Tuesday, February 18, 2014

Skyline Medical (SKLN), Nothing but Blue Skys Ahead for This Revolutionary Device Maker

When the U.S. Food and Drug Administration recalled two models of the Stryker liquid waste management systems last year after two patient deaths and other patient injuries due to providers applying high-flow, high-suction vacuums to passive chest drains using the system, hospitals were faced with the daunting task of looking for alternatives to deal with the unpleasant issue of liquid medical waste.  

Enter Skyline Medical's Streamway Liquid Waste Management System:

Benefits

Medical waste disposal for patients safetyThe STREAMWAY System:

  • Virtually eliminates handling of surgical fluids by providing automated collection, measurement and disposal
  • Increases safety for staff and patients by reducing exposure risk
  • Cuts overhead expenses by eliminating costly canisters, handling and disposal
  • Boosts operative efficiency by delivering uninterrupted performance
  • Improves staff utilization by decreasing time for set-up and cleanup, and freeing valuable floor space near surgical areas.

How It Works

Fluid Management SystemOperative fluid is suctioned directly from the surgical field into the STREAMWAY System, which automatically measures and records volume before it disposes of the fluid directly into a facility’s existing plumbing system. Cleaning the STREAMWAY System is easy—simply detach the procedure filter, connect our proprietary cleaning solution, and activate the clean cycle on the touch screen.

Fluid Management Systems - STREAMWAY System


Skyline has a new name, (formerly BioDrain Medical) and a new CEO, Josh Kornberg whose looks to be taking the Company to the next level. An advisory board was also formed last year which is comprised of top doctors and a healthcare executive with ties to one of the largest purchasing groups in the country HCA. The business model is to not only to sell the Streamway System but to also sell a one time cleaning solution and filter that hospitals will use with each surgery ( ie "razor blade model".) The Company estimates that there are approximately 50,000 operating rooms in the US with a total number of procedures performed of around 70m. If Skyline can penetrate just 5-10% of this market, their high gross margin (80%) recurring revenue model will generate substantial earnings.

It appears that the Company's efforts are starting to be realized :
  • Revenues were $107,835 and $386,418 for Q3 and first nine months of 2013, up more than 108% and 289% compared to Q3 and first nine months of 2012;
  • More than 50 purchase orders were received in Q3 2013 for Skyline's improved STREAMWAY System, scheduled for delivery in Q4 and beyond;
  • Company strengthened balance sheet through conversion of all convertible notes;
  • Company entered Virginia market with multi-unit purchase from Ambulatory Surgical Center;
  • Skyline expanded its presence in Florida with multiple unit sale to a major hospital;
  • Increased sales force to support national and international rollout of STREAMWAY System;
  • National ambulatory surgical center chain client doubles initial Q2 2013 order fully replacing Skyline competitor; and
"Now that the technological modifications of our STREAMWAY System are complete, we will prepare for mass production and be able to fulfill a large backlog of purchase orders currently in our pipeline. These orders represent approximately $2 million in revenue of which approximately $1 million will be recurring on an annualized basis. We will begin to recognize these revenues immediately as they will impact our financial results starting over the next two quarters."  Kornberg, 11/14/2013

Skyline Medical Expands Early Access to Its Revolutionary Fluid Waste Management SystemThrough Attainia partnership:

"Skyline's STREAMWAY® System will be included in the world's most widely used healthcare equipment planning and budgeting software  Our partnership with Attainia will increase awareness among healthcare organizations worldwide that they have an alternative to the antiquated, high-risk fluid disposal methods they've been using for years," said Josh Kornberg, CEO of Skyline Medical, formerly BioDrain Medical. "The patented STREAMWAY System is the first truly closed system designed specifically for medical applications, where safety simply cannot be compromised. Our system is a one-piece, wall-mounted unit that connects directly to a facility's plumbing system to minimize human intervention, provide unlimited capacity, and eliminate the cost and environmental waste of canisters," Kornberg explained. "By working closely with clinical teams and architect partners in the early stages, we can ensure a seamless and successful installation." Skyline Medical chose Attainia because it's the industry leader in healthcare equipment planning. "Currently, more than 2,000 active healthcare projects are being planned using Attainia software systems, totaling more than $30 billion," Kornberg said. "As a leading provider for healthcare planning, Attainia was a logical choice for our new alternative solution to fluid waste management."

Skyline recently raised over $2m in a private placement in which the CEO put his money where his mouth is. The Company will use the proceeds from the sale of the Securities to expand its sales and installation efforts and for general working capital purposes. Skyline Medical will also use this capital to help fulfill the purchase orders of STREAMWAY Systems ready for placement in hospitals and surgical centers, as well as anticipated installations to occur in the first half of 2014 as a result of expected trials. "This private placement provides us with the growth capital necessary to expand our sales force and meet the demand we are seeing from healthcare facilities and hospital groups for our STREAMWAY System," stated, Josh Kornberg, CEO of Skyline Medical.

 


Technically the chart is in the lower risk basing zone and appears to be setting up a nice bottoming pattern in preparation for what I believe will be a big move in 2014. First major resistance is at 30c, a break of that with volume will bring a move towards the September highs of 47c. I fully expect a break of that level once this Company gets discovered with a move towards $1.00 as more major hospitals switch to the Streamway System.

2014 should be a transformative year for Skyline. The Company appears poised to execute on their recurring revenue business model and ramp up the sales of the Streamway System to a mass scale level. This is already represented by the current $2m in backlog of orders that should substantially increase with the recent Attainia partnership in place. In addition, many hospitals and surgery centers will need to replace the Stryker Neptune System to due the Class I recall. The Streamway System is at the right place at the right time.

Patient investors should benefit significantly from  purchases of the stock at around this level as Skyline has recently raised $2m to fuel future growth and  the Company should see extremely high profits margins on dramatically ramping revenues during 2014.

Disclosure: I am long SKLN. I wrote this article myself, this is NOT investment advice, it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with Skyline Medical SEE FULL DISCLOSURE BELOW 

Monday, December 30, 2013

Adamis Pharmaceuticals, (ADMP) Undiscovered Gem Set to Soar in 2014


On August 1, 2013, Adamis Pharmaceuticals, (ADMP) entered into an agreement, paying $3m to initially license and with an additional closing payment fully acquire from 3M Company certain intellectual property and assets relating to 3M's Taper Dry Powder Inhaler technology under development for the treatment of asthma and chronic obstructive pulmonary disease. On December 27, Adamis filed an 8k showing that they made the additional and final payment of $7M to 3M and that ownership of the assets and intellectual property were transferred to the Company.  With this closing, Adamis now has rights to a dry powder inhaler that combines a patient-friendly design with active aerosolization to provide effective delivery of drug in a multi-dose and will attack Glaxo's (GSK) $8 billion a year Advair franchise.

 3M's Taper Dry Powder Inhaler
  • Can be used with single or combination drugs
  • Virtually eliminates need for complex powder treatments or lactose in most formulations
  • Holds up to 120 doses in convenient pocket sized design
  • API dose range up to 1 milligram
  • Protects against moisture ingress
  • Utilizes patented 3M breath actuated technology for simple open, inhale, close functionality
  • Integrates dose counter to ensure patients know how many doses remain

APC-5000 - Dry Powder Inhaler ***NEW PRODUCT***

APC-5000 is Adamis' first product using the Taper Dry Powder Inhalation (DPI) technology that the Company has exclusively licensed, and with additional payment, fully acquire from 3M Drug Delivery Systems. The Taper DPI is a patented pre-metered device that Adamis expects will have a number of advantageous features when compared to competing DPI products including: greater efficiency, less dependence on the individual's inspiratory flow rate (due to the aerosolization energy inherent in the device), no need for excipients in most formulations, capability of delivering up to 120 doses (a two month supply), moisture protection, and ease of use. In addition, the device has been designed to reduce the likelihood of delivering a double dose.

Addressable Market ~$4.0 billion

According to IMS Health data, the global asthma and COPD prescription market is more than $34 billion and is averaging 7% growth per year. Also according to IMS, annual sales of the AdvairDiskus® are currently in excess of $5 billion in the United States and $8 billion globally.


FDA Guidance clears path for Advair generics

In September, the US Food and Drug Administration (FDA) has published draft guidance on generic copies of combination drugs for respiratory diseases which could hasten generic competition to GlaxoSmithKline's (GSK) big-selling Advair brand. The FDA's new draft guidance provides a simplified framework for companies trying to develop generics of Advair as well as other combination inhaled medicines such as AstraZeneca's Symbicort (budesonide/formoterol), also a blockbuster with sales of $3bn-a-year. The FDA laid out the kind of scientific studies generic companies need to submit to be considered for approval. The new clarity means generics could potentially hit the market by 2016 or 2017, analysts said, though some cautioned that the complexity of producing an exact copy could still delay generics to a later date.


 Dr. Dennis J. Carlo, President and CEO Adamis stated, "There are a limited number of companies that have the capability to develop this type of novel inhalation drug delivery technology, and 3M is considered one of the leaders. To date, there is no low cost alternative to Advair. We believe that the exclusive license and acquisition of the 3M Taper DPI technology provides Adamis with a blockbuster opportunity in the branded generic asthma/COPD market, where even a small market share could generate a very large potential return on investment for Adamis shareholders. This technology strengthens the Company's respiratory product pipeline and has the potential to provide solid growth for Adamis for years to come and I believe the acquisition of this pivotal technology could be a transforming event for our company. This acquisition is consistent with one of the objectives outlined in my recent letter to shareholders in a press release dated May 3, 2013."



Adamis Specialty Pharmaceuticals Product Pipeline



Products


Epinephrine Pre-filled Syringe (PFS) - single dose


The Epinephrine Pre-filled Syringe (PFS) (Epinephrine Injection USP 1:1000, 0.3mg Pre-Filled Single Dose Syringe) will compete as a simpler, more intuitive, low cost therapeutic alternative to epinephrine auto injectors like the well-known brand EpiPen® in the anaphylaxis market. The Company's New Drug Application to the FDA for marketing approval of the product is completed and ready to be filed.

Addressable Market ~ $800 million

In the U.S., an estimated 5% of the population suffers from insect sting anaphylaxis, up to 6% are latex sensitive and up to 1.5% of adults and 5% of children under three years of age experience food related anaphylaxis. The number of prescriptions has grown annually as the risk of anaphylaxis has been more widely understood. Adamis also intends to introduce the Epinephrine PFS world-wide through licensing agreements.

 TeloB-VAX: Prostate Cancer Telomerase Vaccine
Adamis Pharmaceuticals TeloB-VAX vaccine is composed of the patients' own circulating B lymphocytes harboring a unique patented engineered plasmid DNA. The transfection procedure is "spontaneous", requiring no facilitating molecules or devices. After 60 minutes of incubation with the plasmid, the cells can be re-infused back into the patient. In studies conducted to date, TeloB-VAX cancer vaccine induces a potent cellular immune response against the first truly common cancer antigen, the telomerase reverse transcriptase (TERT).

Telomerase is an enzyme that adds DNA sequence repeats (e.g., "TTAGGG") to the 3' end of DNA strands in the telomere regions of chromosomes at every cell division. Telomerase confers the immortality trait that converts normal cells into cancer cells and prevents the erosion of telomeres and end-to-end chromosomal fusion. As such, telomerase is over-expressed in the vast majority of differentiated cancer cell types. Importantly, telomerase is also necessary for self-renewal of cancer stem cells and cancer cell progenitors. Based on the foregoing, TERT is an antigen expressed in both differentiated and progenitor cancer cells making vaccination against TERT a potentially effective measure to induce an immune response against cancer cells at both stages of differentiation.

If successfully developed, Adamis believes the technology offers certain significant advantages over the existing FDA approved vaccine, Provenge. Some of the advantages include: 1) prolonged antigen presentation by B cells (5 days) as compared to the short presentation time by dendritic cells (12 hours), 2) a unique patented technology using a universal cancer antigen (marker) that is increased in approximately 85% of all tumors, 3) induces an immune response after a single injection, 4) no need for complicated culture procedures (easy to manufacture), 5) much fewer steps, and 6) lower cost.

If future clinical trials are successful, TeloB-VAX may very well be called a "universal cancer vaccine" that could induce immunity against multiple cancer types as well as targeting the specific cancer stem cell.

Upcoming Catalysts:

  • Focusing on submitting our single dose epinephrine syringe for regulatory approval and sale next year
  • Completing the manufacture of our Beclomethasone-HFA product to initiate Phase III studies in asthma and COPD
  • Finalizing our allergic rhinitis product development in order to initiate Phase III clinical trials
  • Acquiring or in-licensing an established product or technology that, following regulatory marketing approvals, will compete in large (multi-billion dollar) product markets and will be synergistic with our existing assets. (Done)
  • Completing our Phase I prostate cancer drug trial
  • Finalizing the activities necessary to begin a Phase I/II trial for our second prostate compound
  • Initiating a Phase II prostate cancer vaccine trial for TeloB-VAX.
Conclusions:

On December 13, Adamis completed an uplisting to the NASDAQ and announced the pricing of an underwritten public offering of 3,720,000 shares of common stock at an offering price of $5.95 per share, the Company also completed a 1-17 reverse split. In addition to paying off the $7m to 3M Company for the Taper Dry Powder Inhaler Technology,  Adamis intends to use the remaining net proceeds to fund the filing and launch of the Epinephrine PFS product candidate and fund clinical trials.

As I have outlined above, in addition to APC-5000, using the just acquired Taper Dry Powder Inhalation (DPI) technology addressing a $4b market , Adamis has a very deep pipeline that addresses multi-billion dollar markets. With just a $64m market cap, small public float and many significant near term catalysts, Adamis appears to be extremely undervalued. Once this tiny biotech is discovered, we could see a dramatic share price appreciation in 2014 which would reflect the true value of the Company and its current pipeline.

Disclosure: I am long ADMP. I wrote this article myself,  this is NOT investment advice, it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with Adamis Pharmaceuticals, Inc. SEE FULL DISCLOSURE BELOW 

Thursday, October 17, 2013

Advaxis (ADXS): Uplisting Should Expand Valuation by 300%

Yesterday Advaxis (ADXS), a next generation immunotherapy biotech company, announced the pricing of its public offering of 5.7m shares at an offering price of $4.00, with estimated proceeds of $23m.  The shares are being uplisted and will start trading today on the NASDAQ.  Aegis Capital was the sole acting book-running manager.  Coincidentally, Aegis also ran the book for Cancer Genetics (CGIX), which uplisted on August 14th and it went on a spectacular run from $9 to nearly $23. The completed uplisting to the NASDAQ is a major catalyst and I expect the stock to respond in a big way over the short term.

Another potential big near term catalyst is that Advaxis will be presenting three abstracts at the Society for Immunotherapy of Cancer November 8-10th:
  
The abstract titled “Listeria monocytogenes (Lm)-LLO immunotherapies reduce the immunosuppressive activity of myeloid-derived suppressor cells and regulatory T cells in the tumor microenvironment” has been selected for oral presentation during the session, “Tumor Microenvironment and Innate Cells Recognition" on November 8, 2013 from 9:40 AM to 12:00 PM. Anu Wallecha, Ph.D., Director of Research and Development at Advaxis, will report on the localized effects of Lm-LLO immunotherapies on the tumor microenvironment in preclinical studies using transplantable mouse models.

The abstract titled “ADXS11-001 immunotherapy targeting HPV-E7: Updated survival and safety data from a Phase 2 study in Indian women with recurrent/refractory cervical cancer” has been selected for poster presentation during the Vaccine session. Robert Petit, Ph.D., Chief Scientific Officer of Advaxis, will present final 18-month survival and updated safety data from the ongoing trial.

The abstract titled “Biomarker identification in serum samples from patients with recurrent cervical cancer treated with ADXS11-001 immunotherapy” has been selected for poster presentation during the session “Biomarkers and Immunoscoring”. Poonam Molli, Ph.D., Senior Scientist at Advaxis, will report on the correlation of changes in cytokine and chemokine levels pre- and post-dosing with ADXS11-001 from the Phase 2 study in Indian women with recurrent/refractory cervical cancer.
     
“The three presentations of Advaxis data at SITC reflect our growing understanding of the unique attributes of the Advaxis platform technology for immunotherapies. Dr. Wallecha’s presentation will highlight the ability of Lm-LLO immunotherapy to counteract immune suppressor cells that enable persistence of the tumor. We will report final 18-month survival and final tumor response data from our 110 patient Phase 2 study in India in women with recurrent cervical cancer. Dr. Molli’s presentation will illustrate the remarkable immune stimulation that occurs in patients after treatment with ADXS11-001. Together, these data paint a picture of an immunotherapy that has a strong positive impact on the immune system while at the same time counteracting immune suppression in the tumor microenvironment that can lead to apparent prolonged survival and objective tumor responses from a single immunotherapeutic agent,” commented Dr. Petit.

Slide2


Advaxis has all the ingredients for a nice short term momentum run: reverse split, uplisting, tiny market cap and float, plenty of cash to fund ADXS-HPV phase 3 trials and key near term clinical data presentations. I anticipate that ADXS has near term appreciation potential back to its recent September highs of near $11.

Disclosure: I am long ADXS. I wrote this article myself,  this is NOT investment advice, it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with Advaxis, Inc. SEE FULL DISCLOSURE BELOW

Tuesday, September 3, 2013

Oculus Innovative Sciences (OCLS): 3 Near Term Catalysts That Could Provide 200% Upside

Catalyst #1 

Ruthigen IPO

2013 has been an extremely hot year for biotech IPOs. The average biotech IPO has priced 4% above the S-1 price range and many IPOs are trading at nearly twice their offering price.  Most traders are unaware that the small biotech firm, Oculus Innovative Sciences (OCLS) is planning to spin off its wholly owned subsidiary Ruthigen. The  S-1A was filed on August 8, 2013 and although the exact timing is still unknown, the Ruthigen IPO maybe coming in short order. Ruthigen is focusing on the development of RUT58-60, a drug candidate intended for the prevention of infection in trauma and surgical procedures. RUT58-60 is a new unique chemical formulation of Oculus's Microcyn that contains twice the concentration of hypochlorous acid, along with magnesium and no sodium hypochlorite.  RUT58-60 is designed to prevent and treat infections, including  MRSA and C diff,  RUT58-60's addressable market includes 46 million surgical and trauma procedures performed in U.S. hospitals and more than 200 million procedures globally.  Tetraphase (TTPH), which is developing antibiotics to treat multi-drug bacterial infections,  maybe the closest comparable recent IPO to Ruthigen. Tetraphase's IPO priced at $7 and currently trades at approximately $8.50/$175m market cap. If we assume that Oculus will retain a 50% ownership and that Ruthigen will be valued at between $50m-100m, it is possible that this spinoff alone could add over $3-$6 to the Oculus share price. An additional benefit to Oculus as a result from the Ruthigen IPO is $8 million of clinically triggered milestone payments.

Catalyst #2

501(k) Clearance

Oculus submitted its 510(k) application for their uniquely formulated Microcyn Technology-based hydrogel for scar management sometime between May 14th and June 14th, 2013 and is anticipating FDA clearance as early as mid September.

From the March 14th press release: "The company is encouraged by the initial clinical trial results from the management of scars trial and expects to complete data analysis and submit the 510k application to the FDA for review within the next 60 to 90 days. In accordance with FDA regulations, the company expects to release the data immediately after completion of FDA's review. The FDA's standard review time from submission to clearance is ninety days, although industry averages suggest this process can take up to six months. According to a LifeSci Advisors 2012 report, there are currently no FDA-approved pharmaceuticals indicated to reduce scar severity and several available procedure-based and over-the-counter treatments are either invasive, costly or have been reported with limited clinical efficacy or high recurrence rates," said Jim Schutz, CEO of Oculus. "We believe the rapid patient enrollment is indicative of the need for effective and safe management of scars. We remain optimistic about achieving our intended results and upon FDA clearance, anticipate that our U.S. dermatology partner, AmDerma/Quinnova, will launch later in 2013." AmDerma/Quinnova has agreed to pay Oculus a milestone payment at the time of the FDA pre-market notification clearance that will reimburse Oculus for the cost of this trial."


Catalyst #3 

Guidance
On the August 9th earnings conference call,  Oculus provided the following guidance for their next quarter "we expect total revenue to be higher than 3.6 million, cash operating expenses to be in the $3.8 million range and EBITDA to be in the range of 1.2 million negative. The Ruthigen expenses for this quarter are expected to be about 1.3 million, which includes salaries, consultant services and preclinical studies IND application for the primary drug candidate for the prevention of infection in abdominal surgery." So its quite possible that for this next quarter ended September 30, after backing out the Ruthigen IPO expenses, Oculus will be EBITDA positive.


 Conclusion:
"This is a year of transition for Oculus, setting the stage to create long-term value and stronger revenue growth with several exciting near-term opportunities," said Jim Schutz, Oculus CEO. "First, our drug subsidiary, Ruthigen, continues to progress towards a planned IPO, which we believe will add significant short-term value in the form of cash and potential for increased stock price. Second, Vetericyn's animal healthcare sales are picking back up after a slow spring with a strong start to the summer. Third, we see continued strong unit growth in Latin America that has averaged 50% plus over the last three quarters as compared to the prior years' quarters. Fourth, we anticipate an FDA clearance for our new scar hydrogel and subsequent launch before the end of this fiscal year. And finally, international sales, especially in Europe, should show solid growth before our fiscal year end as a result of additional product approvals and added partners. We believe the stage is set for a return to positive year-over-year revenue growth later this year and next."

At its recent price of $2.75, (off of its 52 wk high of $7) Oculus trades at a market cap of just $18.2m, with $5.4m of that in cash. Any one of the above 3 catalysts could put this tiny biotech with only a 5.5m float (1-7 reverse split 4/1/2013) stock in motion, but the combination of all 3 possibly coming together in the near term could provide for an explosive 200% upside move.




Disclosure: I am long OCLS. I wrote this article myself,  this is NOT investment advice, it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with Oculus Innovative Sciences. SEE FULL DISCLOSURE BELOW


Sunday, August 4, 2013

Sunshine Heart: 10 Reasons Why This Game Changing Cardio Device Company Could Be Acquired for $50 share

#1 Biotech pick for the next 12-24 months.

#1) Huge Market Opportunity:  Sunshine Heart (SSH) is targeting the enormous New York Heart Association's (NYHA) Class III and ambulatory Class IV Congestive Heart Failure (CHF) market. This is a huge, unmet, untapped opportunity with approximately 1.5m patients in the US and another 3.7M patients in the EU. If the Company merely penetrates 10% of this market, the opportunity could reach over $5bln.

#2) C-Pulse The C-Pulse Heart Assist System is a game changing device that has three major distinct advantages over the current device based therapies offered to Class III CHF patients:

1) Zero contact with the patent's bloodstream.

2) Much less invasive implantation method.

3) Ability to temporarily disconnects the device.

The Company has already completed a twenty patient single arm feasibility study and presented six month data on fifteen of the twenty patients in November 2011. The data showed that  twelve of the fifteens patients saw a reduction in NYHA class, seven showed a one class reduction and two patients showed a two class reduction in class. Astoundingly, two of the patients improved so much that they were able to permanently disconnect from the C-Pulse device. Recently the Company announced that "two additional patients have been identified as potential candidates to be weaned from the device based on significant symptomatic improvement".
 
On November 20, 2102, Sunshine Heart received unconditional FDA approval for the C-Pulse(R) system's U.S. pivotal trial. The Company estimates enrollment for the event-driven pivotal trial will take approximately 2.5 years. The primary endpoint of the trial will be reduction in worsening heart failure events leading to hospitalization, advanced heart failure therapies and heart failure related mortality. A one year safety follow-up is expected. The lead investigator for the trial will be Dr. William T. Abraham, Director of the Division of Cardiovascular Medicine at The Ohio State University Medical Center.

On May 9, 2103, Sunshine Heart announced the implant of the first patient in the European OPTIONS HF C-Pulse System Multi center Study. The post market study is intended to treat patients with moderate to severe heart failure. "We are extremely pleased to announce the implant of the first patient at the German Heart Institute - Berlin in our European multi center post market study," said Dave Rosa, Sunshine Heart's Chief Executive Officer. "In particular, we are encouraged to see early success of our next generation cuff in its ability to improve the ease of implant and allow for better predictability of proper securement. We anticipate the activation of additional sites in the coming months and look forward to updating the market with our progress as enrollment proceeds."

#3) Fully Implantable C-Pulse  A fully implantable device, using existing transcutaneous energy transfer (TET) has already been proven in animal studies. The Company has recently executed an agreement with Cirtec MedicalSystems, a leader in advanced engineering and manufacturing capabilities, specializing in minimally invasive surgical and delivery devices for development of a fully implantable C Pulse Pump. The Company is targeting the completion of a chronic animal trial in late 4Q13 for the pump and intends to provide more information as progress is made.

#4) Re-hospitalization Rates  In October 2012, the Affordable Care Acts Hospital Readmission Reduction Program was instituted and includes a penalty system to incentivize hospitals to ensure their heart failure related re-hospitalization rates meet a defined benchmark rate of less than 24.7% at 30 days. If hospitals exceed this benchmark, they risk repayment reimbursements as a penalty. In the Company's pilot study, at least 17 of the 20 patients had been hospitalized due to worsening heart failure in the year prior to receiving the C-Pulse implant. Post implant, the re-hospitalization rate was only 15%, at 12 months. In  addition, the average number of days stayed in the hospital was nine compared to nineteen for patients who received LVADS. As a note, the patients who received the C-Pulse device using the minimally invasive manner vs thoracotomy, only required a hospital stay of four days.
in October this year the Affordable Care Acts Hospital Readmission Reduction Program was instituted and includes a penalty system to incentivize hospitals to ensure their heart failure related rehospitalisation rates meet a defined benchmark rate of less than 24.7 percent at 30 days. If hospitals exceed this benchmark then they risk repayment of reimbursements as a penalty. - See more at: http://www.biospectrumasia.com/biospectrum/influencers/121257/c-pulse-heart-failure-bay/page/4#.UfO72W1Meb6

Read more at: http://www.biospectrumasia.com/biospectrum/influencers/121257/c-pulse-heart-failure-bay/page/4#.UfO72W1Meb6
in October this year the Affordable Care Acts Hospital Readmission Reduction Program was instituted and includes a penalty system to incentivize hospitals to ensure their heart failure related rehospitalisation rates meet a defined benchmark rate of less than 24.7 percent at 30 days. If hospitals exceed this benchmark then they risk repayment of reimbursements as a penalty - See more at: http://www.biospectrumasia.com/biospectrum/influencers/121257/c-pulse-heart-failure-bay/page/4#.UfO72W1Meb6

Read more at: http://www.biospectrumasia.com/biospectrum/influencers/121257/c-pulse-heart-failure-bay/page/4#.UfO72W1Meb6
in October this year the Affordable Care Acts Hospital Readmission Reduction Program was instituted and includes a penalty system to incentivize hospitals to ensure their heart failure related rehospitalisation rates meet a defined benchmark rate of less than 24.7 percent at 30 days. If hospitals exceed this benchmark then they risk repayment of reimbursements as a penalty - See more at: http://www.biospectrumasia.com/biospectrum/influencers/121257/c-pulse-heart-failure-bay/page/4#.UfO72W1Meb6

Read more at: http://www.biospectrumasia.com/biospectrum/influencers/121257/c-pulse-heart-failure-bay/page/4#.UfO72W1Meb6
Section 3025 of the Affordable Care Act (ACA) added section 1886(q) to the Social Security Act establishing the - See more at: http://www.policymed.com/2012/08/cms-begins-penalizing-hospitals-for-readmissions.html#sthash.dafEu5Gc.dpuf
Section 3025 of the Affordable Care Act (ACA) added section 1886(q) to the Social Security Act establishing the - See more at: http://www.policymed.com/2012/08/cms-begins-penalizing-hospitals-for-readmissions.html#sthash.jffpa7Q7.dpuf
Section 3025 of the Affordable Care Act (ACA) added section 1886(q) to the Social Security Act establishing the Hospital Readmissions Reduction Program, which requires the Centers for Medicare & Medicaid Services (CMS) to reduce payments to Inpatient Prospective Payment System (IPPS) hospitals with excess readmissions, effective for discharges beginning on October 1, 2012.  - See more at: http://www.policymed.com/2012/08/cms-begins-penalizing-hospitals-for-readmissions.html#sthash.jffpa7Q7.dpuf
Section 3025 of the Affordable Care Act (ACA) added section 1886(q) to the Social Security Act establishing the Hospital Readmissions Reduction Program, which requires the Centers for Medicare & Medicaid Services (CMS) to reduce payments to Inpatient Prospective Payment System (IPPS) hospitals with excess readmissions, effective for discharges beginning on October 1, 2012.   - See more at: http://www.policymed.com/2012/08/cms-begins-penalizing-hospitals-for-readmissions.html#sthash.jffpa7Q7.dpuf
Section 3025 of the Affordable Care Act (ACA) added section 1886(q) to the Social Security Act establishing the Hospital Readmissions Reduction Program, which requires the Centers for Medicare & Medicaid Services (CMS) to reduce payments to Inpatient Prospective Payment System (IPPS) hospitals with excess readmissions, effective for discharges beginning on October 1, 2012.   
CMS defined readmission as an admission to a subsection (d) hospital within 30 days of a discharge from the same or another subsection (d) hospital.   
“Almost one in five Medicare beneficiaries that leave a hospital end up being readmitted within 30 days,” said Janet Corrigan, PhD, MBA, president and CEO of NQF. “Those readmissions cost about $15 billion annually, and many have the potential to be prevented. These new measures help push us as a nation to address this serious problem.”  
- See more at: http://www.policymed.com/2012/08/cms-begins-penalizing-hospitals-for-readmissions.html#sthash.jffpa7Q7.dpuf
Section 3025 of the Affordable Care Act (ACA) added section 1886(q) to the Social Security Act establishing the Hospital Readmissions Reduction Program, which requires the Centers for Medicare & Medicaid Services (CMS) to reduce payments to Inpatient Prospective Payment System (IPPS) hospitals with excess readmissions, effective for discharges beginning on October 1, 2012.   
CMS defined readmission as an admission to a subsection (d) hospital within 30 days of a discharge from the same or another subsection (d) hospital.   
“Almost one in five Medicare beneficiaries that leave a hospital end up being readmitted within 30 days,” said Janet Corrigan, PhD, MBA, president and CEO of NQF. “Those readmissions cost about $15 billion annually, and many have the potential to be prevented. These new measures help push us as a nation to address this serious problem.”  
- See more at: http://www.policymed.com/2012/08/cms-begins-penalizing-hospitals-for-readmissions.html#sthash.jffpa7Q7.dpuf

Section 3025 of the Affordable Care Act (ACA) added section 1886(q) to the Social Security Act establishing the Hospital Readmissions Reduction Program, which requires the Centers for Medicare & Medicaid Services (CMS) to reduce payments to Inpatient Prospective Payment System (IPPS) hospitals with excess readmissions, effective for discharges beginning on October 1, 2012. - See more at: http://www.policymed.com/2012/08/cms-begins-penalizing-hospitals-for-readmissions.html#sthash.dafEu5Gc.dpuf

#5) Management: All proven winners whom have vast experience in grooming companies for a successful buyout.The management team is led by Mr. David Rosa, CEO.  Prior to joining Sunshine Heart, Mr. Rosa was Vice President of Global Marketing for Cardiac Surgery and Cardiology at St. Jude Medical, Inc. While at St. Jude, he directed the launch of twenty seven new products within the Company's cardiovascular division. 

William Peters, MD, serves as Medical Director and Chief Technical Officer invented the proprietary C-Pulse technology and served as Sunshine Heart’s initial CEO upon co-founding the Company in 1999. In addition to C-Pulse, Dr. Peters has developed a number of other successful cardiac technology innovations, including an endovascular cardiopulmonary bypass system for minimally invasive cardiac surgery, which was commercialized by Heartport Inc., a NASDAQ-listed company that later was acquired by Johnson & Johnson.

The Board of Directors is headed by Mr. John Erb who was appointed Chairman on September 13, 2012. "Mr. Erb currently serves as the Chairman of Vascular Solutions (NASDAQ:VASC), Chairman ofOsprey Medical (ASX:OSP), and current Chairman and CEO of U.S. based Cardia Access. He has been part of recent acquisitions such as SenoRx (C.R. Bard), CryoCath Technologies(Medtronic Inc.), CHF Solutions (Gambro) and IntraTherapeutics (Sulzer Medica). Mr. Erb has also served in Senior Management roles with Schneider Worldwide, a leader in the cardiovascular space prior to its acquisition by Boston Scientific".The other members have significant connections with major global medical device companies, including; Johnson & Johnson, Medtronic and Boston Scientific

#6) Unmet Need  Despite the current therapies (LVADs, Pacemakers, CRT-D and drug therapies) heart failure morbidity and mortality remain high. Five year mortality rates range from 15-50%, depending on the severity of the disease. There is a huge need for additional therapies, especially for patients with advanced heart failure. Current devices only work to slow the progression of the condition and either shock the heart or perform the work for the heart. The C-Pulse system employs extra-aortic counter pulsation technology which actually reduces the workload of the left ventricle and increases the blood flow to the heart thereby allowing the muscle to undergo a level of recovery.

#7) Potential Suitors Currently, the M&A activity in the biotech sector is at running at a fevered pace and the market is richly rewarding companies that engage in strategic acquisitions. Sunshine Heart is trading at an absurd valuation and would be an ideal fit for many players in the cardiac device space. The C-Pulse system has serious potential to become the standard of care in the massive and fast growing Class III and ambulatory Class IV CHF market. There are many potential suitors, among them; Thoratec, Heartware, St. Jude, Medtronics and Johnson and Johnson, all of which are most likely salivating over this opportunity right now.

#8) Strategic Investor  A Little known fact to most investors is that according to page 91, of the S-1 filed on August 8, 2102 the Company has a "strategic investor"
A strategic investor, which is not a current stockholder of our company, has indicated an interest in purchasing approximately $3 million of our common stock in this offering at the public offering price. However, because this indication of interest is not a binding agreement or commitment to purchase, the underwriters may determine to sell more, less or no shares in this offering to this investor, or this investor may determine to purchase more, less or no shares in this offering. The underwriters will receive the same discounts and commissions from any shares of our common stock purchased by this strategic investor as they will from any other shares of our common stock sold to the public in this offering. In connection with this investment, we intend to enter into an agreement with this investor pursuant to which it will have the right to designate a board observer, who would be entitled to attend all meetings of our board of directors, and all committees thereof, in each case subject to customary exclusions, as well as the right to review certain of our clinical and regulatory data. The investor would maintain these observation and inspection rights for two years following the date we receive approval from the FDA to sell our C-Pulse System in the United States so long as it beneficially owns at least 0% of the number of shares purchased in this offering.
#9) Poison Pill  On June 14, 2013, Sunshine Heart adopted a stockholder rights plan  and declared a dividend distribution of one right  for each outstanding share of Sunshine Heart. The Rights Plan is intended to protect the Company and its stockholders from efforts to obtain control of Sunshine Heart that its Board of Directors determines are not in the best interests of the Company and its stockholders, and to enable all stockholders to realize the long-term value of their investment in Sunshine Heart. The Rights Plan is not intended to interfere with any merger, tender or exchange offer or other business combination approved by the Board of Directors. Obviously, the fact that they implemented this Rights plan signifies that there are plenty of potential suitors sniffing around the Company.

#10) Market Cap  At the same stage of development, Heartware (HTWR) (current market cap of $1.5b, $49.2 Q1 revenues) was valued at $200m vs Sunshine Heart's current market cap of $93m. Sunshine Heart is targeting a much larger CHF market segment ($5 bln) than Heartware, at $7.50, SSH is trading at an unprecedented level in relation to its long term potential.  Many recent acquirers of developmental biotech firms have paid in excess of $1bln for assets with much less potential. What most investors don't realize is that Sunshine Heart only has 12.3mln shares outstanding, so while a takeover at $50 share might seem outlandish, it would still only value the company at approximately $600mln.

 Conclusion: In the near term, the excitement will start to build for Sunshine Heart's shares as additional patients are weaned off the C-Pulse system (i.e."cured"), new clinical trial sites are activated in the U.S., the completed feasibility study data is published in a major medical journal, clinical updates are given on the open label European study, progress is given on the development of the fully implantable version of the device and additional research houses initiate coverage. If the C-Pulse system were an investigational new drug, (based upon the early feasibility study, which results should only get better with device enhancements etc,)  the pundits would be hailing this as one of the biggest potential blockbuster drugs of all time. I believe the reason Sunshine Heart is currently trading at such an obscene low valuation is that investors simply think that for the time being, this is "dead money". They believe they will have to wait many years for the phase three trial results to report and therefore will have to wait for a corresponding time for a significant rise in share price. I think this is a huge miscalculation as I believe one of the big players in the field will step in (possibly causing a bidding war) well in advance of the phase three trial readout and make a takeover bid of at least $50 share/$600m. The Company wont be able to refuse it.

Disclosure: I am long SSH. I wrote this article myself,  this is NOT investment advice, it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with Sunshine Heart.


Monday, July 8, 2013

Mast Therapeutics: MST-188, the next Orphan Drug to get Adopted.

Orphan drugs have been all the rage recently, Sarepta Therapeutics (SRPT) rocketed from $3.30 to $45 in just three months after presenting results for Eteplirsen, its novel orphan drug for Duchennes Muscular Dystrophy. Aegerion Pharmaceuticals (AEGR) has nearly tripled since January after the  FDA approved its orphan drug, JUXTAPID, for Homoozygous Familial Hypercholesterolemia (HoFH), a rare, fatal disease. Enter Mast Therapeutics (MSTX), (formerly Adventrx Pharmaceuticals) which now has the most advanced new molecule, MST-188, in a phase three clinical trial, for the treatment of the highly unmet orphan indication, sickle cell disease (SCD) vaso-occlusive crisis. Mast Therapeutics also has plans to develop MST-188 for complications of arterial disease (ALI).

Sickle Cell Disease

Sickle cell disease, SCD is a group of inherited red blood cell disorders. Healthy red blood cells are round, and they move through small blood vessels to carry oxygen to all parts of the body. In someone who has SCD, the red blood cells become hard and sticky and look like a C-shaped farm tool called a “sickle”. The sickle cells die early, which causes a constant shortage of red blood cells. Also, when they travel through small blood vessels, they get stuck and clog the blood flow. This can cause pain and other serious problems such infection, acute chest syndrome and stroke. Sickle cell disease (SCD) affects millions of people throughout the world and is particularly common among those whose ancestors came from sub-Saharan Africa; Spanish-speaking regions in the Western Hemisphere (South America, the Caribbean, and Central America); Saudi Arabia; India; and Mediterranean countries such as Turkey, Greece, and Italy.
It is estimated that:
  • SCD affects 90,000 to 100,000 Americans.
  • SCD occurs among about 1 out of every 500 Black or African-American births.
  • SCD occurs among about 1 out of every 36,000 Hispanic-American births.
  • SCT occurs among about 1 in 12 Blacks or African Americans.
People with SCD have less access to comprehensive team care than people with genetic disorders such as hemophilia and cystic fibrosis. More than $1.0 billion is spent annually in the U.S. to treat patients with SCD  It is estimated that, in the U.S., sickle cell disease results in over 95,000 hospitalizations and, in addition, approximately 69,000 emergency department treat-and-release encounters each year. When a patient with sickle cell disease makes an institutional visit, vaso-occlusive crisis is the primary diagnosis in approximately 77% of hospital admissions and 64% of emergency room treat-and-release encounters.


Big Pharma Interest in SCD

 In October 2011, Pfizer signed a $340m development deal with GlycoMimetics obtaining exclusive worldwide rights to its investigational compound GMI-1070. The compound is a pan-selectin antagonist currently in phase 2 development for the treatment of vaso-occlusive crisis associated with sickle cell disease. More recently in November 2012, Novartis signed an option deal with Selexy for its phase 2  novel drug for SCD, SelG1, which is an anti-P selecting antibody.  The deal is valued at up to $665m in upfront, acquisition and milestone payments.


 FDA Orphan Drug Status
 
The Orphan Drug Act (ODA) provides for granting special status to a product to treat a rare disease or condition upon request of a sponsor. The combination of the product to treat the rare disease or condition must meet certain criteria. This status is referred to as orphan designation. Orphan designation qualifies the sponsor of the product for tax credits and seven years of market exclusivity. A marketing application for a prescription drug product that has been designated as a drug for a rare disease or condition is not subject to a prescription drug user fee unless the application includes an indication for other than a rare disease or condition.  MST-118  has received orphan drug designation for SCD in the U.S. and the EU

MST-118-SCD

MST-188 (formerly ANX-188) is a purified form of a nonionic, triblock copolymer (poloxamer 188). It is an investigational agent that binds to hydrophobic surfaces on damaged cells and improves membrane hydration and lowers adhesion and viscosity, particularly under low shear conditions. MST-188 has the potential to reduce ischemic tissue injury and end-organ damage by restoring microvascular function, which is compromised in a wide range of serious and life-threatening diseases and conditions. Mast is developing MST-188 as a treatment for complications arising from SCD.

After completing the acquisition of Synthrx, Inc. in April 2011, Mast Therapeutics (formerly Adventrx Pharaceuticals) acquired the worldwide rights to ANX-188, (formerly PP-188) a potential treatment for patients in sickle cell crisis, which is a severe and painful condition often with life-threatening complications. An earlier patient phase 3 study, which was completed by Glaxo SmithKline, (the prior sponsor) was published in JAMA, (n=249). This trial narrowly missed its primary endpoint, duration of crisis,  (p=.07) in patients of all ages but in the pediatric (<16 yrs old) sub-population, (n=73) the drug was associated with reducing the duration of painful episodes by 22 hours (p=.01).  Using a Kaplan-Meier post-hoc analysis of the proportion of patients <16 years old remaining in crisis, yielded a highly statistically significant p=.007 and showed a clear separation in the time curves.  MST-188 appears to have a favorable safety profile with no differences between the 2 treatment groups in the overall incidence of adverse events and no evidence of increased risk of bleeding during the treatment period.

Based upon the much higher response rates observed in pediatric patients in the prior trial, on January 30, 2013,  Mast Therapeutics initiated a  forty center, randomized, double-blind, two-arm, placebo controlled, pivotal phase 3 clinical study, focusing only on pediatric patients ages 8-17 (n=388). The primary endpoint of the trial is the reduction of  the duration of vaso-occlusive crisis in SCD patients. Using a two-sided alpha of .05, the study is 90% powered to detect a 16 hour difference between treatment arms. The secondary endpoints  will compare re-hospitalization rate (for vaso-occlusive crisis) within 14 days of initial discharge from the hospital and the occurrence of acute chest syndrome within 120 hours of randomization. This phase 3 trial will take approximately 24 months to complete and assuming a successful outcome,  a potential product launch in 2015.

As part of its discussions with the FDA, Mast Therapeutics committed to conduct a parallel QTC/QTc study of MST-188 to obtain additional safety data. This single center, double blind,randomized study initiated dosing on February 11, 2013. Sixty patients were to be enrolled and  the study will assess whether MST-188 has an effect on QT prolongation. The study was scheduled to complete dosing in the first quarter of 2013 with results expected to be announced in the middle of the year.


MST-Acute Limb Ischemia (ALI)

On February, 28, 2013 Mast Therapeutics announced its plans to develop MST-188 in the complications of arterial disease, initially as an adjunct to thrombolytics in acute limb ischemia (ALI), a complication of peripheral arterial disease. ALI is a progressive circulatory problem in which obstructed arteries reduce the blood flow to tissues peripheral arterial disease affects an estimated 8 to 12 million people in the United States and there is significant morbidity and mortality.

R. Martin Emanuele, Senior Vice President, Development, said: "Data from experimental models demonstrate the potential for MST-188-188, when used alone or in combination with thrombolytics, to improve outcomes for patients with thrombotic arterial disease, whether manifesting as acute limb ischemia, stroke or some other variant.  Studies in animals and humans suggest that ANX-188 can shorten time-to-thrombolysis, improve blood flow, delay re-occlusion and reduce reperfusion injury, each of which may improve the effectiveness of existing thrombolytic agents."   Santosh Vetticaden, Chief Medical Officer, said: "We plan to evaluate the potential of  MST-188 in arterial disease initially by evaluating it in acute limb ischemia.  Near-term goals include seeking orphan drug designation for ANX-188 in ALI, meeting with FDA to discuss our development plan in ALI and, assuming FDA agrees with the plan, initiating a phase 2, clinical proof-of-concept study in late 2013 or early 2014.  Currently, we estimate that third-party costs to conduct this study will be approximately $2 million and that it will take approximately 15 to 18 months to enroll.  Ultimately, we plan to leverage the data in ALI to find a partner to develop  MST-188 in larger indications within arterial disease, such as stroke." 

On March 25, 2013, following a positive opinion adopted by the Committee for Orphan Medicinal Products (COMP), the European Commission designated MST-188 as an orphan medicinal product.
Brian M. Culley, Chief Executive Officer, said: "Now that we actively are recruiting patients in EPIC, our pivotal phase 3 study of MST-188 in sickle cell disease, we intend to pursue strategic alliances more aggressively.  We believe orphan designation and the expectation of 10 years of marketing exclusivity in the EU will enhance partnering interest in Europe.  In addition to enabling development in multiple countries and enhancing the overall commercial opportunity for MST-188, partnerships will help fund its development within the U.S." Mr. Culley continued: "Our recently announced plans to investigate MST-188 in acute limb ischemia, a complication of peripheral arterial disease, also may bolster our partnering efforts.  Indeed, we already have been approached by at least one pharmaceutical company that wished to discuss our near- and long-term plans in arterial disease, which we announced just three weeks ago."


Catalysts:

Key objectives for the remainder of 2013 include:
  • Announcing results from the thorough QT/QTc study of MST-188, expected mid-year;
  • Soliciting FDA input on our planned phase 2 study in acute limb ischemia, expected in the third quarter;
  • Announcing results of nonclinical studies evaluating the physiologic significance of TEG results observed in prior nonclinical studies funded by the Defense Advanced Research Projects Agency (DARPA) Surviving Blood Loss (SBL) program, expected in the second half of the year;
  • Initiating a microvascular blood flow sub-study in EPIC, expected in the fourth quarter;
  • Initiating a phase 2 clinical proof-of-concept study of MST-188 in acute limb ischemia, expected in late 2013/early 2014;
  • Obtaining orphan drug designation for MST-188 for acute limb ischemia;
  • Submitting application(s) to request funding from the U.S. government to conduct a phase 2 clinical proof-of-concept study with MST-188 for resuscitation of shock following major trauma; and
  • Filling patent applications claiming key aspects of our proprietary manufacturing process.
On March 28, 2013, Mast Therapeutics engaged ESC Advisors to identify partnering opportunities for MST-188. Brian M. Culley, Chief Executive Officer, said: "Given the high unmet need and limited treatment options, sickle cell disease is experiencing significant levels of interest from strategic partners. MST-188 is now the only new molecular entity in phase 3 development in sickle cell disease.   Based on its stage of development, the absence of competitive, novel and late-stage products, its designation as an orphan drug in the U.S. and Europe and its potential utility in additional indications, we believe there will be substantial interest in MST-188 from potential partners, both in the U.S. and globally, and we intend to pursue strategic alliances aggressively. ESC's experience in transactions involving orphan product candidates will complement our internal capabilities and expand the scope of our current and future partnering discussions."

Other Considerations:

After the recent offering, Mast Therapeutics has a fully diluted market cap of approximately $60m. As of 3/31/13, the 10Q shows cash and cash equivalents of $32m. With the addition of the $22.9m from the 6/14 offering, cash now totals approximately $55m with zero debt. The Company is trading near its cash level, yet it has a very attractive phase 3 asset in MST-118, in the orphan indication of SCD, which due to trial redesign, has a VERY high probability of success. Mast Therapeutics is also developing the therapy in what could ultimately be a very large cardio indication.

Mast Therapeutics reminds me alot of Acadia Pharmaceuticals (ACAD), which had a similar situation and setup. After learning from mistakes made in the design of their failed first phase 3 trial for their parkinsons drug, pimavanserin, Acadia analyzed the data, redesigned a new phase 3 trial and subsequently set up a a new phase 3 trial for success.  After reporting positive phase 3 results on November 27, 2012, the stock exploded from $2.30 to over $6.50, and now trades around $18.

As outlined above, Mast Therapeutics has two shorter term catalysts that could move the stock; announcement  of the results from the thorough QT/QTc study of MST-188, expected mid-year and obtainment of orphan drug designation for MST-188 for acute limb ischemia. Longer term, once the stock gets on "catalyst traders" radars, it should experience the typical strong "biotech runup" into the SCD phase 3 clinical trial results.

Technically, on a short term basis, the stock is severely oversold and is digesting the recent stock offering in the 45c area. There is a gap to be filled at 61c, with major resistance at 75c -81c. On a longer term basis, a move above that major resistance level opens the way to the $1.50-$2.75 area.

Conclusion:

Over the last few years, Mast Therapeutics has completely transformed itself, appointing a new management team, board of directors and even changed its corporate name. The Company is dramatically different now with a laser focus on the development of its lead candidate MST-118.

Reduction of a sickle cell patient's duration of painful episodes is a highly unmet medical need, with with only one approved treatment option, hydroxyurea. If MST-188 is successful in the current phase 3 clinical trial, I believe it could become the new standard of care in the treatment for this very painful disorder. Annual U.S. incidence of SCD crisis produces 100,000 hospitalizations, if  just 35,000 of those patients undergo MST-188 therapy, annual peak sales could conservatively approach $300m. Assuming a 2015 launch and conducting a conservative NPV analysis yields a current price target in the $2.00-$2.50 range.


Disclosure: I am long MSTX. I wrote this article myself,  this is NOT investment advice, it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with Mast Therapeutics.







Tuesday, June 4, 2013

NeuroMetrix (NURO): A Five Bagger in the Making



What if I told you that there is a little known biotech company with a tiny market cap of  approximately $4.5 million and a public float of only 1.9m shares, that has the only recently FDA approved device to treat Painful Diabetic Neuropathy (PDN), a condition that represents a market opportunity of approximately $300 million in the U.S. alone. What if I told you further that this company has also just recently filed a 510(k) with the FDA for this device that will provide for managing and monitoring pain while the patient sleeps?  Furthermore, PDN is only the company's initial target market, the technology could eventually evolve to the treatment of neurological disorders.  On top of this, this tiny little biotech trades at only around $2.00 but has more than $3.00 in cash per share alone. Let me introduce to you NeuroMetrix (NURO).

Diabetic Epidemic
According to the World Health Organization (WHO) there are 347m people in the world who have diabetes. WHO projects that diabetes will be the 7th leading cause of death in 2030. There are approximately 25.8m people in the USA alone with diabetes and 79m whom are pre-diabetic. The annual direct cost of diabetes in the USA alone is estimated to be $100bln. Painful Diabetic Neuropathy (PDN), causes pain, numbness, infections and foot ulcers that may lead to amputation.  There is a serious unmet need in the detection, confirmation, monitoring and treatment of PDN. PDN is often not diagnosed leading to missed chances for early intervention and once the nerves have degenerated there are no treatment options. Foot ulcers represent the most expensive complication of PDN and treatment options can cost $5-$50,000 per episode.The American Diabetes Association recommends annual screening for PDN. The current tools identify only late stage PDN, most people diagnosed with diabetes do not get annual  testing or foot exams.

NeuroMetrix solutions:

NeuroMetrix completed the 510(k) clearance process for SENUS Pain Management Device on November29, 2012 and subsequently launched on January 7, 2013. From the Company's April 25th, 2013 earnings conference: "SENSUS is a transcutaneous electrical nerve stimulator intended for the symptomatic relief in management of chronic intractable pain. It is the only device designed specifically for people with neuropathic pain. The most common cause of such pain in people with diabetes is painful diabetic neuropathy or PDN, which is a severe debilitating chronic form of pain. PDN affects 16% to 26% of people with diabetes or 3 million to 5 million patients in the U.S. alone. Most patients with PDN have moderate to severe pain and half have sleep disturbances due to their pain. We believe this represents a U.S. market opportunity that we estimate in excess of $300 million annually During the first quarter, which is our initial commercial quarter with SENSUS, we shipped 145 devices. Early patient feedback has been encouraging with many reports of a substantial decrease in pain and improved sleep. Feedback from distributors has also been positive based on physician and patient reaction and early experience of the reimbursement."

During the first quarter of 2013, the initial SENUS commercial quarter, 145 devices were shipped and early feedback has been encouraging with many patients reporting major decreases in pain and improved sleep. Under the SENUS business model they will sell devices and electrodes to durable medical equipment suppliers, DMEs, who stock the product, create demand through their sales reps, fulfill prescriptions and also bill insurers. The company has stated that they wish to have 100 DMEs  in place by midyear and 250 by year end. For 2013, the goal is shipping 2000 SENUS devices , which would mean about 1500 patients using the device. NeuroMetrix is counting on the revenues that comes after placing the device with patients, the "Razor Model", as the device is used with proprietary disposable high margin (60%+)electrodes. There are currently 10 regional distributors in place and they are in discussions with "several national businesses that could lead to agreements later in the year". A six week  post market open label study is designed and scheduled to begin this quarter with study results hoped for by end of the year.  As reported on April 25th, an additional catalyst could be 510(k) clearance for device use during sleep.
  • Filing of a 510(k) for expanded indications relating to device use during sleep. The current device may be used at bedtime prior to sleep. This 510(k) submission, if successful, will give SENSUS unique regulatory labeling for electrical stimulation during sleep.

2013 is set to be a year to build a solid foundation of a broad national sales channel for SENUS and to build on positive patient experiences and the initial post-market study.
NeuroMetrix's complementary product, launched in Q4 2011, in the diabetic space is NC-STAT DPNCheck. This is a rapid point of care test that may aid in the early detection, confirmation and monitoring of diabetic peripheral neuropathy (DPN). The test is used at an early stage to guide treatment and will be focused on the single domestic market segment Medicare advantage plans. They view the Medicare advantage plan market as the largest near term market opportunity, $20-25 million annually, providing strong margins(60%) with very low marketing costs. Currently, they have three plans with a total of 130,000 covered lives that are scheduling or carrying out pilot programs and are in early discussions with prospective customers totaling another 250,000 covered lives. Several distribution agreements have been signed recently, most notably with; Handok, a $300 million revenue South Korean pharmaceutical and device company and in Japan with Omron Healthcare, a $600 million division of the $6 billion Omron Company. The company ended 2012 with an installed base of 939 devices, which was slightly below their goal of 1000.

Conclusion
NeuroMetrix at around $2.00 per share has a market cap of approximately just $4.5m and has no long term debt. The company is trading at a substantial discount to it's $6.9m cash as reported in the March 31, 2013 10Q, which is enough resources to fund operations through the first quarter of 2014. There is a $20M shelf registration in place but its use is restricted to 30% of market capitalization, or about $1.3M currently.  Another factor is that on February 29, 2013 the company announced a  one for six reverse stock split, subsequently there are approximately 2.1M shares issued and outstanding and a public float of only 1.9M shares.

As reported in the company's 10K for the year ended 12/31/12, the company had $7.6m in total revenues. The company has streamlined operations, reduced expenses and has completely narrowed down their commercial focus to their two novel and proprietary diabetes products.  If the SENSUS device alone can capture just 25% of the estimated $300m USA alone market opportunity, annual revenues would increase 10 fold.

Technically, the stock is developing a very strong base in the $1.84-$2.04 area, a move above $2.04 with volume may signal a trend reversal and a possible move back to $3.25. On a longer term basis, there is an unfilled gap in  the chart at $6.90 from 2/8/12 that needs to be filled.

As with any small cap biotech company, NeuroMetrix is a very speculative investment, the company has realigned and is laser focused in attacking the diabetic epidemic. I believe that NeuroMetrix has tremendous potential and even if the stock should trade at a price of $10 sometime in the next 12-24 months, the company would still only have a market cap of approximately $22M.

Disclosure: I am long NURO. I wrote this article myself,  this is NOT investment advice, it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with NeuroMetrix.