Victhom Human Bionics Inc V.VHB

VHB:Upgraded :Target $0.40 in 2009 and $1.50 in 20

[JABombardier]

ERESEARCH:

UPFRONT

Plans to commercialize the Neurostep in 2009 mean that a partnership agreement may be

on the horizon. The POWER KNEE 2 is attracting greater market attention and expanding

addressable market size. The next 12 months should be interesting.

RECOMMENDATION

We have increased our one-year Target Price to $0.40 per share from $0.30, with our valuation

based on discounted cash flow and sales multiple analyses. We are introducing our four-year

target price of $1.50 based on 4.5x expected 2011 sales. We continue to rate the shares as a

Speculative Buy, suitable for risk-tolerant investors willing to take a longer-term view.

PROFILE

Victhom Human Bionics Inc. (“Victhom” or the “Company”) specializes in the development

of artificial intelligence-based prosthetics and fully implantable neurostimulation devices for

the treatment of stroke-related physical dysfunctions.

HIGHLIGHTS

• $5 billion addressable market for the Neurostep which could potentially become the

market leader.

• Positive initial results for the Neurostep. Public release of trial results expected by the

end of 2008.

• Neurostep is just the beginning; the CLS (closed-loop system) platform can open

additional markets with greater revenue potential for Victhom.

• Significant technical improvements in the POWER KNEE 2 have positioned the product

to address greater market size.

• Substantial intellectual property portfolio with 50 granted and 75 pending patents.

• Dependence on external capital for at least the next two years.

• Market conditions and stock price may be key deciding factors in proceeding with new

Recommendation

Speculative Buy 

Risk

High

Price 

$0.125

52-Week Range

$0.30-$0.085

Target Price

1-Year: $0.40 (Raised)

3-Year: $1.50 (New)

Potential Return

1-Year: 3.20x

3-Year: 12.00x

Shares O/S

95.89 million

Market Cap

$12 million

Average Daily Volume

20-day: 191,800

150-day: 117,900

Year-End

December 31

C$ REV EPS

2007A $2.27
2008E $3.00
2009E $2.80
2010E $12.88
2011E $35.84