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IsoRay: A Little Biomedical Company With Big Potential

|About: IsoRay, Inc. (ISR), Includes: BCR, BMY, JNJ
Summary

Lawsuit appears to be a non-issue.

More independent clinical study results coming.

MD Anderson Cancer Center using Cesium-131.

Young Peruvian girl treated with Cs-131 for inoperable brain cancer doing great.

Isoray expecting 189% increase in revenue coming quarter.

Three months ago I informed readers of the upcoming release of a long term lung study results using IsoRay's(NYSEMKT:ISR) Cesium-131. I reported the results were coming within weeks, the results would be positive and would be the catalyst that sent IsoRay share price back above $2 and possibly much higher in the coming weeks. Exactly three weeks to the day of the articles release, the results of Cesium-131 lung study result were published and propelled IsoRay's share price from $1.48 to $4.00 in a 24 hour span. The day after the results were published an article came out accusing IsoRay of "taking liberties with lung cancer study results to prop up stock price." An immediate, and in my opinion, over exaggerated panic set in as numerous law firms began advertising they were seeking lead plaintiffs for a class action law suit against IsoRay. IsoRay's share price quickly dropped to $2.01 the following day and continue dropping for the next two and a half months to where it closed at $1.38 yesterday.

The class action suits have been filed and combined into one class action lawsuit that is set to go before the United States District Court, Eastern District of Washington. The docket number is 15-cv-05046. It appears there is a total class action investor loses of only around $200,000. So even if the lawsuit is not dismissed for lack of merit when it goes before a judge, which I believe it will be, the small amount of the lawsuit and IsoRay's insurance should cause this to be a non-issue as pertaining to share price anyway.

Some retail investors may still be nervous about the lawsuit and the possibility that IsoRay exaggerated the lung results, which they did not. The results were actually much better than expected. Cesium-131 was used on high risk patients while the other treatments were used on low risk and Cesium-131 still had better results than the other treatments.

There appears to be another study about to be released, by Dr. Parashar and WCMC, it is "Cesium-131 Seed Brachytherapy Plus Subtotal Resection for Lung Cancer Patients Who Are Not Candidates for Lobectomy or Patients With High Risk of Local Recurrence." The main objective of the study was to, "assess local control of localized lung cancers after limited resection (wedge resection or segmentectomy) and Cesium-131 seed placement in comparison to previously assessed local control of localized lung cancers after limited resection and Iodine-125 seed placement." The study also assessed "quality of life (as related to side effects) of Cs-131 seed placement after limited surgical resection in lung cancers and compare it to already existing data on Iodine-125."

I spoke with CEO Dwight Babcock yesterday, he said publications had contacted IsoRay about various pending studies to mainly ask one of the most important question, how much did IsoRay pay for the studies? He said nothing was paid for the studies, they are independent clinical studies.

Verifying whether IsoRay is paying for a study obviously helps publications verify that the trial is independent and unbiased. This generally happens towards the end of the process before sending an article to be published. It appears some study results should be coming soon.

What will probably be the most important study for Isoray is the one that was done by Dr. Steven Franks of The University of Texas MD Anderson Cancer Center in Houston Texas. MD Anderson is the number one hospital in the United States for cancer care. MD Anderson has been named one of the top two cancer hospitals in the United States every year since 1990 when they began the survey. It has been ranked number one for 11 of the last 14 years, including 2015-2016. Having the number one cancer hospital in the United States doing a clinical study of Cesium-131 is a big deal for IsoRay and Cesium-131. You can bet Big Pharma will be looking at these results. These results could be the make or break for IsoRay.

MD Anderson began ordering Cesium-131 for a prostate cancer study back in October 2011 to continue its research into brachytherapy treatment to control intermediate risk prostate cancer. Intermediate risk is a classification of early stage prostate cancer that has a high recurrency rate even after surgery and radiation therapy. The MD Anderson study compared Cesium-131 to other forms of brachytherapy for treating prostate cancer. This stage of the study is completed and pending the published report.

Dr. Frank has accrued all the patient data and already discussed the prostate cancer trial results at the "Advances in Brachytherapy Symposium" in New York on May 8th-9th. This is the same symposium that Dr. Parashar discussed his Cesium-131 lung trial results at shortly before they were published. It looks like the published results should be coming any time now.

The results of Cesium-131 in the MD Anderson Cancer Center prostate cancer trial is evidently extremely positive as compared to other forms of brachytherapy treatment, since Dr. Frank and MD Anderson have continued to order and use Cesium-131 on their patients even though the study is completed.

An update on the little seven year old Peruvian girl, who back in March of 2014 was diagnosed with inoperable and life threatening brain cancer. The pressure of the tumor on her brain had caused the girl significant weakness, trouble walking and maintaining alertness. She had a drain placed in her brain in an attempt to help ease the increasingly worsening problems. She was also given chemotherapy and whole brain radiation which did nothing to improve the increasingly deteriorating problem. Her doctor, Dr. Carlos Alvarez Pena knew about IsoRay's Cesium-131 and its use in treatment of high risk cancers. He worked with IsoRay and they designed and manufactured a custom implant for her. In July 2014, Dr. Alvarez implanted the Cesium-131 implant directly into the tumor.

According to doctors, her recovery was incredible. She was alert and eating the next day. Within a couple weeks, she was walking again without assistance. Ten weeks after the Cesium-131 treatment, an MRI scan showed a 70% reduction of the tumor. She also returned to her normal activities and was back in school again without assistance or special accommodations.

Dr. Alvarez, had stated "We knew she faced a very short life expectancy. The remarkable 70% reduction in the tumor and the other early results are far better than expected. We are working on a scientific paper in order to share with the scientific community this exciting new way of dealing with these life-threatening cancers."

She is reportedly doing well and Dr. Alvarez has completed the scientific paper on the procedure. The paper is pending publication. This will be another huge catalyst when it is published and more importantly, another life saved.

All the previous independent study have been remarkable as well as the experimental surgery on the Peruvian girl. They all appear to show Cesium-131 to be a superior cancer treatment for high risk cancers. I expect the upcoming clinical trials to continue with the same positive results. The incredible results alone will cause Cesium-131 to become the standard care in certain cancer treatments. But lets also not forget that Cesium-131, with its low initial dose rate and shorter half-life compared to other permanent isotopes, significantly reduce patient side effects as well as reduces radiation exposure to the doctors and other medical staff providing the treatment. This makes IsoRay's Cesium-131 much safer and more beneficial to the patient and the doctors as well.

Isoray also had a large increase in Cesium-131 interest by doctors and medical centers as a result of all the positive clinical trials. This past April, IsoRay had more doctors and medical centers inquire about Cesium-131 than they have in the past two years combined. And it appears that the interest is going to continue increasing with the coming clinical studies and medical papers being written about Cesium-131's incredible results.

This increased interest in Cesium-131 appears to be increasing IsoRay's revenue. Revenue estimates for the quarter ending June 15, 2015 are expected to grow by 36% to $1.3 million. The following quarter, September 2015, when most of the new sales will begin to be realized, the revenue estimates jump almost 189% to $3.01 million. This is expected to continue year over year with revenue expected to increase a whopping 203% to $13.86 million in 2016.

Conclusion
Isoray is a complicated company for investors. It is a small biomedical company that is financially healthy, with over $20 million cash on hand, low cash burn, no debt and a line of patented products, including Cesium-131, a multi cancer treatment that is currently FDA approved for treating brain cancer, prostate cancer, lung cancer, ocular cancer, head and neck cancer, and other cancers throughout the body. Cesium-131, has an unbelievably high success rate and minimal side effects compared to other cancer treatments. While it consistently shows to be far superior to other cancer treatments, it seems every time good news has come out there is something negative that brings the share price back down. It then takes months before more positive news comes out to give retail investors their confidence back. However, institutional ownership seems to be growing, it is up 17.5% quarter to quarter, revenue is expected to finally start increasing steadily, IsoRay knows what the lawsuit value is in a worst case scenario, it looks like news and study results are about to start coming out consistently for the next several months and physicians and major medical centers are finally accepting Cesium-131 as a better cancer treatment. I believe IsoRay is a great company with an incredible lifesaving product and an extremely undervalued share price of around $1.38. I am looking for IsoRay share price to begin moving up and surpass the analysts $5 price target within the year due to increased revenues and interest. Also look for interest from Johnson & Johnson(NYSE:JNJ) Pfizer(NYSE:PFE) Merck(NYSE:MRK) Bristol-Myers Squibb(NYSE:BMY) and Bard(NYSE:BCR). They will not be able to ignore the MD Anderson Cancer Center prostate cancer study results and the fact that the number one cancer hospital in the nation is using IsoRay's Cesium-131.

Disclosure: I am/we are long ISR.

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: The information in the article above is for educational purposes and is not an investment recommendation. Reader comments and opinions are encouraged. Readers should always perform their own due diligence before investing in any stock.