A lot of people have been emailing and messaging me the last couple weeks with questions about IsoRay (NYSEMKT: ISR); what do I know about the M.D. Andersons clinical prostate cancer trial, what do I know about IsoRays latest shelf offering, what do I think is going to happen to IsoRays share price and what is going on with the class action lawsuit that was filed against IsoRay in May. So let me answer all the questions, in order, real quick. I don't know. Holy cow, what shelf offering? Much higher. And I could care less, because I am tired of hearing about the silly lawsuit. The lawsuit has no merit and it is so small even if they lost the case, which is unlikely, it would have no bearing on the share price or the company's future.
Let me start by giving a little information about IsoRay. They are a small biomedical company out of Richland, Washington, with a line of patented products, including Cesium-131, a multi-cancer treatment that is currently FDA approved for treating prostate cancer, brain cancer, lung cancer, ocular cancer, head and neck cancer, and other cancers throughout the body. What makes Cesium-131 so incredible is that it has an unbelievably high success rate and minimal side effects compared to other cancer treatments. IsoRays products are also covered by Medicare as well as private insurance. So there are no limitation on receiving payments and reimbursements.
Cesium-131 is the biggest advancement in low dose radiation and brachytherapy in the brachytherapy in the last 20 years and with its issued patents and FDA approval for several types of cancer, IsoRay is protected from their competitors entering the market. This gives them a monopoly in the market. IsoRays patented technology for seperating Cesium-131 from barium leaves a highly purified form of Cesium-131 that is free from other metals and radioactive ions, which is required in order for it to be useful. It also has patented technology in the construction of CS-1 permanently implantable seed. IsoRays patented process for Cesium-131 allows it to be permanently implanted so as to only need one treatment, instead of numerous as is the norm with external beam radiation treatment. Cesium-131 is also the fastest decaying isotope with only a 9.7 day half-life, which is much shorter compared to other brachytherapy treatments. This allows it to be used to treat aggressive cancers, such as brain, lung, head and neck, gynecological, prostate etc., with incredible results and minimal complications, therefore enhancing the patients quality of life.
Now to to answer the questions in a little more detail, I traveled to Houston, TX this past week to try and get some information concerning the Phase II clinical trial that was conducted at M.D. Anderson, I called IsoRay CEO Dwight Babcock.
First, this is what I found out from Dr. Frank and M.D. Anderson about the clinical trial. Per Dr. Frank, "the clinical trial was a Phase II monotherapy trial for prostate cancer patients with intermediate risk localized disease. This was a 300 patient trial (100 Iodine, 100 Pd, 100 Cesium) and we are analyzing the data for publication. The Cesium patients were the last 100 patients and have only 2.5 years of medium follow-up. We will be presenting more data in Nov…."
Dr. Frank as well as a Dr. Pugh, will be presenting the data on November 7th-8th at The Utilization of MRI in LDR and HDR Prostate Brachytherapy: From Diagnostics to Response Assessment conference.
Dr. Frank will be presenting the following lectures on Saturday November 7, 2015
- 8:05-8:15 MRI-based Brachytherapy - The Knowledge Gaps and Technical Challenges
- 10:55-11:05 The Replacement of US Simulation with MR Simulation - Can We Do It?
Sunday November 8, 2015
10:00-10:15 MRI from Diagnosis to Assessment - Next Steps to MARS
And Dr. Pugh will be presenting the following lectures on Saturday November 7, 2015
1.9:15-9:30 MR Correlation with Prostate Pathology
Sunday November 8, 2015
2. 10:15-10:30 MD Anderson Phase II Trial of Monotherapy for Intermediate Risk Localized Disease.
The Sunday November 8th lecture by Dr. Pugh, appears to be where they will actually be going over the current results to date. The results of M.D. Anderson Phase II monotherapy trial is likely to be the most important catalyst in IsoRay history, other than a buyout, due to the fact that it is a head to head comparison against the two other leading forms of low dose radiation brachytherapy. MD Anderson is the number one hospital in the United States for cancer care and if their independent trial shows Cesium-131 results are better than Iodine-125 and Palladium-102 results in head to head comparisons -which appears to be he case- you will have more physicians and medical centers begin using Cesium-131. This would bring a huge increase in revenue for IsoRay.
Having the number one cancer hospital in the United States do a clinical study of Cesium-131 and then continue using it on patients after the study is completed, appears to show just how good Cesium-131 really is. And I have confirmed through M.D. Anderson, Cesium-131 is first on their list for brachtytherapy treatments for their patients.
Next, I spoke with the CEO, Dwight Babcock about a few things. Some of my questions are below. He answered most, but some he could not due to the pending earnings report.
First thing I wanted to know was, why file for a shelf offering on August 25th? Mr. Babcock explained they have had inquiries into acquisitions and they are looking at offices, manufacturing facilities, etc… Take from that what you will, I see it as positive news.
Next I asked about the upcoming ER date, if sales were up and if so how much? He said ER will be September 14, 2015. As for what their sales were, he could not give me any information for obvious reasons. He does however think everyone will be surprised.
When I asked if any publications were coming out concerning Cesium-131 trial studies, he said because they are independent studies, IsoRay does not receive any information about results until the information is released publicly. He actually complimented me, by saying, "you actually seem to be better than anyone at digging up that information. You seem to get it before anyone."
However, he did tell me about a month ago that publications had contacted IsoRay about various pending studies, mainly to ask how much did IsoRay pay for the studies? He said nothing was paid for the studies, they are independent studies. Determining 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 publishing the article. That leads me to believe study results should be coming soon.
I also asked Mr. Babcock if any new physicians or medical centers were using Cesium-131. He said, "yes, several, in fact there are new ones coming all the time."
Last but not least, I ask him if IsoRay was looking to be acquired or if they were in talks with anyone. Of course, he said he is unable to comment on that.
After speaking with Mr. Babcock and M.D. Anderson, I feel more confident than ever that IsoRay will be moving to the upside soon. The quarter ending March 31, 2015 revenues increased 2% compared to quarter ending March 31,2014 and the increased interest in Cesium-131 is increasing with major medical centers now using it. Revenue estimates for the quarter ending June 15, 2015 are expected to grow by 36% to $1.3 million. I think they will beat that estimate. 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. When the M.D. Anderson trial results are released I expect IsoRay will beat those numbers as well.
Risks - Minimal
Although there are numerous ongoing clinical trials, currently there is no long term data on Cesium-131. This is why IsoRays share price spikes on news releases and then fades back to where it was previously and then remains stagnant until the next news release. IsoRay requires positive results from the next earnings report and continued positive clinical trial results to begin a continued upward move. Without either of the two there will be little upside in the near future.
Recommendation - Buy
IsoRay is a low risk/high reward stock, with a maximum loss of $1.42 while upside is very likely to break above the recent all time high of $4 and has an analyst price target of $5. I believe IsoRay is a buy for several reasons; the company is financial stable, with over $20 million cash on hand, a low cash burn, no debt and another $20 million available in a shelf offering, their technological monopoly with Cesium-131, the number one cancer hospital in the U.S. is now using their products, FDA approval which allows them to sell their products into trials thereby allowing them to generate revenue while gaining traction through independent studies, and a 17.5% share purchase increase by institutional investors in the last six months, IsoRay is likely multi-bagger with serious buyout potential from Bard (NYSE:BCR), Johnson & Johnson (NYSE:JNJ), Pfizer (NYSE:PFE), Merck (NYSE:MRK) or Bristol-Myers Squibb (NYSE:BMY) as well.
Disclosure: I am/we are long ISR.
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.