Research

Echo (ECTE) Note 03-30-15

downloadreportEcho Hits First Development Milestone for Connectivity to Mobile Devices
Redesigned System to be Better, Cheaper and Faster for Multiple Markets
Partnership Announcements Expected but Additional Capital Required

Download Full 5-Page Note with Important Disclosures: Morning Note 03-30-15 ECTE

Echo Therapeutics hit their first milestone under new CEO Scott Hollander as they announced the new communications technology linking the data from their transdermal glucose biosensor to any 3rd-party mobile devices including consumer smartphones and wearable devices. Echo has now commenced their internal testing of these advancements.

Specifically, Echo developed a new architecture to communicate wirelessly using Bluetooth Low Energy (BLE) connectivity, keeping power consumption and cost to a minimum. Echo also developed the software for a mobile application to demonstrate the transmitted glucose information on a smartphone. This new system leverages the progress made recently in both the skin preparation and glucose sensing technology and is currently being evaluated using in-house clinical feasibility studies.

Remaining Neutral for Now: After the severe management issues of the past year, Echo’s new management appears to be successfully refocusing and refining their transdermal continuous glucose sensing technology as they hit their first milestone. We are remaining Neutral for now while we wait for further evidence that the company will be back on track within our 12 to 18 month time horizon.

Download Full 5-Page Note with Important Disclosures: Morning Note 03-30-15 ECTE

Navidea (NAVB) Update 03-23-15

downloadreportRevenue Guidance for 2015 More than Double 2014
Macrophage Therapeutics Remains Undervalued – For Now
Buy Ahead of Macrophage Therapeutics Newsflow

Download Full 22-Page Report with Important Disclosures: NAVB Update 03-23-15

Q4 Sales Results Exceed Our Estimates: Navidea’s total revenue of $6.3M for 2014, including Lymphoseek sales of $4.2M for 2014, exceeded our estimates of $5.4M and $4.1M, respectively. Navidea’s gross profit was $4.7M for 2014 and $1.9M for Q4 2014, exceeding our estimates of $3.8M and $1.0M, respectively. December 31st cash on-hand was $5.5M plus an additional $5.5M cash from Q1’15 consisting of $3M from their credit facility (approximately $28M remains available), $2M upfront cash from Norgine for the EU partnership and $500K cash from Macrophage Therapeutics’ first tranche.

2015 Sales Guidance More Than Double 2014: For 2015, Navidea is targeting in excess of 50,000 procedures with Lymphoseek revenue to Navidea of $10M to $12M. However, it should be noted that the sales will be weighted towards H2 2015 as the entire 12 person sales team is assembled and a 4 to 6 months selling cycle is completed. Navidea expects to achieve cash flow breakeven by Q1’16.

Streamlining Continues: Navidea continues to evaluate term sheets to effectively divest their neuroimaging programs, which we expect to be announced in Q2. Navidea also initiated another reduction in force that will include seven staff members and three executives.

Macrophage Therapeutics – Undervalued Crown Jewel: We believe that Navidea’s Macrophage Therapeutics, which is developing a pipeline of Manocept™ drugs targeting the CD206 mannose receptor found on activated macrophages, represents Navidea’s crown jewel for transformation into a biotech company. Macrophage therapies remain a relatively untapped field that could yield multiple drug successes, even potential blockbusters. Unfortunately, it remains undervalued at the present time as we await results from undisclosed proof-of-concept studies for multiple disease indications and the resulting development pipeline plan. On March 20th, it was announced that early human data showed the ability to safely cross the blood brain barrier with the ability to deliver a payload to the intended target and thus indications for central nervous system (CNS) diseases such as Alzheimer’s, Parkinson’s, Multiple Sclerosis and ALS may be pursued. While the rheumatoid arthritis (RA) indication is being developed in the R-NAV joint venture, we ultimately expect opportunities in a broad swath of diseases in addition to RA and CNS. Macrophages play roles in oncology, autoimmunity, infectious diseases, cardiology, and inflammation and it now becomes an exercise in completing proof-of-concept studies with data, analyzing disease targets, availability of in-house development resources and capital as well as partnerships and out-licensing.

Macrophage Therapeutics Funding Begins: Navidea announced an agreement for the funding of Macrophage Therapeutics. Anticipated gross proceeds of $2.5M are expected with the first tranche of $500K having been completed on March 11th. (see Recent Financing Activity)

Reiterating Strong Speculative Buy as Shares Remain Undervalued: While those investors focusing on Lymphoseek will need to wait for H2’15 for significant revenue growth as the new salesforce completes their initial sales cycle, we would not be surprised for Navidea shares to begin trading higher in advance of Macrophage Therapeutics drug pipeline newsflow. The investment proposition is unusually favorable as the Manocept scaffold is already de-risked for safety, efficacy and manufacturing as it is already FDA-approved in Lymphoseek. The unique mechanism of action and utility in a wide variety of diseases also makes it especially attractive for NIH grants and partnerships, both of which are sources of non-dilutive financing. Therefore, we believe Navidea will eventually become a biotech drug company rather than “just” a diagnostic imaging company. 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 internal estimates for program valuations (Macrophage Therapeutics $20M, NAV4694 $8M, NAV5001 $5M, NAV1800 $2M).

Download Full 22-Page Report with Important Disclosures: NAVB Update 03-23-15

Echo (ECTE) Note 03-04-15

downloadreportUpgrading Echo Therapeutics to Neutral on New Management & Gameplan
Redesigned System to be Better, Cheaper and Faster for Multiple Markets
Partnership Announcements Expected but Additional Capital Required

Download Full 5-Page Note with Important Disclosures: Morning Note 03-04-15 ECTE

Upgrading Echo Therapeutics to Neutral: After almost a year with an Avoid/Sell rating, we believe the severe management issues are finally behind us as the new management team begins the rebuilding process. While we are still unable to model a valuation until we receive clarity on timelines and finances, we are now upgrading Echo to Neutral as a result of a more focused, coherent gameplan and the belief that the company will be back on track within our 12 to 18 month time horizon.

Product Changes: Investors should note that on last night’s conference call the terms “Prelude” and “Symphony” appear to have been replaced with “Abrader” and “Sensor”. Design changes to the abrader are expected to improve consistency, speed (3-5 seconds instead of 30-45 seconds), improved algorithm and simplified design with a lower manufacturing cost. The sensor (consisting of the biosensor, housing, electronics, transmitter and housing) is being redesigned to be thin and flexible to more resemble a patch with inexpensive, disposable components.

EchoNewSensor

CLICK TO ENLARGE

Product Additions & Deletions: Echo has discontinued all work on their proprietary display to focus on transmitting encrypted data to any mobile device screen. Instead, Echo will develop a simple app that tracks glucose curves while also developing a software API (application program interface) to enable 3rd-party software developer to create their own apps as well as interfaces for other devices.

Markets: Echo will be pursuing the wearable, wellness market which includes fitness, weight-loss and healthy living customers who want to avoid elevated glucose levels. These products are expected to fall under the FDA’s draft guidelines for low-risk General Wellness devices. It should be noted that it will display and track glucose curves but cannot be used to determine insulin therapy. Using the same abrader and sensor, Echo will also continue development for out-patient diabetics and hospital use under FDA clinical trial protocols. Finally, Echo expects to derive additional value from the data collected for consumer and pharma marketing or other “Big Data” purposes.

China: Partner MTIA is simultaneously pursing the China market and a meeting with the Chinese FDA is expected next quarter and will be preparing for manufacturing by year-end.

Partnerships: Echo heavily emphasized partnerships is all facets of their business plan, from development, manufacturing, marketing and distribution in both the consumer and medical markets. While only MTIA has been announced thus far, management indicated that they are in advanced talks with a number of partners (whose roles were not disclosed).

Funding: With a cash burn of approximately $400K per month, Management stated that they expect to raise additional capital in the summer to enable them to complete their gameplan. We believe Echo will be much more cash efficient than in the past due to the heavy reliance on partnerships.

Download Full 5-Page Note with Important Disclosures: Morning Note 03-04-15 ECTE

Navidea (NAVB) Note 2-27-15

downloadreportSAB Named for Macrophage Therapeutics as Initial Funding Nears Completion
Preliminary 2014 Revenues Exceed Our Estimates – 2015 Sales Push Begins
Data Shows Lymphoseek SNL Detection in H&N Accurate Even the Next Day
Data Shows Lymphoseek Requires Fewer SNL Removals in Breast Cancer

Download Full 10-Page Note with Important Disclosures: Morning Note 02-27-15 NAVB

NOTE: Navidea Q4 Conference Call is Thursday, March 5th at 8:30am EST /U.S. 1-800-708-4540/Int: 1-847-619-6397/Passcode: 39040655/ Webcast: http://edge.media-server.com/m/p/wnxb6jnn/lan/en

This morning, Navidea announced their initial scientific advisory board (SAB) for their Macrophage Therapeutics subsidiary consisting of 9 members with expertise in oncology, immunology, autoimmune diseases and macrophage biology. Of particular note to investors is the appointment of Siamon Gordon who is world-renowned for his expertise in macrophage research. It was also announced that the funding plan that was announced on January 21st is expected to close next week. (see Macrophage Therapeutics-Initial Funding Plan). The members are listed below and we have added links to their publicly accessible biographies:

Siamon Gordon, M.B., Ch.B., Ph.D.
Glaxo Wellcome Professor of Cellular Pathology (Emeritus), University of Oxford
http://en.wikipedia.org/wiki/Siamon_Gordon

Mark I. Greene, M.D., Ph.D., F.R.C.P.
John Eckman Professor of Medical Sciences, Vice Chair of Pathology, Division of Immunology and Experimental Pathology, University of Pennsylvania
http://www.afcri.upenn.edu/ourfaculty/green_bio.html

Wael Jarjour, M.D.
Associate Professor, Director, Division of Rheumatology & Immunology, The Ohio State University
http://internalmedicine.osu.edu/rheumatology/directory/faculty/waeljarjour/

Michael S. McGrath, M.D., Ph.D.
Professor, Departments of Laboratory Medicine, Pathology, and Medicine, University of California San Francisco
http://labmed.ucsf.edu/about/faculty/labmed-mmcgrath.html
http://cancer.ucsf.edu/people/profiles/mcgrath_michael.3373

Thomas J. Rosol, D.V.M., Ph.D.
Professor, Veterinary Sciences, The Ohio State University; Senior Advisor, Life Sciences, University Office of Technology Commercialization and Knowledge Transfer, The Ohio State University; Special Assistant to the Vice President for Research, The Ohio State University
http://vet.osu.edu/ThomasRosol

Eric K. Rowinsky, M.D.
Head of Research and Development and Chief Medical Officer, Stemline Therapeutics, Inc. and Director of Navidea Biopharmaceuticals
https://www.linkedin.com/in/ericrowinsky

Larry S. Schlesinger, M.D.
Chair, Department of Microbial Infection and Immunity, Director, Center for Microbial Interface Biology, The Ohio State University
http://internalmedicine.osu.edu/infectiousdiseases/directory/faculty/larryschlesinger/

David Sidransky, M.D.
Professor of Otolaryngology – Head and Neck Surgery, Professor of Oncology, Professor of Pathology, Professor of Cellular & Molecular Medicine, Professor of Urology, and Director, Head and Neck Cancer Research, The Johns Hopkins University
http://www.hopkinsmedicine.org/profiles/results/directory/profile/8627021/david-sidransky

Kenneth C. Williams, Ph.D.
Professor of Biology, Boston College
http://www.bc.edu/schools/cas/biology/facadmin/williams.html

Download Full 10-Page Note with Important Disclosures: Morning Note 02-27-15 NAVB

Navidea (NAVB) Note 02-17-15

downloadreportData Shows Lymphoseek SNL Detection in H&N Accurate Even the Next Day
Preliminary 2014 Revenues Exceed Our Estimates – 2015 Sales Push Begins
Data Shows Lymphoseek Requires Fewer SNL Removals in Breast Cancer
$2.5M Funding for Macrophage Therapeutics – Navidea Retains 99.5%

Download Full 9-Page Note with Important Disclosures: Morning Note 02-17-15 NAVB

Navidea announced the peer-reviewed publication of results from the NEO3-06 Phase III clinical trial of Lymphoseek® (technetium 99m tilmanocept) injection in patients with certain head and neck cancer (squamous cell carcinoma of the oral cavity) in the journal Annals of Surgical Oncology. While the FDA has already approved Lymphoseek for sentinel lymph node detection (October 15, 2014), it is nonetheless interesting that Lymphoseek appeared effective even if the surgery was done the next day:

Of note, the specificity of tilmanocept for lymphatic tissues assessed via in vivo imaging and in vitro analysis of its receptor binding properties suggest that tilmanocept does not move downstream to distal lymph nodes, permitting high confidence that a hot node found during nextday procedures is in fact an SLN. The present study supports that the SLN detection rate and FNR for nodal metastases were not significantly affected by the day of surgery relative to timing of [99mTc]tilmanocept injection. This attribute portends that the use of [99mTc]tilmanocept provides substantial leeway and scheduling flexibility with regard to time of injection and subsequent lymphoscintigraphy and SLNB procedures (i.e. next-day surgery) without compromising the reliability of results.

The full research paper may be downloaded in PDF form at: http://bit.ly/17dT8H1

Preliminary Lymphoseek Results for Year-End 2014
On February 9, 2015, Navidea announced preliminary unaudited total revenue of $6.3M for 2014, including Lymphoseek sales of $4.2M for 2014, exceeding our estimates of $5.4M and $4.1M, respectively. Navidea’s gross profit is expected to be $4.7M for 2014 and $1.9M for Q4 2014, exceeding our estimates of $3.8M and $1.0M, respectively. Key metrics for 2014 included:

- Approximately 22,000 procedures using Lymphoseek were performed in 2014
- Sustained average quarter-on-quarter growth rate of >20%
- Realized a reorder rate in excess of 80%
- Ended 2014 with more than 500 customers

For 2015, Navidea is implementing new commercial initiatives:
1.) Launch a new branding campaign based on the new FDA label that was approved in the fourth quarter of 2014, which includes sentinel lymph node biopsy for three types of cancers 2.) Increase engagement with surgical oncologists as the key target within the broader treatment team 3.) Deploy a direct sales force beginning in the first quarter of 2015 with focus on regions with the greatest concentrations of cancer diagnosis 4.) Coordinate nuclear medicine directed activities with Navidea’s US distribution partner 5.) Build upon the key performance indicators: Accelerate growth in existing accounts, Add new customers, Capitalize on the greater than 80% reorder rate and Drive patient education in partnership with advocacy groups

Download Full 9-Page Note with Important Disclosures: Morning Note 02-17-15 NAVB

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