment - RSV
Market for RSV
RSV is a widespread bronchial disease that almost all children contract by the age of two. According
to the WHO, 64m cases occur every year (160,000 deaths). RSV is one of the most common
reasons for hospital stays among children and causes high costs.
There is no prophylactic medication apart from the antibody Palivizumab/Synagis (Medlmmune/
AstraZeneca), which has an unsatisfactory cost/benefit ratio. AstraZeneca generated sales of over
USD1bn (+6% y/y) with Synagis in 2012. In our opinion this demonstrates the potential.
According to Bloomberg, there are about 30 drugs in the preclinical phase and only seven in clinical
phases I to III. Only two of them were licenced to partners which shows the complexity of RSV.
RSV: Drugs and licences (selection)
Substance/active Target company/
substance
licensor
Acquirer/
licensee
Phase
Comments on price, licencing out, transfer price
ALN RSV01
Alnylam Pharmaceuticals Kyowa Hakko Kirin
(formerly Kyowa Hakko)
Cubist Pharmaceuticals
II
2008 - licence agreement with Kyowa Hakko Kirin on development and marketing in Japan and other
Asian markets: upfront payment: USD15m; milestone payment: up to USD78m
January 2009 - agreement (50/50) on development and profit sharing in North America and worldwide
licence (without Asia) with Cubist Pharmaceuticals: upfront payment: USD20m; milestone payment:
up to USD82.5m; claim for royalty payments except North America and Asia;
November 2009 - agreement was changed and switched to ALN RSV02 for RSV disease in the
paediatric population group with an option to re-entry via opt-in payment
MDT 637
ViroPharma
MicroDose Therapeutx
MicroDose Therapeutx
Gilead Sciences
I
2009 - takeover of a RSV portfolio by MicroDose Therapeutx; price not disclosed
2011 - exclusive worldwide licence agreement with Gilead Sciences: amounts of research grants and
(upfront, milestone or royalty) payments not disclosed
RSV vaccine
University of
Massachusetts Medical
School
Novavax
PC
I
2007 - exclusive worldwide licence agreement with Novavax for paramyxovirus vaccines based on
VLP; price not disclosed
2012 - development of a drug for infants in poor countries with PATH: first grant of about USD2m;
possibly further 50% subsidies by PATH in case of successful completion of phase II
Source: Company information; Bloomberg
January 30, 2014
Valuation Memorandum
11
Financials (I)
Assumptions: New patent
and marketing structure
In our valuation from October 8, 2012 we assumed that AmVac would develop AMV100 and
AMV110 until market approval and would market the drug in all target markets via partners.
A short while ago AmVac has acquired 88% in Vakcina Kft. and thus all product, technology and
manufacturing licences for the Gynevac platform (so far only distribution rights). In return, the
Vakcina management received a share in AmVac (5.9m shares) and a reduced royalty payment of
EUR4.00 (before: 5.80) per package sold.
AmVac now plans to licence the Gynevac platform to a partner in the FDA region (US, Canada). We
accordingly now assume a licence model for AMV100 and AMV110 in North America. In the other
regions we still expect the marketing with partners.
We have made sales and profit forecasts for (product)platforms AMV100, AMV110 and AMV602.
The MALP-2 platform (preclinical trials) is not accounted for reasons of simplicity.
New structure: Vakcina and AmVac
Old structure: Vakcina and AmVac
Vakcina Switzerland (company of the Vakcina mgmt.)
Vakcina Kft.
Licence fee:
Patents for BPH
Approval for AMV100 in Hungary - basis for approval in
other countries
EUR4.00 per package
Patents for BPH
Approval for AMV100 in Hungary - basis for approval in
other countries
Property in the vaccine, know-how and technology
Production permission for vaccines
Property in the vaccine, know-how and technology
Plant for production of 10m doses p.a.
Production permission for vaccines
Licence fee:
Plant for production of 10m doses p.a.
EUR5.80 per package
AmVac
AmVac
Source: AmVac
Source: AmVac
January 30, 2014
Valuation Memorandum
12
Financials (II)
Assumptions: New patent
and marketing structure
(continued)
AMV100 (bacterial vaginosis; trichomoniasis)
There were some delays in the clinical trials for AMV100. We now expect the market launch in
Eastern Europe in 2014 (before: 2013). Marketing agreements were already concluded in some
former CIS countries (Georgia etc.). In the EU, we expect the market launch in 2015 (before: 2014).
We estimate the product price at CHF50.00 (competition: USD45.00 to USD70.00). In North America we forecast the upfront and milestone payments at CHF80.0m and the royalty rate at 12.5%.
Conservatively estimated, AMV100Вґs market share should be 4.0%.
Upfront and milestone payments
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
Eastern Europe - sales
Europe (EMA) - sales
AMV100
8.0
36.0
36.0
North America - royalties
Japan, Asia - sales
Eastern Europe - sales
Europe (EMA) - sales
AMV110
AMV602
10.0
45.0
5.0
25.0
45.0
North America - royalties
Japan, Asia - sales
35.0
5.0
Upfront payment following conclusion of phase I of CHF5.0m
8.0
Upfront payment of CHF8.0m when licenced
36.0
Milestone payment following conclusion of phase III of CHF36.0m
36.0
Milestone payment upon narket approval of CHF36.0m
35.0
Europe (EMA) - royalties
North America - royalties
Japan, Asia - royalties
Source: Independent Research
January 30, 2014
Valuation Memorandum
13
Financials (III)
Assumptions: New patent
and marketing structure
(continued)
AMV110 (benign prostatic hyperplasia; BPH)
We now expect the market launch in Eastern Europe in 2015 (before: 2014). We expect the EU
market launch in 2016 (before: 2015) after the phase III study is concluded. North America and Asia
will follow in 2017 (before: 2016).
We assume a product price of CHF50.00. The upfront and milestone payments in North America will
be CHF100.0m with a 12.5% royalty rate.
For AMV110 we also expect a market share of 4.0%.
AMV100 and AMV110: additional potential
With the out-licencing of the Gynevac platform AmVac also licences potential product candidates
that might result from further R&D activities. This potential added value for the licensee should
cause further upfront payments that we estimate at CHF50.0m (recognised in the years 2015 to
2017; no milestone payments and royalties).
AMV602 (respiratory syncytial virus; RSV)
We expect the market launch in 2020 (before: 2019).
We assume that AMV602 can also be used as a prophylactic vaccine.
We expect an out-licencing agreement after the conclusion of phase I with milestone and upfront
payments of in total CHF100.0m. This is realistic given the deal of Trellis/MedImmune (in total
USD338.0m; out-licencing agreement with drug in preclinical trial). The royalty rate is 12.5%.
We expect a market share of 30% (Synagis of AstraZeneca so far is the only drug).
January 30, 2014
Valuation Memorandum
14
Financials (IV)
We expect AMV100 to generate the first sales from the marketing in Eastern Europe in 2014
(before: 2013). In our opinion, higher sales cannot be expected before 2015 when the phase III/IV
studies will be concluded and the market launch in the EMA region is achieved.
AMV100 (bacterial
vaginosis; trichomoniasis)
From 2015 to 2017, we assume upfront and milestone payments (cumulated CHF80m) on the
important North American market. Compared to our valuation from October 2012, sales in North
America will be clearly lower in the following years as AmVac will only recognise royalty payments
(royalty rate: 12.5%). However, in future AmVac does not have to pay commissions to the distribution partner any longer (50% of the product price).
EBIT are positively influenced by lower costs of materials. This is due to the lower licence fees to be
paid to Vakcina for the products sold in all regions (EUR4.00 (before: 5.80) per package).
The EBIT margin of about 69% (before: about 65%) thus is slightly higher in the long run.
Valuation Oct. 2012: P&L key figures for AMV100
Valuation Feb. 2014: P&L key figures for AMV100
Unit:
CHFm
Sales
Growth y/y
Eastern Europe
EMA
US, Canada
Japan and rest of Asia
thereof upfront/milestone payments
2013E
2014E
0.1
1.5
0.1
0.0
0.0
0.0
0.0
1.5
0.0
0.0
0.0
0.0
2015E
2016E
2017E
17.2
52.9
65.8
1048% 208.4% 24.4%
3.0
4.5
6.1
6.1
12.4
18.7
8.0
36.0
37.3
0.0
0.0
3.8
8.0
36.0
36.0
2018E
42.9
-34.8%
7.7
25.0
2.6
7.6
0.0
Unit:
CHFmCHFm
2013E
Sales
Growth y/y
Eastern Europe
EMA
US, Canada, Japan
EBIT
EBIT margin
EBIT
EBIT margin
Source: Independent Research; AmVac
January 30, 2014
-0.7
0.4
13.9
47.8
56.7
29.7
neg.
25.2%
81.0%
90.4%
86.1%
69.1%
1.4
1.4
0.0
0.0
2014E
2015E
8.5
15.7
528.4% 85.1%
2.7
4.1
5.8
11.6
0.0
0.0
2016E
2017E
2018E
31.3
47.0
61.6
99.2%
5.5
17.5
8.3
50.4%
6.9
23.5
16.6
30.9%
7.0
29.5
25.1
0.1
4.9
9.6
20.3
30.7
40.3
6.8%
57.7%
61.4%
64.8%
65.2%
65.4%
Source: Independent Research; AmVac
Valuation Memorandum
15
Financials (V)
Following the market entry of AMV110 in Eastern Europe we expect first sales in 2015 (before:
2014). As of 2016 (before: 2015) sales should grow rapidly due to the market entry in the EMA
region.
AMV110 (BPH/benign
prostatic hyperplasia)
We expect AmVac to incur the first upfront and milestone payments in North America in 2015
(CHF80m in total). From 2017 onwards we expect cash flows from royalties (royalty rate of 12.5%).
Comparable to AMV100, the cost savings from lower licence fees to be paid (EUR4.00 (before:
5.80) per package for products sold in any region) are considerable.
The EBIT margin of about 70% (before: about 65%) thus is higher in the long run.
Valuation Oct. 2012: P&L key figures for AMV110
Valuation Feb. 2014: P&L key figures for AMV110
Unit:
CHFm
Sales
Growth y/y
Russia
EMA
US, Canada
Japan and rest of Asia
thereof upfront/milestone payments
2013E
2014E
2015E
0.0
0.0
12.9
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
2.9
0.0
10.0
0.0
10.0
2016E
2017E
62.4
85.3
384.8% 36.7%
5.8
8.7
11.6
23.4
45.0
46.4
0.0
6.8
45.0
45.0
2018E
63.5
-25.6%
11.7
35.3
2.8
13.7
0.0
Unit:
CHFm
Sales
Growth y/y
Russia
EMA
US, Canada, Japan
EBIT
EBIT margin
EBIT
EBIT margin
Source: Independent Research; AmVac
January 30, 2014
-0.6
-2.1
11.0
57.2
73.2
44.4
neg.
neg.
85.4%
91.6%
85.8%
70.0%
2013E
2014E
0.0
1.9
0.0
0.0
0.0
1.9
0.0
0.0
2015E
2016E
2017E
14.8
39.0
63.5
661.9% 163.9% 62.9%
3.9
5.9
7.9
10.9
21.9
33.0
0.0
11.2
22.6
2018E
88.4
39.1%
9.9
44.3
34.1
-2.2
0.2
12.3
29.0
41.4
57.7
-
10.6%
82.9%
74.4%
65.1%
65.3%
Source: Independent Research; AmVac
Valuation Memorandum
16
Financials (VI)
The studies for AMV602 so far run according to plan. As a matter of precaution, we have postponed
the scheduled product launch by one year to 2020 (before: 2019; focus on products AMV100 and
AMV110 and their product launch).
AMV602 (RSV)
Meanwhile, AmVac has identified AMV602 as the most suitable RSV agent. After the conclusion of
the phase I study and the subsequent out-licencing agreement we expect the first upfront payment
in 2015 (before: 2014).
The cumulated upfront and milestone payments should have a volume of CHF100m. This appears
to be realistic given the transactions of Anylan Pharma and Cubist Pharma (USD102.5m; phase II)
as well as biota and MedImmune (USD112.5m; preclinic).
Valuation Feb. 2014: P&L key figures for AMV602
Unit:
CHFm
Sales
Growth y/y
Royalties EMA
Royalties US
Royalties Japan and rest of Asia
Royalties therapeutic vaccination
Upfront/milestone payments
EBIT
EBIT margin
Source: Independent Research; AmVac
January 30, 2014
Valuation Oct. 2012: P&L key figures for AMV602
2013E
2014E
2015E
2016E
2017E
2018E
0.0
0.0
5.0
25.0
0.0
35.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
5.0
0.0
0.0
0.0
0.0
25.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
35.0
-1.6
-3.0
4.7
24.7
-0.4
34.6
neg.
neg.
93.4%
98.6%
neg.
98.9%
Unit:
CHFm
Sales
Growth y/y
Royalties EMA
Royalties US
Royalties Japan and rest of Asia
Royalties therapeutic vaccination
Upfront/milestone payments
EBIT
EBIT margin
2013E
2014E
0.0
5.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
5.0
2015E
2016E
2017E
25.0
0.0
35.0
35.0
0.0
0.0
0.0
0.0
35.0
0.0%
0.0
0.0
0.0
0.0
35.0
400.0% -100%
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
25.0
0.0
2018E
-3.0
4.7
24.7
-0.4
34.6
34.6
neg.
93.5%
98.6%
neg.
98.9%
98.9%
Source: Independent Research; AmVac
Valuation Memorandum
17
Financials (VII)
We expect the first sales from the marketing of AMV100 in Eastern Europe in 2014 (before: 2013).
The R&D costs should be high due to the beginning clinical studies for AMV100 (phase III/IV; costs:
about CHF5.0m) and AMV 110 (phase III; costs: about CHF5.0m). In 2014 and 2015, we extpect
R&D costs of CHF5.5m and CHF4.4m. In 2014, the EBIT loss should be CHF7.2m.
Profit and loss forecasts
Contrary to our valuation from October 2012, we expect significant profits as of 2015 - despite the
R&D costs. This is due to the upfront and milestone payments from the out-licencing agreement for
AMV100 (CHF80m) and AMV110 (CHF100m) in North America. The Gynevac platform has the
potential to create further product candidates that are licenced as well. For this reason we assume
an upfront payment of CHF50m (one third to be recognised in 2015 to 2017, respectively).
Receiving upfront and milestone payments means that profits are recognised “earlier”. Profits
excluding upfront and milestone payments thus are lower in the following years (royalty rate of
12.5% vs. sales of own products).
Valuation Feb. 2014: P&L key figures
Unit:
CHFm
2013E
Sales
thereof product sales
thereof upfront/milestone payments
R&D expenditure
EBIT
EBIT margin
EBIT w/o upfront/milestone paym.
Valuation Oct. 2012: P&L key figures
2014E
2015E
2016E
2017E
2018E
0.1
1.5
51.7
157.0
167.8
141.4
0.1
0.0
1.5
0.0
12.0
39.7
34.3
122.7
70.1
97.7
106.4
35.0
-3.5
-5.5
-4.4
-4.2
-5.7
-11.2
R&D expenditure
EBIT
-6.1
-7.2
41.2
140.2
138.5
95.5
neg.
-6.1
neg.
-7.2
79.6%
1.5
89.3%
17.6
82.6%
40.9
67.6%
60.5
Net income
-6.1
-7.2
37.8
128.5
127.0
87.6
Net margin
neg.
neg.
73.1%
81.9%
75.7%
61.9%
Source: Independent Research; AmVac AG
January 30, 2014
Unit:
CHFm
2013E
2014E
2015E
2016E
Sales
thereof product sales
thereof upfront/milestone payments
EBIT margin
EBIT w/o upfront/milestone paym.
2017E
2018E
1.4
15.4
55.5
70.3
145.6
185.0
1.4
0.0
10.4
5.0
30.5
25.0
70.3
0.0
110.6
35.0
150.0
35.0
-7.3
-3.9
-5.4
-5.8
-11.1
-14.0
-9.7
4.6
39.8
40.7
92.9
115.9
neg.
-9.7
30.0%
-0.4
71.8%
14.8
57.8%
40.7
63.8%
57.9
62.7%
80.9
Net income
-9.7
4.3
36.6
37.3
85.2
106.3
Net margin
neg.
28.0%
65.9%
53.1%
58.5%
57.5%
Source: Independent Research; AmVac AG
Valuation Memorandum
18
Financials (VIII)
We expect total R&D expenses of CHF13.4m from 2013 to 2015.
Balance sheet and cash
flow forecasts
AmVac has covered its capital requirements for 2013 and partially for 2014 (CHF13.4m) by issuing
convertible bonds with a volume of CHF9.7m. The bond was converted into 10.253m AmVac shares
at the end of December 2013 (capital increase by 19.4%). AmVac thus has no more financial debt.
The acquisition of 88% in Vakcine Kft. was mainly paid with AmVac shares (capital increase by
5.900m shares, 9.4% of the so far share capital). The number of shares thus has increased to
68.964m (before the capital increases in 2013: 52.811).
Compared to our valuation from October 2012, we expect a more comfortable liquidity situation for
AmVac - at the latest from 2016 onwards. This is due to the upfront and milestone payments.
Depending on the timing of the first larger product sales and the receipt of the first upfront payment
we expect AmVac to require another cash inflow in 2014 and 2015.
Valuat. Feb. 2014: Balance sheet & cash flow key figures
Unit:
CHFm
2013E
2014E
2015E
2016E
2017E
2018E
Cash earnings
-6.1
-7.2
37.8
128.5
127.0
87.6
Operating cash flow
-6.1
-7.3
34.9
120.0
123.4
92.1
Free cash flow (FCF)
-6.1
-7.3
34.9
120.0
123.4
FCF w/o upfront/milest. paym.
-6.1
-7.3
-1.5
7.6
33.9
Source: Independent Research; AmVac AG
January 30, 2014
Valuat. Oct. 2012: Balance sheet & cash flow key figures
Unit:
CHFm
2013E
2014E
2015E
2016E
2017E
2018E
Cash earnings
-9.7
4.3
36.6
37.3
85.2
106.3
Operating cash flow
-9.8
3.4
34.6
33.3
81.2
102.4
92.1
Free cash flow (FCF)
-9.8
3.4
34.6
33.3
81.2
102.4
60.0
FCF w/o upfront/milest. paym.
-9.8
-1.6
9.6
33.3
46.2
67.4
Source: Independent Research; AmVac AG
Valuation Memorandum
19
Valuation (I)
Assumptions
Our valuation of AmVac is based on a sum-of-the-parts analysis. We have created separate DCF
models for each of the three products AMV100 (bacterial vaginosis, trichomoniasis), AMV110 (BPH)
and AMV602 (RSV).
Further costs (administration etc.) and net liquidity are also part of the calculation of the fair value of
AmVac.
To keep it simple, we have not included the MALP-2 platform (all agents still in preclinic trials) and
other indications for AMV100, AMV110 and AMV602 (for example against infertility or para influenza
virus 3) into our valuation.
Assumptions of the DCF models
We have included our sales and profit forecasts into our DCF models for AMV100, AMV110 and
AMV602.
In our estimates we also employ the rNPV model (risk adjusted net present value) and its
parametres (for example ramp-up period to peak sales; probability of success).
We calculate the WACC at 10.5%. As AmVac is solely financed with equity we assume an equity
ratio of 90%. The beta of 1.5 reflects the risk of a biotech company and the already advanced
product pipeline.
As is customary in the industry we assume different probabilities of success for the individual
products - depending on the phase of development:
AMV100 (combined phase III/IV according to EU standard, phase III study already
successfully concluded according to Hungarian standard): 74%
AMV110 (phase III will begin shortly): 67%
AMV602 (phase I about to start): 15%
January 30, 2014
Valuation Memorandum
20
Valuation (II)
AmVac - AMV100
CHFm
Turnover
2014E
2015E
1.5
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
17.2
52.9
65.8
42.9
54.6
60.1
64.1
56.5
48.8
Growth y/y
- 1048.0%
208.4%
24.4%
-34.8%
27.3%
10.1%
6.7%
-11.8%
-13.6%
EBIT margin
-
81.0%
90.4%
86.1%
69.1%
68.9%
68.4%
67.9%
67.4%
66.6%
EBIT
0.4
13.9
47.8
56.7
29.7
37.6
41.1
43.6
38.1
32.5
- Income taxes
0.0
-1.6
-4.3
-5.1
-2.2
-7.9
-8.6
-9.2
-8.0
-6.8
+ Amortisation and depreciation
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
- Change in long-term provisions
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
+/- Others
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Gross operating cash flow
0.4
12.3
43.5
51.6
27.5
29.7
32.5
34.4
30.1
25.7
-/+ Change in net working capital
-0.1
-1.6
-3.6
-1.3
2.3
-1.2
-0.6
-0.4
0.8
0.8
-/+ Investments in fixed assets
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Free cash flow
0.2
10.7
39.9
50.3
29.8
28.6
32.0
34.0
30.9
26.5
Present values
0.2
8.8
29.4
33.3
17.8
15.3
15.4
14.8
12.1
9.3
Total present values (2014-2023E)
156.3
Total present values (2024-2028E)
16.3
Terminal value
19.3
Value of operating business
192.0
Probability of success
74%
Equity market value
142.0
as % of total value: 10%
Fair value is 30% higher
than the value calculated
as of October 8, 2012 due
to the value-enhancing
licencing in North America
Model parameters/ entity DCF model:
Target capital structure ->
Risk-free rate:
Growth FCF:
4.0%
2.0%
Equity:
90%
Debt:
10%
4.0%
Beta:
1.4
Risk prem. debt:
Risk prem.:
5.0%
Tax shield:
21.0%
Cost of equity:
11.0%
Cost of debt:
6.3%
WACC:
10.5%
Date:
01/30/14
Source: Independent Research
January 30, 2014
Valuation Memorandum
21
Valuation (III)
Due to the out-licencing agreement for AMV100 in North America we calculate a clearly higher fair
value of CHF192.0, (valuation as of October 8, 2012: 147.6). Accounting for the assumed probability
of success of 74%, the adjusted fair value is CHF142.0m (valuation as of October 8, 2012: 109.2).
Valuation AMV100
The higher value reflects two aspects:
The cash inflow from upfront and milestone payments is recognised earlier than the sales/
profits from a distribution partnership. This positively affects the discounted cash flows.
The savings from the lower licence fees paid to Vakcina improves the EBIT.
When looking at the fair value, we think another aspect has to be considered:
In regions where AMV100 is marketed by a partner the sales reflect only AmVacВґs share.
50% of the product sales are incurred by the future distribution partner. This reduces
AmVacВґs EBIT.
Sensitivity analysis - AMV100 (CHFm)
Growth
(TV)
Discount rate (WACC)
10.0%
10.5%
11.0%
2.0%
148.0
142.0
136.5
11.5%
131.4
2.5%
149.2
143.0
137.3
132.1
3.0%
150.5
144.1
138.2
132.8
3.5%
152.1
145.4
139.2
133.7
Source: Independent Research
January 30, 2014
Valuation Memorandum
22
Valuation (IV)
AmVac - AMV110
CHFm
Turnover
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
0.0
12.9
62.4
85.3
63.5
86.9
107.7
116.7
114.4
100.0
Growth y/y
-
-
384.8%
36.7%
-25.6%
36.9%
23.9%
8.4%
-2.0%
-12.6%
EBIT margin
-
-
91.6%
85.8%
70.0%
70.0%
69.9%
69.6%
69.6%
69.2%
-2.1
11.0
57.2
73.2
44.4
60.8
75.3
81.3
79.6
69.2
0.0
-1.3
-5.2
-6.5
-3.2
-12.8
-15.8
-17.1
-16.7
-14.5
EBIT
- Income taxes
+ Amortisation and depreciation
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
- Change in long-term provisions
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
+/- Others
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
-2.1
9.7
52.0
66.7
41.2
48.0
59.5
64.2
62.9
54.7
-/+ Change in net working capital
0.0
-1.3
-5.0
-2.3
2.2
-2.3
-2.1
-0.9
0.2
1.4
-/+ Investments in fixed assets
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Free cash flow
-2.1
8.5
47.1
64.4
43.4
45.7
57.4
63.3
63.1
56.1
Present values
-1.9
6.9
34.6
42.6
25.8
24.5
27.7
27.5
24.7
19.7
Gross operating cash flow
Total present values (2014-2023E)
232.2
Total present values (2024-2029E)
36.9
Terminal value
32.6
Value of operating business
301.7
Probability of success
67%
Equity market value
202.2
as % of total value: 11%
Fair value is 27% higher
than the value calculated
as of October 8, 2012 due
to the value-enhancing
licencing in North America
Model parameters/ entity DCF model:
Target capital structure ->
Risk-free rate:
Growth FCF:
4.0%
2.0%
Equity:
90%
Debt:
10%
Beta:
1.4
Risk prem. debt:
4.0%
Risk prem.:
5.0%
Tax shield:
21.0%
Cost of equity:
11.0%
Cost of debt:
WACC:
10.5%
Date:
6.3%
01/30/14
Source: Independent Research
January 30, 2014
Valuation Memorandum
23
Valuation (V)
Due to the out-licencing agreement for AMV110 in North America we calculate a higher fair value of
CHF301.7m (valuation as of October 8, 2012: 238.6). With an assumed probability of success of
67% the adjusted fair value is CHF202.2m (valuation as of October 8, 2012: 159.8).
Valuation AMV110
When compared to the valuation as of October 8, 2012, the higher fair value reflects the upfront and
milestone payments (earlier cash flows) and the reductions in material costs.
The higher value as compared with AMV100 reflects what in our opinion is the greater ease in
achieving a larger patient population (greater awareness of prostate disease).
The high importance of AMV110 is once more highlighted when taking into account that the
adjusted fair value beats that of AMV100 despite the later product launch (meaning later cash flows)
and lower probability of success.
Sensitivity analysis - AMV110 (CHFm)
Growth
(TV)
Discount rate (WACC)
10.0%
10.5%
11.0%
11.5%
2.0%
211.7
202.2
193.4
185.2
2.5%
213.5
203.6
194.6
186.2
3.0%
215.6
205.3
195.9
187.3
3.5%
218.0
207.2
197.5
188.6
Source: Independent Research
January 30, 2014
Valuation Memorandum
24
Valuation (VI)
AmVac - AMV602
CHFm
Turnover
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
0.0
5.0
25.0
0.0
35.0
35.0
2.1
5.6
31.5
57.6
Growth y/y
-
-
-
-
-
-
-94.1%
170.1%
463.0%
83.2%
EBIT margin
-
-
98.6%
-
98.9%
98.9%
79.7%
82.7%
84.2%
84.4%
EBIT
-3.0
4.7
24.7
-0.4
34.6
34.6
1.6
4.6
26.5
48.6
- Income taxes
0.0
-0.5
-2.2
0.0
-2.5
-7.3
-0.3
-1.0
-5.6
-10.2
+ Amortisation and depreciation
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
- Change in long-term provisions
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
+/- Others
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
-3.0
4.1
22.4
-0.3
32.1
27.3
1.3
3.6
20.9
38.4
Gross operating cash flow
-/+ Change in net working capital
0.0
0.0
0.0
0.0
0.0
0.0
-0.2
-0.4
-0.5
-0.5
-/+ Investments in fixed assets
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Free cash flow
-3.0
4.1
22.4
-0.3
32.1
27.3
1.1
3.3
20.4
37.9
Present values
-2.7
3.4
16.5
-0.2
19.1
14.7
0.5
1.4
8.0
13.3
Total present values (2014-2023E)
74.0
Total present values (2024-2033E)
130.2
Terminal value
Value of operating business
27.6
231.8
Fair value is 13% higher
than the value calculated
as of October 8, 2012
as % of total value: 12%
Model parameters/ entity DCF model:
Probability of success
15%
Target capital structure ->
Equity:
90%
Debt:
10%
Equity market value
34.8
Risk-free rate:
Beta:
1.4
Risk prem. debt:
4.0%
Risk prem.:
5.0%
Tax shield:
21.0%
Cost of equity:
11.0%
Cost of debt:
6.3%
Growth FCF:
4.0%
2.0%
WACC:
10.5%
Date:
01/30/14
Source: Independent Research
January 30, 2014
Valuation Memorandum
25
Valuation (VII)
The fair value of AMV602 of CHF231.8m (valuation as of October 8, 2012: 205.5) is almost
unchanged. The progressing discount period compensates for the product launch being delayed by
one year (and the delayed receipt of upfront and milestone payments).
Valuation AMV602
Since the product development is only in an early stage and the assumed probability of success is
therefore only 15%, the adjusted fair value is just CHF34.8m (valuation as of October 8, 2012: 30.8).
We further expect significant (royalty) sales in the coming years. The then high cash flows contribute
only below average to the fair value (they are discounted to their fair value).
Sensitivity analysis - AMV602 (CHFm)
Growth
(TV)
Discount rate (WACC)
10.0%
10.5%
11.0%
2.0%
37.2
34.8
32.5
11.5%
30.5
2.5%
37.6
35.0
32.7
30.7
3.0%
38.0
35.4
33.0
30.9
3.5%
38.4
35.7
33.3
31.1
Source: Independent Research
January 30, 2014
Valuation Memorandum
26
Valuation (VIII)
Valuation Feb. 2014: Conclusion AmVac
CHFm
Fair value
AMV100
AMV110
Add. ind. +
plant
AMV602
Expenses
142.0
202.2
58.8
34.8
-11.7
Total fair value
Difference to 2012
Valuation Oct. 2012: Conclusion AmVac
42.3
58.8
Fair value
AMV100
AMV110
Add. ind. +
plant
AMV602
Expenses
109.2
159.8
0.0
30.8
-14.5
Total fair value
426.0
32.8
CHFm
3.9
285.4
2.8
140.6
Net cash
Capital increases (net)
5.0
0.0
Net cash
Capital increases (net)
1.8
14.1
Fair value of equity
431.0
Fair value of equity
301.4
Number of shares (m)
68.964
Number of shares (m)
55.628
Fair value per share (CHF)
Source: Independent Research
Valuation result
6.25
Fair value per share (CHF)
5.42
Source: Independent Research
We have calculated the fair value at CHF431.0m (valuation as of October 8, 2012: 301,4). The
higher value results from the planned out-licencing agreement for AMV100 and AMV110 in North
America (upfront/milestone payments of CHF180m; upfront payment of CHF50m from licencing of
further potential agents; in addition, the value of the plant and manufacturing licence acquired from
Vakcina; value of the identified mode of action of the Gynevac platform).
The delayed product launch has little effect (progressing discount period).
Due to the increased number of shares (+24%) the fair value per share rises only below proportion
to CHF6.25 (valuation as of October 8, 2012: 5.42; +15%; absolute fair value in CHFm: +43%).
January 30, 2014
Valuation Memorandum
27
Valuation (IX)
Valuation Feb. 2014: Conclusion AmVac (alternative scenario)
CHFm
Fair value
Total fair value
Net cash
Capital increases (net)
AMV100
AMV110
Add. ind. +
plant
AMV602
Expenses
172.0
247.7
58.8
42.9
-11.6
509.8
5.0
0.0
Valuation Oct. 2012: Conclusion AmVac (alternative scenario)
CHFm
Fair value
Total fair value
Net cash
Capital increases (net)
AMV100
AMV110
Add. ind. +
plant
AMV602
Expenses
137.2
200.9
0.0
37.8
-14.6
361.4
1.8
14.1
Fair value of equity
514.8
Fair value of equity
377.4
Number of shares (m)
68.964
Number of shares (m)
55.037
Fair value per share (CHF)
Source: Independent Research
Alternative scenario
7.47
Fair value per share (CHF)
6.86
Source: Independent Research
In our opinion, the fair value calculated in the basic scenario leaves room for further development:
The market share of 4.0% (AMV100, AMV110) and of 30.0% (AMV602) are conservative.
Further indications for AMV100, AMV110 and AMV602 were not considered. The MALP-2
platform was not included in our valuation.
To better illustrate the valuation dynamics we have created an alternative scenario.
We assume that the market shares of AmVac with AMV100 and AMV110 will both increase
to 5.0% and that of AMV602 to 37.5% (meaning an increase by 25%, respectively).
Based on these assumptions, the fair value of AmVacВґs equity increases to CHF514.8m
(valuation as of October 8, 2012: 377.4) or CHF7.47 (before: 6.86) per share.
January 30, 2014
Valuation Memorandum
28
Excursus: Starpharma Holdings Ltd. (I)
Break-even expected in 2016; high dynamics
in profit growth after far-reaching investments
Starpharma Holdings Ltd. - financials*
AUDm
2008
2009
2010
2011
2012
2013
2014E
2015E
2016E
CAGR
Turnover
0.6
0.6
0.9
0.0
2.0
1.4
3.3
6.6
42.1
70%
EBITDA
-9.2
-12.3
-14.4
-14.5
-2.4
-5.4
-7.7
-0.3
14.3
-
EBIT
-9.9
-13.3
-16.4
-16.6
-4.4
-7.1
-8.8
-1.4
13.2
-
Net result
-7.7
-7.5
-7.2
-7.5
-4.1
-6.4
-5.6
-3.7
28.0
-
EPS
-0.07
-0.06
0.00
-0.04
-0.02
-0.03
-0.02
-0.01
0.09
-
Total assets
24.7
28.8
37.6
29.8
54.3
48.6
-
-
-
-
Cash + cash equiv.
7.5
11.6
22.9
18.9
42.8
33.8
22.0
17.9
5.3
-4%
Net cash
7.5
11.6
22.9
18.9
42.8
33.8
21.9
17.8
5.2
-4%
Equity
20.4
25.5
34.8
27.7
48.7
46.0
40.6
26.4
38.7
8%
Equity ratio
83%
88%
93%
93%
90%
95%
-
-
-
-
Working capital
5.5
10.0
21.6
17.9
39.4
36.9
-
-
-
-
Operat. cash flow
-5.4
-4.0
-3.6
-6.5
-9.8
-9.8
-14.1
-10.1
-19.2
17%
Capex
0.0
0.0
0.0
0.1
0.1
0.2
0.2
0.2
0.2
24%
Free cash flow
-5.4
-4.1
-3.7
-6.6
-9.9
-10.0
-14.3
-10.3
-19.4
17%
Financ. cash flow
2.8
8.2
14.9
2.7
33.8
1.0
-
-
-
-
Market cap
49.4
70.5
129.0
371.6
384.7
231.3
223.5
223.5
223.5
21%
EV
41.9
58.9
106.1
352.7
341.9
197.5
201.6
205.7
218.3
23%
P/B ratio
2.4
2.8
3.7
13.4
7.9
5.0
5.5
8.5
5.8
11%
Source: Starpharma Holdings, Bloomberg
Capex as key figure makes no sense
as investments directly flow through
the profit and loss account.
Operating or free cash flow development shows high investments.
Financing cash flow of a total of
AUD63m since 2008; primarily
financed by capital increases.
High equity ratio of more than 80% over the
long run.
Almost continuous increase in stock market
valuation (AUDm)
Temporary peak in 2012 at
AUD385m.
Current market cap: AUD225m.
* fiscal year-end as of June 30
Product pipeline of Starpharma for the treatment of bacterial vaginose (VivaGelВ®):
Phase II and phase III study: proven effectiveness for healing and relief of symptoms.
Current phase II study to prevent the relapse of BV.
January 30, 2014
Valuation Memorandum
29
Excursus: Starpharma Holdings Ltd. (II)
Shareholders of Starpharma Holdings Ltd.
Shareholders by region
Number of shares
(m)
Stake
(%)
Allan Gray Australia
38.2
13.4%
Prudential
34.2
12.0%
Dow Chemical
14.4
5.1%
Sunsuper Fund
5.3
1.9%
Microcap Investment
4.5
1.6%
Vanguard Group
4.5
1.6%
Allianz
4.4
1.6%
Commonwealth Superan
3.4
1.2%
Acorn Capital
3.0
1.1%
First State Super
3.0
1.0%
Fidelity (FIL)
2.8
1.0%
CBA Officer Super Fund
2.6
0.9%
Unisuper
2.2
0.8%
2.00
Queensland LGsuper
2.1
0.7%
1.80
Auscoal Super Fund
2.0
0.7%
Fairley Jacinth
2.0
0.7%
Jenkins, Peter James
1.5
0.5%
1.40
Nestor Investment
1.4
0.5%
1.20
HSBC Holdings
1.4
0.5%
Dimensional Dund
1.4
0.5%
134.4
47.3%
Total - top 20
6%
1%
7%
14%
48%
24%
Australia
UK
US
Luxembourg
Norway
Other
Source: Bloomberg
1.60
1.00
0.80
0.60
Source: Starpharma Holdings, Bloomberg
0.40
0.20
AnalystsВґ estimates:
Price targets of AUD1.58 to AUD2.00 per Starpharma
share (four analystsВґ opinions according to Bloomberg)
January 30, 2014
Jan. 2009
Jan. 2010
Valuation Memorandum
Jan. 2011
Jan. 2012
Jan. 2013
0.00
Jan. 2014
30
Contact Details
Your contacts:
Independent Research
Unabhängige Finanzmarktanalyse GmbH
Pierre Drach
Managing Partner
Stefan Röhle Senior Analyst
Matthias Engelmayer Senior Analyst
Friedrich-Ebert-Anlage 36
60325 Frankfurt am Main, Germany
Telephone:
Fax:
Internet:
E-Mail:
January 30, 2014
+ 49 (0) 69 / 97 14 90-0
+ 49 (0) 69 / 97 14 90-90
http://www.irffm.de
pdrach@irffm.de
Valuation Memorandum
31
Legal Notice
We would like to point out that the presentation is intended exclusively for internal purposes. It may only be disclosed to third parties with the prior
written consent of Independent Research GmbH. This presentation is incomplete without the spoken comments of Independent Research and is
only valid in connection with same.
The information shown is of a general nature and is not intended for the special situation of any individual or any legal entity. Although we
endeavour to provide reliable and up-to-date information, we cannot guarantee that this information is as accurate as it was at the time it was
received, or that it will also remain as accurate in the future. Nobody should act on the basis of this information without appropriate expert advice
and without a thorough analysis of the situation concerned.
Summary of the bases of the valuation:
Standard, recognised valuation methods (including the discounted cash flow method (DCF method), peer group analysis) have been used for this
company valuation. In the DCF method the capitalised value of the issuer is calculated which represents the sum of the discounted results of the
company, i.e. the present value of the future net distributions of the issuer. The capitalised value is therefore determined by the expected future
corporate results and by the capitalisation rate applied. The issuers listed on the stock exchange are appraised in the peer group analysis by
comparing ratio indices (e.g. price/profit ratio, price/book value ratio, enterprise value/turnover, enterprise value/EBITDA, enterprise value/EBIT).
The comparability of the ratio indices is primarily determined by the business activity and the economic prospects.
Sensitivity of the valuation parameters:
The figures from the income statement, cash flow statement and balance sheet on which this company valuation is based are date-related
estimates and thus subject to risks. These can change at any time without prior notice.
The risks include unforeseen changes with regard to competitive pressure or to the demand for the products. Such fluctuations in demand can also
occur due to changes of a technological nature, overall economic activity or, in some cases, to changes in social values. Changes in tax law,
exchange rates and, in certain sectors, regulations may also affect valuations. This explanation of valuation methods and risk factors makes no
claims as regards completeness.
January 30, 2014
Valuation Memorandum
32

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