Echo (ECTE) Note 07-24-14

downloadreportThe Gloves Come Off as Platinum Demands Echo’s Books & Records
Dissident Platinum Shows Solid Game Plan for Symphony tCGM Development

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Morning Note 07-24-14 ECTE

The Gloves Come Off: Echo’s largest shareholder Platinum Management (at 20% and 30% fully converted) is now invoking Section 220 of Delaware’s corporate law statutes demanding to inspect the books and records for Echo Therapeutics. Platinum stated they are specifically looking for possible mismanagement, breaches of fiduciary duty and wrongdoing by, among others, members of the Board and the current interim CEO. The letter states the documents are due on or before July 30, 2014. Platinum’s press release with comments are at: and Section 220 Inspection of Books and Records can be found at:

We continue to reiterate our Avoid/Sell rating as the company in its present condition is uninvestable in our opinion. We remain disappointed that almost a year has gone by since several senior management changes, countless board meetings combined with a successful dissident shareholder proxy battle, which have all have failed to compel Echo to fully unlock the value of the Symphony tCGM and its underlying technology. We believe the strategic game plan presented at the July 18th shareholder forum and supported by Platinum is a credible way forward for the company while we await Echo management’s response.

Download the Full 7-Page Note with Important Disclosures: Morning Note 07-24-14 ECTE

Echo (ECTE) Note 07-23-14


Dissident Platinum Shows Solid Game Plan for Symphony tCGM Development
Reiterating Avoid/Sell as Echo “Enrages Rather than Engages Shareholders

Download Full 6-Page Note with Important Disclosures: Morning Note 07-23-14 ECTE

Echo’s largest shareholder Platinum (at 20% and 30% fully converted) held their shareholder forum on July 18th and we believe presented a credible product develop game plan including a fast-to-market strategy for the Symphony tCGM system in the rapidly growing wearable technology space for dieters, athletes and pre-diabetes markets. Also presented was a development plan for gestational diabetes, which currently affects 4% of all pregnant woman but new guidelines from the IADPSG (International Association of Diabetes Pregnancy Study Groups) could increase glucose monitoring for up to 20% of all pregnancies. The plan would also continue the current critical care pathway but focus on a more commercially-viable lower-cost system incorporating GEN2 features. Finally, an informal non-binding vote taken during the forum, estimated at representing >50% shareholders called for, among other things, the resignations of legacy directors, Mr. Enright, Mr. Grieco and Mr. Smith (see all voter referendums at

While it is understandable that Echo management would not attend the forum, we were disappointed that they did not release an updated development game plan for investors, as we feel the current plan fails to unlock enough shareholder value compared to the time and development costs required.

We continue to reiterate our Avoid/Sell rating as we continue to view the company as uninvestable. The cognitive dissonance between Echo’s disastrous 3-year performance and management’s willingness to continuously enrage, rather than engage, a passionate shareholder base is a red flag in our opinion. While we don’t have any insight into management’s current strategy, if any, we certainly hope it is worth any potential damage to their reputations within investment community.

Download Full 6-Page Note with Important Disclosures: Morning Note 07-23-14 ECTE

Navidea (NAVB) Note 07-16-14

downloadreportNavidea Creates Joint Venture R-NAV for Mannocept in Rheumatoid Arthritis
FDA Approves Lymphoseek® Head & Neck Sentinel Lymph Node Detection
October 16th FDA PDUFA Date for Enhanced Lymphoseek® Usage
European Approval for Lymphoseek® Expected by Year-End

Download Full 7-Page Note with Important Disclosures: Morning Note 07-16-14 NAVB

Navidea’s Interim CEO Michael Goldberg has started to make good on the promise to focus on Lymphoseek sales and label expansion while developing their Manocept platform under the guidance of Mark Pykett in a cost-effective manner. This morning, Navidea announced they have formed a joint enterprise with Rheumco, LLC, (private backed by Essex Woodlands) to develop and commercialize radiolabeled diagnostics and therapeutics for rheumatologic and arthritic diseases. The joint enterprise, called R-NAV, LLC, will combine Navidea’s proprietary Manocept CD206 macrophage targeting platform and Rheumco’s proprietary Tin-117m radioisotope technology. The areas of initial focus will be:

1) Detection of rheumatoid arthritis (RA) initially using Navidea’s Lymphoseek® (Tc-99m tilmanocept).
2) Combination of the Manocept platform with Tin-117m for detection and treatment of RA.
3) Detection and treatment of human and veterinary osteoarthritis (OA) using the Tin-117m technology.
4) Treatment of pediatric hemophilic arthropathy (PHA), a rare rheumatologic condition.

Rheumco’s Tin-117m (Tin isotope of mass 117m with a half-life of 13.6 days) is a patented, high-specific-activity Tin-117m technology to optimize its therapeutic potential and safety profile. Tin-117m possesses unique imaging and therapeutic properties not found in alternative medical isotopes, including its ability to locally target disease-causing cells without damaging adjacent healthy tissue. Navidea’s Manocept technology is able to quickly seek out and attach to certain immune cells expressing CD206, called macrophages. Macrophages are an emerging participant in disease-associated inflammation, which has been found to play a role in conditions such as RA, cancer, and heart disease.

$4M Funding from Outside: R-NAV will be initially funded primarily through a $4 million investment from Infinity Capital III, of Houston-based McRay Money Management, and other third-party private investors working closely with Essex Woodlands, and underpinning the technology contributions from Rheumco and Navidea.

$1M Funding from Navidea: Navidea has committed an additional $1 million to support R-NAV’s development efforts to be paid in equal installments over three years.

30% Ownership to Navidea: In exchange for its cash, in-kind and technology contributions, Navidea has received both common units and Preferred Series A units of R-NAV and will initially own approximately 30% of the combined entity.

Navidea Option to Acquire Prior to Phase III: Navidea also has an option to acquire, at its sole discretion prior to Phase III clinical study, imaging products derived from the Manocept platform, and therapeutic products combining Manocept agents from Navidea with the Tin-117m technology for commercialization.

Management: Joint oversight of R-NAV is shared between Navidea, Rheumco, Infinity Capital III of Houston-based McRay Money Management, and the other investors.

Reiterating Strong Speculative Buy: Our 12-18 month target price of $3.25 values the Lymphoseek program at $3.00 per share based on a 35x multiple on projected fiscal year 2018 EPS and discounted 20% for cumulative risk plus $0.25 per share based on our estimated upfront cash licensing values assuming deferred clinical trial enrollment ($15M NAV4694, $10M NAV5001, $3M NAV1800, $7M Manocept). Investors should note that Management’s stated goal is reducing cash burn to match Lymphoseek revenues and eliminate the possibility of a dilutive stock offering.

Download Full 7-Page Note with Important Disclosures: Morning Note 07-16-14 NAVB

Echo (ECTE) Note 07-11-14

downloadreportPlatinum Tells Board “The Party’s Over” in Attempt to Take Away Punch Bowl
Platinum to Hold Special Shareholder Forum on July 18th
Reiterating Avoid/Sell – “It Became Necessary to Destroy the Town to Save It

Download Full 6-Page Note with Important Disclosures: Morning Note 07-11-14 ECTE

Platinum Tells Board “The Party’s Over” – Attempts to Take Away the Punch Bowl: Platinum Management, Echo’s largest shareholder at 20%, issued a public letter to Echo exercising Platinum’s contractual right under the December 10, 2013 Stock Purchase Agreement to call a meeting of stockholders to vote to lift the “blockers” limiting Platinum’s voting power. If the stockholders vote in favor of lifting the blockers, Platinum would wind up with the power to vote approximately 30.34% of Echo shares with the ultimate goal to remove, for cause, the legacy directors (or as Platinum calls them “lingering directors”) consisting of Mr. Enright, Mr. Grieco and Mr. Smith.

Platinum to Hold Shareholder Forum – Echo Board Invited: On Friday, July 18th at 10:00am, Platinum will be hosting a public forum for shareholders to express their views on the strategic direction of Echo. Platinum’s two recently elected board members will be presenting their plan and the existing legacy directors have been invited to present their plan. The meeting will take place in NYC at 152 West 57th Street, 54th Floor and will also be webcast at We strongly recommend that investors read Platinum’s public letter in its entirety at 

Legacy Board’s Controversial Move to Block Investor Lawsuits was Tipping Point: As we mentioned last week, Echo amended their bylaws to provide financial indemnification, including cash advances, for all legal fees, judgments, fines and settlements for the directors and officers of Echo. For more background on this controversial change to the corporate bylaw, we recommend investors to read the following Reuters article at where it was noted that “most companies are probably reluctant to adopt the bylaw because of the potential to harm investor relations” and that it may not hold up in court.

Reiterating Avoid/Sell Rating: Echo has been financially rewarding for management, the Board, their lawyers and proxy advisors but for shareholders, not so much. We feel like the U.S. Major in the battle for Ben Tre during the Vietnam Tet Offensive who stated “‘It became necessary to destroy the town to save it“. Echo has lost 95% of its value, terminated a permanent CEO and an interim CEO with the CFO heading for the exit, increased non-developmental cash expenditures and most recently changed their bylaws to protect themselves from investor lawsuits. We continue to believe Echo Therapeutics remains uninvestable unless dramatic changes are undertaken to refocus on developing the Symphony tCGM system and its Prelude and wireless biosensor components.

Download Full 6-Page Note with Important Disclosures: Morning Note 07-11-14 ECTE

StemCells Inc. (STEM) Note 07-07-14

downloadreportStemCells Inc. Adds Former CIRM President to Board of Directors
Solid Interim Results in Dry AMD Adds to HuCNS-SC® Track Record
Based on Strong Results StemCells Inc. Moves to Phase II for Dry AMD
Controlled Phase II Trials for Cervical Spinal Cord Injury Soon

Download Full 9-Page Note with Important Disclosures: Morning Note 07-07-14 STEM

StemCells Inc. continues to build on their strong management team from last month with the appointment of Alan Trounson, Ph.D. to their Board of Directors. Dr. Trounson most recently served as President of The California Institute of Regenerative Medicine (CIRM), the largest scientific funding body for stem cell research in the world. Dr. Trounson has been the recipient of over 30 awards and distinctions for his scientific work, including pioneering work in the fields of in-vitro fertilization and stem cells. As part of his academic research, Dr. Trounson pioneered a new stem cell biology approach for the treatment of a broad range of diseases and injuries, which was awarded the first ever Australian Center of Excellence in Biotechnology grant worth $110 million dollars. Dr. Trounson’s previous academic positions include Scientific Director of Monash IVF Pty Ltd., Personal Chair in Stem Cell Science and Director of the Monash Immunology and Stem Cell Laboratories, Deputy Director/Director of the Monash Institute of Reproduction and Development, Director of the Centre of Early Human Development, Facility of Medicine, and Personal Chair of Obstetrics and Gynaecology-Pediatrics at Monash University in Melbourne, Australia. He has founded a number of companies including Infertility Medical Center Pty Ltd./Monash IVF Pty Ltd., IVF Australia Corp/IntegraMed Corp (US), Sydney IVF Pty Ltd./Genea Pty Ltd., Maccine Pte Ltd and the Australian Stem Cell Center Ltd. He established two foundations, the Low Cost IVF Foundation for the treatment of infertile women in Africa and for the treatment of patients with HIV, to avoid vertical transmission to children and the Friends of Low Cost IVF (US). He is returning to Melbourne to continue to support international biotechnology in regenerative medicine.

The other Independent Board members are shown below:

John J. Schwartz, Ph.D., John J. Schwartz, Ph.D., was elected to the Board of Directors of the Company in December 1998 and was elected Chairman of the Board at the same time. He is the former President and Chief Executive Officer of SyStemix, Inc. He is currently President of Quantum Strategies Management Company, a registered investment advisor located in Atherton, California. Prior to his positions at SyStemix, he served as Assistant Professor of Physics, and subsequently as Vice President and General Counsel, at Stanford University. Dr. Schwartz graduated from Harvard Law School in 1958 and received his Ph.D. degree in physics from the University of Rochester.

Eric H. Bjerkholt, Mr. Bjerkholt is Senior Vice President and CFO of Sunesis Pharmaceuticals, Inc. At Sunesis, he leads the financial operations, public and investor relations, and treasury activities of the South San Francisco small molecule biopharmaceutical company. Before joining Sunesis, Mr. Bjerkholt served as Senior Vice President and CFO of IntraBiotics Pharmaceuticals, Inc., where he completed multiple financings. Earlier in his career, Mr. Bjerkholt co-founded LifeSpring Nutrition, Inc., a privately held nutraceutical company. From 1990 to 1997, Mr. Bjerkholt was an investment banker at J.P. Morgan & Co., Inc., where he founded its Western U.S. Healthcare Investment Banking Practice, leading many equity and financing transactions for biotechnology and other healthcare and life sciences companies. Mr. Bjerkholt holds an M.B.A. from Harvard Business School and a Cand. Oecon degree in economics and econometrics from the University of Oslo, Norway.

R. Scott Greer, R. Scott Greer was elected to the Board of Directors of the Company in June 2010, and was simultaneously appointed to Chair the Company’s Strategic Transactions Committee. Mr. Greer is currently a principal and managing director of Numenor Ventures LLC. Previously, Mr. Greer was founder of Abgenix, Inc., a biotechnology company that pioneered the development of antibodies as therapeutics, and served as its Chief Executive Office from its inception in 1996 until 2002, and as its Chairman from 2000 until 2006. Abgenix was acquired by Amgen in 2006 for $2.2 billion. Prior to Abgenix’s formation, Mr. Greer held senior management positions at Cell Genesys, Inc. including Senior Vice President, Corporate Development and Chief Financial Officer, and held various positions at Genetics Institute (acquired by Wyeth). Mr. Greer currently serves as Chairman of Acologix, a development stage biotechnology company, and is also on the board of Nektar Therapeutics and BAROnova. In the past, Mr. Greer served on several other public and private company boards, including Sirna Therapeutics (acquired by Merck), where he served as Chairman of the Board, Affymax, Anaptys Biosciences, Illumina, Chimeros, Inogen, and CV Therapeutics (acquired by Gilead Sciences). Mr. Greer received a B.A. in Economics from Whitman College and an M.B.A. from Harvard University, and was also a Certified Public Accountant.

Ricardo Levy, Ph.D., Ricardo B. Levy, Ph.D. is Chairman of the Board of Catalytica Energy Systems, Inc., and has been a member of its Board of Directors since June 1995, when the company was formed as a subsidiary of Catalytica, Inc. He also served as director of Catalytica Pharmaceuticals Inc. from 1995 to 2000. Dr. Levy was a founder of Catalytica, Inc. in 1974, serving as Chief Operating Officer from 1974 until 1991 and President and Chief Executive Officer until December 2000, when Catalytica, Inc. and Catalytica Pharmaceuticals Inc. were sold to DSM N.V. Before founding Catalytica, Inc., Dr. Levy was a founding member of Exxon’s chemical physics research team, and prior to that served as Chief Executive Officer of Sudamericana C.A. in Quito, Ecuador. He currently also serves on the Board of Directors of Pharmacopeia, Inc. and NovoDynamics, Inc. Dr. Levy holds an M.S. from Princeton University, a Ph.D. in chemical engineering from Stanford University and is an alumnus of Harvard University’s Executive Management Program.

Irving L. Weissman, M.D., is the Karel and Avice Beekhuis Professor of Cancer Biology, Professor of Pathology, and Professor of Developmental Biology at Stanford University and Director of the Stanford Institute for Cancer/Stem Cell Biology and Medicine, Palo Alto, California. Dr. Weissman’s lab was responsible for the discovery of the first ever mammalian stem cell, the hematopoietic (blood-forming) stem cell. Dr. Weissman was responsible for the formation of three stem cell companies, SyStemix, Inc., StemCells, Inc., and Cellerant, Inc. He is a member of the Board of Directors and Chairman of the Scientific Advisory Boards of StemCells and Cellerant. Dr. Weissman co-discovered the mammalian and human hematopoietic stem cells and the human neural stem cell. Past achievements of Dr. Weissman’s laboratory include identification of the states of development between stem cells and mature blood cells and identification of the states of thymic lymphocyte development. More recently, his laboratory at Stanford has developed accurate mouse models of human leukemias, and has shown the central role of inhibition of programmed cell death in that process. Dr. Weissman has been elected to the National Academy of Sciences. He has received the Kaiser Award for Excellence in Preclinical Teaching, the Pasarow Foundation Award, and the Outstanding Investigator Award from the National Institutes of Health.

Reiterating Strong Speculative Buy: StemCells Inc.’s HuCNS-SC® (purified human neural stem cells) have now shown unprecedented results in Thoracic Spinal Cord Injury, Pelizaeus-Merzbacher Disease (PMD) and now with the first interim data for Dry Age-Related Macular Degeneration (Dry AMD). The company is now progressing with controlled Phase II trials in Cervical Spinal Cord Injury and Dry Age-Related Macular Degeneration (Dry AMD) and is also expecting to file an IND for Alzheimer’s Disease in 2016 with preclinical funding via a forgivable loan of $19.3M from the California Institute for Regenerative Medicine (CIRM). With a very strong management team unlocking the value of HuCNS-SC’s strong science, we believe StemCells Inc. has emerged as the most advanced stem cell player 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 07-07-14 STEM

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