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Grant Zeng, CFA
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Grant Zeng has over 10 years of professional experience in equity research and analysis. Grant joined Zacks Investment Research Inc. in March 2006, and currently is a senior equity analyst covering biotech/pharma industry. Before joining Zacks, Grant worked for as a biotech analyst... More
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  • Current Decline In Share Price Is An Opportunity To Accumulate Shares

    Balance Sheet Boosted By Public Offering

    On February 13, 2013, Novelos Therapeutics (NVLT) announced the pricing of a public offering of 11,000,000 units at $0.50 per unit for gross proceeds of $5,500,000.

    Each unit consists of one share of common stock, a Class A Warrant with a one-year term to purchase one-half of a share of common stock at an exercise price of $0.50 per share and a Class B Warrant with a five-year term to purchase one share of common stock at an exercise price of $0.50 per share.

    We think this financing is positive to the Company in general. Although this public offering dilutes shareholder base, it greatly boosts the Company's balance sheet.

    At the end of September 2012, NVLT had cash and cash equivalents of $5.6 million. With the $5.5 million gross proceeds, the Company should have about $6.5 million in cash as of today. Current cash will last into 3Q13.

    On Nov. 5, 2012, Novelos announced the closing of a private placement of equity securities to an affiliated entity of Renova Group for gross proceeds to Novelos of $2 million. Novelos has earmarked the proceeds for the build-out of an in-house clinical-stage manufacturing facility for I-124-CLR1404 (LIGHT). The facility is expected to be completed in about one year and is expected to cost approximately $3 million. The build-out of an in-house clinical-stage manufacturing facility for LIGHT is a key strategic initiative as the Company moves toward larger Phase II and pivotal LIGHT imaging trials. NVLT already has an operational in-house clinical-stage manufacturing facility for HOT.

    The financing will accelerate the development of the Company's LIGHT, HOT and GLOW2 cancer diapeutic programs, which are all progressing well. Current share price decline may be a good opportunity to accumulate NVLT shares.

    Diapeutic Technology Platform Presented at EMIT: Targeted Radiotherapy Conference

    On January 31, 2013, Novelos Therapeutics (NVLT) presented an oral presentation on research conducted by Novelos and its collaborators at the EMIT: Targeted Radiotherapy international conference taking place January 29 to 31, in Washington, D.C.

    This presentation by invitation from EMIT describes the mechanistic foundation for Novelos' diapeutic (diagnostic + therapeutic) technology platform together with animal data and initial findings in advanced cancer patients that demonstrate selective and prolonged accumulation of Novelos' PET imaging I-124-CLR1404 (LIGHT), therapeutic I-131-CLR1404 (NYSE:HOT) and optical imaging CLR1502 (GLOW2) compounds in a range of tumor types. The presenter is Dr. Chris Pazoles, who is the Senior Vice President of Research and Development for Novelos.

    NVLT's LIGHT, HOT and GLOW2 have been designed to exploit a feature shared by most, if not all cancer cells including cancer stem cells, which results in the selective uptake and prolonged accumulation of the Company's proprietary, small-molecule delivery vehicle in a wide range of malignant tumors compared with normal tissues. By incorporating a unique functional property in each - PET imaging, radiotherapy or optical imaging, NVLT has generated an array of potential therapeutic and diagnostic products that could, alone or in combinations, significantly improve the detection and treatment of cancer in multiple ways.

    Novelos' diapeutic platform, which includes cancer-targeted PET Imaging, therapeutic and optical Imaging Compounds, offer broad-spectrum diagnosis and treatment for solid tumors.

    (click to enlarge)

    The presentation is titled "Cancer-Targeted Diapeutics: Radioiodinated Phospholipid Ether Analogs for Broad-Spectrum Imaging and Therapy". Dr. Pazoles presented data showing that LIGHT, HOT and GLOW2 all share a common cancer-targeted core chemical structure. Each attaches a unique moiety to this delivery vehicle - LIGHT, a PET imaging agent (iodine-124), HOT, a radiotherapeutic agent (iodine-131) and GLOW2, an optical imaging agent (near-infrared tracer).

    • Results described with LIGHT demonstrate broad-spectrum tumor PET imaging in dozens of animal tumor models, and recent human findings from ongoing Phase I/II clinical trials show selective uptake and retention by primary tumors and metastases in advanced non-small cell lung and brain cancer patients.
    • HOT results shown include single-dose efficacy in a wide range of animal tumor models, and clinical trials to date demonstrate selective accumulation in cancerous tumors, including metastases.
    • Dr. Pazoles' presentation highlights the potential diapeutic application of LIGHT and HOT, based on their chemical identity, to provide individualized treatment to cancer patients. For example, LIGHT serves as an ideal biomarker to potentially identify patients most likely to benefit from therapy with HOT.
    • Dr. Pazoles' talk also describeed how selective uptake of GLOW2 could provide better definition of tumor margins in real time during cancer surgery, enabling more complete and selective removal of malignant tissue and potentially improving patients' prognosis. Data illustrating the potential use of GLOW2 for non-invasive detection of tumors was also featured.

    We believe Novelos' platform technology has great potential for cancer imaging and therapy, which can be used in various cancer types.

    NVLT is making good clinical progress with LIGHT and HOT across multiple human trials while advancing GLOW2 towards human trials. With all these progresses made in the past few months, we believe Novelos' share price deserves further appreciation.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Feb 14 8:28 AM | Link | Comment!
  • Galena Biopharma: Clinical Programs Remain On Track And Valuation Is Attractive

    Balance Sheet Boosted by New Equity Financing

    On December 18, 2012, Galena Biopharma (NASDAQ:GALE) priced an underwritten public offering of 15,156,250 units at a public offering price of $1.60 per unit with total gross proceeds of $24.25 million.

    Each unit consists of one share of common stock, and a warrant to purchase 0.5 share of common stock at an exercise price of $1.90 per share. The warrants are immediately exercisable and expire on the fifth anniversary of the date of issuance. The shares of common stock and warrants are immediately separable and will be issued separately.

    Galena intends to use the net proceeds from the offering to conduct its ongoing Phase III clinical trial for NeuVax, its Phase I/II clinical trial for Folate Binding Protein-E39 (NYSE:FBP), the planned Phase II clinical trial for NeuVax in combination with trastuzumab (Herceptin®), as well as for general corporate purposes.

    Although the equity financing dilutes existing shareholder base, it greatly boosts the Company's balance sheet.

    As of September 30, 2012, Galena had cash and cash equivalents of $15.4 million. We estimate cash burn for the 4Q12 will be about $6 million. With this new financing, current cash balance should be around $35 million, which could last into the second quarter of 2014.

    Also, in connection with the RXi spin-off on April 27, 2012, approximately 67.0 million shares of RXi common stock were distributed as a dividend to the Galena shareholders, representing a net liability position of $2.2 million at historical cost. GALE retained a 4% interest in RXi, or approximately 32.7 million shares of RXi common stock, which is carried at historical cost, effectively zero, at June 30, 2012. The market value of the RXi shares held by Galena at Jan 8, 2013 was approximately $3.0 million.

    GALE Presents Final Landmark 60-Month Results From NeuVax Phase I/II Trials

    On December 7, 2012, Galena Biopharma (GALE) presented data from the completed SN-33 trial and final results from the Phase I/II trials of NeuVax (nelipepimut-S or E75) for breast cancer at the 35th Annual CTRC-AACR San Antonio Breast Cancer Symposium.

    Overview of the Phase I/II Trails

    The Phase I/II trials of NeuVax included SN-33 (Node Positive, n=97) and SN-34 (Node Negative, n=90), which evaluated a combined 187 patients with 108 in the vaccine group (NYSE:VG) and 79 in the unvaccinated control group (NASDAQ:CG).

    (click to enlarge)

    The Rational for Booster Inoculation

    Patients were initially given a series of up to six inoculations of NeuVax once a month. As the trials progressed, the physicians noticed that E75-specific immunity waned after this initial monthly primary vaccine series (PVS) and translated to late recurrences of cancer in some patients. As a result of this finding, a voluntary booster program was added to the trials to maintain long-term immunity following the initial monthly PVS.

    The booster program offered patients an additional inoculation every six months with a maximum of six boosters. Because the booster program was voluntary, not all women chose to receive the full six additional doses.

    (click to enlarge)

    The Combined SN-33 and SN-34 Results

    Trials SN-33 (NYSE:NP) (n=97) and SN-34 (NN) (n=90) enrolled clinically eligible patients who were rendered disease-free after completion of standard of care multi-modality therapy (n=187). Treatment assignment was then based on HLA type, with HLA-A2/A3 patients vaccinated and HLA-A2/A3 negative patients followed prospectively as controls for recurrence. NeuVax exhibited an excellent safety and tolerability profile, and demonstrated a durable response out to 60 months:

    • Maximum toxicity for all inoculations produced primarily Grade 1 and some Grade 2 toxicities, with injection site reactions and fatigue most common. No serious adverse events (SAEs) or cardiotoxicity were reported.
    • At 24-month: 94.3% of NeuVax patients were disease-free versus 86.8% of patients on the control arm (p=0.08).
    • At 60-month: 89.7% of NeuVax patients remain disease-free versus 80.3% of patients on the control arm (p=0.077)--a recurrence reduction of 47.7% among all patients at any dose. Multiple dose response analyses underscore the efficacy of the vaccine with statistical significance being achieved among the optimally-dosed and boosted patients.

    The SN-33 HER2 Negative Booster Results

    SN-33 was conducted in node positive patients, and was well balanced between the two arms: Vaccine HLA-A2/A3 positive (n=53) vs Control HLA-A2/A3 negative (n=44). During the conduct of this trial, Herceptin® (trastuzumab; Genentech/Roche) became commercially available for HER2 IHC Positive (3+) patients, and the trial was modified accordingly to allow these patients to receive Herceptin, and exclude this patient group from future enrollment and analysis.

    Below are the summary results from the SN-33 trial. SN-33 Intent-to-treat (NYSE:ITT) population (n=97); NeuVax (n=53) vs. Control (n=44):

    • At 24-month: 90.6% of NeuVax patients (n=53) were disease-free versus 79.5% of patients on the control arm (n=44) (p=0.1155).
    • At 60-month: 84.7% of NeuVax patients (n=53) remain disease-free versus 77.1% of patients on the control arm (n=44).

    SN-33 HER2 Negative IHC 1+/2+ patients who received boosters (n=45). NeuVax (n=18) vs. Control (n=27):

    • At 24-month: 0% recurrences for patients treated with NeuVax: statistically significant DFS for NeuVax at 100% vs. 77.8% Control (p=0.0358).
    • At 36-month: 0% recurrences for patients treated with NeuVax for a statistically significant DFS for NeuVax at 100% vs. 77.8% Control (p=0.035). Of note, no patients receiving booster inoculations had a recurrence through 36 months, which is the Phase III PRESENT study endpoint.
    • At 60-month: 5.6% recurrence rate with NeuVax versus 25.9% recurrence rate in the control arm. DFS for NeuVax at 94.4% vs. 74.1% Control--a recurrence reduction of 78.4% in the target patient population.

    This new, 60-month data analysis shows that breast cancer recurrence is greatly reduced for patients treated with NeuVax and that these results are both clinically relevant and durable over time.

    Our assessment of the booster inoculations from the data presented: the booster inoculations are well-tolerated and don't increase any side effects compared to the primary vaccine series. Further, booster inoculations appear to assist in the maintenance of long-term peptide-specific immunity. In terms of efficacy, boosted patients have better recurrence rates and improved DFS compared to patients who did not receive vaccine. This may be attributed to increased immunity induced by the booster inoculations.

    As a result of these findings, booster inoculations have been incorporated into the design of the ongoing Phase III PRESENT study.

    The Phase III PRESENT Trial is Underway

    Based on the SN-33 booster data, on Jan. 20, 2012, GALE initiated the Phase III PRESENT trial for NeuVax (E75 peptide plus GM-CSF) vaccine in HER2 1+ and 2+ breast cancer patients in the adjuvant setting to prevent recurrence.

    The PRESENT (Prevention of Recurrence in Early-Stage, Node-Positive Breast Cancer with Low to Intermediate HER2 Expression with NeuVax Treatment) study is a randomized, multicenter, multinational clinical trial that will enroll approximately 700 breast cancer patients. The trial design has been updated to include current National Comprehensive Cancer Network guidelines and recently received Special Protocol Assessment (NYSE:SPA) concurrence from the FDA. Based on a successful Phase II trial, which achieved its primary endpoint of disease-free survival (NYSE:DFS), the FDA has agreed that the design and planned analysis of the Phase III study adequately address the objectives necessary to support an acceptable regulatory submission for marketing approval.

    The NeuVax Phase III trial will be conducted in adjuvant breast cancer patients who are node positive, have an HLA status of A2/A3+, and have low or intermediate HER2 expression (IHC 1+, 2+, sometimes referred to as HER2 negative). These patients are not eligible to receive Herceptin (trastuzumab, marketed by Roche-Genentech) therapy that is currently approved only for patients with high HER2, or 3+ expression.

    According to the protocol, once qualified patients have achieved a complete response from current standard-of-care treatment (surgery, radiation and/or chemotherapy), they will be randomized and dosed with either NeuVax (E75 + GM-CSF) or control (placebo plus GM-CSF). Patients will receive one intradermal injection every month for six months, followed by a booster inoculation every six months thereafter. The primary endpoint is disease-free survival at three years or 139 events (recurrence of cancer). A data safety monitoring board will conduct an interim analysis for safety and futility after 70 events.

    To date, 70 sites are approved globally, with continued expansion to over 100 sites planned.

    We think the Phase III trial design is prudent based on the existing data from the Phase I/II trials. This Phase III trial is well designed and better controlled one compared to the Phase I/II trials.

    We believe NeuVax has a blockbuster potential if it finally reaches the market.

    Two Partnerships Established to Expedite NeuVax Development and Commercialization

    On December 4, 2012, GALE signed an agreement with a subsidiary of Teva Pharmaceutical Industries Limited for the commercialization of NeuVax (nelipepimut-S or E75) in Israel.

    Under the agreement, Teva Israel will assume responsibility for regulatory registration in Israel, provide financial support for local development, and will commercialize the product in the region. Specific financial terms were not disclosed, but the agreement allows for significant royalty payments to Galena Biopharma on future sales.

    Israel will be the location of at least four clinical trial sites for the NeuVax Phase III PRESENT study.

    On December 6, 2012, GALE announced a partnership with Leica Biosystems to develop a companion diagnostic for Galena's NeuVax (nelipepimut-S or E75) breast cancer therapeutic.

    Leica Biosystems is a global leader in workflow solutions and laboratory automation for anatomic pathology, bringing clinicians and researchers high workflow efficiency and confidence in cancer diagnostics. Leica Biosystems provides a comprehensive product range with easy-to-use and consistently reliable solutions for the entire laboratory.

    Leica's Bond Oracle™ HER2 IHC System companion diagnostic will be used to support the selection of the appropriate patients for the NeuVax Phase III PRESENT study. Bond Oracle™ HER2 IHC System is an FDA cleared semi-quantitative immunohistochemical (NYSE:IHC) assay to determine HER2 (Human Epidermal Growth Factor Receptor 2) oncoprotein status in breast cancer tissue processed for histological evaluation. NeuVax targets HER2 negative patients (IHC 1+, or 2+ and FISH < 2.2) who achieve remission with current standard of care, but have no available HER2-targeted adjuvant treatment options to maintain their disease-free status.

    We think the two partnerships established will accelerate the development and commercialization of NeuVax in the US and around the world.

    The agreement with Teva Israel is the first piece of GALE's global commercialization strategy. Teva is a world-class pharmaceutical company and a major pharmaceutical company in Israel. Their financial support, as well as market leadership will help accelerate NeuVax development and commercialization in the region.

    The agreement with Leica also marks a significant milestone for Galena. By partnering with Leica, GALE will be able to ensure the proper and accurate assessment of breast cancer patients considering participation in the NeuVax PRESENT trial. Galena strengthens its NeuVax personalized medicine and regulatory pathway with companion diagnostic development.

    Valuation is Attractive

    We are still bullish on GALE based on the recent progresses the Company has made. Therefore, we maintain an Outperform rating on Galena shares and reiterate our 12-month price target of $4.0 per share.

    Apparently, Galena has made great progress in the past few months in its clinical programs, IP protection and strengthening its balance sheet. The Company has become stronger than ever with the spin-off of RXi Pharmaceuticals with more focused cancer programs and less cash burn for its operations.

    Galena's cancer program NeuVax and FBP provide significant leverage in cancer immunotherapy generally, as well as in "off the shelf" vaccines specifically.

    Currently, the Company has 5 programs in clinic including Phase III NeuVax for breast cancer, Phase I/II FBP for gynecological cancers. This is quite unusual for a small cap biotech company.

    (click to enlarge)

    We believe NeuVax has a blockbuster potential if it reaches the market. FBP also targets the relatively large gynecological cancer market, which is underserved and has unmet medical needs.

    Based on the Company's strong fundamentals, we believe Galena's shares are undervalued compared to its peers. Currently, the Company's shares are trading at about $1.86 per share which values the Company at about $153 million in market cap based on 83 million shares outstanding. This is a discount compared to its peers. Most small biotech companies of development stage in the business of cancer are valued from $50 million to $500 million in market cap depending on how advanced the pipeline is and which indications the company is targeting. Galena is a late stage development biotech company, and its lead candidate NeuVax is already in Phase III clinical trials.

    We believe Galena should be valued at $300 to $400 million in market cap. Our price of $4.0 per share corresponds to a $328 million in market cap based on 83 million outstanding shares.

    But keep in mind that cash burn is still a concern even with the new $24.3 million financing. Current cash balance will last into the second quarter of 2014. More financing is needed to fund its ongoing clinical trials. Equity financing is still the primary choice in our view, which will dilute existing shareholder base.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: GALE
    Feb 11 8:34 AM | Link | Comment!
  • NeoGenomics Is Poised To Grow Further In 2013

    Visibility and Liquidity Increased Through NASDAQ Capital Market Listing

    On December 6, 2012, NeoGenomics' common stock was approved for listing on the NASDAQ Capital Market and commenced trading on the NASDAQ Capital Market on December 10, 2012 under the new ticker symbol "NEO".

    The transition to the NASDAQ Capital Market is a significant milestone for NeoGenomics and reflects the strong revenue and operating income growth the Company has achieved over the last several years. We think the upgrading is important to the Company and its shareholders in the following matters:

    • Trading on a NASDAQ Capital Market will raise the Company's visibility and gain liquidity at the same time. NeoGenomics shares have been traded OTC for a long time. Trading OTC is often viewed as highly risky and less liquid to most investors especially to institutional investors. As a result, many institutional investors are restricted from buying shares traded OTC.
    • The successful upgrade to be listed in the NASDAQ Capital Market increases both visibility and liquidity of the Company. As a result, many institutional investors can buy its shares now.
    • Another way to attract institutional investors is through the inclusion in an index. After being listed on NASDAQ Capital Market, NeoGenomics could have the potential to be added into a small cap index, especially in a small cap biotech index. Inclusion in an index will further raise NEO's visibility and liquidity. At the same time, NeoGenomics will be automatically included in some index funds which mirror the index which includes NEO. This makes NEO more suitable for a broader group of investors.

    New FISH TEST Will further Stimulate Top Line Growth

    On December 17, 2012, NeoGenomics, Inc. (NEO) announced that it has validated and launched a laboratory developed Fluorescent in Situ Hybridization (NASDAQ:FISH) assay NeoSITE for the surveillance of patients with Barrett's Esophagus (BE). The test is highly sensitive for the detection of the presence of esophageal cancer or high grade dysplasia indicative of precancerous changes.

    BE is a very large market for NeoGenomics. Approximately 3 million Americans suffer from BE in the United States, a condition which can be a precursor to esophageal cancer. Endoscopic examinations with multiple tissue biopsies to look for dysplasia and cancer have long been considered the standard surveillance procedure for BE patients. However, current data suggests that an esophageal "brushing" may be more effective than a traditional tissue biopsy, because it allows for the collection of cells from a larger area of the esophagus for testing, which results in less sampling error. Esophageal brushings are also generally easier and less costly to obtain than tissue biopsies.

    NeoGenomics' NeoSITE BE FISH test was designed specifically to be performed on brushing samples and can be used as an objective and easier means to aid in routine surveillance of BE patients. The Company performed an extensive trial to validate this new test in which the test showed initial sensitivity of 86% and specificity of 67% when the Company's proprietary algorithms were used to assist with interpreting the FISH results. Reported sensitivity and specificity levels were even higher when brushing samples were obtained from nodules rather than pan-brushing.

    With the commercial launch of NeoSITE, NeoGenomics becomes the first lab in the US to offer this important FISH test on a national basis. The new test will further grow its top line in the coming quarters.

    There is Further Room for Share Price Appreciation

    2012 has been a banner year for NeoGenomics (NASDAQ:NEO). The Company's shares reached all-time high on September 25 at $3.20 per share. Currently, NEO shares are trading at about $2.88 per share. The Company's share price has more than doubled since we initiated our coverage on October 7, 2011 at $1.06 per share, an appreciation of 172%.

    We think the momentum will continue in the coming quarters and share price could appreciate further in 2013. Our optimism is based on the fact that the Company has achieved strong financial performance in fiscal year 2012 and that continued success is widely expected for 2013 and beyond.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Dec 19 10:43 AM | Link | Comment!
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