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Hi Everyone,

Recently I have moved forward in my life and ventured into different niches of finance. Thus, I am suspending the BioStocks $25.99 program temporarily.

However, the part and full-time programs (partnered with AccessaTrader.com) are still on-going.

If you have ANY questions please email me: Brett@BioStocks.com

Updates are soon to come as I plan to continue my trading journey, as well as help create companies that will change peoples lives.

Best,

Brett Sifling

Biostockselite article:

Athersys, Inc. (ATHX) is a small cap biotech stock that appears to have significant potential. What is initially intriguing about Athersys is that it holds proprietary Cell-Based Biology Platforms that aids in expediting drug discovery. One platform, Random Activation of Gene Suppression (RAGE) “can be used to produce human cell lines expressing virtually any protein encoded in the human genome, without requiring the cloning and isolation of individual genes.” The RAGE technology portfolio includes 11 issued U.S. patents, pending patents, and international patents. Their other platform, Genome-wide, Cell-based Knock-out (GECKO) is a compliment to RAGE in that GECKO is proprietary, genetic technology that leads to the rapid identification of gene function, directly linking the gene to its role in the cell’s biology and acceleration the functional validation of human genes. One does not need to be a scientist to understand the importance and value of having platforms that expedite drug discovery.

MultiStem:

What is at the forefront of Athersys is MultiStem. MultiStem is a proprietary stem cell therapy that can potentially be utilized across a wide variety of platforms. “MultiStem consists of a special class of human stem cells that have the ability to express a range of therapeutically relevant proteins and other factors, as well as form multiple cell types. Factors expressed by MultiStem have the potential to deliver a therapeutic benefit in several ways, such as reducing inflammation, protecting damaged or injured tissue, and enhancing the formation of new blood vessels in regions of ischemic injury. These cells exhibit a drug-like profile in that they act primarily through the production of multiple factors that regulate the immune system, protect damaged or injured cells, promote tissue repair and healing, and the cells are subsequently cleared from the body over time.” Athersysstates ”MultiStem represents a potential best-in-class stem cell therapy because it exhibits each of the following characteristics based on research and development to date: (1) it may be produced on an industrial scale, in a well validated and reproducible manner; (2) it may be administered without tissue matching, making it analogous to type O blood; (3) it exhibits a consistent safety profile; and (4) it appears capable of delivering therapeutic benefit through multiple mechanisms of action.”

What makes MultiStem a potential blockbuster:

What makes Athersys a potential blockbuster? Since MultiStem has shown potential therapeutic benefit through a variety of mechanisms (regulate the immune system, protect damaged or injured cells, and promote tissue repair and healing) it can potentially be used for treatment throughout the body. To date, Athersys has identified the potential benefit of MultiStem for gastrointestinal diseases, stroke, spinal cord injuries, multiple sclerosis, traumatic brain injuries, acute myocardial infarction, congestive heart failure, vascular and artery disease, critical limb ischemia, neonatal hypoxic ischemia, and organ transplantation; among others. Each of the aforesaid alone has the ability to generate billions if MultiStem works. At the present time there are a several indications currently in clinical trials.

Pipeline Status:

1.) Inflammatory Bowel Disease: Athersys has a MultiStem partnership with Pfizer (PFE) worth over $100M for Inflammatory Bowel Disease. The two most common types of inflammatory bowel disease are ulcerative colitis and Crohns disease. Inflammatory Bowel Disease represents a billion dollar market opportunity with over 800,000 people having Crohns disease and around 1.6 million having uclerative colitis in the United States, Europe and Japan. Phase 2 results of this study are conservatively expected second half of 2013, but most likely 3rd quarter of 2013.

2.) Ischemic Stroke: Athersys has an ongoing MultiStem study for Ischemic Stroke. At the present time there are limited treatment options for ischemic stroke with the only approved treatment by the FDA being tPA which is a clot buster that must be administered within 4 hours of stroke onset. The ongoing study of Athersys is evaluating MultiStem for therapeutic benefit from the onset of stroke up to 36 hours post onset.“Ischemic stroke represents a major unmet need – and annual market opportunity of more than $15 billion” according to the company. In October 2012 Athersys reported an update of the clinical study where the Independent Safety Committee reviewed data and determined the doses of MultiStem were safe and well tolerated, therefore recommending the continuation of the study. Results are expected early 2014, however, management indicated during their March 12, 2013 conference call ”we are doing some things to actually expedite enrollment of the trial” by getting more sites set up in the U.S. and U.K. One could speculate that the company is aware of positive clinical response as the reason for expediting the clinical trial.

3.) Graft v. Host Disease: Athersys also has their graft-versus-host disease (GvHD) study for which the company was granted orphan drug status. Athersys is targeting patients with leukemia or related hematologic cancers who have been treated with radiation or chemotherapy followed by donor-derived stem cell transplant to restore the patients blood and immune system. Phase 1 results were very favorable and the company is currently working with the FDA to obtain criteria to initiate their phase 2 study. Athersys obtained another patent last year for GvHD. GvHD represents another very significant market opportunity for Athersys.

4.) Bone Allograft for Orthopedics: Athersys partnered with RTI Biologics, Inc. (RTIX) wherein RTI Biologics is using Athersys technology for bone allografts in orthopedic indications. RTI Biologics is a company focused on medicine that repair and support the natural healing of the human bone and tissues. It is believed that this partnership should start generating recurrent revenues for Athersys starting this year.

5.) Acute Myocardial Infarction: Athersys completed a phase 1 study with Angiotech Pharmaceuticals for acute myocardial infarction but recovered all rights when Angiotech ran out of resources. The FDA has already approved a phase 2 study for acute myocardial infarction.“According to AHA estimates, direct costs from cardiovascular disease will grow from $273 billion annually (2010) to more than $818 billion annually (2030) as a result of an aging and increasing obese population.” During the March 12, 2013 conference call, management indicated “right now, we’re evaluating partnering opportunities in several different areas around MultiStem across different therapeutic indication areas…” It is possible that Athersys will be partnering their acute myocardial infarction in the short term.

6.) 5HT2c for obesity, diabetes and schizophrenia: Athersys also has the rights to 5HT2c. 5HT2c is a receptor compound that has the potential to treat obesity since the compound stimulates a key receptor in the brain for the regulation of appetite and food intake. It is well known that weight loss reduces the risk for heart disease, diabetes, and other factors that cause premature death or injury. What is interesting is that this compound can potentially be used alone or in conjunction with other new weight loss drugs such as those by Vivus (VVUS), Orexigen Therapeutics (OREX), and Arena Pharmaceuticals (ARNA). More importantly, “Atheresys’ lead compounds exhibit superiority over Lorcaserin and other agents” in preclinical models according to Athersys.Weight loss drugs are estimated to generate billions annually. During the March 12, 2013 conference call, Athersys indicated they continue to advance partnering discussions that would include 5HT2c solely for the obesity, solely for schizophrenia, or a partnership for both.

7.) Hurler’s SyndromeAthersys received Orphan Drug Status for Hurler’s Syndrome in 2012. This indication has not yet been partnered and it is presently unknown the extent of the market potential.

8.) Spinal Cord InjuryIn October 2012, Athersys presented preclinical data at the Society of Neuroscience indicating that MultiStem demonstrated potential benefit after Spinal Cord Injury. Spinal cord injuries represent another billion dollar market opportunity. Athersys has not yet announced whether they are going to advance MultiStem for Spinal Cord Injury alone or partner.

9.) Acute Brain InjuryIn October 2012, the Journal of Neuroinflammation published an article indicating the MultiStem treatment may reduce inflammation and promote reparative processes following acute brain injuryAthersys has also received grant funding for Stem Cell Product Development for the use of MultiStem in Traumatic brain injuries. Acute brain injuries represent another billion dollar market opportunity. Athersys has not yet announced whether they are going to advance MultiStem for Acute Brain Injury alone or partner.

10.) Multiple SclerosisIn October 2012, Athersys provided an update of MultiStem for the treatment of Multiple Sclerosis. In the preclinical studies MultiStem “displayed sustained and statistically significant improvement in functional testing compared to placebo treated animals. This functional improvement correlated with a statistical decrease in demyelinated lesions in the nervous system of cell treated animals compared to placebo as well as increased remyelination in cell treated animals, and this result has been confirmed in a second animal model of MS, suggesting that MultiStem treatment may accelerate the process of axonal remyelination.” Multiple Sclerosis represents another billion dollar market opportunity. Athersys has not yet announced whether they are going to advance MultiStem for Multiple Sclerosis alone or partner.

11.) Additional Indications: Congestive Heart Failure, Solid Organ Transplant, Critical Limb Ischemia, Peripheral Vascular Disease, Peripheral Artery Disease, and Neonatal Hypoxic Ischemia are other areas where MultiStem may provide therapeutic benefit. During theMarch 12, 2013 conference call, Athersys stated “and right now, we’re evaluating partnering opportunities in several different areas around MultiStem across different therapeutic indication areas…”

Management:

Management has impressive credentials with the Chairman and CEO, Executive Vice President and Chief Scientific Officer, and President and Chief Operating Office all having graduated from Stanford. Management has extensive knowledge and experience in the regenerative medicine field and has shown their leadership by entering into partnerships and advancing their pipeline while being cognizant of its shareholders.

What is also exciting is that, according to management, “more of the bigger companies are actually starting to pay attention to the sector. Pfizer (PFE), Shire Plc (SHPG), Johnson & Johnson (JNJ), Roche, and quite a few other companies have started to make strategic bets in the area because they recognize that this is an area that may actually transform medicine in a lot of different ways.”

Fundamentals:

Athersys has a market cap of $80M at its current level. It ended year 2012 with $25.5M in cash or cash equivalents. Athersys has very little debt and burns approximately $4M per quarter. At its current levels, the company has enough funding for over a year assuming it receives no additional grants, cash infusion from partnerships, or a case raise through dilution. The market potential for MultiStem will depend on which products make it to the marketplace. As stated above, each market represents a potential to generate literally billions of dollars. Since Athersys only has an $80M market cap, the upside potential is very significant if they are able to get MultiStem to the marketplace. The likelihood that Athersys will be able to generate revenues from MultiStem will depend on the efficacy of its upcoming studies, positive findings from phase 3 studies, and FDA approval.

Risk versus Reward & the Significance of Phase 2 studies:

The phase 2 results of MultiStem for the Inflammatory Bowel Disease and Stroke studies are very significant events for Athersys. If the phase 2 studies are favorable, Athersys is one step further to advancing a treatment for what could be a dozen different indications each worth in the billions. Favorable phase 2 results will also put Athersys in a strong position to partner other indications in their pipeline. The potential market opportunity is massive for a company whose market cap is presently $80M. The low market cap and large market potential for MultiStem could mean that Athersys gets acquired by a large pharmaceutical willing to bet that MultiStem eventually gets FDA approval. To be objective, if the phase 2 studies of MultiStem do not show efficacy then that would be a significant blow to a company who is clearly focused on advancing MultiStem.

Additional information can be obtained on the Athersys website.

My personal stock evaluation:

I am long ATHX for the following reasons: First and foremost is market potential. Athersys has an $80M market cap, $25M in cash and a strong pipeline whose indications could each be worth billions of dollars. From a technical analysis I believe Athersys has based in the $1.40-$1.60 range so downside risk is limited. With the phase 2 Stroke trials now being expedited and the results of the phase 2 study for Inflammatory Bowel Disease most likely in the third quarter of 2013, I would expect the interest in Athersys to increase. The company has also publicly stated, as stated in the article above, they are in a variety of partnership discussions which, if successful, could also be another catalyst for investors.

This article is intended for informational and entertainment uses only and should not be construed as professional investment advice. The aforesaid is solely my opinion based on my personal due diligence. As with all stocks there is risk of suffering financial losses. Do your own due diligence and/or consult with a professional financial advisor before investing in any stock including ATHX.

www.BioStocksElite.com

By @BlueRose and @Bioinvestor71

February 21, 2013

XENOPORT, INC. (XNPT)

Corporate offices

3410 Central Expressway

Santa, Clara, CA 95051

408-616-7200

XNPT specializes in drugs that treat neurological conditions and develops prodrugs that utilize the body’s nutrient transport systems to improve uptake of a drug.

SPASTICITY

Spasticity is a common condition resulting from damage to the motor neuron at the spinal cord or cerebral level. It is typically associated with multiple sclerosis (MS), spinal cord injury (SCI), stroke, cerebral palsy, and traumatic brain injury[1]. The prevalence of spasticity is estimated at approximately 5 million individuals in the USA [2] with 80-85% of patients with MS, 65-78% of patients with SCI and 35% of patients with stroke demonstrating some degree of spasticity[1, 3].

Individuals with spasticity experience an exaggerated response to a velocity dependent increase in the tonic stretch reflex and an increase in muscle tone that is involuntary due to damage to upper motor neurons[4]. Initially, in the early stages of spasticity the patient presents with a normal muscle lengthening reaction to the velocity dependent stretch. However, with time, the amount of muscle stretch elicited decreases resulting in muscle atrophy and contractures. Spasticity can be a hindrance in the ability for a patient to perform activities of daily living, pain, and decrease in quality of life. Even though spasticity has many negative consequences for the patient there may be potential benefits such as enabling a patient to walk or stand.

Assessment of spasticity by the clinician should include the validated Ashworth or modified Ashworth scale which despite its limitations is considered the gold standard. In the Ashworth assessment the clinician tests the passive resistance in a joint and scores it on a scale of 0-4 (Ashworth) or 0-5 (modified Ashworth) based on the examiners perception. Other spasticity evaluations include the Tardieu scale that measures muscle reaction to passive stretch, self-report of perceived spasticity using a visual analogue scale, pendulum test that measures the swing of the dangling leg, and the disability and pain caused by the spasticity as assessed by the clinician[5].

Management of spasticity is a multiple modality treatment regime that includes physiotherapy, Botulinum toxin A, orally administered drugs, intrathecal baclofen, alcohol or phenol neurolysis, and surgery. The two most common orally administered drugs for spasticity are baclofen and tizanidine (Figure 1)[2]. Arbaclofen placarbil (AP) developed by Xenoport (XNPT) is a prodrug of baclofen.

Figure 1 Xenoport, Inc data evaluating orally administered drug treatments for spasticity.

BACLOFEN

Oral baclofen has been used since the mid-1970’s for the treatment of spasticity and has been shown to reduce velocity dependent muscle tone on the Ashworth scale that is dose dependent [6, 7]. Interestingly, despite the positive impact observed on the Ashworth scale there does not appear to be any effect on the functional impact of spasticity.

Baclofen is a racemic drug in which the “R” form is the active compound. It is absorbed in the small intestine, crosses the blood brain barrier where it binds to the GABA receptor at the presynaptic terminal. This binding results in the decrease of calcium that results in a reduced release of neurotransmitter that inhibits the spinal reflexes. After oral administration baclofen is rapidly absorbed with a mean half-life of 3.5 hours and is rapidly cleared from the blood. It is estimated that 80% of baclofen is excreted, virtually unchanged in the urine. Therefore, patients on oral baclofen must take the drug up to 4 times a day. Even with frequent dosing blood levels of baclofen fluctuate and concentrations in the blood are related to the time after administration.

Many patients cannot tolerate the side effects of baclofen which include sedation, fatigue and drowsiness which together with frequent dosing of the drug decrease the compliance and usefulness[5, 7]. As shown in figures 2 and 3 nearly 45% of patients fail baclofen as their first line treatment with lack of efficacy as the number one reason for discontinuing[2].

Figure 2 Xenoport, Inc data of clinicians experience with treatment failures.

Figure 3 Xenoport, Inc data of clinicians experience with why baclofen failed.

The frequent dosing requirements, absorption limited to the small intestine, and significant side effects have contributed to the lack of oral baclofen success. Therefore, the development an extended release formulation of baclofen that was absorbed along the entire length of the intestine that had reduced side effects should ultimately increase compliance and patient satifisfaction.

ARBACLOFEN PLACARBIL (AP)

AP is a prodrug that was developed by Xenoport, Inc. A prodrug is a biologically inactive compound that becomes active after metabolic processing. As shown in Figure 4, Xenoport, Inc. made an addition to the known chemical structure of R-Baclofen to yield the prodrug AP [8]. AP is in a class of prodrugs called acyloxyalkyl carbamate. This class of drugs have two significant properties: 1) they contain chemical structures that are recognized by the monocarboxylate transporter-1 which is present within both the small and large intestine[9] and 2) contain chemical structures that are known to undergo hydrolysis to release them from active drug[8].

Figure 4 Structure of (1) R-Baclofen and (2) AP. From Ref 8.

Figure 5 Schematic demonstrating mechanism of prodrug transport[9].

In vitro studies on AP showed it was chemically stable over both physiologically ranges of pH and temperatures. The hydrolysis of AP to R-Baclofen was similar from various species in numerous tissue preparations demonstrating the metabolic stability of AP. The major enzyme responsible for the hydrolysis of AP to R-Baclofen is carboxylesterase -2 whereas carbosylesterase-1 plays only a minor role while the CYP450 pathway is not involved in metabolism[8]. Epithelial polarized cell transport studies demonstrated that AP is partially hydrolyzed during transport from apical to basolateral membrane.

Multiple in vivo animal studies in a variety of species were conducted to evaluate the bioavailability of AP and R-Baclofen. Intravenous administration of AP resulted in rapid conversion to R-Baclofen in the blood. Oral administration of AP demonstrated only a small amount of AP enters the blood stream. In addition, the amount of R-Baclofen available after oral administration of AP was dose dependent and bioavailablity was species dependent with upwards of 94% of R-Baclofen present in the blood. Intracolonic administration of AP or just R-Baclofen showed low levels of both in the blood. However, after the administration of AP there was a substantial amount of R-Baclofen demonstrating the addition of the chemical moiety resulted in absorption through the entire intestinal tract[8].

Recently, the safety and efficacy of AP was studied in patients with SPI who had spasticity as determined by the Ashworth scale. Thirty-seven SPI patients participated in a multiple-dose randomized, double-blind placebo controlled, two-period crossover study [1]. Doses of the drug were 10, 20 and 30 mg and were given twice a day. There was a dose dependent reduction in spasticity as determined by the Ashworth scale meeting the primary endpoint (Figure 6[2]). The secondary endpoint was met with a statistically significant reduction in patient-rated spasticity at doses of 20 and 30 mg. No deaths were reported during the trial nor changes in vital signs, blood values or EKG. Adverse effects (AE) were rated as mild to moderate with urinary tract infection being the most common AE (11%). Other AE’s included pain in extremity, insomnia and nasopharyngitis. No participated stopped the study due to AE[1].

Figure 6 Ashworth scale data from SCI patients on AP[2].

After completion of the SCI study that resulted in positive primary and secondary endpoints the FDA approved a single phase 3 efficacy and safety study in MS patients. The phase III clinical trial for the use of AP in patients with MS is called “Command Trial.” The study was conducted in 35 different sites in the US which enrolled 75 patients of either sex from ages of 18-70. The Command Trial is an open label extension study and results are anticipated by April 30, 2013.

Currently, Xenoport, Inc. is near completion of renal impairment studies. Additional studies will include full food effect and carcinogenic studies. Anticipated 2013 NDA filing will also need to be completed.

Overall impression of the scientific research:

1)There has been a complete investigation of the pharmokinetics of AP both in vitro and in vivo in various animalI anticipate the FDA will be satisfied with these studies.

2)SPI studies met both primary and secondary endpoints with statistical significance. The study was well done but the number of patients in the study was small which one must always be aware that in a larger study statistical significance may not be found.

Overall prediction:

1) Since the mechanism of spasticity in SPI and MS are both due to lesions of the motor neuron at the spinal cord or brain I predict positive phase III clinical trial results in MSMS patients on AP will demonstrate a decrease in spasticity using the Ashworth scale and AEs will be minimal.

2) I predict there will be no problems with their NDA filing of AP due to the fact their published peer reviewed research is quite complete and should satisfy the FDA.

3) I predict approval of AP for the treatment of spasticity in patients with MS and SPI. The only potential concern will be the incidence of urinary tract infections.

4) The lack of statistical significance in other parameters beyond the Ashworth scale ie, decrease in pain due to spasms, sleep quality, patellar reflex scores, etc. will be raised by the FDA but should not be a hindrance since orally administered Baclofen does not affect any of these parameters.

PIPELINE

Drugs currently marketed by XNPT include: Horizant® (gabapentin enacarbil) Extended-Release Tablets is approved in the United States. Initially, they were in partnership with GSK for commercialization of Horizant but this agreement has recently ended and XNPT will have sole rights to commercialization. In addition, Regnite® (gabapentin enacarbil) Extended-Release Tablets is approved in Japan and five other asian countries and Astellas Pharma Inc. holds all development and commercialization rights[9].

CURRENT MARKET VALUATION AND FINANCIALS

XNPT currently has a market cap of $348M. With over $100M in cash and limited debt that leaves XNPT’s pipeline valued at approximately $250M. XNPT retains the sole rights to commercialization of arbaclofen placarbil which gives XNPT very significant upside potential. XNPT hit a high of $13 in October, 2012. With favorable phase 3 results by April 30, 2013, it is possible that XNPT will break through that previous high in 2013 especially given the limited shares available for trading and high institutional ownership (see below).

FLOAT AND INSTITUTIONAL OWNERSHIP

XNPT has 42M shares outstanding of which 33M is the float. 75% of the float are held by institutions. Since institutions own 75% of the 33M float, that only leaves 8.25M shares are available for active trading. Some of those institutions or funds that hold shares literally control billions of dollars such as BlackRock, Vanguard, Orbimed Advisors, Price T. Rowe, Wellington Management, etc. Big money usually does extensive research into companies prior to taking such a large position so one would assume those companies are optimistic regarding the chances of success. If the phase 3 results are positive, one would assume those companies would increase their stake in XNPT. With only 8.25M shares freely trading, there could be a significant upward spike on positive data.

PRICE REFLECTION FOLLOWING PHASE 3 DATA RESULTS BY APRIL 30, 2013

Considering baclofen is the most widely prescribed drug for the treatment of spasticity, a modified and more effective version of the same medication provides XNPT with major market opportunity. Assuming the phase 3 results are positive, it should take little or no effort for sales forces to convert doctors into prescribing XNPT’s modified and more effective version for what they are already prescribing. This should clearly allow for quick and significant market penetration leading to sales and profits in a relatively short time period. FDA hurdles should be relatively easy since they already approved a variant of the same drug. As such, the safety of the drug should not be an issue for the FDA.

TECHNICAL ANALYSIS

XNPT is forming an ascending wedge pattern (note the higher lows and lower highs). The majority of the time ascending wedge patterns break out to the upside. Watch for this break out.

ANALYST RESEARCH[10]

Note the following charts were all obtained from reference 10.

CONSENSUS RECOMMENDATION

Each Recommendations received from contributors is mapped to one of the I/B/E/S standard ratings. A consensus recommendation is determined by an average of the numeric values, rounding that mean value to the nearest integer. This area currently displays US research coverage only. In many cases, non-US related research coverage can be accessed from the homepage of the respective company.

ANALYST RECOMMENDATION

Firms making recommendations: Cowen & Company, Ladenberg Thalm, Morgan Stanley, RBC Capital, Deutsche Bk Sec, Leerink Swann, Piper Jeffrey, Webush Security

12-MONTH PRICE TARGET RANGE

Analyst consensus at time of recommendation is $13.

Price targets are calculated by estimating future earnings per share and then applying a price-to-earnings multiple, known as the P/E ratio.

FORECAST EARNINGS GROWTH

OWNERSHIP SUMMARY

Ownership Analysis
# of Holders
Shares
Total Shares Held:
102
39,025,010
New Positions:
10
373,832
Increased Positions:
47
6,081,460
Decreased Positions:
36
4,002,951
Holders With Activity:
83
10,084,411
Sold Out Positions:
12
2,028,117

TOP FIVE HOLDINGS

PRICE T ROWE ASSOCIATES INC /MD/ 6,074,311

FMR LLC 5,297,207

WELLINGTON MANAGEMENT CO LLP 4,022,724

CAPITAL WORLD INVESTORS 2,792,000

DEERFIELD MANAGEMENT CO /NY 2,686,064

This article is not an endorsement to purchase this stock. We currently hold no positions but may purchase at any time. Looking for an entry into this stock possibly immediately following earnings OR upon strength in trading. General market has been weak with the market down around 100 points yesterday and this may create a great buying opportunity.

1. Nance, P.W., et al., Efficacy and safety study of arbaclofen placarbil in patients with spasticity due to spinal cord injury. Spinal Cord, 2011. 49(9): p. 974-80.

2. Xenoport, I., JPMorgan Global Healthcare Conference. 2012.

3. Nielsen, J.B., C. Crone, and H. Hultborn, The spinal pathophysiology of spasticity–from a basic science point of view. Acta Physiol (Oxf), 2007. 189(2): p. 171-80.

4. Young, R.R., Spasticity: a review. Neurology, 1994. 44(11 Suppl 9): p. S12-20.

5. Rekand, T., Clinical assessment and management of spasticity: a review. Acta Neurol Scand Suppl, 2010(190): p. 62-6.

6. Hudgson, P. and D. Weightman, Baclofen in the treatment of spasticity. Br Med J, 1971. 4(5778): p. 15-7.

7. Simon, O. and A.P. Yelnik, Managing spasticity with drugs. Eur J Phys Rehabil Med, 2010. 46(3): p. 401-10.

8. Lal, R., et al., Arbaclofen placarbil, a novel R-baclofen prodrug: improved absorption, distribution, metabolism, and elimination properties compared with R-baclofen. J Pharmacol Exp Ther, 2009. 330(3): p. 911-21.

9. http://www.xenoport.com/default.asp, February 17, 2013.

10. http://www.nasdaq.com/symbol/xnpt/institutional-holdings, 2013 Feb 13.

Below is an article detailing the story of EntroMedics ($ETRM) by Scott Matusow (StockMatusow.com) posted with full permission. Original article can also be viewed HERE.

 

The Obesity Epidemic: EnteroMedics’ New Treatment Approach

In this write-up, I would like to talk about EnteroMedics (ETRM), which offers a new treatment approach that is currently in Phase III clinical, designed to help morbidly obese people lose weight. EnteroMedics’ approach might be a better solution for many people who see little or no benefit from current treatments on the market. If the device proves successful, the company might end up being a very good long-term investment.

The treatment device, currently in Phase III trials, acts similar to a pacemaker, but in this case for the vagal nerve. The system periodically inhibits the delivery of the message from the stomach to the brain which informs the brain, “I’m hungry.” Instead, it sends a message that no more food is needed, suppressing excess appetite. This fully eliminates the need for gastric bypass surgery, diet pills and weight loss shakes.

I asked my friend, Dr. Dung Trinh, Clinical Assistant Professor of Medicine, University of California-Irvine ((UCI)) to give us a summary of the current obesity problem we are facing in today’s world, and to go over the current treatments being offered in the market.

SM: Obesity seems to be a growing health and appearance issue these days. Can you please explain to us the current scope and magnitude of this problem for us?

Dr. Trinh: Obesity is a huge problem in the United States. Two thirds of Americans fit the definition of overweight or obese. Obesity is associated with a multitude of healthcare problems we see in the office on a daily basis – diabetes (1 in 3 adults in the US have prediabetes), heart disease, stroke, and cancer. Some blame obesity on genetics, the food industry, proximity of McDonald’s to elementary schools, large sizes of soda drinks in New York City, and the lack of adequate exercise.

If our out-of-control healthcare spending and rising insurance premiums are ever going to be manageable, we need to focus on prevention of disease (obesity) rather than putting out burning fires related to obesity (diabetes, heart disease, hypertension, etc). Our strategy needs to be focused on maintaining wellness rather than fighting Illness.

Our approach to fight obesity comes from multiple fronts. From a regulatory stand point, last year the FDA approved two weight loss medications. Politically, New York City banned soft drinks over a certain size (I’m not sure how that would circumvent someone from drinking multiple smaller sodas). Surgeons are shrinking stomach sizes with invasive gastric bypass, gastric banding, and other surgical techniques.

SM: Dr. Trinh, what are the current methods people can choose to help them with severe weight issues?

Dr. Trinh: In addition to caloric burning exercise, the most basic approach to weight loss is simply to cut caloric intake by eating less. Here is a quick review of our current weight loss approaches:

· The surgical approach to weight loss:

Treatments such as gastric bypass surgery, gastric banding, etc lead to a smaller stomach. Having a smaller stomach leads to the mental sensation of “being full” earlier with a smaller meal content. This sense of fullness (satiety) is driven by the vagal nerve that provides communication between the stomach and the brain. The vagal nerve is the information highway between the stomach and the brain. When the vagal nerve is “inhibited,” it tells the brain “hey I am full now, stop eating.” Having a smaller stomach through surgery means the stomach is distended by a smaller amount of food (less caloric intake), which in turns tells the vagal nerve to inform the brain that you are full. The downside of anatomically changing the stomach through surgery includes possible problems with digestion and malaborption as well as a possible need for repeat surgeries in the future.

· Prescription weight loss medications:

Two weight loss drugs were approved by the FDA last year; Qsymia by Vivus (VVUS) and Belviq by Arena (ARNA). Both medications have documented weight loss benefits as well as side effects. The approvals come after a 13 year dry spell of any new weight loss medications due to issues with safety with previous weight loss medications (i.e. “fen-phen”). Vivus patients on average lose 10% of their weight after a year of treatment while Arena’s patients lose 5% of their weight. Qsymia has potential risk of birth defects and has a fairly strict prescribing label. Arna’s Belviq appears safer than Qsymia but achieves only modest weight loss of 5% in clinical trials. Neither drug is meant to be taken “forever.”

There is also a company named Orexigen (OREX) that is currently testing an obesity drug in clinical trials called Contrave. Contrave is a combination of two medications already on the market for many years, bupropion SR and naltrexone SR. Bupropion is currently FDA approved for depression and naltrexone used primarily for the management of alcohol dependence. Bupropion’s side effect profile includes “weight loss” and naltrexone’s common potential side effects include non-specific GI complaints (nausea, abdominal cramping, etc). Apparently the documented side effect profiles of these two medications lead to the weight loss indication Orexigen is seeking approval for. Orexigen may have an advantage over both Qsymia and Belviq which were approved a few months ago. Both Qsymia and Belviq are currently tightly controlled by the FDA (requiring “special prescriptions”) whereas Contrave’s medications used are not as highly regulated, allowing easier access to prescribing and refills at local pharmacies.

· Weight loss programs:

Over the years many types of weight loss programs have come and gone. I’ve been exposed to many of the weight loss programs and diets out there through the experiences of my patients – Weight Watchers, Jenny Craig, Slim Fast shakes, Lendora, Adkins diet, Zone diet, South Beach diet, etc. The shakes and meal plans all have the same underlying goal: Reduce caloric intake with the attempt to “not feel hungry.” These diet plans again rely on the vagus nerve physiologic function by eating low caloric foods while expanding the stomach and inhibiting the vagus nerve (connects stomach to brain). This sends a message to the brain, “I’m no longer hungry, stop eating.”

SM: As I recall the other day, we spoke about the drawbacks of drug treatments. Can we cover that again for the readers out there?

Dr. Trinh: Sure, although most patients do lose weight during their active participation in these programs, from my experience the results are usually not long term. The problem I’ve witnessed is a lack of long term behavioral changes in exercise and good eating habits. When the diet plan ends, we tend to revert back to our original habits that caused weight gain in the first place. As a result, the pounds come back.

The age long belief that preventing obesity boils down to simple exercise and healthy diet remains true, but the facts point out that teaching diet and exercise alone have been ineffective. If it was effective, we would not see a continuous rise of obesity in our culture. This article would not exist. It’s obvious that something different needs to be done in order to reverse this trend.

Up to now there hasn’t been a very good option at tackling weight loss. Surgeries are invasive, diet pills have systemic side effects and not long term, and weight loss plans come and go without consistency.

SM: I know, when it comes to diet and exercise, I certainly need to do a better job myself! Arena, Vivus and Orexigen seem to offer some hope to people suffering from morbid obesity.

SM: Thank you Dr. Trinh for giving us some scope on the current Obesity problems we face today.

Dr. Trinh: My pleasure Scott.

Now, let’s take a further look at EnteroMedics and its flagship treatment and device, The Maestro System.

Unlike gastric bypass, the placement of this device is not done through invasive surgery, but rather laproscopically. The device attaches with two leads which innervates the vagal nerve. Despite how dangerous it may sound, no significant safety issues have been reported to date. The device also preserves normal digestive system anatomy and may be adjusted, deactivated, reactivated, or entirely removed at any given point in time.

The EMPOWER study:

The EMPOWER study was a randomized, double-blind, controlled study of 252 patients designed to test the safety and efficacy of the company’s first generation Maestro RF System. Both groups were implanted the Maestro Rechargable System but only the treatment group system was activated to inhibit the vagus nerve on an intermittent basis.

The Detailed Preliminary Results reported in November 2009 showed that the Maestro system did meet its safety endpoint but failed to meet the primary and secondary endpoints for efficacy. Such results significantly impacted the company as the stock saw significant losses to the downside.

 

  • Patients who met or exceeded the prescribed nine hours of daily device use (n=128, 51% of evaluated patients) averaged 10.9 hours of daily use and experienced an average excess weight loss ((EWL)) of 23.1% from implant by BMI method (18.3% from treatment initiation by Met Life method) in the treatment arm and 22.6% ((BMI)) from implant, (17.8% from initiation, Met Life) in the control arm at 12 months.
  • Patients who did not meet the prescribed nine hours of daily device use (n=125) averaged 6.9 hours of daily use and experienced a mean EWL of 10.5% from implant in the treatment arm (6.4% from initiation, Met Life) and 8.6% in the control arm (4.6% from initiation, Met Life) at 12 months.
  • For all patients (n=253), the average EWL at 12 months was 16.6% EWL from implant (12.1% from initiation, MetLife) for the treatment arm and 16.4% EWL from implant (12.0% from initiation, MetLife) for the control arm.
  • For those patients with a diagnosis of hypertension (n=110), a statistically significant reduction of systolic and diastolic blood pressure from baseline was observed, a result that will require follow-up study.

 

Also from the detailed review, the company stated;

Based on the analysis to date, the control arm of the trial, which was intended to be inactive, apparently provided a low-intensity blocking signal that introduced VBLOC Therapy in human subjects.

My interpretation of this statement is that the control arm somehow had VBLOC treatment as well which would explain the statistically indistinguishable results between both arms – both groups lost weight. President and CEO Mark Knudson stated, “The apparent control arm effect, while unexpected, may be a scientifically important addition to our understanding of neuromodulation.”

As I began to dig deeper into my due diligence, I found another PR dated November 8th, 2010, on the company’s website that seems to back up my interpretation of the company’s statements from the detailed November, 2009 report.

In the Australian cohort, a total of 83 subjects were enrolled at two centers, with 61 subjects implanted. Main outcome measures were morbidity, mortality and excess weight loss at 12 months. Results include:

 

  • Mean 12-month excess weight loss was 25% for the treatment group and 17% for the control group;
  • Weight loss was linearly related to hours of device use; subjects with greater than or equal to 9 hours/day use achieved 37% and 21% mean EWL (treated versus control, p = .02);
  • No therapy-related serious adverse events or deaths were reported across the entire study population.

 

Based on the data above, it appears my understanding of the company’s original suspicion was correct, the control arm of the EMPOWER study was receiving some form of treatment, when they should not have been.

The newly designed Recharge Study:

More often than not, drug companies, after realizing a failure in a late stage clinical study, meet with the FDA to determine the best path forward on how to re-design a study that is acceptable to the organization in order to gain eventual approval of a drug and/or a device. Also, more often than not, companies find success in a re-designed study.

In September 2009, Acadia Pharmaceuticals’ (ACAD) drug Pimavanserin failed to meet its endpoints in the treatment of PSP on its initial Phase III study.

Uli Hacksell, Ph.D., Chief Executive Officer of ACADIA remarked at the time:

“While we obviously are disappointed with the results of this Phase III study, we continue to believe in the potential of Pimavanserin based on our clinical experience to date. We will thoroughly analyze these data along with the data on other secondary and exploratory endpoints over the next month to better understand the outcome of this study. Meanwhile, we are continuing with the second Phase III PDP trial with Pimavanserin.”

After engaging in a thorough analysis of the failed first Phase III trial for Pimavanserin, the company obviously got it right the second time around. On November 27, 2012, ACADIA announced successful top-line results from its pivotal Phase III trial.

ACADIA shows here how a re-designed study can produce drastically different results from a former failed one.

In Pimavanserin’s 2009 failure, the placebo effect was high from patients in India/Europe who had higher healthcare standards than what is normal for the region. In the Re-designed study, only North American patients were part of the trial, to get more consistent and equal results.

After the newly found positive results for Pimavanserin, the stock has had an incredible rally, trading from a range of the mid-$1 range to where it currently trades today – $6.19 a share.

Study design matters, and more than most people might think. In this case, ACADIA management saw the issue and corrected it to give the trial a better shot at success.

EnteroMedics launched its newly designed Phase III ReCharge clinical trial in 2011. The trial consists of 234 patients that were randomized and placed in double-blind treatment control group. This time around, the study design was adapted to accommodate for the potential “low-dose treatment effect” of the control arm. Inclusion criteria included not only obese patients (BMI>40 or >35 with one or more co-morbid condition), but also patients with well controlled Type 2 diabetes, which is yet another possible benefit from the device in addition to treating morbid obesity.

The primary endpoint efficacy objective in the new trial is to observe a 10% greater excess weight loss with the treatment group compared to the control group based on the BMI method and to observe meaningful weight loss of 20% and 25% EWL at 12 months for the treatment arm (not statistically based).

Major near -term catalyst:

According to company press releases, conference calls and my correspondence with investor relations for the company, Phase III data from the Recharge study is due to be released around mid Q1, which would be mid to late February. Based on the new trial design and the apparent control group issue that caused the first failure, I expect positive data to be revealed this time around.

Key fundamental information for ETRM:

Shares Outstanding: 41.70M
Float: 26.90M
% Held by Insiders: 29.34%
% Held by Institutions: 56.20%
Shares Short (as of Dec 31, 2012): 1.53M
Short Ratio (as of Dec 31, 2012): 7.10
Short % of Float (as of Dec 31, 2012): 5.90%
Shares Short (prior month): 1.30M
Total Cash (mrq): 27.21M
Total Cash Per Share (mrq): 0.65
Market Cap (intraday): 112.59M
Operating Cash Flow (TTM): -22.41M

Source: Yahoo Finance

The stock has a very low number of shares outstanding, and even a smaller float with a low market cap. What I like about the share structure above is the healthy but not exaggerated number of shorts in the stock. Additionally, both insiders and institutions hold a significant amount of shares in the company. EnteroMedics has been burning about $5M a quarter which gives it over a year of cash to operate on. However, since the trial is now complete, I expect its Q1 cash burn to be somewhat less than last year’s Q1.

Considering the vast potential in the obesity space among its peers, it becomes evident that a market cap for EnteroMedics of $112M is grossly undervalued at this time, especially comparing this to Orexigen Therapeutics, which has a market cap of just over $470M.

In comparison, VBLOC has shown efficacy much greater than Orexigen’s Contrave, which has efficacy of 4.2% over placebo, while VBLOC has shown to be well into the double digits in efficacy (based on Australian cohort) with minimal side effects. If EnteroMedics shows the kind of success I believe it will from its current trial design, the stock should have no issues being valued equal to or greater than Orexigen, which would place it over $11 a share based on the 40M shares outstanding.

Conclusion:

I believe the company is correct in its assessment about the control arm receiving a low dose of the actual treatment and the current ReCharge study design should accommodate for this.

Positive results from the ReCharge study bring into play an obesity treatment option that does not require anatomically changing surgery, prescription medication weight loss pills, or diet plans that fail once the diet is over with. Additionally, the company has reported positive results in treating obesity related hypertension, and is studying the device for the treatment of diabetes related from obesity as well.

The obesity problem in the United States alone costs insurance companies billions of dollars annually, with a good deal of the money shelled out to cover a variety of obesity related diseases. If EnteroMedics’ VBLOC therapy proves to be successful, which we predict it will, this could be a huge game changer in treating morbid obesity, and potentially could save billions of dollars in expenses.

Insurance companies would gladly shell out the cost to cover an effective device that can treat a variety of life threatening diseases, and save them a ton of money in the process which is why EnteroMedics is definitely a company to watch in 2013.

Additional disclosure: Disclaimer: This article is intended for informational and entertainment use only, and should not be construed as professional investment advice. They are my opinions only. Trading stocks is risky — always be sure to know and understand your risk tolerance. You can incur substantial financial losses in any trade or investment. Always do your own due diligence before buying and selling any stock, and/or consult with a licensed financial adviser.

 Hey Everyone,

Let me know what you think of this article before I submit it. Looking forward to seeing it (hopefully) published.

Trade it well!

Athersys, Inc. (ATHX)

 

Athersys, Inc. (ATHX) is a small cap biotech stock that has the potential for blockbuster returns.  The company has a deep pipeline in multiple markets all that can potentially generate billions in sales.  Pfizer(PFE) is currently a partner for one of these markets.  Before I get into specifics regarding ATHX’s potential, I want to briefly discuss ATHX’s valuation, their capital burn rate, and why the current price is cheap for investors.

 

ATHX’s stock price decline in fourth quarter of 2012 was attributed to a fourth quarter stock offering.  Since then stock price has been steady and trading slightly above $1.  ATHX just now appears to be rebounding off this low.  At the current price, the company’s market cap is approximately $60M with $30M of that in cash.  The company burn rate is approximately $4M per quarter so the current cash position should be sufficient to last approximately 2 more years.  With a $60M market cap and $30M is in cash, ATHX’s pipeline is only valued at the remaining $30M which is extremely low for the following reasons.

 

First and foremost, ATHX has a $120M deal with Pfizer plus royalties.  At the end of 2009, the Pfizer(PFE) partnership for ulcerative colitis caused ATHX to run from $1 to $5.   Phase 2 data is forthcoming mid 2013.  One would expect a significant run up into this phase 2 data.  This phase 2 data is critical because, if positive, it will validate the science and significantly impact market potential.  Ulcerative colitis medication has the potential to generate billions since Irritable Bowel Disease (IBD) affects 2.4 million people in the U.S., Europe and Japan.  ATHX’s multi-stem platform is a type of regenerative medicine that can be used on a variety of platforms for therapeutic benefit.

 

Second, ATHX has a partnership with RTI Biologics, Inc.(RTIX) for a bone allograft system.  Since RTI will be using ATHX’s platform, RTI will be paying ATHX royalties.  As such, ATHX should begin having a revenue stream this year.  One would expect to hear news from ATHX about the progress of this partnership and revenue generation.

 

Third, ATHX has an ongoing phase 2 study for ischemic stroke via their multi-stem platform.  This is another billion dollar industry with 2M people suffering from stroke annually in the U.S., Europe and Japan.  One would expect the stock price to increase in anticipation of these results as well.

 

Fourth, ATHX has an interesting compound in their pipeline that is a 5HT2c receptor.  This receptor is key for assisting the brain in regulating appetite and food intake.  As such, this drug has potential to treat both obesity and diabetes.  The market places high valuation on weight loss drugs as we have seen VVUS, OREX and ARNA stock prices significantly increase.  What is unique about this compound is that it can treat patients as a single mode of therapy or in conjunction with recently approved therapies.  This could potentially create a lot of interest in ATHX by the aforesaid companies.  ATHX has publicly stated during a conference call they are looking to potentially partner this compound.

 

Fifth, ATHX was granted orphan drug status for Hematopoietic Stem Cell Transplant / GvHD in April 2012.  Phase 1 was completed in early 2012 for patients suffering from leukemia and other blood-borne cancers.  In the highest single dose group “no cases of severe GVHD were observed and there was only one moderate grade (grade 2) that resolved with treatment. ”  There is a huge unmet clinical need for this platform and results, to date, have been extremely favorable.  ATHX is presently working with a leading clinical center in Europe on this.

 

Sixth, ATHX was partnered with Angiotech Pharmaceuticals to co-develop multi-stem for acute myocardial infarction.  The phase 1 study was promising, however, Angiotech fell on hard times financially so ATHX recovered all rights.  The FDA has already approved their phase 2 study, however, ATHX is deciding whether to advance this study alone or partner.  One would suspect to get an update from the company relatively soon.

 

Lastly, if the aforesaid wasn’t enough, the multi-stem platform has the potential to treat other neurological disorders and injuries such as traumatic brain injuries, spinal cord injury and multiple sclerosis.  Other treatment platforms for multistem include congestive heart failure, peripheral vascular disease, peripheral artery disease, and critical limb ischemia.  Each of these markets are extremely large.

 

ATHX has a “Fact Sheet” and “Corporate Overview” regarding the above on their website.  I would highly recommend reviewing those to get a better understanding as to the significance of their platform.

 

ATHX has about 50M shares in the float.  If ATHX is able to enter into additional significant partnerships, their multi-stem platform is validated, they start generating revenues this year from their bone allograft partnership, or other anything else of significance happens, one would expect ATHX to have a market cap of at least $250M.  With around 50M shares outstanding that puts ATHX’s stock price of $5.  ATHX has the opportunity to further partner with Pfizer for their other platforms since that relationship already exists.  Furthermore, at the current valuation, ATHX could be a potential buyout target of Pfizer(PFE).  Since Pfizer has a $120M deal with ATHX, and ATHX’s pipeline is only valued at $30M, Pfizer could buy ATHX for $4 per share which equates to the $120M they will need to pay in royalties and own the entire company.

 

Clearly this is a small cap biotech with a lot of potential.  As with all small cap biotech stocks, there are always investment risks.  Please do your own due diligence before investing.

 

Disclosure:  LONG $ATHX

OPKO Health  (Ticker: OPK)

“The Next Big Biotech”

 

When it comes to investing in biotech stocks, it is extremely important to evaluate management, the pipeline, and the company’s ability to bring products to the marketplace.  While most biotech companies are lacking in at least one of those categories, OPKO ($OPK) excels in each.

 

Dr. Phillip Frost is a physician, gone entrepreneur.  In 1972, Dr. Frost and a partner bought Key Pharmaceuticals that was sold in 1986 for $600M.  Dr. Frost earned $100M from that transaction.  Dr. Frost served as Chairman of the Board of Directors and CEO of Ivax since 1987 and in January 2006 he sold the company to Israeli-based Teva Pharmaceuticals for $7.4 billion dollars.  In 2006, Dr. Frost became Chairman of Teva, and in 2010 he became Chairman of the Board and was recently re-elected to that position.  Dr. Frost became CEO and Chairman of OPKO upon the merger of three companies in 2007. Dr. Frost is a self-made billionaire on Forbes top 400 richest people.  Dr. Frost clearly has what it takes to make OPKO the next big biotech.

 

OPKO currently has a 1.3 billion dollar market cap with 298M shares outstanding of which there is a 132M float.  Dr. Frost currently owns 118M shares.  Moreover, Dr. Frost literally buys 50,000-200,000 shares almost every single day.  If you look at his purchases, he is literally buying the entire float.  OPKO has about 230M in assets and little debt.  Naysayers believe OPKO is overvalued given it only has 31M in annual revenues this year resulting in 31M shares shorted which is 23% of the float.  Given the amount of shares Dr. Frost continues to purchase in the open market, the short interest should be much higher than 23%. What the shorts do not realize is that OPKO is not the typical biotech company. Dr. Frost has made many strategic investments and like other biotech stocks that receive FDA approval, OPKO is about to turn the corner generating significant revenues in a variety of billion dollars markets.

 

What makes OPKO’s pipeline so valuable?  First, OPKO has a Diagnostics Point-of-Care System.  It is a diagnostic testing device that can be used in doctor’s offices, patient homes and emergency settings.  Testing has shown to be extremely accurate, they only take 10 minutes to get results, and it is significantly cheaper than sending to the laboratory.  The tests under development are:  Prostate-Specific Antigen (Total PSA) Test, 4KScore Prostate Cancer Test, Vitamin D test, Testosterone Test, Alzheimer’s Disease test.  Results of the early Alzheimer diagnostic test showed a diagnostic specificity of 100% as announced in July 2012.

 

OPKO’s diagnostic testing is extremely accurate based on IgG autoantibodies as disease specific-biomarkers.  This discovery platform is also potentially applicable for next generation testing for diabetes, cancer, multiple sclerosis, Parkinson’s and Alzheimer’s.   Other testing applications include fertility, menopause, D-dimer, BNP, CTnl, HIV, Hepatitis, Syphilis, folic acid and others.

 

In 2011, OPKO entered into a nonexclusive license agreement with Bristol Myers to further develop an Alzheimer’s disease diagnostic test.  The benefit of this test is that not only will it assist in early diagnosis, it can also be used to test the effectiveness for the treatment of Alzheimer’s patients.

 

Each of these diagnostic tests represent billion dollar market opportunities.  Imagine going to your doctor’s office where they have the ability to obtain your test results within 10 minutes without having to outsource to laboratories.  Furthermore, the tests being performed are next generation tests that improve accuracy.  According to OPKO’s website, approximately 700,000 prostate biopsies can be avoided per year with their biomarker test.

 

In August 2012, OPKO was awarded a NASA contract for their diagnostic device.  On October 1, 2012 OPKO launched 4Score in Europe and it is estimated to generate 1.8 billion annually.  This next generation test is 99.4% accurate.

 

In June 2012, OPKO entered into a definitive agreement to acquire a 45% stake in a private Israeli company (also where Teva is based). This company has third generation hepatitis B vaccines.  We all know the value of hepatitis vaccines as evidenced by Bristol-Myers acquisition of Inhibitex (INHX) in January 2012 for 2.5 billion.

 

OPKO is also developing small molecule and biological therapeutics to treat asthma and COPD, Parkinsons, CINV & PONV, and protein up-regulation for various diseases including cancer, heart disease, metabolic disorders, neurologic disorders, and genetic disorders.  OPKO is also developing protein vaccines for influenza.

 

OPKO also acquired a variety of companies, some of which are profitable and puts OPKO at the forefront in emerging markets.  OPKO Finetech was derived from a profitable company that has proprietary peptides and small molecule therapeutics. OPKO Mexico is researching cervical cancer vaccines, uterine cancer vaccines, human influenza vaccines, west nile virus vaccines, commercial APIs and other research.
OPKO Chile  is a profitable company that imports, commercializes, and distributes over 100 medical products in Chile including ophthalmology, diabetes, gynecology, and hypertension.  They are also developing a line of pharmaceutical bioequivalents. 
OPKO EU is engaged in the development, manufacturing, marketing and sale of phamaceutical products, nutraceutical and veterinary products in Europe.
 OPKO Curna is developing unique therapeutic modality focusing on targeted up-regulation.

 

OPKO has also made a variety of strategic investments and partnerships, in addition to protecting many patents.  OPKO owns rights to leading preclinical candidate SR-3306 and related molecule compounds that could be the first drug to protect the brain from Parkinson’s, MS, ALS and AD.  OPKO acquired rights from a Taiwan company for vaccines against influenza and other viral infections.
OPKO owns global rights to heparin-derived oligosaccharide for asthma and COPD.

 

What is also interesting is that both OPKO and Teva invested in Cocrystal Discovery, a privately held biopharmaceutical company focused on the discovery and development of novel small molecule antiviral therapeutics tailored for the treatment of serious and chronic viral diseases. It is currently developing oral, small molecule, antiviral therapeutics for Hepatitis C and influenza. OPKO has a strategic investment in Fabrus, a privately held company with next generation therapeutic antibody drug discovery.  OPKO is aligned with Neovasc that is another private company developing and marketing various treatments for refractory angina and cardiac reconstruction.  OPKO is strategically invested in Biozone whereas OPKO now holds a world-wide license for the development and commercialization of ophthalmology and other therapeutic fields.  OPKO is also aligned with Teraro, Sorrento Therapeutics and ChromaDex Corporation for other products.

 

In 2010 OPKO out-licensed Rolapitant for the treatment of nausea and vomiting due to cancer treatment.  Over 1000 patients have been evaluated in phases 1 & 2, with great results, and phase 3 results are expected in 2013.  OPKO would be entitled to payments up to $121M and double digit tiered royalties.

 

To give you a general idea as to valuation for only 2 of the above items, world wide testing for next generation prostate markers is a 2 billion market.  European approval of the Vitamin D test is expected in 2012 with US approval expected shorter thereafter. 100M tests per year equates to a 5 billion market.  The aforesaid estimates were taken from the companies website.  Amazingly, this is only the tip of the iceberg.

 

For more detail regarding all of the above go to:  investor.opko.com/index.cfm and click on investor presentation.

 

With Dr. Frost at the helm of OPKO and currently sitting as the Chairman of the Board of Directors at Teva, OPKO’s management is second to none.  Dr. Frost has a proven track record of building successful businesses and selling them.  The fact that he is literally buying the OPKO float, to me, is a sign that he believes his company is going to be a huge success.  With the vastness of the pipeline, new products now coming to the market, Dr. Frost literally buying the float, and a large short position, OPKO could also become one of the biggest short squeezes ever seen.  As with any other company, there is always the speculation that Dr. Frost would sell OPKO, perhaps again to Teva where he is chairman of the board.  While Dr. Frost is clearly an elite businessman and entrepreneur, at his current age of 75, one can assume he will be retiring soon. Perhaps it is a coincidence that OPKO acquired an Israeli company and Teva is an Israeli company.  Maybe OPKO and Teva talk regularly as evidenced by the fact that both companies invested in Cocrystal Discovery.  No matter what thought or speculation one has on OPKO, it clearly has the potential to be the next big biotech.

Disclosure:  This article represents my own opinion.  I have not received any compensation from the company.  I may initiate a position in OPK within the next 72 hours. Everyone should do their own due diligence before investing.

By Brett Sifling

Alexza Pharmaceuticals (ALXA) first caught my eye in April as a run up play into their May PDUFA. This play was solid for some momentum into the catalyst and quick profits were grabbed. Unfortunately for those who held too long, a CRL was issued one day early for “manufacturing issues.” This was their second CRL as the price dropped to about $0.375 ($3.75 adjusted for the reverse-split).

After a continued bleed to a low of $2.55, it seemed to be getting just too good to be true for a cheap entry. To help you understand why I believe ALXA will be one of the highest percentage gainers in 2012, I put together a timeline on its history so you can get a better understanding for the company and its situation, but first, here is a little about Alexza Pharmaceuticals:

Alexza Pharmaceuticals, Inc., a pharmaceutical company, engages in the research, development, and commercialization of novel proprietary products for the acute treatment of central nervous system conditions worldwide. Its product candidates are based on a proprietary technology, the Staccato system, which vaporizes an excipient-free drug to form a condensation aerosol that, when inhaled, allows for rapid systemic drug delivery. The company’s lead product candidate includes ADASUVE (Staccato loxapine) for the acute treatment of agitation in adults with schizophrenia or bipolar disorder. Its other product candidates under development comprise AZ-007 (Staccato zaleplon), which has completed Phase I clinical trials for the treatment of insomnia; and Staccato nicotine that is in pre-Phase 1 clinical trials to help smokers quit by addressing both the chemical and behavioral components of nicotine addiction by delivering nicotine replacement through inhalation. [Source: Yahoo Finance]

 

 Now that you know a little about the company, here is their a history of important events:

Timeline:

 

As stated above, ALXA’s new PDUFA date is 12/21/12 and I am excited to play this one for a second time because:

  1. Cash: With the $20 Mil ATM agreement with Azimuth, the company should have enough cash to avoid a financing until after the PDUFA, which as you saw with Exelixis Inc. (EXEL), can be devastating. As of 12/31/11 they had working capital of $27.5 vs $34.9.
  2. Market Cap: Company has a current $48.4 Mil market cap. This leaves huge upside potential as the market cap could nearly double and only be back to where it was before the second CRL. At the current price of $4.05, the company has a $52.9 Mil market cap. At the run up peak for the May PDUFA, the market cap hit $90.1 Mil at $0.76 ($7.60 adjusted).
  3. Low-Float: The company did a 10:1 reverse-split effective 6/13/12 which greatly reduced the amount of shares in the float to 11 Mil of which 27.47% are institutionally owned, which leaves even less for retail traders. Since it has a lower float, it takes less buying power to move the stock higher, and can jump to significant gains much easier than others. Horizon Pharma Inc. (HZNP) is a great example of the last great low-float run up.
  4. Short Interest: Company has a fairly large short interest at 14.62%. Once this starts to run, short-sellers will run to the exits, causing more forward momentum.
  5. High Odds of Approval: According to the company’s CEO, “in this CRL, there were no new clinical or safety issues identified, and there were no other identified deficiencies.” This means nothing was wrong with the drug from a clinical standpoint, only light manufacturing issues, which leads to high odds of approval.
  6. Seeking European Approval: Not only does the company have the U.S. PDUFA on 12/21/12, but EU approval in December also. This second catalyst brings extra attention to the run up.
  7. Institutional/Insider Holdings: Before the last PDUFA run, insiders bought stock in the open market, and I would not be surprised to see a few insiders buy again. Approximately 45 institutions hold the company’s common stock, 26% of shares are held by insiders or 5% holders, and 37% of shares in the float are held by institutions or mutual funds.

 

Overall

Alexza Pharmaceuticals is poised for a great run up into two catalysts in December 2012. Given the details above, I give it high chances to become a huge percentage runner just as we recently saw with a similar low-float set up, Horizon Pharmaceuticals Inc. (HZNP).

Disclosure: I am long ALXA and EXEL. I wrote this article myself, it expresses my own opinions, and I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

The $SPY pushed to new 52 week highs on Friday and the Bio market continued along with it. We are continuing to see great set ups and taking advantage of the situations on a daily basis, although things are about to change.

Unfortunately, this is my last week of full-time trading. That means that I will be switching from active day-trading to more swing trades into catalysts (run up plays). I will be completely mobile from school, so forgive me for any lag time between my entries/exits, and my tweets. I will try to keep up as best I can, but the truth is that it is much harder to trade via iPhone from class than it is from my dual monitor set up at home. I will be cutting out a lot of higher risk plays and stick to about 5 main core positions. Incase you were wondering, I have done this before with the same consistent performance, so don’t worry :)

Now here is this weeks watch list!

$ACAD (Acadia Pharmaceuticals Inc.)

As we inch closer and closer to the end of the month, we should hear from Acadia about their Phase III trial enrollment of Pimavanserin in patients with Parkinsons disease. I believe that they will get a pop on the PR release, and then the run will begin as traders rush in for the run up into the data presented three months later. The trick is to be in these plays before the sheep, not after them. $2.50 is my price target. 

$ALXA (Alexza Pharmaceuticals Inc.)

I could literally sit here and write an essay on why I think $ALXA will be one of the best percentage gainers in 2012, and I will.. soon. For now, all you need to know is that their PDUFA is 12/21/12 and it is a cheap low float catalyst play. There will be an in-depth article soon so be on the look out!

$EXEL (Exelixis Inc.)

This is another catalyst run up play that should be huge. It has been in consolidation mode for the last week or so, and should be sparking up very soon to run into the 11/29/12 PDUFA. This could easily get to $6.00+ on the run up. 

$HZNP (Horizon Pharmaceuticals Inc.)

Last week $HZNP filed a $75 Million ATM agreement, AND as part of the February $60MM senior secured loan, they issued warrants of approximately 3,277,191 shares exercisable on 8/22/12. This means even MORE selling pressure added onto the stock on its already horrible fundamentals. If anyone tries to say this is oversold and should bounce, it is off of pure technical reasons. However, I still believe this will be sub $3.00 by November. I am still holding onto 35 Sept $5.00 puts, and may add November puts. This has been an epic run down so far, and will continue to go down even farther. 

Week after week the plays keep lining up and Bio’s are THE sector to be in. There is SO much money to be made every day, you just have to stay discipline and trust yourself.

Remember to review BioStocks.com on Investimonials so I can get some quality feedback.

Reminder: If you want the weekly watch list, or other articles, emailed to you when released, make sure you enter your email in the right column under ‘Subscribe To My Articles Via Email For FREE.’

Now, here are the hot set ups for this week:

$DCTH (Delcath Systems Inc.)

Delcath started its run on Friday as word spread about the NDA that is to be filed in mid-August for their Chemosat system. Our calls were up nearly 100% and I sold half of them to lock in gains (probably too soon) so it is now a ‘free’ trade. I will continue to hold the last half until we get a pop on the NDA news. So far, we are moving along perfectly. 

$VRML (Vermillion Inc.)

On Friday, just minutes before the close, I picked up 1k at $1,96 for a momentum play. It started to heat up like usual and the mono guys started initiating positions as it had a ‘Positive MACD Cross.’ The last time this technical event occurred it ran over 50%. It has earnings on Tuesday so this will most likely be a quick play because I do not want to hold through the earnings. I will be most likely stopping out if we break the recent lows of $1.85 which is only risking -0.11 for a reward of +0.50. That’s what it’s all about, great risk/reward trading. Watch for a nice run, then flip your position to the short side. $VRML has a very long history of popping, and then dropping, and we have been very successful trading it. Stick to stops, and be patient. 

$HZNP (Horizon Pharma Inc.)

Yes, I STILL own my $HZNP put options, and have been trading in/out of them for nice gains. I also picked up a few August $5.00 calls for a cheap hedge incase they throw us a curveball and news comes out. I love the manipulated pops at the market open only to be me by HUGE sell orders. It gives a great chance for the unexperienced to panic, and dump their puts, which presents a great opportunity to grab some more. I will continue to add to my puts on spikes, and take profits along the way. The CC went just as expected (horribly) and gave no new hope for the company. Now, with  dilution near certain, its only a matter of time before this heads even lower. We are up nearly $5,000 (+100% on every position) so far from NAILING this run down. Video lesson will be released when the dust settles. 

$EXEL (Exelixis Inc.)

Trying to play this company is like trying to catch a falling knife. They finally priced the offering, and it has seemed to have bottom out. I’m long 1k shares now and 10 September $4.00 calls. Watch for a nice run into the $6-$7.00 range for a classic PDUFA play. I will keep you updated in the weeks to come. 

$IRWD (Ironwood Pharmaceuticals Inc.)

This is another low float PDUFA run up play. It still seems very weak, and is hanging around the lows. I might take a position if it gets any cheaper for the run up into the September PDUFA for irritable bowel syndrome. Cut your loss if it continues to downtrend and becomes a broken chart. 

$ACAD (Acadia Pharmaceuticals Inc.)

Acadia is due to complete their Phase III trial enrollment of Pimavanserin in patients with Parkinsons disease towards the end of August. Once the enrollment is complete, we will hear the results three months later which puts us around November/December area. The chart is looking very good, and interest has spike again since Jason Napodano released a great article explaining the company and it’s situation. I might look to add more shares this week in anticipation of a huge run. 

The plays just keep popping up! I’m loving this market. After we nailed $PGNX, $HZNP, $NAVB, and $CRTX last week, this week should be just as great, if not better!

Chat is on FIRE lately. There is not one person who has joined who has not profited since. No matter what your experience level is, you should be in there participating, or learning from other great traders. Email your Gmail address to Brett@BioStocks.com to get in, BUT REMEMBER that not everyone can join. I like to keep the group to less than 15 people and those who email first will be added. If not, I will add as people drop out. I would like to eventually get a chat room on the site that can support everyone, but for now this is how it has to work. I am just saving up the donation money to implement it because I don’t like paying out of my own pocket to upgrade these things. It’s getting expensive.

If you didn’t catch the great news in the last article I suggest you take a look. BioStocks.com has now been accepted for reviews at Investimonials.com, and already has 4 reviews. I strongly suggest you write a review so I can get some feed back! I already have one basher on there that straight LIED in his review (you can see my rebuttal in the comments below his review), so we need some honest and truthful feedback.

Now here are FIVE hot stocks!

$CYTK (Cytokinetics Inc.)

After a small dip to the 0.64 range last week, I bought 5,000 shares in the low 0.64′s. Sheff bought in at 0.70 which means he is underwater, and will most likely try to pump it up a little which always helps. However, $CYTK shouldn’t need the help with no debt, high institutional interest, and a key catalysts in Q4. This should be a nice runner and here is my DD on the company’s catalyst:

CYTK – what to expect 2H of 2012:

Skeletal Muscle Contractility
tirasemtiv (formerly known as CK-2017357)

In 2012, Cytokinetics anticipates additional interactions with regulatory authorities to discuss the development of tirasemtiv as a potential treatment for patients with ALS, including potential registration strategies.
CK-2127107.
Also, in the second half of 2012, Cytokinetics anticipates that data will be available from its ongoing Phase IIa Evidence of Effect clinical trial of tirasemtiv in patients with generalized myasthenia gravis (CY 4023).
Lastly, in the second half of 2012, Cytokinetics expects to collaborate with Amgen in the finalization of a protocol for a Phase II clinical trial of oral formulations of omecamtiv mecarbil in patients with heart failure. In addition, the companies anticipate making other preparations for the potential initiation of this Phase II clinical trial.
In the fourth quarter of 2012, Cytokinetics anticipates a decision regarding the potential progression to the third cohort of the ATOMIC-AHF clinical trial, following a review of data from the second cohort by an independent data monitoring committee.
In the fourth quarter of 2012, Cytokinetics plans to initiate CY 4026, a Phase IIb, multi-national, double-blind, randomized, placebo-controlled trial designed to evaluate the safety, tolerability and efficacy of tirasemtiv in patients with ALS.
By the end of 2012, Cytokinetics anticipates filing an IND for CK-2127107.
Cardiac Muscle Contractility.

$OPK (Opko Health Inc.)

I love insider buying and no other company has more consistent insider buys than Opko’s CEO Robert Frost. He has bought 5.6 MILLION shares year to date. $OPK has 31 million shares shorted and just recently predictably bounced off of the $4.00 support line. I bought calls last Friday, in anticipation of this squeezing shorts if it gets a little momentum. They have a technology for blood testing where the results are done in 10 minutes unlike hours and days with current technology, which could be huge. This could be a longer term play, but it should pay off big in the weeks, or months, to come. 

$ECYT (Endocyte Inc.)

Last Friday, $ECYT released good earnings along with positive data for their drug. This pushed the PPS over the recent double top high in the $8.60 range and formed a breakout on the daily chart while closing at the high for the day. Depending on Monday’s strength I will add because this thing could easily rip to $9.00+. If not, I will stop out around $8.45 area.

$HZNP (Horizon Pharma Inc.) 

We absolutely have nailed this so far guys. Congrats if you took the trade because you should be seeing 100%+ gains! Watch for continued weakness and possibly dilution into the August 10th CC. In my opinion, it is currently being propped up above $5.00 until the financing is complete to dilute in the low to mid $4.00′s. I will continue to take profits along the way and will hold some through the CC. Do NOT forget to take profits off the table!

$CRTX (Cornerstone Therapeutics Inc.)

I would give you my thoughts on this great low-float run up play, but Scott Matusow pretty much nailed my thoughts word for word in his AMAZING Seeking Alpha article. Here is why this will be a great run up:

“Cornerstone is a specialty pharmaceutical company focused on commercializing products for the hospital, niche respiratory, and related specialty markets.

On March 13th the company announced that the FDA accepted a New Drug Application (NDA) for CRTX 080, indicated for the treatment of hyponatremia. The FDA has assigned a PDUFA date of October 29, 2012, with an advisory committee meeting scheduled for September 13th which will decide whether or not to recommend the drug for approval.

Hyponatremia affects up to six million people in the U.S. with direct medical costs estimated to range between $1.6 and $3.6 billion annually. CRTX 080 is a highly potent, non-peptide, oral capsule that works by reducing the action of a hormone (vasopressin) that blocks fluid excretion. CRTX 080 acts specifically on the vasopressin-2 receptor in the kidneys, causing water to be excreted while sparing sodium without affecting other electrolytes.

CRTX 080 was one of the assets that Cornerstone gained with the acquisition of EKR Therapeutics earlier this year. According to their Q1 conference call, Cornerstone feels great about their meetings with the FDA and thinks CRTX 080 will be launched in early 2013. Along with this advanced pipeline drug, Cornerstone also received Cardene as part of the deal. This drug is already FDA approved and indicated for the short-term treatment of hypertension when oral therapy is not feasible or desirable. Prior to the acquisition, Cardene made up a large portion of the $58 million in net revenue that EKR Therapeutics attained in 2011.” -Scott Matusow

With TWO great catalyst and a low float, this thing has been compared to be the next $HZNP which made us 100%+ gains. Pyramid your entries and don’t be afraid to take profits!