Resource Stock Report V21 #6.0 Flying High, Alaska Airlines ALK, LVN March 24, 2015
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Levon Resources TSX:LVN OTC:LVNVF Recent Price $0.45
Entry Price $0.25 Opinion � strong buy
Last Friday Levon announced enormous news that I don't think the market really grasped.
The speculation was on some type of transaction and I speculated a good chance it would be Bio Tech related based on the big names that came into the stock last year.
And so it was as Levon announced they would acquire 100% of SciVac Ltd. An Israeli based bio tech company. Sci Vac is 45% owned by OPKO Health Inc. NY:OPK. OPKO Health is a $6.4 billion bio tech/drug company that just made a $570 million plus deal with world Leading pharmaceutical company Pfizer Inc. NY:PFE
OPKO's CEO and Chairman, is Dr. Phillip Frost, who came into a Levon private placement last year.
SciVac is a commercial-stage bio tech leader in protein engineering whose flagship product, Sci-B-Vac, is a superior next-generation hepatitis B vaccine. Sci-B-Vac has received approval for use in 10 countries, including Israel, where it captures half the market for neonatal hepatitis B vaccinations, and is offered to adults who do not respond to competing hepatitis B vaccines.
As a private company it is difficult to find information. The best is probably this utube video from last year https://www.youtube.com/watch?v=V7MBHtdOOss
There was also a story in Reuters in 2013. What was highlighted here was that SciVac had revenues of $10 million in 2012 and was expected to break even in 2013 and into the black in 2014. At that time the CEO commented they would look to go public, possibly an IPO on NASDAQ valued at between $600 million and $1 billion.
http://www.reuters.com/article/2013/07/25/us-scivac-hepatitis-idUSBRE96O0OV20130725
That appears to be a hefty valuation and there is no telling what it was based on. However this new vaccine they have, could dominate and expand the billion-dollar global hepatitis B vaccine market upon successful completion of the Food and Drug Administration approval process.
There is no doubt the potential here is huge and success looks good when you have a $6.5 billion company OPKO helping with the FDA process.
Some 1.2 million people die each year from Hepatitis B (HBV), 100 times more than HIV, while as many as 400 million people are carriers. According to this mid 2013 Reuters story below SciVac has distributed more than a half-million doses of its vaccine since 2009. It is also registered for use in India, Hong Kong, Vietnam, the Philippines and some African countries. It was to start clinical trials in the U.S back then so this should be close to completion
http://www.reuters.com/article/2013/07/25/us-scivac-hepatitis-idUSBRE96O0OV20130725
Under the planned acquisition, current Levon shareholders would own 31.6% of the new Levon (Sci Vac) this would mean new shares would be issued to the current SciVac shareholders for their 68.4%
Levon has about 232 million shares out, so this would expand to approx. 734 million shares.
Currently at C$0.45 the market is putting an implied valuation on the deal of $330 million.
Before the stock ran up on speculation the market was putting a value on Levon with their Mexican Silver asset at $0.28 to $0.30. At $0.29 this would have been about $67 million.
As part of the deal, the Cordero, Mexican Silver asset will be spun out into a new company (Spinco). For every share you hold in Levon, you will get half a share in the new company (Spinco). The new company will also have the Pershing Gold shares and including that, they will have about $20 million in working capital.
Assuming the market keeps the same $67 million value on mining assets, the new company Spinco should come to trade around $0.35. Since $27 million in cash will stay with Levon (SciVac) I subtracted that $27M from $67M equals $40M divided by 116M shares out so $0.35 per share.
To Value what the market is putting of SciVac, we subtract the $67M (value of the mining assets and cash) from the current market cap of $330 million.
This means the market is valuing SciVac at C$263M or US$210 million.
Considering in the Reuters story a $600M to $1Billion IPO was contemplated, we have a vaccine in the advance stage of commercialization in a $1 billion market and a strong $6.5 billion partner OPKO, I think it is way under valued. SciVac has other products and revenues as well. I think we should have a valuation 2 or 3 times higher than we have today and that is why at this price I see Levon as a strong buy
The Frost Factor
You cannot ignore the great track record of Dr Phillip Frost, he is no billionaire by luck or inheritance. In 1986 he sold Key Pharmaceutics for $600 million. In 2006 sold Ivax Corporationn to Teva Pharmaceutics Israell based) for $7.4 billion. He was Chairman of the Board as recent as 2013. It is the largest generic drug manufacturer in the world and one of the 15 largest pharmaceutical companies worldwide, currently valued at $58 billion.
He is now CEO and Chairman of OPKO Health a $6.5 billion company, that is becoming the major shareholder of the new Levon.
http://en.wikipedia.org/wiki/Phillip_Frost
734 million may sound like a lot of shares out but this is no resource company but in the hottest sector in the market now, bio tech. This large number of shares out is quite common in this sector.
There is some good info on the Levon website with this presentation
http://www.levon.com/i/pdf/LVN-SciVac_Investor_Presentation-V6.pdf
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