EpiCept's AmiKet Gets FDA Fast Track

EpiCept’s investment case is centred on finding a development partner for AmiKet, a product for chemotherapy-induced peripheral neuropathy. Although EpiCept’s valuation is depressed as a result of the ongoing regulatory and commercial setbacks with respect to Ceplene and Azixa, the upside from a successful deal -- that might include an M&A transaction -- could be considerable. Cash currently lasts to Q3, while our valuation -- presuming Amiket is partnered -- is a multiple of the current share price.

AmiKet Granted Fast-Track Designation By FDA
The U.S. FDA’s recent award of Fast Track designation to Amiket for chemotherapy-induced peripheral neuropathy (CIPN) should shorten regulatory timelines and could help attract a development partner. In January, EpiCept received finalised FDA guidance for the Phase III clinical development plan. EpiCept also recently received EMA guidance that is consistent with the FDA, which should make it easier to design a Phase III programme for filing an NDA in both the U.S. and EU that is faster and cheaper.

F573 Emerges From Preclinical Studies For Viral Hepatitis
F573 (EP1013), a small molecule licensed to GNI Group for Asia, Australia and New Zealand, has demonstrated a therapeutic effect in a preclinical acute liver injury model, including a reduction in TNF-alpha and cell apoptosis. An Investigational New Drug (IND) application was filed in China by GNI in July 2011. EpiCept retains ex-Asia rights to the compound.

Financials: Funded To Q312
An April 2012 $1.1m ($0.97m net) fund-raising of convertible preferred stock (convertible into 6.3m ordinary shares) should extend the cash runway into Q312. EpiCept ended Q112 with $5.1m of cash.

Valuation: Risk-Adjusted NPV Of $79m
EpiCept has a current market cap of $12.6m, a senior secured loan of $6.6m and cash of $5.1m as of 31 March 2012 resulting in an EV of $14.1m. In comparison, we calculate a risk-adjusted NPV of $79m based on prudent assumptions of the four products’ probability of success in each indication, launch date, pricing and market penetration.

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