Seeking Alpha
Growth, momentum, long-term horizon, newsletter provider
Profile| Send Message|
( followers)  

The imminent expectation of multiple product launches during the course of the coming year and the further development of a pipeline full of urine-based diagnostics designed to detect various cancers and infectious diseases placed Trovagene Inc (NASDAQ: TROV) on the map during the closing half of 2012, especially when shares nearly quadrupled in value in anticipation of the many milestone catalyst events that were due to unfold throughout 2013. The first of those catalysts came to fruition in late March when Trovagene announced that it had commercially launched a urine-based human papillomavirus (HPV) diagnostic test, the first of numerous elements of its pipeline expected to hit the market this year and a move into a very lucrative market, as six million new cases of HPV are diagnosed in the United States each year, according to the Centers for Disease Control and Prevention.

Trovagene's technology utilizes transrenal DNA and RNA from simple urine samples to detect genetic abnormalities that may result from cell deaths and/or disease progression. Any diagnostic test resulting from the advancement of this technology follows the current healthcare industry trends of emphasizing early detection through less-invasive (and less costly) means and launching its first test onto the market is a huge validation to the company and its future prospects. That said, the development and commercialization of such next-generation technology may not be enough alone to convince investors looking at the near term that the medical community is ready to fully embrace such a drastic shift in early-detection methods, but investors could quickly become convinced if much larger and more relevant parties from the industry come into play to support future development.

Just such an instance was reported earlier this year when Trovagene announced a collaborative effort with the University of Texas MD Anderson Cancer Center to detect transrenal BRAF mutations in the urine of patients with advanced or metastatic cancers. At the time this deal provided TROV a significant boost in validation, given the Anderson Center's stature in the arena of cancer care, and led to a bounce in the share price. Another deal, however, announced last week in an SEC filing may hold even more collaborative relevance and may have made believers out of some of the remaining skeptics that may doubt Trovagene's potential to take its technology mainstream.

In a Friday 8-k filing, Trovagene revealed that it had entered into a collaborative agreement with PerkinElmer Health Sciences Inc (NYSE: PKI) in which the two entities will design an assay to determine the risk for developing hepatocellular carcinoma. The two companies will jointly validate the assay while also exploring the possibilities of combining PerkinElmer's technology for the automation of nucleic acid isolation with Trovagene's TrNA technology. The deal, should the combined effort develop into any diagnostics, could return Trovagene notable milestone payments and - later on down the road - royalties on future sales. Investors were keen on the significance of this announcement, as TROV shares jumped by ten percent on nearly triple the average volume.

Monday's trading session also saw volume roll in at levels above the norm, although price levels remained relatively flat.

In addition to the noted developmental guidelines, the two entities also outlined the potential for future licensing agreements to be negotiated, too, pending further collaboration. Such forward-looking talk indicates that a long-term partnership may be materializing between the two companies, which could be considered a boon for a Trovagene as it enters the late developmental and early commercial stages. It also lays the groundwork for future merger and acquisition speculation, as Trovagene's growing portfolio of patents alone could be worth a significant bundle later on down the road if the technology is consistently proven to work and is embraced by medical professionals.

With industry trends shifting, the market may be ready for this next-generation technology. As outlined above, the target market for the recently-launched HPV is very significant and medical professionals may be quickly-convinced that its urine-based diagnostic may eventually negate the much more intrusive methods of detection that are the current standards of care. The same can be said for the potential results of the PKI collaboration.

Hepatocellular carcinoma has been identified as the third leading cause of cancer deaths worldwide and treatment - including early detection - involves numerous MRIs, ultrasounds and/or CT-scans of the abdominal section, all more intrusive - and much more costly - options than what could potentially be provided by a urine-based diagnostic. With that in mind, the PKI collaborative effort has the potential to turn into a very lucrative endeavor for both companies involved.

Furthermore, incidences of hepatocellular carcinoma are especially prevalent in Asia and Africa, according to the above-linked information portal, and as outlined in a Seeking Alpha report last week, PerkinElmer already holds a significant presence in Asia through past merger and acquisition deals. This fact could significantly underlie the intentions of PKI to quickly bring any diagnostic developed in conjunction with Trovagene's technology to market in an environment where demand is intense. Not only does the PKI agreement come with collaborative development, the sharing of technology and future milestones and royalty payments, but it also comes with a global reach already intact.

That's not a small point to miss.

Over the coming quarters, investors will look to monitor the PKI collaboration, as this agreement could later on down the road prove as one of the most significant milestones undertaken by the company. It'll also be worth identifying the commercial progress of the HPV test, as only modest market penetration could justify significantly higher share prices for TROV, according to numbers posted in the most recent company presentation. The potential over the longer term, however, is even more significant as the early detection and identification of cancer is a multi-billion dollar business. Should the medical profession embrace the shifting industry trends with Trovagene's urine-based methods of detection, then exponential gains are possible for shareholders as the company capitalizes on its position in the industry.

Those prospects and possibilities continue to make Trovagene one of the more intriguing speculative picks out there right now, especially with quite a few more commercial launches slated for the coming quarters.

As per the latest financial report issued earlier this month, TROV had just over ten million dollars of cash on hand at the end of the reporting period. The company conducted an offering of stock and warrants in early 2012 which raised nine million dollars and a private placement during the fourth quarter, which raised more than four million dollars. While the PKI agreement indicates that milestone payments and future royalties are likely if the collaboration is a success, the details are still unknown and there are no indications that Trovagene will bring in enough revenue over the short term to alleviate the need to raise money again at some point in the coming quarters.

With numerous milestones still expected throughout the course of the year, however, potential price catalysts still exist and investors with eyes on the short term stand to benefit, as do those who are looking to put some 'trading shares' to use while potentially holding on for the long term to see this story out. Trovagene has gained increased attention over recent months from multiple popular financial media outlets, a good indication that the market is starting to take notice of the potential of the company's technology.

Although volume has spiked in conjunction with key news events over the past months, it's still not yet rolling in at a point that indicates a widespread belief of future success. Should the recent momentum carry over into the coming months, and should the commercialized diagnostics start gaining a share of their respective markets, then volume could flow in at an increased rate, which would likely lead to a price boost, too.

If nothing else, this company should provide investors with enough news this year to keep them interested. By announcing the collaboration with as big a player as PerkinElmer, however, Trovagene has 'upped the ante' just a little bit.

Still a story to keep an eye on.

Source: Trovagene 'Ups The Ante' With PerkinElmer Collaboration