Hi Padco -
"Vancouver is experiencing snow right now, and nothing functions out here..."
Yup, almost a foot of snow. People have been asking about something called "snow tires", often, from the bottom of a ditch.
Snow in LaLaLand...>g<
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We get a newsletter called CEOCast, which devoted a biggish section to biotech/pharma this month. In this month's text was a paragraph that was somewhat surprising, especially re: WF10. It's bolded below... it raises some questions, if true.
Am I reading this correctly? And if correct, then wouldn't WF10 have been a logical contender for such treatment?
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Oncolytics Biotech (NASDAQ: ONCY), a beaten-down biotech stock, announced this week that it will initiate a Phase I/II clinical trial investigating the use of its lead compound REOLYSIN® to treat patients with recurrent malignant glioma, the most aggressive form of brain cancer. We believe that this company is highly undervalued, and that investors are still reacting to the termination of the collaboration with Pfizer in the animal health area. We will say it again: the future of this company has always been in treating human cancers, and that the decline in its current share price to $2.25 is a reflection on recent events that are not core to its business.
SurgiCare (AMX: SRG), an ambulatory-surgical company, recently announced the continuation of its expansion activities, as it will develop a G.I. center in Houston. The stock, which had increased to $2.40, has recently pulled back to $2.15 because of problems that another surgery center operator has experienced. However, these problems are unique to Dynacq (NASDAQ: DYII), a company that is in many ways comparable to SurgiCare…with one exception. It still trades at a valuation that is six times that of SurgiCare’s! SurgiCare has been profitable every quarter that it has been public, and we expect it to report solid fourth-quarter results soon.
We suggested last week that investors pay careful attention to regulatory filings. Buried in CT Holdings’ (OTCBB: CITN) disclosure filing is a relationship with SBC Communications, a telecommunications giant. We received an e-mail this week on a promotion that SBC is doing for CT Holdings’ Citadel security product. We believe that this is highly significant for a small company that trades for just $0.40, as the revenue potential that could be generated from this partnership is enormous. SBC has millions of subscribers, and if even a small number of those that receive the promotion purchase this security product, it could substantially increase the company’s revenues. Many large companies such as SBC do not want their name released, so investors may only see the impact of this promotion when CITN’s results are announced. Those that invest ahead of this are likely to be rewarded.
SPECIAL SITUATIONS
HEMISPHERx BIOPHARMA, Inc. (AMX: HEB) $3.92
As each passing week goes by and another one-compound biotech/pharmaceutical company receives disappointing clinical results, we realize that it is more important than ever before that investors select companies that have multiple late-stage clinical opportunities. This gives investors several opportunities for the company to commercialize its technology, and mitigates downside risk from adverse clinical findings. Admittedly, the biotech sector contains risks, but if investors select companies with technology that has multiple applications, it is likely to lead to a much sounder investment opportunity. Thus, we have tried to find companies with modest valuations, good cash positions so that they don’t have to raise capital at a time when it is dilutive, and multiple late-stage clinical programs.
HEMISPHERx BIOPHARMA is a pharmaceutical company engaged in the manufacture and global clinical development of new drug entities in the nucleic acid (NA) class for chronic viral diseases and disorders of the immune system. Its lead product Ampligen® and its sister compound Polyadnor have applications in three potentially blockbuster areas—HIV, Chronic Fatigue Syndrome (CFS) and Hepatitus-B. More significantly, the company has late stage clinical trials ongoing in each area. The company’s technology is designed to re-stimulate the body’s natural anti-viral defense system. It has been granted Orphan Drug Status for CFS and Hep-B.
It is currently in a pivotal Phase III trial for CFS, a disease that has no known treatment and affects approximately 1.5 million people in North America, Europe and Asia. Management estimates that if the drug is approved that it could generate approximately $15,000 in revenues per patient per year, with margins of approximately 50%. Thus, if the company were to penetrate just 5% of the U.S. market, it would result in profits from the drug of about $562 million per year. The company has already been authorized by the FDA to conduct these trials, and patient enrollment is more than 90% complete. A recent report published by a governmental agency studying CFS indicated that Ampligen® yielded the most promising results. Based upon a customary 40-week clinical cycle and a realistic FDA approval period, the company could launch this product by late-2003.
The company’s second major opportunity is in Hep-B, where it has a Phase II/III trial ongoing. This is another enormous opportunity, as there are potentially 450,000 people affected in both North America and Europe. The number in the Pacific Rim is estimated at almost 60 million. We forecast that if the company ultimately receives FDA approval that it could be in the market in 2004. Another opportunity is in the treatment of HIV, and the company again has a Phase II study ongoing. Because of the high death rate, commercialization of AIDS drugs has often occurred on the basis of successful Phase II studies; Phase III studies have even been conducted after marketing efforts have commenced. The company also recently filed another patent addressing the growing challenges presented by multi-drug resistant HIV/AIDS.
The stock has traded in a relatively narrow range during the past year, and currently trades at a key technical support level. It has a market capitalization of approximately $170 million on a fully-diluted basis. This is an extremely modest valuation, especially for a company that has completed or has six Phase II trials ongoing. It is even more undervalued when compared to companies in the sector such as Trimeris (NASDAQ: TRMS), which also has a product in Phase III trials, but only one other product in Phase I/II. Trimeris has a valuation of approximately $650 million or almost FOUR times greater than HEMISPHERx’s. Trimeris’ technology seeks to treat HIV, much as HEMISPHERx’s does. We believe that given HEMISPHERX’s broad late-stage product portfolio and low valuation relative to both the stock’s trading range (it was $7 in July) and peer companies, that it presents a highly attractive entry point for investors both technically and fundamentally. |
