Alfacell Gets My Vote of Confidence

| About: Tamir Biotechnology (ACEL)

Alfacell (OTC:ACEL) and Dendreon (NASDAQ:DNDN) were identified by participants in a survey that I conducted earlier in the year which asked for readers’ top emerging healthcare stock pick for 2008 with market caps below $500 million and share prices greater than 50 cents. As a follow-up to one of my first Seeking Alpha articles last June on the Company, I believe that Alfacell will be the top performing stock of those mentioned in my investor survey. In just the last few weeks, the Company has received additional votes of confidence in the form of upfront cash from multiple licensing partners for its experimental cancer drug Onconase.

In mid-January, a Par Pharma (NYSE:PRX) subsidiary, Strativa Pharma, announced an exclusive licensing deal for exclusive marketing, sales, and distribution rights to Onconase for the treatment of cancer in the domestic market. Alfacell retains all rights and obligations for product manufacturing, clinical development, and obtaining regulatory approvals, as well as all rights for non-US markets. Alfacell received $5 million in upfront cash with another $30 million due at FDA approval and provides the Company with up to $225 million in non-dilutive funds in the form of future development milestone payments, royalties on sales, and an option for a co-promotion effort in the future. As a follow-up deal one week later, Alfacell announced a distribution agreement with BL&H Co. Ltd. for the commercialization of Onconase in South Korea, Taiwan, and Hong Kong. Alfacell received an up-front fee of $100,000 and is eligible for milestone payments based on the regulatory and net sales milestones with a generous 50% royalty payable to the Company. Alfacell will manufacture and supply the product to BL&H, but unlike the earlier agreement BL&H will be responsible for all activities and costs related to regulatory filings and commercial activities in the territory.

Alfacell investors are eagerly awaiting the pivotal Phase 3b results for Onconase to support the FDA filing and approval process for an Orphan Drug indication in the treatment of inoperable, malignant mesothelioma – a $300 million global market opportunity versus a current market cap just over $100 million. The drug is also being evaluated in earlier stage studies for non-small cell lung cancer and other solid tumors, which represent even larger market opportunities. Previously announced interim results based on one-third of the required events (deaths) of the study — which evaluates the efficacy, safety and tolerability of the combination of Onconase plus doxorubicin as compared to doxorubicin alone — have been reported and were sufficient to continue the trial as planned. The overall median survival time demonstrated a trend favoring the Onconase plus doxorubicin treatment group (12 months) over the doxorubicin group (10 months).

Alfacell has guided for the following timeline to complete its rolling NDA submission: (1) report occurrence of 316 events (deaths) via press release within 72 hours of confirmation and (2) if data are positive, submit the final clinical section of the Company’s rolling New Drug Application within four months of reporting the 316 events. The timeline for reaching 316 deaths in the Phase 3b trial has been delayed several times already, which may be a good sign for investors if Onconase is responsible for prolonging the patients’ lives in the study and thereby delaying the occurrence of 316 deaths in the trial. I believe the survival benefit trends observed in the interim analyses for Onconase plus doxorubicin will lead to a statistically significant survival benefit for the drug, and the recently announced licensing deals including over $5 million in upfront cash provide me with additional confidence on the pending results and the near-term explosive upside potential for the stock.

Disclosure: Author has a long position in ACEL

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