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Highlights Of The Biotech Showcase 2016: Part Two

|Includes: Dipexium Pharmaceuticals, LLC (DPRX), NRXGQ, RDHL, RLMD, SRNE

Every January the Biotech Showcase is an excellent chance to uncover investment opportunities and conduct due diligence. This year was no exception. This is the second summary of companies that I found interesting at this years event. As in the earlier summary, these companies have generally been hit hard by the recent selloff. Some have lost as much as 90% of their market cap.

Current prices may be an opportunity. "Babies are being thrown out with the bathwater". Here are some (mostly late-stage) companies that caught my attention for one reason or another.

Dipexium

Dipexium has an antibiotic cream (Locilex) in a phase 3 trial for diabetic foot ulcers. There are several million of these infections annually in the USA and Europe. The idea is to treat these foot infections when they are still relatively mild, and thereby reduce both hospitalizations and amputations associated with more severe infections. At present there is no standard of care.

Topline phase 3 data is expected in the second half of this year, with an NDA projected in 2017. The study is over 70% enrolled at this point. An earlier phase 3 trial showed non-inferiority to an oral antibiotic, but there were issues identified and an FDA ADCOM voted against the product for efficacy reasons. The company is confident that these issues have been addressed. Locilex is also a candidate to treat mild/moderate ABSSSI.

The company had $32 million in cash at the end of 2015, almost no debt, almost no warrants, a market cap of less than $100 million and a monthly burn of under $1.25 million. Insiders own a bit less than half the fully diluted shares. The stock sits at $9.26 as a write this. The high last July was $17.10.

Sorrento Theraputics

Sorrento is an immunotherapy company with oncology, autoimmune and inflammation targets. Four Biosimilar/Biobetter antibodies are in phase 3 trials, targeting some big indications. Positive phase 3 results for the first 2 were announced in mid-January. The company also has multiple pre-clinical programs and two phase 1/2 clinical trials, so this is not a one-shot deal.

Sorrento has a lot of cash and a relatively low burn rate. The stock has dropped over 75% over the last 6 months, and presently is $6.30, down from its high of $26.80 last July. Six analysts Have targets of from $15 to $45, and all of them rate the stock either buy or strong buy.

Red Hill Biopharma

Here is a company with lots of data coming this year, one NDA filed and 3 products in phase 3 trials. Red Hill has developed oral combination therapies for H-pylori infection and for Crohn's, both in phase 3. The results of the first phase 3 trial for H. pylori look stellar. More results are due this quarter.

In addition, Rizaport is an oral thin-film formulation of rizatriptan for migraines, and has received marketing approval in Germany with an NDA pending in the US.

The company has $64 million in cash and burned about $5 million in the third quarter of last year. The stock is hovering around $10, down from over $22 last June.

Relmada

Relmada is developing chronic pain treatments via novel versions of proven drugs products together with new medicines. Their lead product is dextromethadone, or d-methadone, which is intended to deliver the same levels of pain relief without the problems associated with opiods. Entering phase 2, results are expected in 2017. An oral formulation of buprenorphine is expected to enter phase 3 this year via the 505(b)(2) pathway. This has application in both the treatment of pain and opiod dependence. The most advanced product is a novel version of levorphanol called LevoCapER. LevoCapEr is extended release, abuse-deterrent and tamper-resistant. This is for severe and chronic pain, and is projected to begin phase 3 trials this year. Finally, there is an anesthetic gel version of mepivacaine called MepiGel that is being readied for trials.

This stock has fallen 70+% since reaching a high of $5.70 last September, and currently trades at $1.65. The market cap is fairly close to the cash on the balance sheet, with close to $20 million in cash as of the last 10-Q (probably about $16 million now at prior burn rates) and 11 million shares outstanding.

NephroGenex

NephroGenex has a couple of treatments for kidney disease, including diabetic nephropathy. The oral version (Pyridorin) is in a phase 3 trial expected to end in 2018. The FDA has given the drug a Fast-Track designation and the trial is being conducted under a Special Protocol Assessment (NYSE:SPA). The first of 2 interim reports are expected this summer. Today it was announced that the data and saftey monitoring board for this study recommended its continuation as planned. The company recently received the go-ahead to proceed to phase 1 with an IV version of the drug.

Three institutions own a substantial minority of shares, with CareCapital holding 33%.

The announcement today has sent the share price to new lows. The price is now around $.90, off from over $10 at the beginning of 2015. The management group, directors and advisory board all have strong experience and credentials. (I wonder if the persistent selloff is warranted.) This company also has a market cap close to its cash position, but will likely need to raise funds in 2016.

Summary

These are several of the companies that looked interesting to me at this year's showcase. Information for this article was taken from presentations made at the showcase and from company websites. Any commentary is strictly my opinion. I have a background in research and statistics but have no medical expertise.

Disclosure: I am/we are long RDHL AND NRX, BOTH AS OF TODAY.

Additional disclosure: I have no position in the other stocks mentioned, but may initiate long positions at any time. I do not short small biotechnology stocks.