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Next Milestone: European Phase III

With the production release of its active substance DermaPro in October, Cyto­­Tool­s AG (ISIN DE000A0KFRJ1, Basic Board, T5O GY) has now overcome all hurdles for the marketing authorization in India so that the drug can now be produced and sold (under the name Woxheal) in this market for the indication "diabetic foot". Together with its Indian license partner Centaur, the company had already built up production capacities in India in 2017 following approval, but these have only now been approved by the authorities. The first license revenues from marketing are therefore expected as early as the beginning of 2020. We regard the final approval by the Indian authorities as a convincing reference for approval in other important pharmaceutical markets.

After the identical active substance in a clinical phase III study for the European approval "Diabetic Foot" did not show the expected effect due to a production error on the part of the contract manufacturer (the concentration of the active substance was formulated much too low), this study has to be repeated. First results are expected in 2020, we expect approval in 2022 and, for reasons of caution, market launch in 2023. The costs of the study are estimated at approximately €6 million. Since the further issue of convertible bond tranches did not receive a majority at the last AGM, we assume that a capital increase will be required to finance the study. In view of the current liquidity of approximately €4 million and the lean cost structure (T€650 p.a.), this should amount to approximately €2.5 million. Furthermore, the start of a European phase III study for the indication "open leg" is planned for 2020, with costs of about €5.5 million. The funds required for this are being recruited from the "India proceeds" and a further capital increase.

In addition to the main product DermaPro of the 62% subsidiary DermaTools Biotech GmbH, CytoTools AG with its second subsidiary Cytopharma GmbH (50% share) has an innovative preclinical pipeline in important indications, including sepsis ("unmet medical need") and oncology. Patent protection exists for all active substances in the most important pharmaceutical markets, for DermaPro until 2033.

In our DCF-based valuation we conservatively consider only revenues from the marketing of DermaPro in the indication diabetic foot. Future and, due to the existing study data, regulatory simplified approvals in the area of further chronic wounds are not included in our valuation, nor are developments from the preclinical pipeline of the subsidiary Cytopharma.

On the basis of our DCF analysis we determine - after consideration of model-implicit dilution - a value of €25.28 per CytoTools share. In view of the current price level, our recommendation is "Buy".