Echo Therapeutics (ECTE)

Echo (ECTE) Note 04-09-14

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Platinum Gets Serious – Names Nominee to Replace Board Chairman

Download Full 5-Page Note with Important Disclosures: Morning Note 04-09-14 ECTE

Platinum Gets Serious: According to an 8-K filing, on April 3rd, Echo’s Board extended Chairman Robert Doman’s contract to act as interim CEO yet again, this time through June 30th. Presumably in response, Echo’s largest shareholder, Platinum, just filed a 13D with the SEC stating that Platinum is nominating Shepard Goldberg for election to the Board of Directors, specifically for the seat currently occupied by Chairman Robert Doman. We note that Shepard Goldberg is cousin to Michael Goldberg who was recently named to the Echo Board on February 28th.

Background: After a disastrous 2012-2013 when the stock declined over 90% due to multiple poorly executed financings, the CEO Patrick Mooney was terminated on September 27, 2013 with Board Chairman Robert Doman stepping in as interim CEO. After several months, no permanent CEO had been named and on their March 27th conference call it was revealed that the search for a permanent CEO was just getting started and that Mr. Doman intended to remain on the Board subsequent to a new CEO being named.

What this Means to Investors: We believe that Platinum, as Echo’s largest shareholder, is more closely aligned with shareholder interests than current management. The severe decline in stock price, the need to develop a GEN2 system in order to begin U.S. trials and a planned “limited” launch in Europe (limited launches generally cost more than they make), with no permanent CEO named is not conducive to investor confidence. While the addition of Michael Goldberg to the Board was viewed as a solid first step, clearly Platinum is unsatisfied with management, and as a result, is seeking additional Board representation (at the expense of Mr. Doman’s seat).

Maintaining Neutral: We continue to believe in the basic science of the tCGM Symphony system however, this is not enough to generate confidence in Echo shares. The continuing management and governance issues, development delays and poorly thought-out European strategy, all act as dampers on any possible Symphony success in the near-term. Unless and until investor confidence is regained in Echo, we believe the shares will remain relatively flat.

Download Full 5-Page Note with Important Disclosures: Morning Note 04-09-14 ECTE

Echo (ECTE) Update 03-31-14

downloadreports Software & Manufacturing Changes Cause Delay
s Critical GEN2 Fixes & Financing Risks Remain
s Maintaining Neutral Rating – Needs Permanent CEO

Download Full 21-Page Update with Important Disclosures: ECTE Update 03-31-14

Cost Reductions Push Timetable Out 3 Months: Echo reduced headcount by approximately 33% and cash burn by 39% in part by outsourcing software development and switching contract manufacturers. As a result, the GEN2 modifications such as algorithm modifications for consistent Prelude microabrasion, warm-up and calibration improvements and sensor correction for IV acetaminophen are slightly delayed. We are now expecting limited European launch in Q1 2015 and initiation of the U.S. FDA clinical trial also in Q1 2015. (see Symphony™ tCGM Milestones & Events)

Restarting CEO Search: Echo is restarting the search for a permanent CEO, which we consider essential for investment in Echo shares. We do not anticipate investors returning with any enthusiasm due to the continued uncertainty surrounding management and the Board until an experienced permanent CEO is named.

Still Waiting on MTIA Funds: On December 10, 2013, Echo announced a 10-year strategic collaboration agreement with Medical Technologies Innovation Asia (MTIA), Ltd., Hong Kong, for a license agreement and $5M equity investment in Echo. However, as of March 26, 2014, Echo has only received $1.9M of the $5M and Echo is not be obligated to commence the transfer of any technology or other documents, product or information to MTIA until the total $5M has been received. (see Partnerships)

Good Data: As a reminder, the results for the tCGM Symphony trial were very good with a MARD of 12.5%, CG-EGA of 98.2% and CG-EGA A+B of 99.4% in 32 patients (18 cardiac/14 non-cardiac) using over 630 glucose readings with a wide range of glucose values 49-324 mg/dL. This was the first controlled clinical trial using all three components of the tCGM Symphony system (Prelude, Biosensor and Wireless Monitor) and the topline data appears to be clinically acceptable. It also met the primary safety objectives as there were no unanticipated adverse events during the study. (see Clinical Trial Results: CE Mark Trial – Gen1)

GEN2 Fixes Are Critical: The current GEN1 tCGM Symphony system requires several fixes to be commercially successfully. These range from minor fixes such as training and user manual operations to minimize variability among users, to significant issues requiring R&D such as an improved algorithm, more consistent Prelude skin ablation and a more consistent warm-up and calibration schedule. Of particular concern, IV acetaminophen (as used in ICU) interfered with the Biosensors and as a result, 3 patients were excluded from the trial. While management believes they have identified a solution, this is a known issue in the field and would hamper the commercial prospects for the Symphony system. Completion of the GEN2 fixes are critical for the pivotal U.S. FDA trial to begin next year.

Maintaining NEUTRAL: We continue to believe in the basic science of the tCGM Symphony system and that it should ultimately be successful. However, the near-term unknowns, especially the need for a permanent CEO, combined with the anticipated volatility surrounding both the product development and the financings prevent us from modeling Echo with any degree of confidence at this time.

Download Full 21-Page Update with Important Disclosures: ECTE Update 03-31-14

Echo (ECTE) Note 02-28-14

downloadreportEcho Relents – Michael Goldberg Appointed to Board
Files for CE Mark in Europe – Expects Limited Launch in EU
Waiting on Full $5 Million Investment from MTIA – March 10th Deadline

Download Full 5-Page Note with Important Disclosures: Morning Note 02-28-14 ECTE

This morning, Echo announced that Michael M. Goldberg, M.D., has been appointed to Echo’s Board of Directors. We believe this a significantly positive event as he is representing the single largest shareholder in Echo and whose interests have been consistently aligned with those of smaller shareholders. Dr. Goldberg was a Managing Partner of Montaur Capital Partners from January 2007 to December 2013. Prior to that, Dr. Goldberg was with Emisphere Technologies, Inc., serving as Chief Executive Officer from August 1990 to January 2007, Chairman of the Board of Directors from November 1991 to January 2007, and President from August 1990 to October 1995. Before joining Emisphere, Dr. Goldberg served as Vice President of The First Boston Corp., where he was a founding member of the Healthcare Banking Group. Dr. Goldberg currently serves on the board of Navidea Biopharmaceuticals. He has been a Director of Alliqua, Inc., Urigen Pharmaceuticals, Inc., Adventrx Pharmaceuticals Inc. and several private companies. Dr. Goldberg received a B.S. from Rensselaer Polytechnic Institute, an MD from Albany Medical College of Union University and an MBA from Columbia University Graduate School of Business.

Maintaining Neutral for Now: We believe that Dr. Goldberg’s appointment to the Board of Directors represents a significant first step in regaining shareholder confidence in Echo. However, we are remaining neutral until we have better visibility on financial and operational issues. We continue to believe in the basic science of the Symphony tCGM system and that it should ultimately be successful. However, the near-term unknowns combined with the anticipated volatility surrounding both the product development, clinical data and future financings prevent us from modeling Echo with any degree of confidence at this time.

Download Full 5-Page Note with Important Disclosures: Morning Note 02-28-14 ECTE

Echo (ECTE) Note 01-13-14

downloadreportEcho Files for CE Mark in Europe – Expects Limited Launch in EU
Still Waiting on $5 Million Investment from MTIA – March 10th Deadline
Maintaining Neutral – Waiting for Gen2 Development, Testing & FDA

Download Full 4-Page Note with Important Disclosures: Morning Note 01-13-14 ECTE

CE Mark Filed: Echo announced they submitted their European CE Mark Technical File to obtain market approval for its Symphony CGM System in the hospital critical care environment and anticipates receiving CE Marking Q2 2014. Investors should note that the company is expecting a “limited launch” in Europe where reimbursement is typically negotiated on a country by country basis.

Waiting on MTIA $5 Million Investment: While Platinum-Montaur Investment has invested their $5 million per the December 10, 2013 agreement, the $5 million from Medical Technologies Innovation Asia, LTD. (MTIA) and Beijing Sino Tau Shang Pin Tech and Development Corp. (MTIA Affiliate) has been delayed to the governmental currency exchange process in China. As a result, MTIA now has until January 31, 2014 and the MTIA Affiliate now has until March 10, 2014 to make their combined $5 million investments. Echo is not obligated to transfer of any technology or documents to MTIA until Echo receives their $5 million. If Echo can terminate the agreement if the $5 million is not received by March 10th.

Maintaining NEUTRAL: While a CE Mark is certainly helpful in validating the Gen1 Symphony tCGM system, the “limited launch” in Europe will result in low sales revenues. We are maintaining our neutral rating until we see how well management executes in developing and testing the Gen2 product enhancements as well as the initial feedback from the FDA on trial design. We continue to believe in the basic science of the Symphony tCGM system and that it should ultimately be successful. However, the near-term unknowns combined with the anticipated volatility surrounding both the product development, clinical data and future financings prevent us from modeling Echo with any degree of confidence at this time.

Download Full 4-Page Note with Important Disclosures: Morning Note 01-13-14 ECTE

Echo (ECTE) Note 12-11-13

downloadreportEcho Signs China Partnership with MTIA for Development and Distribution
Raises $10M from MTIA and Platinum at $2.75 – Withdrawing S-1
Maintaining Neutral – Waiting for Gen2 Development and Testing

Download Full 4-Page Note with Important Disclosures: Morning Note 12-11-13 ECTE

Echo announced that they signed the China partner and will receive the $10M investment as originally proposed by Platinum-Montaur on August 30th.

Partnership in China: Echo announced a 10-year strategic collaboration agreement with Medical Technologies Innovation Asia (MTIA), Ltd., Hong Kong, for a license arrangement and equity investment in Echo. Echo granted MTIA rights to develop, manufacture, market and distribute the Symphony CGM System on an exclusive basis in the Peoples’ Republic of China, Hong Kong, Macau and Taiwan. Echo and MTIA will share is the sales generated in territory (terms were not disclosed). MTIA is responsible for development, manufacturing and marketing costs for the Chinese market. Echo would pay a milestone payment of $1.5M in stock (553,506 shares @ $2.71) upon regulatory approval in China or as a break-up fee in the case of termination. 

China Investment: MTIA and its affiliate purchased 1,818,182 shares of Echo’s common stock at $2.75 per share and will also receive 181,818 5-year warrants with an exercise price of $2.75 per warrant, exercisable starting June 9, 2014.

Platinum-Montaur Investment: Platinum Partners and its affiliates, increased their position in Echo by purchasing 69,569 shares of Echo’s common stock at $2.75 per share. Platinum is also purchasing 1,748,613 shares of Series E Convertible Preferred Shares at a purchase price of $2.75 per share which are convertible into common stock on a one-for-one basis. Platinum will also receive 181,818 5-year warrants with an exercise price of $2.75 per warrant, exercisable starting June 9, 2014.

S-1 Withdrawn: Echo will withdraw the registration statement on Form S-1 filed on December 2, 2013.

Maintaining NEUTRAL: While we find calling $0.04 per share “a premium” disingenuous, the resulting terms where certainly more shareholder friendly than the anticipated $15M S-1 filing, which will be withdrawn. We are maintaining our neutral rating until we see how well management executes in developing and testing the Gen2 product enhancements as well as the initial feedback from the FDA on trial design. We continue to believe in the basic science of the tCGM Symphony system and that it should ultimately be successful. However, the near-term unknowns combined with the anticipated volatility surrounding both the product development, clinical data and future financings prevent us from modeling Echo with any degree of confidence at this time.

Download Full 4-Page Note with Important Disclosures: Morning Note 12-11-13 ECTE

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