On behalf of Van Leeuwenhoeck Institute Inc (VLI), it is my...

On behalf of Van Leeuwenhoeck Institute Inc (VLI), it is my pleasure to send you our initiating coverage report on Australian biotech company Regeneus (ASX: RGS).
In summary:

-Regeneus Ltd (ASX: RGS) is one of the leading biotech companies in Australia in the fast growing area of regenerative medicine. The company is developing and commercializing its proprietary technology platforms for autologous and off-the-shelf cell therapies using fat (adipose)-derived regenerative cells for the treatment of musculoskeletal and other inflammatory diseases in humans and animals. The company also has a proprietary autologous therapeutic cancer vaccine technology.

-Regeneus currently has three commercially available products in Australia: CryoShot® Canine and CryoShot® Equine for the veterinary market and HiQCell® for the human market. CryoShot® is an allogeneic off-the-shelf cell-based product. It has been used in trials to treat hundreds of cases of canine and equine osteoarthritis and tendinopathy. HiQCell® is a proprietary cell therapy that uses regenerative cells taken from a patient’s own adipose tissue to treat musculoskeletal conditions with a focus on osteoarthritis and tendinopathy. It has already been used to treat more than 450 patients with over 1,000 human arthritic joints in clinical trials and commercial settings.

-The company is currently in a process to roll out several of its products in the US, UK, Japan and Singapore. Recently, Regeneus announced a partnership with US vaccine manufacturer Hennessy Research for the production of its canine cancer vaccine, Kvax as well as a partnership with a leading US vet health care services group to conduct a marketing trial in the United States. The same technology will also be used to develop and commercialize a new personalized therapeutic human cancer vaccine.  A first-in-man trial (safety study) is scheduled to commence in the first half of 2015.

-Next to this Regeneus is developing a human version of CryoShot® (Progenza), which should be the most important long-term value driver. Recently, Regeneus received ethics approval to collect stem cells from human donors for use in production of its new allogeneic off-the-shelf stem cell product for osteoarthritis (OA). This approval allows Regeneus to begin manufacturing the cells for its first-in-man clinical trial to assess initial safety and preliminary efficacy in human volunteers with knee OA.

-The market for regenerative medicine, particularly stem cell therapy is growing rapidly. Even though the majority of people perceive regenerative medicine as something of the future, it is actually here and now. A significant number of regenerative medicine products are already commercially and clinically successful. In addition to over 60,000 stem cell transplants annually performed worldwide for the treatment of oncology and blood-based disorders, it is estimated that in 2012 cell therapy products distributed by biotech companies generated over USD 900 million with 160,000 patients receiving treatments. The Stem Cell Therapy Market is poised to grow at a CAGR of 39.5% from 2015 to 2020, to reach USD 330 million by 2020.

-Certain important news expected in the next 12 months could drive the stock up. Several key near-term milestones for each of Regeneus’ programs are anticipated, including the start of a clinical Phase I/II study with Progenza, the start of a registration study in the US with CryoShot® and the start of a first-in-man safety study with Kvax as well as a US marketing study with Kvax in dogs.  

-Based on sum-of-the-parts valuation, we believe Regeneus is substantially undervalued at the current share price of AUD 0.26. Using our valuation model, the Company’s total value is AUD 177 million, or AUD 0.90 per share. This represents a 250% upside from the current share price.


Marcel Wijma
CEO & Managing Partner
Van Leeuwenhoeck Institute
244 Fifth Avenue
New York, NY 10001
phone: +1 917 460 6185