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Egor Romanyuk
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I have worked as Logistics executive for over 10 years and have been trading BioTech stocks for secondary income. At age of 27 I retired and took up trading BioTech stocks as primary income.
My company:
Barna Financial Services Inc.
  • Oxygen Biotherapeutics Destined To Outperform 0 comments
    Feb 14, 2014 11:57 AM | about stocks: OXBT

    I have been watching and trading (NASDAQ:OXBT) since the news of taking over Phyxius Pharma hit the wire, resulting in a 500% rise in the value of the stock in just 4 trading sessions. This rise in the share price has undeniably allowed long positions to take hefty profits and attracted "shorters" looking to make a quick buck, which in turn drove the price down from a high of $11.98 to just above $5 per share. Shortly after, Oxygen Biotherapeutics announced the completion of the merger and have issued more shares to finance the deal and begin development of Levosimendan.

    Levosimendan is used to treat cardiac surgery patients at risk of developing low cardiac output syndrome (LCOS)

    Once the acquisition was complete, John Kelley, co-founder and CEO of Phyxius Pharma, was named CEO of Oxygen Biotherapeutics. The news, however, did not have much effect on the value of the shares and the stock has continued to lower.

    • November 4th, 2013 the company reported that trial results have shown significant improvement in patients undergoing heart surgery.
    • January 6th, 2014 the company reported that Levosimendan Phase 3 trial protocol was published on clinicaltrials.gov
    • February 13, 2014 the company reported that Levosimendan significantly improves post-operative kidney function in patients who have undergone surgery of the mitral valve in the heart. This study was published in the Journal of Cardiothoracic & Vascular Anesthesia.

    Now that I have taken you through the key events, I want to point out why I believe OXBT is severely undervalued.

    • Phyxius Pharma, now owned by Oxygen Biotherapeutics, has exclusive rights to develop and commercialize Levosimendan in the United States and Canada
    • FDA has granted Oxygen Biotherapeutics "Fast-track" designation and an agreed study protocol under the SPA
    • If approved, Levosimendan will gain Orphan drug status, allowing 10 year exclusivity for development and commercialization.
    • Phase 3 trial to begin as early as Q3 2014
    • Levosimendan is already approved and sold in over 50 countries worldwide.

    Levosimendan's past:

    Levosimendan was originally developed by Orion Corporation, who failed to deliver statisically significant results to the FDA for approval in 1999. The US FDA asked Orion to complete further studies to show durability of efficacy and safety of the drug, but the compnay was lacking resources to do so, and decided to withdraw the NDA application. However, Orion was able to receive approval in Sweden in 2000. Since then the drug has been approved and sold in 55 countries worldwide. Orion has granted Phyxius Pharma, now Oxygen Biotherapeutics the rights to develop and commericialize Levosimendan in the United States and Canada.

    Clinical Findings:

    Numerous studies have been completed to prove efficacy and safety of Levosimendan in the past. According to the report published by the NCBI in 2006, 7 studies have been completed, including 3500 patients suffering from Congestive Heart Failure. These studies have shown that "levosimendan does not cause any diastolic calcium overload, unlike other inotropic agents, it also does not cause any cardiac myocyte dysfunction, arrhythmia, or an increase of energy consumption" which are the main adverse effects of any availbale drugs used to treat the disease. The report adds: "Levosimendan is generally well tolerated. Most of its adverse effects are dose-related and due to its vasodilator effect" followed by a conclussion that "clinical studies have shown that the use of levosimendan is safe and effective in postponing heart failure and in heart failure following acute myocardial infarction".

    Apart from proving that the drug is safe to use, the FDA wants the company to prove that Levosimendan is effacacious. On October 30, 2013 the company reported findings published by the Duke Clinical Research Institute. "The study aggregated and analyzed results from 14 independent clinical trials with a total of 1,155 patients. The published results showed that levosimendan was associated with reduced mortality (death) and other adverse outcomes including heart attacks during and after operation in patients with reduced heart function undergoing heart surgery."

    As a result, the FDA has agreed to Phyxius Pharma's Phase 3 protocol design under Special Protocol Assessment (NYSE:SPA), and provided guidance that a single successful trial will be sufficient to support approval of levosimendan in this indication. FDA also added that they will only require results evaluating 760 patients. According to the compnay the Phase III study shall be enrolling subjets as soon as Q3 2014 with primary endpoind of 180 days.

    Financial Findings:

    Given the information available, it is safe to say that Oxygen Biotherapeutics is on a clear path to approval of Levosimendan by the end of 2015.

    Oxygen Biotherapeutics reported about $2.5 million in cash, not including $6.2 million, received from secondary offering in Q4 2013. The company has also reduced their debt to $250,000. John Kelley, CEO of Oxygen Biotherapeutics, believes that current capital is sufficient to fund all operations until June 2014. It is likely that the company will need more financial assistance to complete Phase 3 trial.

    October 21st, 2013 comany's press release mentioned: "upon closing of this transaction OXBT will be a company that has a clear path to commercialization with a Phase 3 asset addressing a $600M market". Let's take that into consideration and apply a fair value of 50% of peak sales annualy, valueing company's revenue at $300 million.

    Current market cap is $72 million with 12 million floating shares, 10% of which are short. Even at the lower end of the sales spectrum of Levosimendan, the company will be making anywhere from $300-$400 million per year. Let's apply a low multiplier of 2x, resulting in market cap of $600 - $800 million. Let's assume that the company will not further dilute and issues more shares, which they shouldn't as they have more than enough cash after the last offering. $700 million / 13.2 million shares = roughly $53 per share.

    However, as mentioned above, the company may issue more shares to fund Phase 3 trial, which is modestly sized, as well as time and cost efficiant. CEO of the company belives current capital of approximately $9 million will last about a year. Taking that into account, let's assume they will need another 18 months and $20 million to complete the study. At current value of the stock, this will result in issuing approximately 3.3 million shares. $700 million / 16.5 million shares = roughly $43 per share (one year revenue).

    Yes, all of these calculations are mere speculation. Nonetheless, I believe that approval of Levosimendan is likey, and given the safety results of the drug, it should be used as a primary agent for treatment for the disease. If all goes according to my plans, (OXBT) shall see triple digits by 2020.

    Disclosure: I am long OXBT.

    Stocks: OXBT
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