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Navidea (NAVB) Update 08-13-14

downloadreportLymphoseek On Track for $5M-$6M Sales for 2014
FDA Approves Lymphoseek for Sentinel Lymph Node
October 16th FDA PDUFA Date for Enhanced Usage
Lymphoseek Should Become the New Standard of Care

Download Full 44-Page Update Report with Important Disclosures: NAVB Update 08-13-14

Lymphoseek Sales Accelerating: Q2 sales increased 67% over Q1 to $1M (or $2M including partner Cardinal Health NYSE:CAH). Lymphoseek was ordered by 120 new hospitals during the quarter bringing the total number of hospitals having ordered Lymphoseek to 350 facilities. Management also reiterated their 2014 revenue guidance of $5M-$6M. Navidea is continuing to push Lymphoseek into a medical market segment that has not materially changed in 30 years and remains focused on overcoming this inertia by driving and expanding Lymphoseek usage across multiple indications.

FDA Approves Lymphoseek Sentinel Lymph Node Detection in H&N: On June 13, 2014, the FDA approved Navidea’s sNDA for the expanded use of Lymphoseek for guiding sentinel lymph node (SLN) biopsy in head and neck cancer patients with squamous cell carcinoma of the oral cavity. Lymphoseek is now the first and only FDA-approved radiopharmaceutical application for sentinel lymph node detection. Navidea management stated they will leveraging their success in SLN detection for head & neck cancer of the oral cavity to SLN detection for other solid tumors and with additional data Lymphoseek could go on to become the new standard of care.  Investors should also note that we believe the FDA approval increases the likelihood of full European approval in breast, melanoma and head & neck cancers by year-end.

October 16th FDA PDUFA Date for More Flexible Usage: On March 5, 2014, the FDA accepted for review an additional sNDA (Supplemental New Drug Application) for Lymphoseek with a standard review PDUFA data of October 16, 2014 for expanding label claims to include lymphoscintigraphy (sentinel lymph node mapping) and flexible procedure timing allowing for up to 2-days post-injection of Lymphoseek. We believe this added flexibility and convenience would help drive additional adoption of Lymphoseek as the future standard of care.

European Approval of Lymphoseek Expected by Year-End: Following the current Scientific Advisory Group on Oncology (SAG-O) review of Lymphoseek in Head & Neck cancer, we are anticipating a European Committee for Medicinal Products for Human Use (CHMP) recommendation for approval of Lymphoseek in breast cancer, melanoma and head & neck cancer with sentinel lymph node detection. We then expect the European Medicines Agency (EMA) to follow the Committee for Medicinal Products for Human Use (CHMP) recommendation and grant full European approval to Lymphoseek.

Manocept Platform Joint Venture Announced: On July 15, 2014, Navidea 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. R-NAV was funded $4M from Infinity Capital III and others with Essex Woodlands and $1M funding from Navidea to be paid in equal installments over 3 years with Navidea initially owning approximately 30% R-NAV. (see R-NAV Manocept Joint Venture)

Corporate Restructuring Continues: The full benefits of Navidea’s restructuring have not yet been realized as $1.2M in CEO separation costs combined with $333K investment in R-NAV offset reductions during Q2. The spending slowdowns in the NAV4694 (Alzheimer’s) and NAV5001 (Parkinson’s) programs will take some time to be realized while a development partner is being sought. Investors should note that management reiterated their objective is to achieve profitability without having to access the equity markets.

Reiterating Strong Speculative Buy: As a result of Navidea’s focus on increasing Lymphoseek sales while reducing cash burn from their neurological development programs, we have eliminated sales of NAV4694, NAV5001 and NAV1800 from our model along with reducing operating expenses. Our model 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 there is significant upside to our financial model if Navidea successfully reduces cash burn on NAV4694 and NAV5001 while increasing Lymphoseek sales to become cash flow positive.

Download Full 44-Page Update Report with Important Disclosures: NAVB Update 08-13-14

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


Download the Full 7-Page Note with Important Disclosures:
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: http://prn.to/1nEa3J1 and Section 220 Inspection of Books and Records can be found at: http://delcode.delaware.gov/title8/c001/sc07/

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

downloadreport

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 http://prn.to/1neYSFy):

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 https://www3.gotomeeting.com/register/181404134 We strongly recommend that investors read Platinum’s public letter in its entirety at http://prn.to/VSKNTH 

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 http://reut.rs/1oMOV1p 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

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