I regard InVivo Therapeutics Holdings Corp (NVIV.OB) as a good investment in a short time horizon.
Some of the key positive aspects of its business are in the following.
1. Market potential. InVivo was founded to develop a groundbreaking medical technology to treat Spinal Cord Injuries (SCI), for which there is no effective treatment but to ease the symptoms. Its indication can be extended to peripheral nerve injuries etc., so the potential of this market could easily hit $10 billion a year.
2. Product with clear safety and simple mechanism profile. A scaffold made of a biodegradable and biocompatible polymer -poly(glycerol-co-sebacic acid), which is already approved by the FDA for surgical sutures. The creative part of this company is to apply the same material into the spinal cord to prevent "secondary injury" and promote neuroplasticity right after the initial SCI.
Therefore, the safety profile of its product is quite solid -FDA approved, on the other hand, the theoretical basis of this innovative application into spinal cord is also solid, which has been verified by a handful of research papers published by top tier journals - Journal of Neuroscience Methods, Biomaterials, PNAS. The research team is led by Nobel Laureate Sir Richard Roberts and a great scientist/inventor, Bob Langer from MIT. The company's pipeline also includes biocompatible hydrogel and polymer scaffolding device seeded with autologous human neural stems cell.
3. Clinical trial data and progress with the regulatory. Positive results have been released on both rodents and non-human primates in the SCI model experiments. Everyone who watched the video, which compares two monkeys with and without the scaffold treatment, would be impressed by the efficacy evidence. Late this year, the FDA approved the Humanitarian Use Device (HUD) route of InVivo's marketing permission application, allowing the trial of polymer scaffold into human beings early next year. It's absolutely a good green-light path for InVivo because the HUD designation and a subsequent approved Humanitarian Device Exemption (HDE) would enable InVivo to commercialize the devices in the U.S. faster than the regular Pre-Market (PMA) approval process. Moreover, the FDA committee also reduced the required number of human being to be tested from 10 to 5, significantly expediting the speed of realizing the capital value of Invivo.
4. Sound cash position ($16.2 million of cash as of September 30, 2012; $16.7 million of potentially additional cash from warrant exercises during 2012-2015 and $2 million loan agreement with Commonwealth of MA), recruitment of experienced industry leaders from big-name shops (i.e. Kenneth Dipietro, an Executive VP from Biogen Idec (BIIB) joined InVivo recently) are all good signs for the continuing development of InVivo.
However, there are several dubious things about InVivo too.
1. Legitimacy of "groundbreaking" technology. No matter how they boast this technology as "groundbreaking" or "innovative", it just doesn't resonate that much. After all, the product - a degradable biopolymer, has been approved by the FDA and extensively used in surgeries for a long time. The only new or shinning idea is to apply the polymer as a scaffold in the injured spinal cord. Even this idea of application, no doubt, is not brand new, since the pathological theory of "second injury" is well established and acknowledged in this medical area.
The hardest part, per my view, is to take a tremendous amount of efforts and resources to test this simple idea, which InVivo did. Given the fact that the CEO Frank himself had suffered from paralysis after a truck accident years ago, it's understandable in terms of his courage and determination to pursue this venture.
So, the creativeness should not be disregarded just because of its simplicity. To protect its intellectual property, the company has obtained world-wide exclusive license for patents co-owned by MIT and Harvard's Children's Hospital.
2. Inside trading. In the last couple of months, the two major stake holders - CEO Francis Reynolds and Chief Scientist Robert Langer have been dumping their stocks in millions. This is apparently not a good sign for investors. The CEO explained over the investor conference that he was in bad need of cash. Given the totality of ~28 millions of shares they held (~36% of all the shares), cashing out just one million is acceptable.
3. Small proportion of institutional ownership. The stock is denoted as 3% owned by institutional investors (via Google Finance as of this writing, December 2013). Even though the CEO Frank stated that ~$20 million (the percentage should be way much larger than 3%) of its total capital is funded by blue chip investors. Why there is the discrepancy between InVivo's own statement and Google's profile? If it's true there is only 3% institutional ownership, why do institutional investors shun InVivo?
All in all, I still consider InVivo a good investment in a one-year horizon. The greatest part of playing with this stock is the short time period. It's a medical device, not a cancer drug, which may take years and billions to come to a conclusion by the FDA. Early next year, once there is a qualified human test object, we just need the patience of several weeks to observe whether the magic result from monkeys could be replicated in human beings. Very likely, it will.
In the long-time horizon, I can't tell how great the leaders are, however, the CEO Frank is no doubt an arduous speaker/presenter on numerous media. His efforts will enhance the liquidity of its stock and, eventually, when it's time for big device makers like Stryker (SYK) and Johnson & Johnson (JNJ) to acquire InVivo, help investors to cash out quickly.