Although the broad markets were trending lower to start the new trading week as European economic data continued to look weak, there were - as always - some exciting and encouraging stories making headlines in the markets that are worth investor interest.
While the current market dip has been modest thus far and has not caused any widespread panic that would lead to a mass exodus of investors, any decline usually offers investors the opportunity to 'average down' on their investments and pick up a few shares of companies that they are following for sometimes 'discounted' prices.
The healthcare sector in particular - given its speculative nature - is prone to more dramatic moves than most others and that volatility creates an environment that traders love. With that said, the 'buy and hold' crowd could also do quite well, if they've got the stomach to ride out the volatility and wait for the potential to play out.
With those thoughts in mind, here's a few still-developing companies that are attracting their share of interest in the healthcare sector worth keeping an eye on...
NeoStem, Inc. (NBS): Upated - - NeoStem reported during the early hours on Wednesday that the company has received approval from a data monitoring committee to move forward with its Phase II PreSERVE trial. Such an approval is a nice sign of validation for a company that its product or treatment is safe and effective enough to justify trial continuation. - - read further for more.
Overall, it's been a relatively good year for companies in the stem cell sector. Many, like NeoStem, are looking to position themselves to play a key role in what is arguably being considered as the future of medicine. With a solid portfolio of intellectual property, a strong pipeline of clinical and pre-clinical treatments, and with encouraging progress noted thus far in development, NeoStem is boasts the potential to become a major 'next-generation' type of player in treatment using cell therapies.
Just a few months ago shares of NeoStem were trading for below forty cents before flying to north of eighty again as investors continued to be attracted by the company's growing potential in the field of regenerative medicine. Shares also received a boost as the company decided to divest its majority stake in a subsidiary, Erye, in order the strengthen its balance sheet. Through the noted divestiture, as outlined in the company's quarterly report:
"NeoStem expects to receive $12.3 million in cash and further bolster its balance sheet by removing $35 million in short- and long-term debt obligations through the divestiture of Erye. Fifty percent of the cash price has now been received directly or is in escrow and closing is expected to occur over the next 6-10 weeks."
Additionally, the company has raised $17.6 million year to date through warrant exercises and equity sales. Those are significant sums of money for a still-developing company and strengthen the company's ability to bring its technology through the developmental stages and ultimately to market.
NeoStem's most advanced therapy candidate, AMR-001, is most likely to first benefit from the cash influx. AMR-001 is designed to prevent major cardiac events following acute myocardial infarction (AMI) - or better known to us as a heart attack. Phase I trials were successfully completed for this indication, as outlined in a recent company presentation, and the first patient has already enrolled in the ongoing PreSERVE Phase II trial.
According to estimated numbers by NeoStem - numbers also cited by the American Heart Association - Of the roughly 800,000 annual AMI patients, about 20% are considered ST segment elevation myocardial infarction (STEMI), a condition that places patients at risk to experience conditions of progressively deteriorating heart function. It is that 20% of patients who will be systematically targeted for treatment via the PreSERVE trial. The market targeted by AMR-001 for its intended market - the company is also developing the therapy to treat congestive heart failure - stands in the billions.
Results from the PreSERVE trial are expected to start rolling in during the latter half of 2013, at which time the NBS share price could appreciate quite significantly, if results are positive.
Additionally, NeoStem completed in early 2011 the acquisition of Progenitor Cell Therapy a large-scale contract manufacturing facility that has the potential to bring in additional revenue for the company in order to fund its pipeline candidates. Revenue generated by this division has already led to a growth rate of 95% during the past two reporting quarters, according to numbers presented the latest quarterly report.
With a market cap of under $100 million at the current time - as the pipeline in still in the relatively earlier stages of development - NBS may be a nice one to accumulate and keep an eye on in a rapidly-expanding sector. Advanced Cell Technology (ACTC), another company developing cell therapies, has recently traded with a cap nearly triple that of NeoStem's while its pipeline is also in the earlier stages of development.
When the day comes that stem cell therapies are proven to work, investors will have wished they had gotten in on the ground floor - and that's where companies such as ACTC and NBS might be right now, posing a unique opportunity for those willing to hold with eye towards the future.
Keep in mind, however, that the sector is risky and volatile and each investor must conduct his or her own DD and invest accordingly.
Pharmacyclics (PCYC): When discussing potential 'buy and hold' stories, it's hard to ignore the mother of all recent 'buy and hold' successes. Just a few years ago - well, four to be exact - shares of Pharmacyclics were trading for a dollar following the failure of its late-stage drug candidate, Xcytrin. Shares quickly rebounded, however, to over two bucks, then three, then fell again to below two. At the time, investors such as myself considered that volatility as heavenly trading territory and were happy with the profits provided by the share price fluctuations.
Shares of PCYC closed Tuesday at just under sixty dollars.
It's never smart to dwell on an "Imagine what could have been" story because doing so may effect an investor's future trading decisions, but it is worth noting that there are solid 'buy and hold' plays still developing every day, even though the smartest trading strategy may include using a handful of trading shares to go along with a core position that is held for the long term.
After the failure of its flagship product, Pharmacyclics has built itself into a powerhouse with multiple products preparing for Phase III - a huge speculative success story, and congrats to those that held after buying on that dip to a buck. Had this guy held after buying PCYC at a buck for a quick trade, I'd be spending a whole lot more time writing from my wireless account while sitting on a European beach.
Synergy Pharmaceuticals (SGYP): Synergy Pharmaceuticals issued milestone news this week by announcing the completion of enrollment for its Phase IIb/III clinical trial measuring the effectiveness of Plecanatide in treating chronic idiopathic constipation (CIC). While some investors may brush off such developments as 'insignificant,' this is key news for Synergy, and such developments should not be ignored in relation to any still-developing company.
The fact that Synergy has completed enrollment validates the potential that results are still set for a late-year 2012 release. In the speculative world of developmental pharmas and biotechs, a company's ability to meet milestone is one of the key factors that separates the potential 'will be' company from the 'wanna be'.
This development for Synergy validates its billion dollar potential and has also attracted high profile investor research interest. Following the milestone event for the company,
Aegis Capital Corp also tagged SGYP on Tuesday with a price target of $25, noting the trial developments, expectations of results and potential of Plecanatide on the open market. In terms of valuation, Aegis noted the following:
"Synergy's current market cap of about $250mm does not adequately value the potential of Plecanatide and the firm's platform technology, in our view. We also note that linaclotide is currently valued at a level approaching $3bn based on the market cap of Ironwood Pharmaceuticals (IRWD/NASDAQ - Buy), the originator of this agent."
Shares of Synergy Pharmaceuticals (SGYP) also rebounded to above the four dollar mark following the trial update and Aegis report. Although you can't bank on sure things in this highly-volatile and unpredictable sector, it is widely expected that the results from this trial will be positive.
Ironwood Pharmaceuticals (IRWD) has already submitted with the FDA for the approval of Linaclotide - a treatment designed for the same indications and shares origins and the same mechanism of action with Plecanatide - and a decision is expected to take place next month. A trial delay announced this spring allowed Plecanatide to play a bit of 'catch up' in the path towards commercialization, but Tuesday's Synergy announcement keeps its developmental timeline in tact.
In the end, however, Synergy may hold a distinct advantage over Ironwood and could still make SGYP the more compelling play. During Ironwood's Linaclotide trials, the treatment was successful in alleviating constipation when compared to a placebo, but the kicker is that side effects included cases of extreme diarrhea. Some cases were extreme enough to force 6% of the patients to abandon the trial altogether. No such side effects were noted during Plecanatide trials, according to publicly-released information.
That's a huge benefit for team Synergy.
Another key factor to consider for Synergy is that the company has yet to land a partner, unlike Ironwood who has already signed Forest Laboratories, Inc. (FRX), with which the company will share Linaclotide revenue. Since IRWD's market cap sits at well over a billion dollars already, the market is effectively valuing Linaclotide at over two billion dollars, terms of the partnership considering. Synergy has yet to realize such expectations, although a recently-announced merger with Callisto Pharmaceuticals (CLSP) may have paved the way for SGYP to start inching towards a market cap based on a more fair valuation to IRWD.
It could be a stellar second half for SGYP. Worth keeping an eye on.
MRI Interventions (MRIC): MRIC also reported milestone news this week by announcing in conjunction with Brainlab that the company's ClearPoint system "is being used in a groundbreaking clinical trial for the treatment of pediatric brain cancer."
In conjunction with this announcement, it was revealed that the first procedure had already taken place and the early results were encouraging. A team of professionals gathered at the Memorial Sloan Kettering Cancer Center and "used the ClearPoint System in the delivery of a cancer-fighting agent into the tumor of a pediatric patient while viewing three-dimensional MRI images of the delivery in real-time throughout the procedure."
ClearPoint, as previously discussed, is an MRI-enhancing technology that has thus far enabled surgeons - by providing real-time imagery during complicated procedures - to conduct less-invasive and more precise operations on the brain. Its potential in augmenting such procedures has also led to quick partnership opportunities for the company, as evidenced by a deal with Boston Scientific Corporation (BSX) that brought in an up-front payment of $13 million. Siemens AG (SI) and the above-mentioned Brainlab AG have also jumped in to assist in advancing this technology.
The Tuesday announcement of a move into the pediatric sector is no small milestone for MRI Interventions and its ClearPoint technology. Medical professionals generally need to be overwhelmingly convinced of a product or drug's safety and efficacy before putting it to use in the pediatric arena. The fact that doctors have utilized the technology in association with surgery on a pediatric patient is a sign that the conviction is there.
ClearPoint also has the potential to be put to more widespread use in similar trials where treatments need to be directed towards specific points in a patient's brain. Tocagen, for example, announced earlier in the year that it, too, would utilize the technology in a clinical trial for brain cancer. There are numerous other companies out there conducting similar trials that could also see the benefit of utilizing ClearPoint.
Dr. Mark Souweidane, who led the team that conducted the noted pediatric procedure noted that, "This trial is about renewed hope. It's a departure from the standard therapy and has the potential to create a whole new paradigm in brain tumor treatment. Delivering drugs intravenously hasn't worked because of the blood-brain barrier – to get even a small amount of medicine to the tumor we need high doses of chemotherapy, which is toxic to the rest of the body. But placing the agent outside of the blood vessels, directly into the tumor, greatly reduces that toxicity while maximizing the attack on the tumor itself."
This is a still-developing story with huge potential worth watching, especially since shares have recently slipped back towards the two dollar mark.
Disclosure: Long SGYP.
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