FDA Approval of TrifericRockwell Medical (RMTI) Gets FDA Approval of Triferic

In news out in pre-market, Rockwell Medical (RMTI) received  FDA approval of Triferic, a new drug that delivers iron to the bone marrow via dialysate in a non-invasive manner to treat iron-deficiency anemia in End Stage Renal Disease patients.
End Stage Renal Disease affects 2.52 million patients globally and is growing 6-8% annually, exceeding population growth rates in much of the world.

Rockwell is also planning to develop new brand extensions based on Triferic to treat other iron-deficiency anemia indications including: stages 3 and 4 chronic kidney disease, oncology, women’s health, pre-mature babies, gastroenterology and parenteral nutrition, as well as new drugs for other targeted renal therapies and indications.

The average analyst estimate for 2015 is for 85% revenue growth yoy and EPS to turn a positive .25/share.

Rockwell Medical Estimates Year Ending December 2014 Year Ending December 2015
Avg. EPS Estimate -0.47 0.25
No. of Analysts 5.00 5.00
Avg. Revenue Estimate 52.79M 97.94M
No. of Analysts 5 6

Most recent coverage from Oppenheimer on January 6, with a $24/share price target.

Rockwell will be introducing Triferic in presentations to nephrologists at the Annual Dialysis Conference January 31 – February 3, 2015.

For more on Rockwell Medical, see:  Rockwell Medical (RMTI) Speculative Buy as January PDUFA Date Nears

Congratulations to our subscribers who invested with us in RMTI at 12 month lows in December!


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Disclaimer

Paul TraversPaul Travers founded Vuzix Corporation and has served as President and CEO since 1997 and as a member of the board of directors since November 1997. Prior to the formation of Vuzix, Mr. Travers founded both e-Tek Labs, Inc. and Forte Technologies Inc. With more than 25 years of experience in the consumer electronics field, and 15 years of experience in the virtual reality and virtual display fields, he is a nationally recognized industry expert. Mr. Travers holds an Associate degree in engineering science from Canton, ATC and a Bachelor of Science degree in electrical and computer engineering from Clarkson University.

 


Cautionary Note on Forward-Looking Statements

Certain statements contained in this interview may be “forward-looking statements” within the meaning of the Securities Litigation Reform Act of 1995 and applicable Canadian securities laws. They are generally identified by words such as “believes,” “may,” “expects,” “anticipates,” “should” and similar expressions. Readers should not place undue reliance on such forward-looking statements, which are based upon the Company’s beliefs and assumptions. The Company’s actual results could differ materially due to risk factors and other items described in more detail in the “Risk Factors” section of the Company’s Annual Reports and MD&A filed with the United States Securities and Exchange Commission and applicable Canadian securities regulators (copies of which may be obtained at www.sedar.com or www.sec.gov ). Subsequent events and developments may cause these forward-looking statements to change. The Company specifically disclaims any obligation or intention to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.


 

MR:  Congratulations on winning 4 Innovation Awards for the V-720 Mobile Gaming Platform at CES 2015 as well as the $24.8 million investment from Intel Corporation (INTC) announced on January 2. The Intel investment brings improvements to the Vuzix balance sheet and removes several obstacles for the company to obtain a NASDAQ listing.  Do you have a goal in mind for when uplisting might take place?

PT: We have stated in the past that it is a goal of ours to list our shares on a more senior exchange.  We believe that the Investment from Intel beefs up our balance sheet sufficiently enough to meet the listing criteria of a national exchange.  In fact we made a filing with the SEC of how the recent transactions have transformed our balance sheet.  On the time frame – that is a question better suited for the exchange!

 

 

Paul Travers - Vuzix CorporationMR: The V-720 Mobile Gaming Platform features HD 720p high-definition displays with a field of view equivalent to a home theater’s 130″ screen viewed at 10 feet and was a hit at CES this year. My 15 year old son (an avid gamer) said the V-720 “looks wicked awesome.”  Is there a timeline estimate for when sales might begin?

PT: Yes, the V720 came across “wicked awesome” at the CES show. In fact to quote a CNET review of the V-720 – “Get this puppy out there in consumers hands – they’re gonna love it!”

Unlike devices like the Oculus Rift, the V720 is compatible with pile of content already available and it has a wonderfully large field of view with HD displays designed to work with modern gaming systems like the Nvidia shield, the PC and the major consoles.

As for timing, we expect that by the end of Q2/early Q3 you will see the V720 start shipping.

 

MR:  That’s great news on the V720 shipping. 
Adoption of smart glasses at the enterprise level seems to be running ahead of consumer adoption. What will it take for consumers to embrace the technology and what is Vuzix doing to foster consumer adoption?

 PT: Smart Glasses in industry make perfect sense today.  As a tool many companies are beginning to show large returns on investment for employing the devices.  Imagine picking in a warehouse up to 4 times faster and much more accurately, that would be a winner by most accounts.  Frankly almost any enterprise environment where hands free access to information is important is seeing benefit from Smart Glasses today.

In the consumer space it’s a different story.  There is no doubt that the experiences that will be delivered to consumers will be amazing and as if out of a sci-fi movie but the glasses can’t look like they are too. The majority of consumer’s wear fashion and that is one of the keys to crossing the chasm into the mass market.  To do this conventional optics are just not up to the task.  That in fact is one of the problems with Google Glass. They are using conventional optics and because of that you stand out (look geeky) while wearing them.

To solve this new optics technology is needed and this is a big focus at Vuzix.  We have been working on proprietary “waveguide optics” that are as thin as reading glasses with displays that can shrink into the temples of conventional fashion styled glasses.  These optics will make the technology disappear and that is when consumers will start getting excited.

 

MR:  Several key Google employees instrumental in developing Glass left the company, including lead developer Babak Parviz, electrical engineering chief Adrian Wong, and Ossama Alami, director of developer relations. Launch of Glass has been delayed and it’s uncertain when it might launch. What is Vuzix doing to gain market share in light of the delays in the Glass launch?

PT: Vuzix is focused on delivering winning solutions in the enterprise space today and we are augmenting this by building key relationships with some of the biggest players; leading companies in their respective markets. Some examples; Lenovo is the #1 PC supplier, Intel is the #1 Silicon supplier, SAP is the #1 ERP provider.  These are just a few examples of some of the companies that have strategic relationships with Vuzix.

We are also putting a significant effort into our next generation waveguide based Smart Glasses.  Our goal is to deliver these next generation solutions as soon as possible with first products expected by the end of 2015.  We do have a lead today and we want to keep it.

Our partnerships and current products are creating standards and making great inroads and our new technology will hopefully extend our lead.  That said there are going to be many winners in this market and having Google being in the mix has been nothing but good for the entire industry.

 

MR: What’s the difference between augmented reality and virtual reality? Are they competing or complementary technologies?

PT: Virtual Reality is a “fully immersive” experience that will not be something that people do as part of their everyday lives.  The idea behind virtual reality is to wear a head mounted display that blocks out the real world and places a person in the virtual one.  Because it is not related to the real world it will be relegated to home use. Even navigation has to be controlled as walking around in the virtual world while actually being in the real world is impossible.

Augmented Reality on the other hand allows a user to mix (or augment) the real world with computer information.  Everyone I am sure has seen the “imaginary” first down yard line in a football game on TV. That is an example of augmented reality.  The line is not real but it sure looks it.  Augmented reality in smart glasses will allow that type of experience but in the real world.  Imagine being in Italy unable to read a menu or the street signs; you dawn your smart glasses and magically through the glasses everything is translated into English directly on the page or street sign.  Or imagine getting direction to the nearest ATM that are literally painted on path in front of you, like the first down line on the football game.  Augmented Reality will be part of our everyday lives and used everywhere.  The possibilities and utility are far beyond what virtual reality will be able to deliver.

 

MR:  Looking out 5-10 years into the future, what new applications for smart glasses might be available due to advances in technology?

PT: Smart glasses have the potential to completely replace current computing devices in the future, including the smart phone itself.  Everything you can do on your smart phone you will be able to do with your smart glasses and much more.  I remember when touch screens first came out and you felt like you could almost touch the internet while browsing the web. It made using computers so easy a child could do it.  The touch interface and connectivity/portability of the smartphone really made smart phones accelerate and frankly is transforming the computer industry.  That transition will happen again as wearable devices become more ubiquitous. Especially smart glasses that can integrate geospatial connected cloud information to the real world.  When this happens amazing things will be possible that cannot be done any other way.

 

MR:  Thank you Paul, for sharing your time with our subscribers. I look forward to following Vuzix Corporation and the exciting future ahead!


 

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Disclosure: The publishers of MicrocapResearch.com are long shares of Vuzix Coproration (VUZI). They have not been paid by the company or any third party fro this interview.

Disclaimer

In our first month since launch at MicrocapResearch.com, our December picks are up an average of 35% as of the close on 1/14/2015 (see picks and performance page).

InVivo Therapeutics has gained 36% since we published this article and we believe the stock will continue to outperform during 2015 as more patients are enrolled in clinical trials of the company’s Neuro-Spinal Scaffold for spinal cord injury patients.

The first patient in clinical trials, Jordan Fallis (see our exclusive interview) is, by all accounts, doing extremely well.

Here is a video of Jordan walking with assistance in a pool during a recent rehab session.

The FDA’s expedited enrollment plan for InVivo’s pilot trial of the Neuro-Spinal Scaffold is also very encouraging.

Biotech analyst, Jason Napodano, recently wrote: “If there is one stock that has the potential to have a big move higher in 2015, it is InVivo Therapeutics.”

We agree.  At MicrocapResearch.com we still hold our core position taken December 17th and will add to that as opportunities present.

The market has been especially volatile during the first two weeks of the year, mostly due to the continued plunge in oil prices.  However, during the same period many pharmaceutical and biotech names have strongly outperformed the market (as our early picks have shown). While biotech stocks won’t escape the volatility of the market in general, we believe the early trend for 2015 with select biotech stocks outperforming will continue and MicrocapResearch.com will be here to uncover them for our subscribers.

InVIVO Therapeutics - coming upComing up: A virtually unknown biotech stock that has passed our initial checklist as having potential to make a major move this year. The company is a true nanocap at present and my partner and I will be speaking with management to get more information.

Subscribe now (it’s free) to get our upcoming report on this unknown biotech player with potential for a major new partnership.

 


Rockwell Medical

Our second pick for 2015 is Vuzix Corporation,(VUZI), a company we believe is undervalued given the market capitalization (below $50 million as of Friday’s close) when combined with:

  • Investment from Intel Corporation of $24.8 million announced in aftermarket hours Friday. Intel now owns approximately 1/3 of Vuzix Corporation
  • Removal of approximately $10 million of derivative liability from Vuzix’ balance sheet concurrent with Intel’s investment
  • Vuzix and Intel have a collaborative development agreement for commercialization of future products
  • 96% revenue growth reported in the most recent quarter is expected to accelerate as a new sales partnership with Lenovo for sales/distribution throughout China is realized
  • NASDAQ listing now possible

Vuzix logoVuzix Corporation designs, manufactures, markets, and sells wearable display devices globally as well as virtual reality products that provide users with 3D computer simulated environments which simulate the real or an imaginary world. Vuzix also develops and sells augmented reality products that provide users a live, direct or indirect view of a physical and real-world environment whose elements are augmented by computer generated sensory input, such as sound, video, graphics, or GPS data.

In addition to winning 4 CES 2015 Innovation Awards, Vuzix has won 13 Consumer Electronics Show Innovations Awards (see Vuzix Corporation Awards PDF) and has 49 patents issued or pending. Vuzix Corporation was founded in 1997 and is based in Rochester, New York with offices in Oxford, England and Tokyo, Japan.

Shares Outstanding: ~19 million fully diluted (includes investment from Intel Corporation)

Float: approximately 7.8 million (per Andrew Haag, Managing Partner, IRTH Communications)


Enterprise Market Opportunity

Early adoption of smart glasses appears strongest in enterprise solutions, an area in which Vuzix has early mover advantages and a noteworthy partnership with SAP. The ability for an engineer to remote in to a technician on the ground as shown in the video below has obvious applications to increase productivity in warehouse operations as well as the airline, oil & gas, and automotive industries among others.


 

Consumer/Prosumer Market Opportunity

Growth estimates for smart glasses vary widely depending on the source. The most bullish projection comes from IHS which forecast shipments of smart glasses as high as 6.6 million units in 2016, up from just 50,000 in 2012. This projection was based on anticipated rapid consumer adoption of Google Glass, the full launch of which has been delayed until (maybe) sometime this year. Even then, Google Glass has hurdles to overcome according to this Business Insider article.

Investors should note that the issues facing consumer adoption are being addressed by Vuzix. Moreover, Vuzix is the recognized world leader in augmented reality hardware systems.

Widespread consumer adoption will require non-bulky, more fashionable smart glasses. In mid-2015 Vuzix will launch consumer grade smart glasses that will deliver what Google Glass failed to do.

Vuzix waveguide consumer smart glasses• Vuzix Waveguide based optics engine
• First binocular fashion-wear smart glasses
• Hands-free operation by voice and gesturing
• Hi resolution displays and 1080p camera
• Designed to support Augmented Reality applications
• True eyeglass styling to “cross the chasm” to the mass market

Investors may find this insight from AugmentedReality.org prescient in light of Intel’s investment in Vuzix on Friday.
AugmentedReality.org believes as the smart glasses market expands beyond early adopters and initial winners emerge, that by the end of 2016 the market will experience a “ major shakeup” with mergers, acquisitions, and significant investments. AugmentedReality argues that consumer electronics giants and other players in the ecosystem have a one year window to position their companies in the space (build, buy, partner) or risk missing the opportunity.

Vuzix adoption curve- smart glasses


Six Catalysts for Share Price Increases in 2015

At MicrocapResearch.com we’ve identified no less than 6 drivers for significant appreciation in Vuzix shares during 2015:

 

  1. Intel Corporation investment
    The investment by Intel not only provides cash, it wipes out some $10 million in long term liabilities, giving Vuzix a much-improved balance sheet. Moreover, it’s a validation of Vuzix and the company’s patented technology as an early mover in the smart glasses space at both the enterprise and consumer levels.


  2. Likely Joint Venture/Collaborative Agreement with Intel by March
    Beyond purchasing approximately 1/3 of Vuzix, the Intel investment includes the following from the 8-K filing on Friday:
    “Collaborative Development Agreement.  Within the 45-day period following the Closing, the Company and the Purchaser shall use their commercially reasonable efforts to negotiate in good faith a collaborative development agreement pursuant to which: (a)  the Company and the Purchaser would collaborate with respect to the following three technologies of the Company: (i) Flat Passive Waveguides, (ii) Curved Passive Waveguides and (iii) Dynamic Waveguides (the “Specified Technologies”), and (b) the Company would grant to the Purchaser the right to be the lead partner to commercialize the Specified Technologies for a period of time to be agreed upon by the Company and the Purchaser, with the terms of such right (including the markets to be agreed upon, which shall include fashion and athletics) to be further specified in such agreement.”
    This collaborative development agreement may involve commercialization of the near-eye display technology described in this October patent application by Vuzix.


  3. Likely NASDAQ Uplisting
    In an October letter to shareholders, Vuzix President and CEO, Paul J Travers, explained:
    “The listing of our common 
    stock on NASDAQ, something we have discussed before at Vuzix as a corporate goal, requires as one of its conditions a minimum net shareholders’ equity of $5 million. We would satisfy this minimum standard with the cash exercise of all of our outstanding warrants and the elimination of the related derivative liability. Our objective is to ultimately accomplish the minimum stockholder equity requirement with the least amount of dilution to our existing capital base.”
    The Intel investment eliminates the previous barriers of shareholders’ equity and $10 million in derivative liabilities, thereby expediting a move to the NASDAQ.


  4. Accelerating Revenue Growth in Q4 2014 and in 2015
    Vuzix reported 96% sales growth in Q3. While the percentage in growth is impressive, Q3 sales were still modest at $664,586. At MicrocapResearch.com we expect sales to rapidly accelerate as the partnership with Lenovo for sales of Vuzix M100 Smart Glasses throughout China is realized. Initial sales began in November after accreditation by China’s CQC (Quality Certification Center) was announced.  Sales of the Vuzix M100 Smart Glasses also began on Amazon.com in November.



  5. Increasing Consumer Market Penetration
    While Vuzix has early mover advantages at the enterprise level and meaningful partnerships with SAP, Lenovo, and XOEye Technologies, the holy grail of smart glasses is the untapped consumer market. We believe Intel Corporation’s investment in Vuzix, and more specifically the “Collaborative Development Agreement” is likely aimed at this market.
    Following Google’s missteps in launching smart glass that people will actually wear, the consumer market for smart glasses is wide open. Collaboration between Vuzix and Intel may bring about a pole position in “markets which shall include fashion and athletics”, according to the filing.



  6. Increased Analyst Coverage and Analyst Upgrades
    Presently only 2 analysts follow Vuzix Corporation with a mean price target of $5.75 according to Thompson/First Call. Given items 1-5 above, we believe the current price targets will be raised and that additional coverage will soon follow. This is especially true if we assume (and we do) that a NASDAQ listing is accomplished.

The Bottom Line

Due to the catalysts above, we see room for both near and longer term upside in shares of Vuzix Corporation. MicrocapResearch.com partner Harris Shapiro shares his expertise in on how to handle the expected opening gap on Monday…

Very often a Company will come out with big news on a Friday after the market closes. The news about Intel investing in Vuzix Corporation should result in a big gap opening. This brings us to the question of how to enter the stock. With the shares closing at $4.21 and Intel paying the equivalent of $5.00 a share I suggest paying up to $5.50 on the opening. If it gaps higher we have two choices- either wait till it pulls back or buy a 1/3 position at the opening and buy more if it pulls back. I would recommend limiting any purchase to $6.00. If we miss it I wouldn’t run after the shares. The Company has a very small capitalization and may prove to be an outstanding winner, but limit orders are the call for now.


Supplemental: Vuzix Corporate Overview (December 2014)


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Rockwell Medical

Zogenix-Inc.-logoZogenix Inc. (web site) is a pharmaceutical company which develops and commercializes medications for central nervous system disorders and pain. Zogenix has commercialized Zohydro, an extended-release hydrocodone for the treatment of moderate to severe chronic pain. The company is currently developing Relday, which is in Phase I clinical trials to treat schizophrenia and bipolar disorder in adults and teenagers 13 years of age and older. The company was founded in 2006, is headquartered in San Diego, and has approximately 110 employees.

Current Market Cap: ~ $210 million


Share Structure

Zogenix ownership summary

 

 

 

 

 

 

 

Shares short:

Zogenix shares held short

 

Source: Nasdaq.com


 

Why Zogenix Shares Were Beat Down in 2014

Zogenix shares were hit hard in 2014, closing the year down 73% from the high of $5.19 made in February. While shares were making this precipitous drop, revenue for the nine months ended September 30, 2014 was $25.6 million, an 11% increase from the $23.1 million in sales during the first 9 months of 2013. In Q3 the company also trimmed losses from .10/share to .09/share.

Despite these positives, shares were under pressure from dilution with approximately 40 million new shares hitting the market in 2014. More significantly, both the FDA and Zogenix received a torrent of negative publicity over the FDA’s approval of, and the company’s commercialization of Zohydro ER.

Zohydro ER is an extended-release form of hydrocodone used for around-the-clock treatment of severe pain. Like any narcotic, Zohydro can be addictive and has the potential for misuse by substance abusers.  Even before the drug was launched in March, a group called “Fed UP!” (a coalition to end the opioid epidemic) sent this letter to FDA commissioner Margaret Hamburg imploring her to re-write policies regarding FDA approval of all narcotics and that “the very last thing the country needs is another dangerous, high-dose opioid.”

With 2014 being an election year, some politicians couldn’t help themselves in what I believe was an attempt to win a few votes with the “Act to Ban Zohydro” in March. The lead on this bill was Sen. Joe Manchin (D-W.Va.). His daughter is the CEO of competing drug company Mylan Inc. which was also a major contributor to his campaign. This is a severe conflict of interest if ever there was one.

The media picked up on the Zohydro story with gusto, with multiple outlets parroting false claims such as:

  • Zohydro will kill people as soon as it is released (nobody has died)
  • Zohydro is 10 times stronger than Vicodin (it is the same strength)
  • It only takes 1 or 2 tablets to kill a patient (untrue)
  • Children who take 1 pill will die (unlikely, and how will a child have access?)
  • This is the worst decision by the FDA, a disaster and tragedy for this country (it was the right decision)
  • Zohydro is more powerful than anything on the market (it is actually the least powerful opioid in its class, when compared to oxycodone or morphine)

Zogenix tried to correct the misinformation spread by the media and politicians in Let’s Get the Facts Straight About Zohydro in May, as did the FDA in this update, but much of the damage to shares had already been done.  Never letting facts get in the way of improving their ratings, media outlets continued to perpetuate false claims about Zohydro and shares continued to slide to a low of $1.07 made two weeks ago.

Personally, I trust the judgment of noted pain management specialist Dr. Lawrence Robbins who wrote Zohydro Debate: Drug Hysteria or True Concernand FDA Commissioner Margaret Hamburg who discusses the safety and efficacy of Zohydro in this video over a politician with a clear conflict of interest and the media’s perpetuation of  falsehoods to boost ratings.

The “Act to Ban Zohydro” is one of over 10,600 bills and resolutions currently before Congress and of those, only about 5% will become law. The web site GovTrack.us  gives the Zohydro ban a 0% chance of being enacted.  GoveTrack.us is one of the world’s most visited government transparency websites and their embeddable widgets are deployed on more than 80 official websites of Members of Congress.

However, due to the unwarranted controversy and continued misinformation surrounding Zohydro ER, Zogenix shares were sold and shorted throughout 2014.  Shares are just now coming off their lows while at the same time 25 million shares are held short.

At MicrocapResearch.com, we like this setup when combined with near-term events in January that we believe will lead to an appreciable recovery.

 


Why Zogenix Shares Will Recover- PDUFA January 30th 

Zogenix submitted a supplemental New Drug Application (sNDA) to the FDA for a new formulation of Zohydro, “Zohydro AD” (Abuse Deterrent). Zohydro AD is more difficult to abuse by injection or nasal insufflation and the FDA’s decision is expected on January 30th. Having already refused to cave in to pressure from a politician who received large campaign contributions from a competitor (and whose daughter is the CEO of that same competitor), the odds of the FDA approving the same drug in a safer formulation that’s harder to abuse appear excellent.

Zogenix - ReldayIn addition to the likely approval of Zohydro AD on January 30th by the FDA, Zogenix will be initiating the next phase of studies for Relday, a once/month subcutaneous injection for persons suffering from schizophrenia in Q1 of this year.

Phase I trials of Relday were positive and if approved, Relday will be the first subcutaneous antipsychotic product that allows for once-monthly dosing. Non-compliance by patients taking antipsychotics is common and well documented. A once-monthly subcutaneous dose would have obvious advantages for both clinicians and their patients. This is truly a potential blockbuster drug in the Zogenix pipeline- note that sales of the antipsychotic drug Abilify alone were some $5.4 billion in 2011-2012.

Also in development is Brabafen for the treatment a catastrophic form of epilepsy (Dravet Syndrome) for which there is currently no cure. Treatment options are “extremely limited” according to this Dravet Syndrome Foundation Scientific Advisory Board publication. Brabafen had dramatic results in a Belgian study where 70% of patients taking the drug were seizure-free for at least 1 year. Phase 3 clinical trials are expected to begin in Q2.


Technically Speaking…

Shares are now approaching a resistance level around $1.50 that they failed to break for months as shown on the weekly chart below.

Zogenix weekly chart - resistance levels

We believe shares will break above resistance due to forward events and recent activity in the stock. On December 30th, shares crossed the 100 day moving average on heavy volume, prompting us to make this tweet to notify subscribers we entered the stock at $1.30.  Zogenix is one of many high-potential, “best microcaps” we’ve identified, and the volume in crossing the 100 dma is convincing, as was the New Year’s Eve follow-thru on lower, but still respectable volume.

Zogenix 100 dma breakout

 

Finally, the odds of a golden crossover look good in Q1…and possibly in the next 2-3 weeks.
The 200 dma will continue a rapid decent for the next month while the 50 dma should begin to slope up given last week’s rise off the bottom. Something to watch for!

Zogenix golden cross


 

The Bottom Line

  • Shares of Zogenix have been oversold and over-shorted, due in large part to media misinformation re: Zohydro ER that fueled investor fear
  • With year-end tax loss selling over, the January 30th PDUFA date for Zohydro AD, the Q1 pharmacokinetics study of Relday, and sizable short interest in the stock, we believe shares of Zogenix are on the verge of an appreciable move to the upside in January
  • Risk of near term share dilution appears mitigated by the company’s $50 million cash balance reported at the end of Q3 combined with the December 31st filing of a credit facility of up to $20 million

Traders may wish to hold off for a break above $1.50-$1.55 resistance- which we believe will take place soon.

We recommend the use of stop-loss orders to preserve capital in all trades.

Supplemental: Zogenix December 2014 Investor Presentation


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Disclosure: The publishers of MicrocapResearch.com are long ZGNX.  We have not been paid by any company or third party for this article.

See Disclaimer.

Rockwell Medical

 


MicrocapResearch.com emailed and tweeted a trading alert on Sorrento Therapeutics (NasdaqCM: SRNE) at market open on 12/24 at $8.60. We believe Sorrento Therapeutics has serious potential to make strong gains in 2015 for reasons discussed in this article. 


 Company Overview

Sorrento Therapeutics logoFounded in 2006, Sorrento Therapeutics (web site) is based in San Diego, California and focuses on the discovery, development, and commercialization of proprietary pharmaceuticals internationally for the treatment of several forms of cancer and auto-immune diseases as well as intractable pain in end-stage disease. Sorrento’s lead product, Cynviloq, is currently approved and marketed in various countries, including South Korea, for metastatic breast cancer (MBC), non-small cell lung cancer (NSCLC), and ovarian cancer under the trade name Genexol-PM. Cynviloq has also completed Phase I or III trials for MBC, and Phase I or II trials in NSCLC, Ovarian, Bladder, and Pancreatic cancers.  Resiniferatoxin, a non-opiate, ultra potent drug for intractable pain in end-stage disease is also under development. Sorrento Therapeutics is also developing antibody drug conjugates and recombinant intravenous immunoglobulin (rIVIG) for the treatment of certain auto-immune diseases, as well as immunodeficiencies.

Sorrento also notes in their Q3 filing:
“Through September 30, 2014, we have identified and further developed a number of potential drug product candidates across various therapeutic areas, and intend to select several lead product candidates to further advance into preclinical development activities in 2014 and 2015.”



 

Share Structure

Shares Outstanding: 36.1 million as of the 12/22/2014 Schedule 13D, which includes the shares from a $40 million investment by Dr. Patrick Soon-Shiong for a 20% stake in the company.

Market Cap: ~ $345 million

Public Float: 18-20 million, depending on source

(click to enlarge)

Sorrento Therapeutics ownership summary

 Sources: SEC filings, Nasdaq.com, and Fidelity Investments


New Joint Venture and Key Investor Bring Strong Upside Potential in 2015

In the last 10 days,  Sorrento Therapeutics made three major announcements regarding their direction in 2015:

  1. The 12/15/2014 announcement of “The Immunotherapy Antibody” joint venture with privately held NantWorks Inc. and its founder, physician scientist, and biotechnology entrepreneur Dr. Patrick Soon-Shiong. Dr. Soon-Shiong has provided 20 million in “initial” funding and now owns 20% of Sorrento Therapeutics at a purchase price of $5.80/share. The JV will accelerate development of multiple immuno-oncology monoclonal antibodies (mAbs) for the treatment of cancer
  2. The 12/19/2014 announcement of collaboration with privately held Conkwest Inc. (web site) to develop “Next Generation Cancer Immunotherapy”
  3. The 12/24/2014 announcement  of a $48 million investment by Dr. Soon-Shiong in Conkwest Inc.
    Sorrento Therapeutics is also purchasing $2 million in class A common stock in Conkwest Inc. as part of the transaction

Who is Dr. Patrick Soon-Shiong?

For starters, he:Dr. Soon-Shiong Sorrento Therapeutics

  • Founded Abraxis BioScience and developed Abraxane, a blockbuster drug approved for use in liver, lung, pancreatic, and breast cancers. Dr. Soon-Shiong sold Abraxis BioScience to Celgene for $2.9 billion in 2010
  • Founded American Pharmaceutical Partners which he sold to Fresenius SE for $5.6 billion in 2008
  • Has a net worth estimated at $13 billion (Forbes), is the wealthiest American in the healthcare industry, and the wealthiest man in Los Angeles
  • Is a pioneer in genomics and immunotherapy drug research, drugs that stimulate our immune systems to work harder or smarter to attack cancer cells

Dr. Soon-Shiong in November of this year, San Diego News


Dr. Soon-Shiong “Disrupting Cancer”.  60 Minutes, December 7, 2014 


The market for new immunotherapy treatments for cancer was estimated at $35 billion annually by Citigroup last year. Obviously, the “Immunotherapy Antibody Joint Venture” announced between Sorrento Therapeutics and Dr. Soon-Shiong’s NantWorks Inc. and the Sorrento-Nantomics-Conkwest collaboration is aimed squarely at this segment.

Dr. Soon-Shiong stated:

“Immunotherapy is one of the most powerful next-generation platforms added to our war against cancer. Integration of Nantomics advanced proteomics platform with the power of Sorrento’s fully human antibody libraries and Conkwest’s natural killer cell-lines is expected to enable an approach to attack tumors and their micro-metastases in a manner never before addressed.”


 

Strong Balance Sheet

Sorrento Therapeutics reported current assets of $45.8 million vs. current liabilities of $8.7 million as of the September 30th Q3 filing.

  • Q3 cash balance of $44.3 million has been increased with the additional$40 million in funding by Dr. Soon-Shiong just announced
  • Dr. Soon-Shiong’s investment in Sorrento Therapeutics has been called “initial joint funding” and an “initial joint venture”- strongly suggesting there’s more to come
  • The potential for a massively dilutive financing at poor terms for current shareholders seems remote given Dr. Soon-Shiong’s personal wealth and investment in the company

Analyst Mean Price Target of $17/share Likely to Increase 

Sorrento Therapeutics is rapidly growing from a microcap into a small cap company. There are currently 4 analysts following Sorrento, all with buy recommendations.

Price Target Summary
Mean Target: 17.00
Median Target: 14.50
High Target: 30.00
Low Target: 9.00
No. of Brokers: 4

Source: Yahoo Finance
Zacks Small Cap Research increased their price target on Sorrento Therapeutics to $18/share on December 15.  The price targets in the table above were made prior to the materially significant news of the last 10 days and I expect them to be revised upward as well.

Zacks (see release) points out the following positives from the Sorrento/Natworks JV:

Sorrento Therapeutics positives -Zacks


Expect a Jump in Institutional Participation

Sorrento Therapeutics had a healthy 39% institutional ownership as of 9/30/14 (see table above) and I expect that level is increasing now. With a relatively small float of 18-20 million shares, this could easily keep momentum to the upside…but due to the smallish float investors should expect and be prepared for volatility. There doesn’t appear to be a meaningful short position in the stock at present.


Technicals

The 1 month chart for Sorrento Therapeutics is a thing of beauty. Following the high volume breakout earlier this month, there were a few days of lower volume sideways trading. Then, during the holiday-shortened 12/24 trading day, shares gained another 11.5% on heavier volume. It’s noteworthy that the initial move in Sorrento shares was made during the biggest weekly decline in two years for the broader market.

Momentum and money flow show an uptick on 12/24 and could be signaling the start of another leg up.

Stock chart for Sorrento Therapeutics 12-26-2014

There is some resistance at around $11 on the 12 month chart.

resistance level Sorrento Therapeutics chart 2


The Bottom Line

I believe Sorrento Therapeutics is a strong buy here and a gain of 50% from current prices over the next 6 months is a reasonable, if not conservative expectation. Short term/active traders may want to see a breakout above $11 resistance before jumping in. 


 

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Disclosure: I am long SRNE. I have not been paid by any company or third party for this article.

Disclaimer: Opinions expressed are my own and should not be considered investment advice nor an invitation to buy or sell shares of any company mentioned on this site. Investors should perform their own due diligence and consult with a Registered Investment Advisor prior to making any investment decision. See sidebar for full disclaimer.

Rockwell Medical

 


The publishers of MicrocapResearch.com have taken long positions in Sorrento Therapeutics, (SRNE)NasdaqCM (web site) at $8.60

Share price:[s_static_display codes=”SRNE”]

  • We believe the move over the last week is just the beginning of a much larger move in 2015.
  •  Our report on Sorrento Therapeutics will be published on 12/26/2014. 

 

 

Most of all, we want to thank you for subscribing during our early launch period.

We look forward to sharing great small and microcap stocks with our subscribers in 2015 and beyond.

 

Trade alert

 

 


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First Paralyzed Human To Have Received Neuro-Spinal Scaffold Implant Says “I’m Going To Walk Again”

Author: John Harrell


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Summary

  • Rare interview of a patient during a clinical trial.
  • Gradual, but significant progress is occurring.
  • Jordan Fallis’ attitude, courage and determination makes everyone want to root for him.

Back on October 15th, InVivo Therapeutics (OTCQB:NVIV) announced that their long awaited clinical trial involving humans was underway, as the first patient in the world to receive a Neuro-Spinal Scaffold implant for traumatic spinal cord injury had undergone successful implant surgery. The objective of the pilot study is to evaluate the safety and feasibility of the Neuro-Spinal Scaffold as well as to gather preliminary evidence of effectiveness. The ultimate goals for the scaffold implant are outlined here on page 10 of the company’s recent November 19th presentation. Some of these goals for those suffering from paralysis include recovery of muscle control, movement, strength, a decrease in neuropathic pain and most importantly in my opinion, recovery of bowel/bladder control. Assuming that the scaffold implant leads to a reversal of paralysis and even partially accomplishes any of the above named goals, some of those suffering from this horrific condition may literally be jumping for joy.

For the few that follow this company, most are aware that the scaffold implant in animals was an overwhelming success, as seen here in this video from last year. Of the 44 monkeys used in the study, all of them recovered from their spinal cord injuries and were free from paralysis. In 99.9% of all clinical trials, the public has no access whatsoever to those that are being studied for whatever condition they’re being treated for and obviously that’s why investing in biotech is very risky. The access factor for InVivo would have fallen into the above category had it not been for this local TV news report on November 11th, whereby the surgeon and patient were interviewed about the first-ever surgery.

Invivo therapeutics - Jordan Fallis- Patient No. 1It was disclosed that the first-ever human recipient of the Neuro-Spinal Scaffold implant was 25-year-old Jordan Fallis from Scottsdale, AZ. The interview found Fallis to be very hopeful about his chances for a recovery and his positive attitude certainly took the spotlight. A “Pray For Jordan Lee Fallis” Facebook page was created by his ex-girlfriend and a donation page was created by his mother on the “gofundme” site to help with medical costs, needs and care. In seeing a phone number listed on the “Pray For Jordan Lee Fallis” Facebook page, I reached out to the creator of the page and discovered it was Jordan’s ex-girlfriend. In letting her know that I wanted to reach out to Jordan for an interview and knowing I might also be an encouragement to him since we shared at least two things in common (lower back surgery and motocross), she sent a text to Jordan and alerted him that I would be calling. I waited three weeks before calling, as I wanted to give him some breathing room from the recent media attention and I also knew he was about to move from the hospital into a 1st-floor apartment across town.

When I called Jordan, I found him to be very receptive to my call, as we spent an hour and fifteen minutes on the phone. As was the case in his local TV interview three weeks earlier, he was extremely positive, hopeful and thrilled with his progress. I shared with him my passion for motocross racing as a teenager and the fact that I myself had undergone lower back surgery (L-4 and L-5) as a result of breaking two discs after landing on hard snow (I thought it was powder) from a jump while skiing at Whistler/Blackcomb some sixteen years ago. I told Jordan that people he didn’t even know were rallying around him, as they found his local TV appearance to be incredibly inspiring and uplifting, especially in seeing the positive attitude and courage he displayed after having a life changing event take place in just a split second. He couldn’t believe and was overwhelmed that someone even publicly stated that a new dirt bike was waiting for him upon his being able to walk again. He also expressed his gratitude for those that financially contributed to him through the “gofundme” site.

In talking about the accident, Jordan told me that he was a fairly well known BMX rider in the Phoenix area and that he loved doing tricks on his bike. He stated that he had executed many perfect backflips and that motocross riders in the area encouraged him to take up that sport. Jordan took their advice, got a dirt bike and immediately fell in love with the sport, transferring his skills from the BMX bicycle over to the dirt bike. He and his friends had built ramps and other formations for performing various tricks. When Jordan felt he was ready to execute his first-ever backflip on a dirt bike, he stated that he under-rotated after jumping off the ramp and landed on his head, with excruciating pain to follow.

Jordan stated that he was paralyzed from his belly button down and immediately agreed to the experimental scaffold implant that took place within 24 hours of the accident, the surgery lasting somewhere between 4 to 6 hours. Nearly a month later, he stated in the local TV interview (link above)I’ve already started getting feeling back lower and it’s coming through.

My interview of Jordan took place on December 2nd, three weeks after he spoke with the local TV station in Phoenix. With regard to his recovery, I found what he shared with me to be nothing short of remarkable.


His Progress

Jordan told me that he is thrilled with what the implanted scaffold into his spine is apparently accomplishing concerning his acute spinal cord injury. He says that he is experiencing gradual, but significant progress. The initial paralysis from the belly button down seems to have shifted lower to the area of his upper thighs down. Jordan said the worst thing at first was the inability to control bowel/bladder movements and having to deal with a catheter. He now says that the catheter has been removed, as sensation has returned to the point whereby he’s beginning to feel pressure and thus can sit on a commode and either urinate or defecate on his own. As of the date I interviewed him, he said that he hadn’t had to insert a rectal suppository for bowel stimulation in a week and that “some” feeling had returned to his penis. He also stated that two days before I called, he felt a cold sensation below the knee on his calf when it touched the porcelain surface of the bathtub while he was struggling to get in.

I purposely didn’t mention it earlier in our conversation for the sake of not wanting to elevate his hopes, but after hearing what he told me and feeling very comfortable with our conversation, I asked him how aware he was of the prior scaffold study executed on animals. I specifically pointed out the video (link above) involving the monkey(s). Jordan told me he knew nothing about the scaffold being implanted into the spine of paralyzed monkeys and that he was asked not to explore the internet in search of more information, most likely a gesture by either InVivo, the doctors or both, to prevent him from getting his hopes too high. I asked him if he wanted to see the video and he said yes, thus I asked him to shoot me a text message with his e-mail address after our conversation and I subsequently received his text immediately thereafter.

In concluding our conversation, I wished him well and told him that many people he didn’t even know were praying for him and that I believed prayer is not only answered, but extremely powerful. Obviously being a Christian, that’s what I firmly believe and thus felt comfortable in sharing that with Jordan. I told him that I would check in on him on down the road and he was very receptive to that.

After I wrote the main contents of the article, I called Jordan on Friday, December 12th, as I wanted to read the article to him prior to submitting it for publication. He didn’t answer the phone, so I left a message. In not hearing back from him, I sent him a text message on Monday, December 15th, basically repeating the same message I left on his voicemail and to also let him know that two colleagues of mine had just donated $600.00 to his site on “gofundme.” After still not hearing back from Jordan, I sent his mother a message through the “gofundme” site, once again reiterating the same thing I sent Jordan via voicemail and text. I didn’t hear back from her and then didn’t realize until this week that his grandfather had passed away the day before I called. During our conversation, he did mention that his grandfather was gravely ill back in Iowa and while at first I thought I may have not received a return call or text due to the passing of his grandfather, I now speculate a week later that either the doctors or InVivo may have requested that he and his family not make contact with any potential media source during the remainder of the trial, especially since the company just announced on Tuesday that the FDA just approved expedited enrollment for the ongoing pilot trial, possibly reducing the duration of the pilot trial by up to one year and signaling that there seem to be no safety issues with Jordan’s implant up to this point, the two month mark. I would also tend to believe that they still want to keep Jordan’s high hopes in check, regardless of the amazing progress he’s made to date.

Jordan shared with me how much he misses his work as a gear machinist and how badly he wants to return to the shop. He said that he recently watched his surgery and then told the doctors that he would be happy to be a spokesman for the procedure when the time is right. He told me with confidence, “I’m going to walk again” and that “My goal in six months is to be able to swing my leg back over the seat of my motorcycle.” It was brought up and we even discussed the possibility of him eventually completing that backflip, which just shows you the courage and determination this guy has.

John Harrell


See also:

InVivo Therapeutics (NVIV): Disruptive Technology for Spinal Cord Injuries

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As many as 20,000 people suffer spinal cord injuries annually in the U.S. (CDC estimate) and some 250,000-500,000 people globally (WHO estimate). Many of these people are left with a devastating lack of sensory and motor function below the level of injury- making even simple tasks challenging, if not impossible.

Now, a truly game-changing treatment may be on the horizon from InVivo Therapeutics (web site). InVivo Therapeutics has not only received FDA approval to proceed with clinical trials of their Neuro-Spinal Scaffold, they were granted an expedited enrollment track by FDA to accelerate those trials on December 16, 2014 (press release).

I believe InVivo Therapeutics offers tremendous upside based on reasons presented in this article.


 

 Overview/Share Structure

InVivo Therapeutics logo- croppedFounded in 2005 and based in Cambridge, MA, InVivo Therapeutics is a development stage biotechnology company focused on utilizing polymers as a platform technology to develop treatments to improve function in individuals paralyzed as a result of traumatic spinal cord injury (SCI). InVivo Therapeutics is developing a biocompatible Neuro-Spinal Scaffold to treat acute SCI and biocompatible Neuro-Spinal Scaffold Plus Stem Cells to treat chronic SCI. The company has proprietary technologies and intellectual property licensed under exclusive, worldwide license from Children’s Medical Center Corporation and the Massachusetts Institute of Technology, as well as intellectual property that has been developed internally in collaboration with advisors and partners.

 

Shares Outstanding: 101.6 million
Market Capitalization: Approximately $135 million
Insider Ownership: Approximately 27%
Employee Count: 48
Institutional Ownership: 10.2%
Insider Ownership: 26%
Revenue: (TTM) $0.00
Enterprise Value: $101.8 M (12/18/2014)
EPS: (Adjusted TTM) $-0.01
Analyst Coverage: InVivo Therapeutics currently has only one analyst following it with a $3/share price target
(Source: Thompson/Reuters and Fidelity Investments)

November 2014 Investor Presentation


InVivoTherapeutics-spinal-cord-scaffoldThe biodegradable Neuro-Spinal Scaffold developed by InVivo Therapeutics is surgically implanted at the epicenter of the wound after an acute spinal cord injury.  The scaffold has been shown to facilitate healing to spare spinal cord tissue, decrease post-traumatic cyst formation, and decrease spinal cord tissue pressure in preclinical studies. The Neuro-Spinal Scaffold has received a Humanitarian Use Device designation and is now in clinical trials for the treatment of complete traumatic acute spinal cord injury.

Recent Developments

A very positive development for InVivo Therapeutics was announced last week as the FDA gave the go-ahead for the company to accelerate enrollment in clinical trials of the Neuro-Spinal Scaffold. This is extremely significant, as it speeds up the entire trial period, cutting the enrollment period from 15 months to potentially as low as 6 months according to Senior Pharmaceutical & Biotechnology analyst Jason Napodano from Zacks Small Cap Research (article).

Regarding the expedited enrollment granted by the FDA, Mark Perrin, InVivo’s CEO, stated:

“Over the last calendar year, we have cultivated a collaborative and fruitful relationship with the FDA, and we couldn’t be happier with today’s announcement. Under our new plan, it’s possible to reduce the duration of our pilot trial by up to one year. This, of course, is dependent on patient presentation, but with today’s approval, along with our previously-announced approval of increasing the number of clinical sites up to 20, we are much better positioned to execute and complete this trial in an expedited fashion. Although we cannot predict when subjects will present, we now anticipate full enrollment in the pilot trial in 2015.”

Because the pace toward possible FDA approval for their Neuro-Spinal Scaffold is now faster, InVivo Therapeutics took a leap forward in the time frame for potential commercialization as well.

Chief Science Officer for InVivo, Dr. Thomas Ulich, gave the following presentation on the Neuro-Spinal Scaffold and its use in spinal cord injuries at the 2014 Stem Cell Meeting on the Mesa. 

The presentation is both educational and fascinating.

 


 

Strong Cash Balance Mitigates Risk of Near Term Share Dilution

In May, InVivo completed a round of financing at $1.15/share for $14.6 million in net proceeds and had a cash balance of $17.6 million at the end of Q3. (SEC filing). With $18.3 million in current assets and $4.8 million in current liabilities, the company enjoys a healthy current ratio of 3.8. Management has stated InVivo Theraputics has the cash required for all operations through March, 2016 without additional financing.

In addition to the accelerated clinical trials announced this week, this is another big positive for investors in the company. Uncertainty as to the extent of share dilution and at what price are routine concerns for investors in small and microcap biotech stocks. With InVivo Therapeutics, that risk is greatly diminished for the next 12+ months.

Cash burn has decreased following InVivo’s corporate re-alignment announced in June with expected annualized savings of $3 million and a reduction in cash expenditures of approximately 23% as compared to 2013.  This realignment allows the company to focus exclusively on the development of the Neuro-Spinal Scaffold.


“Miracle” Potential in a Massive Market

For patients suffering traumatic spinal cord injuries, there is no real treatment, no “cure” currently available. Depending on the location and extent of injury, debilitating and life-threatening symptoms are merely managed. Severe thoracic nerve injuries usually result in paraplegia and very little, (if any), control of bowel or bladder…a horrific reality for these individuals. Because trauma is the overwhelming cause of these injuries, the patients are often young adults involved in a motor vehicle crash or a sports-related injury.

As CEO Mark Perrin explained:

“There is nothing out there to help these patients. It’s such an extraordinary unmet medical need that, if successful, the commercialization plans will involve getting the word out to the medical and patient community that this option is now available, and doing everything we can to get the product into hospitals to help treat these patients” (The Wall Street Transcript).

InVivo estimates the worldwide market for treating acute complete SCI to be over $500 million annually and the chronic SCI market to be over $10 billion.

 

Clinical Study Outline

Pilot Study of Clinical Safety of the PLGA Poly-L-Lysine Scaffold for the Treatment of Complete (AIS A) Traumatic Acute Spinal Cord Injury



Disruptive Technology

This is truly disruptive technology for the management of SCI, and if approved by the FDA, the Neuro-Spinal Scaffold would revolutionize the treatment of spinal cord injuries. Should clinical trials in humans come anywhere close to the incredible results in this Must See Video with former CEO Frank Reynolds, “New Technology has Paralyzed Monkeys Walking“, then the current market cap of $135 million will be a fraction of where this company will ultimately trade.


The NVIV chart shows the volatility typical in a disruptive microcap company.  The breakout on 11/12 followed media reports on the first human being entered into the FDA study for the Neuro-Spinal Scaffold, and shows early reaction to yesterday’s news on the expedited enrollment granted by the FDA.
Invivo therapeutics 2 month stock chart


 

Conclusion

NVIV may be a perfect fit for aggressive investors with a high risk tolerance as the company continues down the (often bumpy) road of clinical trials and hopefully, eventual FDA approval of the Neuro-Spinal Scaffold.

Disclosure: I am long NVIV. I have not been paid by any company or third party for this article.

Disclaimer: Opinions expressed are my own and should not be considered investment advice nor an invitation to buy or sell shares of any company mentioned on this site. Investors should perform their own due diligence and consult with a Registered Investment Advisor prior to making any investment decision. See sidebar for full disclaimer.

Rockwell Medical

 

 

Supplemental: On 12/31 I received permission to post this InVivo Therapeutics Research Report from the author, Dr. Jerry Isaacson of LiceSci Capital.


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Rockwell Medical (RMTI) Speculative Buy as January PDUFA Date Nears

 

  • January 24 PDUFA date set for patented, drug with large market potential = near term catalyst
  • Shares may be coming off double bottom formation
  • Completed capital raise in November by BofA Merrill Lynch at 9:00/share for net proceeds of $54.7 million
  • $53 million in ttm revenue from existing operations

 

 

Overview/Share Structure

Rockwell Medical logoRockwell Medical, Inc. (RMTI) is a biopharmaceutical company targeting end-stage renal disease (ESRD) and chronic kidney disease (CKD) with products and services for the treatment of iron deficiency anemia, secondary hyperparathyroidism and hemodialysis.

Founded in 1995 and headquartered in Wixom, MI, Rockwell Medical has 286 full time employees.

Shares outstanding: 46.6 million (following November capital raise)

Insider ownership: 18.6% with 420,000 shares purchased in last 4 months and zero insider sells

Institutional ownership: 22-28% (depending on source)

 

January 24 PDUFA Date for New Drug, “Triferic”

For those new to pharma/biotech stocks, a critically important day is the PDUFA date (pronounced puh-doo-fuh). It stands for “Prescription Drug User Fee Act” and the trading leading up to the PDUFA date is typically volatile.

What’s at stake is huge, as the PDUFA date is the day the FDA votes to approve or reject a new drug. Sometimes, the FDA will rule before the announced PDUFA date, but it’s the day by which a decision is expected.

Triferic is Rockwell’s late-stage investigational iron maintenance therapy for the treatment of iron deficiency in chronic kidney disease patients receiving hemodialysis, and the PDUFA date set for approval or rejection by the FDA is January 24.

While this may not be as exciting as a cure for cancer, the market/revenue implications for Rockwell are big. End Stage Renal Disease (ESRD) is the condition where a patient’s kidneys have completely failed. As a result, patients with ESRD require dialysis treatments several times/week (or a kidney transplant) to survive. There is no cure. Unfortunately, ESRD affects 2.52 million patients globally and is growing 6-8% annually, exceeding population growth rates in much of the world.

The key to understanding Triferic’s potential is that these 2.5 million dialysis patients also suffer from chronic anemia (low hemoglobin levels) and serious (sometimes life-threatening) liver failure. Liver failure in this patient population is most often caused by iron toxicity resulting from the iron replacement therapies currently used to treat the underlying anemia. It’s a real (and expensive) problem for hospitals and renal physicians to manage hemoglobin and iron levels in these patients, and Triferic addresses the problem.

Triferic is administered during the patient’s dialysis treatment and in positive clinical trials has shown to be efficacious in preventing anemia and high iron levels that can lead to liver failure. There were no adverse effects from the drug reported in the studies. Should the FDA approve Trifecta for use in ESRD patients, then I can see widespread use of by physicians to more easily manage their patients.

Moreover, hospitals nationwide have an increasing role in patient treatment modalities. Hospitals nationwide must be accredited by and follow “best practice standards” set by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO). The JCAHO has enormous power in healthcare administration nationwide. If a hospital loses accreditation from JCAHO, they lose their Medicare funding…a devastating blow. While JCAHO may not literally “prescribe” a drug, they can strongly influence its use by making hospitals prove they are using “disease-specific best practices” to lower cost and reduce the average patient length of stay. So a drug like Triferic can become a best practice protocol used by hospitals to demonstrate to JCAHO what they are proactive in reducing patient length of stay limiting expensive complications of anemia and liver toxicity in ESRD patients. These protocols become part of a standard set of orders that physicians who are authorized to practice at a particular hospital must follow.

 

Existing Operations

Risk in RMTI is somewhat mitigated in the fact the company has a 20 year operating history and ttm revenues of $53 million from sales of various solutions and products for dialysis. In October 2014, the company entered into an exclusive licensing agreement with Baxter Healthcare, a $40 billion industry giant, to market their dialysis solutions (listen to conference call). So, unlike a pharma microcap with one product that’s make or break leading up to the PDUFA date, RMIT has several irons in the fire for future revenue expansion.

 

Possible Double Bottom

RMTI shares are volatile and might be making a double bottom formation. With end of year tax-loss sales, support could be broken with new lows made between now and eoy, so caution is advised. In fact it’s possible that RMTI may have broken to new lows by the time this is published.

Rockwell Medical chart

Analyst Estimates

For those who follow analyst estimates, there are 5 currently covering Rockwell Medical. Their average estimate for 2014 is for a loss of .46/share, improving (dramatically) to positive earnings of .24/share for 2015.

 

Suggested Trade

I believe shares have a reasonably strong chance of coming off the bottom here and are likely to move up rapidly by January as the 1/24/2015 PDUFA date nears.

Buy RMTI shares above recent $8.10 low and below $9 with a tight stop loss. Should shares be under $8.10 by the time you read this- you might consider holding off for even lower prices as the year winds down and tax loss sellers complete their exit.

Disclosure: I am long RMTI @ $8.14

Rockwell Medical

 

 

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