MELA: MELA Sciences, innovative leader in a growth market
Mela Sciences (NASDAQ: MELA) has developed an innovative tool, MelaFind®, which provides a non-invasive way to derive information on melanoma during skin examinations. Melanoma is the deadliest form of skin cancer and the fastest growing cancer in the U.S. MelaFind® has been approved by the U.S. Food and Drug Administration for use in the U.S. and is approved for use in the European Union. MelaFind® was designated by the Cleveland Clinic as one of the Top 10 Innovations for 2013 based on several factors like clinical impact and probability of commercial success (source: http://finance.yahoo.com/news/mela-sciences-announces-fourth-quarter-210200607.html). MelaFind® is the first and only FDA-approved diagnostic tool that helps dermatologists detect melanoma at its most curable stage (source: finance.yahoo.com/news/mela-sciences-inc...).
Recent research shows that MelaFind® can significantly increase the melanoma detection rates of resident dermatologists when deciding to biopsy melanoma. Prior to factoring in results from MelaFind®, dermatology residents' biopsy sensitivity was 57%. After reviewing MelaFind® results, sensitivity improved to 77% (source: finance.yahoo.com/news/mela-sciences-inc...).
Melanoma rates continue to rise and the market for MelaFind® will grow as more people come in for skin exams. Every hour one American dies from melanoma. The key to saving lives is by catching skin cancer before it has advanced. According to a Harris survey commissioned by MELA Sciences Inc., the majority of Americans have an annual physical exam (86%), less than one in four Americans (23%) visit a dermatologist each year for skin exams and professional mole checks. Recent studies have shown that people are being diagnosed with melanoma at a younger age.
Major steps in growing market
Mela Sciences is making significant strides with MelaFind, which has been in the market for only about a year. It ended the fourth quarter with 95 MelaFind® systems installed in dermatologists' offices in the U.S. and Germany. In addition it has obtained signed user agreements for 115 MelaFind® systems in the U.S. and Germany to be installed by the end of the fourth quarter.
The company is accelerating its rate of signed user agreements, system placements, and the training of new customers as well as entered into discussions with over 100 additional dermatologist practices as of year-end 2012.
It is expanding commercial sales presence with more territory managers with dermatology sales experience. In addition, it expanded the team of Practice Support managers to focus on practice-wide adoption of MelaFind®.
Moreover it has launched several initiatives to promote patient awareness with peer to peer videos, in-office literature, posters and tear sheets for dermatologists to better educate patients about MelaFind®.
The recent engagement of Rpr Marketing Communications, a marketing communications agency, singularly focused on dermatology and skincare, is another significant step in this regard.
During the American Academy of Dermatology meeting in Miami, the company experienced heavy booth traffic, with over 650 dermatologists engaging to learn more about MelaFind, 350 of which received in-depth demonstrations. Several dermatologists signed user agreements on site.
After the recent financing and with the committed debt in place, MELA has $30m in cash committed, which will fund the second phase of launch strategy through 2013 and 2014. In March 2013, the Company entered into a Loan Agreement with Hercules Technology Growth Capital in connection with a loan of up to $10 million. Of the $10 million loan, $6 million was funded in March and the company has the option to draw down the remaining $4 million through March, 2014, subject to conditions. The loan bears interest at the rate of 10.45% per year.
The company recorded revenues for the first time in 2012 of $278,461 and deferred revenues reported as of December 31, 2012 were $303,377 versus no deferred revenue as of December 31, 2011. Revenues were based on the installation of 95 MelaFind® systems and deferred revenues reflect the timed recognition of the installation fee revenue over the term of the user agreement, which is generally two years. Though the company is experiencing losses currently, we believe with success of MelaFind®, it will attain significant revenue in near future.
Upcoming investor event
Mela Sciences will be hosting a meeting for investors and analysts in conjunction with Melanoma Monday on May 6, 2013 from 10:00am to 11:00am Eastern time, in New York City.
Joseph V. Gulfo, MD, the Company's President and CEO, will host the meeting and will provide a brief introduction and business update. He will then moderate a panel discussion and presentations from leading dermatologists Mark S. Nestor, MD, PhD, Voluntary Associate Professor of the Department of Dermatology and Cutaneous Surgery at the University of Miami Miller School of Medicine, and Dr. Gary Goldenberg, MD, Medical Director, Dermatology Faculty Practice at The Mount Sinai Medical Center, Assistant Professor of Dermatology and Pathology at the Mount Sinai School of Medicine. The clinicians will discuss their current practice patterns, the clinical utility of MelaFind and how they are incorporating it into their practice, as well as the product's potential market opportunity. Following the presentations, there will be a question and answer session.
A live audio webcast of the MELA Sciences Investor Meeting will be accessible through the investor relations section of Company's website at www.melasciences.com. An archived edition of the presentation will be available later that day and will be available for at least 30 days afterward.
Joseph V. Gulfo, MD, Chairman, President and CEO has been with the company since January 2004. From May 1999 to November 2003, he served as Chairman, Chief Executive Officer and President of Antigen Express, Inc., a development-stage company developing immunodiagnostics and therapeutics for cancer. Dr. Gulfo received a B.S. in biology from Seton Hall University, an M.D. from the University of Medicine and Dentistry of New Jersey and an M.B.A. in finance from Seton Hall University.
Richard I. Steinhart, Senior Vice President - Finance; Chief Financial Officer and Treasurer has been with the company since April 2006. Before joining the Company, he spent 14 years as Managing Director of Forest Street Capital/SAE Ventures, a boutique investment banking, venture capital, and management consulting firm focused on healthcare and technology companies. Prior to Forest Street Capital/SAE Ventures, he was Vice President and Chief Financial Officer of Emisphere Technologies, Inc. He holds BBA and MBA degrees from Pace University and is a Certified Public Accountant.
Dina Gutkowicz-Krusin, PhD, Principal Scientist and Director of Clinical Research
was one of the founders of MELA Sciences, Inc in 1990. Her responsibilities at MELA include: the development of data analysis and classification algorithms; designing studies for the research and development of products for review by FDA; preparation of scientific papers and regulatory submissions. Dr. Gutkowicz-Krusin received a BS in physics from the City College of New York and a PhD in theoretical physics from Cornell University, and was an NSF Postdoctoral Fellow at MIT.
The stock, at $1.10, hit a new 52 week low as we write our report and we think it is good value. With price to book below 3, the stock has significant upside in our opinion. The company, with its pioneering and leadership offering, could also be a takeover target.
Insider buying is another positive sign for the stock. CEO Dr. Joseph Gulfo recently bought 20,000 shares at $1.15 per share for a total value of $22,974.
Disclosure: I am long MELA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I am long and may be buying more in the next 72 hours.