BST Position Update: March 11, 2014

| March 11, 2014

March 11, 2014

Position Update

. . . . Lpath (NASDAQ: LPTN) – Buy up to $5.30

LPTN was added to the portfolio a few days ago.  This fascinating biotech is pioneering a new approach to drug development using lipidomics and its ImmuneY2 technology.

The company’s leading drug candidate is a monoclonal antibody called iSONEP that is being developed to treat wet age-related macular degeneration (wet AMD). iSONEP targets S1P, a bioactive lipid implicated in the progression of many diseases, including multiple sclerosis and several types of cancer.

Lpath has already completed a successful phase 1 trial of iSONEP and is currently conducting a phase 2a study.  The purpose of the trial is to determine how iSONEP can best be used to treat wet AMD.

Results from this study are expected by the end of the third quarter of 2014.

While LPTN has yet to take off, we think it will rally sometime prior to the release of trial results. 

The drug is targeting a disease that prompted over $11 billion in drug sales in 2012.  And if the trial is a success, Lpath will have an opportunity to earn up to $497 million in potential milestones from Pfizer or a potential third party who may acquire Pfizer’s option on iSONEP.

With a current market cap of just over $62 million, the stock clearly has huge upside potential.  If the trial shows iSONEP could become a safe and effective treatment for wet AMD, the stock could easily double, triple or even quadruple in value.

Take advantage of the recent weakness in LPTN to grab your shares at a nice discount. The stock is a good buy up to $5.30 per share.

. . . . Threshold Pharmaceuticals (NASDAQ: THLD) – Hold

THLD has continued to move higher since our last update.  The stock spiked last week to give us a solid peak gain of 28%.  And even though the shares pulled back a bit in recent days, they’re up 17% from our entry point.

That’s not bad for just over a month into the trade.

And we think the stock has even higher upside ahead.

Remember, the company has an important catalyst on the near-term horizon.  In fact, CEO Barry Selick, Ph.D. recently confirmed that interim results from the phase 3 trial of TH-302 in soft tissue sarcoma are still expected around mid-year…

“In 2014, we expect the Independent Data Monitoring Committee for the soft tissue sarcoma trial, which monitors patient safety on an ongoing basis, will conduct a planned interim efficacy and safety analysis after 235 events are reported.  Because the interim analysis is event-driven, we cannot predict with certainty when the interim analysis will commence, but current projections suggest that the number of events may be reached around mid-year, with the interim analysis to be conducted thereafter.”

With interim results from a pivotal trial just around the corner, we’re expecting THLD to trend higher.  So, hang on to your shares for greater gains.

. . . . BioLineRx (NASDAQ: BLRX) – Buy up to $3.30

BLRX dropped last week after announcing it had priced a $21 million public offering at $2.50 per share.  But don’t worry.  This is most likely just a temporary decline.

It’s not uncommon for stocks to trade down to the offering price when a company announces a public offering.

We fully expect, after a short period of consolidation, that investors will move back into BLRX and drive the share price higher.  Don’t forget, the biotech is expected to report initial results from the phase 2 trial of BL-8040 in acute myeloid leukemia during the second quarter of 2014.

This is an important near-term catalyst that is sure to attract investors to the shares sooner rather than later.

What’s more, demand for BLRX shares through the offering appears to have been quite strong.  The company ended up selling 1.26 million more shares than originally planned. And as a result, the offering generated an additional $3.1 million in gross proceeds.

When these proceeds are combined with the $18.7 million in cash on hand, the company is clearly in a much stronger financial position.  That’s an important factor for biotech investors.  And it can only help our prospects for this trade.

If you haven’t grabbed your shares of BLRX, you may want to use the current weakness to establish your position.  The stock is currently trading at an 11% discount to our entry point.

Those who already own the stock may wish to add to their position and lower their cost basis.

BLRX remains a good buy up to $3.30 per share.

. . . . Conatus (NASDAQ: CNAT) – Hold

Management announced exciting news last week.

Conatus has initiated a new phase 2 trial of leading drug candidate, emricasan.  This proof-of-concept trial will evaluate the drug’s potential to treat non-alcoholic fatty liver disease (NAFLD) as well as inflammatory and/or fibrotic non-alcoholic steatohepatitis (NASH).

The study will enroll 40 patients who will be randomized 1:1 to receive either 25mg of emricasan or placebo orally twice per day for 28 days.  Both groups will then be followed for another 28 days.

The trial’s primary endpoint is a reduction of elevated levels in key biomarkers. However, safety and tolerability will also be evaluated.

Top-line results are expected in the second half of 2014.  In other words, we have just acquired another relatively near-term catalyst for CNAT!

Both NAFLD and NASH are highly prevalent diseases with potentially deadly consequences.

NAFLD occurs worldwide with a similar prevalence to obesity and type 2 diabetes.  In the US, it has emerged as the most common form of liver disease with a prevalence as high as 30% of the general population.

NASH is also highly prevalent in the US. Approximately 15% of the American population suffers from the disease.  And it’s even more common in diabetics (22%) and Hispanics (19%).

No question about it, this trial could be huge for CNAT.  If it’s a success, investors will likely send CNAT soaring as emricasan would then have two more potential blockbuster indications.

Speaking of the shares…

CNAT has continued to trend higher since we last discussed it.  In fact, the stock has gained another 25% to give us an outstanding return of 96% on the position.

And the shares could still skyrocket from here…

Remember, Conatus is expected to report results from the phase 2b trial of emricasan in acute chronic liver failure during the first half of 2014.  These results could be a huge upside catalyst for the stock.

No question about it, you should hang on to your shares for higher prices.  This is one biotech stock that could really take off in short order.

. . . . GTx (NASDAQ: GTXI) – Buy up to $2.00

GTx recently provided an update on its clinical program.

Enobosarm 3mg for the prevention and treatment of muscle wasting in patients with advanced non-small cell lung cancer…

The company received some bad news during its recent meeting with the FDA.  Because the POWER trials did not meet the pre-specified statistical criterion for the co-primary endpoints, the current trial data are insufficient to support a new drug application.

With that said, management believes there is a regulatory path forward for enobosarm 3mg.  As such, they plan to meet again with the FDA to seek agreement on the Phase 3 program required to provide the efficacy and safety data needed to support an NDA.

It’s unfortunate the trial data was insufficient to support an NDA at this time, but enobosarm is clearly not dead in the water for this indication.  It’s just going to take more time and more clinical testing before we will know if the drug has potential in this area in the US market.

What’s more, the news wasn’t all bad for enobosarm 3mg…

The drug appears to be getting a more positive reception in Europe. GTx recently had a positive meeting with representatives from two member countries of the European Medicines Agency.  Based on input from the two national authorities, the company expects to file a marketing authorization application by the first quarter of 2015.

Enobosarm 9mg for the targeted treatment of androgen receptor and estrogen receptor positive metastatic breast cancer…

The phase 2 trial of enobosarm for this indication continues to move forward.  Nine clinical study sites in the US have fully enrolled the study and the drug has been well tolerated so far.  Data from all patients in this study are still expected late in the second quarter of 2014.

This is definitely encouraging news.  If results from this trial are positive, they could provide the spark we need to get GTXI back into positive territory.

With GTXI having moved back below our maximum buy price, we’re moving it from Hold to Buy. 

Keep in mind that our trade in GTXI is highly speculative following the disappointing results from the POWER trials in August 2013.  Don’t pay more than $2.00 per share for this stock.

. . . . Merrimack Pharmaceuticals (NASDAQ: MACK) – Hold

Management provided an update on its clinical program during a recent earnings call.

They indicated that the phase 3 trial of MM-398 in pancreatic cancer is moving forward according to schedule.  As such, results from this pivotal trial are still expected during the second quarter of 2014.

If the results are positive, the company plans to quickly file a new drug application with the FDA.

With the trial results now fast approaching, the stock has begun trending upward once again.

You may recall that MACK pulled back along with the overall market in late January.  But after bouncing off support at the $4.50 level in early February, the shares have traded up to a recent price of $5.75 per share.

We think the stock will continue moving higher leading up the trial results.  So, hang on to your shares for a potential rally in the near future.

Action To Take

  • Move GTx (NASDAQ: GTXI) from Hold to Buy.


Category: BST Update

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