Covered Companies

Navidea (NAVB) Note 09-24-13

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Navidea Raises $28.8M Priced At-the-Market – Strong Balance Sheet

 

Download Full 7-Page Note with Important Disclosures: Morning Note 09-24-13 NAVB

Navidea announced a registered direct public offering of 10,563,381 shares of common stock and warrants to purchase up to 3,169,015 shares of common stock for a purchase price of $2.84 per unit resulting in gross proceeds of $30M ($28.8M net) with the three-year warrants having an exercise price of $3.83. The buyer was Crede CG III, Ltd., a wholly-owned subsidiary of Crede Capital Group, LLC, a U.S.-based accredited, institutional investor. This sizable at-the-market transaction, along with the 35% premium for warrant exercise, confirms our belief that Navidea Biopharmaceuticals shares remain significantly undervalued.

Download Full 7-Page Note with Important Disclosures: Morning Note 09-24-13 NAVB

 

Navidea (NAVB) Note 09-19-13

downloadreportNavidea Unveils New Manocept™ Imaging Platform Technology
Lymphoseek® Granted CMS Pass-Through C-Code Effective October 1st
European Lymphoseek Partnership Soon with EU CHMP Opinion Q4
Lymphoseek sNDA for Sentinel Lymph Node Could Be Game Changer

Download Full 7-Page Note with Important Disclosures: Morning Note 09-19-13 NAVB

Navidea Unveils New Manocept™ Imaging Platform Technology
Leveraging on their FDA-approved Lymphoseek® (Technetium Tc99m Tilmanocept) Injection, which is the first and only radiopharmaceutical agent that binds to the CD206 mannose receptor for lymphatic mapping, Navidea presented data for a new indication using their Manocept™ CD206 mannose receptor platform.

Proof-of-Concept data shown at the Cancer Advance Conference at Harvard Medical School using Navidea’s new imaging candidate, tilmanocept-Cy3, utilizing CD206 mannose receptor binding combined with Cy3 Cyanine dye, to target macrophage inflammatory cells with imaging via yellow-green fluorescence. Macrophages are monocyte derived white blood cells that perform two functions, clean cellular pathogens and debris (phagocytosis) and to assist in initiating the adaptive immune system to respond to the pathogen. They play a role in multiple indications such as oncology, autoimmunity, infectious diseases, cardiology, and inflammation.

The particular studies presented by Navidea included human tissue, animal models and in vitro analyses focused on establishing the ability of fluorescent tilmanocept-Cy3 to target macrophages in two disease states which are representative of broader macrophage-associated disorders: Kaposi’s Sarcoma (KS) and Tuberculosis (TB). However, their use could extend to other macrophage mediated disorders such as Rheumatoid Arthritis, Lupus and Crohn’s disease.

Undervalued Shares Represent a Significant Investment Opportunity: We continue to believe the current weakness in Navidea’s share price represents a limited view of Navidea’s true long-term value. We recommend that investors not focus solely on Lymphoseek U.S. sales, especially prior to their CMS reimbursement pass-through C-code, which goes into effect October 1st. Navidea has a number of additional upcoming catalysts including a positive CHMP recommendation in Europe by year-end as well as a wide-ranging EU partnership with a specialty pharmaceuticals company to be announced soon. In addition, we expect Navida to file an sNDA for Lymphoseek expanding the label to a sentinel lymph node biopsy claim, which would be a game changer in the space. Navidea continues advancing additional candidates, NAV4694 in Alzheimer’s disease, which just began a pivotal Phase III clinical trial, and NAV5001 in Parkinson’s disease expected to begin a Phase III trial soon as well as getting RIGScan back into clinical trials with a humanized MAb. We believe these multiple shots-on-goal represent a significant buying opportunity as we reiterate our Strong Speculative Buy rating and 12-18 month price target of $5.75 based on a 35x multiple on projected fiscal year 2016 EPS and discounted 25% for cumulative risk.

Download Full 7-Page Note with Important Disclosures: Morning Note 09-19-13 NAVB

StemCells Inc. (STEM) Note 09-18-13

downloadreportPublished Data Supports Ongoing Human Clinical Trial in Dry AMD
HuCNS-SC® Dry AMD Trial Advances to High-Dose 1,000,000 Cells
StemCells Inc. Begins Alzheimer’s Work with Initial $3.8M from CIRM
Three Active Programs in Human Trials: PMD, Spinal Cord and Dry AMD

Download Full 11-Page Note with Important Disclosures: Morning Note 09-18-13 STEM

StemCells Inc. announced the publication of preclinical data that confirms their HuCNS-SC® (purified human neural stem cells) can restore ocular function normally performed by RPE (Retinal Pigmented Epithelial) cells via phagocytosis of photoreceptor outer segments with preservation of specialized synaptic contacts between photoreceptors and second order neurons. This data supports HuCNS-SC implantation and functional rescue in retinal degeneration and StemCells Inc. ongoing human clinical trial (now enrolling 1,000,000 cell high-dose patients) for Dry Age-Related Macular Degeneration (Dry AMD).

The paper was published in the September 17th issue of Investigative Ophthalmology and Visual Science, the journal of the Association for Research in Vision and Ophthalmology (ARVO) with the lead author Nicolas Cuenca, PhD, Professor in the Department of Physiology, Genetics and Microbiology at the University of Alicante, Spain. The paper is available at: http://www.iovs.org/content/early/recent

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.

HuCNS-SC Engraft in the Subretinal Space of RCS rats and Preserve Photoreceptors

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Light microscopy of toluidine blue stained semi-thin retina sections across the HuCNS-SC graft area (A,C) and in control areas of the same eyes but distal from graft site (B,D) at two time points: P60 (A,B) and P90 (C,D). A uniform layer of human cells stained with the human specific marker STEM121 were detected on top of OS in the temporal area of the retina, where they were injected (A,C; arrows), at both time points. The ONL adjacent to the HuCNS-SC graft is well preserved, with multiple rows of photoreceptor nuclei. The panel on the right (B,D) shows cross sections of the same retinas but in the area distal to the HuCNS-SC graft. In this region, the ONL is much thinner and many photoreceptors have pyknotic nuclei. DZ: debris zone; OS: outer segments; IS: inner segments; ONL: Outer nuclear layer; OPL: Outer plexiform layer; INL: inner nuclear layer; IPL: inner plexiform layer; GCL: ganglion cell layer. Scale bar: 20 μm.

Source: Cuenca, N. et al, “Phagocytosis of photoreceptor outer segments by transplanted human neural stem cells as a neuroprotective mechanism in retinal degeneration” Invest. Ophthalmol. Vis. Sci. September 17, 2013   IOVS-13-12860

Download Full 11-Page Note with Important Disclosures: Morning Note 09-18-13 STEM

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

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