Readers who have been following me these past months know that I'm a fan of tech driven tickers who, at times, combines the best of both worlds by associating technology with the healthcare industry. In this piece I will be looking at a couple of themes that piqued my interest during the first week of April. As usual, I'll be sticking to my customary forte by discussing a familiar name in Organovo (NYSEMKT:ONVO), a misinterpreted story regarding Inovio (NASDAQ:INO) and the dynamic U.S. diabetes market which is in the midst of a critical time. The respective headlines will provide a briefing and analysis of how each can be interpreted.
Organovo develops a platform technology that generates functional human tissues which can be employed in drug discovery, biological research, and as potential therapeutic treatment of damaged tissues. On April 4th, CEO Keith Murphy held a live webcast to update investors on the 3D bioprinting company's operations. Listeners were informed that the company was progressing exceptionally well as it hit evaluation targets with Pfizer (NYSE:PFE) on the collaborative agreement the two had entered into at the end of 2010. Already having renewed its United Therapeutics (NASDAQ:UTHR) contract, this successful Pfizer update indicates that another contract extension should be forthcoming for ONVO and, as a result, continued revenue streams from the partnership. Additionally, the call shed some light on the collaboration with Autodesk (NASDAQ:ADSK). The software designer is working on a visual design software program that will make the NovoGen MMX Bioprinter more efficient for broader use. Instead of having to use coding, scientists will be able to employ visual design software (think AutoCAD). This adds a feature of convenience to the revolutionary technology which will open the door to greater expansion possibilities.
The main takeaways from the webcast, however, were regarding the liver cell assays ONVO is currently developing and the announced fiscal year change. Keith Murphy informed investors that major new data will be revealed at the Experimental Biology conference in Boston on April 22nd, when ONVO is scheduled to present. This will be the first public look at how ONVO's 3D printed liver cells are performing. Cell assays provide the company with a potential $500 million market opportunity by 2018 through building kits that can be sold for research. Organovo's printed cells are better indicators than the current conventional 2D gold standard method as they offer better behavior and liver cell function. Due to the CEO's excitement and publicized efforts, chances are the data will be encouraging. Otherwise the company would have been subtle about the upcoming conference. Positive results will validate the research thus far, and propel Organovo one step closer to launching its first product by the end of 2014.
Other exciting news announced was the fiscal year end change from December 31st to March 31st. Organovo's fiscal year will now begin on April 1st and end on March 31st the following year. This change was done in alignment with intentions for uplisting to a more reputable exchange at the earliest opportunity. ONVO can show audited financial statements for 12 months post its merger process, from April 1st 2012 - March 31st 2013. This adjusted timeframe includes the warrant calls that cleaned up the balance sheet, meaning ONVO can meet all financial requirements needed for listing on NASDAQ CM. The company must also add to its board of directors to get a majority independent board before submitting an application. Organovo expects to file an application of uplisting by mid 2013.
The above catalyst dates should prove to make the coming months exciting for Organovo as it continues to pursue the development of its platform technology and financial progress through uplisting.
Inovio presents some recovery after released data
Inovio Pharmaceuticals is a development stage company that focuses on providing universal protection against cancers and various diseases through its synthetic vaccine technology and delivery process. On April 2nd, preliminary clinical trial results were released by Inovio's collaborator, ChronTech, which failed to show statistically significant results for ChronTech's vaccine treatment of the hepatitis C virus. Following this release, the stock price of INO opened the day 10% lower at $0.50. Initial market reaction misinterpreted the news release as the drug was not even Inovio's vaccine, but ChronTech's. Though INO was involved in the collaboration, the company shared minority ownership stake in the failed vaccine for providing its MedPulser electroporation device for the delivery of the vaccine. In addition, Inovio had no financial contributions in this Phase II study which denotes the collaboration with ChronTech as having minimal downside, but immense potential in the case of success. Also, Inovio had no control over the study as it only provided its electroporation delivery technology, which is an older generation of devices that are no longer used by the company in current trials.
Inovio continues to focus on its broad platform of drugs in the pipeline with each providing their own potential breakthroughs. Apart from the above drugs, looking forward, INO intends to initiate a Phase I/IIa clinical study in the second half of 2013 for its own hepatitis C vaccine that is designed differently from the ChronTech drug. The company will also use its refined next generation CELLECTRA electroporation delivery device for this clinical study.
Market misinterpretation of the data released last week was resolved as CEO Joseph Kim purchased 90,000 shares after the subpar announcement. Shares also climbed by the end of the week to recover some of the initial loss, showing investor realization of the minimal involvement and impact the ChronTech vaccine data has on future Inovio outlook. Investors should be encouraged by the CEO's confidence and the broad range of products in the pipeline with upcoming catalysts.
Diabetes market patiently waits for next big thing
On March 29th, Johnson & Johnson (NYSE:JNJ) received FDA approval for its Type 2 diabetic treatment drug Invokana (also referred to as canagliflozin). With its first prescription drug for Type 2 diabetes approved, JNJ is entering into a huge diabetes market faced with stiff competition from the likes of Novo Nordisk (NYSE:NVO), Sanofi (NYSE:SNY) and Eli Lilly (NYSE:LLY). The total U.S. diabetes market was $20+ billion in 2011. Therefore, the entry of JNJ into the field will provide the company with a lucrative opportunity as Invokana is the only oral, once-daily medication available in the U.S. that lowers blood sugar in people with Type 2 diabetes by causing excretion of glucose in urine.
Data compiled by Bloomberg showed that in 2011 drug makers lost patent protection on products valued at $34 billion in annual sales. This figure is projected to rise to $147 billion by 2015. In order for these large pharmas to remain competitive in the diabetes market and avoid the effects of the patent cliff, patent life must be extended through acquisitions and partnerships with companies that provide safe and convenient diabetic solutions. An example of this patent extension was seen last year with Bristol-Myers' (NYSE:BMY) $5.3 billion acquisition of Amylin Pharmaceuticals. As part of the deal, BMY received a longer acting diabetic drug and a twice- daily diabetic injection, both of which were approved in the U.S. market.
A more recent example of the effects of the patent cliff can be seen with the hype MannKind (NASDAQ:MNKD) has received; as its ultra-fast inhalable insulin, Afrezza, is preparing for a third FDA submission. Afrezza would offer any player in the diabetes field an alternative treatment that would extend patent portfolio ensuring the potential buyer a competitive product and steady revenue stream for years to come. In 2013, MNKD has experienced a 57% surge in its stock price in hope of finally receiving FDA approval sometime in 2014. Obviously, approval to market in the U.S. would have the big pharmas lining up at Mr. Mann's door with partnership deals worth billions. This fact alone is giving investors a reason to be speculating with the future of this potentially breakthrough diabetic drug.
AntriaBio (OTCQB:ANTB) is a biopharmaceutical company that focuses on the development of therapeutic products for the diabetes market. The company's lead product candidate, AB101, is an injectable once-a-week basal insulin for Type 1 and Type 2 diabetes. This long acting insulin ingredient is moving from preclinical to Phase I trials in Russia for the second half of 2013 (more info can be found here and here). If ANTB's long acting basal insulin delivery proves its safety and efficacy in humans, the company could be seeing the same type of attention MNKD has been receiving. As mentioned above, both big pharmas and investors are willing to dish the cash if ANTB could provide diabetics with a convenient weekly injection. The progress of ANTB's lead product, however, will determine if the company will be one of the innovations that help extend the patent life of a big pharma during this daunting time in the pharmaceutical industry.
Disclosure: I am long ONVO, OTCQB:ANTB, INO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.