Piper :DCGN :DG031 Phase IIa Data Looks Good
October 19, 2004
Edward A. Tenthoff, Sr Research
deCODE genetics (DCGN - $6.61)
Outperform
Volatility: Medium
Price Tgt -- $14.00
FY04E Rev -- $47.9 (mil)
Price: $6.61
52 Week High: $13.80
52 Week Low: $5.10
Price Target: $14.00
(Proj Enterprise Value=$760M)
Shares Out (mil): 53.5
Market Cap. (mil): $353.6
Avg Daily Vol (000): 459
Book Value/Share: $1.57
Cash Per Share: $4.23
Debt to Total Capital: 60%
DG031 Phase IIa Data Looks Good
KEY POINTS:
* This morning, deCODE genetics announced positive Phase IIa data on DG031 demonstrating a reduction in CV inflammatory biomarkers including leukotriene B4 (LTB4), myeloperoxidase and sICAM-I. These validated biomarkers have been linked to an increased risk ofheart attack.
* In this trial, 172 patients with a history of heart attacks were enrolled in a double-blind, variable-dose, placebo-control study. The patients were dosed with 250mg of placebo or DG031 once, twice, or three times daily for four weeks. Following dosing and a two week washout period, the drug and placebo groups were switched and dosed for another four weeks.
* As expected, DG031 was found to be safe and well tolerated with no serious adverse events including liver toxicity.
* Depending on how the FDA views the data, deCODE may advance DG031 directly into Phase III trials by early next year, which would be a huge positive for the company.
* Further, this data will be important for potential partners as they evaluate DG031. We believe deCODE will seek a partner to pursue future trials of DG031 in MI. We believe deCODE could recognize a significant return on DG031, which was in-licensed from Bayer only 1 year ago for a few million dollars.
* We look for deCODE to present the full data set, potentially at ASHG conference being held October 26- 30 in Toronto.
* deCODE will host a conference call today at 11AM EDT.
* Importantly, we believe the initial success of the DG031 in-licensing demonstrates the power of deCODE's population genetics approach. deCODE enriched the trial with a population that carried a gene-variant it identified as being associated with an increased risk of heart attack. We look for deCODE to repeat this model in other disease areas.
INVESTMENT RECOMMENDATION: We are maintaining our Outperform rating on deCODE with a price target of $14. We arrive at this price target by forecasting an enterprise value of $760 million based on its clinical pipeline and Encode subsidiary.
RISKS TO ACHIEVEMENT OF TARGET PRICE: Among the risks associated with shares of DCGN are those typical with all genetic/biopharmaceutical discovery companies including developmental, clinical, and regulatory. DC031 could fail in the clinic. deCODE may fail to file INDs or enter into new collaborations or achieve milestones in existing alliances, thereby lowering revenues. deCODE may need to seek additional funds from the capital markets or may face future litigation.
COMPANY DESCRIPTION: deCODE is a population genetics company located in Iceland, that uniquely combines genealogy and healthcare records with a massive genotyping capability to identify disease-associated genes. deCODE is developing these discoveries into drugs and diagnostic products, and can use this information for pharmacogenomic drug salvage and to design information-rich clinical trials (Encode). |
