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LPTN A 28c Biotec Trading Below 65c/Share Cash Value Could Gain 400% Overnight

Summary

  • Lpath's is awaiting FDA's green light to proceed with clinical trials of its potentially blockbuster drug candidate Lpathomab. Preclinical studies showed positive results with Lpathomab in several pain models.
  • In 2015 Lpath's market cap has been reduced to $6 million, about half its current cash value because of adverse clinical trial results with two of its most important drugs.
  • Through recent restructuring, royalty payments, and grants, the company will be able to fund its planned drug discovery and development activities through the first quarter of 2016.
  • Besides an announcement on the start of Phase 1 clinical trials for Lpathomab, other possible near-term catalysts are updates about the iSONEP and ASONEP data reviews currently underway.

Lpath, Inc. (LPTN) focuses on the discovery and development of monoclonal antibodies that target bioactive lipids known to contribute to diseases such as most cancer types, inflammations, pain, asthma, diabetes, and others. Lpath's unique drug-discovery engine platform named ImmuneY2 is able to generate therapeutic antibodies that bind to and inhibit harmful bioactive lipids. To date, Lpath has formulated several antibodies addressing a wide range of diseases. The company has a significant intellectual property position in the bioactive lipid area,with over 50 issued or pending patents in the U.S., with corresponding international applications.

The uniqueness of Lpath's drug-discovery methodology has enabled it to engage Pfizer (NYSE:PFE) into potentially very lucrative collaborations. This will be discussed later in this article.

LPTN in recent months reported adverse clinical results for two of its major drug candidates causing the stock to hit the current all-time lows. These two drugs are iSONEP for wet AMD (The Nexus Trial) and ASONEP for cancer. Lpath's major third drug product candidate, Lpathomab, has demonstrated strong preclinical activity in several animal models in diseases including neuropathic pain, diabetic neuropathy, traumatic brain injury and spinal cord injury. The company filed an IND with the FDA in February 2015 and is awaiting the FDA's response to embark in Phase 1 clinical trials.

Lpath's share price of 28c/share is well below its current 65c/share cash (no debt). The company's market cap has been reduced to less than $6 million dollars from over $100 million a year ago. This is extremely low for a company having a unique drug-delivery platform, an extensive product pipeline, and over 50 issued or pending patents. Furthermore,Lpath has an agreement with Pfizer that provides Pfizer an exclusive option for a worldwide license to develop and commercialize iSONEP. This collaboration could result in payments up to $517.5 million plus tiered double digit royalties to Lpath.

To conserve cash, Lpath announced on May 20, 2015, that it will restructure its workforce and conduct a strategic evaluation of its research and development programs in order to conserve working capital and focus its resources on those programs deemed most likely to create value in the near term. The company estimates that it has sufficient cash to support its planned research and development activities through March 31, 2016. In the 10-Q for Q1 2015 dated May 8, 2015 the company stated:

"As they are currently planned, we estimate that our ongoing drug discovery and development efforts, including general and administrative expenses, will require Lpath to expend approximately $16 million from April 1, 2015, through the first quarter of 2016. As of March 31, 2015, Lpath had cash and cash equivalents totaling $12.7 million. Additional near-term sources of cash include our accounts receivable of $1.4 million and additional funding from Pfizer under the terms of the Pfizer Agreement to support our Nexus clinical trial. We may also receive additional funding from future awards of NIH grants. We believe these funds should be sufficient to fund our planned drug discovery and development activities through the first quarter of 2016 without including any funds that we may receive should Pfizer exercise its iSONEP option."

With a float estimated at 13 million shares, LPTN could move up fast on any positive news. I expect some insight on the status of the Lpathtomab program and the path forward with iSONEP and ASONEP this week when the company reports its 2Q 2015 financial results.

I will now discuss the potential of the company's Lpathomab drug candidate and will follow with an assessment and possible path forward for iSONEP and ASONEP.

The Lpathomab opportunity

Lpathomab is a patented monoclonal antibody targeted against a bioactive lipid known as lysophosphatidic acid (LPA). LPA has been recognized to be involved in disorders of the central nervous system (including pain, traumatic brain injury, neurodegeneration), fibrosis, ocular disease, and cancer. According to the company and other independent studies, Lpathomab has demonstrated strong preclinical activity in several animal models of these diseases, including neuropathic pain, diabetic neuropathy, traumatic brain injury and spinal cord injury.

Preclinical studies showed strong in vivo results with Lpathomab in several different pain models, which suggest that LPA may be an attractive target across a variety of chronic pain conditions, including diabetic peripheral neuropathy, post-herpetic neuralgia, chemotherapy-induced neuropathic pain and pain associated with lumbosacral radiculopathy.

In February 2015, the company submitted the Investigational New Drug (NYSE:IND) application to the FDA to conduct a Phase 1 study of Lpathomab for the treatment of various forms of severe chronic pain. The primary objective of the study is to evaluate the safety and tolerability of Lpathomab in subjects that are experiencing severe chronic pain. In March 2015 the FDA requested that Lpath provide additional information. The company has since presented the FDA with the requested information. The company plans to begin enrolling patients in the Phase 1 trial once the FDA's IND review has been completed and the study has been approved by the investigational review boards for the clinical trial sites.

Published research has also demonstrated that LPA is a significant promoter of cancer-cell growth and metastasis in a broad range of tumor types. Take for instance the article titled "Lysophosphatidic Acid Stimulates the Proliferation of Ovarian Cancer Cells via the gep Proto-Oncogene Gα12," which discusses the role of LPA as a "novel ovarian cancer stimulator" causing both migration and proliferation of ovarian cancer cells.

A study conducted by scientits at the University of Melbourne in Australia found in mice studies that Lpathomab could be used in treating neurotrauma, such as traumatic brain injury (NYSE:TBI) or spinal cord injury (NYSE:SCI). According to NINDS, the National Institute of Neurological Disorders and Stroke, TBI costs the US more than $56 billion a year, and more than 5 million Americans alive today have had a TBI resulting in a permanent need for help in performing daily activities. The report also states that "survivors of TBI are often left with significant cognitive, behavioral, and communicative disabilities, and some patients develop long-term medical complications, such as epilepsy."

An October 22, 2012 article entitled, "Lpathomab Offers Hope In Billion-Dollar Neurotrauma And Pain Markets," and written by fellow SA contributor LastFinancier examines several potentially lucrative applications for Lpathomab. The author suggested at the time, when LTPN traded around $6, that the stock was undervalued citing the July 2011, Bristol Meyers Squibb (NYSE:BMY) acquisition of Amira for $325 million up-front and potential additional milestone payments totaling $150 million. The author commented:

"Amira's AM152 targets one of numerous LPA receptors whereas Lpath's Lpathomab goes straight to the source of the problem by soaking up the LPA itself. This lofty price tag was placed on the AM152, which, like Lpathomab, does not (yet) possess human efficacy data. Comparisons between Lpath and Amira indicate that Lpath is severely undervalued and validates Lpathomab's target and pathway."

The above discussion, and LastFinancier's article, clearly suggest that Lpathomab could some day become a blockbuster drug addressing several debilitating, and in some cases deadly diseases. I am hoping that Lpath's management will apply the "lessons-learned" from the iSONEP and ASONEP's failures and prevent situations that could lead to yet another failure with Lpathomab. I am also hopeful that, like in the past, the company will be able to execute a collaboration agreement similar to the one with Pfizer to help fund Lpathomab's clinical trials.

iSONEP Phase 2 Results

On May 20, 2015, Lpath reported that its multicenter, phase 2 "Nexus clinical trial" evaluating iSonep in patients with wet AMD did not meet its primary or key secondary endpoints. Wet AMD patients who had not responded adequately to existing therapies did not show any statistically significant improvement in visual acuity when treated with iSonep as an adjunctive or monotherapy. The market reacted very negatively to these news bringing the stock down from almost $2/share to the current under-30c pps.

Dario Paggiarino, MD, Lpath's Senior VP and Chief Development Officer commented:

"While the primary endpoint of the trial was not met, we will be conducting a complete analysis of the data (deep dive), including additional anatomical endpoints, to better understand the results from each arm of the trial."

Encouraging results from the Phase 2 are: 1) the data collected suggests that in this study iSONEP was safe and well tolerated across all dose levels when administered alone or in combination with another therapy, and 2) 11 patients continue to be evaluated, with completion of follow up at month nine for all patients expected in September 2015.

Full study results will be presented during the Retina Subspecialty Days in conjunction with the American Academy of Ophthalmology in Las Vegas on November 14, 2015. The study results will be presented by Thomas A. Ciulla, MD of the Midwest Eye Institute. It is interesting that Dr. Ciulla's clinic was one of the clinics that participated in the iSONEP Nexus trial. Dr Ciulla also presented iSONEP's Phase 1 results on September 9, 2010. Phase 1 results presented by Dr. Ciulla were very encouraging unlike what we currently know about Phase 2 results. Dr. Ciulla's poster drew the following conclusions:

  • iSONEP was well tolerated in all subjects at doses up to 1.8 mg, and a maximum tolerated dose was not reached;
  • Out of ten subjects that had potential to show biologic activity, eight showed signs of biological activity;
  • Several subjects experienced substantial regression of the underlying CNV lesion;
  • S1P (the bioactive lipid that iSONEP binds to and neutralizes) appears to be a mediator in the pathogenesis of wet AMD;
  • iSONEP has biologic activity in this subject population and holds promise as a new therapeutic agent; and
  • 100% of subjects with PEDs (two of two) resolved completely with a single injection of iSONEP by Day 45.

Seekingalpha contributor LastFinancier in his article "Why Lpath Shares Could Soar Ahead Of ISONEP Trial" gives a more detailed assessment of Phase 1 iSONEP's results.

I am hoping that the "deep dive" will uncover some or all of the reasons for the failed Phase 2. Things that come to mind are: 1) was QC not properly done on batches manufactured for Phase 2?, 2) why did the formulation not show the excellent activity shown in Phase 1?, 3) were there impurities and/or preservatives that rendered the formulation used in Phase 2 less active than in Phase 1? 4) did they retain any samples from Phase 1 so that they can do a side-by-side evaluation?, 5) why are 11 patients still being evaluated? is there anything that can be learned from them to apply to another test protocol?, etc..

ASONEP Phase 2 Results

On March 24, 2015 Lpath announced that its Phase 2a single-agent, open-label study of ASONEP did not meet the primary endpoint of statistically significant progression-free survival in patients with advanced renal cell carcinoma (RCC).

The primary endpoint of the trial was that 25 out of 39 patients needed to be progression-free at two months of treatment. The results showed that the overall median time to progression was less than two months, thus failing the primary endpoint. There were however some very encouraging results as seven patients were progression-free for at least six months, with three patients progression-free for over 20 months. The company reported that six patients currently continue to receive weekly infusions of ASONEP.

As was the case with iSONEP, ASONEP was well-tolerated by patients overall.

Dario Paggiarino, M.D., chief development officer of Lpath, commented, "at the conclusion of this RCC trial, we will take a strategic look at exploring with a partner other opportunities where ASONEP may have the best chance of success."

The Phase 1 and Phase 2a clinical trials of ASONEP were partially funded by a $3.0 million grant from the National Cancer Institute under its Small Business Innovation Research Program. The reference shows a number of grants for several clinical trials and studies related to the company's main drug candidates.

On a personal note, my mother was diagnosed with RCC in 2013. She was administered Sutent which did nothing because in two months the cancer had spread to her bones, pancreas, and lungs. The side effects of Sutent were so horrible, specially excessive bleeding and liver problems, that our family still believes that it was the drug that expedited her death. Having known about ASONEP at the time would have been a blessing, if nothing else to improve her quality of life because of its improved safety profile compared to Sutent.

Conclusions

I expect news soon about the start of Phase 1 clinical trials of the company's Lpathomab drug candidate for the treatment of various forms of severe chronic pain. As it was the case with iSONEP and ASONEP, Lpathomab has an excellent safety profile. As I discussed above, this formulation has a potential to become a blockbuster drug because of the wide range of applications where the bioactive lipid LDA has shown to play a role. I am hoping that Lpath will again be able to find a large partner like Pfizer to help fund the upcoming clinical trials. I also hope that the company will apply any lessons learned from the failed Phase 2 trials on iSONEP and ASONEP.

Regarding iSONEP, the company is conducting a "deep dive" on the trial data and will report its findings when those results are available. According to the company, Pfizer has 75 days from the date the Phase 2 results were reported (May 20) to exercise the option for a worldwide license to develop and commercialize iSONEP. Lpath is scheduled to present the final Phase 2 study results during the American Academy of Ophthalmology conference in Las Vegas on November 14, 2015.

ASONEP for RCC, despite failing the endpoint of the Phase 2 trial, has shown encouraging results as seven patients were progression-free for at least six months, with three patients progression-free for over 20 months. The company is evaluating the path forward with a partner according to the March 24, 2015 conference call.

LPTN with a market cap of only $6 million is extremely undervalued. I expect that the share price will head North with any positive news. An announcement of the start of Phase 1 clinical trials for Lpathomab is a potential near-term catalyst. Other near-term catalysts are any encouraging path forward for iSONEP and ASONEP resulting from the current data review and conversations with potential partners.

Investors interested in LPTN should do their own due diligence by carefully by evaluating the risks and uncertainties as detailed in the company's SEC filings. In addition to the risks listed in SEC filings, there are other potentially adverse situations that could cause significant losses: 1) inability to accomplish cost-cutting objectives, 2) potential dilution related to seeking funds to drive clinical trials, 3) potential delisting if the company is unable to trade above $1 for at least 10 days, 4) loss of key talent to competition, and 5) failure of more clinical trials.

Disclosure: I am/we are long LPTN.