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Isoray (ISR) Stock: Circles Back Toward Leadership Position In Treating Prostate Cancer

Summary

Cesium 131 is a disruptive isotope.

The treatment should be a first line therapy.

Isoray could find itself in a leadership position.

If an investor pitched me on all of the positive features of IsoRay, Inc. (NYSEAMERICAN: ISR) and told me at the end of the presentation that the stock was selling for just 0.45 cents, I would ask him where I could back up the truck to load up on shares. After all, Isoray is a revenue producing company, has assembled an experienced and efficient management team, and is continuing its potentially disruptive cancer treatment using Cesium-131, the Company's cancer fighting isotope that is currently used to treat a broad range of cancers.

Acknowledging that the oncology treatment sector usually follows the money and offers treatments that may provide the highest revenue stream, it's a bit easier to understand why ISR might have fallen off an investor's radar during the past few years. But, now that the industry and treatment demands are changing once again, ISR is newly positioned to take swift advantage of treating patients with prostate cancer, the company's primary focus at the moment. However, Cesium-131 brachytherapy is likely to expand into the treatment of both brain and head and neck cancers in the relative near term.

Moving forward, science and long-term data is proving that the use of Cesium-131 to treat cancer patients has come full circle, starting to replace therapies that rely on radioactive iodine and palladium that take a lot longer to treat prostate cancer patients and do not have optimal properties to treat more aggressive cancers.

For ISR and Cesium-131, the timing of the changes may be an opportune moment for Isoray to capitalize on its fourteen years of experience with the isotope, with a significant ten-year patient data set that supports the efficacy of the product.

Cesium-131 Is A Disruptive And Effective Isotope

Cesium-131 is not a new concept in targeting cancers. For more than fourteen years, Isoray has continued its development of this unique isotope, proving its targeted benefits in over 11,000 patients that have various cancer indications. In brain cancer, the results show the ability to provide localized control in more than 80% of the patients, while substantially reducing radiation exposure to uninvolved brain tissue and minimal effect on patients' continued cognitive abilities. But, the benefits go well beyond safety. Cesium-131 can be used as a second line treatment after the maximum radiation is dosed to a patient, providing long-term beneficial effects and may give the company a lucrative opportunity to expand its use in multiple cancer indications.

However, as strong as Cesium-131 might be, the fact that ISR is the only company able to produce “seeds” using this promising isotope makes the case and position for Isoray that much stronger. For those new to the Cesium-131 isotope, it's important to know that there is already a fourteen -year history of clinical data and patient use. And, now that encouraging five, seven, and longer term data is getting published, the results are emerging as to why this treatment may become a potential first-line approach to treat both prostate and brain cancers.

Cesium-131 is proving its worth to replace radiative iodine and palladium, both of which are shown to take long periods of time to administer their radiation dose due to their radioactive half-lives being considerably longer than Cesium-131, thereby prolonging the therapeutic time required for the radiation treatment in patients and often prolonging the lengthy and uncomfortable side effects from radiation as well. At this juncture, the patient population and its oncology practitioners may begin to once again look to Cesium-131 as a quickly administered treatment that may significantly reduce the time course of the side effects of high-dose radiation therapy.

The oncology industry tends to follow the money, and for patients, this means they sometimes get the treatment that generates a higher reimbursement rate for practitioners, regardless of other factors related to patient outcomes. That might be a harsh statement to believe, but, a quick historical snapshot may indicate that Cesium-131 should have never left the front of the pack for treatment options, despite the money made through other options.

Two Decades Later, It's A Return To Cesium-131

In the early 1990's, for instance, patients were primarily treated with surgery and now outdated radiation therapy. The introduction of brachytherapy in that same period boosted the hopes of many prostate cancer patients, introducing a much less invasive, out-patient treatment option that implanted permanent seeds to target cancer with great reported success. This evolution was timely, especially when more than 150,000 patients diagnosed with prostate cancer had to undergo complete prostate removal, which led to scores of adverse side effects and life-altering challenges. The addition of brachytherapy was disruptive and a significant step forward, and brought in big players like GE Medical and Johnson and Johnson. But, in the early part of the next decade, that technology took a back seat to even newer technology –the next generation of external beam radiation.

Like brachytherapy, the external beam radiation was a less invasive treatment option over other standards of care such as surgical removal of the prostate gland. But the process took upwards of seven weeks to apply and appeared to be more attractive to oncologists because of its high reimbursement rate rather than its long-term effectiveness. To be clear, medical professionals need not get criticized for using a particular treatment option available to them, but, data shows that preferred methods to treat often follow the money, and the external beam was a money maker at the time.

Now, with the long-term data of Cesium-131 making its way to market, and peer-reviewed publications showing support, ISR is positioned to benefit from many strategic maneuvers made at the company over the prior two years. With a revamped sales and management team in place, the company's infrastructure is already built to withstand far higher revenue streams that will not require a substantial increase in its SG&A expenditures. In fact, analysts have commented on their belief that ISR, with its current management and sales team in place, can generate upwards of $50 million in revenue, enjoy much healthier margins, and would not be at risk to jeopardize the economies of scale that are now in place at the Company.

Cesium-131 Benefits Is First-Line Worthy

Proven to have a far shorter half-life and higher energy than other regularly used implantable radioisotopes, Cesium-131 brachytherapy is demonstrating its ability be highly effective in treating cancer, along with the advantages of fewer side effects and quicker recovery times. In addition to those benefits, the treatment can be personalized to the individual patient to provide a higher concentration of radioactive therapy to the cancer, and at the same time significantly reduce unintended spillover of excess radiation to healthy cells and organs.

With over five years of data supporting its merits, Cesium-131 can become a disruptive treatment option for patients with prostate, brain, and other types of cancers. The data, collected by multiple institutions and reported in peer-reviewed journal publications, supports the thesis that Cesium-131 provides excellent local control of treatment and offers a significant quality of life enhancement to patients versus competing therapies. Recently published prostate cancer results suggest a quality of life improvement over competitive implantable isotopes as well. With these results, Isoray is active in seeking increased reimbursement rates from providers for surgical procedures that can offer a springboard of opportunity to the company.

Further, the company is pursuing additional reimbursement for its non-prostate applications. There is a pending application for a new payment for brain brachytherapy treatment that if accepted, will make it easier for clinicians to offer this innovative new treatment.

Now, a little over a decade since its introduction, Cesium-131 is getting called out as the "next generation" of cancer treatment that holds the ability to change the way patients get treated.

The Next Generation Of An Established Cesium-131

Providing a faster and more consistent treatment option for patients, Cesium-131 is getting called the "next-generation" of brachytherapy isotope therapy. Supported by a decade worth of clinical data that shows Cesium-131 as having the ability to deliver a highly targeted dose of intense radiation therapy treatment without unnecessary radiation dosing to surrounding tissue, the isotope is gaining new attention.

Far removed from lengthy and often uncomfortable dosing regimens, Cesium-131 is delivered in a single-session treatment, avoiding the 6-8 weeks usually associated with external radiation treatment. And, with its high efficacy, ISR is positioned to take advantage of the more than $9.3 billion radiation therapy market that is projected by 2024.

In fact, clinical indications show that Cesium-131 is already a better option. Data shows the product to have a much shorter half-life and is a higher energy low dose rate (NYSE:LDR) isotope that aggressively attacks cancer. Importantly, the treatment has limited impact on surrounding tissues and much faster radiation disposition for aggressive cancers.

And, while the sector tends to follow the money, Cesium-131 may provide a cost-effective and patient-friendly approach to patients who can benefit from a single treatment session. In doing so, patients can avoid invasive surgeries and instead benefit from Cesium-131's low side effect profile.

Coming full circle and enjoying significant attention and positive reviews, Isoray may be able to leverage the success in the near term.

Massive Market Potential Creates Value Opportunity

The market opportunity for Isoray is substantial, estimated to eclipse the $1 billion level for only the cancers that ISR is targeting. Prostate cancer, where ISR is heavily focused, may offer a $700 million market, followed by brain, head & neck, and other cancers adding an additional $600 million market opportunity.

Annual diagnosis of prostate cancers is expected to surpass 200,000 cases per year, with potential LDR isotope treatment given to approximately 140,000 of those patients. Brain tumors account for more than 100,000 new cases per year, while head and neck, and other addressable cancers account for roughly 240,000 new cases per year for those indications. The opportunity can be global for ISR, and with Cesium-131 proving to be a potentially best-in-class treatment option, a significant reflection of value may be missing from the company's current market cap.

While the LDR isotope market offers substantial opportunity, the growing opportunity in the brachytherapy market can be equally as impressive an opportunity. Brachytherapy is proven in randomized clinical trials to demonstrate significant therapeutic advantages in high-risk patients. And, where new data shows that competing therapies are not meeting their intended expectations, Isoray's treatment option stands out even further and can generate an expected $150 million of potential revenues where ISR currently holds only 3% of the share. Thus, as management continues to move the company forward, a market of more than 25,000 annual prostate brachytherapy procedures may offer substantial near-term opportunities for ISR to generate meaningful and long-term revenue streams.

The Opportunity For This Disruptive Isotope Gets Better

Here is where the opportunity gets even better for both ISR and its investors. First, there is no clear market leader in the small brachytherapy space, and many of the existing companies have reduced sales forces and an IP portfolio that is inferior to Cesium-131. Additionally, the market is consolidating, and fewer companies are concentrating on better treatments to target prostate cancer, a specific focus for Isoray. Banking on its low toxicity rate and clinical evidence to support the benefits of Cesium-131, ISR may benefit significantly from their increased investment in the prostate cancer market.

On the topic of brain cancer, Isoray's isotope platform has received support from multiple publications from Weill Cornell Medical College, which showed high rates of brain cancer control when Cesium-131 brachytherapy is used in combination with surgery. The company is also part of a collaborative partnership with GammaTile to develop and commercialize a custom brachytherapy delivery system for treatment of Brain Cancer. The GammaTile product has treated over 100 patients as part of an approved IRB protocol at the Barrow Neurological Institute, a leading neurological disease treatment and research center which gets consistently ranked as one of the best neurological training centers in the United States.

The device is following the 510(k) regulatory pathway, and ISR expects to complete final bio-compatibility testing in the first half of 2018. The device itself is a combination of Cesium-131 seeds embedded into collagen "tiles" and placed onto the resection margin during surgery. The process adds less than ten minutes to the surgical procedure, and ISR enjoys a ten-year exclusive manufacturing agreement executed in January of 2018. The critical FDA approval process is moving forward in parallel with Medicare Reimbursement with the ICD 10 code already issued and the NTAP (New Technology Add on Payment) application in process.

To date, the use of Cesium-131 tiles shows high rates of local control of the treated tumors combined with a low rate of radiation injury, a long-time concern for patients who have undergone multiple treatments for their brain tumors.

Thus, with an ample market, supporting data, and an ongoing regulatory approval process established, Isoray is hitting on all cylinders as they gain increased market exposure and receive additional supporting data for their proprietary isotope treatment.

How Isoray Keeps Getting Better

Having a great product and a clear path for expected FDA approval of its GammaTile device is half of the measure needed to seize upon the long-term opportunity. It takes a focused strategy to deliver the goods. For ISR and its investors, the accretive benefits from its upgraded commercial team will play a key role in building further success, as it will assist in securing Cesium-131's share with base customers and at the same time potentially increase active customers by more than 40%.

Management is also taking advantage of established marketing programs to communicate the benefits of Cesium-131 by bringing resources directly to patients through social and digital channels. Importantly, physicians are starting to contact ISR directly to initiate sales processes and to learn more about the benefits of Cesium-131 treatment.

Management is also focused on maintaining and building cost-minimizing and process improvement programs to create higher margins and quickly benefit from the installation of their manufacturing automation processes in 2017 and 2018.

Perhaps the most near-term catalyst for Isoray is to establish increased reimbursement levels and coverage of Cesium-131 in surgical procedures, and at ISR, this process that is well underway. Combining a well-built infrastructure with a potentially disruptive technology, Isoray is positioned to increase shareholder value as they execute on many strategic fronts.

Targeting prostate cancer, ISR is investing in sales and marketing, research and development, and commercialization of Cesium-131. The goal is to grab a stronger position in not only the prostate cancer market but to target and take advantage of the lucrative opportunities presented by the potential to effectively treat brain, head and neck, and gynecological cancers. The commitment to seizing this opportunity is demonstrated by ISR's five consecutive quarters of revenue growth, supported by increased volume in both new and existing accounts. From Isoray's perspective, they believe that they have the "right team, right isotope, right strategy." And, based on the mountain of empirical evidence that shows Cesium-131 to be a potentially disruptive force in how specific cancers are treated, investors may be wise to agree with their assessment.

This article was featured on CNA Finance.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.