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Cell Therapy Firm Finalizing $5.1M Strategic Investment and Partnership with Chinese Company

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The terms of a proposed agreement between this cell therapy company and YOFOTO, a Chinese health and consumer products company, have been revised and will result in a $5.1 million investment.

RepliCel Life Sciences Inc. (RP:TSX.V; REPCF:OTCQB) and YOFOTO (private) have revised the terms of what Echelon Wealth Partners analyst Doug Loe calls a "strategic alliance" between the companies, whereby three of Replicel's cell therapy products would be licensed to YOFOTO and marketed in China.

On May 2, Replicel announced it had a new "binding term sheet" with YOFOTO that "both parties believe represents a stronger deal for both sides and positions them to finalize the transaction in the very near-term." The original proposal was announced in January 2017.

The terms include "an exclusive license to three RepliCel products [in China] in exchange for payment by way of investment, milestones, program funding and sales royalties," according to Replicel. Those products include the company's "tendon regeneration cell therapy (RCT-01) in development, skin rejuvenation cell therapy (RCS-01) in development, and its injection technology in development for dermal applications (RCI-02) (excluding hair-related treatments)."

The changes involve the financial terms of the agreement. In a May 2 research report detailing the alliance, analyst Loe outlined the alterations, which include "[less upfront cash from partner's share-based investment, but with far less dilutive impact on capital structure than previous deal incarnation incurred."

Loe described "a measurably positive share-based investment into RepliCel, with magnitude of investment now lower in absolute terms ($5.1M, was US$6.5M before) but at a far higher per share valuation ($0.95/shr. . .was $0.54/shr before."

According to the company, "The deal structure continues to include milestone payments (of up to CDN$4,750,000), sales royalties, and a commitment by YOFOTO to spend a minimum of CDN$7,000,000 on the RepliCel programs over the next five years in Greater China." It also includes an upfront deposit of $650,000, which remains in escrow until the alliance is finalized.

The changes in terms do not "dramatically revise our core investment thesis on RP or its non-bulbar dermal sheath (NBDS)/dermal sheath cup (DSC) regenerative medicine platform," Loe noted. Echelon has a $2.15 price target on Replicel shares; shares currently trade at $0.37.

Echelon remains "encouraged by all Phase I/II data that RepliCel has generated in recent quarters, including in androgenetic alopecia (hair loss) with RCH-01, in tendon repair (specifically Achilles tendinosis) with RCT-01, and in skin rejuvenation with RCS-01," Loe stated, adding that Replicel's partnership with Shiseido remains in force, and that "updated Phase II data from a 19-patient androgenetic alopecia trial could generate final five-year safety data and two-year efficacy data by FQ318."

"We remain positive about medical prospects for all of RepliCel's hair follicle-derived cell therapies based either on its proprietary NBDS or DSC platforms, and we are clearly positive about new capital accessed in Asia that allows the firm to reinvigorate development activities that have languished for the last few quarters while the firm was more capital-constrained," Loe wrote.

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1) Tracy Salcedo compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) The following company mentioned in this article is a billboard sponsor of Streetwise Reports: RepliCel Life Sciences. Click here for important disclosures about sponsor fees.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
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Disclosures from Echelon Wealth Partners, RepliCel Life Sciences, May 2, 2018

Echelon Wealth Partners compensates its Research Analysts from a variety of sources. The Research Department is a cost centre and is funded by the business activities of Echelon Wealth Partners including, Institutional Equity Sales and Trading, Retail Sales and Corporate and Investment Banking.

ANALYST CERTIFICATION: I, Douglas Loe, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.

Is this an issuer related or industry related publication? Issuer.

Does the Analyst or any member of the Analyst’s household have a financial interest in the securities of the subject issuer? Yes. If Yes: 1) Is it a long or short position? Yes, and, 2) What type of security is it? Common shares & Warrants

Does the Analyst or household member serve as a Director or Officer or Advisory Board Member of the issuer? No

Does Echelon Wealth Partners Inc. or the Analyst have any actual material conflicts of interest with the issuer? No

Does Echelon Wealth Partners Inc. and/or one or more entities affiliated with Echelon Wealth Partners Inc. beneficially own common shares (or any other class of common equity securities) of this issuer which constitutes more than 1% of the presently issued and outstanding shares of the issuer? Yes

During the last 12 months, has Echelon Wealth Partners Inc. provided financial advice to and/or, either on its own or as a syndicate member, participated in a public offering, or private placement of securities of this issuer? No

During the last 12 months, has Echelon Wealth Partners Inc. received compensation for having provided investment banking or related services to this Issuer? Yes

Has the Analyst had an onsite visit with the Issuer within the last 12 months? No

Has the Analyst or any Partner, Director or Officer been compensated for travel expenses incurred as a result of an onsite visit with the Issuer within the last 12 months? No

Has the Analyst received any compensation from the subject company in the past 12 months? No

Is Echelon Wealth Partners Inc. a market maker in the issuer’s securities at the date of this report? No

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