Covered Companies

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

StemCells Inc. (STEM) Note 01-10-14

downloadreportSpinal Cord Enrollment Expands to North America – Completes in Q1
Multiple Shots-On-Goal with Human Trials in Spinal Cord, AMD & PMD
Strong Balance Sheet and With New GMP Facility Coming Online
Alzheimer’s Disease Pre-Clinical Work Funded by CIRM

Download 8-Page Note with Important Disclosures: Morning Note 01-10-14 STEM

Spinal Cord Trial on Track to Complete Enrollment Q1: Today, StemCells Inc. announced that the ninth patient in the ongoing Phase I/II chronic spinal cord injury became the first spinal cord injury patient to be implanted with HuCNS-SC® (purified human neural stem cells) in North America (University of Calgary). The first eight patients were implanted at the University of Balgrist in Zurich, Switzerland and with the additional trial sites in North America, the company expects to complete enrollment of the final three patients (12 total) during Q1 with a controlled Phase II trial expected to commence mid-2014.

Dry AMD Enrollment to Complete Mid-2014: StemCells Inc. indicated that they have implanted 6 of the 18 patients required in their Phase I/II trial for Dry Age-Related Macular Degeneration (Dry AMD) and expected to complete enrollment by mid-2014. The trial is an open-label dose-escalating trial in 16 patients treating their worst eye with a single injection into the space beneath the retina and results evaluated over the course of 12 months. Importantly, 85% of all AMD patients currently have the Dry form and 100% of patients with the more serious Wet form progressed from the initial Dry form. The dry form can also cause vision loss without turning into the wet form.

New GMP Manufacturing Facility Coming Online for 2014: StemCells Inc. is bringing their new GMP manufacturing facility in Sunnyvale online to prepare for multiple Phase II trials starting in 2014. The facility allows StemCells Inc. to secure their own supply chain including process development laboratories, manufacturing, QC/QA and documentation systems. They recently received their drug manufacturing license from the state California.

We are reiterating a Strong Speculative Buy with a Price Target of $4.50 as StemCells Inc. continues to be 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 2018 EPS discounted 50% for cumulative risks in a first-in-class stem cell therapy.

Download 8-Page Note with Important Disclosures: Morning Note 01-10-14 STEM

Navidea (NAVB) Note 01-07-14

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Navidea Continues Lymphoseek Globalization – First Step in Asia

 

Download Full 8-Page Note with Important Disclosures: Morning Note 01-07-14 NAVB

Lymphoseek Globalization Continues – Now in Asia: Navidea continues is strategy to globalize Lymphoseek and executed a distribution agreement with Global Medical Solutions Taiwan, Ltd. (GMST), which currently distributes nuclear medicine and diagnostic imaging products in Taiwan. For flexibility, GMST will distribute both non-radioactive kits as well as unit-dose product which will be radiolabelled at GMST’s radiopharmacy. Prior to complete Taiwanese FDA approval (expected 2014-2015), Lymphoseek may be made available under “named-patient” protocols. GMST represents Navidea’s first step in Asia and follows a recently signed distribution agreement in Canada. Navidea has also begun shipments of Lymphoseek to selected medical centers in the Middle East.

Reiterating Strong Speculative Buy: Navidea continues progress in placing Lymphoseek on a global scale but such efforts remain below the radar screen on Wall Street. In regard to the CHMP delay in Europe, we believe incorporating all the cancer indications and SLN data into a single MAA, rather than splitting them as in the U.S., will ultimately make sales and marketing in Europe easier with a faster adoption curve than originally anticipated. We continue to believe Navidea remains undervalued with a strong balance sheet as Lymphoseek’s U.S. permanent A-Code for reimbursement went into effect January 1, 2014. Additional catalysts during 2014 are expected to be European launch (with material sales in 2015), sNDA approval in head & neck cancer with a sentinel lymph node claim as well as significant newsflow for NAV4694 in Alzheimer’s disease, NAV5001 in Parkinson’s disease and their new Manocept™ imaging platform. We are reiterating our Strong Speculative Buy rating with a 12-18 month price target of $3.75 based on a 35x multiple on projected fiscal year 2017 EPS and discounted 25% for cumulative risk.

Download Full 8-Page Note with Important Disclosures: Morning Note 01-07-14 NAVB

StemCells Inc. (STEM) Update 01-02-2014

downloadreportStemCells Inc. Gains Momentum Going into 2014
Strong Balance Sheet and New GMP Facility
Human Trials in Spinal Cord, AMD & PMD
Alzheimer’s Pre-Clinical Work Funded by CIRM 

Download Full 33-Page Update Report with Important Disclosures: STEM Update 01-02-14

Very Strong Balance Sheet: StemCells Inc. begins 2014 with a very strong balance having over $30M in cash, which enables StemCells Inc. to continue developing their HuCNS-SC® cells (purified human neural stem cells) for multiple indications uninterrupted.

Enrollment in Spinal Cord Injury to Complete Q1 2014: StemCells Inc. has enrolled 8 of the 12 patients in their clinical trial of HuCNS-SC® cells in severe spinal cord injury and expects to complete enrollment during Q1. Investors should note that on February 12, 2013, StemCells Inc. announced the final 12-month data from the 1st patient cohort (AIS-A) showing that the gains in sensory function observed in 2 of the 3 patients at 6 months persisted for the 12 month period. Of particular note is the unexpected improvement in 1 patient classified as a complete injury (AIS-A) to being reclassified as an incomplete injury (AIS-B). The third patient remained stable and the HuCNS-SC continued to demonstrate a favorable safety profile. (see Human Trial of HuCNS-SC® for Chronic Thoracic Spinal Cord Injury)

Dry AMD Enrollment to Complete Mid-2014: StemCells Inc. indicated that they have implanted 6 of the 18 patients required in their Phase I/II trial for Dry Age-Related Macular Degeneration (Dry AMD) and expected to complete enrollment by mid-2014. The trial is an open-label dose-escalating trial in 16 patients treating their worst eye with a single injection into the space beneath the retina and results evaluated over the course of 12 months. Importantly, 85% of all AMD patients currently have the Dry form and 100% of patients with the more serious Wet form progressed from the initial Dry form. The dry form can also cause vision loss without turning into the wet form. (see Dry Age-Related Macular Degeneration (Dry AMD) Background & Development)

Awaiting FDA Pathway for PMD: StemCells Inc. is communicating with FDA on the next steps on the regulatory pathway for HuCNS-SC® cells Pelizaeus-Merzbacher disease (PMD). The results showed that 24 months after transplantation the evidence of myelination is even more pronounced than the 12 months results. The gains in neurological function reported at 12 months were maintained and there were no safety concerns. PMD patients have a defective gene resulting in insufficient myelin in the brain with progressive and irreversible loss of neurological function and death. Investors should note that the results reported by StemCells Inc. represent are unprecedented in PMD patients suggesting that HuCNS-SC cells are altering the course of the disease. (see Pelizaeus-Merzbacher Disease (PMD) Background & Development Program)

New GMP Manufacturing Facility Coming Online for 2014: StemCells Inc. is bringing their new GMP manufacturing facility in Sunnyvale online to prepare for multiple Phase II trials starting in 2014. The facility allows StemCells Inc. to secure their own supply chain including process development laboratories , manufacturing, QC/QA and documentation systems. They recently received their drug manufacturing license from the state California.

New CFO for 2014: The year 2014 also brings a new CFO, Greg Schiffman, with experience leading the financial operations and strategy of global publicly-traded companies such as Affymetrix and Applied Biosystems. Most recently, Mr. Schiffman was Executive Vice President and CFO of Dendreon Corporation since 2007, where he had primary responsibility for capital raising, financial reporting and controls, information technology, and investor relations. Mr. Schiffman also held financial roles at Hewlett Packard. He holds a bachelor’s degree in accounting from De Paul University and an MBA from the Kellogg Graduate School of Management at Northwestern University. (see Management)

We are reiterating a Strong Speculative Buy with a Price Target of $4.50 as StemCells Inc. continues to be 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 2018 EPS discounted 50% for cumulative risks in a first-in-class stem cell therapy.

Download Full 33-Page Update Report with Important Disclosures: STEM Update 01-02-14

Navidea (NAVB) Note 12-20-13

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Europe Incorporates H&N SLN Data to Existing MAA Creating Delay
Buy on Weakness – No Impact on Financial Model

Download Full 7-Page Note with Important Disclosures: Morning Note 12-20-13 NAVB

Why was the Committee for Medicinal Products for Human Use (CHMP) Opinion Delayed? The European Medicines Agency (EMA) elected to include the recent Lymphoseek Head & Neck NEO3-06 Phase III data into the Marketing Authorization Application (MAA) that was originally filed for just Breast Cancer and Melanoma. Since the EMA incorporated the recent Head & Neck data, including the Sentinel Lymph Node (SLN) data, the review clock stopped for the entire application while Navidea responds to their queries on the recent H&N SLN data.

Why was this a surprise? The original MAA was filed on December 18, 2012 for Breast Cancer and Melanoma. On April 11, 2013, the interim data from the Head & Neck Phase III trial was so strong that the Data Safety Monitoring Board (DSMB) recommended the trial be ended early. In the U.S. the FDA reviewed (and approved) Breast and Melanoma while Navidea filed a separate sNDA for Head & Neck. In contrast, the European Medicines Agency decided they wanted all three indications incorporated into the single MAA for review.

Does this increase the risk? The Head & Neck cancer data was very strong with a False Negative Rate of 2.56% (1/39), Negative Predictive Value of 97.8% (44/45) with Overall Accuracy of 98.8%. We believe this additional data strongly reinforced the original MAA.

What does the timeline look like now? While the EMA does not have timelines like the FDA, we conservatively expect to see a CHMP opinion in Q2 with timely EMA decision shortly thereafter.

How does this affect the financial model? There is no change to our financial model as European Sales in 2014 were de minimis. With all three cancer indications, including a SLN claim, we expect sales in 2015 to remain on track or even a faster adoption curve. It is also possible that the FDA review for Lymphoseek in H&N SLN could come as soon as the summer if the sNDA is granted priority review as a result of the Fast Track status granted on December 10, 2013.

Expecting Volatility Today – Buy on Weakness: We believe incorporating all the cancer indications and SLN data into a single MAA, rather than splitting them as in the U.S., will ultimately make sales and marketing in Europe easier with a faster adoption curve than originally anticipated. We believe long-term investors should take advantage of the expected weakness from headline newsflow. We continue to believe Navidea remains undervalued with a strong balance sheet as Lymphoseek’s U.S. permanent A-Code for reimbursement goes into effect for 2014. Additional catalysts during 2014 are expected to be European launch (with material sales in 2015), sNDA approval in head & neck cancer with a sentinel lymph node claim as well as significant newsflow for NAV4694 in Alzheimer’s disease, NAV5001 in Parkinson’s disease and their new Manocept™ imaging platform. We are reiterating our Strong Speculative Buy rating with a 12-18 month price target of $3.75 based on a 35x multiple on projected fiscal year 2017 EPS and discounted 25% for cumulative risk.

Download Full 7-Page Note with Important Disclosures: Morning Note 12-20-13 NAVB

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