One of my advisors rating today Journey’s end nearing BUY ▲...

One of my advisors rating today
Journey’s end nearing

BUY ▲ Speculative $0.65 $0.32


Company description. Tissue Therapies has developed a wound-healing product called VitroGro ECM for use in the treatment of diabetic, venous and pressure ulcers. Tissue Therapies argues that VitroGro ECM can be a billion dollar product in the US$30-40bn global market for chronic wound care. There is potential for VitroGro ECM to gain its CE Mark in early 2015.


BUSINESS DESCRIPTION

A wonderful solution to diabetic foot ulcers and venous ulcers.

Around 6~12% of US diabetics have foot ulcers, many of which prove difficult to heal and some of which can lead to expensive and often life- shortening amputations. With ~19 million diagnosed adult diabetics in the US alone any wound healing product with efficacy in diabetic foot ulcers can sell into a market of more than a million people. Another ~2 million Americans probably have venous ulcers today as a result of poor circulation. VitroGro ECM, a combination the two human skin matrix proteins vitronectin and IGF-I, is an elegant solution to venous and diabetic ulcers. In the CE Mark trial of 44 patients, 34% had complete healing and 43% had >90% healing after 12 weeks in wounds that had ulcerated for years.

A delay getting the product to market provides a buying opportunity.

Tissue Therapies completed clinical work for CE Marking of VitroGro ECM in late 2011, however three years later the product is still not approved in Europe. This is in part due to a 2013 disagreement between the UK health regulator, the MHRA, and the EMA as to the appropriate final review process. This has been resolved and the final review of quality data is now underway, albeit with some delays in order to answer EMA questions about manufacturing. We see these delays as providing a buying opportunity since, potentially, CE Mark can be granted early in 2015.


Tissue Therapies is undervalued on our numbers. We value Tissue Therapies using a probability-weighted DCF approach, at 67 cent per share base case valuation and a $1.71 cent optimistic case valuation (was $0.65/$1.44). Our target price of $0.65 per share sits at around the low point of our DCF range