VistaGen Therapeutics, Inc (VTGN) Equity Research Report, Dec. 2020

EQUITY RESEARCH PRICE TARGET CHANGE Jason McCarthy, Ph.D. (212) 895-3556 jmccarthy@maximgrp.com Biotechnology VTGN - NASDAQ December 22, 2020 Closing Price 12/21/20 $1.38 Rating: Buy 12-Month Target Price: (prior $3.00) $5.00 52-Week Range: $0.30 - $1.53 Market Cap (M): 102.1 Shares O/S (M): 74.0 Float: 87.6% Avg. Daily Volume (000): 1,250.1 Debt (M): $0.0 Dividend: $0.00 Dividend Yield: 0.0% Risk Profile: Speculative Fiscal Year End: March Total Expenses ('000) 2020A 2021E 2022E 1Q 6,224 3,122A 5,633 2Q 5,351 3,628A 5,878 3Q 5,963 4,353 6,367 4Q 3,263 5,224 6,612 FY 20,801 16,327 24,490 Prior 20,802 16,000 23,000 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 30 25 20 15 10 5 0 Price Volume Price (USD) Volume (MM) VTGN Source: Factset VistaGen Therapeutics, Inc. Buy Financing + Pipeline + Rising Mental Health Space = A Company in the Strongest Position it's Ever Been; Raising PT to $5 Summary • On 12/18, VistaGen announced pricing of an equity financing, raising gross proceeds of $100M (~$93M net) and bringing the company's cash balance to ~$103M. Importantly, the financing included participation of some leading institutional healthcare investors, which in our view is further validation of VistaGen's mental health-focused pipeline (NMDA modulation, nasal-active pherines (PH94B, PH10)) and management's ability to execute. We are also now factoring in PH10 into our model and the increased cash balance, which raises our PT to $5, from $3. • While the COVID pandemic continues, a key therapeutic area that is being highlighted with significant unmet need is mental health. This is likely to be further exacerbated with the holiday season, and we have already seen 2020 marred with rapidly rising prescriptions for benzodiazepines which we highlighted in a 9/28 note ( LINK ) . As such, the mental health space, particularly around NMDA targeting, over the past year has captured investor attention and has seen significant rises in valuations for some companies. • This also includes VTGN shares, which have now recovered from the P2 depression trial in late 2019. However, for VistaGen, there is still plenty of value yet to be unlocked and the company is now in its strongest position ever to deliver. In 2021, we expect a wide range of trial initiations around all three assets; PH94B (including the P3 in social anxiety disorder), PH10 and AV-101. We could also see expansion into other CNS areas with new potential drug candidates. • The question then becomesl with its cash and mental health pipeline, could VistaGen, from a valuation perspective become the next Axsome (AXSM - NR) or Sage Therapeutics (SAGE - NR)? We'll see as 2021 starts the next chapter in the VistaGen story. Details Financing update. On 12/18, VistaGen announced pricing of an equity financing, raising $100M in gross proceeds ($93M-$94M net) with the issuance of the following; 63M shares of common stock at $0.92 share and 2M shares of Series D convertible preferred stock at $21.16 per share. Each share of series D is initially convertible into 23 shares of common stock. However, no conversion is permitted until VistaGen stockholders approve an amendment to its articles of incorporation to increase the authorized share count. A busy 2021 ahead. PH94B US-based P3 in social anxiety disorder initiating in 2Q, followed by the global P3 with partner AffaMed (private, note that EverInsight merged with AffaMed in October). The P2 adjustment disorder study should start in 2Q as well. PH10 is moving into a P2b in depression in 2021. Additional P2 programs around the pherin-assets are planned. AV-101 is also moving forward into new clinical programs. These mental-health trials could also yield data relatively rapidly as well. PH10 in MDD. PH10 is a pherine steroid in a nasal spray formulation that activates nasal chemosensory receptors that in turn engage GABA (gamma-aminobutyric acid) and CRH (corticotropin-releasing hormone) neurons in the limbic amygdala system. Recall earlier this year, the P2a data for PH10 in major depressive disorder (MDD) was published in the peer-reviewed British Journal of Pharmaceutical and Medical Research. Published P2a study. In the study, N=30 randomized patients received either a 3.2 µg or 6.4 µg dose of PH10, or placebo BID for eight weeks. PH10 efficacy was SEE PAGES 5 - 6 FOR IMPORTANT DISCLOSURES AND DISCLAIMERS