VistaGen Therapeutics (NASDAQ: VTGN) Featured Research Report

The Disclosure section may be found on pages 25 - 26 of this report. Biopharmaceuticals Nathan Weinstein, CFA 646-502-2522 nweinstein@aegiscap.com Initiating Coverage October 8, 2020 Key Metrics VTGN - NASDAQ $0.70 Pricing Date Oct 7 2020 Price Target $6.00 52-Week Range $1.49 - $0.29 Shares Outstanding (mm) 74.0 Market Capitalization (mm) $51.8 3-Mo Average Daily Volume 2,246,478 Book Value/Share $0.30 Price/Book 2.3x EPS FY: March Prior Curr. Prior Curr. 2020A 2021E 2021E 2022E 2022E 1Q-Jun (0.15) -- (0.07)A -- (0.05)E 2Q-Sep (0.13) -- (0.04)E -- (0.05)E 3Q-Dec (0.15) -- (0.04)E -- (0.05)E 4Q-Mar (0.08) -- (0.04)E -- (0.06)E FY (0.50) -- (0.19)E -- (0.22)E P/E NM NM NM Revenue (M) Prior Curr. Prior Curr. 2020A 2021E 2021E 2022E 2022E 1Q-Jun 0.0 -- 0.0A -- 0.0E 2Q-Sep 0.0 -- 0.0E -- 0.0E 3Q-Dec 0.0 -- 0.0E -- 0.0E 4Q-Mar 0.0 -- 0.0E -- 0.0E FY 0.0 -- 0.0E -- 0.0E Company Description: VistaGen Therapeutics, Inc. (VTGN) is a clinical-stage biopharmaceutical company that is developing next generation therapies for central nervous system (CNS) conditions. The company's pipeline includes PH94B and PH10 neuroactive nasal sprays, and AV-101. Lead indications include Social Anxiety Disorder (SAD) and Major Depressive Disorder (MDD). VistaGen is headquartered in South San Francisco, CA and is traded on the Nasdaq exchange. VistaGen Therapeutics, Inc. Rating: Buy Advancing Next Gen CNS Medicines Investment Highlights: ■ VistaGen is developing multiple therapeutic candidates for the treatment of anxiety, depression, and other CNS indications. VistaGen's development pipeline includes PH94B, a neuroactive nasal spray targeting Social Anxiety Disorder (SAD), among other conditions, PH10, an additional neuroactive nasal spray for indications including Major Depressive Disorder (MDD), and AV-101 an oral drug for psychiatric and other CNS disorders. We believe Phase 2 data in PH94B and PH10 strongly supports proof of concept, including compelling safety and efficacy data that likely differentiate these assets from existing treatments in crucial ways that could be supportive of market adoption if and when approved. ■ PH94B. VistaGen's lead asset, PH94B, is a self-administered nasal spray designed to provide rapid-onset (<15 min), situational anxiety relief. PH94B leverages the nasal chemosensory system and has been shown to induce objective changes in key physiological metrics (e.g. decreased heart and respiratory rate, among others). In a Phase 2 study (n=91), patients on PH94B saw a significantly greater reduction in anxiety (on the SUDS scale) vs placebo (p=0.002). We think PH94B's usage profile (use as needed, right before SAD-triggering experiences), and safety/efficacy attributes, are currently underappreciated by the market. We next expect PH94B to move into a Phase 3 trial in 1H:21. ■ Social Anxiety Disorder (SAD). Social anxiety disorder, or SAD, is an epidemic- level indication in the U.S. (impacting an est. 7.1% of adults in the last year). SAD is characterized by a phobia of being the center of attention, public speaking, being in a group setting, and so forth - out of proportion to the threat of these situations. We think PH94B stands out from the existing treatment landscape (that includes benzodiazepines, which may have dependency risk and other side effects), given: 1) its safety profile, 2) on-demand administration for acute situations, and 3) avoidance of systemic uptake. For these reasons, and others, our view is that PH94B could carve-out a strong niche in the SAD treatment landscape. ■ PH10. In addition to PH94B, VistaGen is also advancing PH10 for numerous indications including Major Depressive Disorder (MDD). In a Phase 2A study, PH10 demonstrated an intriguing safety and efficacy profile, including statistically meaningful (p=0.022) improvement in patients (n=30) on the Hamilton Depression Rating Scale (HAM D). We next expect PH10 to move into a Phase 2B trial, in 2H:21. ■ Major Depressive Disorder (MDD). MDD incidence in the U.S. is significant, with an est. 17.3mm adults having at least one major depressive episode. MDD carries a significant symptom burden, which may manifest both psychologically and physically. Remission rates with existing treatments have been estimated at 67%. We believe patients and practitioners are seeking alternative treatment options. We think PH10 could emerge as a differentiated option in MDD. ■ Valuation and target. We initiate coverage on shares of VTGN with a BUY rating and $6.00 price target. Our valuation is based on a discounted cash flow model that explicitly credits PH94B in SAD and PH10 in MDD, while treating additional indications, and AV-101, as option value. Our model applies PoS estimates based on historical precedent data and uses a 25% discount rate. Risks include: 1) clinical, 2) financial, 3) regulatory, and 4) competition, among others.