BST Trade Alert: March 19, 2014

| March 19, 2014

Latest Alert

March 19, 2014


Buy Cerus (NASDAQ: CERS) up to $6.60 per share.

About the Company:

Cerus is a biomedical products company focused on developing and commercializing the INTERCEPT Blood System to enhance blood safety.  INTERCEPT is designed to inactivate blood-borne pathogens in donated blood components intended for transfusion.

The company has worldwide rights to INTERCEPT for three blood components… plasma, platelets, and red blood cells.  The system has already received regulatory approval and is being marketed in Europe, the Commonwealth of Independent States (CIS), and the Middle East.

And it could be approved for marketing in the US later this year.

In November 2013, Cerus submitted the fourth and final module under its Premarket Approval Application (PMA) for the plasma system to the FDA.  A decision from the FDA is expected during the second half of 2014.

The company submitted the second of three modules under the PMA for the platelet system in October 2013.  And it expects to file the third and final module in the second quarter.  The FDA could issue a decision on the platelet system by the end of the year.

No question about it, 2014 is shaping up to be a transformational year for the company.

What’s more, Cerus’ financial situation is nothing to worry about.

The company has nearly $58 million in cash and just over $3 million in debt.  With a cash burn rate of about $5.1 million per quarter, Cerus has enough cash to fund operations for the next 10 quarters.

Let’s now take a closer look at their leading product candidate.

About the Product: 

The INTERCEPT Blood System targets and inactivates blood-borne pathogens, such as viruses, bacteria, and parasites.  At the same time, the system preserves the therapeutic properties of platelet, plasma, and red blood cell transfusion products.

Some of the viruses INTERCEPT has shown to inactivate include HIV, hepatitis B, hepatitis C, West Nile, and certain flu viruses.

By inactivating pathogens in donated blood, INTERCEPT has potential to reduce the risk of pathogens being transmitted to the recipients of blood transfusions.  This is a huge benefit for patients.  You see, testing of donated blood is not completely effective, not always available, and sometimes not even performed.

What’s more, INTERCEPT has potential to inactivate most new pathogens before they are even identified.  No need to wait for tests to be developed to detect them in donated blood.

Both the platelet and the plasma systems employ the same technology.

Platelet or plasma components collected from blood donors are transferred into plastic INTERCEPT disposable kits.  These components are then mixed with Cerus’ proprietary compound, amotosalen. It’s a small molecule compound which has an affinity for nucleic acid.

The disposable kits are then placed in an illumination device (illuminator), where the mixture is exposed to ultra-violet A (UVA) light.

Energy from the UVA light causes the amotosalen to bond with the nucleic acid of any pathogens that may be present.  These bonds, in turn, prevent the nucleic acid from replicating, effectively inactivating the pathogens.

Since platelets and plasma don’t rely on nucleic acid for therapeutic efficacy, INTERCEPT does not impact their ability to perform therapeutic functions.

After the inactivation process has been performed, a compound absorption device is used to eliminate essentially all of the residual amotosalen and by-products.  This device is an integrated component of the disposable kit.

Studies have shown that more than 99% of residual amotosalen is removed by this process.

What’s more, extensive toxicology testing on the residual amotosalen and by-products has demonstrated good safety margins.  Any remaining amotosalen that may be transfused is rapidly excreted by the recipient.

In addition to inactivating pathogens, INTERCEPT also inactivates leukocytes or white blood cells.  Leukocytes are typically present in platelet and plasma components collected for transfusion.

The problem with leukocytes is that they can cause adverse transfusion reactions. And they often lead to a fatal disease called graft-versus host disease.

However, leukocytes (like pathogens) rely on nucleic acid for replication and cellular function.  As such, INTERCEPT is able to inactivate leukocytes in the same manner it inactivates pathogens.

What’s next for INTERCEPT?

As I mentioned earlier, Cerus has submitted all four of its PMAs for the plasma system and is now waiting for a determination from the FDA.  The company plans to file its fourth and final PMA for the platelet system before the end of this month.  And an FDA decision on that system could come before year’s end.

About the Market for This Product:

Cerus believes that FDA approval of INTERCEPT for plasma and platelets would not only open up the US market, but also quickly position the product to become the standard of care in the global market for transfusion of blood components.

That market was valued at roughly $6 billion in 2011.

Management has also said that approval in the US would likely accelerate approval in Asia and other geographies.  If that happens, INTERCEPT’s immediate addressable market would grow to $1.7 billion.

What’s more, if Cerus ultimately gains FDA approval for the INTERCEPT red blood cell system, the product’s addressable market would explode.  The market for red blood cells is much larger than the markets for plasma and platelets combined.

Management estimates INTERCEPT’s addressable market for plasma, platelets, and red blood cell systems at an eye-popping $6.4 billion.

Based on the above, there’s no question that Cerus has a potential multi-blockbuster product on its hands.  All that is needed for this stock to take off now is approval from the FDA.

About the Potential Catalyst:

A decision from the FDA on the INTERCEPT Plasma System is expected during the second half of 2014.

Depending on when Cerus submits the final PMA for the INTERCEPT Platelet System, an FDA decision could come before year’s end or in early 2015.

About the Shares:

CERS has been moving higher in a strong uptrend since the beginning of 2013.  In fact, at a recent price of $6.00, the stock has doubled in value from where it finished 2012.

Investors have been piling into the stock as it looks more and more likely the FDA will approve INTERCEPT.

However, a recent pullback has provided us with an attractive entry point for a trade. After setting a 52-week high of $8.00 in late February, CERS has declined by 25%.

We think the stock will continue the longer-term upward trend as the FDA decision is right around the corner. 

Investors are likely to want to own a piece of CERS with the odds favoring approval. And don’t forget, INTERCEPT has a multi-billion dollar addressable market.

Grab your shares of CERS as soon as possible.  Don’t miss your opportunity to establish a position at a nice discount.

Key Facts:


Company: Cerus
Ticker: CERS
Recent Price: $6.00
Market Cap: $433 million
Avg. Daily Volume: 872,127 shares







Category: BST Trade Alert

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