QuickView: AmpliPhi BioSciences

A $7m private placement with RA Capital and Third Security, and a research collaboration with the U.S. army, provide AmpliPhi BioSciences (APHB) with fresh impetus in its development of bacteriophages. These deals build on the purchase of Special Phage Services (SPS) last year and a recent strategic collaboration with Intrexon. AmpliPhi is the only company to have completed a controlled Phase I/II study with bacteriophages (naturally-occurring viruses that kill bacteria). The next steps towards technology validation are Phase I and II studies with the US army in 2014 in skin infections due to S Aureus, and a Phase II study to treat Pseudomonas infections in cystic fibrosis (CF).

Attracting critical interest
AmpliPhi sold 5m newly created series B shares (each convertible into 10 common shares) to RA Capital and Third Security (and BioScience Managers) for $7m (we estimate $6.25m net proceeds). Warrants to purchase 17.5m shares at $0.14/share have also been issued. Related to this transaction, AmpliPhi converted $6.3m in outstanding convertible loan notes into 5m new series B shares, plus 12.5m share warrants at $0.14/share. We estimate end-Q213 cash at $6.85m.

US army adds manufacturing capability
AmpliPhi has secured a collaborative research and development agreement (CRADA) with the US army to develop and commercialise bacteriophage therapeutics to treat Staphylococcus aureus, Escherichia coli and Pseudomonas aeruginosa infections. A Phase I nasal decolonisation study of S Aureus in Q114 will be followed by a Phase II wound infection study in H214. The US army will manufacture the S Aureus phage (002) at its cGMP bioproduction facility.

Fresh approaches required
With bacterial resistance to conventional antibiotics rising and research dollars falling, there is a critical need for new technologies. A raft of US government legislation and development contract awards highlight this need. Bacteriophages have potential to overcome bacterial resistance, particularly by disrupting biofilms, but few rigorous clinical studies have been conducted. Near-term, successful development of phages against S Aureus and P aeruginosa is key to validation.

Valuation: Modest $25m EV
We estimate AmpliPhi’s EV at $25m, based on 197m total shares now outstanding and $6.85m net cash at end-Q213. We view this as modest, particularly with regard to the CF opportunity. We will initiate full coverage of AmpliPhi in due course.

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