Diamond Equity Research Publishes Report Valuing HOTH Common Stock at USD 7.00 Per Share

NEW YORK: Diamond Equity Research, an equity research firm with a focus on micro capitalization and small capitalization public companies has released a comprehensive update note of Hoth Therapeutics, Inc. (NASDAQ: HOTH).

The report includes detailed information on Hoth Therapeutics' business model and recent developments. More detailed information can be found in Diamond Equity Research's September 2019 initiation report.

The full research report is available by registering here. Highlights from the report include

Hoth Therapeutics, Inc. has intensively collaborated with university research labs to develop their drug candidates. Although currently still in early development stages, the company is targeting large markets. HOTH expects to face significant competition from other current treatments and the development pipelines of large pharmaceutical companies and emerging biotechnology companies. It competes in an industry characterized by (1) rapid technological change, (2) evolving industry standards, (3) emerging competition, and (4) new product introductions. Large competitors will likely be equipped to (1) provide broader product lines with greater sales and marketing forces, (2) make larger investments in research and development, and (3) consummate more acquisitions to strengthen their drug portfolio.

That said, we believe HOTH is well positioned in the industry, with its (1) novel and differentiated potential treatment targeted at preventing the formation of bacterial biofilm and addressing the potential impairment of skin barrier function, (2) patented BioLexa Platform, which combines two existing approved drugs, enabling reliance on existing safety data for those drugs, which could result in faster regulatory approval, (3) strong intellectual property portfolio, including exclusive licenses to patents and trademarks, and (4) additional potential therapies targeting dermatological issues and genetic disorders, including diabetic ulcers, skin aesthetics, psoriasis, and food allergies. However, given the early stage of the company the company is suited for sophisticated institutional investors or high-risk tolerant retail investors.

Micro capitalization equities tend to trade more on their fundamentals versus macro issues, in line with Hoth Therapeutics recently stating to investors that Coronaviruses (COVID-19) should have limited impact on its operations. The company is still planning its trial in Australia for its proprietary BioLexa Platform for patients suffering from mild to moderate atopic dermatitis. We note later stage assets in this area have historically commanded high valuations, including the recent $1.1 billion Eli Lilly acquisition of Dermira, which was pursuing a phase three trial in atopic dermatitis. Hoth recently provided updates on its earlier stage pipeline. The company's preclinical study of WEG-232 for the dermatological treatment of side effects caused by cancer medications is nearing its completion with updates to be provided soon. Additionally, the company's preclinical study on VNLG-152 at Weill Cornell is moving forward evaluating possible efficacy of RAMBA in preventing acne pathogenic gene expression and carcinogenesis in mice. Hoth is also proceeding with its recently initiated preclinical gene therapy program with North Carolina State University for the treatment of asthma and allergic inflammation. Any positive developments within these trials could function as a catalyst for the stock in our view. Micro capitalization equities tend to trade more on their individual business developments versus macro issues, compared to mid and large capitalization stocks which are more exposed, as such we view any positive material updates on any of Hoth's pipeline as potential catalysts for shares despite macroeconomic headwinds.
BioLexa Platform is a patented drug-compound platform for the treatment of eczema that combines approved antibiotics with FDA-approved zinc chelators and topical formulations to address unchecked episodes of eczema by preventing the formation of infectious biofilms and the resulting blockage of sweat ducts. Unlike other treatments in the market such as topical steroids, OTC moisturizers, oatmeal baths, and soaps that lack efficacy in reducing symptoms, BioLexa's approach is intended to delay and prevent the flare-up of symptoms with topical and localized delivery, and can be used with other drugs to maximize benefits. BioLexa can potentially reach the market faster than traditional drugs if the upcoming clinical studies indicate positive results given the 505 (b)(2) pathway.
HOTH operates in the large and growing dermatology market. According to the National Eczema Association, there are approximately 32 million atopic dermatitis (AD) patients in the U.S. AD drug sales are projected to reach $13.6 billion by 2022 according to a recent report by Grandview Research. The U.S. market is projected to grow rapidly due to increasing incidence, new targeted therapies, favorable reimbursement policies, and government initiatives to provide better and more affordable treatments.
Valuation model indicates upside potential if trials prove successful. Despite the unique value HOTH offers with its novel and differentiated BioLexa Platform, it currently is valued at only a $40 million market capitalization. Our combined discounted cash flow and technology value analysis model indicate a fair value of $7 per share, which is largely contingent on the company successfully getting BioLexa approved in mild to moderate AD (eczema).
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Diamond Equity Research Publishes Report Valuing HOTH Common Stock at USD 7.00 Per Share