Adds $10M Cash & $19M CIRM Alzheimer’s Funding

Download Full 30-Page Update Report with Important Disclosures: STEM Update 05-20-13

1.) $19.3M from CIRM For Alzheimer’s Disease: On April 11, 2013 StemCells, Inc. announced the California Institute for Regenerative Medicine (CIRM) will provide approximately $19.3M, as a forgivable loan, to help fund preclinical development and IND-enabling activities of HuCNS-SC for Alzheimer’s disease. The goal of the research will be to file an Investigational New Drug (IND) application with the FDA within four years. According to a RAND study published in The New England Journal of Medicine April 4, 2013, the total U.S. monetary cost of dementia was between $157B billion and $215B with Medicare paying approximately $11B making Alzheimer’s disease more costly to the U.S. than either heart disease or cancer. Investors should also note this comes after 2 failures last year for Alzheimer’s disease drugs, the August 24th failure of Eli Lilly’s (NYSE:LLY) solanezumab and the July 23rd failure of Pfizer (NYSE:PFE) and Johnson & Johnson’s (NYSE:JNJ) bapineuzumab. There remains no adequate treatment for Alzheimer’s disease.

2.) StemCells Inc. Adds More Cash: On April 9, 2013, StemCells Inc. announced that $10M in debt financing from Silicon Valley Bank for general corporate purposes. This results in a pro forma cash balance of $27M at March 31, 2013. The 3-year loan will accrue interest at 6% per year. For the first six months, payments will be interest only and then the loan will be amortized over 30 months with a final $1M payment at the end of the term.

3.) Pelizaeus-Merzbacher Disease (PMD) Moving to Phase II After Unprecedented Results Seen in Phase I: StemCells Inc. has had discussions with global experts and is designing the Phase II clinical trial. They will request a pre-protocol submission meeting with the FDA to finalize the protocol for formal submission. On October 10, 2012, 2 peer-reviewed papers described the successful preclinical animal studies and the successfully completed Phase I human trial using their HuCNS-SC^® (purified human neural stem cells) for severe myelination disorders. The human trial results showed 1.) Small but measureable gains in motor and/or cognitive function in 3 of the 4 patients 2.) After 1 year, MRI showed changes compatible with increased myelination in the region of the transplantation and it persisted even after immunosuppression was stopped at 9 months and in fact, progressed over time and 3.) The development of new myelin signals is unprecedented in patients with conatal PMD and is consistent with HuCNS-SC engraftment. (see Pelizaeus-Merzbacher Disease (PMD) Background & Development Program)

4.) Unexpected Improvements in Spinal Cord Injury in Most Severe Patients: On February 12, 2013, StemCells Inc. announced the final 12-month data from the 1^st patient cohort (AIS-A) in the Phase I/II clinical trial for chronic spinal cord injury. The results showed that the gains in sensory function observed in 2 of the 3 patients at 6 months persisted for the 12 month period. Of particular note is that 1 patient improved from being classified as a complete injury (AIS-A) to being reclassified as an incomplete injury (AIS-B). The third patient remains stable and the HuCNS-SC^® continued to demonstrate a favorable safety profile. StemCells Inc. is now enrolling the 2^nd cohort (AIS-B) with incomplete spinal cord injury which represents the 1st time neural stem cells have been transplanted into a patient that still has sensory function below the injury. (see Chronic Spinal Cord Injury Background & Development Program)

5.) Patient Implantation Continues for Dry AMD Phase I/II Trial: StemCells, Inc. management indicated that they have implanted 3 patient with HuCNS-SC^® in their Phase I/II trial for Dry Age-Related Macular Degeneration (Dry AMD). They added an additional site, Byers Eye Institute at Stanford, in April 2013 and will be adding more enrollment sites during the year. Investors should note that this first cohort of patients consists of very advanced disease and is focused primarily on safety. The trial is an open-label dose-escalating trial in 16 patients treating their worst eye with a single injection into the space beneath the retina and results evaluated over the course of 12 months. Importantly, 85% of all AMD patients currently have the Dry form and 100% of patients with the more serious Wet form progressed from the initial Dry form. The dry form can also cause vision loss without turning into the wet form. (see Dry Age-Related Macular Degeneration (Dry AMD) Background & Development)

6.) We are reiterating a Strong Speculative Buy with a Price Target of $4.50 as StemCells Inc. has evolved into one of the most advanced players in the stem cell space. StemCells Inc.’s HuCNS-SC^® (purified human neural stem cells) have shown unprecedented results in human patients for Pelizaeus-Merzbacher Disease (PMD) and for Complete Thoracic Spinal Cord Injury and both programs are continuing to progress. In addition, the Dry AMD trial is progressing with additional trial sites. CIRM’s $19M funding for HuCNS-SC^® in Alzheimer’s Disease validates their research demonstrating for the first time that human neural stem cells can have a significant effect on memory in two different animal models. (see Alzheimer’s Disease Background & Development Program). We believe the StemCells Inc. management team and science continues to be successfully validated. Our Strong Speculative Buy rating and 12-18 month target price of $4.50 is based on 35x estimated 2017 EPS discounted 50% for cumulative risks in a first-in-class stem cell therapy.

Download Full 30-Page Update Report with Important Disclosures: STEM Update 05-20-13

CardioPET PIIa Images Strong in “At-Rest” Patients

Download Full 27-Page Report with Important Disclosures: FPMI Update 05-17-13

Interim Images Strong from CardioPET™ Phase IIa Trial: On February 28, 2013, FluoroPharma released initial images from their ongoing open-label Phase IIa trial in Europe for CardioPET (Trans-9-[18F]-Fluoro-3, 4-Methyleneheptadecanoic Acid or FCPHA) to assess myocardial perfusion and fatty acid uptake in coronary artery disease (CAD) patients. Of particular interest were the very clear and well-defined images from CAD patients at rest (no stress testing). The clear images strongly suggest that FluoroPharma’s CardioPET may have significant value for diagnosing patients who cannot undergo stress-testing. Investors should also note that since CardioPET provides the metabolic component for Cardiac Viability Assessment (CVA), it could be used in combination with FluoroPharma’s BFPET or other blood flow agents in performing CVA. We are expecting the Phase IIa to be completed in Q3 2013 with the Phase IIb to commence shortly afterward. (see CardioPET Phase II Clinical Trial – ONGOING)

BFPET™ Phase IIa Trial on Track – Phase IIb/III to Start by Year-End: On January 3, 2013, FluoroPharma announced that their BFPET™ (18)F-TPP Phase II clinical trial will be conducted at Massachusetts General Hospital) for use in stress-testing for patients with presumptive or proven Cardiac Artery Disease (CAD). We are anticipating data in Q3 2013 in the open label trial, which is designed to assess the safety and diagnostic performance of BFPET. We anticipate this data will support the following Phase IIb/III trial. Investors should note that on November 30, 2012, FluoroPharma announced continued successful results as they received the second round of high-quality images from their Phase Ib investigator-sponsored trial (IST) at the PLA 301 Hospital in Beijing China. The investigator-sponsored trial administers BFPET to patents with Cardiac Artery Disease (CAD) using FluoroPharma’s BFPET imaging agent for measuring cardiovascular blood flow in combination with PET (positron emission tomography) during stress-testing. These images are then compared against images using the stress perfusion imaging Cardiolite^® (technetium Tc99m sestamibi) which uses SPECT (single-photon emission computed tomography) which showed a high level of agreement between the angiography, the SPECT and the BFPET images. These results were also consistent with those seen from the first round of images announced on July 26, 2012 and which continues to demonstrate BFPET’s clear diagnostic qualities as well as PET technology’s inherent superior resolution compared to SPECT technology. We believe these results are highly supportive for FluoroPharma’s U.S. Phase IIa and Phase IIb/III human clinical trials as BFPET has the potential for non-invasive diagnostic images with higher specificity than Cardiolite^®. (see BFPET Molecular Imaging Agent)

Three “Shots-on-Goal” in Cardiac PET Imaging: FluoroPharma’s BFPET is being developed for use in combination with stress-testing in patients with suspected or proven cardiac artery disease and has the potential to become the cardiac standard of care in institutions with PET/CT imaging scanners. (see BFPET). For patients who are unable to perform exercise cardiac stress-testing, FluoroPharma is developing CardioPET for detecting regions of metabolic insufficiency to diagnose acute and chronic cardiac artery disease. (see CardioPET) Finally, FluoroPharma is developing VasoPET for patients that have already had a heart attack or stroke with the risk of a potentially fatal recurrence. VasoPET detects inflammatory cells and rapidly dividing cells to identify plaque that is likely to rupture and result in a recurring heart attack or stroke. (see VasoPET)

Cardiovascular Disease is the Leading Global Killer: According to the World Health Organization, 7.3M deaths were directly attributable to cardiovascular disease representing 12.8% of all deaths making it the leading cause of death worldwide. In the United States, the situation is even worse with cardiovascular disease being responsible for 32% of all deaths (1 in every 3 deaths) with 11.8% of the U.S. population, or 27.1M people, currently diagnosed with heart disease. (see Coronary Artery Disease CAD)

Better Screening and Diagnostics Needed to Drive Cost-Efficiencies: While other companies are developing drugs and devices to treat cardiovascular disease (see Coronary Artery Disease CAD), FluoroPharma is focused on a pipeline of non-invasive PET imaging agents BFPET, CardioPET and VasoPET that are being developed to more accurately screen and diagnose patients for the most cost-efficient care. With 1 in 3 U.S. adults currently living with cardiovascular disease and 935,000 heart attacks and 795,000 strokes each year, total U.S. direct and indirect costs from cardiovascular disease is almost $300 billion annually. Research has shown that PET imaging is cost-effective for CAD management and can result in a 50% reduction in the use of coronary arteriography and CABG, a 30% reduction in CAD management costs, and excellent short-term patient outcomes, compared with conventional SPECT imaging. (see PET/CT Imaging Scanners)

Attractive Space for M&A: We note that the molecular imaging space has been active for M&A deals such as Eli Lilly’s (NYSE:LLY) acquisition of Avid Radiopharmaceuticals Amyvid™ [¹⁸F] florbetapir for Alzheimer’s PET imaging in Q4’10 for $300M in cash and up to an additional $500M for milestones. More recently, Navidea (Nasdaq:NAVB Rating:Strong Speculative Buy) acquired AZD4694 for PET imaging in Alzheimer’s and acquired an option on [¹²³I]-E-IAFCT for SPECT imaging in Parkinson’s. We also note that last year Piramal Healthcare acquired Bayer Pharma AG’s (XETRA:BAYN) [¹⁸F] florbetaben for Alzheimer’s PET imaging while Phase III trials were still ongoing. We believe FluoroPhama’s cardiac PET imaging portfolio could make them an attractive M&A or partnering candidate as early as Phase II completion should they show strong clinical results.

Reiterating FluoroPharma with Strong Speculative Buy $2.50 Target: Although FluoroPharma is an early-stage company and will be required to raise funds very soon, we believe savvy investors wanting to get ahead of the curve will find FluoroPharma shares attractive. While currently “under the radar”, we expect their future newsflow in the active molecular imaging space combined with their focus on cardiac PET imaging to bring additional investor attention in the near-future. Our Strong Speculative Buy rating and a 12-18 month price target of $2.50 is based on a 35x multiple on projected fiscal year 2017 EPS and discounted 50% for cumulative risk with an acquisition premium of 20%.

Download Full 27-Page Report with Important Disclosures: FPMI Update 05-17-13

Unusually Strong Phase I Results in 2^nd-Line Liver Cancer

Download Full 29-Page Update with Important Disclosures: GNSZ Update 05-16-13

1.) Unusually Strong Phase I Results in Liver Cancer: Results from GenSpera’s Phase I clinical trial were very strong in patients with advanced hepatocellular carcinoma (HCC or liver cancer) who have failed 1^st-Line Sorafanib (Nexavar^®) therapy. Although the Phase I trial was a safety and dosing ranging trial in all solid tumors, the results for the HCC patients were surprisingly strong for such an early-stage trial. 3 out of 5 patients demonstrated significant improvement delaying disease progression compared to historical data with 2 of the patients remaining on the study with stable disease. The fact that patients can be administered multiple cycles (up to 13 so far) of G-202 means that GenSpera’s prodrug delivery chemistry used with the highly toxic 12-ADT agent is working as designed. It should also be noted that there is no currently FDA-approved therapy for patients who have failed on Sorafenib. (see G-202 and Hepatocellular Carcinoma)

2.) Phase II Trial Enrolling: As of May 1, 2013, three patients have been enrolled in the Phase II clinical trial for HCC patients that have failed 1^st-Line Sorafenib therapy. To enroll, patients must have Child-Pugh scores of A through B-7 (lower is healthier) with an ECOG performance status of 0 through 1 (lower is healthier). The 29-patient trial has a primary endpoint of Time to Progression (TTP) by measuring radiologic progression every 8 weeks. We expect to see the interim Phase II TTP data before year-end.

3.) Unique Mechanism of Action (MOA): GenSpera’s unique G-202 prodrug mechanism-of-action harnesses the potent cytotoxic activity of thapsigargin by selective activation via Prostate Specific Membrane Antigen (PSMA) that is produced by vasculature endothelial cells in tumors. PSMA then cleaves the masking peptide from G-202 to liberate 12-ADT, a cytotoxic analog of thapsigargin. 12-ADT then binds to the SERCA pump, producing a sustained elevation in intracellular calcium which results in activation of apoptosis (cell death). We believe G-202′s unique mechanism of action is responsible for the strong results seen in the Phase I trial that surpass competing tyrosine kinase receptor inhibitors. (see G-202 and Hepatocellular Carcinoma)

4.) Maintaining Rating of Strong Speculative Buy and $4.00 Target: GenSpera has been successfully progressing “under the radar” for some time now and we believe the company will soon begin attracting wider investor attention. GenSpera’s G-202 with its unique mechanism of action along with the strong Phase I data provides an intriguing opportunity for savvy investors wanting to get ahead of the curve. Our Strong Speculative Buy rating and 12-18 month Price Target of $4.00 is based on a 35x multiple on projected 2017 earnings and discounted 55% to adjust for risk with a 10% acquisition premium for Phase II results.

The results from GenSpera’s Phase I clinical trial demonstrated very promising results in patients with advanced hepatocellular carcinoma (HCC or liver cancer) who failed sorafenib (Nexavar^®) therapy. The results so far show that 3 out of 5 patients demonstrated significant improvement delaying disease progression compared to historical data. In fact, 2 of the patients remain on the study with stable disease. It also demonstrates that patients can be administered multiple cycles of G-202 indicating the prodrug delivery chemistry used with the highly toxic 12-ADT agent is working. It should also be noted that there is no currently FDA-approved therapy for patients who have failed on sorafenib.

Although the Phase I trial was a safety and dosing ranging trial in all solid tumors, the results for the 5 HCC patients were surprisingly strong for such an early-stage trial. While both the trial and data is limited in scope, the HCC Time to Progression (TTP) results compare favorably to the TTP results seen for various other drug candidates in recent clinical trials for 2nd-Line therapy in HCC patients who have failed 1st-Line sorafenib therapy. We further believe the G-202 results demonstrate a potential utility in 1st-Line HCC patients as well.

Investors should note that the mechanism of action of the above drugs inhibit various tyrosine kinase signaling pathways with the goal of inducing apoptosis (cell death). Brivanib inhibits VEGF (vascular endothelial growth factor) and FGF (fibroblast growth factor) tyrosine kinases. Tivantinib inhibits c-Met and HGF (hepatocyte growth factor) tyrosine kinases. Ramucirumab is an IgG1 monoclonal antibody that inhibits VEGF tyrosine kinase. Resminostat inhibits HDAC (histone deacetylase).

Sorafanib which inhibits VEGF, PDGF (platelet derived growth factor) tyrosine kinases and C-Raf and B-Raf MAP kinases was FDA-approved in 2007 for 1st-Line HCC and is marketed as NEXAVAR^® by Bayer AG (XETRA:BAYN) and Onyx Pharmaceuticals (Nasdaq:ONXX) with worldwide sales revenues over $1B in 2012 for liver cancer and kidney cancer combined. However, there is no currently approved or effective treatment for HCC patients that have failed 1st-Line treatment with Sorafenib and all patients eventually fail Sorafanib.

We also note that Axitinib (Inlyta^®) marketed by Pfizer (NYSE:PFE) is similar to Sorafenib as it also inhibits VEGF and PDGF tyrosine kinases along with cKIT. While Axitinib was approved in 2012 for renal cell carcinoma (kidney cancer) based on improved TTP over Sorafenib (6.7 months versus 4.7 months) there was no improvement in overall survival (20.1 months versus 19.2 months).

GenSpera’s unique G-202 prodrug mechanism-of-action harnesses the potent cytotoxin activity of thapsigargin by selective activation via Prostate Specific Membrane Antigen (PSMA) that is produced by vasculature endothelial cells in tumors. PSMA then cleaves the masking peptide from G-202 to liberate 12-ADT-Asp, a cytotoxic analog of thapsigargin. 12-ADT-Asp then binds to the SERCA pump, producing a sustained elevation in intracellular calcium which results in activation of apoptosis (cell death). We believe G-202’s unique mechanism of action is responsible for the strong results seen in the Phase I trial. A detailed discussion of G-202’s mechanism of action is contained in the follow sections.

Download Full 29-Page Update with Important Disclosures: GNSZ Update 05-16-13

Navidea & Cardinal Health Launch Lymphoseek^® in U.S.

Download Full 36-Page Update Report with Important Disclosures: NAVB Update 05-15-13

Lymphoseek^® Launched in U.S.: On May 1, 2013, Navidea launched their first product in the United States, Lymphoseek^® (technetium 99m tilmanocept) Injection for patients with breast cancer and melanoma, partnered with Cardinal Health (NYSE:CAH) with a price of $300 per procedure. Investors should note that Cardinal is a very strong marketing partner with over 140 nuclear pharmacies and more than 400 radiopharmacists. As a result, they can reach 99% of the nuclear medicine customers within 3 hours after receiving an order. While Lymphoseek must use CMS A-Code A4641 Radiopharmaceutical, diagnostic, not otherwise classified, Navidea expects to file for a unique pass-through C-Code by the June 1^st deadline for an October 1^st implementation.

Lymphoseek Head & Neck Cancer Data could be a Game Changer: On April 11, 2013, Navidea announced that the interim data from their Phase III clinical trial of Lymphoseek met the primary endpoint in patients with head and neck squamous cell carcinoma. The interim results showed Lymphoseek accurately identified 38 of 39 cancer-positive lymph nodes for an overall False Negative Rate (FNR) of 2.56% which was statistically significant (p=0.0205). This is a particularly strong result as the goal was an FNR less than 10%. Lymphoseek only required the removal of 4 lymph nodes per patient on average versus an average of 38 lymph nodes per patient in the trial. LymphoSeek has the potential to provide a substantial reduction in lymph-related adverse side-effects for patients with head and neck cancer undergoing sentinel lymph node biopsy. These results were so strong that the Data Safety Monitoring Committee (DSMC) recommended the trial be ended early to speed an FDA filing. We now expect Navidea to use these strong results to make a solid case for expanding the label for Lymphoseek to a sentinel lymph node biopsy claim. Investors should note there are no FDA-approved imaging drugs for sentinel lymph node detection and if granted, Lymphoseek would represent a major game changer in the space.

European Partnership Soon: On December 18, 2012, Navidea announced they filed the European Marketing Authorization Application (MAA) for LymphoSeek^® (technetium Tc 99m tilmanocept) injection for intraoperative lymphatic mapping (ILM) not restricted to any particular solid tumor type. The Day 120 EMA comments are due later this quarter and a positive CHMP opinion could come in Q4 2013. We then expect Navidea to announce a partner in Europe soon afterward. Partnerships could also be announced for other countries that accept FDA or EU marketing approvals such as Mexico, Israel, Singapore, Saudi Arabia and the Philippines.

NAV4694 for Alzheimer’s Disease Moving to Late-Stage Trials: Navidea is on track to initiate a late-stage Phase III registration trial for Dementia mid-year. On March 27, 2013, as an adjunct study to the Phase III Dementia trial, Navidea began enrollment of a Phase IIb trial for Mild Cognitive Impairment (MCI) for patients who have earlier stage cognitive impairment and would show utility for NAV4694 to diagnose dementia and cognitive impairment earlier. There is also an ongoing 200-patient Phase IIb, open-label, safety and efficacy study in subjects diagnosed with probable Alzheimer’s disease (AD) compared with similarly aged and young healthy volunteers. (see NAV4694 Alzheimer’s Clinical Trials)

NAV5001 Parkinson’s Disease Also Moving to Late Stage Trials: Navidea is also on track to begin pivotal Phase III studies in Parkinson’s disease (Movement Disorders) this year. On April 3, 2013, Navidea announced that Molecular Neuroimaging’s Investigator-Sponsored Trial (IST) enrolled the first subject in a clinical study to investigate the performance of NAV5001 in Dementia with Lewy Bodies (DLB). The IST is a single center, open-label study to assess the distribution, safety and tolerability of NAV5001 as an agent to evaluate the integrity of the dopamine transporters in the brain, using healthy volunteers. This study is in preparation for the planned company-sponsored Phase IIb study in Dementia with Lewy Bodies (DLB). NAV5001 has a high affinity that can generate clean images quickly, beginning 15 minutes after injection as opposed to waiting periods of 3-6 hours and up to 24 hours as required with other agents. NAV5001 is a fully synthetic molecule, unlike GE’s DaTscan, which is derived from cocoa leaves and regulated by the U.S. Drug Enforcement Agency (DEA). NAV5001 can also be sterilized whereas other agents are provided aseptically so NAV5001 could have important and practical convenience in handling advantages. (see NAV5001 Parkinson’s Imaging Background & Development Program)

Undervalued Shares Represent a Significant Investment Opportunity: We believe the current weakness in Navidea’s share price represents a limited view of Navidea’s true long-term value. With an FDA approval for their first product, LymphoSeek, under their belt and a U.S. launch by marketing partner Cardinal Health (NYSE: CAH) we believe management has proven themselves in getting to products into the market. Looking forward, investors can expect a European partnership announcement and EU approval by year-end as well as progress in expanding LymphoSeek’s label with head & neck data and colon cancer data in the future. In addition, Navidea continues to advancing two additional candidates, NAV4694 in Alzheimer’s disease and NAV5001 in Parkinson’s disease into late-stage Phase III trials during 2013 as well as getting RIGScan back into clinical trials with a humanized MAb. We believe these multiple shots-on-goal represent a significant buying opportunity as we reiterate our Strong Speculative Buy rating and 12-18 month price target of $5.75 based on a 35x multiple on projected fiscal year 2016 EPS and discounted 35% for cumulative risk.

Download Full 36-Page Update Report with Important Disclosures: NAVB Update 05-15-13

Navidea & Cardinal Health Launch Lymphoseek^® in U.S.
First Lymph Node Mapping Drug in 30 Years for Breast & Melanoma

Download Full 8-Page Note with Important Disclosures: Morning Note 05-01-13 NAVB

NOTE: Navidea will be holding a conference call today at 8:30am Eastern Time Dial-In: (877) 407-8031 International (201) 689-8031

Navidea announced the United States product launch of Lymphoseek^® (technetium Tc 99m tilmanocept) Injection by their U.S. partner, Cardinal Health (NYSE:CAH). Cardinal will sell and distribute Lymphoseek to health care professionals through its existing network of nuclear pharmacies. Navidea will support the marketing and educational efforts as well.

Lymphoseek will initially be reimbursed under existing CPT (Current Procedural Terminology) codes priced at $300 per procedure. Navidea will be applying for a specific Lymphoseek CPT code and expects to receive it within few months. Navidea and Cardinal Health will provide information and support to providers and payers to ensure that they can secure formulary status and appropriate payment.

While Lymphoseek is approved for lymphatic mapping procedures for breast cancer and melanoma, we expect Navidea to file an sNDA (Supplemental New Drug Application) in Head & Neck cancer soon based on the NEO3-06 interim trial results. The results were so strong that the Data Safety Monitoring Board (DSMB) recommended stopping the trial early and filing.

Undervalued Shares Represent a Significant Investment Opportunity: We believe the current weakness in Navidea’s share price represents a limited view of Navidea’s true value. With an FDA approval for their first product, LymphoSeek, under their belt and an imminent U.S. launch by marketing partner Cardinal Health (NYSE: CAH) we believe management has proven themselves in getting past the previous PDUFA misses. Looking forward, investors can expect a European partnership announcement and EU approval by year-end as well as progress in expanding LymphoSeek’s label with head & neck data and colon cancer data in the future. In addition, Navidea is advancing two additional candidates, NAV4694 in Alzheimer’s disease and NAV5001 in Parkinson’s disease into late-stage Phase III trials as well as getting RIGScan back into clinical trials with a humanized MAb. We believe these multiple shots-on-goal represent a significant buying opportunity as we reiterate our Strong Speculative Buy rating.

Download Full 8-Page Note with Important Disclosures: Morning Note 05-01-13 NAVB

Navidea Investor J.P. Morgan Asset Management Adds More Shares

Download Full 7-Page Note with Important Disclosures: Morning Note 04-24-13 NAVB

Navidea announced the sale to J.P. Morgan Asset Management and one other institutional investor of 2,100,000 shares at $2.43 per share, representing an at-the-market price, for gross proceeds of approximately $5.1 million. This follows their January 30, 2013 sale to J.P. Morgan Asset Management and one other institutional investor of 1,542,389 shares of common stock at $3.10 per share for gross proceeds of approximately $4.8M.

Undervalued Shares Represent a Significant Investment Opportunity: We believe the current weakness in Navidea’s share price represents a limited view of Navidea’s true value. With an FDA approval for their first product, LymphoSeek, under their belt and an imminent U.S. launch by marketing partner Cardinal Health (NYSE: CAH) we believe management has proven themselves in getting past the previous PDUFA misses. Looking forward, investors can expect a European partnership announcement and EU approval by year-end as well as progress in expanding LymphoSeek’s label with head & neck data and colon cancer data in the future. In addition, Navidea is advancing two additional candidates, NAV4694 in Alzheimer’s disease and NAV5001 in Parkinson’s disease into late-stage Phase III trials as well as getting RIGScan back into clinical trials with a humanized MAb. We believe these multiple shots-on-goal represent a significant buying opportunity as we reiterate our Strong Speculative Buy rating.

Download Full 7-Page Note with Important Disclosures: Morning Note 04-24-13 NAVB

Peer-Reviewed Research: NAV4694 Favorable Versus Gold-Standard

Download Full 7-Page Note with Important Disclosures:Morning Note 04-19-13 NAVB

Data published online in the Journal of Nuclear Medicine in a paper titled “Head-to-Head Comparison of ¹¹C-PiB and ¹⁸F-AZD4694 (NAV4694) for β-Amyloid Imaging in Aging and Dementia” from a clinical trial of Navidea’s NAV4694 versus the gold standard ¹¹C-Pittsburgh compound-B (¹¹C-PiB) in a head-to-head comparison in healthy and Alzheimer’s Disease patients demonstrated NAV4694 imaging characteristics were nearly identical to those of ¹¹C-PiB. Investors should note that ¹¹C-PiB only has a 20-minute radioactive decay half-life which limits its use to medical centers with an on-site cyclotron and ¹¹C radiochemistry expertise. These factors result in making ¹¹C-PiB PET too difficult and expensive for routine clinical Alzeimer’s Disease imaging. Previous attempts to use ¹⁸F-labeled amyloid tracers have shown more nonspecific white matter binding than ¹¹C-PiB and some lower cortical binding in Alzheimer’s patients making visual interpretation of scans difficult in detecting low levels of cortical amyloid plaque and requiring significant training to interpret the scans in clinical practice. The researchers compared the cortical and white matter binding of ¹⁸F-AZD4694 (now Navidea’s NAV4694) ¹⁸F-labeled beta-amyloid tracer versus ¹¹C-PiB in the same subjects. They found that Navidea’s NAV4694 showed “a robust separation between AD patients and healthy age-matched controls and less white matter binding than reported with other ¹⁸F-labeled amyloid tracers.” To further characterize NAV4694, the present study compared the cortical and white matter binding of ¹¹C-PiB and NAV4694 in the same subjects. NAV4694 displayed imaging characteristics “nearly identical to those of ¹¹C-PiB. The low white matter and high cortical binding in Alzheimer’s Disease indicate that this tracer is well suited to both clinical and research use.“

The researchers concluded: “Our results demonstrate that ¹⁸F-AZD4694 is highly correlated with ¹¹C-PiB and therefore should reliably detect Aβ deposition in the brain and be useful in the early and differential diagnosis of AD. ¹⁸F-AZD4694 provides images that appear similar to those of 11C-PiB, without the limitation of the short ¹¹C radioactive decay half-life that precludes the application of ¹¹C-PiB in clinical practice. The striking similarity with ¹¹C-PiB suggests that the results from longitudinal studies that are clarifying the relationship between Aβ accumulation and cognitive decline, and asserting the value of Aβ imaging as a predictor of cognitive decline and progression to clinical AD, can be directly translated to ¹⁸F-AZD4694. The high cortical binding in AD and low nonspecific white matter binding also suggests that ¹⁸F-AZD4694 images may be more easily and reliably read in clinical practice than other ¹⁸F-labeled PET tracers for brain amyloid.“

CLICK TO ENLARGE IMAGE

The paper may be accessed at http://jnm.snmjournals.org/content/early/2013/04/10/jnumed.112.114785.abstract 

Download Full 7-Page Note with Important Disclosures: Morning Note 04-19-13 NAVB

Unusually Strong Phase I Results in 2^nd-Line Liver Cancer

Download Full 29-Page Update with Important Disclosures: GNSZ Update 04-17-13

1.) Unusually Strong Phase I Results in Liver Cancer: Results from GenSpera’s Phase I clinical trial were very strong in patients with advanced hepatocellular carcinoma (HCC or liver cancer) who have failed 1^st-Line Sorafanib (Nexavar^®) therapy. Although the Phase I trial was a safety and dosing ranging trial in all solid tumors, the results for the HCC patients were surprisingly strong for such an early-stage trial. 3 out of 5 patients demonstrated significant improvement delaying disease progression compared to historical data with 2 of the patients remaining on the study with stable disease. The fact that patients can be administered multiple cycles (up to 12 so far) of G-202 means that GenSpera’s prodrug delivery chemistry used with the highly toxic 12-ADT agent is working as designed. It should also be noted that there is no currently FDA-approved therapy for patients who have failed on Sorafenib. (see G-202 and Hepatocellular Carcinoma)

2.) Phase II Trial Gets Underway: On February 21, 2013, the first patient was enrolled in the Phase II clinical trial for HCC patients that have failed 1^st-Line Sorafenib therapy. To enroll, patient must have Child-Pugh scores of A through B-7 (lower is healthier) with an ECOG performance status of 0 through 1 (lower is healthier). The 29-patient trial has a primary endpoint of Time to Progression (TTP) by measuring radiologic progression every 8 weeks. We expect to see the interim Phase II TTP data before year-end.

3.) Unique Mechanism of Action (MOA): GenSpera’s unique G-202 prodrug mechanism-of-action harnesses the potent cytotoxic activity of thapsigargin by selective activation via Prostate Specific Membrane Antigen (PSMA) that is produced by vasculature endothelial cells in tumors. PSMA then cleaves the masking peptide from G-202 to liberate 12-ADT, a cytotoxic analog of thapsigargin. 12-ADT then binds to the SERCA pump, producing a sustained elevation in intracellular calcium which results in activation of apoptosis (cell death). We believe G-202′s unique mechanism of action is responsible for the strong results seen in the Phase I trial that surpass competing tyrosine kinase receptor inhibitors. (see G-202 and Hepatocellular Carcinoma)

4.) Maintaining Rating of Strong Speculative Buy and $4.00 Target: GenSpera has been successfully progressing “under the radar” for some time now and we believe the company will soon begin attracting wider investor attention. GenSpera’s G-202 with its unique mechanism of action along with the strong Phase I data provides an intriguing opportunity for savvy investors wanting to get ahead of the curve. Our Strong Speculative Buy rating and 12-18 month Price Target of $4.00 is based on a 35x multiple on projected 2017 earnings and discounted 55% to adjust for risk with a 10% acquisition premium for Phase II results.

The results from GenSpera’s Phase I clinical trial demonstrated very promising results in patients with advanced hepatocellular carcinoma (HCC or liver cancer) who failed sorafenib (Nexavar^®) therapy. The results so far show that 3 out of 5 patients demonstrated significant improvement delaying disease progression compared to historical data. In fact, 2 of the patients remain on the study with stable disease. It also demonstrates that patients can be administered multiple cycles of G-202 indicating the prodrug delivery chemistry used with the highly toxic 12-ADT agent is working. It should also be noted that there is no currently FDA-approved therapy for patients who have failed on sorafenib.

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Although the Phase I trial was a safety and dosing ranging trial in all solid tumors, the results for the 5 HCC patients were surprisingly strong for such an early-stage trial. While both the trial and data is limited in scope, the HCC Time to Progression (TTP) results compare favorably to the TTP results seen for various other drug candidates in recent clinical trials for 2nd-Line therapy in HCC patients who have failed 1st-Line sorafenib therapy. We further believe the G-202 results demonstrate a potential utility in 1st-Line HCC patients as well.

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Investors should note that the mechanism of action of the above drugs inhibit various tyrosine kinase signaling pathways with the goal of inducing apoptosis (cell death). Brivanib inhibits VEGF (vascular endothelial growth factor) and FGF (fibroblast growth factor) tyrosine kinases. Tivantinib inhibits c-Met and HGF (hepatocyte growth factor) tyrosine kinases. Ramucirumab is an IgG1 monoclonal antibody that inhibits VEGF tyrosine kinase. Resminostat inhibits HDAC (histone deacetylase).

Sorafanib which inhibits VEGF, PDGF (platelet derived growth factor) tyrosine kinases and C-Raf and B-Raf MAP kinases was FDA-approved in 2007 for 1st-Line HCC and is marketed as NEXAVAR^® by Bayer AG (XETRA:BAYN) and Onyx Pharmaceuticals (Nasdaq:ONXX) with worldwide sales revenues over $1B in 2012 for liver cancer and kidney cancer combined. However, there is no currently approved or effective treatment for HCC patients that have failed 1st-Line treatment with Sorafenib and all patients eventually fail Sorafanib.

We also note that Axitinib (Inlyta^®) marketed by Pfizer (NYSE:PFE) is similar to Sorafenib as it also inhibits VEGF and PDGF tyrosine kinases along with cKIT. While Axitinib was approved in 2012 for renal cell carcinoma (kidney cancer) based on improved TTP over Sorafenib (6.7 months versus 4.7 months) there was no improvement in overall survival (20.1 months versus 19.2 months).

GenSpera’s unique G-202 prodrug mechanism-of-action harnesses the potent cytotoxin activity of thapsigargin by selective activation via Prostate Specific Membrane Antigen (PSMA) that is produced by vasculature endothelial cells in tumors. PSMA then cleaves the masking peptide from G-202 to liberate 12-ADT-Asp, a cytotoxic analog of thapsigargin. 12-ADT-Asp then binds to the SERCA pump, producing a sustained elevation in intracellular calcium which results in activation of apoptosis (cell death). We believe G-202’s unique mechanism of action is responsible for the strong results seen in the Phase I trial. A detailed discussion of G-202’s mechanism of action is contained in the follow sections.

Download Full 29-Page Update with Important Disclosures: GNSZ Update 04-17-13

FluoroPharma Strengthens Board with Imaging & FDA Regulatory Expertise

Download Full 7-Page Note with Important Disclosures: Morning Note 04-15-13 FPMI

FluoroPharma announced that Dr. Joseph A. Pierro has been appointed to the Board of Directors. Dr. Pierro is currently the Chief Medical Officer for North America at Biomedical Systems, where he is responsible for leading the Scientific Affairs groups, providing medical and regulatory guidance.

Dr. Joseph Pierro has over 25 years of imaging expertise in the field of radiology and more than 20 years of clinical trial research and development experience. In addition to Biomedical Systems, he has worked in such prestigious companies as Covidien (NYSE:COV), GE Healthcare (NYSE:GE) and Mallinckrodt and as a medical reviewer at the FDA Center for Drug Evaluation and Research. Dr. Pierro has been instrumental in numerous submissions to regulatory agencies offering substantial experience in scientific review and medical writing of clinical development strategy, clinical protocol development, and clinical study reports. In addition to imaging, Dr. Pierro provides broad expertise in safety, medical monitoring, pharmacokinetics, pharmacodynamics, biostatistics, and clinical safety reporting. He has a thorough understanding of regulatory submission requirements and an outstanding track record of success with regulatory approvals and responses to regulatory authorities. He has contributed to numerous scientific publications in peer reviewed journals and authored a manual of radiology. Dr. Pierro received his medical degree at the State University of New York at Buffalo School of Medicine and completed residency training in diagnostic radiology at Northeastern Ohio’s Integrated Residency program in Youngstown, Ohio.

We believe Dr. Pierro’s expertise in imaging, cardiology, clinical trial design and FDA experience will add significantly to FluroPharma’s progress in the cardiac PET imaging space with ongoing Phase II trials in BFPET, CardioPET and anticipated trials for VasoPET.

Download Full 7-Page Note with Important Disclosures: Morning Note 04-15-13 FPMI

StemCells Inc. Accepts $19.3M Forgivable Loan for Alzheimer’s Disease
Alzheimer’s Disease Costs U.S. $200B – More than Cancer or Heart Disease

Download the Full 7-Page Note with Important Disclosures: Morning Note 04-11-13 STEM

StemCells Inc. announced they entered into an agreement with the California Institute for Regenerative Medicine (CIRM) where CIRM will provide a forgivable loan of $19.3M to help fund preclinical development and IND-enabling activities for StemCellsInc. HuCNS-SC^® (purified human neural stem cells) for Alzheimer’s disease. The goal is for StemCells Inc. to file an Investigational New Drug (IND) application with the FDA within four years.

Investors should note that in July 2012, data at the Alzheimer’s Association Annual Meeting demonstrating that the StemCells Inc.’s neural stem cells restored memory and significantly enhanced synaptic function in two animal models relevant to Alzheimer’s disease and did not require a reduction in beta amyloid or tau proteins to achieve these results. (see StemCells Inc. HuCNS-SC^® Data in Alzheimer’s Disease)

According to a RAND study published in The New England Journal of Medicine April 4, 2013, the total U.S. monetary cost of dementia was between $157B billion and $215B with Medicare paying approximately $11B making Alzheimer’s disease more costly to the U.S. than either heart disease or cancer.
(see http://www.nejm.org/doi/full/10.1056/NEJMsa1204629 )

Terms of the CIRM funding are: 

• To be disbursed periodically by CIRM over the four-year project period
• Disbursements are subject to progress milestones and compliance with certain financial covenants
• The loan is unsecured and the term of the loan is 10 years but may be extended
• Initial interest is one year LIBOR rate plus 2% and will increase 1% each year after year 5
• Interest will accrue with the first disbursement will not begin payment of interest until year 6
• Repayment of principal and accrued and unpaid interest will be due at the end of the 10 year term
• Prepayment is allowed at any time, in whole or in part, without a prepayment fee.
• The loan is forgivable so that the obligation to repay will be contingent upon the success of HuCNS-SC cells as a treatment for Alzheimer’s disease
• In the event of commercial success of HuCNS-SC cells in Alzheimer’s disease, StemCells Inc will owe various success milestone payments, in an aggregate amount of up to 5 times the principal funds disbursed by CIRM

Download the Full 7-Page Note with Important Disclosures: Morning Note 04-11-13 STEM