Allied Healthcare Group (ASX: AHZ) is the subject of a broker research report which has placed a Speculative Buy recommendation and a price target of $0.10 per share on the stock.
An extract of the report is below.
Recommendation: Spec Buy
Target (12 months): $0.10 (previously $0.18)
Enterprise value: $21.5 million
Market cap: $22.5 million
Issued capital: 643.4 million
Free float: 100%
Avg. daily vol. (52wk): 0.65 million
12 month price range: $0.026-$0.095
Upside in DNA vaccines and soft tissue repair
Tissue engineering technology that works
Over the last six years Allied Healthcare (bioMD until July 2011), has successfully demonstrated that its ADAPT technology can work well in a variety of soft tissue repair situations.
This opens up the potential for the technology to displace existing synthetic products used in soft tissue repair. Around US$700m a year gets spent in the US on soft tissue repair procedures such as heart valve replacement, hernia surgery, and pelvic floor reconstruction.
We rate highly Allied Healthcare’s chances of addressing these markets. Studies on the use of ADAPT in tissue heart valves are ongoing.
Professor Ian Frazer’s Next Big Thing
The 2011 merger of bioMD with Allied Medical brought into the listed company a major investment in Coridon, which is developing a new generation DNA vaccine.
The Coridon technology is being worked on in the laboratory of Professor Ian Frazer, famous as the inventor of Merck & Co’s Gardasil cervical cancer vaccine.
Coridon’s lead candidate is a vaccine for HSV-2, the virus which causes genital herpes. It will go to the clinic sometime in the next twelve months.
Meanwhile pre-clinical work is being undertaken on an Epstein-Barr Virus vaccine, potentially useful in the treatment/prevention of lymphomas and head-and-neck cancers. In addition, the work may contribute to a prophylactic vaccine against glandular fever.
High risk / High return
Teams around the world have been at work on DNA vaccines for a long time. Ian Frazer’s group believes their chances of success are better than most because 1) they have developed technology to improve protein expression from DNA vaccines, boosting the likelihood of a strong immune response compared to other DNA vaccines; and 2) by mixing together two DNA vaccines, one of which has been combined with the regulatory protein ubiquitin, the Frazer group believes it can get a long-lasting cell-mediated immune response.
Allied Healthcare is undervalued on our numbers
We value Allied Healthcare at $0.08 per share base case and $0.12 per share optimistic case, diluted for another $15m raising.
Our target price of $0.10 sits at the midpoint of our valuation range. We expect the market to re-rate Allied Healthcare as further clinical and pre-clinical data on the utility of its technologies emerges during 2012.