Cerus: An Unknown Gem That's Primed for a Boost

May.18.10 | About: Cerus Corporation (CERS)

Cerus (NASDAQ:CERS) is unknown to most, but its technology and main product, the INTERCEPT System, is of importance to more people on the planet than Coca-Cola (NYSE:KO), Intel (NASDAQ:INTC) chips and perhaps Treasury bills.

Intercept cleans blood platelets of almost everything, making the supply of platelets donor independent. Today Cerus and the Whittemore Peterson Institute published the results of joint research effort showing INTERCEPT inactivated the XMRV virus. XMRV has been anecdotally linked with Chronic Fatigue Syndrome (CFS). For this reason, the UK, Canada, New Zealand and Australia have banned patients with CFS from giving blood. These results proves the widespread applicability of INTERCEPT to many known and unknown pathogens. Complete results may be presented at the American Association of Blood Banks conference in October.

I have written about Cerus before and I view the company as a “short” on the blood supply, especially in the US. INTERCEPT is being adopted in many European countries, notably France, Germany, Belgium and Switzerland. However, the company is still negotiating with an embarrassingly reluctant FDA for the design of a Phase III trial. A few weeks back a lone statistician held up approval of a new trial design, due to the fact that their successful Phase III results were rejected a few years back due to amorphous safety concerns that have not fazed more progressive – and at the same time, more conservative – European regulators. I believe the company will eventually get the FDA to agree to a new trial in the US.

Cerus is also moving forward to bring INTERCEPT to a much larger market: red blood cells. The company successfully completed a Phase I trial and is moving forward as rapidly as is possible to get to Phase III and marketing approval.

Few analysts follow the stock, which is one reason it is relatively unknown. One house has a target price of $5; I think the company will turn profitable next year and even without a US approval could be worth $8-$11 a share in two to four years based on the market adoption rates seen in Europe and other parts of the world. Short-term potential catalysts include a FDA approval for a Phase III trial design for INTERCEPT for platelets, movement to a Phase II or directly to a Phase III trial for red blood cells, signing a partnering agreement for the red blood cell development or even for INTERCEPT for platelets in the US and the publication of the XMRV study results in October.

Disclosure: I recommend the stock in my service and own shares, they are my second largest holding.