Lpath: A Solid Pipeline With Good PPS

| About: Apollo Endosurgery (APEN)
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I earlier wrote an article describing why I believed the PPS of Lpath (LPTN.OB) post share offering was a solid value. It offered limited downside with huge upside. Since the publication, It seems that there has been plenty of appetite for shares at the .75 level and the stock has been trading in the .75 to .80 range. Lpath is the stock I am most bullish about in my portfolio and this article is to share one component of the science which justifies my views.

Lpath is the leader in targeting bioactive lipids. I think many people within the industry recognize the potential power of targeting bioactive lipids and is probably why Lpath was on Pfizer's (PFE),and previously Merck's (NYSE:MRK), radar so early. While harnessing great potential therapeutic power, bioactive lipids are also very challenging to work with. While those 'in the know' are very excited about this technology, it has still flown under investors radar this far. This issue of Nature is a good resource for starting due diligence on bioactive lipids.

iSONEPs results in wet AMD targeting this far have been nothing short of amazing. The below picture says it all. The exciting part is this wasn't even the only patient that experienced results such as these. A patient who experienced a 100% reuction had the effect last the for the entire 1 year monitoring period after just 1 dose. Compare these results that with any drug approved or in clinical trials and you'll start to understand my excitement. These were tough patients who were not responding to the standard of care.

(Click to enlarge)

The problem facing the investor is that there are many promising drugs with interesting approaches and one must sift through all of them to find the true diamond in the rough. In addition, many trials that showed promise in the beginning with smaller patient population turn out to flop in large phase III trials. There are many challenges with bioactive lipids, but there are also many advantages. One such advantage has contributed to the success of the iSONEP program and highlights why Lpath is a solid investment relative to other similar early stage biotechs.

Most drugs target proteins in some way. Proteins are highly evolved and differ from species to species. Since most preclinical work is done on rats and mice, it is largely different than humans. This is why so many promising approaches fail when trying them on humans. In addition, many disease causing cells have the ability to mutate around protein targeted therapeutics.

Lipids by contrast do not vary from species to species. They are small and simple structures. This allows for preclinical results to translate much better into human clinical trials. The results of the iSONEP trial are a direct result of these advantages. I think that while there are many exciting drug approaches, to a large extent companies get lucky when they find success with a given approach. I believe that Lpath has the advantage of removing this barrier and they will have a good indication how a drug will perform before proving it in the clinic. Not only does this translate directly into results, but it saves money. Lpath has enough cash to get to mid 2014.

As many biotech investors are aware, sometimes a company can catch fire for no (or very little) reason. I think at some point in 2012 we will see this run with Lpath. We saw this excitement building until a bit of bad luck hit with problems with one of its contractors. This news was certainly not great, but it has nothing to do with the prospects of this company and its drugs. I of course could be wrong, but I think a short time from now we will look back fondly at the time when we could have bought in at these levels. Do you think this company is only worth 55 million?

I don't.

Disclosure: I am long LPTN.OB.