Research

Echo (ECTE) Note 04-24-14

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Echo’s Response to Platinum’s “Gold” Proxy Misses the Point for Shareholders

Download Full 6-Page Note with Important Disclosures: Mid-Day Note 04-24-14 ECTE

Today, Echo Therapeutics issued an amended Preliminary Proxy Statement in response to Platinum’s competing GOLD proxy. We believe it useful to remind Echo management of their shareholder performance as shown below:

CLICK ON GRAPH BELOW TO ENLARGEECTEPrices

Echo has stated that the “Board and its committees held 34 meetings from August to December 2013 in addition to the 4 Board and committee meetings scheduled to take place during that time.Despite this, it is clear from the chart above that investors continue to lack confidence in Echo management and shares.

Platinum Issues Competing Proxy: On April 21st, Echo’s largest shareholder has issued a competing proxy (the “GOLD” proxy) nominating Shepard Goldberg for election to the Board of Directors to replace the seat currently occupied by Chairman and Interim CEO Robert Doman. We note that Shepard Goldberg is cousin to Michael Goldberg who was recently named to the Echo Board on February 28th.

Specifically, Platinum lists 4 major reasons for their competing proxy nominee: 1.) Poor Stock Price Performance and Significant Value Destruction, 2.) Questionable Strategic Decisions By The Board And Management, 3.) Poor Operating Performance and 4.) Lack of Accountability. Investors can read the details of Platinum’s competing proxy at
http://www.sec.gov/Archives/edgar/data/1031927/000101359414000370/echoprec14a-041714.htm 

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 6-Page Note with Important Disclosures: Mid-Day Note 04-24-14 ECTE

Echo (ECTE) Note 04-21-14

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Platinum Send Out Competing “Gold” Proxy for Their Board Nominee

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Download Full 5-Page Note with Important Disclosures: Morning Note 04-21-14 ECTE

Platinum Issues Competing Proxy: Echo’s largest shareholder has issued a competing proxy (the “Gold” proxy) nominating Shepard Goldberg for election to the Board of Directors to replace the seat currently occupied by Chairman and Interim CEO Robert Doman. We note that Shepard Goldberg is cousin to Michael Goldberg who was recently named to the Echo Board on February 28th.

Specifically, Platinum lists 4 major reasons for their competing proxy nominee: 1.) Poor Stock Price Performance and Significant Value Destruction, 2.) Questionable Strategic Decisions By The Board And Management, 3.) Poor Operating Performance and 4.) Lack of Accountability. Investors can read the details of Platinum’s competing proxy at:
http://www.sec.gov/Archives/edgar/data/1031927/000101359414000370/echoprec14a-041714.htm 

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 04-21-14 ECTE

Navidea (NAVB) Note 04-21-14

downloadreportEU Oncology Advisory Committee to Review Lymphoseek for Head & Neck
Multiple Near-Term Catalysts for Lymphoseek® Market Expansion
Alzheimer’s, Parkinson’s and Manocept™ Under the Radar & Undervalued

Download Full 7-Page Note with Important Disclosures: Morning Note 04-21-14 NAVB

European Regulatory Update for Lymphoseek: After the close Thursday, Navidea announced their expectation that the EMA (European Medicines Committee) advisory committee, CHMP (Committee for Medicinal Products for Human Use) is now reviewing Lymphoseek for Head & Neck cancer and will seek advice from the SAG-O (Scientific Advisory Group on Oncology), a specialist committee of cancer experts including head and neck cancer surgery. This does not impact our financial model as we expected delays in Head & Neck cancer in Europe as it is not yet approved anywhere in the world. Investors should note that the FDA PDUFA date for Head & Neck Cancer is June 16th. We also expect Navidea to begin reaching out to European experts this week (April 24-26) at the 6th European Congress on Head and Neck Oncology (ECHNO) in Liverpool, UK. Dr. Stephen Y. Lai from the MD Anderson Cancer Center at the University of Texas will be doing an oral presentation “Receptor-targeted 99mTc-tilmanocept For Sentinel Lymph Node Biopsy (SLNB) In HNSCC: Predictive Utility Vs. Elective Neck Dissection”

NEO3-06 Phase III Head & Neck Clinical Trial Results: On April 11, 2013, Navidea announced that the interim data from their Phase III clinical trial of Lymphoseek in head and neck squamous cell carcinoma that were so strong that the Data Safety Monitoring Committee (DSMC) recommended the trial be ended early to speed an FDA sNDA submission. The primary endpoint for the NEO3-06 trial was based on the number of subjects with cancer-positive lymph nodes following a multiple level lymph node dissection and required a minimum of 38 patients whose lymph nodes contained pathology-confirmed disease. The results were for 39 patients with cancer-positive lymph nodes and Lymphoseek accurately identified 38 for an overall False Negative Rate (FNR) of 2.56%. This is a particularly strong result considering the goal of the trial was a FNR less than 10%. The results were also statistically significant (p=0.0205). Sensitivity was 97.4% and the Negative Predictive Value was 97.8% yielding an Overall Accuracy of 98.8%. It should also be noted that using Lymphoseek led to the removal of only 4 lymph nodes per patient on average versus an average of 38 lymph nodes per patient in the trial. LymphoSeek has the potential to provide a substantial reduction in lymph-related adverse side-effects for patients with head and neck cancer undergoing sentinel lymph node biopsy. The Head & Neck trial was unique compared to the previous trials as it compared LymphoSeek against a full pathology dissection. This is a true gold standard as each of the lymph nodes is assessed by pathology to see if cancer has moved from the primary site into lymphatics. We believe the strong interim data supports extending the label for a sentinel lymph node biopsy claim or a general lymphatic mapping in all tumor types. Additional clinical trial protocol details are available at http://www.clinicaltrials.gov/ct2/show/NCT00911326 

Phase IV Clinical Trial Sentinel Lymph Node Mapping Post-Injection Site Pain: Navidea is also conducting a Phase IV post-marketing study to see if breast cancer patients experience less pain with Lymphoseek verus sulfur colloid. The study is also exploring comparative performance characteristics such as amount of time to sentinel lymph node visualization on lymphoscintigraphy imaging prior to surgery, sentinel lymph node localization success and the number of tumor draining lymph nodes removed. Investors should note that out of 542 Lymphoseek patients in Phase III trials, only 1 patient reported pain and only 3 patients reported site irritation. Additional clinical trial design details are at http://www.clinicaltrials.gov/ct2/show/NCT02065232 

Undervalued Shares: We continue to believe 2014 represents the turning point for Navidea as multiple Lymphoseek® near-term regulatory and sales catalysts extend the boundaries of the overall market for Lymphoseek to the point where the company now expects >50% market share in 2015. Furthermore, we believe the late-stage Phase III trials for NAV4694 (Alzheimer’s disease) and NAV5001 (Parkinson’s disease) remain under the radar on Wall Street. Combined with NAV1800 (RIGScan oncology) entering clinical trials and additional Manocept™ platform utility data expected this year, we believe Navidea shares are significantly undervalued for savvy investors. 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 2018 EPS and discounted 25% for cumulative risk.

Download Full 7-Page Note with Important Disclosures: Morning Note 04-21-14 NAVB

StemCells Inc. (STEM) Note 04-17-14

downloadreportEnrollment Completed for Phase I/II Trial in Thoracic Spinal Cord Injury
Next Steps: Clinical Trials for Cervical Spinal Cord Injury and Dry AMD
Alzheimer’s Disease Pre-Clinical Work Funded by CIRM – IND Early-2016

Download Full 9-Page Note with Important Disclosures: Morning Note 04-17-14 STEM

Enrollment Completes for Phase I/II Trial in Thoracic Spinal Cord Injury: StemCells, Inc. announced today they completed enrollment in the Phase I/II clinical trial in thoracic spinal cord injury. The multi-national, open-label, Phase I/II trial is evaluating both safety and preliminary efficacy of StemCells, Inc.’s proprietary HuCNS-SC® human neural stem cells as a treatment for chronic spinal cord injury. The trial enrolled 12 patients with chest-level injury to the spinal cord. The trial enrolled 7 patients with complete paralysis, no motor or sensory function below the point of injury, classified as complete (AIS-A) and 5 patients with no motor function and limited sensory function below the point of injury classified as incomplete (AIS-B). Six month interim data for the first 6 patients will be presented at the American Spinal Injury Association conference May 14-17 by Dr. Armin Curt of the University of Zurich. Final results are expected mid-2015.

Investors should note that StemCells Inc. has already 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 plus an unexpected improvement in 1 patient classified as a complete injury (AIS-A) to being reclassified as an incomplete injury (AIS-B). (see Human Trial of HuCNS-SC® for Chronic Spinal Cord Injury (SPI))

OTHER NEWS:

Controlled Phase II with Cervical Spinal Cord Injury to Begin: In Late-2013, StemCells Inc. received FDA authorization for a controlled Phase II trial including cervical spinal cord injury patients, which represents approximately 60% of all traumatic spinal cord injuries. The trial is expected to begin mid-2014 and complete enrollment in 2015.

Phase I/II in Dry Age-Related Macular Degeneration (Dry AMD) – Enrollment Completing Soon: On March 12, 2014, StemCells, Inc. management indicated that they completed implantation in the 1st cohort of 8 patients (20/400 vision, 4 patients receiving 200,000 cells and 4 patient receiving 1 million cells) in their Phase I/II trial for Dry Age-Related Macular Degeneration (Dry AMD) with interim cohort data expected later this year. StemCells Inc. expects to complete enrollment in the 2nd (final) cohort of 8 patients receiving 1 million cells by mid-2014 as they expand from four sites to a total of five sites.

Controlled Phase II in Dry Age-Related Macular Degeneration (Dry AMD to Begin: Subsequent to enrollment of the 2nd cohort in the Phase I/II Dry AMD trial, StemCells Inc. stated that they expect to initiate a controlled Phase II efficacy proof-of-concept study by year-end 2014 with enrollment completing in 2015. 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.

Alzheimer’s Disease IND Moved Up One Year: StemCells Inc. announced that they intend to file an IND for Alzheimer’s Disease in 2016, a year earlier than expected. The current preclinical work is being funded with a $19.3M forgivable loan from the California Institute for Regenerative Medicine (CIRM).

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 already shown unprecedented results in human patients for Pelizaeus-Merzbacher Disease (PMD) and for Complete Thoracic Spinal Cord Injury. The company is now progressing with controlled Phase II trials in Cervical Spinal Cord Injury and Dry Age-Related Macular Degeneration (Dry AMD) and they are also expecting to file an IND for Alzheimer’s Disease a year early in 2016 with preclinical funding via a forgivable loan of $19.3M from the California Institute for Regenerative Medicine (CIRM). With their new cGMP manufacturing facility fully operational and a strong management team unlocking the value of HuCNS-SC’s strong science, we believe StemCells Inc. has emerged as a cutting-edge stem cell company with a focus toward commercialization for large unmet medical needs. Our Strong Speculative Buy rating and 12-18 month target price of $4.50 is based on 35x estimated 2020 EPS discounted 50% for cumulative risks in a first-in-class stem cell therapy.

Download Full 9-Page Note with Important Disclosures: Morning Note 04-17-14 STEM

Navidea (NAVB) Note 04-10-14

downloadreportManocept™ Platform Gaining Visibility – Undervalued Asset for Navidea
Multiple Near-Term Catalysts for Lymphoseek® Market Expansion
Alzheimer’s, Parkinson’s and Manocept™ Under the Radar & Undervalued

Download the Full 10-Page Note with Important Disclosures: Morning Note 04-10-14 NAVB

Data from Navidea’s Manocept™ platform was successfully used for identifying affected tissues and lymph nodes in patients with Kaposi Sarcoma (KS) and was presented by the University of California, San Francisco (UCSF) at the 2014 American Association for Cancer Research (AACR) conference. The presentation titled “Kaposi’s sarcoma represents a dynamic pathogenic process involving ongoing macrophage replenishment with both tumor cells as well as macrophages expressing CD206, a target for the recently approved imaging agent, Tilmanocept.

The study presented on April 9th was designed to define macrophage subsets in all forms of KS and determine if the CD206 mannose receptor is present on the tumor-associated macrophages (TAMs) as well as KS tumor cells. The data presented reinforce earlier results in KS and demonstrate in 66 evaluable cases and controls obtained from the AIDS and Cancer Specimen Resource (ACSR) that the CD206 mannose receptor is highly expressed on both TAMs and KS tumor cells, thereby making it an attractive target for precision diagnostic agents derived from the Manocept platform. The researchers concluded “Considering the current inability of clinicians to determine the degree of KS spread beyond the presence of obvious skin lesions, the potential for using Tilmanocept to define tumor burden may allow earlier tumor specific treatment beyond the current use of anti-retroviral therapy alone which is proving ineffective in growing numbers of KS patients worldwide.” Investors can access the abstract at http://bit.ly/1gb77vb

We note that Navidea’s Manocept platform continues to show utility in multiple diseases such as Kaposi’s Sarcoma (KS), Rheumatoid Arthritis (RA) and Tuberculosis (TB) and other macrophage mediated disorders such as Lupus and Crohn’s disease. (see Manocept™ Platform Development Program). We continue to believe the Manocept platform remains under the radar and is an undervalued asset in Navidea’s portfolio.

Download the Full 10-Page Note with Important Disclosures: Morning Note 04-10-14 NAVB

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