NEUROTROPE INC. Company Note - March 8, 2018 Modeling Assumptions Our revenue projections are based on the moderate-to-severe segment of the 5.5 million patients diagnosed with Alzheimer’s disease in the US. We have estimated 15% of the population is in this range of disease and would be candidates for the IV therapy. As a disease modifying therapy that could reverse the neuronal and synaptic loss and restore memory, the drug could achieve much higher market penetration, but have kept our market penetration assumptions low at this time. Our valuation year estimates do not include mild-to-moderate Alzheimer’s patients or Mild Cognitive Impairment, an early stage of pre-Alzheimer’s disease where there is memory loss. We have also allowed for research and development expenses for other conditions where neuronal connections are either lost or not made during development, but have not included these indications in our revenue models yet. We also believe positive data could lead to partnerships for marketing in the US or foreign territories, but have not forecast any collaborative revenues at this time. The company has developed a library of molecules that could be moved to clinical development as results and funding permit, but we have not forecast large research expenditures for them. Exhibit 6. Product Model for Bryostatin-1 in Severe Alzheimer’s Disease We assume that only the moderate-to-severe population would be candidates for the IV version of the drug. This is intentionally conservative and is based only on the data presented. 2023E 2024E Bryostatin-1 Alzheimer's disease patients, US 5,500,000 5,500,000 Moderate to severe AD 10% Target population 550,000 Market penetration 4% Patients treated per period 23,375 Cost per quarter (year) 10,000 Revenues (000) 935,000,000 Risk adjustment 75% Revenues (000) 233,750 Source: ROTH Capital Partners LLC estimates VALUATION Our Buy rating is based on the expectation that the company plans a new Phase II the begins in 2H18. Other indications where brain cells have caused memory loss include stroke, traumatic brain injury, and other developmental disorders. We allow two years for the study with data expected in 2H20. Allowing for a Phase 3 from 2021 to late 2022, we anticipate approval in late 2023. Our models have assumed an initial low market penetration that increases gradually. To determine a price target for NTRP, we began with estimated earnings for the first year of profitability. Based on a cost of $800 per month ($10,000 annual cost) we assume revenues begin in FY2024. We based our revenues on the severe portion of the diagnosed Alzheimer’s disease population, which is estimated at 10-15% of the estimated 5.5 million patients by the Alzheimer’s Association. We have not included any of the 40 million additional patients in the rest of the world. We adjust these revenues for the high risk of failure in clinical trials for Alzheimer’s disease and reduce the revenue projections by 75% for our revenue estimates. Our estimates reflect the probability of success, market penetration, and revenue potential, which should change as clinical data becomes available. Milestones to drive the stock include announcement of the Phase 2 trial design, initiation of the study, and presentation of data at scientific meetings. Page 10 of 18 NEUROTROPE INC. Company Note - March 8, 2018 We further discount our FY2024 EPS of $6.46 by 30% per year, and apply a multiple of 15X for a price target of $15 per share. Based on expected sales of drugs that are intended to slow the decline in cognitive function or reduce symptoms, we believe our estimates for Bryostatin-1 are conservative. Our valuation correlates with a market capitalization of $330 million compared with about $68 million today. Factors that could impede the achievement of our price target include delays in starting the Phase 2 clinical trial, perceived flaws in the design of the clinical trial, and scientific data from the clinical trial that is interpreted negatively. Exhibit 7. Valuation Matrix for Neurotrope Biosciences, Inc. Current Year 2017 Discount Rate and Earnings Multiple Varies, Year is Constant Year of EPS 2024 2024 EPS Earnings Multiple 15 15.5 5% 10% 15% 20% 25% 30% Discount Factor 30% Earnings 0 $0.00 $0.00 $0.00 $0.00 $0.00 $ - Selected Year EPS $ 6.46 Multiple 5 $22.97 $16.58 $12.15 $9.02 $6.78 $ 5.15 NPV $ 15 10 $45.93 $33.17 $24.30 $18.04 $13.55 $ 10.30 15 $68.90 $49.75 $36.45 $27.06 $20.33 $ 15.45 20 $91.87 $66.33 $48.60 $36.08 $27.11 $ 20.60 25 $114.83 $82.92 $60.74 $45.09 $33.89 $ 25.75 30 $137.80 $99.50 $72.89 $54.11 $40.66 $ 30.90 35 $160.77 $116.08 $85.04 $63.13 $47.44 $ 36.05 EPS Year 30% Discount 15.5 2018 2019 2020 2021 2022 2023 Earnings 5 -$6.45 -$5.50 -$4.42 -$3.06 -$2.58 $ (2.20) Multiple 10 -$12.90 -$11.01 -$8.83 -$6.13 -$5.16 $ (4.41) 15 -$19.34 -$16.51 -$13.25 -$9.19 -$7.74 $ (6.61) 20 -$25.79 -$22.02 -$17.67 -$12.26 -$10.32 $ (8.82) 25 -$32.24 -$27.52 -$22.08 -$15.32 -$12.89 $ (11.02) 30 -$38.69 -$33.03 -$26.50 -$18.38 -$15.47 $ (13.23) 35 -$45.13 -$38.53 -$30.92 -$21.45 -$18.05 $ (15.43) 40 -$51.58 -$44.04 -$35.33 -$24.51 -$20.63 $ (17.64) Source: ROTH Capital Partners LLC estimates RISKS Drug Development Risk Neurotrope is developing drugs for neurological diseases with no known cures. Alzheimer’s disease is not well characterized and its causes are not established. It has historically been difficult to treat, and the risk of product failure is high. Intellectual Property Risk The company faces the risks of the drug development industry, including scientific, technical, clinical, regulatory failures. As novel therapies, its products also face risks with reimbursement and product adoption. The field of patents and intellectual property involves complex scientific and legal issues that are subject to change by legislation or judicial action. Other companies with greater resources may challenge the company through the legal system or in the marketplace. Regulatory Risk The company has conducted a Phase 2 trial, and although we believe the pre-clinical and early clinical data indicate efficacy, the drug still needs to undergo further testing. The finding from the trial must be reviewed by the FDA before the company receives approval to continue clinical testing. Analysis by the agency may not agree with the analysis presented by the company and is not guaranteed. Exchange and Market Risk NTRP shares trade on the NASDAQ exchange. The company is expected to raise additional capital to fund additional trials in the coming year, which is subject to market conditions. Page 11 of 18 NEUROTROPE INC. Company Note - March 8, 2018 Clinical Supplies and Manufacturing Risk Neurotrope does not own or operate facilities for manufacturing and relies on partners for clinical compounds. The company had been obtaining its clinical supplies from the National Institutes of Health, and recently secured a supply agreement with Stanford University. We expect the company to continue to use third-party manufacturers for its planned clinical trials and commercial production. We believe the supply of clinical materials is sufficient to conduct the trials, although third party manufacturing still carries a risk of problems or disagreements that could delay clinical trials. Changing Political Environment The pharmaceutical industry has historically been criticized over the cost of drugs and its pricing policies. We expect the industry to remain a political target by politicians from both parties. Drug approval is under the authority of the FDA, while reimbursement by third-party payors often follows policies established by the Center for Medicaid/Medicare. Both agencies are divisions of the Department of Health and Human Services, run by Commissioners appointed by the President and confirmed by the Senate. Policy changes could have broad effects on the environment for drug development and reimbursement. Page 12 of 18 NEUROTROPE INC. Company Note - March 8, 2018 VALUATION Our valuation is based on conducting a Phase 2, a confirmatory Phase 3, and then approval of Byrostatin-1 in 2023. We discount the revenues at 75% to adjust for risk, then discount earnings in FY2024, the year after product introduction at 30% per year. Our price target is $15 per share. Factors that could impede the achievement of our price target include delays in starting the Phase 2 clinical trial, perceived flaws in the design of the clinical trial, and scientific data from the clinical trial that is interpreted negatively. RISKS Drug Development Risk Neurotrope Inc. is developing drugs for Alzheimer's disease and neurological diseases with no known cures. The company is conducting clinical trials, and although we believe the preclinical and early clinical data indicate efficacy, the drug still needs to undergo further testing in each of the indications. Alzheimer’s disease is not well characterized and its causes are not established. It has historically been difficult to treat, and the risk of product failure is high. Industry Risks The company faces the risks of the drug development industry, including scientific, technical, clinical, regulatory failures. As novel therapies, its products also face risks with reimbursement and product adoption. Intellectual Property Risk The field of patents and intellectual property involves complex scientific and legal issues that are subject to change by legislation or judicial action. Other companies with greater resources may challenge the patents and IP through the legal system or in the marketplace. Exchange and Market Risk NTRPshares trade on the NASDAQ exchange. The company had $18.6 million in cash at September 30, 2017, which we believe is enough to fund operations into 2019. The company may to raise additional capital in the coming year, which is subject to market conditions. Clinical Supplies and Manufacturing Risk Neurotrope does not own or operate facilities for manufacturing and relies on partners for clinical compounds. We expect the company to continue to use third-party manufacturers for its planned clinical trials and commercial production. We believe the supply of clinical materials is sufficient to conduct the trials, although third party manufacturing still carries a risk of problems or disagreements that could delay clinical trials. Changing Political Environment The pharmaceutical industry has historically been criticized over the cost of drugs and its pricing policies. We expect the industry to remain a political target by politicians from both parties. Drug approval is under the authority of the FDA, while reimbursement by third-party payors often follows policies established by the Center for Medicaid/Medicare. Both agencies are divisions of the Department of Health and Human Services, run by Commissioners appointed by the President and confirmed by the Senate. Policy changes could have broad effects on the environment for drug development and reimbursement. COMPANY DESCRIPTION Neurotrope Biosciences, Inc. is developing drugs for neurodegenerative diseases and developmental conditions. The company's lead product is Bryostatin-1, a drug that stimulates an early regulatory protein associated with neuronal pathways. Page 13 of 18 NEUROTROPE INC. Company Note - March 8, 2018 Neurotrope, Inc and Subsidiary: Income Statement ($000) Fiscal Year Ended December 31 2016A 1Q17A 2Q17E 3Q17A 4Q17E 2017E 1Q18E 2Q18E 3Q18E 4Q18E 2018E 2019E 2020E 2021E 2022E 2023E 2024E Product sales Bryostatin-1 - Moderate-to-severe AD 233,750 Total Product Sales - - - - - - - - - - - - - - - - 233,750 Expenses Cost of Goods Sold - - - - - - 35,063 COGS/Revenues Research and Development - related party 1,029 12 77 75 80 245 Research and Development 5,604 1,630 1,288 745 1,100 4,763 1,200 1,800 2,500 3,500 9,000 18,000 26,000 28,000 33,000 36,000 40,000 General and Administrative - related party 60 2 13 13 13 39 General and Administrative 3,436 1,223 1,358 1,253 1,200 5,034 1,300 1,300 1,500 1,500 5,600 6,200 7,600 9,000 9,570 11,500 14,000 Stock based payments - related party 753 33 34 34 40 141 Stock based payments 2,052 190 195 197 200 782 Total expenses 12,933 3,090 2,964 2,317 2,633 11,003 2,500 3,100 4,000 5,000 14,600 24,200 33,600 37,000 42,570 47,500 89,063 Operating Income (Loss) (12,933) (3,090) (2,964) (2,317) (2,633) (11,003) (2,500) (3,100) (4,000) (5,000) (14,600) (24,200) (33,600) (37,000) (42,570) (47,500) 144,688 Loss on abandonment of fixed assets (34) Gain on settlement of lease obligation 54 Interest income 8 9 18 20 10 57 4 4 4 4 16 20 24 28 32 32 32 Total other income 8 28 18 20 10 57 4 4 4 4 16 20 24 28 32 32 32 Pretax Income (12,924) (3,062) (2,946) (2,296) (2,623) (10,946) (2,496) (3,096) (3,996) (4,996) (14,584) (24,180) (33,576) (36,972) (42,538) (47,468) 144,720 Provision for income tax - - - - Tax Rate 0% Net earnings (12,924) (3,062) (2,946) (2,296) (2,623) (10,946) (2,496) (3,096) (3,996) (4,996) (14,584) (24,180) (33,576) (36,972) (42,538) (47,468) 144,720 Preferred stock dividends Net loss attribtuted to common shareholders (12,924) GAAP-EPS (basic) (5.69) (0.43) (0.38) (0.29) (0.33) (1.42) (0.31) (0.39) (0.50) (0.46) (1.68) (1.88) (1.94) (1.76) (1.92) (2.13) 6.46 GAAP EPS (diluted) (5.69) (0.43) (0.38) (0.29) (0.33) (1.42) (0.31) (0.39) (0.50) (0.46) (1.68) (1.86) (1.94) (1.75) (1.92) (2.13) 6.46 Weighted Average Shares (basic) - '000s 2,272 7,145 7,794 7,894 7,910 7,686 7,926 7,942 7,958 10,974 8,700 12,997 17,300 21,125 22,213 22,302 22,391 Weighted Average Shares (diluted) - '000s 2,272 7,145 7,794 7,894 7,910 7,686 7,926 7,942 7,958 10,974 8,700 12,997 17,300 21,125 22,213 22,302 22,391 Source: Neurotrope SEC filings, press releases, and ROTH Capital Partners LLC estimates Robert M. LeBoyer rleboyer@roth.com Page 14 of 18 NEUROTROPE INC. Company Note - March 8, 2018 Neurotrope, Inc. and Subsidiary: Balance Sheet ($000) Assets 2016A 1Q17A 2Q17A 3Q17A 4Q17E 2017E 1Q18E 2Q18E 3Q18E 4Q18E 2018E 2019E 2020E 2021E 2022E 2023E 2024E Cash and Cash Equivilents $25,774 $23,765 $21,466 $18,651 $17,774 $17,774 $15,904 $13,536 $10,368 $31,707 $31,707 $58,994 $79,464 $115,204 $78,815 $37,805 $190,089 Prepaid expenses and other assets 139 133 180 431 431 431 431 431 431 431 431 431 431 431 431 431 431 Subscription receivable Prepaid expenses - related party - Total current assets $25,912 $23,898 $21,646 $19,082 $18,205 $18,205 $16,336 $13,967 $10,799 $32,139 $32,139 $59,425 $79,896 $115,635 $79,246 $38,237 $190,521 Fixed assets, net of accumulated depreciations 55 23 22 21 21 21 21 21 21 21 21 21 21 21 21 21 21 Total assets $25,967 $23,921 $21,668 $19,103 $18,226 $18,226 $16,357 $13,988 $10,821 $32,160 $32,160 $59,447 $79,917 $115,657 $79,267 $38,258 $190,542 Liabilities Accounts payable 2,167 1,878 2,131 1,618 1,618 1,618 1,618 1,618 1,618 1,618 1,618 1,618 1,618 1,618 1,618 1,618 1,618 Accrued expenses 191 57 53 50 50 50 50 50 50 50 50 50 50 50 50 50 50 Note payable Accounts payable - related party Accrued expenses - related party 5 12 - - - - - - - - - - - - - - Total current liabilities $2,363 $1,947 $2,184 $1,668 $1,668 $1,668 $1,668 $1,668 $1,668 $1,668 $1,668 $1,668 $1,668 $1,668 $1,668 $1,668 $1,668 Conbertible redeemable preferred stock, Series A Conbertible redeemable preferred stock, Series B - Total liabilities $2,363 $1,947 $2,184 $1,668 $1,668 $1,668 $1,668 $1,668 $1,668 $1,668 $1,668 $1,668 $1,668 $1,668 $1,668 $1,668 $1,668 Stockholders' equity Common stock 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Additional paid-in capital 73,649 75,080 75,536 75,784 77,529 77,529 78,156 78,883 79,712 106,047 106,047 157,514 211,560 284,272 290,421 296,880 304,445 Accumulated deficit (50,045) (53,107) (56,053) (58,349) (60,972) (60,972) (63,468) (66,564) (70,560) (75,556) (75,556) (99,736) (133,312) (170,284) (212,822) (260,291) (115,572) Total Equity 23,605 21,974 19,484 17,436 16,559 16,559 14,689 12,321 9,153 30,492 30,492 57,779 78,249 113,989 77,600 36,590 188,875 Total Liab & Equity $25,967 $23,921 $21,668 $19,103 $18,226 $18,226 $16,357 $13,988 $10,821 $32,160 $32,160 $59,447 $79,917 $115,657 $79,267 $38,258 $190,542 Shares Issued (000) 2,272 7,145 7,794 7,894 7,910 7,686 7,926 7,942 7,958 10,974 8,700 12,997 17,300 21,125 22,213 22,302 22,391 Shares Outstanding (000) 2,272 7,145 7,794 7,894 7,910 7,686 7,926 7,942 7,958 10,974 8,700 12,997 17,300 21,125 22,213 22,302 22,391 Source: Neurotrope SEC filings, press releases, and ROTH Capital Partners LLC estimates Robert M. LeBoyer rleboyer@roth.com (646) 616-2785 Page 15 of 18 NEUROTROPE INC. Company Note - March 8, 2018 Neurotrope, Inc and Subsidiary: Cash Flow Statement ($000) Cash flows from operating activities: 2016A 1Q17A 2Q17A 3Q17A 4Q17E 2017E 1Q18E 2Q18E 3Q18E 4Q18E 2018E 2019E 2020E 2021E 2022E 2023E 2024E Net income (loss) (12,924) (3,062) (6,008) (8,304) (10,927) (10,927) (2,496) (5,592) (9,588) (14,584) (14,584) (24,180) (33,576) (36,972) (42,538) (47,469) 144,719 Stock based compensation 2,805 223 451 682 2,800 2,800 500 1,100 1,800 2,500 2,500 3,100 4,000 4,100 4,600 4,900 6,000 Consulting services paid by issuance of common stock 31 105 122 Consulting services paid by issuance of Series B units Depreciation expense 7 2 2 3 Loss on abandonment of fixed assets 34 34 34 Changes in assets and liabilities: Change in prepaid expenses and other current assets 1,351 6 (41) (293) Change in subscription receivable 3 Change in accounts payable - related party 0 Increase (decrease) in accrued expenses - related party (384) 8 (5) (5) (Decrease) Increase in accounts payable 1,718 (290) (36) (550) (Decrease) Increase in accrued expenses 49 (134) (138) (141) Net Cash Used in Operating Activities (7,377) (3,182) (5,635) (8,451) (8,127) (8,127) (1,996) (4,492) (7,788) (12,084) (12,084) (21,080) (29,576) (32,872) (37,938) (42,569) 150,719 Cash flows from investing activities: Purchase of property and equipment (3) (4) (4) (4) 0 Net cash provided by investing activities (3) (4) (4) (4) 0 0 0 0 0 0 0 0 0 0 0 0 0 Cash flows from financing activities: Issuance of preferred stock, net of transaction costs Issuance of common stock, net of transaction costs 21,760 127 127 127 254 382 26,018 26,018 48,367 50,046 68,612 1,549 1,559 1,565 Proceeds from note payable Repayments on note payable (11) Proceeds form exercise of common stock warrants 173 1,178 1,331 1,331 Net cash provided by financing activities 21,922 1,178 1,331 1,331 127 127 127 254 382 26,018 26,018 48,367 50,046 68,612 1,549 1,559 1,565 Effect of exchange rate on cash and cash equivalents Net Increase (decrease) in cash and cash equivilents 14,543 (2,008) (4,308) (7,123) (8,000) (8,000) (1,869) (4,238) (7,406) 13,934 13,934 27,287 20,470 35,740 (36,389) (41,009) 152,284 Cash and equivalents, beginning of period 11,231 25,774 25,774 25,774 25,774 25,774 17,774 17,774 17,774 17,774 17,774 31,707 58,994 79,464 115,204 78,815 37,805 Cash and equivalents, end of period 25,774 23,765 21,466 18,651 17,774 17,774 15,904 13,536 10,368 31,707 31,707 58,994 79,464 115,204 78,815 37,805 190,089 Source: Neurotrope SEC filings, press releases, and ROTH Capital Partners LLC estimates Robert M. LeBoyer rleboyer@roth.com (646) 616-2785 Page 16 of 18 NEUROTROPE INC. Company Note - March 8, 2018 Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Disclosures: ROTH makes a market in shares of Neurotrope Inc. and as such, buys and sells from customers on a principal basis. Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to a rating or price target, except for the first box, which may only represent the first note written during the past three years. Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliate received compensation for investment banking services in the past 12 month. Distribution of IB Services Firmwide IB Serv./Past 12 Mos. as of 03/08/18 Rating Count Percent Count Percent Buy [B] 247 71.39 133 53.85 Neutral [N] 45 13.01 18 40.00 Sell [S] 4 1.16 2 50.00 Under Review [UR] 49 14.16 27 55.10 Our rating system attempts to incorporate industry, company and/or overall market risk and volatility. Consequently, at any given point in time, our investment rating on a stock and its implied price movement may not correspond to the stated 12- month price target. Ratings System Definitions - ROTH employs a rating system based on the following: Buy: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return of at least 10% over the next 12 months. Neutral: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return between negative 10% and 10% over the next 12 months. Sell: A rating, which at the time it is instituted and or reiterated, that indicates an expectation that the price will depreciate by more than 10% over the next 12 months. Under Review [UR]: A rating, which at the time it is instituted and or reiterated, indicates the temporary removal of the prior rating, price target and estimates for the security. Prior rating, price target and estimates should no longer be relied upon for UR-rated securities. Not Covered [NC]: ROTH does not publish research or have an opinion about this security. ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. The material, information and facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon Page 17 of 18 NEUROTROPE INC. Company Note - March 8, 2018 request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without the express written permission of ROTH. Copyright 2018. Member: FINRA/SIPC. Page 18 of 18
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