Australia | Dec 23 2008
By Chris Shaw
There haven’t been many Christmas presents for equity investors this year but according to ABN Amro Morgans Christmas has come early for Peplin ((PLI)) and shareholders could benefit from the company’s good fortune.
The broker has upgraded the stock to Buy from Hold on the back of the conclusion of enrolments for its first Phase III (non-head) clinical trial for its PEP005 compound for the treatment of actinic keratosis - sunspots in laymans terms. The PEP005 trial is targeting regions of the body such as the trunk and extremities.
The trial to date is proceeding according to previous expectations and the broker notes results should come in the second quarter of next year as the efficiency of the compound is to be assessed after 57 days. Results should also be available in the first quarter of 2009 from a previous Phase IIb trial where sunspots on the head and face were treated. Assuming this trial is a success, a follow-up Phase III trial is expected to commence in the second quarter.
With the potential for positive results from these trials the broker sees news flow for the company as likely to be supportive for the share price in coming months, especially as the data from previous trials indicate a reasonable chance of success from the current programs.
Further factors supporting the broker’s upgrade in rating is that there appear to be sufficient funds for the current development program given around US$31 million in net cash on the company’s balance sheet, while foreign exchange movements have seen it lift its DCF valuation to $1.02 from $0.78. As sentiment towards the sector is negative at present, the broker has set its price target at a 40% discount to this level, which means it increases to $0.61 from $0.55. This implies potential upside of 100% from current levels.
Given a very modest market capitalisation of around $4.3 million there is little coverage of the stock, the FNArena database showing no other ratings. Shares in Peplin today are stronger and as at 1.00pm the stock was up 1.5c at $0.355. This compares to a trading range over the past year of $0.28 to $0.88.