Phytopharm IMS: Cogane Solid Dose Development

Phytopharm is seeking to strengthen its partnering package for its Parkinson’s disease candidate Cogane with the start of an important Phase I bioavailability study with solid dose capsule formulations. Results by end 2012/early 2013 are significant to making Cogane, currently being tested as a slightly less convenient liquid formulation, more commercially viable and attractive to potential partners. However, Cogane’s true magnetism is ultimately dependent on top-line results in February 2013 from the Confident-PD Phase II study, a binary event for Phytopharm. We maintain our rNPV of £48m while noting that success in both trials and securing a partner would raise our valuation to £83m.

Getting Phase III ready
Cogane has the potential to become the first small-molecule, disease-modifying therapy for Parkinson’s, and therefore could attract a lucrative licensing deal. However, this depends on the outcome of the Confident-PD study in 408 patients with newly diagnosed, treatment-naive Parkinson’s disease, which should render top-line results in February 2013. The concurrent development of a solid dose capsule formulation of Cogane is also important as positive results in both studies would present potential partners with a Phase III-ready asset and help Phytopharm extract best value from partnership discussions. We recently published full details of the Confident-PD study, Phytopharm’s other pipeline projects and the overall investment case.

ALS option
Cogane has also demonstrated potential as a treatment for amyotrophic lateral sclerosis (ALS), with positive data from four different models of ALS. Depending on the outcome of Confident-PD, ALS could offer an additional valuation parameter in any licensing discussions or may provide a fall-back avenue of development for Cogane if the drug fails in the Parkinson’s trial.

Valuation: rNPV of £48m with significant uplift potential
We maintain our risk-adjusted NPV of £48m, which compares favourably with Phytopharm’s £10.4m enterprise value, based on net cash of £13.3m as of 31 March 2012. Over 50% of our valuation is assigned to Cogane’s potential in Parkinson’s. Ahead of data from the Confident-PD trial, we assign a 25% probability of success – positive results and securing a partner would raise that probability to 50% and therefore our rNPV to £83m. Phytopharm has reiterated prior guidance that existing cash reserves are sufficient to fund operations to the end of 2013.

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