Sunshine Heart - A Speculative Biotech Play For Substantial Short-Term Gains

Summary

• Sunshine Heart develops the C-Pulse device for HF (Heart-Failure) patients. C-Pulse showed outstanding clinical results in the US feasibility study, and EU study, including improvement in HF condition, and recovery.
• Heart Failure is poorly treated, resulting in 5 year mortality rate of 60%. C-Pulse targets a huge unmet market of 5.2 million patients in relatively progressed HF stages.
• Slow enrollment in the US pivotal trial (the equivalent of an FDA phase III trial), and circumstantial pause and resumption of trial enrollment have lead to dwindling cash.
• SSH share price fell rapidly, fueled by panic, tax purposes selling, inability to raise additional cash, fears of approaching bankruptcy, and a poison-pill mechanism preventing an otherwise likely take-over.
• Sunshine Heart basically has no other option but pursuing a strategic move soon, that is explored in this article, and can result in substantial gains in the next 6 months.

The Opportunity

In this article I describe a speculative play opportunity, that I estimate based on analysis, can likely result in substantial gains over the next 6 months, due circumstances that basically mandate Sunshine Heart's management to pursue a strategic deal, such as licensing, a strategic investment, or an acquisition.

Sunshine Heart (NASDAQ:SSH) has been the topic of many articles on Seeking Alpha: Robert Honeywill published many very good and informative articles in the past few years, and several additional authors took note of the impressive opportunity and published articles as well.

Sunshine Heart's share price plummeted from $11 two years ago, to $6 in February 2015, and to the $1.00 - $1.40 range in the past few weeks. The current market cap of Sunshine-Heart is miniature, in the $20M-$25M range, and is based on investors' belief that bankruptcy is approaching fast, due to the company's dwindling cash balance, and inability to raise sufficient amount of additional needed cash using a secondary offering (even if the current share price would hold in the face of a secondary offering, a higher than 100% dilution in the number of shares would be needed in order to raise cash just for 1 year of operations). The current SSH share price is therefore currently largely disconnected from the potential future value of the company's C-Pulse device, for Heart Failure patients.

This large disconnect is especially striking, considering excellent results C-Pulse showed in the US feasibility trial of 20 patients, and EU Option-HF trial of 15 patients, which both showed improvement in Heart-Failure condition in more than 60% of the patients, and even recovery in 25% of the patients. The weight of these excellent results can be further appreciated in the face of the poor treatment currently available to Heart-Failure patients that only slows progression, or provides a temporary relief by making the

Analyst’s Disclosure:I am/we are long SSH. 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.