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COMPANY UPDATE
Pluristem Therapeutics, Inc.
(PSTI NASDAQ $3.24)
Pluristem :An Erroneous Story Misrepresents the Facts
We spoke with Pluristem last week as a Bloomberg story was breaking that suggested the company failed to report a patient death and in-fact was guilty of hyping and miss-representing the companys clinical experience. The story immediately made no sense to us, as the patient in question, a young pediatric patient, died, six months after treatment; many months after the allogeneic cells were long gone. The story in question was an article published in Bloomberg on November 7, 2012. Pluristem has submitted a direct request to Bloomberg to publish a correction because the article it published is factually inaccurate and in our opinion, totally misleading. We expect better from Bloomberg. The article reviewed a pediatric patient who was critically ill, in imminent danger of death and who had exhausted all other treatments. The patient was treated on a compassionate use basis in Israel, and was not part of any Pluristem clinical trial. The patient was able to leave the hospital and survived six months, the last four of them in her home country of Romania. The patient left Israel over the objections of her Israeli treatment team, and we believe if she had remained in country, she may be alive today. Pluristem was not monitoring the patient and learned of her death at the discretion of her family and physician. In addition, the formal report relating to the death clearly stated that there was no connection between the PLX cell treatment and the death of the patient. PLX cells for this patient were used after all other options were exhausted. The patients was days (maybe hours) away from death as a result of two failed marrow transplants. For the patient to have survived six months, and died of sepsis in her home country, is for us, a sad but unrelated event. PLX cells for us worked, and at least initially allowed the graft to take hold. We reiterating Buy rating and $8 price target. We provide three valuation metrics FCF, discounted EPS, and sum of the parts and are modeling PSTI out to 2018. This derives a 2018 EPS number of $2.79, which we discount at 30% and equally weight the three metrics to derive an $8.00 price target.
Biotechnology
November 12, 2012 Closing Price 11/9/2012 $3.24 12-Month Target Price: $8.00 52-Week Range: $2.02-$5.00 Market Cap (M): $168 Shares O/S (M): 51,713 Float (M): 46,542 Avg. Vol. (000) 1,053 Cash & Cash Equivilents (M) Q1-2012 70,127 Debt (M) $0 Dividend/Yield: $0.00/0.00% Risk Profile: Speculative Revenues 2017 2018 CLI $181 $347
Buy
FYE: December 2011A 2012E 2013E 2014E 2015E 2016E 2017E 2018E
GAAP EPS $ (0.35) $ (0.29) $ (0.36) $ (0.37) $ (0.26) $ 0.04 $ 1.41 $ 2.79
Pluristem (PSTI)
(212) 895-3516
Maxim Group LLC 405 Lexington Avenue New York, NY 10174 www.maximgrp.com
SEE PAGES 4-6 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS
2012E (14,088) 0% (14,088) (996) 393 (12,699) (46,431) 30% 1% 526,459 406,218 440,111 51,765 8.5
June 2012
$ $
8.82
8.8 10 15 20 25 30 35 40 45
Discount Rate and Earnings Multiple Varies, Year is Constant 2018 EPS 25% 30% 35% 40% $7.31 $5.77 $4.60 $3.70 $10.96 $8.66 $6.91 $5.55 $14.61 $11.55 $9.21 $7.40 $18.27 $14.44 $11.51 $9.25 $21.92 $17.32 $13.81 $11.11 $25.57 $20.21 $16.12 $12.96 $29.23 $23.10 $18.42 $14.81 $32.88 $25.99 $20.72 $16.66
$ $ $ $ $ $ $ $
LT Gr 1% 1% 1% 1% 1% 1% 1% 2%
Discount Rate 30% 30% 30% 30% 30% 30% 30% 30%
Yrs. to Mkt 5 7 6 7 7 5 9 0
Peak Sales MM's $500 $100 $1,000 $100 $100 $200 $100 $2
Term Val $1,724 $1.75 $345 $0.08 $3,448 $0.83 $345 $0.08 $345 $0.08 $690 $0.70 $345 $0.05 $7 $0.04 30% 52 $4 $1.34 $4.94
2009A
2010A
2011A
1Q12A
2Q12A
3Q12E
4Q12E
2012E
1Q13E
2Q13E
3Q13E
4Q13E
2013E
2014E
2015E -
2016E 29,888
2017E 181,200
2018E 346,572
Phase 3
PLX-RA P 1/2 Phase 2 Phase 2 Phase 2 Phase 2
154
231
385
29,888
181,200
346,572
0 -
5,978 0 5,978
36,240 0 36,240
6,123 (1,822) 4,301 6,629 2,849 1,074 2,486 2,486 9,944 3,480 3,480 3,480 3,480 13,921 14,617 15,348 0 16,115 5,081 17% 16,921 30,804 17% 17,767 58,917 17%
2,156 2,156 15,348 (15,348) 3 (15,351) (1,603) 10% (13,748) (0.26) 52,311 52,311
5,081 2,199 2,199 27,174 2,714 117 2,597 420 16% 2,178 0.04 52,521 52,521
30,804 2,243 2,243 83,965 97,235 272 96,963 22,196 23% 74,767 1.41 52,731 52,731
58,917 2,288 2,288 145,999 200,574 272 200,302 52,123 26% 148,179 2.79 52,942 52,942
Source Maxim
Source: Investars.com
Maxim Group makes a market in Pluristem Therapeutics, Inc. Maxim Group expects to receive or intends to seek compensation for investment banking services from Pluristem Therapeutics, Inc. in the next 3 months I, Jason Kolbert, attest that the views expressed in this research report accurately reflect my personal views about the subject security and issuer. Furthermore, no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report. The research analyst(s) primarily responsible for the preparation of this research report have received compensation based upon various factors, including the firms total revenues, a portion of which is generated by investment banking activities. Valuation Methods: We provide detailed market models and assumptions around Pluristem Therapeutics. We provide three valuation metrics FCF, discounted EPS, and sum of the parts and model PSTI out to 2018. We only assume success in CLI and have not included milestone or deal revenues related to United Therapeutics or other new partners. This derives a 2018 EPS number of $2.79, which we discount at 30% and equally weight the three metrics to derive a $8.00 price target. Price target and investment risks: Aside from general market and other economic risks, risks particular to our price target and rating for Pluristem Therapeutics include: 1) The regulatory and clinical risk associated with pivotal trials in CLI and other indications the company is pursuing; 2) the rate and degree of progress of product development; 3) the rate of regulatory approval to proceed with clinical trial programs; 4) the level of success achieved in clinical trials; 5) the requirements for marketing authorization from regulatory bodies in the United States and other countries; 6) the liquidity and market volatility of Pluristems equity securities; 7) regulatory and manufacturing requirements and uncertainties; 8) technological developments by competitors; and 9) the financials (capital structure) of the company.
RISK RATINGS
Risk ratings take into account both fundamental criteria and price volatility. Speculative Fundamental Criteria: This is a risk rating assigned to early-stage companies with minimal to no revenues, lack of earnings, balance sheet concerns, and/or a short operating history. Accordingly, fundamental risk is expected to be significantly above the industry. Price Volatility: Because of the inherent fundamental criteria of the companies falling within this risk category, the price volatility is expected to be significant with the possibility that the investment could eventually be worthless. Speculative stocks may not be suitable for a significant class of individual investors. High Fundamental Criteria: This is a risk rating assigned to companies having below-average revenue and earnings visibility, negative cash flow, and low market cap or public float. Accordingly, fundamental risk is expected to be above the industry. Price volatility: The price volatility of companies falling within this category is expected to be above the industry. High-risk stocks may not be suitable for a significant class of individual investors. Medium Fundamental Criteria: This is a risk rating assigned to companies that may have average revenue and earnings visibility, positive cash flow, and is fairly liquid. Accordingly, both price volatility and fundamental risk are expected to approximate the industry average. Low Fundamental Criteria: This is a risk rating assigned to companies that may have above-average revenue and earnings visibility, positive cash flow, and is fairly liquid. Accordingly, both price volatility and fundamental risk are expected to be below the industry.