Important Nature Medicine Publications
I received this today. It clarifies yesterday's new article. It is from Pacific Growth Equities - they arranged for the recent private placement.
Summary and Investment Recommendation
Important Nature Medicine Publications
Urine and Blood HIV-1 Tests Virtually Equivalent
Several articles have been published in the November 1997 issue of the journal Nature Medicine, and they are likely to be widely reported. These articles have direct relevance to Calypte.
The studies show that serum-based HIV-1 tests (antibody screening test and Western blot confirmed), in a large scale clinical trial, resulted in 99.15% sensitivity. In the same clinical trial, urine-based HIV-1 tests (antibody and Western blot confirmed) resulted in 98.73% sensitivity. The tests are thus virtually equivalent in terms of sensitivity; however, combining both the urine and blood tests would have resulted in 100% sensitivity.
Compartmentalized Response to HIV-1
These studies strongly suggest that a compartmentalized response to HIV-1 occurs in some patients. That is, some patients have a humoral (antibody) response first and other patients have a cell mediated response. In patients where a cell mediated and an antibody response occurs, it appears that these have a significant resistance to infection, which may have implications for new methods of treatment.
Combination Testing
This also confirms that some patients should have antibodies appear in urine tests (and not in blood tests), while other patients may show antibodies in a blood test (and not in urine tests). Thus, a combination of the two specimens, both blood and urine, would improve overall sensitivity. The key findings from these studies are
1) a compartmentalized response
2) discordance in blood and urine tests, meaning that each detects some positive samples that the other misses (with virtually no overlap), and
3) highly sensitive results, that are virtually equivalent, from both tests.
All of this suggests that a combination of urine and blood testing should be used for 100% sensitivity. So, for areas that require a zero tolerance, i.e. the blood supply, for HIV-1, combination testing would be a significant improvement. We believe that these findings will result in additional clinical studies, and that the basis for urine based testing (or combined testing) will be established.
The potential implication is that blood donors may ultimately have to be screened with urine HIV tests. The FDA has required the blood supply to be screened for HIV subtype O, with only 2 confirmed cases having been known to be missed with existing blood tests. With these studies, strong evidence exists that combination testing would be more accurate. Currently, in the U.S. there are 45-50 million blood bank screening tests performed annually.
Reiterating Strong Buy
Calypte received its FDA "Review Complete" letter regarding the urine-based HIV confirmatory test in September, and the test is approvable, or cleared, pending sign-off on the labeling and package insert. The Company, subject to the finalization of labeling changes, will offer the first and only urine-based HIV testing systems (screening and confirmatory test).
The Company just completed a private placement of equity, with gross proceeds of $11 million. This financing is expected to fund the Company through profitability.
Our model assumes revenues from the availability of the complete test kit (screening and confirmatory tests) to begin in Q4:97 now that the FDA review is complete. Once the complete test kit is available, a rapid sales ramp is expected to ensue.
The life insurance testing market, along with clinic and physician testing, is expected to bring the Company to profitability in early 1999.
Urine based HIV OTC testing, with its non-invasive format as compared to blood, is expected to follow in the year 2000. Additionally, the potential of blood donor screening with a urine test will become clearer in 1998.
We have not included any revenue in our model from potential blood donor screening. The Company's urine based HIV test is likely to become the basis on which to build a broad based diagnostic testing business.
We continue to rate the Company's stock a Strong Buy with a 6-12 month target price of $9-10, or 35x 1999 fully taxed EPS estimate of $0.26. Our 18-24 month target price is $18-20, or 35x 2000 fully taxed EPS estimate of $0.53. The company's NOLs extend through the year 2000. |
