Access Pharma: MuGard, Pipeline Make for Appealing Acquisition Possibilities

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 |  Includes: ACCP, ALTH, BIIB, CTIC, FACT, GILD, SPPI
by: Mike Havrilla

Access Pharma (OTCQB:ACCP) is an emerging bio-pharmaceutical company which is focusing on the development of a late-stage, diversified oncology pipeline in addition to a treatment called MuGard is cleared for marketing in the U.S., Europe, and other key global markets for a common side effect of some cancer treatments known as mucositis (painful sores in the mouth and GI mucosal lining).

In addition, the Company is developing earlier stage compounds in its pipeline and has an oral cobalamin nanopolymer drug delivery technology (based on the uptake process for vitamin B-12 in the gut) which has demonstrated positive results for the delivery of insulin by mouth in preclinical animal models (e.g. 80% oral bioavailability for long-acting insulin taken by mouth rather than injection.

Key factors that influence the M&A process in the small / micro-cap bio-pharmaceutical space and how they make Access an appealing takeover target are outlined below.

1.) Management / Egos: In many cases, issues arise in prospective merger deals over who will control the combined company – however, SCO Capital and another large institutional shareholder (Oracle Partners) have no interest in simply prolonging their employment or leading the combined company in any buyout scenario. The perspective of SCO Capital is one of a large investor in the Company that is proactively trying to increase shareholder value and they utilize a network of scientific advisors, partnerships, and collaborations for R&D, commercialization, and marketing activities.

2.) Valuation Issues: The cost basis for large / institutional shareholders in Access Pharma is estimated by the CEO, Jeffrey Davis, at under $3 per share so that a buyout in the $9-11 range (approximately $200-240 million fully diluted market cap based on 22 million shares) would likely be appealing in my opinion and this is also in-line with the price target issued by Griffin Securities in their most recent report.

3.) Products and Pipeline Prospects: Access offers MuGard for the treatment of mucositis and the product is in the process of a global launch. The worldwide marketing clearance eliminates all clinical development risk and interim data from a post-marketing study in the U.K. by SpePharm is very encouraging for the product, demonstrating 100% prevention of mucositis in patients with head and neck cancer.

MuGard is priced at about $150 per week of treatment, which translates into about $1,000 per patient who receives a seven-week treatment course of radiation and/or chemotherapy (the latter treatment may last for much longer than seven weeks). Also, the $1,000 pricing for MuGard in a seven-week treatment cycle is a fraction of the cost for most anti-cancer therapeutics and less than the cost of treating the complications of severe cases of mucositis (e.g. intravenous feeding/hydration, pain medications, extended hospital stays, and antibiotics for infections that may arise from open sores in the mouth and GI tract).

In addition, targeted marketing of MuGard to oncologists will be an easy sell because of improved patient outcomes / comfort due to greatly reduced or prevented incidence of mucositis which allows patients to continue / complete their course of radiation therapy and / or chemo. Economically, oncologists could even purchase / subsidize the cost of MuGard for their patients on regimens with a high incidence of mucositis since typical treatments have a cost in the tens of thousands of dollars and represent a key source of revenue.

Thiarabine is the Company's next-generation nucleoside analogue (e.g. fludarabine, cladrabine) designed for the treatment of blood-based cancers such as lymphoma and leukemia (in addition to promising preclinical data for the prevention and treatment of rheumatoid arthritis). ACCP is working with the leader in this field, Dr. Hagop Kantarjian, who is Head of the Leukemia Department at the M.D. Anderson Cancer Center in Houston (which is the primary treatment center in the U.S. for leukemia and lymphoma). The Company is currently finalizing clinical trial protocols based on previously gathered data to evaluate the drug in a variety of leukemia and lymphoma subtypes, which is expected to occur during 4Q09.

ProLindac is a promising, next-generation platinum anti-cancer compound which includes a proprietary nano-polymer drug delivery vehicle that allows for over 10X the dose of platinum to be delivered in a targeted manner to cancer cells with a much better safety profile compared to standard platinum-based drugs which cause significant and cumulative neurotoxicity. The unique nano-polymer delivery system selectively releases the platinum in a targeted manner to cancer cells because they reside at a low pH (acidic).

Access also has a monoclonal antibody (MAb) with encouraging preclinical results in comparison to Roche's (OTCQX:RHHBY) Avastin. Angiolix targets a specific portion of a protein called lactadherin that is only expressed on solid tumors. Angiolix has a dual mechanism of action, which includes (1) inhibiting angiogenesis (blood vessel proliferation which feeds tumor growth) via the lactadherin target and (2) inducing a process known as apoptosis or programmed cell death in cancer cells which are dividing and growing in an unregulated manner. Unlike Avastin, Angiolix has an anti-proliferative effect on cancer cells when used by itself in addition to when it is used in combination with other chemo drugs.

Finally, licensing discussions for the Company's cobalamin-based nanopolymer drug delivery technology are ongoing for the oral administration of a basal (long-acting) insulin product following mid-June announcement that two bio-pharmaceutical companies (located in Europe and North America) will conduct preclinical, animal studies before proceeding to more formal negotiations. Access is providing the oral insulin while the two interested companies will conduct one animal study each with data expected before year-end. Ongoing discussions with these companies and others may result in the evaluation of other drugs utilizing this delivery platform, including other forms of insulin, human growth hormone (hGH) and erythropoietin (EPO).

Applying the factors outlined above, I believe Access would make an excellent fit with any of the companies outlined below that I also follow and have written about previously this year. Note that the common theme among these four companies is their similarity with regard to being small / micro-cap bio-pharmaceutical companies which are development-stage and / or in the early stages of commercialization for recently approved cancer drugs or new indications for existing products.

1.) Cell Therapeutics (NASDAQ: CTIC) is a Company that I highlighted as a turnaround play in early February while trading below 10 cents that has recently withdrawn its Opaxio regulatory submission in Europe (for a non-inferiority indication in non-small cell lung cancer patients) while awaiting a late April FDA decision for pixantrone. MuGard would provide CTIC with a potential blockbuster, billion dollar product for mucositis while providing cash flow while bolstering the Company’s pipeline. In addition, CTIC shareholders would not experience more than about 30% dilution at a takeover around the $8-11 range based on the market cap of about $700 million for CTIC.

2.) Allos Therapeutics (NASDAQ: ALTH) is a cancer biotech that I highlighted as a buy in late April below six bucks for its pending FDA decision. Late last week, ALTH announced that the FDA granted accelerated approval for Folotyn (pralatrexate injection) for use as a single agent for the treatment of patients with relapsed or refractory peripheral T-cell lymphoma (PTCL). The label for Folotyn includes the following guidance related to mucositis, “prior to administering any dose of Folotyn, mucositis should be less than / equal to Grade 1,” with more severe cases resulting in either omitted doses or discontinuation of therapy.

Data from the Company’s pivotal Phase 2 PROPEL trial for Folotyn revealed that the two most common grade 3/4 adverse events were thrombocytopenia (low platelet count) (32% of patients) and mucositis (22% of patients) while 26 patients discontinued pralatrexate due to adverse events, including mucositis (6%, the primary cause for discontinuation) or thrombocytopenia (5%).

3.) YM BioSciences (AMEX: YMI) is a Company that I wrote about in early August while the stock was trading around 60 cents and below its cash value.

4.) Finally, Spectrum Pharma (NASDAQ: SPPI) is another small / micro-cap cancer biotech which has both approved and development-stage cancer products.

Recent deals in the cancer biotech space include Cougar Biotech, Medarex, and a hostile offer for Facet Biotech (NASDAQ: FACT) from Biogen Idec (NASDAQ: BIIB) and my Emerging Cancer Diagnostic / Therapeutic (Dx / Tx) stock index is the top performing index among the 11 Health Trend Stock Indexes that I have created, revised, and tracked over the past few years that are now being tracked at the Investars YOU website.

Recent weakness in shares of Access may be due to the liquidation of all / most of about 850,000 shares related to the MacroChem acquisition – representing bridge loan holders of MacroChem that received restricted stock of Access with a cost basis of $1 per share. This liquidation of shares represents about 10% of the estimated tradable float for Access of approximately 8-9 million shares, according to Access / SCO Capital Chairman, Steve Rouhandeh.

Also, MuGard is being evaluated in about 1,000 patients in Europe (Germany, Italy, U.K.) by SpePharm in multiple post-marketing studies that include 7-week treatment cycles. A steady stream of data is expected by Access over the next three months (starting in less than a month), including final results from the previously announced U.K trial interim results.

Click on the following link for the stock research section of BioMedReports.com to view or download my latest 19-page PDF research report for Access Pharma published in mid-August, which includes an earnings model for MuGard through 2012 and key upcoming catalysts for the Company that are expected to unlock substantial shareholder value. The stock research section also includes an updated report for Access written by Griffin Securities with a buy rating and $11 price target in addition to the most recent corporate presentation for the Company. Check out Access Pharma's Newsroom site for a compilation of links, videos, presentations, articles, and social media sites for the Company and its executive leadership team.

Disclosure: Long ACCP.OB

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