As an individual investor focusing a large portion of my portfolio on development-phase small pharmaceuticals, I have had my fair share of disappointing choices with failed clinical trials and negative FDA decisions on drugs and medical devices. However, gains made from good decisions have both motivated and enabled me to continue investing based on my own choices. On January 11th, 2012, I released Top of the Class Biotechs for 2012, which profiled four companies whose common shares I believed could lead their peers with solid share price gains for the year. With two of the choices having a disappointing year, but with the remaining two having a phenomenal year, investments spread equally between the four choices would have been highly lucrative as indicated below. A nominal long investment in each of the four choices on the day the article posted would have netted a gain of well over 100% on the year, better than many investors would hope for who invest for the longer term. Although no guarantees can be made that this type of gain is possible for my three 2013 candidates, the example does present to investors the types of gains possible for successful choices in only a small portion of their total decisions. These are development-phase companies and there is potential for substantial losses. Gains could also be considerably larger than the roughly 100% net gain below, although I personally would be skeptical of such a possibility.
January 11, 2012 Closing Share Price
December 31, 2012 Share Price
(* reverse split)
% Gain (or Loss)
$1000 Initial Investment Value Worth on December 28th.
Lpath Inc. (LPTN)
Small Pharma Class Leader in Pain Relief
AcelRX Pharmaceuticals (ACRX) is a $160 million market capitalization pharmaceutical company that has been reporting out solid data throughout the year on its lead product candidate, ARX-01. The drug has been evaluated in three Phase III trials with one having data released just recently and the other two trials' data expected in Q1 2013. ARX-01 is a sublingual (under the tongue) administration of the approved and marketed opioid, sufentanil. The drug is highly effective for pain relief, but its currently approved IV administration technique causes a quick onset of activity and a rapidly waning concentration in the patient's blood plasma, rendering its efficacy short-lived. ARX-01 attempts to address the issue by using AcelRX's proprietary Nanotab® technology to administer the drug sublingually. This administration technique allows for a rapid yet consistent infusion into the patient's blood stream, but without the initial spike of concentration in blood plasma.
Sufentanil is a very effective analgesic (pain reliever), and its more optimal administration may prove to be highly profitable for the company, pending FDA approval for ARX-01 in the coming months. On November 15th, the company released topline data from one of its three Phase III trials wrapping up in Q4 2013. The trial evaluated ARX-01 versus IV PCA (patient controlled analgesia) morphine in 359 patients for the treatment of acute post-operative pain immediately after having major abdominal or orthopedic surgery. The trial met its primary endpoint of "non-inferiority in patient global assessment (PGA) with method of pain control" relative to IV PCA morphine with a promising correlation of (p<0.001). Generally, a (P<0.05) or lower is construed as statistically significant, meaning the positive outcome is due to the therapy, and not as a result of chance. Additional secondary endpoints were met, including: "NanoTab System was statistically superior to IV PCA morphine for the PGA endpoint (p=0.009)" for the 24 hour and 72 hour endpoints; "Nurses setting up the different treatments for use and managing patients in the study reported that they had greater overall satisfaction (3.93 vs. 3.32 out of 5, p<0.001) and overall ease of care (4.26 vs. 3.82, p=0.018) with the Sufentanil NanoTab® PCA System compared to IV PCA morphine. Likewise, patients in the study reported that they had greater overall satisfaction (4.15 vs. 3.83 out of 5, p=0.003) and greater overall ease of care (4.45 vs. 4.07, p<0.001) with the NanoTab System compared to IV PCA morphine."
The two other Phase III trials' data will be reported in Q1 2013. The trials will be evaluating ARX-01's effectiveness and safety in treating post-operative pain following major joint replacement surgery and post-operative pain control following major open abdominal surgery. Success in positive trial data from these two clinicals will support the product candidate's new drug application (NDA) due to be submitted in Q3 2013. Failure of the two remaining trials, although I believe is unlikely based on Phase II clinical data, would not be the end of ARX-01 as the NDA would likely still be submitted for the already promising "post-operative pain immediately after having major abdominal or orthopedic surgery" indication. In the small pharmaceutical sector where share price is often driven by catalysts, 2013 looks to have much ahead for AcelRX Pharmaceuticals. An October 3rd announcement by the company also noted that the three Phase III trials were of a proper design to also allow regulatory approval, pending positive data, in the 27 European Union countries and four European Free Trade Association countries. Investors should expect updates on this regulatory application in 2013 as well. Interested investors are advised to review AcelRX's Phase II and 3 clinical data for ARX-01, its Q3 financials, and growing pipeline to determine if the company is a fit for their portfolios.
AcelRX's common shares were trading at $4.39 as of markets close on Friday, off from its 52-week high of $5.25 it reached shortly after its Phase III data were reported. It has since dipped due to overall market sentiment and a $41 million stock offering announced on December 5th. I believe the number of ensuing catalysts in 2013, its already promising Phase III data, and favorable financing already behind it will likely help to catalyze the company's common shares in 2013. This is a development-phase company and investors should treat it accordingly. It is still dependent on investor money for funding its operations, but the company has already noted on its website that it is "preparing to introduce these products to patients in the United States, either through its own efforts or, in select cases, in conjunction with a partner." This adds a bit of an additional speculative nature to the investment with partnerships or licensing deals also possible in the coming weeks.
Small Pharma Class Leader in Radioisotopes
Advanced Medical Isotope Corporation (OTCQB:ADMD) is a development-phase company that is attempting to both increase its radioisotope customer base and develop its own radiotherapy product for the ongoing war on cancer. Reviewing its 2012 events, the company's near-term revenue stream is likely based on its radioisotope production technology used to produce radioisotopes primarily used in healthcare diagnostic imaging procedures. However, news is also likely imminent on its radiotherapy candidate, which it licensed earlier in the year.
Radioisotopes are radioactive elements commonly used in diagnostic (typically medical imaging) and therapeutic settings (to treat cancers not eligible for resection or not responsive to chemotherapy agents). They are most commonly produced in nuclear research reactors, predominantly outside the U.S. As these reactors are gradually shut down due to age and safety concerns, the healthcare industry must find new sources of the radioisotopes used in over 19 million procedures per year in the U.S. alone. The most widely used radioisotope, molybdenum-99 (Mo-99), has a $5 billion annual market, which provides for a huge area of need in the ever-growing industry. ADMD has an agreement with the University of Missouri to use its research reactor to tentatively produce up to 50% of the U.S. need for Mo-99 according to an April 2012 company presentation. It also has its own ion beam Rhodotron accelerator that the company believes could supply the remaining Mo-99 needs. Whether gaining a large market share or just a portion, developments on production updates or a growing revenue stream could be huge share price drivers for this budding company.
Although most of the company's likely isotope production catalysts are still unannounced, ADMD has noted two radioisotope production contracts in 2012. The first, announced on April 19th, was with Kennewick General Hospital of Kennewick, WA, for the supply of fluorine-18 (F-18) radioisotopes primarily used in positron emission tomography (PET) as well as for other medical isotopes utilized for diagnostic imaging and therapeutic administration. More recently, the company announced on December 11th a strategic alliance with Safety by Design, PC, of Colorado, in collaboration with Colorado State University. The partnership will utilize the TRIGA Reactor currently operating at the Denver Federal Center to produce the radioisotope holmium-166 (Ho-166), used to treat skin cancers. As the partnership matures and Ho-166 advances, the production will expand to cover supplies to develop products for the treatment of joint pain, liver cancer, and multiple myeloma.
An unheralded announcement on December 26th could be very impactful on the company's future with regard to its Mo-99 production. Congress passed the American Medical Isotope Production Act to support the production of Mo-99 for medical use in the U.S. The bill was proposed, "To promote the production of molybdenum-99 in the United States for medical isotope production, and to condition and phase out the export of highly enriched uranium for the production of medical isotopes." Funding will be supplied per the Bill based on the following criteria:
- Time to start production of Mo-99 (ADMD could do this by the end of 2015 according to its April presentation).
- The capacity to produce a significant portion of the Mo-99 demand (excerpt from presentation "system that satisfies, at least, 50% of the US needs").
- Cost of the project (excerpt from presentation "produce the lowest cost and most reliable system").
This funding, according to the Bill, is significant with $143 million at stake. With ADMD already having a plan in place, the company could certainly garner a portion of this funding, helping to more firmly establish its capabilities and customer base.
Along the company's newly-formed clinical development line, ADMD announced its acquisition of a license to develop and market a therapeutic product termed "radiogel" on April 10th of 2012 from renowned independent research and development organization, Batelle. Radiogel is a novel therapeutic radioisotope delivery system designed to deliver yttrium-90 (Y-90) via injection into targeted cancer tumors. The therapy is comprised of an injectable water-based polymer gel that delivers Y-90 microspheres directly to the tumor tissue transdermally. Once inside the body, the polymer warms to body temperature and polymerizes into a lattice (cage-like structure) that traps the radioactive Y-90 microspheres. This allows irradiation of the surrounding tissue while preventing the radiation from traveling throughout the body, keeping its activity at the tumor site while minimizing systemic exposure to its harmful side effects. While the company has been fairly silent with regard to development of radiogel since its licensing acquisition, a December 21st mention of the company's development plans was noted in an article titled "PNNL Recognized for Transferring Innovations to the Marketplace." In the article, ADMD was mentioned noting, "A license agreement with Advanced Medical Isotope Corp. of Kennewick, WA, has led to further development of radiogel products that will eventually be used to treat cancers of the liver, pancreas, brain, neck, and kidneys." Pertaining to possible time frames involved, ADMD noted in its April 2012 presentation on slide number eight that "Animal studies and testing for FDA 510 (K) approval about to begin. Approval is projected in 2013."
With a current $13.1 million market capitalization, Advanced Medical Isotope Corp. should be considered as a speculative investment at this time, but it is beginning to more fully validate its potential due to positive events in 2012. Its Bulletin Board stock exchange listing also adds to the investment risk with the lesser liquidity than the bigger and more liquid stock exchanges. The company's Q3 financials paint a picture of the company's development- phase status with a little over $65,000 in revenue for the quarter while operating at a loss to the tune of $2.28 million. While the risk is certainly evident, upside potential here can be significant with positive developments in its radiogel development, additional radioisotope contracts, or even possible government funding to help it meet its Mo-99 production goals more quickly and robustly.
Small Pharma Class Leader in Sexual Dysfunction
Apricus Biosciences (APRI) had a disappointing year for shareholders with common shares trading at $1.99 on December 31st 2012 after closing out 2011 at $5.19 for a loss of more than 61% on the year. Even now, the company is trading just above its 52-week low of $1.89. Due to recent developments in the company, I now believe Apricus shares could now represent a solid investment through 2013 due to many significant changes ahead for the company. These changes may put it in the investment world spotlight with solid gains for savvy investors willing to have a look at this under-the-radar company.
Apricus currently has four approved products for commercialization. Totect® is approved in the U.S. for the treatment of extravasation (accidental contamination of tissue at the injection site, outside the vascular region) from intravenous anthracycline chemotherapy. Granisol® is approved in the U.S. for the prevention of nausea and vomiting accompanying total body irradiation and fractionated abdominal radiation and for nausea due to emetogenic cancer treatment, including high-dosage cisplatin. NitroMist® (nitroglycerin sublingual spray) is U.S. approved to treat or prevent angina (chest pains).
The company's fourth approved product, Vitaros® as well as another candidate in clinicals are the focus of this article and have now become the primary focus for the company moving forward in 2013. Vitaros® is approved in Canada for erectile dysfunction (ED). The Canadian approval notes that the drug causes "rapid onset with significant efficacy, tolerability and a favorable safety profile, including patients with compromised cardiovascular system such as diabetics or patients not responding to Viagra® after a prostatectomy." Apricus has licensed Vitaros® to Abbott Laboratories (ABT) and expects full launch of the drug in Canada in 1H 2013. Under the licensing agreement, Apricus will receive up to $16 million in upfront license fees and additional milestone payments plus tiered royalty payments based on Abbott's sales of Vitaros® in Canada. In its Q3 2012 filing, the upfront payment of $2.5 million became due from Abbott as was recorded as revenue for the quarter. The company has also partnered with a host of other pharmaceuticals for Vitaros® outside the U.S. which will represent a target market group of roughly $2 billion according to the company's website. The partnerships with many pharmaceuticals not only represent solid revenue going forward if regulatory approval is given, but also represent acquisition potential if any of these companies becomes enamored with the company's potential. The partnerships for Vitaros® include: Novartis-Sandoz (NVS) in Germany, Bracco in Italy, NeoPharm in Israel, Elis Pharmaceuticals in the Middle East, Global Harvest Pharmaceuticals in New Zealand/Australia, Takeda Pharmaceuticals (OTCPK:TKPYY) in the United Kingdom, and the company is seeking partners in other parts of the world. If Apricus successfully navigates the regulatory path for these ex-U.S. markets, a general assumption of 10% of target market of $2.5 billion indicates possible $250 million total annual revenue for the company and its partners. For more information on these partnerships and the revenue potential of each, please review Apricus' Q3 2012 filing.
Arguably the largest market for Vitaros® is the U.S., but this is also a point of great discontent with shareholders. With a market potential of about $5 billion in the U.S., Apricus (then operating as "NexMed") sold U.S. rights to Vitaros® to Warner Chilcott (WCRX) in 2007 (agreement modified in 2009) for an upfront payment of $2.5 million with a $2.5 million milestone payment for the company once the new drug application (NDA) is approved by the FDA. Although Apricus expects to supply the drug to Warner as its supply partner, it will certainly miss out on huge revenue potential if Vitaros® is marketed in the U.S. To the credit of Apricus somewhat, the FDA did reject the drug in July of 2008 via a "Non Approvable Letter" citing concerns of a transgenic mouse carcinogenicity study which the company completed in 2002. In the study, some of the mice developed small tumors known as papillomas, a major concern for the regulatory agency. Apricus hasn't updated shareholders recently on the follow-up investigations, and with only $2.5 million on the line, it may not be motivated to do much - apparently leaving the work up to Warner. The drug's active ingredient, alprostadil, has already been FDA approved for other indications via an injectable form, with a carcinogenesis statement on the label noting, "Long-term carcinogenicity studies and fertility studies have not been done. The Ames and Alkaline Elution assays reveal no potential for mutagenesis." So the drug certainly still has a chance at regulatory success in the U.S. with some additional work by either party.
For interested investors, a January 3rd press release by the company sets the tone for the stock for the remainder of the year. Before reviewing the announcement potential, investors should first note that this press release was via new management as its former CEO, president and Director, Dr. Bassam Damaj, resigned on November 6th, 2012 with changes "effective immediately." The January 3rd "Corporate Goals for 2013" release still referred to Steve Martin as "Interim Chief Executive Officer and Chief Financial Officer," although I would expect a more permanent replacement to be found moving forward through 2013. The company's goals moving forward will now focus on its sexual dysfunction product line of Vitaros® for ED and Femprox® for female sexual arousal disorder (FSAD). Meanwhile, Apricus will be seeking buyers for Granisol® and Totect®, its oncology support products. Change is not always for the better, but with the mistakes made via the Vitaros® FDA concerns not being addressed yet and with the ludicrous sale of the drug to Warner Chilcott for at most $5 million which could target a near $5 billion market for ED, I believe the company needs a fresh start; and Dr. Damaj's departure was certainly a good first step. The more refined focus on the sexual dysfunction product line was already evident in the PR as it noted that Femprox® would be more focused on with "pre-filing meetings with Health Canada and the U.S. FDA regarding the suitability of its existing clinical, preclinical, and chemistry data for Femprox® to support filings in each country."
Apricus appears to be in the process of reinventing itself as evident by recent news. Investors willing to take a risk in this $61 million market capitalization small pharmaceutical may see a prosperous 2013 ahead of them. As of September 30th, 2012, the company had cash and equivalents of roughly $16.9 million with about $5.2 million in revenue for the quarter while still operating at a loss of about $2.5 million for the quarter. Catalysts ahead that may gain more shareholder interest in 2013 include the sale of its two cancer support drugs, European regulatory decisions for Vitaros®, filings for Femprox® in the Canada and the U.S., announcements of additional licensing partnerships for Vitaros®, a permanent President/CEO, and other events expected and unexpected. Apricus common shares are now trading at the $2.0 support level where it has been trading for the last couple of months. As events begin to unfold, shareholder interest may return to this promising company with a new found focus. Although there is obvious risk with Vitaros® and Femprox®, the company's $61 million market capitalization appears to have taken that into consideration.