Cashing In On Diabetes: Novel Approaches

by: Jessica King Holden

In the early 1900s "treating" diabetes, which was not well understood, involved what would now be considered inhumane cycles of starvation and ultimately death. After the discovery of insulin's role in the disease in 1921, treatment became truly that, and from there many advances have been made. Today, more advances have yet to be made and many are looking to move past the current use of insulin systems to find novel approaches to treat if not cure the disease and its many symptoms. Investors can treat their underperforming portfolios by staying ahead of trends in major healthcare fields such as the widespread diabetes epidemic. The following are companies that have unique approaches to the diabetes problem. As always, do your homework as this sector offers potential reward by certain inherent risk.

Halozyme (NASDAQ:HALO) brings an enzymatic approach to improve insulin absorption and effectiveness of standard insulin. HALO's Enhanze ™technology rHuPH20 enzyme offers a platform to improve existing drugs and treatments and is currently being tested in concert with various insulin pumps and analog insulin products in the company's "Ultrafast Insulin" program. The goal of the program is to develop a best in class meal-time insulin product.

This $1.1 billion market cap company's strength lies equally in its successful partnerships with the likes of Roche (OTCQX:RHHBY) and Baxter (NYSE:BAX) for their high profile drugs and the widespread application and simplicity of its main product. It has a revenue generating product in addition to partnership milestones in its Hylenex ® Recombinant enzyme, which is FDA approved to increase hydration and dispersal of drugs in the body. The company gets a lot of attention from good news on clinical trials, like that which came on March 6, with positive results from Viropharma's (VPHM) phase II clinical trials of Cinryze ® with Enhanze ™ technology for patients with hereditary angioedema. Patients showed statistically significant increase in bioavailability of the drug with the addition of the HALO enzyme. Earnings release show sales growth rose significantly in FY 2011, but with pipeline maturity comes additional clinical trial costs and FY 2012 will likely show limited growth. Near its 52-week high after over 100% gains year to date, this stock has a potential target with room for growth. The widespread niche of this company makes it a potential long player in the diabetes market and beyond.

Neurometrix (NASDAQ:NURO) offers neuropathy testing and eventual treatment in specializing in the $2 billion a year diabetic neuropathy market. Diabetic neuropathy can lead to nerve pain, ulceration and ultimately amputation. An estimated 50% of diabetics experience neuropathy and with most tests early detection is not possible. NURO offers an early detection point-of-care diabetic neuropathy test called the NC-STAT® DPNCheck™. This test is a unique quantitative measure of neuropathy, which hit the market in the 4th quarter 2011 approved both in the U.S. and Europe. Currently the test is covered by MediCare in most states, but potential coverage of the test by private healthcare could significantly increase revenue. The company estimates $2.5 million per year on this current primary product. In the pipeline is the Sensus ™ nerve pain therapy device that will be commercialized by quarter 4 2012. This analgesic pain relief product has potential to offer alternatives to antidepressant therapy for nerve pain association with autoimmune and other conditions. Working to stimulate nerve using conduction, the device is reimbursed as a DME benefit.

Neurometrix's has held great potential over the years, once trading above $25 a share with Harvard and MIT pedigree at the helm. Past company direction and insurance changes have left shareholders questioning their investment in the past, but the company does have a decided upside if you are willing to take a discounted risk at today's share price. As it recently raised cash, the $8 million market cap company is now trading below its valued $17 million in cash. The company also has significant IP as it holds over 40 patents in this field could make a lucrative takeover target.

Echo Therapeutics (NASDAQ:ECTE) is offering an interesting take on recent advances in wireless continuous glucose monitoring. The company expects its Symphony Transdermal Continuous Glucose Monitoring (TCGM) system to be a first-in-class method for blood glucose monitoring and eventually insulin delivery. This approach includes the company's Prelude SkinPrep transdermal permeation device to implant a wireless sensor, for which a 510(k) premarket notification has been submitted to the FDA. Echo's take would be the first needle-free continuous glucose monitoring system on the market, should it in fact gain FDA approval, as the company expects by 2013 though it has just begun clinical trials starting this January. Internal and external clinical trials show this innovation has the capability to both extract and deliver substances transdermally without needles by removing the outermost layer of the skin, the stratum corneum. Ferndale Pharma Group, Inc. has been granted license to develop and market the Prelude technology for delivery of its 4% lidocaine topical product in North America. Echo's Durhalieve treatment for corticosteroid-responsive dermatoses has successfully completed phase III trials.

The $75 million market cap stock was a recent Bulletin Board conversion to the NASDAQ this past June. Trading at near $2 a share, Echo will release its earnings March 30, and the numbers will likely reveal the risk. Sales growth is expected to triple in FY 2012 however and analyst coverage has suggested the stock is a strong buy at its current price. Certainly the company has promise with over 40 patents pending and significant IP niche in the U.S. and Canada. It may make a very ripe takeover target with its unique technology if it cannot financially sustain long enough to see its technology through to gain a share of the $10-$12 billion a year blood glucose monitoring market. Technologies such as this could significantly benefit major diabetes pushes such as the race for completion of the Artificial Pancreas Project.

Upstart biotech company Nuvilex, Inc. (OTCQB: NVLX.PK) is a microcap that has shown data that will likely have high profile pharmaceutical companies interested. The company has been able to demonstrate in animal models that encapsulated live cell treatments could reverse the symptoms of diabetes as the transferred cells would be capable of producing insulin. Intermittent infusions of such cells would be required, but daily insulin treatment could in fact be obsolete. The technology, dubbed Cell-in-a-Box ® could be a key technology that would draw interests for many other genetic/cellular level diseases such as diabetes. The Goldman Small Cap report suggests the stock to start at a paltry $0.30 a share, but eyes are looking to possible investment partnerships or talks of acquisition from Big Pharma.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in HALO, ECTE over the next 72 hours.