Zalicus in Q1
In Q1 2011, Zalicus (ZLCS) announced a number of remarkable achievements:
- It rolled out its three-prong ion channel program(s) including: a substantial scientific report on sodium channel 1.7 Z212 (click here), a surprise re-introduction of calcium N-type channel revised NMED-160, now Z160, and its lead advancement for IND filing, a calcium T-type channel designated as Z944 (click here).
- The firm also achieved a key patent (United States Patent 7915265) for Synavive (click here).
- JMP Securities announced coverage of Zalicus on 25 March 2011, setting a target of $5/share compared to Zack's studied analyst Jason Napodano's target of $3/share published in 2010.
Now looking deeply into Q2 2011, the following information should be of interest to Zalicus investors.
Q2 Scheduled Events
21 April 2011: Covidien (COV) reports. Zalicus investors will listen for hints of Exalgo sales in Q1. Most likely, Covidien will not release actual figures, but the firm could comment in general terms on the performance of Exalgo sales.
2-9 May 2011: My understanding is Zalicus will report within this date specific window its Q1 results. Investors will be specifically looking for:
- Exalgo royalty figure - Investors are eager to know . has Exalgo gained exponential sales traction? I expect no less than a 100% gain ($800K) over Q4 2010, which Michael Murphy correctly called at $400K.
- Collaboration news - This is a huge issue within the investor community. In Q1, no names were given, but it was clearly indicated by Zalicus CEO Mark Corrigan that progress of some nature has been/is being made. This includes potential ion channel program partnerships and revenue-generating cHTS collaborations - both were mentioned.
- Amgen (NASDAQ:AMGN) - Amgen moved into a second phase of its initial pilot program that was set to end in September 2010. So the question is: Has Zalicus signed Amgen to a longer term collaboration?
- Expect Zalicus to report $3M for the Novartis (NYSE:NVS) contract extension - Expect Zalicus to report $60-70M in cash reserves following the completion of raising $20M facilitated by Wedbush Securities, adding 8,884,800 common shares (click here). Expect Zalicus to report revenue generated from other cHTS contracts (wild card estimate: $1M). And don't forget to add in Exalgo royalties.
24 May 2011: Annual stockholders' meeting.
8-9 June 2011: World Pharma Congress - Dr. Glenn Short is scheduled to present "Using Combination Ultra High-Throughput Screening (cuHTS) to Address Efficacious Drug Combinations to Responsive Tumor Genotypes." This is the first time for Zalicus, I have read "cuHTS" versus "cHTS" in print. Has Zalicus expanded its high-through-put technology? Additionally, Zalicus Chief Scientific Officer Dr. Terrance Snutch is scheduled to present "Design and Pre-Clinical Development of Novel T-Type and N-Type Calcium Channel Blockers for Pain Intervention." Will Dr. Snutch add sodium channels to that discussion?
Zalicus investors continue to sit tight for:
- Synavive 2B Clinical Trial Launch - As reported by Zalicus, the firm recently received a "Composition-of-Matter" patent for Synavive (click here) and is scheduled to start the SYNERGY trial in Q2 for rheumatoid arthritis. This is one time I hope CEO Corrigan honors his own timeline. I - like other investors - am growing tired of waiting.
- News on Prednisporin - Since 10 November 2010, per the ClinicalTrials.gov website, the phase 2B has been listed as "completed." Meanwhile, Sanofi-Aventis (NYSE:SNY) which bought Fovea (which originally licensed Prednisporin) from CombinatoRx (now Zalicus Inc.) announced in Q1 the launch of an ophthalmology division with FOV1101 (i.e. Prednisporin) among those drug candidates assets. In addition, Genzyme (Sanofi's recent acquisition) is known to have an ophthalmology focus (click here). Furthermore, Sanofi announced a "privileged partnership" with The Vision Institute in Paris, France, for ophthalmology, announced on 23 March 2011 (click here). While all of this implies good news, it does have investors sitting on pins and needles. However, it would appear that Sanofi is getting close to making some type of announcement. I have read all of the details of Sanofi's upcoming conferences (including those in French), and Prednisporin is not mentioned; another researcher I trust has stated the same thing.
Imminent and Potentially Lucrative: Ion Channel Programs
- Three-Prongs: In bite-size chunks, CEO Corrigan not only rolled out the lead soldiers of his acclaimed "ion channel army" (terminology he and Dr. Snutch coined) of at least 50 composition candidates, Corrigan made a very defined statement. This is not just an ion channel program (i.e. singular); these are ion channel programs (i.e. plural). Terminology like this should not be lost on investors. Why? Because Zalicus has three separate programs that they can partner (if they choose) separately. Corrigan even hinted that one of those programs, even at its early stage, may already have collaborative interest. Keep in mind, one indication from each program could be worth $500M, so multiply that by 3 ... that's a whopping $1.5B.
- Z160 (Former NMED-160): Like Synavive, which was reformulated into a once/day time-released tablet, I know many investors who have been here since pre-merger days of CombinatoRx and Neuromed were taken aback by the announcement that Z160 was back in the game. After all, Merck (NYSE:MRK) was ready to put down $450M for NMED-160, so when Corrigan stated that they had resolved the bio-availability problem (i.e. drug absorption) at the molecular level, I sat up and quite frankly cheered. An oral N-type calcium channel pain blocker, you have to think that Zalicus is counting on Z160 to score. The question is, Has Merck come back? Or is someone like Novartis or Amgen, or for that matter Sunovion (Dainippon Sumitomo Pharmaceuticals), looking to step in. All I know is NMED-160 made it deep into phase 2 studies before the bio-availability became insurmountable - but now that problem is resolved.
- Scientific Report and Corporate Presentations: Zalicus is submitting that its ion channel candidates are competitive: Z212 versus Gabapentin (Fanatrex, Gabarone, Gralise, Neurontin) and Z944 versus Naproxen for pain, and Z212 versus Lacosamide or Vimpat (an epilepsy drug). Regarding Lacosamide and Z212 we read: "When tested in the spinal cord slice preparation, lacosamide inhibited lamina I/II neuron AP firing approximately 300 times less potently (IC50 = 150 lM) than Z123212 (Fig. 7C)" (Hildebrand ME et al. A novel slow-inaction-specific ion channel modulator attenuates neuropathic pain. PAIN - 2011 - doi: 10.1016/j.pain.2010.12.035). You don't have to be a scientist to understand what this means: at lower dosages, Z212 was 300 times more potent than Lacosamide. That should make big pharmas interested in epilepsy research to sit up and take notice.
- The Range of Ion Channel Applications: While Zalicus claims to be targeting pain and inflammation, a year ago a report came out that ion channel NP078585 (supplied by Neuromed) may be used to treat alcoholism (also click here). This highlights the diverse business opportunities Zalicus is going to have as it moves forward with its three-prong ion channel programs. As an example, Z212 could be developed as private Canadian firm Xenon Pharmaceuticals is pursuing as a topical cream (XEN402) (click here) for post herpetic neuralgia (PHN) or shingles. Or Z212, if it proved to block one's smell sensory, could be developed into a nasal spray for applicable situations in industry or hospital settings or possibly as an appetite suppressant. These examples may seem extreme, but the ion channel world has a literal myriad of potential applications. Is it possible that Zalicus could decide to sell individual licenses for specific medical indications? If so, it would prove to be extremely lucrative.
- The Competition: Bottom line, Zalicus is deep into the game and is definitely a leader in the pack. Months ago I wrote an unpublished article that detailed Zalicus's key competition. I reference it here. The purpose of that report uncovered that Zalicus is definitely among the world leaders of ion channel research. Keep in mind that is among a pack of Glaxo-Smith-Kline (NYSE:GSK), Vertex (NASDAQ:VRTX), Merck, Hydra BioSciences, Pfizer (NYSE:PFE), Xention, Grunenthal, Scottish Biomedical, Aurora Biomed, Convergence Pharmaceuticals, Chromocell, Selcia, and ICAGen (NASDAQ:ICGN). At that time, I particularly noted the work of Convergence. To that report, I now add Afferent Pharmaceuticals, a private firm in Canada brought to my attention by another investor. I will continue to scan for competition. In any case, Zalicus remains a front-runner.
In a previous article, I made the rationalized claim that I thought Zalicus was worth $13/share. In my opinion, the CEO gets high marks for executing on his originally stated strategic plan in March 2010. My valuation-analysis has not changed; if anything, it has been strengthened. Keep in mind, this present article doesn't even begin to touch on the future of cHTS or cuHTS at Zalicus or its present/future collaborations. We are yet to explore the dissociative steroid market and the low-steroid chemistry platform behind Synavive. What I conclude is that Zalicus is definitely well-funded and major Zalicus events loom large in Q2.
I maintain Zalicus is a Strong Buy.
Disclosure: I am long ZLCS.