Congratulations to the Zalicus (ZLCS) team for doing what few biotechs do. What am I thinking of? Delivering on a promise. CEO Corrigan promised investors that Synavive's Phase 2B trial would start by Q2 end. He delivered on that promise (click here). That deserves praise.
Which is why I am strongly encouraging investors to read a stellar instablog post by Zacks analyst, Jason Napodano (click here). Mr. Napodano has provided straight-forward analysis on Zalicus including a $4 price target. But I will add my own comment: Synavive's Phase 2B clinical trial design is among the best I've seen. Having studied the full range of prior Synavive clinical studies, Corrigan's team has created a trial design that if successful will qualify once/day Synavive for Phase 3. I am that confident. Furthermore, the funding for the trial was secured at the end of last year, so it is full speed ahead.
Yes, Synavive's Phase 2B clinical trial is under-way, but equally if not more importantly to market movers, there are four very serious points of information that explain how under-valued Zalicus share price is. That's why I call it a grand slam.
The first issue concerns publicized comments written by Zacks analyst Jason Napodano in various Seeking Alpha articles. He has repeatedly asserted that he is knowledgeable of Sanofi (SNY) moving Prednisporin forward. I for one have privately (e.g. email) and publicly questioned Mr. Napodano about his assertion (click here) and (click here). His source his own, Mr. Napodano repeatedly expresses a very favorable view regarding Prednisporin going forward. Meanwhile, Zalicus officials refuse, perhaps for legal reasons, to answer. Frankly, it would go a long way if Zalicus answered this key question for its shareholders, but maybe they can't and for good reason. Nevertheless, this appears to be great news and beyond speculation given Zacks' analyst Jason Napodano continues to make this ascertain. And I for one, trust Mr. Napodano. Therefore, in my opinion, Zalicus shareholders have very exciting news on the horizon.
The second issue regards the Q2 revelation that Zalicus, per the CEO's comments, has been doing what it can to get Covidien (COV) to file the necessary paperwork to deliver a 32mg version of Exalgo into the market. Apparently the safety data is complete. The question is, has Covidien done this? I'd like to know and so would fellow investors. Covidien, as we all know, may be selling its pharmaceutical division and Exalgo is clearly its number one trophy. Furthermore, according to CEO Corrigan, the 32mg version will add tremendous value to Exalgo sales, which in turn will benefit Zalicus. This story needs to be watched.
The third issue is the carefully guarded ion channel program. I have word that Zalicus plans to announce Z160 will enter Phase 1 clinical studies in September, and Z944 in Q4. Let's just say Zalicus is firing on all cyclinders and an array of patents that have been filed reflect the guarded approach Zalicus is taking to protect its proprietary knowledge under CSO Terrance Preston Snutch's leadership. My single disappointment was not having a front-row seat to hear Dr. Snutch address an audience of key pharmaceticals leaders in Philadelphia in June, and I could add Dr. Short's presentation on Zalicus's cuHTS technology. What does the "u" or "ultra" mean for Zalicus's future? I know investors are asking. Finally, move aside Z212 (the early sodium channel candidate) because Zalicus has already discovered a handful of improved sodium channel candidates. This must be the "army" Drs. Corrigan and Snutch alluded to in Q1.
The fourth issue is the kind of news that makes investors and market movers sit up and take notice. The market is yet to digest this information. It was discovered in June that Novartis (NVS) filed a patent for multiple myeloma (click here). Given Zalicus's Drs. Lee and Rickles work on multiple myeloma which for a time included a brief collaboration with Clinical Data Inc [acquired by Forest Laboratories (FRX)], the Novartis patent immediately pointed to Zalicus's work with dexamethasone in combination with other variables. But this aside, the bottom of the patent reads: "Data analysis was performed using the Chalice software developed by CombinatoRx (Zalicus Inc., Cambridge, MA, USA)" (Ibid). According to my read of the Novartis-Zalicus contract, Zalicus could earn a milestone up to $58M for each (Note: "each") indication, and if Zalicus shares proprietary space with Novartis--and I submit older Zalicus/CombinatoRx patents strongly suggest this (click here) and (here) and (here) and (here) and (here) and (here) and (here) and (here). Wow! That is what we call a very robust patent estate, so whatever Novartis is up to, expect Zalicus and its shareholders to profit in a very big way. Furthermore, shareholders will be eager to learn that along with Amgen (AMGN), apparently Eisai Company is also engaged in a pilot cHTS or cuHTS trial run, and I conclude there are others Zalicus is not disclosing.
Now what is the share price doing other than giving Zalicus LONGS a momentary headache? I have read that up to 5 million shares may be short, but I also agree with those who have noticed how closely Zalicus has been tracking the Russell 2000 Index. As of this report, Zalicus is just below the 50 moving day average, and it recently broke North after heading South following a very defined head and shoulders pattern. This means Zalicus is poised to retest $3.20. In my estimation, if the Novartis situation comes to light, the pop in the share price will be reminiscent of what recently happened with Icagen (ICGN) and Pfizer (PFE) -- a story I think Zalicus and Novartis could closely parallel.
Therefore, I am issuing a STRONG BUY on the information I have very carefully researched including all referenced documentation.
Disclosure: I am long ZLCS.