Research « LifeTech Capital

21 Nov 2011

GenSpera (GNSZ) Update 11-21-11

Posted in GenSpera Inc. (GNSZ) | Comments Off

G-202 Phase I Human Trial Data Expected Q2 2012
G-202 Unaffected by Changing Competitive Landscape
Chemo-Naive Prostate Cancer Phase II Begins Q2’12

Download Full 26-Page Report with Important Disclosures: GNSZ Update 11-21-11

1.) G-202 Phase I Human Clinical Trial Data Expected Q2 2012: As of September 30, 2011, 22 patients had been treated with G-202 in the ongoing Phase I human clinical trial for solid tumors. The trial is anticipated to complete enrollment of up to 30 patients in Q1 2012 with top-line data expected in Q2 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. There are also several new drugs under development however they also use mechanisms of action that inhibit androgen production or androgen binding to receptors on the cancer cell surfaces. For example, on November 3, 2011, Medivation’s Phase III trial for MDV3100 (and androgen receptor signaling inhibitor) demonstrated a survival benefit of 4.8 months (18.4mo vs. 13.6mo placebo) without the use of steroid co-administration as seen with drugs like ZYTIGA™. While we view this as a positive development for the treatment of patients with advanced prostate cancer, Medivation’s MDV3100’s anti-cancer effect is still dependant 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.) Additional Prostate Cancer Clinical Trials to Begin: GenSpera is currently planning to enroll two separate prostate cancer clinical trials following the completion of the Phase I all solid tumor trial. Beginning in Q1 2012, up to 18 additional patients will be evaluated in a Phase Ib study in a broader patient population consisting primarily of prostate cancer patients who have previously failed treatment with chemotherapeutic agents. The patients in the Phase Ib trial will be treated at the Maximum Tolerated Dose (MTD) as determined by the Phase I study. Starting in Q2 2012, GenSpera is planning on commencing enrollment in a Phase II trial of G-202 for the treatment of castrate-resistant chemotherapy-naive prostate cancer patients in the US with additional sites in the UK.

4.) 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

5.) G-202 Expected to Avoid Pricing Pressures for Prostate Cancer Therapies: The slow adoption of Dendreon’s PROVENGE® cellular therapy, which carries a $93,000 price tag for treatment, has brought attention to treatment costs in the prostate cancer space. Investors should note that our model uses a modest $40,000 treatment cost for G-202, which is lower than other advanced prostate cancer treatment options such as ZYTIGA™ costing about $50,000.

6.) Strong Preclinical Data and IP: We note that preclinical testing of three different human prostate cancer cell line xenographs in nude mice (inactive immune system) showed material degrees of tumor inhibition, regression and resolution. (see G-202 Preclinical Results) GenSpera also has a strong portfolio of patents and patent applications covering 12ADT and other derivates of thapsigargin, peptide “masking/targeting” sequences and their prodrug conjugates. The patents are owned by GenSpera with no royalties or milestone payments due to any third party. (see Intellectual Property)

7.) 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 for their prostate cancer drug (ZYTIGA™) which recently received FDA approval in April 2011. While partnerships and acquisitions are highly unpredictable, we believe GenSpera could eventually be an attractive candidate should they show strong clinical results.

8.) 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.

Download Full 26-Page Report with Important Disclosures: GNSZ Update 11-21-11

18 Nov 2011

Echo (ECTE) Update 11-18-11

Posted in Echo Therapeutics (ECTE) | Comments Off

Symphony in Diabetic Patients – Results This Quarter
Symphony tCGM System Successful in 1st Study
Expecting FDA Clearance for Prelude SkinPrep Q1’12

Download Full 22-Page Report with Important Disclosures: ECTE Update 11-18-11

1.) Symphony tCGM Shows Strong Results in 1st Study: Data from 12 healthy patients and 1,600 glucose readings showed strong results where 1.) the data indicates that the new Symphony tCGM System has superior accuracy over the prototypes 2.) the data indicates that Echo’s non-invasive transdermal biosensor and skin microabrasion technology is equivalent to, and possibly superior, the competition’s invasive sensor wire systems and 3.) the Symphony tCGM System appears safe as there were no adverse events reported. Specifically, the 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% with the MARD for the study was 10.5%. (see Symphony tCGM Study in Healthy Patients)

2.) Results for Symphony 2nd Study This Quarter: Echo Therapeutics is currently conducting a study in up to 25 patients with either Type 1 or Type 2 diabetes and to compare data obtained from their Symphony tCGM System with both the YSI 2300 STAT Plus Glucose Analyzer and a commercially available professional-use glucometer. The study is expected to collect more than 2,400 data pairs to be used in the analyses by taking frequent reference glucose measurements for 24 hours. The study data will be blinded to study subjects and study personnel. A comparison of the data relative to the reference blood glucose values will be used to assess the accuracy of Symphony. We are expecting from this study results before year-end.

3.) Symphony 3rd Study Coming: Quickly following the results of the diabetic patient study, Echo will begin a study of the Symphony tCGM system in critical care patients (the intended first indication for Symphony) the completion of which will set the stage for the registration trial.

4.) Prelude™ Expected Q1’12: Echo partner Ferndale Pharma is in discussions with the FDA regarding final labeling/packaging needed for approval of their 510(k) submission of the Prelude™ SkinPrep for use with lidocaine which we are now expecting in Q1’12. Investors should note that FDA 510(k) clearance for Prelude™ triggers a $750,000 milestone payment 90 days later from Ferndale Pharma Group plus minimum guaranteed royalties of $12.6M. While Echo has granted Ferndale a license to develop, market and sell Prelude™ for delivery of topical 4% lidocaine product in North America and the United Kingdom, Echo retains the rights to continental Europe and Australia which may provide additional upside to Echo through future partnership licensing and royalty agreements.

5.) $2M in Extra Cash: On November 15, 2011, Echo announced that they received a commitment by their largest shareholder, Platinum Partners, for a warrant exercise of $2 million in cash.

6.) Clear Market Opportunity: We also remind investors that the results of the STAR 3 trial indicated that continuous glucose monitoring can benefit patients (see STAR 3 Trial Results-Continuous Glucose Monitoring Benefits), we also reiterate the need for Echo’s transdermal biosensor is growing in light of the FDA Warning Letter to DexCom (Nasdaq:DXCM) on the risks of sensor wire fractures underneath the patients’ skin, particularly pediatric and adolescent patients. The warning letter noted that DexCom’s sensor wires are not approved for use in children or adolescents, pregnant women or persons on dialysis and can only be used in the abdomen. (see FDA Warning Letter to DexCom on Sensor Wire Factures). We believe this should give Echo’s transdermal biosensor a significant advantage in the marketplace.

7.) We are maintaining Echo Therapeutics with a Strong Speculative Buy and a 12-18 month price target of $6.00 based on 35x projected 2013 EPS and discounted 35% for risk as the FDA PMA approval of the Symphony™ tCGM system could occur within the forecast period. This would result in a market capitalization of approximately $200 million. This is a significant discount to DexCom (Nasdaq:DXCM) (see Competition), the only pure-play comparable, which has FDA approval for their invasive, implantable biosensors with a market capitalization of approximately $500 million.

Download Full 22-Page Report with Important Disclosures: ECTE Update 11-18-11

17 Nov 2011

Neoprobe (NEOP) Update 11-17-11

Posted in Navidea Biopharmaceuticals (NAVB) | Comments Off

Lymphoseek^® NDA Accepted with 6/10/12 PDUFA Date
$30M in Bank from Completion of GDS Business Sale
Additional Pipeline Licensing and/or Acquisitions
Lymphoseek^® NE03-06 Head & Neck Interim Data Expected in Mid-2012
Neoprobe Transitioning to Precision Diagnostics Company

Download Full 31-Page Report with Important Disclosures: NEOP Update 11-17-11

1.) FDA Lymphoseek^® NDA Accepted: On October 19, 2011 the FDA accepted for review Neoprobe’s New Drug Application (NDA) for Lymphoseek® (tilmanocept) for use in Intraoperative Lymphatic Mapping (ILM). The Lymphoseek® NDA will go through the standard review cycle with a PDUFA (Prescription Drug User Fee Act) decision date of June 10th, 2012.

2.) Neoprobe Completes Sale of GDS Business for $30M+ in Cash: On August 17, 2011 Neoprobe completed the sale of their Gamma Detection System (GDS) business to Devicor Medical Products for $30M in cash. In addition, Neoprobe may receive up to $20M in royalties if sales are over $21M in any fiscal year for up to 5 years.

3.) Label Expansion Preparations for Lymphoseek^® Underway: With the NDA submission for Lymphoseek accepted, Management is now focusing on ways to augment the potential approval of their product. The NEO3-06 Lymphoseek trial in head and neck cancer is now increasing the number of sites enrolling with the goal of having interim data by mid-2012. The study is designed to expand Lymphoseek’s label into this indication. Management has also committed to conducting post marketing trials to aid in label expansions and marketing against the newly approved sulfur colloid for ILM in breast cancer. Additionally the company is currently searching for an appropriate partner(s) for Lymphoseek^® in Europe and in other international markets.

4.) Additional In‐Licensing and Acquisition Opportunities: Management has indicated that they intend to expand their pipeline through partnering, licensing and acquisition as they transition to a targeted precision diagnostics company. The company desires to find late-stage candidates, preferably in the radiopharmaceutical or molecular imaging space, to build upon their existing contacts and relationships with therapeutic areas of interest include oncology, neurology and cardiology. While future activities in this area are not included in our financial model, investors should note that they could represent additional value moving forward.

Summary: We believe the current weakness in Neoprobe’s shares is overdone and we are maintaining Neoprobe 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 and an acquisition premium of 25%.

Download Full 31-Page Report with Important Disclosures: NEOP Update 11-17-11

16 Nov 2011

Bionovo (BNVI) Update 11-16-11

Posted in Bionovo Inc. (BNVI) | Comments Off

Menerba^® Phase IIIa Commences – Data Q1’13
Phase IIIa Trial Capital Raise Expected
Menerba^® Could Be First Botanical Blockbuster Drug

Download Full 26-Page Report with Important Disclosures: BNVI Update 11-16-11

1.) Phase IIIa Trial in U.S. to Commence Dosing in a Few Days: On October 26, 2011, Bionovo enrollment of the U.S. Phase IIIa human clinical trial of Menerba® (MF101) in postmenopausal women for the treatment of menopausal hot flashes in 50 clinical sites. Since then, entry criteria diaries, randomization and baseline diaries for the first patients are nearing completion. There will be 5 safety reviews by the Data Safety Monitoring Board during the Phase IIIa trial with top-line efficacy and safety data expected in Q1 2013.

2.) Capital Raise Expected: As stated on management’s conference call, they anticipate the cost of the Phase IIIa and supporting expenses to be approximately $50M and we have included this in our model. While the company expects the confirmatory Phase IIIb trial to require another $30M-$50M, we believe that the top-line efficacy and safety results of the Phase IIIa trial (expected Q1’13), if favorable, would unlock additional shareholder value and attract significant financial support from a partner for the Phase IIIb trial.

3.) Menopause Market – Large and Underserved: With approximately 80 million women in the U.S. and Europe transitioning through menopause and at least 70% experiencing hot flashes, night sweats and associated insomnia, we estimate the worldwide market at approximately $10 billion. Current hormone replacement therapy (HRT) carries warnings for increased risk of breast cancer, strokes, heart attacks, and blood clots while alternatives to HRT, such as antidepressant drugs, are not FDA approved and can cause significant side-effects as well. Menerba^® could become the first botanical blockbuster drug which we believe represents an intriguing opportunity for patient investors.

4.) Maintaining Strong Speculative Buy with $5.00 Target: Menerba^® could become the first botanical blockbuster drug with significant upside should the Phase III trials be successful. Investors should note that while the expected capital raise will dilute existing shareholders, the efficacy and safety results of the Phase IIIa trial, expected in Q1 2013, falls within our 12-18 month forecast horizon. Therefore, we are maintaining Bionovo, Inc. with a Strong Speculative Buy rating and 12-18 month Price Target of $5.00 based on a 35x multiple on projected fiscal year 2015 EPS and discounted 45% for cumulative risk.

Download Full 26-Page Report with Important Disclosures: BNVI Update 11-16-11

14 Nov 2011

NovaBay (NBY) Downgrade 11-14-11

Posted in NovaBay Pharmaceuticals (NBY) | Comments Off

Downgrading to Neutral on Trading Liquidity Risk
UCBE First 20 Patients Data Delayed to Q1 2012
Impetigo/EKC Trials Begin Q4/Q1-NeutroPhase H1’12

Download Full 27-Page Report with Important Disclosures: NBY Downgrade 11-14-11

1.) Lack of Trading Liquidity Increases Risk: The failed conjunctivitis trial and subsequent loss of the Alcon partnership combined with issuing 4.7M additional shares at $1.11 has resulted in a significant loss of investor confidence and interest. NovaBay trading volume has decreased >50% over the past 3 months and >80% over the past 6 months resulting in only 15K shares of daily volume with a share price close to $1.00. The increased risk of only $15K per day in liquidity for a $30M market cap company has resulted in an increase from our previous 55% risk discount rate to 60% in our model.

2.) Reducing Rating to Neutral: Despite several potential catalysts in 2012 such as UCBE and Impetigo Phase II data (see below), we believe the time and/or cost of the required registration trials will probably mute investor enthusiasm for NovaBay shares until both investor confidence and interest return. We further note that NovaBay’s planned H1 2012 re-launch of FDA 510(k)-cleared NeutroPhase® for wound care carries first-year partner sales execution risk as well as adoption risk in the crowded wound care space. Therefore, we are reducing our recommendation to a Neutral rating with a 12 month Price Target of $1.25 based on a 30x multiple on projected 2014 earnings now discounted 60% (from 55%) to adjust for risk.

3.) UCBE Data Delayed to Q1’12: NovaBay is currently conducting a Phase II clinical trial for Urinary Catheter Blockage and Encrustation (UCBE) in quadriplegic spinal cord injury patients. NovaBay now expects results for the first 20 patients (Part A) to be available in Q1 2012 with another 20 patient Part B study using a different formulation of NVC-422 expected to have results available in Q1’12. (see Phase II Clinical Trial for Urinary Catheter Blockage and Encrustation UCBE)

4.) Impetigo Trial to Begin: On July 21, 2010 NovaBay announced positive data from their Phase IIa proof-of-concept trial of NVC-422 gel for the treatment of the highly contagious skin infection impetigo. Investors should note that there was a 100% response rate for the 10 patients infected with MRSA who completed treatment and there were no recurrences of infections. NovaBay partner Galderma SA is expected to initiate a multi-country 400-patient Phase IIb clinical trial in Q4’11 with data expected in H2’12. (see Results of Phase IIa Proof-of-Concept Trial for Impetigo)

5.) EKC Program: Although the adenoviral conjunctivitis trial failed, in the 38% of patients with adenovirus serotypes 8, 19, and 37, indicating Epidemic Keratoconjunctivitis (EKC) infection, a post-hoc efficacy analysis suggested a positive effect on sustained clearing of blurred vision in all patients treated with NVC-422 versus placebo. While, these finding require a larger, prospective Phase II clinical trial, we believe that NVC-422 may be more active in the cornea resulting in benefit for EKC patients. We believe that NovaBay will begin Phase II trials in Q1 2012. (see NovaBay Phase II Results for EKC Subgroup)

6.) NeutroPhase® Launching in H1 2012: NovaBay’s NeutroPhase® is an FDA 510(k)-cleared solution containing HOCI (hypochlorous acid) which is rapid-acting but short-lived making it ideal for multiple applications, especially in surface wound care. NeutroPhase has begun FDA validation manufacturing and is expected to be available for sale in H1 2012. NovaBay is currently seeking a commercial partner for NeutroPhase to cover the North American, European and Japanese markets for patients suffering from chronic non-healing wounds such as diabetic, pressure, and venous stasis ulcers.

Download Full 27-Page Report with Important Disclosures: NBY Downgrade 11-14-11

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Research

GenSpera (GNSZ) Update 11-21-11

Echo (ECTE) Update 11-18-11

Neoprobe (NEOP) Update 11-17-11

Bionovo (BNVI) Update 11-16-11

NovaBay (NBY) Downgrade 11-14-11

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