AspenBio Pharma, Inc. (APPY) is focused on obtaining the Food and Drug Administration (FDA) clearance for its lead product, AppyScore, which is a unique blood-based test in the final stages of development. AppyScore is designed to help physicians manage the large number of children and adolescents who enter emergency departments of hospitals each year complaining of abdominal pain, many suspected of having acute appendicitis. Abdominal pain is a high-volume, potentially high-risk complaint, which represents one of the main reasons for emergency department visits. Acute appendicitis is the number one reason for emergency abdominal surgery.
"At AspenBio we believe there is a significant unmet clinical need which has been consistently affirmed by numerous emergency physicians for a simple blood test to be used when signs and symptoms of acute appendicitis are present that can provide physicians with an objective test to aid in the identification of patients that are at low risk for the disease. A negative AppyScore test result could be helpful to physicians in determining if certain patients should be conservatively managed and thereby potentially avoid exposure to radiation from a CT scan."
I see at least six reasons to buy the stock currently:
1. Management team has been buying shares recently
- Stephen Lundy recently purchased 4,000 shares on June 29. Stephen Lundy was appointed to the positions of Chief Executive Officer and President on March 24, 2010. Effective on the same date, he was appointed to the company's Board of Directors. Mr. Lundy has more than 20 years of experience in drug and diagnostic product development and commercialization. He was Chief Executive Officer of MicroPhage from 2008 to 2010.
- Jeffrey McGonegal CFO purchased 5,000 shares on June 28 and currently holds 13,622 shares of the company.
- Gregory Pusey, a director and officer, purchased 2,000 shares on June 29 and currently holds 31,795 shares of the company.
- Michael Merson purchased 1,000 shares on June 29 and currently holds 1,180 shares of the company. Mr. Merson is chair of the nominating and governance committee and sits on the audit committee of AspenBio Pharma.
2. The company intends to commence an FDA pivotal trial in the third quarter of 2012 and seek a CE mark for marketing AppyScore outside the United States in the second half of 2012
The company plans to finalize the conversion of the AppyScore from a single marker test to a multi-marker reader cassette system blood test and submit a pre-investigational device exemption (pre-IDE) application to the FDA in the third quarter of 2012. This submission is intended to document the planned regulatory path for AppyScore and seek regulatory guidance on the statistical analysis plan and protocol for the planned clinical trial. Subsequent to the meeting, the company expects to commence a pivotal clinical trial in the fall of 2012. Following the conclusion of the trial, the company plans to submit the trial results to the FDA and, if successful, launch the product in the United States after FDA clearance. The company expects to file for a conformity mark for product conformity under the European Economic Area (CE mark) for the product in Q3 or Q4 of 2012, which would potentially enable the company to initiate marketing of AppyScore in the European Union, where a pivotal trial is not required.
If the company obtains FDA clearance or approval, it plans to commercialize the product in the United States through a small direct sales organization, supplemented by distributors as necessary. The primary revenue will be generated through the sale of disposable test cassettes, which would be used for each patient tested. The company anticipates the AppyScore instrument will be moderately priced and is exploring options to either sell or lease the instrument to the hospitals. The company expects to market the product outside the United States through either a network of specialized distributors or partners.
3. Prior pilot study of AppyScore shows promise
In 2011, the company conducted a pilot study of the AppyScore multi-marker test in 11 hospitals in the United States and enrolled 503 patients between the ages of 2 through 20. The pilot study evaluated the use of multiple biomarkers for the AppyScore test configuration and demonstrated appreciably better results than the single-marker test evaluated in the company's previous studies. Based upon the pilot study, the panel for AppyScore was determined to comprise three biomarkers; the company's patented MRP 8/14 biomarker and CRP, along with WBC. The concentration in blood or plasma of each of these components was measured and the results were analyzed using a proprietary algorithm.
The following data, which was presented March 16-17, 2012, at the West Region meeting held in Las Vegas, NV, and March 21, 2012 at the Northeastern Region meeting held in Springfield, MA, of the Society for Academic Emergency Medicine (SAEM) summarize the results of the pilot study:
AppyScore Multi-Marker Study Result
95% Confidence Interval
92.1 - 98.5
38.2 - 48.3
92.9 - 98.7
The study data demonstrated high sensitivity and high negative predictive value (NPV) similar to other adjunctive tests currently used by physicians to manage and aid them in ruling out diseases. These performance attributes should provide the physician with incremental diagnostic information that the company believes will enhance its decision-making process when it comes to evaluating possible appendicitis. By way of example, with an NPV of 96.9%, the physician could be 96.9% confident within the confidence interval that the patient did not have the disease, based upon these results. The potential value of the AppyScore test is its ability to aid a physician in his evaluation of possible appendicitis to pursue a more conservative treatment path. The AppyScore's study results are in line with other in vitro diagnostic tests approved for and currently in use in the market today to assist clinicians in their ruling out of disease conditions. Clinicians interviewed have indicated that this performance would be helpful to them in managing low-risk patients suspected for appendicitis and potentially decrease their overall use of computed tomography (CT) scans.
4. AppyScore has no competition currently
The company is aware of no specific blood test that is cleared by the FDA for the purpose of aiding in the evaluation of appendicitis and is not aware of any current competitors in this area. The company expects the main benefit of AppyScore will be to provide the physician with objective information that will aid in the identification of patients at low risk for appendicitis and thereby potentially reduce the number of expensive and potentially hazardous CT scans that are frequently performed on these patients. In addition, the company believes the test will potentially save significant costs through both the reduction of CT scans and improved patient throughput in crowded emergency departments.
5. Blockbuster market potential
Data obtained from the Centers for Disease Control and Prevention (CDC) Public-use Data Files (1973 - 2009) indicates that more than 9.5 million total patients visited U.S. hospital emergency departments in 2009 with the primary complaint being abdominal pain. More than 3.1 million of these patients went on to receive a CT scan. Approximately 300,000 cases of appendicitis were indicated. The company's research indicates that a significant reason for ordering the CT scan is to aid in the rule in or rule out of appendicitis. In 2007, the New England Journal of Medicine published a study, which concluded that CT scans confer a significant increase of cancer risk, particularly when administered to young patients. Physicians the company surveyed have indicated that a blood test to aid them as they evaluate patients suspected of appendicitis would have great value.
6. Stock trading at historically low valuation
AspenBio is trading at historically low values. There is no question that there is a significant market opportunity for the company. The most recent study demonstrated test results that would be beneficial to physicians and patients. Previously, the market has valued the company as high as $400+ million and it is now trading at <$20 million with a significant portion of that in cash from the recent financing.
There are a number of short and medium-term catalysts for the stock, including the potential CE mark approval for AppyScore in Europe later this year, commencement of a pivotal clinical trial, results from the trial, assuming satisfactory results - submission of the FDA filing, clearance and the subsequent product launch in 2013.
Disclosure: I am long APPY.