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NEPT -Omthera reported positive phase 3 trial
1. ®
First Take
Neptune Technologies & Bioressources, Inc. (NEPT)
Price: $3.19 (04/26/2012 - Intraday), Price Target: $7.00, Market Cap(MM):
$158.3, Rating: Market Outperform
Elemer Piros, Ph.D., Senior Biotechnology Analyst 212-430-1754 epiros@rodm.com
Suy Anne Martins, M.D., Ph.D., Associate Biotechnology Analyst 212-430-1778 smartins@rodm.com
Omthera Reported Positive Phase 3 Trial
Key Points:
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Omthera Pharmaceuticals (Private, Not Rated) disclosed Phase 3 top-line results for Epanova
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Epanova is a ultra-pure mixture of free fatty acids EPA and DHA
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AMR101 is a omega-3 fatty acid, comprising ~96% ultra-pure EPA
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Both are lipid-lowering drugs, targeting the large hypertriglyceridemia market
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AMR101’s main advantage is that it does not raise LDL (bad cholesterol)
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Omthera did not disclose LDL data, which prompted speculation that the drug might raise LDL
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Krill oil based CaPre® not only seems to decrease triglycerides, but also appears to reduce LDL and to increase
HDL (good cholesterol)
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We maintain our Market Outperform rating and $7 Target Price on Neptune
No LDL Data Disclosed
Today, Omthera disclosed positive top-line data from its EVOLVE (EpanoVa fOr Lowering Very High triglyceridEs) clinical
study for Epanova, the company's lead compound for the treatment of patients with very high triglycerides.
The primary outcome was the percentage change in triglycerides from baseline to week 12, and the secondary endpoint
was the reduction in non-HDL-cholesterol. Epanova results demonstrated statistically significant reduction of triglycerides in
all dose groups, with median decreases in triglycerides from baseline to end of treatment of approximately 26% in the 2g
cohort and 31% for those subjects on the 4g dose. In addition, it was observed a decrease of 8% in non-HDL-cholesterol in
both groups.
Omthera believes superior bioavailability and greater dosing flexibility would enable its Epanova omega-3 fatty acid to
compete in the $1B market for lipid-lowering drugs, now occupied by Lovaza. Free fatty acids might be more easily
absorbed than an ethyl ester fatty acid like Lovaza. In fact, on January 9, 2012 the company reported that in a 52-subject
clinical study - after 14 days of dosing on a low fat diet - plasma EPA and DHA levels were 5.8x higher in subjects dosed
with Epanova compared to those dosed with Lovaza. Additionally, Epanova increased steady state plasma levels of EPA
plus DHA by 448%, compared to 90% for Lovaza.
Although the company reported positive outcomes today on lowering triglycerides, it did not disclose any data particularly
related to LDL.
For definitions and the distribution of analyst ratings, and other disclosures, please refer to pages 3 - 4 of this report.
2. Neptune Technologies & Bioressources, Inc. April 26, 2012
While AMR101 (Amarin, AMRN, Not Rated) does not lower triglycerides as much as Lovaza, neither does
it raise LDL, which Lovaza’s label warns about. Since Omthera did not show results specifically for LDL,
it prompted speculations that Epanova might increase LDL. This is positive from the competitive
perspective for Amarin.
LDL level is an important differentiator when comparing lipid-lowering medications. The perfect trifecta
would be comprised by (1) lowering triglycerides, (2) decreasing LDL, and increasing HDL.
In contrast with the potential liability of raising LDL, preclinical and initial clinical testing already
®
demonstrated that NKO (from Neptune, NEPT, Market Outperform) appears to have an effect in
®
reducing LDL and triglycerides, as well as increasing HDL levels. CaPre (from Acasti, APO, Not Rated),
®
which is a concentrated form of NKO , has the potential to be the best-in-class lipid-lowering therapy.
Valuation
We value Neptune shares, based on a sum of the parts analysis: (1) probability-adjusted NPV model for
®
CaPre , which yields $120MM (58% ownership), and (2) a DCF valuation on the nutraceutical business,
which contributes $230MM plus $26MM projected cash to our model. The combined value of these two
programs is estimated at $370MM, or $7/share, factoring in fully diluted shares. Upon completion and
®
successful outcome of CaPre Phase 2 development, the value attributed to this program could rise from
$120MM to $240MM, boosting Neptune’s target value from $7 to $9/share, in our view.
RODMAN & RENSHAW EQUITY RESEARCH 2
3. Neptune Technologies & Bioressources, Inc. April 26, 2012
RODMAN & RENSHAW RATING SYSTEM: Rodman & Renshaw employs a three tier rating system for evaluating both the potential
return and risk associated with owning common equity shares of rated firms. The expected return of any given equity is measured on a
RELATIVE basis of other companies in the same sector, as defined by First Call. The price objective is calculated to estimate the
potential movement in price a given equity could achieve given certain targets are met over a defined time horizon. Price objectives are
subject to exogenous factors including industry events and market volatility. The risk assessment evaluates the company specific risk and
accounts for the following factors, maturity of market, maturity of technology, maturity of firm, cash utilization, and valuation
considerations. Potential factors contributing to risk: relatively undefined market, new technologies, immature firm, high cash burn rates,
intrinsic value weighted toward future earnings or events.
RETURN ASSESSMENT
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Market Outperform (Buy): The common stock of the company is expected to outperform a passive index comprised of all the
common stock of companies within the same sector, as defined by First Call.
q
Market Perform (Hold): The common stock of the company is expected to mimic the performance of a passive index comprised
of all the common stock of companies within the same sector, as defined by First Call.
q
Market Underperform (Sell): The common stock of the company is expected to underperform a passive index comprised of all
the common stock of companies within the same sector, as defined by First Call.
RISK ASSESSMENT
q
Speculative - The common stock risk level is significantly greater than market risk. The stock price of these equities is
exceptionally volatile.
q
Aggressive - The common stock risk level is materially higher than market level risk. The stock price is typically more volatile
than the general market.
q
Moderate - The common stock is moderately risky, or equivalent to stock market risk. The stock price volatility is typically in-line
with movements in the general market.
Rating and Price Target History for: Neptune Technologies & Bioressources, Inc. (NEPT) as of 04-25-2012
04/25/12
I:MO:$7
5
4
3
2
1
0
Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2
2010 2011 2012
Created by BlueMatrix
RATING SUMMARY
Distribution of Ratings Table
IB Serv./Past 12 Mos
Rating Count Percent Count Percent
Market Outperform(MO) 82 62.60% 13 15.85%
Market Perform(MP) 28 21.37% 3 10.71%
Market Underperform(MU) 6 4.58% 0 0.00%
Under Review(UR) 15 11.45% 4 26.67%
Total 131 100% 20 100%
Investment Banking Services include, but are not limited to, acting as a manager/co-manager in the underwriting or placement of
securities, acting as financial advisor, and/or providing corporate finance or capital markets-related services to a company or one of its
affiliates or subsidiaries within the past 12 months.
RODMAN & RENSHAW EQUITY RESEARCH 3
4. Neptune Technologies & Bioressources, Inc. April 26, 2012
ADDITIONAL DISCLOSURES
Rodman & Renshaw, LLC. (the "Firm") is a member of FINRA and SIPC and a registered U.S. Broker-Dealer.
ANALYST CERTIFICATION
I, Elemer Piros, Ph.D., hereby certify that the views expressed in this research report accurately reflect my personal views about the
subject company(ies) and its (their) securities.
None of the research analysts or the research analyst's household has a financial interest in the securities of Neptune Technologies &
Bioressources, Inc. (including, without limitation, any option, right, warrant, future, long or short position).
As of Mar 31 2012 neither the Firm nor its affiliates beneficially own 1% or more of any class of common equity securities of Neptune
Technologies & Bioressources, Inc..
Neither the research analyst nor the Firm has any material conflict of interest with Neptune Technologies & Bioressources, Inc., of which
the research analyst knows or has reason to know at the time of publication of this research report.
The research analyst principally responsible for preparation of the report does not receive compensation that is based upon any specific
investment banking services or transaction but is compensated based on factors including total revenue and profitability of the Firm, a
substantial portion of which is derived from investment banking services.
The Firm or its affiliates did not receive compensation from Neptune Technologies & Bioressources, Inc. for any investment banking
services within twelve months before, but intends to seek compensation from the companies mentioned in this report for investment
banking services within three months, following publication of the research report.
Neither the research analyst nor any member of the research analyst's household nor the Firm serves as an officer, director or advisory
board member of Neptune Technologies & Bioressources, Inc..
The Firm does make a market in Neptune Technologies & Bioressources, Inc. securities as of the date of this research report.
Any opinions expressed herein are statements of our judgment as of the date of publication and are subject to change without notice.
Reproduction without written permission is prohibited. The intraday prices of securities mentioned in this report are as of Apr 26 2012.
Additional information is available to clients upon written request. For complete research report on Neptune Technologies &
Bioressources, Inc., please call (212) 356-0500.
Readers are advised that this analysis report is issued solely for informational purposes and is not to be construed as an offer to sell or
the solicitation of an offer to buy. The information contained herein is based on sources which we believe to be reliable but is not
guaranteed by us as being accurate and does not purport to be a complete statement or summary of the available data. Past
performance is no guarantee of future results.
RODMAN & RENSHAW EQUITY RESEARCH 4
