HCW upgrades Cesca Therapeutics to buy

H.C. Wainwright has upgraded Cesca Therapeutics (NASDAQ:KOOL) to “buy” from “neutral” with a new 12-month target price of $2 based on a discounted earnings/revenues analysis. The stock closed at 67 cents on Friday.

“Following a tumultuous period of management turnover, delinquent quarterly filings, and transition to a new financial auditor, we believe the company has successfully reestablished its ability to access capital from the public market, and established a strategy to fund its CLI program, which we view as the primary value-driver,” writes analyst Mark Breidenback.

He said Cesca has developed a multifaceted plan for funding the pivotal CLI trial, which is estimated to cost $20-million and includes $15-million in debt funding. The company also has applied for a $10-million non-dilutive grant from the California Institute of Regenerative Medicine (CIRM).

In addition, Cesca plans to seek partial trial cost reimbursement under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003.

Mr. Breidenbach said that Cesca, which is now compliant with SEC filing requirements, could access additional capital as needed. With a finalized IDE protocol in place, the company plans to initiate a pivotal CLI trial in the first quarter next year.

He figures that the company’s current cash position of $7-million (pro forma) gives Cesca cash to sustain operations until early 2016. If the CIRM grant is awarded, the company could sustain operations until mid-2018, he said.

“Given that the strong scientific fundamentals surrounding the company’s lead programs, we believe Cesca represents an attractive prospect with upside for the long-term investor,” he added.

Stephen Kilmer