Covered Companies

StemCells (STEM) Note 09-16-13

downloadreportHuCNS-SC® Dry AMD Trial Advances to High-Dose 1,000,000 Cells
StemCells Inc. Begins Alzheimer’s Work with Initial $3.8M from CIRM
StemCells Inc. Secures $10M Debt and $30M Equity Line
Three Active Programs in Human Trials: PMD, Spinal Cord and Dry AMD

Download Full 9-Page Note with Important Disclosures: Morning Note 09-16-13 STEM

On September 12, 2013 StemCells, Inc. announced that the independent Data Safety Monitoring Committee (DSMC) conducted a review of Cohort IA of 4 patients each transplanted with 200,000 HuCNS-SC® cells (purified human neural stem cells) in their Phase I/II trial for Dry Age-Related Macular Degeneration (Dry AMD) and found no safety issues. As a result of the successful DSMC review, StemCells Inc. has now transplanted the fifth patient and the first of the high-dose Cohort IB patients transplanted with 1,000,000 HuCNS-SC cells (5x the low-dose). Cohort IB is expected to enroll a total of 4 patients to be followed by 8 additional patients in the final Cohort II arm. (see Human Clinical Trial of HuCNS-SC® for Dry AMD)

StemCells Inc. also received permission from the FDA to open 3 more U.S. trial sites in addition to the 2 currently enrolling sites, the Byers Eye Institute at Stanford and the Retina Foundation of the Southwest.

We are reiterating a Strong Speculative Buy with a Price Target of $4.50 as StemCells Inc. has evolved into one of the most advanced players in the stem cell space. StemCells Inc.’s HuCNS-SC® (purified human neural stem cells) have shown unprecedented results in human patients for Pelizaeus-Merzbacher Disease (PMD) and for Complete Thoracic Spinal Cord Injury and both programs are continuing to progress. In addition, the Dry AMD trial is progressing with additional trial sites. CIRM’s $19M funding for HuCNS-SC® in Alzheimer’s Disease validates their research demonstrating for the first time that human neural stem cells can have a significant effect on memory in two different animal models. (see Alzheimer’s Disease Background & Development Program). We believe the StemCells Inc. strong management team and strong science continues to be successfully validated. Our Strong Speculative Buy rating and 12-18 month target price of $4.50 is based on 35x estimated 2017 EPS discounted 50% for cumulative risks in a first-in-class stem cell therapy.

Download Full 9-Page Note with Important Disclosures: Morning Note 09-16-13 STEM

Echo (ECTE) Note 09-05-13

downloadreportEcho Therapeutics Agrees to Meeting with Platinum-Montaur Next Week
Largest Shareholder Goes Public with Game Plan for the Company
Maintaining NEUTRAL as We Await Meeting Next Week

Download Full 6-Page Note with Important Disclosures: Morning Note 09-05-13 ECTE

In response to Friday’s Platinum-Montaur proposal, Echo management issued a statement this morning that they have communicated with Platinum-Montaur and will meet with them next week (date not disclosed). Echo also stated that they continue to “consider and seek to enter into collaborations or licenses regarding the future development and distribution of its products and remains willing to enter into discussions regarding potential collaborations or licenses.

While it is too early to tell if a credible game plan will emerge from next week’s meeting, we view this as the first potentially positive event for shareholders in a very long time. However, we remain Neutral on Echo shares until there is more clarity on any outcome and its timing with respect to Echo’s cash balance.

Platinum-Montaur Proposal
On Friday August 30th, Platinum-Montaur Life Sciences (the largest shareholder owning roughly 20% of Echo) issued a press release calling on the Board of Directors to accept their proposal by 5pm Wednesday, September 4th. The plan is summarized below:

Board of Directors: Existing Board members Vincent D. Enright and James F. Smith should resign immediately to be replaced by Michael M. Goldberg, M.D. (Platinum-Montaur) and Gary Saxton (http://www.linkedin.com/in/garymsaxton).

China Partner and $10M Investment: Out-license development, manufacturing and exclusive marketing in China to an unnamed China partner. The partner would bear all costs and responsibilities in exchange for a “high double-digit royalty”. Echo would pay a milestone payment of $1.5M in stock upon regulatory approval in China or as a break-up fee in the case of termination. Upon closing of the agreement with the China partner, Platinum-Montaur (and potentially other approved investors) will purchase $10 million of common stock at a premium to the share price (to be determined).

Independent Consultants: Engage an outside consulting firm, to be unanimously approved by the Board, to provide strategic consulting to review the Echo’s product and business development positioning. Engagement a recruiting firm with recent relevant exposure to executives with current experience in medical device business development.

In our opinion, this represents a credible plan for Echo Therapeutics as it addresses our 3 key concerns. The first is having shareholders represented on the Board, in this case by Platinum-Montaur. This would prevent further financing missteps and ensure rational operational execution. The second is conducting an independent review of their existing operational and strategic plans. Finally, it provides for $10M in cash in a rational manner as we believe the United States and Europe are the major value drivers for Echo and that out-licensing China makes sense. While no plan is perfect and we lack details such the China partner, the consulting firm and $10M share price, we believe this plan represents a solid step toward unlocking shareholder value and we await the Board’s response.

Download Full 6-Page Note with Important Disclosures: Morning Note 09-05-13 ECTE

Navidea (NAVB) Note 09-04-2013

downloadreport

Navidea Awarded Second SBIR Grant in Two Weeks for NAV4694

Download Full 7-Page Note with Important Disclosures: Morning Note 09-04-13 NAVB

SBIR Grant for NAV4694 Phase IIb Trial: Navidea was awarded their second NAV4694 Small Business Innovation Research (SBIR) grant from the National Institute On Aging (NIA) of the National Institutes of Health (NIH). This time it is for their ongoing Phase IIb clinical trial (initiated March 2013) using NAV4694 as a diagnostic imaging agent that may aid physicians in identifying those individuals with MCI (Mild Cognitive Impairment) who are at greatest risk of progressing to Alzheimer’s disease (AD). The SBIR grant has the potential to provide up to $2.3M in support, if fully funded, through the conclusion of the Phase IIb clinical study. Initial funding of $152K for the approved first stage of the grant is intended to provide support for initiation activities of the clinical trial program. Funding of the second stage of the grant is contingent upon meeting specific aims related to the first stage of the grant such as clinical site contracting, investigator training and institutional review board approvals. The clinical trial details can be found at http://www.clinicaltrials.gov/ct2/show/NCT01812213 

SBIR Grant for NAV4694 Phase III Trial: On August 21, 2013, Navidea announced the award of a Small Business Innovation Research (SBIR) grant from the National Institute On Aging (NIA) of the National Institutes of Health (NIH) in connection with the Navidea’s Phase III clinical program for its NAV4694 beta-amyloid imaging agent as an aid in the differential diagnosis of Alzheimer’s disease. The SBIR grant has the potential to provide up to $1.8M in support, if fully funded, through the conclusion of the Phase III clinical study. Initial funding of $259K for the approved first stage of the grant is intended to provide support for initiation activities of the Phase III clinical program. Funding of the second stage of the grant is contingent upon meeting specific aims related to the first stage of the grant such as institutional review board approval of the Phase III protocol, clinical site contracting and investigator training. The clinical trial details can be found at http://www.clinicaltrials.gov/ct2/show/NCT01886820 

NAV4694 Adopted as Gold Standard for Large Alzheimer’s Study: On July 16, 2013, it was announced at the World Wide Alzheimer’s Disease Neuroimaging Initiative meeting in Boston that the Australian Imaging, Biomarker & Lifestyle Flagship Study of Ageing (AIBL) (http://www.aibl.csiro.au/) was dropping 11C-labeled Pittsburgh Compound-B (PiB) in favor of Navidea’s NAV4694 (Fluorine-18 labeled β-amyloid PET imaging) for their large research initiative in Alzheimer’s disease and Mild Cognitive Impairment. Dr. Christopher C. Rowe, MD FRACP, Director of the Department of Nuclear Medicine and Centre for PET at Austin Health, Melbourne, Australia, announced the changeover. The AIBL is a study of over 1,100 people assessed over a long period of time (>4.5 years) to determine which biomarkers, cognitive characteristics, and health and lifestyle factors determine subsequent development of symptomatic Alzheimer’s Disease (AD). More study details are available at (http://www.aibl.csiro.au/about/)

Download Full 7-Page Note with Important Disclosures: Morning Note 09-04-13 NAVB

Echo (ECTE) Note 09-03-13

downloadreportA Plan for Echo Therapeutics – But Not From the Board
Largest Shareholder Goes Public with Game Plan for the Company
Maintaining NEUTRAL as We Await the Wednesday 5PM Deadline

Download Full 6-Page Note with Important Disclosures: Morning Note 09-03-13 ECTE 

Friday afternoon, Platinum-Montaur Life Sciences (the largest shareholder owning roughly 20% of Echo) issued a press release calling on the Board of Directors to accept their proposal by 5pm Wednesday, September 4th. The plan is summarized below:

Board of Directors: Existing Board members Vincent D. Enright and James F. Smith should resign immediately to be replaced by Michael M. Goldberg, M.D. (Platinum-Montaur) and Gary Saxton (http://www.linkedin.com/in/garymsaxton).

China Partner and $10M Investment: Out-license development, manufacturing and exclusive marketing in China to an unnamed China partner. The partner would bear all costs and responsibilities in exchange for a “high double-digit royalty”. Echo would pay a milestone payment of $1.5M in stock upon regulatory approval in China or as a break-up fee in the case of termination. Upon closing of the agreement with the China partner, Platinum-Montaur (and potentially other approved investors) will purchase $10 million of common stock at a premium to the share price (to be determined).

Independent Consultants: Engage an outside consulting firm, to be unanimously approved by the Board, to provide strategic consulting to review the Echo’s product and business development positioning. Engagement a recruiting firm with recent relevant exposure to executives with current experience in medical device business development.

In our opinion, this represents a credible plan for Echo Therapeutics as it addresses our 3 key concerns. The first is having shareholders represented on the Board, in this case by Platinum-Montaur. This would prevent further financing missteps and ensure rational operational execution. The second is conducting an independent review of their existing operational and strategic plans. Finally, it provides for $10M in cash in a rational manner as we believe the United States and Europe are the major value drivers for Echo and that out-licensing China makes sense. While no plan is perfect and we lack details such the China partner, the consulting firm and $10M share price, we believe this plan represents a solid step toward unlocking shareholder value and we await the Board’s response.

Download Full 6-Page Note with Important Disclosures: Morning Note 09-03-13 ECTE

Echo (ECTE) Note 08-30-13

downloadreport

Board Member Takes Over Reins at Echo for $2,500 per Day
Maintaining NEUTRAL Rating as Doubts Remain with Existing Board

 

Download Full 5-Page Note with Important Disclosures: Morning Note 08-30-13 ECTE

On Monday, Echo’s Board of Directors announced that CEO Dr. Patrick Mooney went on an immediate leave of absence and was replaced by Board member Robert Doman who stated “Echo’s business operations will continue as usual in Dr. Mooney’s absence…” Apparently so, as Mr. Doman is now being paid $2,500 per day ($650,000 annualized) to act as interim CEO according to the consulting agreement that was just filed as an 8-K with the SEC: http://www.sec.gov/Archives/edgar/data/1031927/000141588913001743/ex10-1.htm  The initial 4-month term of the contract may indeed lead to unlocking value at Echo, but we’re not yet confident it will reach shareholders.

While Mr. Doman is a relative newcomer to Echo Therapeutics, having been on the Board just under 6 months, we are nonetheless surprised at the tone-deaf response to shareholder concerns, especially considering the stock was $7.80 on March 13th when Mr. Doman joined the board. So far, we are unaware of any attempt to communicate their game plan to either investors or Wall Street.

Maintaining NEUTRAL Rating: We reiterate our statement from Monday following the announcement of Dr. Mooney’s leave of absence: While this is a good first step, investors should note that the existing Board remains in control of Echo, which does not currently give us confidence in navigating Echo’s challenges.

Download Full 5-Page Note with Important Disclosures: Morning Note 08-30-13 ECTE

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