Q3 2012 Pharma Company Updates Indicate Upcoming Catalysts

by: Chemistfrog

The number of resources for small pharmaceutical company investors performing research on promising picks is often overwhelming. A single source of data that interested investors may utilize to ascertain a company's short term or longer term potential is available in the form of a company's quarterly report as presented on the SEC's form 10-Q. The information on this filing contains not only unaudited financial statements and a continuing view of the company's financial position, but also corporate updates with regard to that quarter's significant events and upcoming presentations and other possible catalysts. While many of these are often boring or overstated, I have come across some small pharmaceutical 10-Qs for the most recent quarter that contain what I believe to be significant information that could positively move share price in the coming weeks and months if the events unfold positively. Please note as you read through these potential catalysts that significant upside for success can likely mean corresponding downside in the event of failure or delays. I advise any interested investors to perform much additional research into their potential choices before taking any positions in these securities.

Acura Pharmaceuticals (NASDAQ:ACUR) has an interesting pharmaceutical pipeline focusing on developing tamper-resistant drugs through its AVERSION and IMPEDE technologies. The company has had a tough year with a disappointing announcement on July 27th that Pfizer (NYSE:PFE) was terminating its license for three of the four product candidates that it was co-developing with Acura and, thus, returning the products. The reasons behind the return of the products were not given. The products being returned were oxycodone hydrochloride with acetaminophen, hydrocodone bitartrate with acetaminophen and another undisclosed opioid. The news punished Acura's shares which have traded lower since with a 52-week low recently reached of $1.06 after closing at $3.08 on July 26th. Initially Acura had thought that it would take up to a year before the full return of the products which would greatly slow the process of finding another suitor. However, the company announced on September 26th that transfer of the license back to Acura was complete. Strangely, the news had little effect on the company's share price.

Acura released its Q3 financials on November 6th. The company recorded no revenue for the quarter and reported a net loss of $2.2 million, or $0.04 per diluted share. A fiscally-responsible company, it reported no debt as of September 30th, with $29.3 million in cash and equivalents. Notable upcoming catalysts were mentioned in the filing. In the quarter the company started the manufacturing process validation of its NEXAFED product with the active ingredient pseudoephedrine. Sold originally under the name Sudafed before generics became available as a decongestant, pseudoephedrine is often abused as it can fairly easily converted into the illicit drug, methamphetamine. NEXAFED utilizes Acura's IMPEDE technology to greatly inhibit the extraction and conversion of pseudoephedrine into methamphetamine, and the company hopes to begin marketing the drug in December of this year. The company followed up the 10Q with a November 20th announcement that it had completed a bioequivalence analysis of manufactured product and determined that the company's IMPEDE technology used in the tamper-resistance of NEXAFED does not compromise the availability of the pseudoephedrine in a person's body. A statement in the press release supported the timeline of the commercialization of NEXAFED by noting "We remain on track for a national launch of NEXAFED later this year." This should provide for some increased investor interest in the coming days as the company begins its marketing phase and will not be solely construed as a development-phase entity thereafter. An additional upcoming catalyst is approaching in February 2013 as it is then that Acura will begin receiving royalties from Pfizer on the fourth drug the company did retain that it had licensed from Acura. The drug, OXECTA, is a tamper-resistant formulation of the opioid, oxycodone HCl. The company is eligible to receive tiered royalties from Pfizer ranging from 5% to 25% on net sales of the drug, which should help to shore up the Acura's financials and also minimize need for share dilution in the near future. Trading just above its 52-week low, entry now could be a good investment for the long term, especially after its recent dip due to the overall market's sell-off.

NeoStem Inc. (NBS) shareholders have had a wild ride with a 52-week trading range of $0.30-$0.90. Shares are up 27% for the year for this growing biotech, which is a rare stem cell sector candidate that not only has therapies in clinical stages of development, but also has a revenue-generating cell therapy manufacturing facility with multiple pharmaceutical clients. NeoStem's lead therapy candidate is from its Amorcyte division, which is currently developing AMR-001, an autologous (developed from the patients' own bodies) bone marrow-derived cell therapy enriched for CD34+ cells, to preserve heart muscle function following a myocardial infarction (heart attack). The company began enrollment for the phase 2 clinical in January of this year. NeoStem reported in August that the Data Monitoring Committee (DCM) had completed the interim data and safety review and recommended that the trial continue.

Earlier in the year, NeoStem announced that it was divesting its 51% ownership of its Chinese generic pharmaceutical subsidiary, Suzhou Erye Pharmaceutical Co. Ltd. (Erye). The company announced closure of the divestiture on November 13th which provided the company with $12.3 million in cash and additionally removed from the company's balance sheet about $30 million in short-term and long-term debt obligations. The sale also returned to NeoStem over 1 million sharese equivalent to approximately 0.7% of the company's outstanding common stock, about 1.2 million stock options representing approximately 5.1% of the company's outstanding options, and 640,000 warrants to purchase common stock held by Erye representing about 1.1% of its total outstanding warrants.

NeoStem released it Q3 financials on November 14th. The company announced revenue from operations for the quarter ending September 30 of $4.4 million and revenue for the nine-month period of $11.6 million, indicative of solid growth relative to the $2.2 million and $5.8 million for the same periods in 2011. The filing noted that the 98% increase in revenue was largely due to clinical service revenue from its Progenitor Cell Therapy (PCT) division, the entity that sets it apart largely from the remainder of the stem cell sector, most of which has no source of revenue. PCT acts as a Contract Manufacturing Organization (CMO) as it manufactures and stores therapeutic cells used in both stem cell therapies and immunotherapy agents (it was actually the manufacturer of Dendreon's [DNDN] Provenge, the first immunotherapy drug approved to fight cancer in early 2010). As of September 30th, the company had cash and equivalents of $7.9 million, not to mention the additional $12.0 million since that filing from the Erye divestiture. Indicative of its future business focus, the release noted that "The Erye divestiture allows the Company to hone its focus on its cell therapy clinical development programs and the PCT CDMO commercial business. Continuing operations consist of the Company's cellular therapy business in the United States." On the clinical front, the filing noted that enrollment is continuing in its phase 2 AMR-001 trial, which should complete enrollment in 2013 with a 6-month readout by the end of 2013. Trading at a narrow range, predominantly from $0.60-$0.70 in the last three months, interested investors are advised to perform additional research and watch the company's chart to ascertain a solid entry at current levels.

Delcath Systems (NASDAQ:DCTH) investors have also experienced a wild ride in the last year with a 52-week share price range of $1.01-$4.74. The company's shares are now trading at about $1.37, a range that will likely experience little downside in the coming months as financing has already taken place, and an FDA decision coming in June of 2013 will likely begin garnering much attention in the coming weeks. The company's lead product candidate is its chemosaturation system with melphalan hydrochloride as the chemotherapy agent of choice. The system basically involves rerouting of the patient's blood supply into and out of the liver that is targeted for treatment. The procedure uses a series of small balloons that are inserted into the vessels to be closed off while a concentrated dose of melphalan hydrochloride is fed intravenously into the targeted liver and associated tumor where it is allowed to reside for about 30 minutes and render its effect on the cancer cells. The isolation of the liver's blood supply from the remainder of the patient's body allows a much higher than usual dose of the chemotherapy agent to be used to increase efficacy while sparing the remainder of the patient's body from the drug's toxic side effects. Once the treatment is complete, the melphalan-saturated blood is pumped out of the liver and through an extracorporeal (external to the body) filter where most of the agent is removed from the blood before it is returned to the body.

Delcath has received a Prescription Drug User Fee Date (PDUFA) decision date for regulatory decision on marketing of its chemosaturation system for June 15, 2013. This follows a new drug application (NDA) that was rejected in February of 2011 due to statistical, safety and sterilization issues. After what appeared to be a huge amount of time before resubmission of the NDA in August of this year, the company finally announced the acceptance of the NDA on October 15th. While the regulatory path for Delcath has met some resistance in the U.S., it has been more successful in Europe where it received the CE mark approval for its device two months after the FDA rejected its NDA. It also received marketing approval in 1Q of this year for its Generation 2 filter, somewhat confirming the device's upgrade.

Delcath announced its Q3 results on November 7th. It reported sales of $97,000 -- $58,000 of which was deferred revenue associated with an initial order from an Italian distributor. However, the regulatory process and European marketing campaign are not cheap, and the company operated at a loss of about $12.2 million for the quarter. As of September 30th, Delcath had $28.3 million cash and equivalents on its balance sheet and expected to burn $3 million to $4 million per month during Q4. In terms of upcoming catalysts mentioned in its filing, the largest will likely be its June 15, 2013 FDA decision date for the chemosaturation system's use to treat unresectable (inoperable) metastatic melanoma of the liver. Additional recent approval of the system for marketing in Australia in Q3 will add to the company's revenue stream which should continue growing throughout 2013. Additional distribution agreements in Italy and Spain in Q3 should also begin impacting sales in 2013 and beyond as will the improved reimbursement procedures for the treatment's insurance coverage in Italy with additional applications submitted in other European markets. In the company's first real expansion of the chemosaturation platform, it announced CE marking of its Hepatic Chemosat delivery system for Hepatocellular Carcinoma (HCC) using the chemotherapy agent doxorubicin hydrochloride in October. The news went seemingly unnoticed as the share price and volume did not reflect the potential magnitude of possible sales in this region of the world. There are approximately 750,000 new cases of HCC diagnosed annually in the world, and about 500,000 of these are in Asia with 400,000 of those in China. Interested investors should perform additional research on the potential marketability of the system for HCC and review the company's news releases over the last two years in order to build a solid baseline of knowledge about the company and its promising cancer treatment platform. Dilutive financing over the last couple of years will somewhat mute the upside potential in the company's share price in the coming months. However, more investors becoming aware of the platform's potential and the U.S. regulatory decision date will likely start the share prices back on an uptrend in the coming weeks.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in NBS, ACUR, DCTH over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.