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Bret Jensen
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Editor for The Biotech Forum, the #2 subscribed to Marketplace investment service offered through SeekingAlpha. Top 5% ranked analyst (TipRanks) since 2013. Daily contributor for Real Money Pro. Hedge fund manager from 2008 to 2011. Previously technology executive at Fortune 100 firm for a... More
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  • CONTRAFECT: $4 Biotech Worth Consideration?

    A Biotech Forum subscriber asked me to do a bit of research on a small early stage biotech called CONTRAFECT Corp. (NASDAQ:CFRX). The company has a limited but very enthusiastic analyst following with a median price target more than three times the current price of the stock. Here is a quick overview I offer up to my real-time followers for consideration.

    Company Overview:

    ContraFect Corporation is a small biotechnology company based in New York with market capitalization of just over $100 million that came public just over a year ago. The stock has spent the entire largely in trading range of ~$4.00 to ~$6.00 a share and is currently trading at the bottom of that range.

    (click to enlarge)

    This company focuses on discovering and developing therapeutic protein and antibody products for life-threatening and drug-resistant infectious diseases in the United States. Its lead product candidates consist of CF-301, a lysin that is in Phase 1 human clinical trials for the treatment of Staph aureus bacteremia, including endocarditis caused by methicillin-sensitive or methicillin-resistant Staph aureus; and CF-404, a combination of human monoclonal antibodies.


    (click to enlarge)

    As can be seen from the chart above, this is an extremely early stage biotech company. Most of its possible pipeline candidates are in research or pre-clinical mode. CF-301 is one compound in early Phase I trials. This compound is a bacteriophage lysin that has the potential to be a first-in-class treatment for Staph bacteremia but it should be emphasized it is very early in the process even as the market potentially could be very attractive.

    Staph infections occur in both hospital and community settings, and in the U.S. there are approximately 120,000 cases annually of Staph bacteremia. Drug-resistant strains of Staph are also now evolving additional resistance against standard-of-care antibiotics, which may ultimately result in increased number of cases and mortality from Staph bacteremia. In August the FDA designated CF-301 for Fast Track review for the treatment of Staphylococcus aureus infections, including MRSA.

    Analyst Commentary:

    I could find only two analysts that cover CONTRAFECT and both are very positive on the company's prospects. They are Maxim Group and Roth Capital, not the A team in the analyst firm community but here are their views. Roth Capital reiterated their Buy Rating and $14.00 a share price target in Mid-August. Around the same time, Maxim reiterated its Buy Rating with a $16.00 a share price target.


    There is not enough out there I can find on CONTRAFECT to recommend this early stage biotech concern as even its conference call transcripts are not available on SeekingAlpha. I will put in on my radar to keep an eye to see if it progresses along its development path. As of the end of the second quarter, the company had some $35 million in cash on hand. However, given its pipeline is very early stage; it could quite possibly come back to markets to raise additional funding in the foreseeable future. Collaboration deals with larger players in the industry could be another avenue to fund development.

    With that, I conclude my quick analysis of this small biotech concern and offer it up for consideration for my real time followers in our instablog feature of the day.

    Thank You & Happy Hunting

    Bret Jensen

    Biotech Forum

    Tags: CFRX, Biotech
    Nov 19 10:03 AM | Link | 1 Comment
  • Cerulean Pharma: An Intriguing $3 Biotech Concern

    One of the first things I do in the morning - other than march down to the local Starbucks for my morning coffee like a compliant slave - is to pop up to see what new ratings top ranked analysts are providing on the myriad equities within the stock market. This is a good way to see what large cap concerns are gaining momentum in the analyst community. More importantly, it is a good way to see some small cap names one might not be currently aware of but could have upside potential and that have been positively tagged by analysts.

    This morning a ranking by a Top 25 Analyst (out of nearly 4,000 financial analysts ranked on the service) from Wedbush caught my eye. The analyst reiterated a Buy rating and $9.00 a price target on a Cambridge MA based biotech called Cerulean Pharma (CERU). This stock currently just goes for just $3.00 a share after being above $10.00 earlier in the year.

    Wedbush did take down their price target from $16.00 a share but the snippet in analyst David Nierengarten's notes caught my eye " The company ended the quarter with $77.6 million in cash and cash equivalents, which the company believes to be sufficient to fund ongoing operations through 2017". Given the stock currently has a just over $80 million market capitalization, you are basically getting Cerulean Pharma for the cash on the balance sheet at these levels. Interestingly, a lesser ranked analyst from Canaccord Genuity maintained his Buy rating and $15.00 a share price target on Cerulean yesterday as well.

    It was enough for me to take a deeper dive on the investment case on Cerulean Pharma. The company is too small and early stage at this point to push out any of the optimized 20 positions in The Biotech Forum, but intriguing enough for me to pick up some shares when the market opens today. Cerulean Pharma has an interesting drug development platform and two early stage drug candidates in the pipeline.

    Development Platform:

    Cerulean's Dynamic Tumor Targeting™ Platform creates it calls NDCs (Nano-particle drug conjugates) which are designed to provide safer and more effective cancer treatments. The company believes these compounds concentrate their anti-cancer payloads inside tumors while sparing normal tissue because they are small enough to pass through the "leaky" vasculature present in tumors, but are too large to pass through the pores of healthy blood vessels. The theory is that once inside tumors, these NDCs will be actively taken up into tumor cells where they will slowly release their anti-cancer payload, providing a durable inhibition of their targets. An NDC consists of an anti-cancer payload that is chemically conjugated to a polymer backbone with a linker.

    (click to enlarge)


    The company has a couple of drug compounds using this technology in Phase I & II testing.

    (click to enlarge)


    The company's most advanced candidate is called CRLX101. This is an NDC with a camptothecin payload. Camptothecin is a potent topoisomerase 1 inhibitor that was too toxic to develop; however, Cerulean has created CRLX101 in the hope this reduces the toxicities associated with this highly active agent, while increasing the payload concentration in tumors. If successful, the marketplace would welcome a better tolerated and more active topoisomerase 1 inhibitor than the current marketed topoisomerase 1 inhibitors. It is believe these inhibitors block the litigation step of the cell cycle, generating single and double stranded breaks that harm the integrity of the genome. Introduction of these breaks subsequently leads to apoptosis and cell death. In addition to inhibiting topoisomerase 1, a commercially validated cancer target, CRLX101 also inhibits HIF-1α, a cancer target for which there are no marketed products that provide durable inhibition. As can be seen from the chart above, this is in the process of several Phase II trials for different types of cancer.

    This morning it was announced the company AstraZeneca (NYSE:AZN) and the National Cancer Institute (NYSE:NCI) have agreed to collaborate on a clinical study assessing the combination of CRLX101 and LYNPARZA (olaparib) in 55 patients with small cell lung cancer. The Phase 1/2 study, expected to commence in the first half of 2016, will be funded and conducted by the NCI with the companies supplying the products.


    CRLX301 is the other NDC candidate in Cerulean's pipeline at the moment. This NDC has a docetaxel payload. Docetaxel is a commercially successful oncology drug that suffers from a poor safety profile that limits its clinical utility. Cerulean is betting that CRLX301 will be differentiated from docetaxel because it is designed to concentrate more docetaxel in tumor cells and spare healthy tissue. This compound is currently in a Phase 1 trial in solid tumor malignancies.

    In preclinical studies, CRLX301 delivers up to 10 times more docetaxel into tumors, compared to an equivalent milligram dose of commercially available docetaxel and CRLX301 was superior to docetaxel in seven of seven animal models, with a statistically significant survival benefit seen in five of those seven models. In addition, preclinical data show that CRLX301 had lower toxicity than has been reported with docetaxel in preclinical studies.


    The company came public in April 2014 as can be seen below has seen higher levels in the market. One year after coming public it did a secondary offering at about twice the current level of the stock. I never buy IPOs unless my broker can give me an allocation on a hot issue prior to coming public - which happens as often as the Cubs go to the World Series.

    (click to enlarge)

    I do like to come back 12-18 months after a company has come public once the hyperbole and lockup expirations have come and gone. Often you get the same company for 30% to 50% of what it was selling for soon after the IPO, which is the case for Cerulean. Usually, little about the underlying company has changed over that timeframe only the sentiment on it by the market.

    I have score many successes this with this strategy including a six-bagger with ZELTIQ Aesthetics (NASDAQ:ZLTQ) which I tagged in 2012 here on SeekingAlpha. Given Cerulean's underlying drug development technology, evolving pipeline, cash on the balance sheet and previous highs when sentiment wasn't as dismal at it is now on the small biotech sector; I think Cerulean at $3.00 a share is worthy of serious look by aggressive investors. SPECULATIVE BUY

    Thank You & Happy Hunting

    Bret Jensen

    Biotech Forum

    For my free 30 page report on why M&A activity in the biotech space will remain strong in 2016, please click here

    Tags: CERU, Biotech
    Nov 18 9:04 AM | Link | 3 Comments
  • It's All About Oil?

    A very interesting piece in MarketWatch this morning before the markets open on how strong the correlation has become between the price of crude and the direction of equities. This correlation has been increasing since the summer.

    The correlation makes some sense if one looks at the price of oil as a good barometer of global growth which currently is at its weakest level since the financial crisis year of 2009. It seems like every time we get down near $40 a barrel, we see pundits coming out projecting oil is going to take its next leg down. Every time crude goes above $50 a barrel, a different set of prognosticators comment this is a beginning of breakout.

    My own view has not changed on the oil market despite these recent gyrations. After some deep analysis which I issued a free 15 page report on early in October, my conclusion is oil is going to remain in a roughly $40 a barrel to $65 a barrel trading range over the next six to 12 months if not longer for myriad supply & demand reasons.

    Given this, I continue to believe investors should look at companies whose stocks are cheap and that will benefit from a much lower range for oil prices than we have experienced over the prior half-decade. One such stock is General Motors (NYSE:GM) which is one of the cheapest and highest yielding stocks in the market at the moment despite robust third quarter results as well as a booming domestic auto market.

    The so called gasoline "tax cut" is shifting the overall sales mix in the vehicle market to higher margin trucks & SUVs. This is one key reason GM's margins will come in better than 10% in North America this year, one full year ahead of the company's goal.

    The percentage of the overall sales footprint currently going to trucks & SUVs is also at its highest level since 2005, a trend that is likely to continue as long as oil trades within my projected range. I do not believe this is reflected in analysts' earnings estimates and one reason the $1.50 a share in profit the company reported this quarter was more than 30 cents a share above the consensus. Look for upward revisions on forward estimates as we close out 2015.

    The stock is paying a ridiculous over four percent yield at the moment, more than the vast majority of stocks in so called "income" sectors like Utilities and Real Estate Investment Trusts (REITs). One reason the company's valuation is so cheap and yield is so high is investors seem to be thinking the company is the same "boom or bust" firm of the past.

    However, GM used its 2009 bankruptcy and the last few years to radically reduce its debt load and pension obligations. The company needed a domestic market running at 15 to 16 million cars a year to produce a profit prior to its transformation, now it can post earnings at 12 or even 11 million vehicles on an annual basis - current domestic production is running north of 18 million at this time, more than one million vehicles over pre-crisis levels. The company is also putting its ignition debacle behind it as competitors like Volkswagen endure their own self-made crises.

    In addition, GM continues to make good money in China despite a recent sales decline in the overall auto market there. New stimulus measures should get that market accelerated in the near future. The company also should see close to breakeven levels in Europe next year, not great but certainly an improvement. South America will remain problematic but is a small part of General Motor's overall business.

    This leaves us with a stock with north of a four percent yield that will see earnings increase more than 50% year-over-year in FY2015 with another 10% to 15% increase projected for FY2016. Despite the growth, yield and improving business fundamentals; the stock is priced ridiculously at 6.5 times forward earnings. A still conservative 10 multiple gets us up to $54.00 a share, a huge increase from the ~$35.00 a share the stock currently exchanges hands at. STRONG BUY

    Note: I encourage readers to leave their favorite stock that will benefit from lower oil prices going forward, maybe it will become a topic for an upcoming instablog post.

    Thank You & Happy Hunting

    Bret Jensen

    Editor/Manager, Biotech Forum

    Nov 17 8:05 AM | Link | 16 Comments
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