Aspen BioPharma: Anticipating Active '09

| About: Venaxis, Inc. (APPY)

Now that AspenBio Pharma (NASDAQ:APPY) has completed enrollment earlier this month in its FDA 510(k) clinical study for the world's first blood-based appendicitis screening test, AppyScore, investors will not have to wait much longer to get the results. Results in the 800 patient trial are expected in January, which will support APPY's 510(k) application for marketing clearance if the study objectives are met as in the previous, smaller clinical trial of AppyScore in 2007 with 98% sensitivity.

APPY expects to file its 510(k) with the FDA in January for the initial, 45-minute version of the test and hopes to gain marketing clearance by the end of 2Q09. However, assuming the clinical trial results support a 510[k] application, APPY will begin partnership discussions for an estimated $1 billion global market for the appendicitis screening test. Also, APPY is developing a faster, 15-minute version of the test which will follow the initial version and result in a second 510[k] filing at a later date.

APPY also has an animal health segment and signed a deal with Novartis (NYSE:NVS) Animal Health earlier this year in April for exclusive licensing and commercialization of BoviPure LH and BoviPure FSH. The two animal health products are produced by recombinant DNA [rDNA] technology, which offers advantages such as increased potency, increased stability, no risk of disease transmission as with animal-based hormones, and lower manufacturing cost.

From a financial standpoint, APPY is well positioned with about $18M in cash, $26M in total assets, $6M in total liabilities, 31M shares outstanding, and 34.8M fully diluted shares. Insider and institutional ownership are significant at 23% and 40%, respectively, while the short interest declined to 841,286 as of mid-December. The Company has a very low burn rate of about $1.9M per quarter, which is much lower than most development-stage bio-pharma companies of its size.

The market cap currently stands at just $185M with APPY trading at around 6 bucks per share, with both metrics poised to move much higher if everything goes as planned in early 2009 with the trial results and AppyScore receives 510[k] marketing clearance by mid-2009. APPY should easily eclipse the all-time highs of around 15 bucks achieved in October 2007 based on initial annual revenue ranges [included in the accompanying table] of $126M-$296M for the appendicitis screening tests and the two animal health products.

At 15 bucks, APPY would trade at a market cap of less than $500M, which is still well below the $1.2B market cap for Sequenom (NASDAQ:SQNM) and would also include more cash on the balance sheet from licensing deals and milestone payments. Also, the recent appointment of John Landon to the Board provides experience in the diagnostics industry and suggests APPY could become a takeover target as Mr. Landon served on the Board of Cholestech and Digene before they were sold to Inverness Medical (IMA) and Qiagen (NASDAQ:QGEN), respectively.

Disclosure: None