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Ray Dirks has been a respected analyst on Wall Street for decades. Ray has written two books,” The Great Wall Street Scandal” and “Heads You Win, Tails You Win”, published by McGraw-Hill and Bantam Books respectively. Dirks opened his own securities analysis firm after gaining much attention in... More
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  • Heat Biologics: Immunotherapy Vaccine To Transform Cancer Treatment

    We all know that cancer affects many of our friends and family, but why don't we all get cancer? We now know that our immune system is continuously fighting and destroying potential cancer cells. What if we could stimulate the immune system in cancer patients and kill the tumor? This is exactly what Heat Biologics (HTBX: NASDAQ) is doing.

    Cancer is a devastating disease and the harsh effects of current cancer treatments are well-known to us all. A new way of treating cancer known as immunotherapy is transforming cancer, not in the next 5 or 10 years, but today! And Heat Biologics is playing a significant role in this new and exciting landscape. Very simply put their drug activates a patient's cancer killing T-cells (immune cells) that seek and destroy their tumor.

    The way cancer has been treated is essentially barbaric. Patients are injected with poisons known as chemo that kill all cells, but kill cancer cells faster. Patients are bombarded with lethal radiation, or useful organs infested with cancer are removed, leaving patients incapacitated for the rest of their lives.

    Driven by its proprietary platform, ImPACT, Heat is developing multiple vaccines for a number of different cancers. Vaccines have transformed polio, tetanus, chicken pox and measles from being deadly diseases, to merely something we take a shot for today. Cancer could become the next disease to be virtually eliminated by a vaccine.

    ImPACT genetically modifies human cancer cells to pump out antigens (biological agents that target the immune system) and proteins to create an immune response and attack a specific cancer. Not like competitor's drugs that take days, if not weeks, to work, Heat's therapy takes only a few minutes. Then the vaccine lives at the site of the tumor, continuously targeting and destroying the cancer.

    Heat's vaccine platform is easy to make, stays on the shelf until needed, and can be given to anybody, regardless of their blood type or DNA makeup, which is unique in the cancer immunotherapy market. ImPACT is far superior to immunotherapies offered by the global behemoths I will describe below, that need to use the patient's own tissue to make their products work - a costly and inconvenient method.

    Currently, Merck & Co. (NYSE:MRK) is in line at the FDA with Keytruda, first approved for skin cancer (with first quarter sales of $83 million) hoping for approval in non-small cell lung cancer (NSCLC) where analysts predict revenues upwards of $5 billion. Not to be shut out by its giant competitor, Bristol-Myers Squibb Co.'s (NYSE:BMY) Opdivo also began on the market for skin cancer and was approved in March for NSCLC; after only three months Opdivo generated sales of $40 million. Both have severe side effects which I will explain below.

    Joining the ranks of these larger companies, Heat has an ongoing Phase II trial for its HS-110 vaccine in the treatment of NSCLC. Heat is well positioned to compete for this market expected to be $7 billion globally by 2019, with a high annual growth rate.

    In my recent interview with Heat founder and CEO Jeffrey Wolf, I learned that instead of using chemotherapy that destroys all human cells, ImPACT will direct its drugs to kill cancer cells faster with immunotherapy that activates, stimulates, and strengthens a patient's immune system to attack a deadly disease with no known cure. Besides lung cancer, Heat targets bladder cancer with HS-410, now in Phase II at 16 US clinical sites (including Johns Hopkins, known for its extensive urological work) to potentially enter a market estimated at $300 million in the next two years. Expected completion of enrollment for the bladder cancer trial is the third quarter of next year.

    One problem I discussed with Mr. Wolf were side effects of the new anti-cancer wonder drugs that have the potential of pneumonia, holes in intestines, hepatitis and kidney failure. Newer companies like Kite Pharma (NASDAQ:KITE) and Juno Therapeutics (NASDAQ:JUNO), two much-watched darlings of the cancer immunotherapy world, trade at a combined valuation of $7.5 billion. Both target blood cancers but Heat is testing patients much later than Juno for lung cancer. Juno and Kite have shown in trials to lead to an overload of the immune system, known as a deadly cytokine storm; high fever; and serious drops in blood pressure. Medical sources claim cancer immunotherapy drugs like those of Merck and Bristol-Myers work in only 40% of patients and we will see how they fare in lung cancer.

    The grandfather of cancer immunotherapy, Dendreon Corp's (NASDAQ:DNDN), drug Provenge sales were limited due to the cost to the patient which was approximately $93,000, leading the company to declare bankruptcy. The complexity of customizing the drug for each patient was too expensive. This will not happen to Heat. Heat's drug is an off the shelf product, so the cost per patient is approximately $200 for a far superior product, enabling Heat to generate pharmaceutical grade margins, according to Wolf.

    Another major coming on board to battle in the cancer immunotherapy space for NSCLC dollars is Eli Lilly & Co. (NYSE:LLY), but the FDA is wary. Recently, the agency met with Lilly to raise concerns about deadly blood clots. Early data showed an extension of life slightly below Merck's or Bristol-Meyers - a median survival of just under one year. The drug, if approved, is expected to make around $600 million per year but with almost 10% of patients developing what could turn into a heart attack, I'm sure the FDA will be extra cautious.

    Regardless, all sales projections discussed above make for a lucrative story for Heat.

    Heat's NSCLC trials show excellent safety profiles with good efficacy. HS-110 activated a strong immune response in 70% of patients, including even those far along in their disease, leading to a substantial increase in survival - up to 300% over chemotherapy. The Phase II trial should finish enrolling patients in Q3 2015 and data is expected to be reported later in 2016.

    Despite adverse effects from Big (and smaller) Pharma cancer immunotherapy drugs, the industry is projected to generate $35 billion in sales over the next ten years and used to treat 60% of cancers, according to analysts, who believe immunotherapy will cause a tectonic shift in how oncologists view cancer therapy. Experts believe cancer immunotherapy will make current anti-cancer methods primitive (some say barbaric) as we do away with flooding the body with toxic chemotherapy and removing vital organs through surgery.

    Primitive is the word Dr. Mark Schoenberg, key opinion leader to Heat also serving on its clinical advisory board uses to describe current methods of treating bladder cancer (which affects over 500,000 Americans and is one of the most expensive cancers to treat). Standard of care is to the attack disease through surgery, not an optimal choice for the patient because bladder tissue does not grow back. I learned from him there are no new drugs for bladder cancer, with most doctors using BCG - a brutal tuberculosis vaccine originating more than 40 years ago. Male patients, as most are, need a catheter inserted directly into the penis with unpleasant effects like pus formation and skin peeling.

    Foremost immunologists in the world, Dr. Eckhard Podack, is ImPACT's inventor and serves as chairman of Heat's scientific advisory board. His work is in virtually every immunology textbook; he has a track record of developing drugs that have gained FDA approval. For example, Seattle Genetics, Inc.'s (NASDAQ:SGEN) main drug Adcetris for lymphoma, has driven Seattle's $6 billion market cap. This came out of Dr. Podack's lab.

    There are several news-related milestones for Heat coming up in the second half of 2015 I look forward to Phase II data in NSCLC, because many eyes on Wall Street are focused on this indication.

    (click to enlarge)

    Heat is a promising therapy, and in line with industry trends, where larger drug companies invest a lot of money in cancer immunotherapy. Celgene Corp. (NASDAQ:CELG) just spent $1 billion in a licensing deal with Juno that extends for 10 years, with a possible 30% ownership of Juno's stock, what analysts are calling the largest biotechnology deal ever. After the announcement, Juno's shares popped 66%, underscoring the love investors have for immunotherapy.

    Immunotherapy can be the answer to bring cancer treatment into the modern age - from a deadly disease into one open for long-term survival, like what pharma companies did for diabetes. Allied Market Research projects the global cancer drug market to reach $111.9 billion by 2020, with immunotherapy and biological drugs the main driver of growth. This is what's driving cancer immunotherapy drug companies' high values.

    As of March 31, Heat had approximately $21.1 million in cash, cash equivalents, and short-term investments, providing a runway to take it through the first quarter of 2016. With a market cap of $53 million, recent trading at a per share price of between $6 to $7, Heat has an unjustifiably low valuation and I believe it is poised to at least double in the short term. I'm not alone in this prognosis, as the two firms covering the stock have price targets of $13 and $22 per share.

    Heat is a home-run from an efficacy/safety and economic point of view. The stock offers a phenomenal find for those looking for a lot of upside in cancer immunotherapy, which is now characterized by companies with billion dollar market caps.

    RAY DIRKS suggests that Readers/Investors place no more than 1% of the funds they devote to common stocks in any one issue. It's best to diversify.

    Jul 15 4:00 PM | Link | Comment!
  • Oramed's Quick Road To Market As Global Leader Of Oral Insulin Capsule

    The oral insulin pill. It has been described countless times as the 'holy grail' of the $20 billion global insulin market. It's what people living with diabetes want. It's what drug makers have poured hundreds of millions into developing. Yet, it's 2015 and still there is no FDA approved insulin pill. Enter Oramed Pharmaceuticals (NASDAQ:ORMP).

    Oramed just announced it dosed the first patient in its Phase IIb trial for its oral insulin capsule in the treatment of Type 2 diabetes. And with that announcement, this small biotech with an $83 million market cap has become the global leader in bringing an insulin pill to market, the blockbuster of blockbuster drugs.

    Pharma giant Novo Nordisk is the other key player in the oral insulin pill race. Novo completed a Phase I, single dose trial in 2013. Based on my research, it has not yet announced anything definitive about a Phase II trial for an insulin pill. Earlier this year, however Novo did report positive results from its Phase II trial of its oral GLP-1 drug which promotes the body's natural production of insulin. Oramed also has a GLP-1 capsule in Phase I and plans to initiate a multi-center Phase II study in the first quarter of 2016.

    Oramed leads in insulin capsules and Novo leads in GLP-1 tablets. The diabetes market is certainly a big part of Novo's business, but it is still one part of a larger business which makes much of its revenues from traditional diabetes products like injectables. The beauty of this situation for Oramed and its investors is this: the size of the market for its capsule, if approved, is enormous, while the investment in cost and time of Phase II and III trials for this indication is small, when compared to other indications like cancer. This combination is potential gold for a smaller biotech like Oramed. Its focus, its size and its speed may well serve to keep Oramed far ahead of Novo past the finish line of FDA approval for an oral insulin capsule.

    In 2013 Novo's Senior VP and Head of Diabetes Research, Dr. Peter Kurtzhals made the following statement in an article published on the company's website: "It has been a learning curve for Novo Nordisk to establish technologies, animal models and exploratory clinical trials to support the development of oral insulin and GLP-1 formulations, and the company currently has two oral insulin and three oral GLP-1 formulations in phase 1 clinical trials." Novo reportedly spent over $500 million on the development of these oral diabetes drugs, and since 2013 it has only advanced one of its GLP-1 formulations through Phase II.

    Innovative and focused, Oramed is a small biotech with expertise in inventing new ways of treating disease, in a much smarter and more cost-effective way than Novo. In stark contrast to Novo's reported $500 million spend, Oramed has spent $10 million on R&D in the past five years and a total of $15.2 million since inception. And the result? While Novo has concluded a Phase I single dose trial for oral insulin dosing approximately 84 patients, Oramed has delivered over 2,000 doses to 196 people prior to starting its current Phase IIb study.

    Oramed's Phase IIb trial protocol includes over 30 U.S. sites for approximately 180 patients and has both efficacy and safety as its primary end-points. The trial will last 28 days. Although the company has not announced its timeline for when it will report results, I assume investors will hear top line efficacy results well before the end of this year. This kind of timeline is a far cry from drugs being developed for diseases like cancer, which can take years and serve a smaller market. Make no mistake, all of those drugs and treatments being developed to save lives for indications including cancer are critically important to patients, as well as the companies developing the treatments. However, from an investor point of view, especially for investors looking for results in a shorter timeframe, insulin's economics are very different. According to new data just published by Grand View Research, the global market for insulin is projected to grow from $20.97 billion in 2013 to $47.54 billion by 2020. There were 371 million diabetics worldwide in 2012, with 25.8 million of those in the U.S.

    I've written about Oramed in the past and I continue to believe that its unique technology and method for delivering insulin through the digestive system will lead to a much wanted and needed capsule so that Type 2 diabetics can finally say goodbye to needles and even the less commonly used jet injectors, inhalers and pumps.

    Oramed's strong balance sheet will get an additional $30 million from the largest medical group in China upon closing of a licensing deal in the next 60 days. This gives Oramed a $50 million cash position to drive its technology through FDA approval and transform the treatment of diabetes. It also puts Oramed in a very strong position to negotiate even larger licensing deals in other major world markets.

    To sum it up, I couldn't say it any better than what Novo's Dr. Kurtzhals stated in his 2013 article, "The simplicity and convenience of oral insulin would be amazing. While it takes time to learn how to inject insulin with a pen, everyone knows how to swallow a pill. This in turn could support greater compliance and lead to much better treatment outcomes to the benefit of patients, healthcare providers and society."

    I'm sure that Dr. Kurtzhals at Novo and the rest of the diabetes industry, along with some smart investors, are wondering how Oramed's 28-day Phase IIb trial may change the dynamics of diabetes treatment. We won't have to wait too long to find out.

    Jul 07 4:43 PM | Link | Comment!
  • Pluristem Chosen For Accelerated Marketing Approval In Europe

    Potent game-changing medicine is what makes Pluristem Therapeutics (NASDAQ:PSTI) a home run stock in the biotech sector, and they are now recognized by a European regulatory powerhouse that will propel them closer to marketing approval.

    Just this week, Pluristem was selected by the European Medicines Agency (EMA) in its new Adaptive Pathways pilot project for fast-tracking placental-derived PLX cells in critical limb ischemia (CLI), or leg artery blockage often leading to amputation and death. Adaptive Pathways, much like the FDA's Breakthrough Designation, would allow drugs to get to market sooner than lengthy, expensive and big Phase III trials. Pluristem finished a Phase I trial in CLI with good results. With the EMA program, approval to sell PLX cells could come as early as the end of a Phase II study.

    CLI is a huge market - $12 billion globally. According to experts at SAGE Group, three million Europeans have CLI. Driven by an aging population, this number is projected to grow to four million by 2030. That's almost 35% in just 15 years! No wonder the EMA wants an answer to this pervasive problem.

    Based on research conducted by my team, getting into Adaptive Pathways makes Pluristem ahead of other cell therapy companies and first in line to get Europe's regulatory green light. A gigantic win for Pluristem, putting them in the lead of regenerative medicine while altering the landscape of biotechnology itself.

    Looking back, an April 1st Reuters article by European pharmaceuticals, biotechnology and healthcare correspondent Ben Hirschler stated that 58 drugs had been submitted to the EMA for the Adaptive Pathways project and only eight were selected for a second stage of screening. Reuters' Hirschler writes that, "The EMA declined to identify specific drugs or companies involved but an official said the first stage II meeting on April 7 would concern an advanced therapy product, meaning it is a medicine based on genes, cells or tissue engineering." We think the April 7 meeting was favoring Pluristem and the EMA clearly liked what they saw. Now this is confirmed!

    As an 'off-the-shelf' product, PLX cells offer huge advantages over other cell therapies in the works developed by large and small drug companies alike. They come from the human placenta, usually discarded after a healthy, full born birth. Pluristem's patented, fully automated cell expansion methods at its state-of-the art manufacturing facility are capable of very cost-effectively producing 150,000 doses of PLX cells annually. Better yet, Pluristem's cells do not cause an autoimmune reaction and can be given to anyone. The cells treat different diseases by sensing where the body needs repair, and then healing through a systemic effect. After all of our years of research, we believe Pluristem has the perfect cell therapy.

    Japan, one of the largest consumers of pharmaceuticals and world-renowned for interest in cell therapy, has a fast-track approval process in place - the Accelerated Pathway for Regenerative Medicine - and Pluristem's PLX cells are a part of it. That makes two important medical territories the company can sell into quickly.

    Acceptance of PLX cells into the Adaptive Pathways for CLI makes Pluristem a hugely desirable partner. Pluristem already has partnerships in place, including United Therapeutics (NASDAQ:UTHR) with an $8 billion market cap, but Pluristem's dance card if far from full. On the other hand, with $42 million in cash and equivalents on its balance sheet, Pluristem is very well positioned to go this alone and pay for a Phase II trial with its own funds.

    Investors should remember, Pluristem's success in early trials has led it to conduct a Phase II in intermittent claudication, a disease that often leads to CLI, with clinical sites all over the world. PLX cells have also shown strong efficacy in a Phase I/II muscle injury trial that concluded in Germany in 2013, with more studies planned.

    The impact of this latest news is big for Pluristem, its investors and its pharma partners. Beyond the potential benefit to patients, trends toward accelerated approvals will shift the valuation of innovative biotechs like Pluristem who have a pipeline of drugs that Big Pharma needs and constantly hunts for. Being just one successful trial away from commercialization should completely change Pluristem's ridiculously low valuation of under $200 million (the current market cap) now, and propel the company to newer heights of not only value, but recognition as the worldwide premier cell therapy company that it is.

    RAY DIRKS Research suggests that Readers/Investors place no more than 1% of the funds they devote to common stocks in any one issue. It's best to diversify.

    May 19 3:37 PM | Link | Comment!
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