HuCNS-SC® Phase I/II in Spinal Cord Injury Data Shows Safety in AIS-A
Enrollment in Spinal Cord Injury Trial Now Expands to U.S., Canada and EU
HuCNS-SC® Phase I PMD Data in Children Shows Unprecedented Results
Gains in Motor and/or Cognitive Function in 3 out of 4 Children

Download Full 8-Page Note with Important Disclosures: Morning Note 05-17-12 STEM

StemCells Inc. announced completion of the first planned interim safety review in the first cohort of patients (the severe AIS-A patients) in their Phase I/II spinal cord injury clinical trial implanting their HuCNS-SC^® cells (purified human neural stem cells) demonstrating the surgery, immunosuppression and the cell transplants were been well-tolerated. This represents the first time that neural stem cells have been transplanted as a potential therapeutic agent for spinal cord injury.

Specifically, the AIS-A patients suffer from a complete spinal cord injury in which there is no neurological function below the level of the injury and were transplanted with a dose of 20 million cells at the site of injury in the thoracic spinal cord.

• There were no abnormal clinical, electrophysiological or radiological responses to the cells

• All patients were neurologically stable through the first four months following transplantation of the cells.

• The independent Data Safety Monitoring Committee, has recommended that the study advance to enrollment of patients with incomplete neurological injury (AIS-B).

• Enrollment is now underway and is open to patients in Europe, the United States and Canada with incomplete spinal cord injury.

OTHER RECENT NEWS
On March 31st, unprecedented results were announced by StemCells Inc. as they successful concluded the Phase I in Pelizaeus-Merzbacher Disease (PMD), a rare hypo-myelination disorder in children. A summary was presented March 31st at the 2012 European Leukodystrophy Association (ELA) Families/Scientists Meeting in Paris. StemCells Inc. now intends to proceed to Phase II clinical trials. Publication of the detailed data in a peer-reviewed journal will be a significant catalyst for StemCells Inc. Highlights of the results were:

• Progressive and durable donor-cell derived myelination in all 4 patients
• Small but measureable gains in motor and/or cognitive function in 3 of the 4 patients (the 4th patient remained clinically stable)
• After 1 year, MRI showed changes compatible with increased myelination in the region of the transplantation. The MRI signs of myelination persisted even after immunosuppression was stopped at 9 months and in fact, were also found to progress over time.
• The development of new myelin signals is unprecedented in patients with conatal PMD and is consistent with HuCNS-SC engraftment.

These results may also be applicable to other leukodystrophies, as well as more common myelin disorders including transverse myelitis, multiple sclerosis and periventricular white matter injury seen in Cerebral Palsy.

Download Full 8-Page Note with Important Disclosures: Morning Note 05-17-12 STEM

G-202 Phase Ia MTD Clinical Trial Successfully Completed
Phase Ib Now Enrolling in Up To 18 Patients
Phase II Prostate Cancer Trial Planned for Q3
G-202 Unaffected by Changing Competitive Landscape

Download Full 24-Page Report with Important Disclosures: GNSZ Update 05-17-12

1.) G-202 Phase Ia MTD Trial Completed – Phase Ib Now Enrolling: On March 29^th, GenSpera announced the completion of the Phase Ia dose-escalation trial of G-202 and has now commenced enrollment of the Phase Ib trial in up to 18 patients to further refine the dosing regimen and determine a recommended dose for Phase II clinical studies. Specifically, 28 patients were treated in the Phase Ia at doses ranging from 1.2 mg/m²/dose (~2 mg/dose) up to 88 mg/m²/dose (~150 mg/dose). The drug exposure in patients receiving the higher doses of G-202 falls within the range associated with anti-tumor efficacy in animal models. Although the study was not designed to determine the anti-tumor effects of the drug, signs of potential positive effects were observed. GenSpera also stated that they expect to initiate a Phase II study in castrate-resistant, chemotherapy-naïve prostate cancer patients within the next few months. Data from the Phase Ib trial, expected in early 2013, should give additional insight into the efficacy of G-202 in humans. (see G-202 Phase Ia & Ib Human Clinical Trials). GenSpera is also planning on commencing a Phase II trial of G-202 in castrate-resistant chemotherapy-naive prostate cancer patients in the U.S. with additional sites in the U.K. in Q3 2012.

2.) G-202 Still Needed Despite Recent Advances in Prostate Cancer: Although several drugs have recently been approved in prostate cancer such as JEVTANA^®, ZYTIGA™ and PROVENGE^® they have different mechanisms-of-action to GenSpera’s G-202. Eventually, all patients will become refractory to these anti-androgen and chemotherapies while PROVENGE cellular therapy only extended survival by approximately 4.5 months. The new drugs under development also use mechanisms of action that inhibit androgen production or binding to receptors on the cancer cell surfaces such as Medivation’s MDV3100 (an androgen receptor signaling inhibitor) demonstrating a survival benefit of 4.8 months without the use of steroid co-administration (as seen with drugs like ZYTIGA™). However, MDV3100′s anti-cancer effect is still dependent on interrupting androgen signaling. Eventually patients will become resistant to the treatment and the disease will progress. In contrast, G-202 kills independently of androgen pathways and in theory could represent a curative option for advanced prostate cancer patients. (see Competition)

3.) Unique Mechanism of Action (MOA): GenSpera’s drug candidates are based on chemical derivatives of a plant cytotoxin, called thapsigargin, which is a potent inhibitor of the intracellular sarcoplasmic/endoplasmic reticulum calcium ATPase (SERCA) pump. The inhibition of the transport protein causes intracellular Ca2+ (calcium) to rise significantly and trigger apoptosis (cell death). For example, G-202 is a prodrug where the active cytotoxin, 12ADT, is masked by a peptide complex until it binds to and is cleaved by the targeted Prostate-Specific Membrane Antigen (PSMA) thus triggering apoptosis. (see Thapsigargin and Prodrug Delivery of 12ADT). Investors should note a video of GenSpera’s platform technology can be seen at: http://www.genspera.com/investors_mainvideo.html 

4.) Attractive Space for M&A: We note that Cougar Biotechnology, a former bulletin board company formed by a reverse-merger in 2006 was acquired by Johnson & Johnson (NYSE:JNJ) in 2009 for $970M in cash based on Phase II data for their prostate cancer drug (ZYTIGA™) which ultimately received FDA approval in April 2011. While partnerships and acquisitions are highly unpredictable, we believe GenSpera could eventually be an attractive candidate as early as Phase II completion should they show strong clinical results.

5.) Capital Raise Expected: Although GenSpera believes they have sufficient cash through March 2013, we expect the company to raise additional funds in preparation for their planned Phase II clinical trials in multiple indications and we have included our estimates in the financial model.

6.) Maintaining Rating of Strong Speculative Buy and $4.00 Target: GenSpera has been successfully progressing “under the radar” for some time now and we believe the company will soon begin attracting wider investor attention. GenSpera’s G-202 with its unique mechanism of action in prostate cancer and other tumor types along with the strong preclinical data and intellectual property provides an intriguing opportunity for savvy investors wanting to get ahead of the curve. Our Strong Speculative Buy rating and 12-18 month Price Target of $4.00 is based on a 35x multiple on projected 2017 earnings and discounted 55% to adjust for risk with a 10% acquisition premium for Phase II results.

Download Full 24-Page Report with Important Disclosures: GNSZ Update 05-17-12

Lymphoseek^® Data Versus Sulfur Colloid at ASCO
Lymphoseek^® FDA PDUFA Date September 10^th
Multiple Catalysts and Multiple Shots-on-Goal

Download Full 35-Page Report with Important Disclosures: NAVB Update 05-14-12

1.) Lymphoseek^® PDUFA Date is September 10^th: Navidea’s first commercial candidate, Lymphoseek^®, is expected to receive FDA approval by the PDUFA date of September 10^th and to be quickly followed by a U.S. launch with partner Cardinal Health (NYSE:CAH). We do not expect the anticipated interim data from Navidea’s ongoing NEO3-06 Phase III trial in Head and Neck squamous cell carcinoma to impact the NDA decision as the interim analysis would not be completed by the PDUFA date of September 10^th. (see Lymphoseek^® Background & Development Program)

2.) Lymphoseek European Filing on Track for Year-End: Navidea reiterated that they expect to file the Lymphoseek Marketing Authorization Application (MAA) to the European Medicines Agency’s (EMA) for review before year-end. Navida also expects to announce partnership(s) this year in order to prepare the European market for an anticpated Lymphoseek launch in 2013. (see Lymphoseek^® Background & Development Program)

3.) Additional Data to be Presented at ASCO: Navidea recently presented data comparing Lymphoseek to sulfur colloid in breast cancer patients showing Lymphoseek Localization Rate (LR) of 99.91% (meta-analysis) and 98.65% (pooled analysis) versus sulfur colloid LR (from peer-reviewed literature) of 94.13%. Lymphoseek’s Degree of Localization (DL) was 2.1 (meta-analysis) and 2.2 (pooled analysis) versus sulfur colloid DL (peer-reviewed literature) of 1.6. All results were statistically significant. Full data on the comparison of Lymphoseek and sulfur colloid will be presented at the American Society for Clinical Oncology (ASCO) Annual Meeting, June 1-5, 2012 in Chicago, IL.

4.) AZD4694 in Alzheimer’s Disease:
Navidea expects to begin Phase III clinical trials in early 2013 for AZD4694, which was in-licensed with worldwide exclusive rights from AstraZeneca (NYSE:AZN). AZD4694 is an Alzheimer’s disease (AD) diagnostic using a Fluorine-18 labeled radiopharmaceutical that binds to β-amyloid deposits in the brain that can then be imaged using a PET (Positron Emission Tomography) scanner. Since the initial indication will be to show negative for β-amyloid pathology and rule out Alzheimer’s disease, we believe AZD4694 will be quickly adopted for early-onset patient diagnosis. (see AZD4694 Alzheimer’s Imaging Background & Development Program)

5.) Possible Candidate for Parkinson’s Disease: Navidea also has an option agreement with Alseres Pharmaceuticals (Pink:ALSE) to license [¹²³I]-E-IAFCT Injection, an Iodine-123 radiolabeled imaging agent used with single photon emission computed tomography (SPECT) imaging, being developed as an aid in the diagnosis of Parkinson’s disease and movement disorders. The option agreement provides for exclusive rights until June 30, 2012 to perform final due diligence with a focus on the regulatory pathway. We note that both Mark Pykett, CEO and Dr. Thomas Tulip, EVP are previously from Alseres. (see CFT (E-IAFCT) Parkinson’s Imaging Background & Development Program)

6.) RIGScan Human MAb Work Continues: Navidea continues development and manufacturing work on a human CC49 monoclonal antibody for RIGScan™ CR, an Iodine-125 radiolabeled agent used with a hand-held gamma radiation detector to warn surgical oncologists, during surgery, to the existence of additional cancerous tissue that would otherwise be undetectable. However, we believe that Navidea will likely partner both the development and distribution of RIGScan before proceeding to Phase III clinical trials. (see RIGScan™ CR Background & Development Program)

Summary: We believe Navidea shares continue to represent a significant investment opportunity and we are maintaining Navidea with a Strong Speculative Buy rating and a 12-18 month price target of $5.75. Our valuation is based on a 35x multiple on projected fiscal year 2016 EPS and discounted 35% for cumulative risk.

Download Full 35-Page Report with Important Disclosures: NAVB Update 05-14-12

PMD Data in Children Shows Unprecedented Results
Journal Publication Expected to be a Major Catalyst
Interim Spinal Cord Data in Severe Patients this Week
Enrollment to Begin Soon for Dry AMD Phase I/II
Potential CIRM Awards for $20M Each in Summer

Download Full 24-Page Report with Important Disclosures: STEM Update 05-14-12

1.) Unprecedented results were announced by StemCells Inc. as they successful concluded the Phase I in Pelizaeus-Merzbacher Disease (PMD), a fatal myelination disorder in children. Specifically, top-line data showed progressive and durable donor-cell derived myelination was found in all 4 children (investors should note that development of new myelin signals is unprecedented in patients with connatal PMD.) Furthermore, there were small but measureable gains in motor and/or cognitive function in 3 of the 4 children (the 4^th child remained stable). After 1 year, MRI showed changes compatible with increased myelination in the region of the transplantation. The MRI signs of myelination persisted even after immunosuppression was stopped at 9 months and in fact, were also found to progress over time. The detailed data has been submitted to a peer-reviewed journal and we expect publication will be a significant and high-visibility catalyst for StemCells Inc. (see Phase I Human Trial of HuCNS-SC® in Pelizaeus-Merzbacher Disease) StemCells Inc. has also filed for a Strategic Partnership Award with the California Institute for Regenerative Medicine (CIRM) for a Phase II clinical trial in PMD worth up to $10M in funding. Finally, investors should note that these results open the door for StemCells Inc. in more common myelination disorders, such as Multiple Sclerosis and certain forms of Cerebral Palsy.

2.) Interim AIS-A Results for Phase I/II Trial in Chronic Spinal Cord Injury: Armin Curt, MD, FRCPC, Professor and Chairman, Spinal Cord Injury Center at the University of Zurich, and Medical Director of the Paraplegic Center at the Balgrist University Hospital and principal investigator for StemCells Inc.’s Phase I/II clinical trial in chronic spinal cord injury is expected to present interim results for the 1st cohort of chronic spinal cord injury patients (AIS-A) on Thursday, May 17 at the Interdependence 2012 Global SCI Conference in Vancouver, British Columbia. Investors should note that AIS-A patients are the most severe with no motor or sensory function. The AIS-B patient cohort, with less severe injury, is currently being screened and we expect to begin enrollment shortly. (see Phase I Human Clinical Trial HuCNS-SC^® for Spinal Cord Injury) In addition, StemCells Inc. has submitted an application to the California Institute for Regenerative Medicine (CIRM) for development in Cervical Spinal Cord Injuries with UC Irvine for up to $20M million over 4 years with a decision expected this summer.

3.) Phase I/II in Dry AMD Expected to Begin Soon:
On February 2, 2012, the FDA approved StemCells Inc. IND for a Phase I/II trial in Dry Age-Related Macular Degeneration (Dry AMD) and the trial is expected to commence enrollment shortly. The Phase I/II 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. Investors should note that 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 HuCNS-SC^® for Dry AMD)

4.) Alzheimer’s Collaboration: StemCells Inc.and Frank LaFerla, Ph.D., a world renowned leader in Alzheimer’s disease research, are collaborating to study HuCNS-SC^® human neural stem cells in Alzheimer’s disease. Dr. LaFerla’s has already published research has shown that mouse neural stem cells enhance memory in a mouse model of Alzheimer’s disease and the goal of the collaboration is to replicate these results using StemCells Inc.’s HuCNS-SC human neural stem cells. Dr. LaFerla’s original paper titled “Neural stem cells improve cognition via BDNF in a transgenic model of Alzheimer disease” was published in August 2009 issue of Proceedings of the National Academy of Sciences (PNAS) and the full paper can be accessed free of charge at http://www.pnas.org/content/106/32/13594.full In September 2011, the California Institute of Regenerative Medicine (CIRM) awarded a grant totaling approximately $100,000 for their Alzheimer’s collaboration and they have submitted an application for a research award up to $20M over 4 years with a decision expected this summer.

5.) We are maintaining a Strong Speculative Buy with a Price Target of $4.50: We believe StemCells Inc. has now begun distinguishing itself as the most advanced player in the stem cell space. The extraordinary results showing myelination in children with PMD combined with their advancing clinical programs Chronic Spinal Cord Injury, Dry Age-Related Macular Degeneration and Alzheimer’s Disease provide significant milestones in unlocking the value of their HuCNS-SC^® (Human Central Nervous System Stem Cells). The publication in a peer-reviewed journal of the PMD results is expected to be a major and highly-visible catalyst for StemCells Inc.’s shares. In addition, StemCells Inc. has filed for 2 CIRM research awards, one in Cervical Spinal Cord Injury and one in Alzheimer’s Disease, and each award is worth up to $20M over 4 years with decisions expected this summer along with 2 new Strategic Partnership Award applications worth up to $10M each. We believe StemCells Inc. shares will become a significant leader in the publicly-traded stem cell space during 2012. Our Strong Speculative Buy rating and 12-18 month target price of $4.50 is based on 30x estimated 2016 EPS discounted 55% for cumulative risks in a first-in-class stem cell therapy.

Download Full 24-Page Report with Important Disclosures: STEM Update 05-14-12

Echo Announces Very Strong Symphony^® tCGM Results in Critical Care
Final Feasibility Data Expected This Quarter at ADA Conference
Prelude^® SkinPrep Program to Refocus on Ex-US Markets

Download Full 7-Page Note with Important Disclosures: Morning Note 05-02-12 ECTE

Echo Therapeutics announced very strong results for their Symphony^® tCGM (transdermal continuous glucose monitoring) system from the Feasibility 3A study in Critical Care patients (their lead indication) conducted at Tufts Medical Center in Boston. Results from the ongoing 3B study site are expected to be announced at the American Diabetes Association 72nd Scientific Sessions conference June 8th-12th in Philadelphia.

Investors should note three key takeaways from the Feasibility 3A (Tufts) results:

1.) The Feasibility 3A data indicates that the new Symphony^® tCGM System can successfully monitor Critical Care patients, which is their lead indication. The CG-EGA was 99.6% clinically accurate with 0% benign errors for a combined A+B of 99.6%. These are the best results seen thus far during feasibility testing. In addition, the MARD remained in range at 12.3%.

2.) The Feasibility 3A data agreed with the data seen in the previous Feasibility studies in both healthy and diabetic patients using Prelude^® microabrasion. The Symphony tCGM results appear to be accurate and consistent. The data also indicates that Echo’s non-invasive transdermal biosensor and skin microabrasion technology is equivalent to the competition’s invasive sensor wire systems.

3.) The Symphony^® tCGM System appears safe as there were no adverse events reported.

MARD: Mean Absolute Relative Difference – Error calculated as the average relative difference between Symphony and the reference measurements

CG-EGA A: Continuous Glucose-Error Grid Analysis A – the clinically accurate A zone of the Clarke error grid

CG-EGA A+B: includes the clinically relevant B zone benign errors of the Clarke error grid

FEASIBILITY 3 (Tufts)
Study Design: The study was performed at Tufts Medical Center and enrolled 15 adult patients scheduled for elective cardiac surgery. The skin of each patient was prepared using Prelude and a Symphony tCGM biosensor was applied to the skin site prior to surgery. Reference blood samples were taken from arterial line catheters at 30-minute intervals and measured on a YSI 2300 STAT Plus Glucose Analyzer. The data collected by Symphony was blinded to study subjects and Tufts clinical staff. At the conclusion of the study period, the test skin sites were inspected for redness or other undesirable effects.

Study Results: Using over 540 Symphony tCGM glucose readings from 15 study subjects paired with reference blood glucose measurements, CG-EGA showed that 99.6% of the readings were clinically accurate and 0% were benign errors with a combined A+B of 99.6%. The MARD for the study was 12.3%. There were no adverse events reported from the Prelude skin preparation or the Symphony tCGM biosensor.

FEASIBILITY 2
Study Design: 20 adult subjects with Type 1 or Type 2 diabetes were evaluated. The skin of each subject was prepared using Prelude and a Symphony tCGM biosensor was applied to the skin site. Venous reference blood samples were taken from intravenous lines at 15-minute intervals for 24 hours and measured on a YSI 2300 STAT Plus Glucose Analyzer. The study data was blinded to study subjects and study personnel. At the conclusion of the 24-hour study period, the test skin sites were inspected for redness or other undesirable effects.

Study Results: Using over 2,600 Symphony tCGM glucose readings from the 20 study subjects paired with reference blood glucose measurements, CG-EGA showed that 94.4% of the readings were clinically accurate and 2.5% were benign errors with a combined A+B of 96.9%. The MARD for the study was 12.6%. Values for blood glucose measurements ranged from 38 to 399 mg/dL. There were no adverse events reported from the Prelude skin permeation or the Symphony tCGM biosensor.

FEASIBILITY 1
Study Design: 12 adult subjects without a history of diabetes were evaluated. The skin of each subject was prepared using Prelude and a Symphony tCGM biosensor was applied to the skin site. Venous reference blood samples were taken from intravenous lines at 15-minute intervals for 24 hours and measured on a YSI 2300 STAT Plus Glucose Analyzer and a commercially available, professional-use glucometer. The study data was blinded to study subjects and study personnel. At the conclusion of the 24-hour study period, the test skin sites were inspected for redness or other undesirable effects.

Study Results: Using over 1,600 Symphony tCGM glucose readings from the 12 study subjects paired with reference blood glucose measurements, CG-EGA showed that 98.3% of the readings were clinically accurate and 1.2% were benign errors with a combined A+B of 99.5%. The MARD for the study was 10.5%. Values for blood glucose measurements ranged from 64 to 212 mg/dL. There were no adverse events reported from the Prelude skin permeation or the Symphony tCGM biosensor.

Download Full 7-Page Note with Important Disclosures: Morning Note 05-02-12 ECTE

2-Year CATT Results Show $50 Avastin Equivalent to $1,950 Lucentis
Avastin and Regeneron’s Eylea Could Squeeze Lucentis Out of Wet AMD
Novartis Could be Biggest Loser in Wet AMD Space on IVAN Results

Download Full 7-Page Note with Important Disclosures: Morning Note 05-01-12 ROG NVS REGN BAYN

The 2-Year results from the Comparison of Age-related Macular Degeneration Treatments Trials (CATT), which compared two of Roche/Genentech’s drugs, Avastin (bevacizumab) versus Lucentis (ranibizumab) for the treatment of Wet Age-Related Macular Degeneration (Wet AMD) were published in the journal Ophthalmology in the paper titled “Ranibizumab and Bevacizumab for Treatment of Neovascular Age-Related Macular Degeneration”. The U.S. National Institutes of Health National Eye Institute stated that the results showed that “Avastin and Lucentis are equivalent in treating age-related macular degeneration.”

Avastin is a full-length humanized monoclonal antibody that was FDA approved for the treatment of multiple solid tumor cancers in 2004 while Lucentis is a smaller molecule (antigen binding fragment) derived from the same murine monoclonal antibody that is used to construct Avastin. Lucentis was FDA approved for the treatment of “wet” or neovascular Age-Related Macular Degeneration (AMD) in 2006. The two drugs mechanisms of action are the same but they differ in size, affinity for VEGF, speed of clearance from the eye, and cost. Lucentis, which is FDA-approved for Wet AMD, costs approximately $1,950 per dose or $23,400 per year while Avastin, used off-label in Wet AMD, costs approximately $50 per dose or $600 per year.

Winners: We believe these results will split the market between Avastin for Medicare and other cost-sensitive patients, especially those that are able to receive treatment monthly, and Regeneron/Bayer’s Eylea (aflibercept) for private insurance and patients desiring treatment as needed.

Losers: We see Lucentis as less attractive versus Eylea since the latter is FDA approved for once every eight weeks ($1,850 per treatment) based on trials that showed it to be equivalent to monthly Lucentis and thus yielding a cost savings of $12,300 per year. While Roche/Genentech are expected to be impacted, we note that Novartis only has rights to Lucentis (ex-US) and not Avastin, resulting in Novartis losing the most opportunity in the cost restrained ex-US market. We further believe the upcoming 12-month results of the U.K. IVAN trial (also Avastin vs. Lucentis) puts Novartis at risk. (see IVAN trial at http://www.controlled-trials.com/ISRCTN92166560 )

NOTE: The CATT and IVAN results will be discussed in detail at The Association for Research in Vision and Ophthalmology (ARVO) conference on Sunday May 6th at 1:15pm.

Specifically, the results for the 1,107 patients who were followed up during year 2 (out of 1,185 patients originally enrolled) showed that:

1.) Ranibizumab and bevacizumab had similar effects on visual acuity over a 2-year period.

Mean gain in visual acuity was similar for both drugs (bevacizumab-ranibizumab difference, -1.4 letters; 95% confidence interval [CI], -3.7 to 0.8; P=0.21).

2.) Treatment as needed (PRN) resulted in less gain in visual acuity, whether instituted at enrollment or after 1 year of monthly treatment versus monthly treatments.

Mean gain was greater for monthly than for as-needed treatment (difference, -2.4 letters; 95% CI, -4.8 to -0.1; P= 0.046).

The proportion without fluid ranged from 13.9% in the bevacizumab-as-needed group to 45.5% in the ranibizumab monthly group (drug, P=0.0003; regimen, P<0.0001).

Switching from monthly to as-needed treatment resulted in greater mean decrease in vision during year 2 (-2.2 letters; P=0.03) and a lower proportion without fluid (-19%; P<0.0001).

3.) There were no differences between drugs in rates of death or arteriothrombotic events.

Rates of death and arteriothrombotic events were similar for both drugs (P>0.60). The proportion of patients with 1 or more systemic serious adverse events was higher with bevacizumab than ranibizumab (39.9% vs. 31.7%; adjusted risk ratio, 1.30; 95% CI, 1.07-1.57; P=0.009).

4.) The interpretation of the persistence of higher rates of serious adverse events with bevacizumab is uncertain because of the lack of specificity to conditions associated with inhibition of VEGF.

Most of the excess events have not been associated previously with systemic therapy targeting vascular endothelial growth factor (VEGF).

Among all organ systems, the greatest imbalance was in gastrointestinal disorders.

When all known VEGF–related serious adverse events are excluded, most of the imbalance remains, leaving it uncertain whether this difference was the result of chance, imbalances at baseline not captured in multivariate modeling, or truly higher risk.

We note these comments made at ARVO 2011: The excess number of events were distributed over many different types of conditions, most of which were not seen in cancer trials where patients had received 500X the Avastin dose that was used in the CATT trial. Based on this, Dr. Martin believed this difference may not be drug-related and that the trial would have required 10,000 patients to be powered to detect the differences to statistical significance.

The paper can be accessed at: http://www.ophsource.org/webfiles/images/journals/ophtha/announcement.pdf

Download Full 7-Page Note with Important Disclosures: Morning Note 05-01-12 ROG NVS REGN BAYN

AMR-001 Phase II Trial in AMI (Heart Attack) Enrolling
Exiting China Stem Cell Therapy & Pharma Markets
Downgrading to Speculative Buy – Terminating Coverage

Download Full 25-Page Report with Important Disclosures: NBS Downgrade 04-20-12

1.) AMR-001 Phase II Trial for AMI Enrolling: Amorcyte (a subsidiary of NeoStem) is currently enrolling the PreSERVE Phase II trial for acute myocardial infarction (AMI). The study is a 160-patient, multicenter, randomized, double-blind, placebo-controlled clinical trial to evaluate the safety and efficacy of infarct-related artery infusion of AMR-001, an autologous bone marrow derived cell therapy enriched for CD34+ cells. Progenitor Cell Therapy (also a NeoStem subsidiary) will support the manufacturing, product supply, and logistics for the trial. The AMI Phase II trial is expected to complete enrollment with top-line data 6 months after the last patient is treated or mid-2013. (see Amorcyte AMR-001)

2.) Exiting China Stem Cell Therapy Market: Although China’s regulatory environment had previously been more accepting of cellular based therapies, in December 2011, the Chinese Ministry of Health announced that companies using stem cells must register their clinical activities and asked local health authorities to halt unapproved use of stem cells in their regions. They also asked for a moratorium on new clinical trials and that patients in existing clinical trials should not be charged. As a result of this and other factors, NeoStem has determined to take steps to restrict, and expects to ultimately eliminate, its regenerative medicine business in the PRC. (see China Corporate Structure & Suzhou Erye Pharmaceuticals Businesses)

3.) Exiting Erye as China Pharma Sales Decline 4th Quarter in a Row: Pricing pressure in China continues to adversely impact Erye’s sales with an overall decline of 24% in 2011 due to pricing. Further medical insurance cuts are expected to reduce some of Erye’s drugs by as much as 50% to 75%. In addition, government curbs on antibiotics may add additional sales pressures in the future. NeoStem continues to explore strategic alternatives to sell their 51% interest in Erye. Although a number of issues can hamper a sale, including the 49% shareholders, we have modeled a sale of NeoStem’s interest in Erye in Q3. (see China Corporate Structure & Suzhou Erye Pharmaceuticals Businesses)

4.) Additional $6M in Cash Raised: On April 5th, NeoStem raised gross proceeds of $6.8M by selling 17M units (1 share and 1 warrant) for $0.40 per unit with the warrant having an exercise price of $0.51. We believe this serves as a cash cushion until the Erye sale has been finalized. (see Recent Financing Activity)

5.) Downgrading to Speculative Buy – Reducing Target to $0.40: The headwinds of both new regulatory and financial pressures in China have been adversely effecting NeoStem’s strategic position in that region. Unfortunately, the China situation has deteriorated faster than NeoStem can transition to cellular therapeutics company. As such, we believe the upside to the AMR-001 trial, with results expected in 2013, are currently outweighed by the current issues in China that need to be resolved combined with the company’s capital requirements during this transition. Therefore, we are downgrading NeoStem to Speculative Buy (from Strong Buy) and reducing our price target to $0.40 (from $4.00) based on a 35x multiple on projected 2017 earnings and discounted 45% (up from 30%) to adjust for risk. In addition, we are also terminating coverage as we reallocate our research resources toward nearer-term investment opportunities.

Download Full 25-Page Report with Important Disclosures: NBS Downgrade 04-20-12

Interim Phase II 1st-Line Lung Data Confounded
Funding Headwinds Dampens Near-Term Catalysts
Downgrading & Terminating Peregrine Pharma

Download Full 43-Page Report with Important Disclosures:  PPHM Downgrade 04-13-12

Bavituximab 1st-Line NSCLC Data: On March 9, 2012 Peregrine announced interim results of their randomized Phase II trial for Progression-Free Survival (PFS) and Objective Response Rate (ORR) in Stage IIIB and IV chemotherapy-naïve, locally advanced or metastatic non-small cell lung cancer (NSCLC) patients. However, the results were somewhat confounded due to differences between the Investigator (PI) and Independent (IND) imaging reads and interpretation. Peregrine expects to report median overall survival (OS) from this trial in the second half of 2012. These results are roughly comparable with the previous single-arm Phase II bavituximab+paclitaxel+carboplatin study as well as the E4599 Phase III Avastin (bevacizumab)+paclitaxel+carboplatin trial. (see Lung Cancer-Phase II Controlled Study of Paclitaxel/Carboplatin With or Without Bavituximab in Previously Untreated Non Small-Cell Lung Cancer (NSCLC))

New PS Imaging Program: Peregrine has filed an Investigational New Drug (IDE) with the FDA to begin human testing of their radiolabeled phosphatidylserine (PS)-targeting molecular imaging candidate, ¹²⁴I-PGN650, for the imaging of multiple solid tumor types. This marks Peregrine’s entry into molecular imaging agents as well as a potential companion diagnostic for bavituximab treatment. At AACR 2012, a poster titled “Tumor Detection and Measurement of Responses to Chemotherapy Using Human Phosphatidylserine Targeting Antibody Fragments” used near-infrared fluorescent NIR-PGN650 which showed increased exposure of phosphatidylserine (PS) following docetaxel treatment. Specifically, docetaxel enhanced the uptake of NIR-PGN650 in breast and prostate tumor mouse xenografts and that peak tumor uptake of NIR-PGN650 was when docetaxel was administered 24 hours prior to injection of NIR-PGN650. (see ¹²⁴I-PGN650 Bavituximab for Imaging)

Downgrading on Near-Term Economics: The data for bavituximab, while thus far promising compared to trial controls and historical controls, has not been conclusive against historical controls that have contained a monoclonal antibody. While we continue to believe in Peregrine’s science, we recommend investors move to the sidelines until all of the results are in for 2nd line NSCLC, which is Peregrine’s lead indication. Furthermore, even though Peregrine had $20M in cash as of January 31st, we believe the near-term data catalysts will not provide enough upside momentum in light of their cash requirements during our forecast horizon. The new $150M shelf-registration, a $43M market capitalization and the risk of a reverse split (Nasdaq delisting notice received March 28th) combined with projected cash needs, make it unlikely in our opinion for the expected clinical trial data to result in a sustained increase in shareholder value over the near-term.

Finally, as Peregrine continues discussions with the FDA on a Phase III trial design for Cotara® (which we expect to be concluded relatively soon), we are not confident an upfront payment by a potential partner will be enough to materially change the projected cash outlook for the company in the near-term. We feel similarly toward Peregrine’s HCV program as well.

Therefore, we are downgrading Peregrine to Neutral with a $0.50 price target. In addition, we are also terminating coverage as we reallocate our research resources toward nearer-term investment opportunities.

Download Full 43-Page Report with Important Disclosures:  PPHM Downgrade 04-13-12

GE [¹⁸F] Flutemetamol Positive Data – Eli Lilly’s Amyvid^® Receives FDA
De-Risks Navidea AZD4694 Alzheimer’s Strategy – Phase III Starts Q1’13
Lymphoseek^® FDA PDUFA Now September 10th

Download Full 6-Page Note with Important Disclosures: Morning Note 04-12-12 NAVB

As expected, the GE Healthcare division of GE (NYSE:GE) announced positive preliminary data from their 2 Phase III trials of [¹⁸F] flutemetamol Alzheimer’s imaging agent. In terminally ill patients who agreed to undergo brain autopsy, showed strong concordance between flutemetamol PET images and Alzheimer’s disease-associated beta amyloid brain pathology. The other study, in young healthy volunteers under age 40, had results concordant with the known lack of brain amyloid in this population. The Phase III clinical trials were “Positron Emission Tomography (PET) Imaging of Brain Amyloid Compared to Post-Mortem Levels” http://clinicaltrials.gov/ct2/show/NCT01165554 and “Assess the Prognostic Usefulness of Flutemetamol (18F) Injection for Identifying Subjects With Amnestic Mild Cognitive Impairment Who Will Convert to Clinically Probable Alzheimer’s Disease” http://clinicaltrials.gov/ct2/show/NCT01028053

This follows Eli Lilly (NYSE:LLY) expected FDA approval on April 6, 2012 for Amyvid™ florbetapir F18 injection for brain imaging of beta-amyloid plaques in patients with cognitive impairment who are being evaluated for Alzheimer’s Disease and other causes of cognitive decline. We also expect positive data in the near future from Bayer’s (XETRA:BAYN) 18-F florbetaben Phase III clinical trial “Phase III Study of Florbetaben (BAY94-9172) PET Imaging for Detection/Exclusion of Cerebral β-amyloid Compared to Histopathology” http://clinicaltrials.gov/ct2/show/NCT01020838

We believe the approval of Eli Lilly’s Amyvid™ and positive data from GE and Bayer validates both the mechanism of action and market adoption in this diagnostic drug class. Therefore, we believe the development of Navidea’s AZD4694, while behind others, has been de-risked as a result. Based on the favorable economics of the AZD4694 license with AstraZeneca addressing a large underserved market with a validated diagnostic drug class, we view this as a net benefit to investors. Investors should note that Eli Lilly acquired Avid Radiopharmaceuticals in Q4 2010 for $300M in cash and up to an additional $500M for milestones.

NAVIDEA AZD4694 COMPETITIVE ADVANTAGES:
Although all clinical trials have not been completed, preclinical and Phase I & II data indicates that AZD4694 may have significantly better sensitivity with improved contrast resulting in a higher precision scan (and presumably earlier detection). It also may provide improved ease-of-use allowing for shorter imaging times. The reduced risk of head movement as a result may also improve scan quality. Finally, AZD4694 has potential to be used for measuring blood flow. In general the targeted advantages are:

Clean images with less white matter uptake
• High sensitivity with better contrast
• Identification of lower levels of amyloid
• Earlier detection of amyloid

Rapid imaging procedure
• Patient-friendly
• High throughput at imaging site
• Minimal head movement enables high quality images
• Potential to replace FDG scans measuring blood flow

Excellent reader reproducibility
• Easy reader training
• Consistent test/re-test performance

AZD4694 in Alzheimer’s Disease US Regulatory Update: Navidea expects to begin Phase III clinical trials in early 2013 for AZD4694, which was in-licensed with worldwide exclusive rights from AstraZeneca (NYSE:AZN). AZD4694 is an Alzheimer’s disease (AD) diagnostic using a Fluorine-18 labeled radiopharmaceutical that binds to β-amyloid deposits in the brain that can then be imaged using a PET (Positron Emission Tomography) scanner. Although there is debate as to whether β-amyloid plaque is the root cause of Alzheimer’s disease, it is a broadly accepted biomarker for AD diagnosis. Since the initial indication will be to show negative for β-amyloid pathology and rule out Alzheimer’s disease, we believe AZD4694 will be quickly adopted for early-onset patient diagnosis.

Lymphoseek US Regulatory Update: On April 3, 2012, it was announced that as a result of the FDA first-cycle review questions, Navidea submitted updated chemistry, manufacturing and control (CMC) information related to one of several drug analytical assays supporting the manufacturing process and procedures for Lymphoseek on March 30, 2012. However, this data was submitted within 90-days of the PDUFA date on June 10th and therefore, the FDA extended the review period by 90 days to complete their first-cycle review by September 10th. Neither this FDA decision nor the NDA review-to-date has raised questions on Lymphoseek’s safety or efficacy.

Download Full 6-Page Note with Important Disclosures: Morning Note 04-12-12 NAVB

Eli Lilly’s Amyvid^® Receives FDA Approval As Expected
De-Risks Navidea AZD4694 Alzheimer’s Strategy – Phase III Starts Q1’13
Lymphoseek^® FDA PDUFA Now September 10th

Download Full 6-Page Note with Important Disclosures: Morning Note 04-09-12 NAVB

As expected, on April 6, 2012, Eli Lilly (NYSE:LLY) announced that they received FDA approval for Amyvid^® florbetapir F18 injection for brain imaging of beta-amyloid plaques in patients with cognitive impairment who are being evaluated for Alzheimer’s Disease and other causes of cognitive decline. The approved labeling states:

“Amyvid is a radioactive diagnostic agent for Positron Emission Tomography (PET) imaging of the brain to estimate β-amyloid neuritic plaque density in adult patients with cognitive impairment who are being evaluated for Alzheimer’s Disease (AD) and other causes of cognitive decline. A negative Amyvid scan indicates sparse to no neuritic plaques, and is inconsistent with a neuropathological diagnosis of AD at the time of image acquisition; a negative scan result reduces the likelihood that a patient’s cognitive impairment is due to AD. A positive Amyvid scan indicates moderate to frequent amyloid neuritic plaques; neuropathological examination has shown this amount of amyloid neuritic plaque is present in patients with AD, but may also be present in patients with other types of neurologic conditions as well as older people with normal cognition. Amyvid is an adjunct to other diagnostic evaluations.

Limitations of Use:

• A positive Amyvid scan does not establish a diagnosis of AD or other cognitive disorder.

• Safety and effectiveness of Amyvid have not been established for:

• Predicting development of dementia or other neurologic condition

• Monitoring responses to therapies”

We believe the approval of Eli Lilly’s Amyvid^® validates both the mechanism of action and market adoption in this diagnostic drug class. Therefore, we believe the development of Navidea’s AZD4694, while behind others, has been de-risked as a result. Based on the favorable economics of the AZD4694 license with AstraZeneca addressing a large underserved market with a validated diagnostic drug class, we view this as a net benefit to investors. Investors should note that Eli Lilly acquired Avid Radiopharmaceuticals in Q4 2010 for $300M in cash and up to an additional $500M for milestones.

AZD4694 in Alzheimer’s Disease US Regulatory Update:
Navidea expects to begin Phase III clinical trials in early 2013 for AZD4694, which was in-licensed with worldwide exclusive rights from AstraZeneca (NYSE:AZN). AZD4694 is an Alzheimer’s disease (AD) diagnostic using a Fluorine-18 labeled radiopharmaceutical that binds to β-amyloid deposits in the brain that can then be imaged using a PET (Positron Emission Tomography) scanner. Although there is debate as to whether β-amyloid plaque is the root cause of Alzheimer’s disease, it is a broadly accepted biomarker for AD diagnosis. Since the initial indication will be to show negative for β-amyloid pathology and rule out Alzheimer’s disease, we believe AZD4694 will be quickly adopted for early-onset patient diagnosis.

Lymphoseek US Regulatory Update:
On April 3, 2012, it was announced that as a result of the FDA first-cycle review questions, Navidea submitted updated chemistry, manufacturing and control (CMC) information related to one of several drug analytical assays supporting the manufacturing process and procedures for Lymphoseek on March 30, 2012. However, this data was submitted within 90-days of the PDUFA date on June 10th and therefore, the FDA extended the review period by 90 days to complete their first-cycle review by September 10th. Neither this FDA decision nor the NDA review-to-date has raised questions on Lymphoseek’s safety or efficacy.

Download Full 6-Page Note with Important Disclosures: Morning Note 04-09-12 NAVB