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Here in 2012, Zalicus (ZLCS) is re-emerging on the biotech scene as a great investment opportunity offering substantial gains. I have put together this highly investigative report to explain why investors need to get in now. My conclusion is that the share price is very under-valued given the information provided in this report. Zalicus deserves fives * * * * * for investors looking for a substantial financial return. I fully expect Zalicus to be the 'come-back story' of 2012.

1. Strong Research Partnerships. The company has multiple shots on goal and the Novartis (NYSE:NVS) collaboration highlights the versatility and novelty of Zalicus' cHTS - Chalice technology, as for example one invention filed by Novartis has yielded:

  • "The present invention has a therapeutic use in the treatment of cancer, particularly retinoblastoma protein (retinoblastoma tumor suppressor protein or pRb) positive cancers. Types of such cancers include mantle cell lymphoma, pancreatic cancer, breast cancer, non small cell lung cancer, melanoma, colon cancer, esophageal cancer and liposarcoma."

In fact, Novartis now has four invention filings as a result of the Zalicus collaboration:

  1. Combination... For Treating Cancer (Ibid)
  2. PKC Inhibitors... B-Cell Receptor Signalling
  3. Use of a PKC Inhibitor
  4. Method for Treating Haematological Cancers

As an aside, Zalicus recently added to its intellectual property with another combination medicament: Methods and Reagents for the Treatment of Immunoinflammatory Disorders. This may suggest that Zalicus has a new project flying below the market radar. Meanwhile, Dr. Corrigan continues to mention that Zalicus is working with biopharma giant Eisai and we already know about other government contracts.

Bull Run Coming, Here's why

2. Technical Indicators. Looking at the charts, the market has positioned Zalicus for a renewed bull run. The narrowing bollinger bands, a pennant formation with lower lows, the 50 day moving average looks like it's nearing the time where it will turn upward and re-cross the 200 day moving average. Where it stands right now, Zalicus should be trading in league with AEterna Zentaris (NASDAQ:AEZS), YM Biosciences, (YMI) and Astex Pharmaceuticals (NASDAQ:ASTX), or the $1.40 - $2.25/share range. The bear raid in August 2011 was an over-reaction and retailers have an unbelievable opportunity to get in for just above $1/share.

3. New Collaboration with Hydra Biosciences. The news of late coming out Zalicus is impressive. The company has maintained its near $50M cash reserves and I hear CEO Corrigan mentioning Eisai in the same breath as Novartis that as I have pointed out in past articles, Novartis has used Zalicus' cHTS-Chalice technology towards its own cancer research. But of greater significance is this strategic partnership or alliance, whatever you might want to call it, with Hydra Biosciences for sodium channel pain research with a most curious connection to Cubist Pharmaceuticals (NASDAQ:CBST) where Zalicus CEO Corrigan sits on Cubist's Board of Directors. I'd suggest that Cubist is the probable collaboration partner for Zalicus' ion channel program once Z-160 moves into phase 2a. Actually, I see a tri-fold unification unfolding between Hydra-Cubist-Zalicus.

4. On-Schedule 'SYNERGY' trial. Credit also goes to Zalicus management for the forward advance of the Synavive 'Synergy' phase 2B clinical trial that was recently updated on clinicaltrials.gov that is set to wrap-up in mid-summer with data following shortly thereafter. There's been no delays and expectations are running very high for the reformulated low-dose disassociated steroid that targets a large market space for rheumatoid arthritis. I also hear Dr. Corrigan already talking about European partnerships suggesting to me that there is keen interest in Synavive's low-steroid efficacy coming in at a low affordable cost, as well as the opportunities in the North and South American markets. That is another reason why getting in for ~$1/share is one of those rare opportunities to beat what I suspect will be a run-up going into news. A savvy investor would be getting Zalicus shares at bargain-basement prices, and one analyst told me he expects the share price to go over $2/share on Synavive's success. My read is the stock price will creep above $1.40/share going into summer, if not higher.

5. Prednisporin & Exalgo. I also see another pps stimulus in the expected announcement that will come from Sanofi (NYSE:SNY) that Zalicus-licensed Prednisporin is entering phase 3 clinical studies for allergic conjunctivitis. My reasoning is Dr. Corrigan's recent comment that Sanofi's own CEO Viehbacher expects Prednisporin to enter the market in 2015. Well, if that's true and I have no reason to doubt Viehbacher at Sanofi, then Zalicus is not only going to get that treasured $3M milestone payment, but more importantly, an announcement like that will improve the market's perception of Zalicus as a front-runner biopharma. I've also heard Dr. Corrigan say that Exalgo is the lead drug for the spin-off firm coming out of Covidien (NYSE:COV); I expect this will be the year where investors will see exponential sales growth including higher dosages that will capture greater market share. My point is: Prednisporin and Exalgo will add color and reason why Zalicus' share price is poised for a bullish run. But there is much, much more to say...

6. Leaner & Meaner. Zalicus, the 'leaner and meaner' firm that strategically closed its Vancouver location, masterfully turned to Hydra Biosciences, and is focusing its operations out of Cambridge MA, the hub of cancer-research. Hydra Biosciences has the expertise to ramp up Zalicus' sodium channel pain research. So not only does Zalicus have Synavive, Exalgo, and Prednisporin, but it has re-emerged in the ion channel pain-relief space of clinical research. This excites me especially as I watched Pfizer (NYSE:PFE) welcome Icagen into its pharma family because the market opportunity for new pain medicines is a multi-billion dollar pie. I think if Zalicus gets to where I think Z-160 is taking them, you will see this firm swept up in a heartbeat by a much larger biopharma. I have also observed that Dr. Corrigan mentions Convergence spun out of Glaxo-Smith-Kline (NYSE:GSK), so the research space is highly competitive. The point here is, Zalicus has strategically maneuvered its resource into a highly focused collaboration with Hydra and I expect we're going to see much more come out of this new relationship.

7. Z-Z's on Top. Of recent, I was genuinely excited by Dr. Corrigan's update on Z-160 (the company's lead N-type pain blocker) reported at the Cowen Group Healthcare Conference. I would strongly encourage every investor to take the time and listen to his presentation, especially the chart he talks about on slide #14. Zalicus has a achieved a very bullish milestone and as market investors discover this, I expect increased volume activity and upward stock momentum.

I think Z-160 will be Zalicus' #1 block-buster pain drug.

In simple terms, Z-160 out-performed morphine and Gabapentin in a clinical test called the 'Spinal Nerve Ligation Model (Chung) of Neuropathic Pain' among other tests. This is a top-line study generated by ion channel world leaders.

Forgive me for expressing a little emotion, but I'm still pinching myself having learned that Z-160 bettered two of the world's most recognized bazookas of pain relief: morphine and Gabapentin.

Now that we know that Z-160 successfully completed phase 1 clinical studies and is moving into phase 2a, I can understand why Dr. Corrigan was so upbeat at Cowen. Please take the time to view this presentation. I for one think Zalicus has hit 'pay-dirt' with Z-160 as phase 1 results were stellar. Knowing that Z-160 is reformulated NMED-160 (thanks to German chemists) that was already tested in ~200 patients, I have very high expectations for Z-160. My reason focuses on the success of phase 1 and two scientific tidbits from the animal studies: (1) Z-160 did not adversely affect the 'rotarod' (motor coordination) of the test mice, and (2) the following comment by Dr. Corrigan: "what's remarkable is that across all the"... (pain models: Corrigan lists them [e.g. cold allodynia, analgesia, etc.]) ... "the signature sine curve is associated with an active pharmacologic agent". Meaning, it works! And then Dr. Corrigan stated: "That's the sine curve you're going to see for almost all approved drugs" and to that I add: that comment is coming from a man who is hardly given to hyperbole and has an expert history in drug development. I interpret Dr. Corrigan's comments as very bullish. Retailers should contact the company directly about these recent developments.

The addition of Z-944 would give Zalicus two block-buster pain drugs with multiple applications such as epilepsy.

The company has also registered a major patent for Z-944 (T-type blocker) that includes a potential application for epilepsy. Add to all of this the sodium channel work ongoing at Hydra Biosciences, Zalicus is well on its way to a very impressive pain-blocker portfolio. In fact, very recently the company released another scientific paper on its T-type research entitled 'T-Type Calcium Blockers...'. Looking forward, adding a sodium channel pain blocker to its portfolio would definitely position Zalicus as the world leader in ion channel research.

Zalicus Back on Top in 2012

Based on my hours of due-diligence, I concluded that at ~$1/share, Zalicus is going for a bargain basement price. The greatest foreseeable risk is Synavive's phase 2B results though the reformulated version tempers my apprehension. The Wedbush activity is keeping Zalicus well-capitalized and making ~$1/share an easy entry point for investors; on historic knowledge of past Zalicus-Wedbush activiities, I perceive this will conclude very soon and that may also fuel a strong upward climb in the share price. We already know that Z-160 will enter phase 2A clinical studies. Dr. Corrigan is on record that they expect Sanofi to enroll Prednisporin for allergic conjunctivitis into phase 3 clinical studies and hearing that Exalgo is the lead drug for Covidien's spin-off firm, I perceive that as a market revenue positive. Should Z-944 successfully complete phase 1 clinical studies, investors will wish that they bought ZLCS for ~$1/share because on this much corporate synergy, the share price will be well over $2/share if not much higher before year end.

Finally, investors may also benefit from my previous coverage including my earlier analysis of Z-160 as a major catalyst going forward. I think Zalicus is a STRONG BUY.

Source: 7 Bullish Reasons To Buy Zalicus Right Now