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rob_cos 23 posts  |  Last Activity: May 1, 2016 8:21 PM Member since: Dec 31, 1997
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  • rob_cos rob_cos May 1, 2016 8:21 PM Flag

    Yahoo not letting me post the entire note or the XON note - see Investorvillage ZIOP board for both must read notes

  • Bioivest Medical Tech Stock Letter...ZIOP – Poised to Shine at ASGCT With Oral Presentations & ASCO Next-cheaper CARs with SB to leap frog KITE/JUNO 1st gen...IL-12 PD-1 combo/SB cheaper CARs not in current valuationBuy

  • Wunderlich-The Spotlight Has Faded: 90-Page Report Lacks Substance. Successful partnerships overlooked. conjecture of the reports has little to no factual basis. Buy dip $50 target.
    Wunderlich Securities

    Technology: Enterprise Software

    Flash Note

    INTREXON CORPORATION (XON: $27.24) Rating: Buy

    April 28, 2016 Price Target: $50.00

    Rob Breza •Ryan MacDonald •

    Wunderlich Securities, Inc.

    1255 Battery StreetSuite 425 San Francisco, CA 94111

    The Spotlight Has Faded: 90-Page Report Lacks Substance

    o Summary. After reading through the follow-up report by Spotlight Research posted on Seeking Alpha, we break down what we believe to be Spotlight's major inaccuracies in each section. We remain confident in the multi-vertical growth prospects for Intrexon and would use any weakness as a buying opportunity in XON shares, all else being equal.

    o Part 2 – The related party business model. XON’s ECC business model was established in earnest in 2011, designed to create focused investments while diversifying risks and leveraging XON’s technology across the different verticals. Spotlight Research claims a mismatch in reported revenue, which is fully disclosed in XON’s footnotes and does match if an interested party were to take the time to read the footnotes to understand that fees are often deferred to the balance sheet for many years. We believe the company's accounting policies are proper and adjusted EBITDA is a key metric to judge the company as revenues are deferred. PwC, a very well respected accounting firm, is XON’s auditor.

    o Successful partnerships overlooked. The Spotlight Research report points out many negative partnerships. However, it fails to mention XON’s approximate $53M investment in Ziopharm, which resulted in an approximate $172M special dividend that has been distributed to investors, while they still retain a 50% royalty stream going forward.

    Clearly, a 3.25x return for investors was a positive outcome and more returns are likely given the future revenue stream.

    n Part 3 – biofuels are a pipe dream. We were able to speak to an investor who recently toured XON’s Isobutanol facility in South San Francisco and was able to independently verify that the pilot facility exists. We were not able to ascertain any production or engineering characteristics. However, the facility looks very similar to the Spotlight Research picture on page 22 of their report. We believe XON remains on track to achieve commercial revenue in early 2018.

    o Part 4 – value of Trans Ova. Based on Spotlight’s research, Trans Ova was a good acquisition as XON only paid 1.8x forward revenues for the company. However, Spotlight claims that Trans Ova is now worth 20x revenues. We would not make the same interpretations regarding the value paid for Trans Ova to today’s market cap as Spotlight’s analysis in this area ignores the other revenue-generating segments of XON’s business, as well as future growth opportunities - but it has been considered a good acquisition.

    o Part 5, 6, 7, & 8 – "google of life sciences." The conjecture in this part of the reports has little to no factual basis, in our opinion.

  • rob_cos rob_cos Mar 9, 2016 2:55 PM Flag

    Could be right the Brain Chancery guy is doing amazingly well - no sign of brain cancer. the other patients are all alive - statistically these heavily pretreated patients should have died in 3 months but they are all alive 7 months out. And the lack of on target and off target tox because of rheo switch - FDA gave go ahead for dose escalation...huge

  • rob_cos rob_cos Mar 9, 2016 2:49 PM Flag

    Agree - the Big Pharmas in current negotions with Cooper and Kirk for ZIOP understand how important all the recent publications in TCR, neoantigen targeting, NK Cell off the shelf and the confirmation non-viral is 1/10th the cost of KITE JUNO - you are right. What is clear is the low volume selloff with others in sector crushed last two days on high vol. I suspect Kirk is getting ready to drop a bomb on the ZIOP shorts once and for all - the shorts really have never met Kirk and don't really understand what the off the shelf NK trials and neoantigen benefits and this TCR news with Rosenberg means. Takes KITE JUNO a yr to develop T cells with TCR....RAPID is not in their vocabulary with their old time technology.

  • Have had 5.3 million shr, 4.4 million and 3 million+ up days past week but yesterday/today down days 2.7 mill/today 1.5 mill so far with sector drop on biologic pricing - low vol down high vol up....
    options being bought at the ask on the dips.

  • ZIOP RELATED:

    " We generated a rapid, cost-effective strategy to genetically engineer cancer patient T cells with TCRs using clinical Sleeping Beauty transposon/transposase system" Co-authored by Dr Cooper & S Rosenberg of NCI. NCI with FDA will determine TCR standard

    of care...in cancer....you can be certain safety and cost will be of paramount importance...I wrote 2 weeks ago when JUNO and KITE were getting hit - there was a buzz that institutional owners were getting worried how this "older" technology will simply not produce commercially viable TCR drugs... (Think Kirk's comment last week...."When thinking about the competition we think "Is it a drug"...we think not" )

    SEE TODAY'S ZIOP PRESS RELEASE AND Actual abstract here a MUST READ – CAN’T POST MANY LINKS SO SEE INVESTORVILLAGE ZIOP BOARD FOR ALL THE LINKS I HAD TO TAKE OUT OF THIS POST


    For almost a yr now Cooper has been talking about RAPID generation of T Cells a a lower cost with better safety as a differentiator and how this combined with "the keys to the kingdom" in neoantigen targeting will allow us to leapfrog the old techology immunotherapy companies with their "me-too CD-19 targets" as Kirk calls them...Cooper is building something that he says will take the off the shelf NK cells and TCRs generation from "weeks, to days, to hours....eventually it will be logistically possible to go from diagnosis to treatment in days" ....The competitors are behind in this new technology. Granny may be right - this type of publication with Cooper talking to potential acquirers and TCR partners for over 9 months - well its the type of article that could indeed close a deal...bring the offers up to what kirk wants for a partnership or more.

    Now Steven Rosenberg from NCI is behind this fully - the guy who was basically the star of the PBS Cancer show on immunotherapy - some see him as "The Godfather of CAR T and TCR" and he will have a major role on what will be the standard of care in TCR gene therapy


    Here's what the "Godfather" said in Dec...

    "The Sleeping Beauty (SB) transposon-transposase system represents a unique non-viral system for introducing encoding T-cell receptors and chimeric antigen receptors into lymphocytes that can be of great value in the development of personalized immunotherapies for patients with cancer"

    Dr Steven A. Rosenberg MD Ph.D.
    National Cancer Institute
    December 2015


    Sector has been week last 2 days because of Medicare rules for biologic pricing....again highlighting what a huge benefit non-viral will be at 1/10th the cost of KITE or JUNO therapies - old therapies that cannot generate "rapid, cost effective" T cells with TCRs" like this article proves MDA/ZIOP can...this is the beginning of the awakening. Again the Griffin "TCR Advantage and Neoantigen" paragraph is particularly important


    Griffin - THE TCR ADVANTAGE & NEOANTIGENS- ZIOP approach saves time & money..result weighs heavily in favor of Sleeping Beauty because it directly inserts one or two copies of the TCR gene into a cell’s DNA...
    THE TCR ADVANTAGE & NEOANTIGENS
    Ziopharm has a clear advantage in developing T cells that express normal receptors (i.e., TCRs) against specific tumor antigens, and that advantage is the Sleeping Beauty transposon/transposase technology. The Company, together with Intrexon, licensed the exclusive rights to this gene insertion tool for the field of oncology because it inserts a gene to a cell’s DNA directly without the need for a viral vector.
    As illustrated in Figure 3, the preparation of T cells against specific tumor antigens involves four major steps.4 The first in this example (see the blue box) is the separation of circulating tumor cells (CTCs) from the patient’s blood. In the diagram, this is accomplished with an antibody that recognizes a tumor associated protein called EpCAM. The second step, which is highlighted by pale yellow, involves isolation via microfluidics; gene extraction, amplification, and sequencing; and finally pulsing of antigen presenting cells (APCs) with either peptides from the tumor associated antigen or minigenes for those peptides. The resulting APCs are then able to present the peptides to T cells, which enables them to create receptors recognizing the tumor associated antigen. In the third step, highlighted in pink, the T cells are expanded and the α and β chains of the TCRs are sequenced. At this point, the next step depends on the technology being used to create a population of T cells that express the desired TCR. (This cannot be accomplished simply by expanding the original T cells that were exposed to the APCs.) Here is where theSleeping Beauty technology (see the green box) distinguishes Ziopharm from competitors that use a viral vector (see the red box) to deliver the TCR gene. The difference between the two approaches can be measured in time and money, and the result weighs heavily in favor of Sleeping Beauty because it directly inserts one or two copies of the TCR gene into a cell’s DNA. Use of a viral vector for this purpose is fine if the goal is to create a single, large batch of T cells for many individuals. Yet, the technology is not suitable for many small batches because of the time and cost involved in creating each viral vector. And that is where the problem is – TCR therapies must not only target the appropriate antigen(s), but also express human leukocyte antigens (HLA) that are compatible with the patient’s.
    Figure 3. Generating Autologous TCR Therapies Against Neoantigens4
    4 Klebanoff, CA, et al. Prospects for gene-engineered T cell immunotherapy for solid cancers. Nat Med (2016); 22(1): 26.
    Ziopharm is developing TCR therapies that target neoantigens, which are often tumor- and/or patient-specific abnormal proteins resulting from damage to the genome and failure of DNA repair mechanisms. The presence of neoantigens varies between different types of cancer, as shown in Figure 4.5 The simple graphic breaks the malignancies into three general groups based on mutation prevalence (i.e., number of mutations per million DNA base pairs). Brain cancers account for half of the ten cancers in the low prevalence group, along with three hematological malignancies, acute myeloid leukemia (AML), acute lymphocytic leukemia (ALL), and chronic lymphocytic leukemia (CLL). Thyroid cancer and a rare form of kidney cancer complete the group. Most cancers (19 shown), which express neoantigens “regularly,” consist of solid tumors primarily and two hematological malignancies, myeloma and B-cell lymphoma. Only one cancer, melanoma, is listed as “frequently” displaying neoantigens, and that trait probably stems from the severe damage caused by ultraviolet light. However, many cancers that “regularly” express neoantigens are suitable candidates for immunotherapies that may be based on molecular signatures (i.e., neoantigen immunogenicity or other biomarkers) rather than on the tumor type (e.g.,bladder or prostate). This would be in keeping with results from a recent clinical study of different cancers, including colorectal cancer, that found tumors lacking a specific DNA repair mechanism (i.e., mismatch repair) had the best response to checkpoint inhibition.3
    Figure 4. Estimate of the Neoantigen Repertoire of Different Cancers.5
    Ziopharm’s TCR program is focusing on neoantigens that play a role in oncogenesis. The Company hasn’t revealed the malignancies that it considers prime targets, but the Sleeping Beauty technology will play a role in creating the
    therapies. The ultimate goal of this program is to prepare personalized medicines against neoantigens for a patient during a short hospital stay.


    "Use of a viral vector for this purpose is fine if the goal is to create a single, large batch of T cells for many individuals. Yet, the technology is not suitable for many small batches because of the time and cost involved in creating each viral vector"

    Remember Kirk's comments last week...


    We really got a break with that immunotherapy comment at the end - IMO Kirk knocked it out of the park with the answer....
    grand slam - my thesis has been for awhile - Kirk and cooper are not interested in "another me-too CD-19 CAR T target" - have used that quote many times in the past months...its clear Kirk and Cooper have not thought with the exception of some of the blood cancer CD-19 trials - there are very few approvable drugs in the competitions pipeline because of high cost, extreme trial or clinical management problems that require single site top tier only center, high on target and off target tox, and cost - "Is it a drug - we think not".....over the rest of this yr I think we see the two targets from Merck that are not CD-19 go into IND (on schedule happy with progress was to me a big positive today) and I think at least 2 more targets (+$115 million) announced by yr end, a BMY or Merck US IL-12 plus checkpoint partnership, NK Cell IND off the shelf this yr, A Rosenberg (mentioned again by name by Kirk today) / NCI Sleeping Beauty partnership/CRDA given all the positives and the Roseberg praise in the Nature Medicine article, and something bringing the ZIOP neoantigen solid tumor advantage discussed often by Cooper into the clinic. There is so much going on - and clearly multiple discussions with imo at least 3 very interested big pharmas.....ZIOP has never been in better shape imo.
    Kirk on the XON call re ZIOP/immunotherapy - "Our strategy here is to leapfrog the others technically.....we're very, very pleased"
    Tycho Peterson - JPMorgan
    Okay. And then last one, over on the human health side, Merck. Any update on when they may start their CAR T trials and how they're progressing?
    Randal Kirk
    I have to defer to Merck on that. They -- I can't tell you, as we mentioned in the press release, that we're making very, very good progress. I'm actually authorized to tell you that both partners are very pleased by the progress we're making.
    I would ask you to note just what we -- and Tycho, you were on our IPO so I know you remember our S-1, so I'd ask you to remember back in August 2013 what we said our strategy around acellular therapeutics really was. So as we described the terrain at that time, we thought that the work of Dr. Rosenberg and Dr. June [ph] was absolutely phenomenal, absolutely demonstrating an extremely powerful potential generation of therapeutics that could actually lead to the significant cure and/or management, successful management, of cancer. I think cure is probably the better term.
    However, there are -- there were significant technological obstacles that keep this technology at least so far from demonstrating real utility and practically anything outside of CD-19 CAR T at this point.
    So while we've seen several companies plow ahead running basically with a very high set of costs and therapies that really have to be administered in, you know, very top-flight research institutes in order to manage the side effects that are associated with the on-target toxicity and so forth, we just didn't consider that the motif as practiced by the first-generation of companies in this field is really workable, or to kind of put it in drug development parlance, is it a drug? Our conclusion is no, it's not.
    So we weren't interested in joining that race because it's -- we think it's a race that ultimately leads to nowhere, except for the fact that obviously three or four companies are going to have a successful CD19 CAR T. But beyond that, I'm not really sure what they're racing for or toward. What we realized was that there were significant technical hurdles that needed to be overcome. We focused on those hurdles. We highlighted how some of our technology could help us get over those hurdles. And based on all that, I will say we're very, very pleased.
    Just what -- in summary, let me just say, please remember that our strategy here is not to raise to the clinic as fast as we can go with a me-too [ph] CAR T or TCR. Our strategy here is to leapfrog the others technically. We think we've shown a lot of really encouraging data that lead us to believe that we'll be able to do that.
    And don't forget the last two MTSL updates
    Med Tech Stock Letter ZIOP comments- How ZIOP is Differentiating Immuno-Oncology-Nature article on Stem Cell editing & IL-12 Dose Escalation in GBM...large partnership soon?.... BUY under $12. Target price $18
    ZIOP - Nature Publication Shows Breadth of ZIOP’s Gene Editing of Stem Cells & IL-12 Dose Escalates in GBM

    The publication of a study in Scientific Reports, a journal of the Nature Publishing Group, describes the genetic editing of human leukocyte antigen (HLA) in hematopoietic stem cells as a means of broadening the human application of these and other cell therapies. The article, titled “Genetic editing of HLA expression in hematopoietic stem cells to broaden their human application”, is available online at http://www.nature.com/articles/srep21757. Publication in a peer-reviewed journal is an important Company development as it validates and provides proof to Wall Street that your technology is real. The ability to specifically edit genes in stem cells is just the start for ZIOP as with their partners XON and MD Anderson, they have access to multiple technologies to advance the findings of these studies and create universal off-the-shelf cancer drugs across the spectrum of their T-cell and natural killer (NK)-cell therapy platforms.
    Laurence Cooper, M.D., Ph.D., Chief Executive Officer of ZIOP and senior author of the journal article, noted: “Genetic editing of HLA expression is a step towards generating universal biological products, where one donor’s cells may become suitable for sustained engraftment in multiple unrelated recipients. Unlocking the method by which HLA repertoire can be modified is one key to achieving this goal and fully harnessing the potential for off-the-shelf (OTS) therapies in immuno-oncology applications.” Transplantation of allogeneic, or donor-derived, hematopoietic stem cells (HSCs) into recipients with hematologic disorders is used to restore bone marrow function, termed hematopoiesis. Finding a suitable donor can be challenging due to the need to match the constellation of HLA with the recipient.
    For the study, researchers at The University of Texas MD Anderson Cancer Center eliminated expression of one set of HLA molecules, termed HLA-A, on donor HSC using artificial zinc finger nucleases. Other HLA molecules, such as HLA B and C remained expressed to help prevent elimination by resident NK cells. Following genetic editing, the HSCs maintained their ability to engraft and reconstitute hematopoiesis. This paper reveals that genetically altered HSC harvested from a small pool of donors will then match with a large number of unrelated recipients, which has two implications. First, it broadens the number of recipients who might benefit from bone marrow transplantation, which has particular appeal for racial minorities underserved by the current genetic makeup of unrelated
    donors. Second, it paves the way for generating OTS cells that are HLA matched with multiple recipients, even though they were obtained from one donor.
    Researchers chose to employ a zinc finger nuclease (ZFN) since these proteins have been validated as safe and efficacious in an early-phase clinical trial infusing T cells genetically edited to prevent CCR5 expression as investigational treatment of patients with HIV.
    Furthermore, the group had undertaken a preliminary study demonstrating that embryonic stem cells can be genetically edited with ZFN to eliminate HLA-A expression. This is a strong validation of SGMO’s ZFN gene editing technology as Dr. Cooper choose it specifically over many others.
    Baxalta Deal Continues Validation of Gene Editing
    Two days after the Nature publication, Baxalta and Precision BioSciences signed a broad gene editing collaboration, with the closely held company receiving $105 million upfront to collaborate on six CAR-T projects and as much as $1.6 billion more in option fees and milestones. Precision BioSciences’ proprietary ARCUS genome editing technology enables the production of CAR T cells derived from healthy donors rather than relying on the patient. This approach aims to overcome the manufacturing-related limitations with existing CAR T therapies and enable a broader range of malignancies to be targeted. Taken together, the ZIOP article and the BXLT/Precision deal provide further evidence of the attraction of gene editing and its broad application to various diseases.
    IL-12 Dose Increased, Data at ASCO
    ZIOP also announced last week that following the successful completion of the initial dose cohort, the first patient has been dosed at the succeeding dose level in the Company’s ongoing multicenter Phase 1 study of Ad-RTS-hIL-12 + orally administered veledimex in recurrent or progressive glioblastoma or grade III malignant glioma (GBM). Ad-RTS-hIL-12 + veledimex is a novel viral gene therapy candidate for the controlled expression of IL-12, a critical protein for stimulating an anti-cancer T-cell immune response.
    The primary objective of the study is to determine the safety and tolerability of a single intra-tumoral Ad-RTS-hIL-12 injection activated upon dosing with oral veledimex. Secondary objectives are to determine the Ad-RTS-hIL-12 + veledimex maximum tolerated dose, the immune responses elicited by Ad-RTS-hIL-12 + veledimex, and assessment of biologic response. The Company anticipates reporting updated results from the study at the ASCO Annual Meeting in June, and preclinical results combining Ad-RTS-hIL-12 + veledimex and checkpoint inhibitors at the American Society of Gene and Cell Therapy Annual Meeting in May. Increasing the dose implies that there is activity and acceptable safety in the patients with advanced brain cancer.
    ZIOP Differentiating Itself From Other CAR Ts
    ZIOP continues to execute well in the clinic as witnessed by the recent dose escalation in the IL-12 GBM program. Upcoming data from this program at ASCO has the potential to serve as a significant catalyst. We would not be surprised to see a large partnership soon as the recent publication regarding ZIOP’s unique ability to specifically edit genes to create broader application of cancer drugs will only attract more attention to their unsurpassed suite of skills and technologies. The BXLT/Precision deal is a good example. In our view, universal OTS gene based cancer drugs have the potential to be the next class of billion dollar drugs and ZIOP is the leader.
    ZIOP is a BUY under 12 with a TARGET PRICE of 18
    Med Tech Stock Letter-"New ZIOP 2nd Generation CAR T trial starts - 4 competitive advantages & designed to improve persistence & anti-tumor response...Buy ZIOP under $12 for $18 target"
    (have attached as PDF also comments about XON, SGMO, CELG in this week’s issue)
    ZIOP – Starts 2 Generation Non-Viral CD-19 CAR-T Trial
    ZIOP announced that the first patient has been enrolled in a Phase I trial of its second-generation non-viral CD19-specific chimeric antigen receptor (CAR) modified T-cell therapy in patients with advance lymphoid malignancies. The CD19-specific T cells were modified using the non-viral delivery system Sleeping Beauty to stably express the CAR in T cells.
    The Sleeping Beauty transposon-transposase is a unique non-viral system for introducing genes encoding CARs and T-cell receptors (TCRs) into lymphocytes. This non-viral approach may play an important role in immunotherapy and has several potential advantages over viral delivery systems, including:
    o Lower cost of generating genetically modified T cells
    o Generate T cells with minimal ex vivo processing
    o Conduit to targeting solid tumor neo-antigens using TCRs
    o Pathway to overcome regulatory hurdles
    In two prior trials the first-generation CD19-specific CAR T cells, patient-derived (autologous) or donor-derived (allogeneic) T cells were administered to recipients with advanced CD19-expressing leukemias and lymphomas after hematopoietic stem-cell transplantation (HSCT). Results demonstrated an apparent doubling of survivals compared to historical controls. Sleeping Beauty offers the potential to significantly reduce the expense and simplify the implementation of genetically modified T cells, both of which are critical to the personalization and broad application of immunotherapies based on CARs and TCRs.
    The second-generation Sleeping Beauty CAR T cells employ a revised CAR construct designed to improve persistence and antitumor response over the first-generation therapy. Additionally, this investigational treatment is independent of HSCT. The ability to develop CAR-Ts without expensive HSCT has the potential to significantly expand the patient population. The entire CAR-T field got a boost last weekend when Dr. Stanley Riddell, an immunotherapy researcher and oncologist at Seattle’s Fred Hutchinson Cancer Research Center presented an update on new adoptive T-cell strategies for cancer at the annual meeting of the American Association for the Advancement of Science (AAAS). His group has shown in preliminary CAR-T results "sustained regression” in many previously relapsing and treatment-resistant cases of B-cell malignancies: acute lymphoblastic leukemia (ALL),Non-Hodgkin lymphoma (NHL) and chronic lymphocytic leukemia (CLL). ZIOP continues to execute in the clinic. The next catalyst, in our view, will be the IL-12 brain cancer data in relapsed/refractory patients which could be a big winner at this year’s ASCO.
    ZIOP is a BUY under 12 with a TARGET PRICE of 18
    Remember Kirk's comments last yr....deal is coming - just don't know whether we get rapid fire BMY IL-12 - Opdivo deal, separate TCR deal then NCI CRDA in Sleeping Beauty or if GILD, GSK, Roche, Merck KGaA comes in a takes the whole thing with a buyout with a heavy CVR giving us the upside potential as well...

    Per the Steven Rosenberg Jan 6 Nature Medicine article SB is the farthest into clinic non-viral...we already have 3 yr data & now are moving to SB 3.0.....
    There are other methods but SB is farthest along - 3 yr data - safe - cheaper. Dr Cooper though thinks Sleeping Beauty 3.0 will make giant strides over 1.0 which has shown decent, safe, long term results but his emphasis this yr will be on why SB 3.0 will be better than 1.0 (and remember SB 1.0 is what GSK and others made a bid for after 9 months due diligence in 2014 but lost out to XON/ZIOP because MDA said they were the companies "more likely to cure cancer" per Dr Cooper public statement). In addition to the SB 3.0 emphasis I think we will continue to see the differentiation vs competitors that we started to hear in the Dec 16th and JPM presentations and in the list in today's Press Release - by yr end this will be much clearer to investors and Wall St in general - especially those all in on KITE-JUNO-BLCM or long them/short ZIOP....those in that trade should take their ZIOP short profits now or risk losing them all by yr end imo.
    The Sleeping Beauty transposon-transposase is a unique non-viral system for introducing genes encoding CARs and T-cell receptors (TCRs) into lymphocytes and is exclusively licensed by Intrexon Corporation (NYSE:XON) through The University of Texas MD Anderson Cancer Center and accessed as part of ZIOPHARM's collaboration. This non-viral approach may play an important role in immunotherapy and has several potential advantages over viral delivery systems, including:
    • Lower cost of generating genetically modified T cells
    • Generate T cells with minimal ex vivo processing
    • Conduit to targeting solid tumor neo-antigens using TCRs
    • Pathway to overcome regulatory hurdles

    Now remember Cooper bold comment at JPM on neoantigen - supported by the comment in yellow in Nature Medicine

    Dr Cooper at JPM: 'You are welcomed to talk to other companies and ask them about how they're gonna do gene transfer for the purpose of targeting neoantigens. We have the keys to the kingdom for this biology"
    These are MANY important comments in that one-TWO in particular are important given Cooper discussing for first time Weds.....
    Figure 3 A pathway for generating autologous TCR gene therapies targeting neoantigens for patients with advanced epithelial cancers. From a single blood draw, all of the requisite components required to produce this therapy can be procured. Circulating tumor cells (CTCs) can be enriched from the blood using a combination of antibody-mediated isolation based on epithelial marker expression (for example, EpCAM) followed by microfluidic isolation. Subsequent genomic extraction, amplification and whole exome sequencing can identify non-synonymous mutations present within the tumor. Circulating T cells that express PD-1 can be isolated and co-cultured with autologous professional antigen presenting cells (APCs) that have either been pulsed with synthetic long peptides harboring the amino acid change resulting from the mutation or RNA-electroporated with tandem minigenes (TMGs) encoding the amino acid change and flanked on either side by 12 amino acids from the endogenous protein. T cells that upregulate the activation markers 4-1BB and/or OX-40 can then be isolated and the α and β chains of the TCR associated with this cell can be sequenced. The α/β TCR that confers reactivity against aneoantigencan then be cloned into an expression vector, for example an integrating virus or the Sleeping Beauty (SB) transposon/transposase system. T cell subsets isolated from the peripheral blood of the patient can finally be modified with this expression vector, expanded in vitro to numbers sufficient for treatment, and re-infused back into the patient. TL, transmitted light; TN, T naive; TSCM, T stem cell memory; TCM, T central memory; SB11, SB transposase 11.
    As an alternative to retroviral and lentiviral vectors, nonviral gene-transfer methods can potentially be used to genetically introduce antigen receptors. Because nonviral integration systems use oligonu¬cleotides and recombinant proteins, they can be considerably cheaper to manufacture and easier to implement for single-use applications com¬pared with viral vectors. By some estimates, production of nonviral rea¬gents may cost one-tenth that of GMP-grade virus118. Presently, use of the Sleeping Beauty (SB) transposon/transposase system has advanced farthest in clinical development22. Genome editing strategies that intro¬duce double-stranded DNA breaks that serve as sites for targeted gene insertion, including zinc-finger nucleases, transcription activator-like effector nucleases (TALENs), and the clustered regularly interspersed short palindromic repeat (CRISPR)-Cas9 system, might offer additional nonviral means of inserting antigen receptors in the near future119. Although the SB transposon/transposase system typically has a lower gene-transfer efficiency compared with viral integration techniques, selection for modified cells by drug exposure120, magnetic bead isola-tion121, or propagation using artificial antigen presenting cells122 can improve the frequency of receptor-engineered cells.
    Excerpts above are from the FULL Rosenberg Nature Medicine Sleeping Beauty positive article which can be read in its entirety at this link:

    SEE INVESTOR VILLAGE ZIOP BOARD FOR LINKS HAD TO TAKE OUT

    With Cooper/Kirk "Talking to everyone" just an FYI....a cash acquisition of ZIOP by XON or Big Pharma would now even with fast close be after June 15th making ZIOP shares dividended to XON shareholders now a long term capital gain on sale to either....
    Not say it definitely happens - just that a cash deal just got much more tax efficient (something he mentions below) - we know deals are coming and they are talking to everyone. Two institutional guys I talked to last week say the longer a TCR deal is not announced, the bigger the possibility of sale of the entire company...Especially now that the close would be more than a yr after the XON dividend of ZIOP shares. Reminder of Kirk comments....
    1) A few days after Dr. Cooper's appointment, Intrexon released its 1st quarter earnings report and sprung a surprise: They announced that they were divesting Intrexon's holding of ZIOP shares and returning it back to Intrexon's shareholders as a special dividend. An analyst at the earnings conference call pointed out that there had been rumors in the market that Intrexon may decide to acquire ZIOPHARM but since the company is divesting the shares it already owns, therefore those speculations should be put to rest. Randal Kirk disagreed and said the following: "No. It doesn't rule out. So according to all the lawyers, and first of all let me preface this by saying we have no ongoing discussions with ZIOPHARM concerning merger. But obviously given the significant economics that we share, it's a prospect that could at some point be attractive in the future. But it's also the case that there are other parties for whom ZIOPHARM acquisition might be very attractive in the future as well. In either case, our dividending these shares to our shareholders actually would simplify any such transaction."
    2) In response to yet another question on this subject, Kirk elaborated further: "So, perhaps I was too subtle, and -- no, we got a question on this call that related to whether our dividend and new shares meant that we are foreclosing the possibility of us acquiring ZIOPHARM and the answer to that is absolutely not. In fact it would just be the other way around. It actually would simplify that process in the event we would actually be interested and square it off to do that."
    3) Randal Kirk is not given to making flippant remarks (delivered four "significant transactions" after saying "significant transactions underway"). On that call he clearly stated that either ZIOP is being prepared for an acquisition by Intrexon, or by an outside company. Who will be the acquirer or when this acquisition will come to pass, we don't know. But it clearly sounds like a ZIOP acquisition is one of many deal options.
    4)At this same conference Kirk was asked "Yesterday you said the dividend of ZIOP will make an acquisition of ZIOP by XON simpler and more tax efficient...Can you expand on that and would it also allow for a simpler and more tax efficient acquisition by another large pharma or bio company other than XON?" and Kirk replied "yes definitely the acquisition by ANY company was just made much easier and more tax efficient. (actually said that as question was being asked)...First of all I will be able to vote my shares including the new shares...second of all from a tax standpoint you get favorable tax treatment with capital gains vs XON holding and selling and paying a much higher corporate tax on the large gains...Yes and it is certainly now much easier and more tax efficient if the companies interested in ZIOP now decide to make the acquisition. Yes."

    HERE ALSO IS A SUMMARY POST FOR NYT READERS INCLUDING SO MUCH DUE DILIGENCE A MUST READ
    SEE INVESTOR VILLAGE ZIOP BOARD FOR LINKS HAD TO TAKE OUT

    _________________________________________________________________________________

    Wall St will come out of the ether....and on a separate track we have patients in the Glioma trial far exceeding even ZIOP's wildest expectations. Buzz is Brain Chancery's C Peacock is doing amazingly well. All the patients have lived longer than expected. ASCO data will be exciting per Cooper....


    GBM update - Cooper "Glioma clinical data looks good we will update you at ASCO obviously I am communicating today a level of enthusiasm about the results to date - even at the low dose in the initial cohort"
    The actual human IL-12 ZIOP trials are showing great results so far if we are to believe Cooper and now we have dose escalation in monotherapy. Cooper seems very excited in monotherapy so far and says ASCO update should be positive see quote in bold below from my previous post.
    But he also says the preclinical trials adding IL-12/Veldemex to the checkpoint inhibitors result in better efficacy in GBM than checkpoint monotherapy (results already submitted to ASGCT we will see first in abstract before the May meeting) ....he provided reasons why checkpoint monotherapy may not be working (BMY Opdivo could use a boost in GBM for sure)

    Dr Cooper "Glioma clinical data looks good we will update you at ASCO obviously I am communicating today a level of enthusiasm about the results to date - even at the low dose in the initial cohort"
    Dr Cooper "Even the breast data early is very encouraging even in the first cohort very low dose"
    Personally I think we see a deal or BMY cooperation soon. Opdivo fits well.
    Now we know the results of the first cohort were good enough and safe enough for FDA to give ZIOP go ahead on dose escalation and more patients (see trial info at bottom of post)...word is demand to get in the second cohort is strong. We know also that Cooper said we have VERY promising pre-clinical IL-12 + checkpoint inhibitor data-abstract already submitted to ASGCT - with combo human trial on deck (expect BMY or Merck to run it)....
    Its clear from Cooper comments - ZIOP has completed preclinical work on IL-12 with the checkpoint inhibitors and likely has the one IL-12 works best with. I agree we can expect a deal with either BMY or Merck US for the combo trial...

    From my Partner guess list post I think its BMY

    o BMY - smart, adding Rheo Switch inert therapy would be smart - especially with TCR/NK cell. Pretty clear ZIOP has preclinical tests of IL--12 plus all three checkpoint inhibitors - one appears to work better...I think Opdivo fits well with the IL-12 checkpoint inhibitor combo on Cooper slide and their glioma trial needs a boost. Remember what Dr Cooper said recently

    “Cytokine IL-12 has import for other biology. Literature shows that checkpoint inhibitor data have been underwhelming for brain tumors. The likely reason is that there is not enough of an inflammatory signature within brain tumor for checkpoints to work. If you don’t have T cells in brain tumor it doesn’t matter how much checkpoint is swimming around the body. The answer is a pro-inflammatory cytokine like IL-12. If you put IL-12 in the tumor, you can call in the T-cells. Maybe more exciting as duality than monotherapy. MD Anderson are planning a single site exploratory trial in 2016”


    Full guess of partners at this post

    SEE INVESTOR VILLAGE ZIOP BOARD FOR LINKS HAD TO TAKE OUT

    Building upon foundation safely control & deliver IL-12 - combo with checkpoint inhibitors - pre clinical data demonstrates improved anti-tumor response in glioma (coming ASGCT in May )


    SCOTTI SAID:
    So, it seems that with the exception of companies with checkpoint inhibitors, there are no clear leaders in potential new glioblastoma treatments. However, remember what Dr Cooper said at JPM. “Cytokine IL-12 has import for other biology. Literature shows that checkpoint inhibitor data have been underwhelming for brain tumors. The likely reason is that there is not enough of an inflammatory signature within brain tumor for checkpoints to work. If you don’t have T cells in brain tumor it doesn’t matter how much checkpoint is swimming around the body. The answer is a pro-inflammatory cytokine like IL-12. If you put IL-12 in the tumor, you can call in the T-cells. Maybe more exciting as duality than monotherapy. MD Anderson are planning a single site exploratory trial in 2016”. When this combination trial gets underway this year it will be the one to watch and if the duality of treatment proves to be as successful as Dr Cooper’s vision then a large part of a $3 billion market will open up for Ziopharm. A pretty good prospect for a company whose MC is currently valued at about $650m net of cash, a valuation comprising the Sleeping Beauty platform in CAR-T, RheoSwitch technology, ongoing Phase 2 trials in breast cancer, ongoing CD19 CAR-T trials in leukaemia/lymphoma, planned trials this year in viral CAR-T and NK cell therapy, pre-clinical work in Sleeping Beauty TCR and GvHD, partnerships with MD Anderson and NCI, and a half share of a $941m CAR-T deal by Intrexon/Merck KGaA

  • Ziopharm March 8, 2016
    Griffin Securities Equity Research

    Stock Symbol NYSE: ZIOP
    Current Price $9.49
    Target Price $21.00
    Ziopharm BUY
    Company Update : Biotechnology

    Standing Apart from the Competition Ziopharm is blazing a trail in immuno-oncology. We believe the Company is leading the way in key aspects of product development that augur well for the long-range prospects.

    ■ Its IL-12 gene therapy has probably attracted attention to
    this cytokine. Ziopharm is testing its gene therapy in clinical
    trials against brain and breast cancers. Updates from these
    studies will be provided at the ASCO meeting on June 3 – 7 in
    Chicago. Meanwhile, other companies have begun to evaluate
    their own IL-12 therapies.

    ■ Switches are becoming popular. Intrexon’s RheoSwitch®,
    which is used presently to control expression of the IL-12
    gene therapy, should figure importantly in future products
    developed by Ziopharm. Other companies have begun to work
    with switches too. But that’s not a surprise, given the measure
    of safety they provide.

    ■ The Company has an advantage in targeting neoantigens,
    which will figure importantly in therapies for solid tumors. These
    antigens are patient- and tumor-specific proteins that are not
    found in normal cells. A key aspect of Ziopharm’s research is
    the Sleeping Beauty technology, which facilitates the creation
    of T cell receptors against such aberrant proteins. Accordingly,
    we believe the Company is leading the development of
    personalized cancer medicines.

    ■ Basic research is setting parameters of high-quality and
    off-the-shelf immunotherapies. An automated method that
    was created to study how T and NK cells destroy malignant
    cells may set a standard for commercial product quality. Also,
    a method of deleting one HLA gene moves off-the-shelf
    immunotherapies closer to realization.

    Ziopharm will expand its infrastructure this year. The
    Company plans to increase its employee base from 28 at the end
    of last year to 40. The new hires will likely support the clinical
    trials that are expected to commence in the remainder of this year
    and in 2017. We estimate R&D expenses will increase from $29.5
    million in 2015 (excluding $67.3 million for one-time licensing
    and collaboration fees) to $60 million this year. General and
    administrative costs will probably rise, too, from $17.6 million to
    more than $18 million. Overall, we figure operations will consume
    $60 million in cash in 2016.

    We are affirming our BUY rating on ZIOP shares and our
    price target of $21. Sentiment for the biotech sector has begun to
    improve since the January downturn. More important, we believe
    the Company’s R&D pipeline justifies a much higher valuation.
    Please Review Disclosures on Page 11 of This Report

    INVESTMENT CONSIDERATIONS
    The immuno-oncology sector is an emerging field of medicine that holds promise against the scourge of cancer.
    Multiple companies are working toward their first commercial product, some that appear closer to that goal than others. We believe Ziopharm is taking a methodical approach that is laying the foundation for multiple therapies rather than striving to be the first to the market. The research has involved both basic scientific studies that identified mitochondria as important determinants of T cell vitality, for instance, and advanced genetic engineering tests that enhanced the persistence and effectiveness of CAR T cells. This report considers a few of the important areas in which the Company is blazing a trail in immuno-oncology and discusses a couple of fundamental studies that should lay the foundation for high-quality commercial products. We believe this work will culminate in safe and effective cell therapies. Accordingly, we are maintaining our BUY recommendation on ZIOP shares with a $21 price target.

    THE CLINICAL PIPELINE
    Ziopharm plans to have seven clinical trials ongoing before year end and another three starting in 2017, as shown in Figure 1. Among those planned are two trials involving combination therapies, one involving IL-12 and a checkpoint inhibitor and the other involving IL-12 and NK cells. Both will be tested in patients with brain cancer.

    Figure 1. Ziopharm’s Clinical Pipeline 2016 & 2017

    WHERE ZIOPHARM IS EXERTING A LEADERSHIP ROLE
    Through its collaborations with Intrexon and the MD Anderson Cancer Center, the Company is drawing upon the distinct capabilities of experts in their respective fields to create and test new immunotherapies against cancer. As a result, the Company secured gene switch and insertion technologies well ahead of the competition. And it continues to benefit from basic immunology research and advanced genetic engineering. The shared knowledge is in itself an advantage because defeating cancer will require combination therapies, some involving personalized medicine.

    ENGAGING THE IMMUNE SYSTEM VIA IL-12
    Ziopharm is evaluating a gene therapy that expresses the powerful immune stimulant interleukin-12 under the control of a RheoSwitch® as a therapy for breast and brain cancers. The Phase 1/2 studies have been progressing slowly as requested by the FDA. However, the results have shown that on-target toxicities are as predicted, consistent between patients regardless of the tumor type, and controllable with the RheoSwitch ligand veledimex. As a result, enrollment has accelerated recently.

    In the breast cancer trial, the first patient achieved the targeted 12-week progression-free survival goal. Enrollment has continued, with six participating as of December 15th. The single-arm trial may include as many as 40 women with locally advanced or metastatic breast cancer and at least two measurable lesions. They are also required to have achieved stable disease or a partial response after 12 weeks of either first- or second-line chemotherapy. The study is intended to further document the safety of the Ad-RTS-IL-12 gene therapy, identify the maximum tolerated dose of the activator ligand with a standard dose of the gene vector (1 x 1012 virus particles/injection), and confirm an increase in memory T cells that was observed in earlier studies, as shown in Figure 2. (Note that the sum score in the Figure reflects the frequency of cells stained for identification multiplied by the intensity of the staining at two time points, at screening and after treatment.) Efficacy will also be monitored based on the disease control rate (i.e., the number of patients who have a complete response, partial response, or stable disease at 12 weeks after the start of one cycle of therapy), overall response rate (i.e., the sum of the complete response rate and the partial response rate at 12 weeks), and the number of subjects whose baseline tumor status (stable disease or partial response) improves to partial response or better at 12 weeks.

    Figure 2. Increased Memory T Cells with IL-12 Gene Therapy
    The brain cancer study, which is a dose-escalation trial that is being conducted at five U.S. medical centers, is designed to evaluate the safety of the IL-12 gene therapy in patients with advanced brain cancer (i.e., glioblastoma or Grade III glioma). The viral vector is administered into the region in which a tumor was excised, and the patients are allowed to recover before initiation of the activator ligand. Four dosage strengths of the oral ligand will be tested (20, 40, 80, and 120 mg/day) unless toxicity precludes continuation to the higher doses. As of december 15th, seven patient out of a possible 48 were enrolled.

    Neurotoxicity has been minimal and manageable thus far, with only one drug-related serious adverse event (grade 3) in each of the following categories: leukopenia, neutropenia, thrombocytopenia, and vomiting. No data are available on efficacy, though the Company has been permitted to proceed to the dose-escalation stage. We note, too, that in a recent meeting, management expressed enthusiasm over the data from the two trials that will be presented at meeting of the American Society of Clinical Oncology, June 3 -7.

    Future clinical research will examine Ad-RTS-IL-12 in combination with two immunotherapies for brain cancer. One will combine the gene therapy with a checkpoint inhibitor to determine whether the immune stimulant is able to work synergistically with a drug that blocks a “cloaking” mechanism used by tumors to avoid immune attack. As monotherapies, checkpoint inhibitors have response rates of 20%-30% typically, with higher rates in some patient subsets.1,2 Conducting the trial in patients with brain cancer makes sense, as a recent study found that 46% of glioblastoma tumors express the checkpoint receptor, PD-1.3 Ziopharm’s trial will probably begin enrolling patients later this year. Preclinical data on the IL-12/checkpoint inhibitor combination will be presented at the American
    Society of Gene and Cell Therapy Annual Meeting that will be held May 4 – 7.The other clinical trial, which is scheduled to commence in 2017, will assess the potential benefit of the IL-12 therapy in combination with NK cells.

    1 Kobold, S, et al. Immunotherapy in tumors. Dtsch Arztebl Int (2015); 112(48): 809.
    2 Le, DT, et al. PD-1 blockade in tumors with mismatch-repair deficiency. N Engl J Med (2015); 372(26): 2509.
    3 Xiu, J, et al. Multi-platform molecular profiling of a large cohort of glioblastomas reveals potential therapeutic strategies. Oncotarget, epub
    February 25, 2016.

    Other companies are developing IL-12 therapies to treat cancer, as summarized in Table 2. None employ a gene switch to control against potential serious side effects. Besides these clinical stage programs, Juno Therapeutics has announced its intention to develop a CAR T cell that also secretes IL-12 in the tumor microenvironment.

    Table 1. IL-12 Therapies in Clinical Development

    BETTER SAFETY THROUGH GENE SWITCHES
    Intrexon’s RheoSwitch is an important component of Ziopharm’s plans for immunotherapies. Presently, it is used to control expression of the IL-12 gene therapy. But it may well be incorporated into advanced T and NK cell therapies
    for safety purposes and for temporal or dosing control over therapeutic molecule expression. Other companies have begun to appreciate the value of gene switches for their own purposes, as exemplified by the following:
    Cellectis: The company is developing allogeneic T cells using a proprietary technology presently for hematological malignancies. A switch technology was recently licensed that is akin to an on/off switch built into chimeric antigen
    receptors (CARs). The normal CAR design is modified to include a hinge that can be in an open (“on”) position or in a closed (“off”) positon that determines whether the binding site of the CAR receptor is exposed or not.
    Bellicum: Two switches are being employed to control against serious unwanted toxicities. One is a suicide switch that expresses caspase-9 when activated, resulting in apoptosis. The other switch more closely resembles the RheoSwitch in that an activator molecule is required for a CAR T cell to be fully activated. The mechanism is somewhat different, though, since the company has separated the activator receptor from the CAR and full activation is dependent on the CAR binding to its antigen and the activator binding with its receptor concurrently.
    Juno: The company recently reported that it has developed a suicide switch to protect against serious toxicities. This “all or nothing” approach has its drawbacks since the kill switch terminates the therapy entirely and it can only be restarted by adminstering a fresh batch of CAR T cells. We believe the RheoSwitch exemplifies care being taken at Ziopharm and Intrexon to develop effective therapies that are also safe. In addition, it epitomizes the careful planning that is going into the design of new immunotherapies.

    THE TCR ADVANTAGE & NEOANTIGENS
    Ziopharm has a clear advantage in developing T cells that express normal receptors (i.e., TCRs) against specific tumor antigens, and that advantage is the Sleeping Beauty transposon/transposase technology. The Company, together with Intrexon, licensed the exclusive rights to this gene insertion tool for the field of oncology because it inserts a gene to a cell’s DNA directly without the need for a viral vector.

    As illustrated in Figure 3, the preparation of T cells against specific tumor antigens involves four major steps.4 The first in this example (see the blue box) is the separation of circulating tumor cells (CTCs) from the patient’s blood. In the diagram, this is accomplished with an antibody that recognizes a tumor associated protein called EpCAM. The second step, which is highlighted by pale yellow, involves isolation via microfluidics; gene extraction, amplification, and sequencing; and finally pulsing of antigen presenting cells (APCs) with either peptides from the tumor associated antigen or minigenes for those peptides. The resulting APCs are then able to present the peptides to T cells, which enables them to create receptors recognizing the tumor associated antigen. In the third step,
    highlighted in pink, the T cells are expanded and the α and β chains of the TCRs are sequenced. At this point, the next step depends on the technology being used to create a population of T cells that express the desired TCR. (This cannot be accomplished simply by expanding the original T cells that were exposed to the APCs.) Here is where the Sleeping Beauty technology (see the green box) distinguishes Ziopharm from competitors that use a viral vector (see
    the red box) to deliver the TCR gene. The difference between the two approaches can be measured in time and money, and the result weighs heavily in favor of Sleeping Beauty because it directly inserts one or two copies of the
    TCR gene into a cell’s DNA. Use of a viral vector for this purpose is fine if the goal is to create a single, large batch of T cells for many individuals. Yet, the technology is not suitable for many small batches because of the time and cost involved in creating each viral vector. And that is where the problem is – TCR therapies must not only target the appropriate antigen(s), but also express human leukocyte antigens (HLA) that are compatible with the patient’s.

    Figure 3. Generating Autologous TCR Therapies Against Neoantigens4
    4 Klebanoff, CA, et al. Prospects for gene-engineered T cell immunotherapy for solid cancers. Nat Med (2016); 22(1): 26.

    Ziopharm is developing TCR therapies that target neoantigens, which are often tumor- and/or patient-specific abnormal proteins resulting from damage to the genome and failure of DNA repair mechanisms. The presence of neoantigens varies between different types of cancer, as shown in Figure 4.5 The simple graphic breaks the malignancies into three general groups based on mutation prevalence (i.e., number of mutations per million DNA base pairs). Brain cancers account for half of the ten cancers in the low prevalence group, along with three
    hematological malignancies, acute myeloid leukemia (AML), acute lymphocytic leukemia (ALL), and chronic lymphocytic leukemia (CLL). Thyroid cancer and a rare form of kidney cancer complete the group. Most cancers (19 shown), which express neoantigens “regularly,” consist of solid tumors primarily and two hematological malignancies, myeloma and B-cell lymphoma. Only one cancer, melanoma, is listed as “frequently” displaying neoantigens, and that trait probably stems from the severe damage caused by ultraviolet light. However, many
    cancers that “regularly” express neoantigens are suitable candidates for immunotherapies that may be based on molecular signatures (i.e., neoantigen immunogenicity or other biomarkers) rather than on the tumor type (e.g.,
    bladder or prostate). This would be in keeping with results from a recent clinical study of different cancers, including colorectal cancer, that found tumors lacking a specific DNA repair mechanism (i.e., mismatch repair) had the best response to checkpoint inhibition.3

    Figure 4. Estimate of the Neoantigen Repertoire of Different Cancers.5
    Ziopharm’s TCR program is focusing on neoantigens that play a role in oncogenesis. The Company hasn’t revealed the malignancies that it considers prime targets, but the Sleeping Beauty technology will play a role in creating the
    therapies. The ultimate goal of this program is to prepare personalized medicines against neoantigens for a patient during a short hospital stay.

    FOUNDATIONAL RESEARCH

    Ziopharm and MD Anderson are conducting research that we believe will aid in developing effective immunotherapies in the future. The latest two studies published are reviewed briefly below:
    •Profiling cell motility for better therapies: An automated system using timelapse imaging microscopy was used to assess T and NK cells’ conjugation with and killing of tumor cells. The results found that cytotoxicity is directly related to their motility.6,7 This system may be useful for research purposes and performing quality control evaluations of commercial products.
    5 Schumacher, TN and Schreiber, RD. Neoantigens in cancer immunotherapy. Science (2015); 348(6230): 69.
    6 Liadi, I, et al. Individual motile CD4(+) T cells can participate in efficient multikilling through conjugation to multiple tumor cells. Cancer
    Immunol Res (2015); 3(5): 473.

    •Expanding hematopoietic stem cells suitability: Dr. Cooper’s MD Anderson team has created an enzyme that selectively removes one gene for human leukocyte antigens (i.e., HLA-A) from hematopoietic stem cells, thus rendering the cells suitable for a broader range of patients, notably minorities that are not represented in the current bone marrow transplant pool.8 By removing only one of the three human leukocyte antigens, the genetically engineered cells are protected against NK cells, which target cells completely lacking these proteins of the major histocompatibility complex. As a result, this technology is also applicable to the creation of universal cells for off the- shelf immunotherapies.

    FINANCIAL REVIEW & VALUATION ANALYSIS
    The Company closed 2015 generally in line with our estimates, and so, we’ve made modest changes to our 2016 figures to take into account the new personnel being hired this year. Our long-range projections have had only minor adjustments – they are still based on the IL-12 therapy for brain cancer; CAR T cells for non-Hodgkin’s lymphoma, acute myeloid leukemia, and multiple myeloma; and IL-12 for breast cancer, as discussed in detail in our December
    8, 2015 report.

    VALUATION ANALYSIS We used a discounted future value method to establish our price target. Specifically, we applied a price-earnings multiple of 38 to the projected share earnings of $1.69 in 2021 to arrive at a future valuation of $64.22. That figure was discounted back four years at an annual rate of 32%, resulting in a price of $21.15 per share. Accordingly, we are maintaining our price target at $21.

  • rob_cos rob_cos Mar 7, 2016 3:35 PM Flag

    Some definitions

    Basic:

    What are 'Contingent Value Rights - CVR'

    Contingent value rights (CVR) are a type of rights given to shareholders of an acquired company (or a company facing major restructuring) that ensures they receive additional benefit if a specified event occurs. A contingent value right is similar to an option because it often has an expiration date that relates to the time the contingent event must occur.
    What Are the Contingent Value Rights in a Stock?
    by Vicki A. Benge, Demand Media

    The value of contingent value rights may depend on the future performance of a particular stock, and may work similarly to put options, where the investor holds contractual rights, but is not required, to sell specific securities at a certain price within a set time. Just as the New York Stock Exchange Listed Company Manual calls contingent value rights "unsecured obligations," shareholders have no guarantee that the reward offered will materialize when based on a particular stock price. In addition, contingent value rights expire. If the specified set of events does not take place within the allotted time, the shareholders with the CVR in the stock receive nothing extra.
    Price-Based CVR
    Suppose the XYZ Corporation acquires the International Gadget Company, and the price of Gadget Co.'s stock is $10 per share at the time of acquisition. The buyer of the company, which is the XYZ Corp., issues the contingent value rights in the stock to the shareholders of the acquired company, who are the sellers of the Gadget Co. The rights specify that should the share price of the stock fall below $8 within the coming 12 months, the company will award a specified cash payment to the shareholders of the Gadget stock. If this event does not occur within the allotted time frame, the contingent value rights expire.
    Option to Buy
    Another way contingent value rights work is for the shareholders of the acquired company to have an option to obtain additional stock shares in the company if a predetermined price target is not met during the set time of the CVR. Since stock prices cannot be predicted for certain, the price target may be met, and the CVR becomes meaningless to the investors.
    Risk Transfer
    In reality, at the time of issue, the actual values of CVRs are uncertain. Based solely on future expectations of stock prices or some other unpredictable event, the risk to the investor is unknown. When contingent value rights become part of mergers and acquisitions, essentially much of the risk to the acquirer is transferred to the shareholders of the target company, while allowing the buyer to put forth a more attractive offer.

    Here is a more complex explanation in a good PDF: see IV ZIOP board as link wont post here.

  • Don't be so sure...ZIOP is for sale - Kirk has a lot to do with Intrexon...I believe he now has a guy in Dr Cooper (I hear he is saying hiring Cooper was the single best thing he has ever done in his business career) he would trust to watch over his interests with a larger company like GILD or Roche or AZN or BMY or GSK - a company that likely would get at least DOUBLE the number of approved drugs to market than ZIOP on its own. It appears that ZIOP has the lead in Off the Shelf NK cells, TCR, neoantigens in solid tumors - over KITE, JUNO, BLUE...but those firms have billions of dollars behind them with CELG, AMGN and others behind them....ZIOP needs that heft - a world class organization like GILD with $12 to $15 billion in annual cash flow on top of the $25 billion in cash and receivables on its books now - how many MORE Phase 3 trials could they run. Kirk simply cannot continue to spend half his time on ZIOP deals and ZIOP trials and meetings....he has too much to do to make XON the largest company in the world....also the $400 million he would get personally in a ZIOP takeover - it could fund XON without an additional secondary if he wants and plop $50 million into SYN, FCSC, HALO etc - game over for the shorts in all those companies.

    More importantly - with Roche's Genentech arm or GILD or BMY - kirk's ZIOP and Cooper and MD Anderson would cure more cancers than ZIOP with one off deals with each. Also read - I mean really read - the comments made last yr about selling ZIOP - the dividend clearly was done to make it ready for a sale (likely in a yr or so).....there simply is no other reason to take 17 million shares out of XON making it worth less - unless you were serious about selling it in a yr. Tax efficient and legally simplier. He put it in writing and said it over and over. Take him at his word. He will not give it away - and the rightly structured CVR protects the billions in upside. Never say never - Kirk was clear - with the right partner and right deal (that will include a CVR to participate in the upside) - there is no doubt in my mind Kirk would sell ZIOP. The largest institutions I talk to who talk to Kirk regularly agree with me. Now its up to which potential acquirer meets Kirk's demands...with likely multiple interested parties after the Cooper disclosures at BIO on NK cells and the recent articles in JCO and Nature and Nature Medicine and the very recent new abstacts and Cooper comments about the quality of the glioma data he has seen and we are aboutt to - I suspect someone will step up to meet his requirements. Also if Hillary wins Kudlow on CNBC says LT Cap Gains could go to 30%....another reason to sell this yr now that its a LT cap gain before rates go up and participate in the upside via CVR.

    Also a CVR can increase the shorts pain on announcement of a sale of ZIOP - why - because right when the stock doubles or more causing short covering....there will be little stock for sale because sharholders need to hold until the closing in July say to get the CVR....so in general the CVR will cause the price on announcement to be higher than the cash or share value because you may have a future payment - but also because unlike a cash deal where a shareholder may sell on announcement instead of holding for 4 months until closing to get the last 5% or so if stock is trading under close value, more shareholders will hold until close to get the CVR. Think no stock available to sale just when shorts need the shares the most. Also if the shorts don't cover before the close (which the CVR makes more expensive and difficult) then they would be responsible for all CVR payments down the road (similar to how shorts have to pay divindend for stocks they may be short with a dividend).

    _____________________________________________________________________________________

    For those who need a little primer on CVRs - a CVR is a "Contingent Value Right" given to those who hold the shares until the closing of the deal lets say in the Summer. You get a certificate and the certificate gives you the right to a certain payment for each share you own into the closing based upon upside items from the ZIOP portfolio down the road. Some CVR's like the one CELG gave to the owners of Abraxis when they bought company actually trade on the markets daily - - that one included a milestone paid of around $6.933 per share in 2013 based on approval in pancreatic cancer....there are also future payments based on 2.5% of Abraxane sales exceeding $1 billion but less than $2 billion and 5% over $3 billion and 10% over 3 billion. It is actually a tradable security under CELGZ....which of course went down in value after the big payment but is still worth something. Not all CVRs trade, like the one Kirk got us for CLDA based on sales only. Expect Kirk's next CVR to be much more complex and heavier if he sells ZIOP to protect the upside...for instance we could hypothetically see....

    50 cents per ZIOP share sold at close for each IND accepted and Ph 1 trial started for the next 10 yrs.
    $1.50 for each drug approved initially
    $1 for each additional indication drug is approved in (Supplemental NDA approval)
    2.5% for any ZIOP related drug sales between $1 billion and $2 billion annually for the next 15 yrs
    5% for sale above $2 billion up to $3 billion per yr
    10% above $3 billion

    These are only examples - you basically can negotiate anything you want in a CVR as long as both parties agree. Obviously a strong CVR like the above is much more likely if the cash payment is low like say $20.....If the company was sold for $30 or more - then the CVR would be less per milestone or could be negotiated away completely. its just a vehicle to be able to sell the core company for a good value now but participate in the upside while allowing a much larger company with much greater resources to take more drugs into trials and to approval while taking less risk but allowing selling company to participate in the upside should it come.

  • rob_cos rob_cos Mar 6, 2016 6:28 PM Flag

    Sorry have not done recent due diligence on GALE ....I like ZIOP more though

  • This week’s FULL Med Tech Stock Letter ZIOP comments- How ZIOP is Differentiating Immuno-Oncology-Nature article on Stem Cell editing & IL-12 Dose Escalation in GBM...large partnership soon?.... BUY under $12. Target price $18

    ZIOP - Nature Publication Shows Breadth of ZIOP’s Gene Editing of Stem Cells & IL-12 Dose Escalates in GBM

    The publication of a study in Scientific Reports, a journal of the Nature Publishing Group, describes the genetic editing of human leukocyte antigen (HLA) in hematopoietic stem cells as a means of broadening the human application of these and other cell therapies. The article, titled “Genetic editing of HLA expression in hematopoietic stem cells to broaden their human application”, is available online a (see IV ZIOP BOARD FOR LINK) Publication in a peer-reviewed journal is an important Company development as it validates and provides proof to Wall Street that your technology is real. The ability to specifically edit genes in stem cells is just the start for ZIOP as with their partners XON and MD Anderson, they have access to multiple technologies to advance the findings of these studies and create universal off-the-shelf cancer drugs across the spectrum of their T-cell and natural killer (NK)-cell therapy platforms.
    Laurence Cooper, M.D., Ph.D., Chief Executive Officer of ZIOP and senior author of the journal article, noted: “Genetic editing of HLA expression is a step towards generating universal biological products, where one donor’s cells may become suitable for sustained engraftment in multiple unrelated recipients. Unlocking the method by which HLA repertoire can be modified is one key to achieving this goal and fully harnessing the potential for off-the-shelf (OTS) therapies in immuno-oncology applications.” Transplantation of allogeneic, or donor-derived, hematopoietic stem cells (HSCs) into recipients with hematologic disorders is used to restore bone marrow function, termed hematopoiesis. Finding a suitable donor can be challenging due to the need to match the constellation of HLA with the recipient.
    For the study, researchers at The University of Texas MD Anderson Cancer Center eliminated expression of one set of HLA molecules, termed HLA-A, on donor HSC using artificial zinc finger nucleases. Other HLA molecules, such as HLA B and C remained expressed to help prevent elimination by resident NK cells. Following genetic editing, the HSCs maintained their ability to engraft and reconstitute hematopoiesis. This paper reveals that genetically altered HSC harvested from a small pool of donors will then match with a large number of unrelated recipients, which has two implications. First, it broadens the number of recipients who might benefit from bone marrow transplantation, which has particular appeal for racial minorities underserved by the current genetic makeup of unrelated donors. Second, it paves the way for generating OTS cells that are HLA matched with multiple recipients, even though they were obtained from one donor.
    Researchers chose to employ a zinc finger nuclease (ZFN) since these proteins have been validated as safe and efficacious in an early-phase clinical trial infusing T cells genetically edited to prevent CCR5 expression as investigational treatment of patients with HIV.
    Furthermore, the group had undertaken a preliminary study demonstrating that embryonic stem cells can be genetically edited with ZFN to eliminate HLA-A expression. This is a strong validation of SGMO’s ZFN gene editing technology as Dr. Cooper choose it specifically over many others.
    Baxalta Deal Continues Validation of Gene Editing
    Two days after the Nature publication, Baxalta and Precision BioSciences signed a broad gene editing collaboration, with the closely held company receiving $105 million upfront to collaborate on six CAR-T projects and as much as $1.6 billion more in option fees and milestones. Precision BioSciences’ proprietary ARCUS genome editing technology enables the production of CAR T cells derived from healthy donors rather than relying on the patient. This approach aims to overcome the manufacturing-related limitations with existing CAR T therapies and enable a broader range of malignancies to be targeted. Taken together, theZIOP article and the BXLT/Precision deal provide further evidence of the attraction of gene editing and its broad application to various diseases.
    IL-12 Dose Increased, Data at ASCO
    ZIOP also announced last week that following the successful completion of the initial dose cohort, the first patient has been dosed at the succeeding dose level in the Company’s ongoing multicenter Phase 1 study of Ad-RTS-hIL-12 + orally administered veledimex in recurrent or progressive glioblastoma or grade III malignant glioma (GBM). Ad-RTS-hIL-12 + veledimex is a novel viral gene therapy candidate for the controlled expression of IL-12, a critical protein for stimulating an anti-cancer T-cell immune response.
    The primary objective of the study is to determine the safety and tolerability of a single intra-tumoral Ad-RTS-hIL-12 injection activated upon dosing with oral veledimex. Secondary objectives are to determine the Ad-RTS-hIL-12 + veledimex maximum tolerated dose, the immune responses elicited by Ad-RTS-hIL-12 + veledimex, and assessment of biologic response. The Company anticipates reporting updated results from the study at the ASCO Annual Meeting in June, and preclinical results combining Ad-RTS-hIL-12 + veledimex and checkpoint inhibitors at the American Society of Gene and Cell Therapy Annual Meeting in May. Increasing the dose implies that there is activity and acceptable safety in the patients with advanced brain cancer.
    ZIOP Differentiating Itself From Other CAR Ts
    ZIOP continues to execute well in the clinic as witnessed by the recent dose escalation in the IL-12 GBM program. Upcoming data from this program at ASCO has the potential to serve as a significant catalyst. We would not be surprised to see a large partnership soon as the recent publication regarding ZIOP’s unique ability to specifically edit genes to create broader application of cancer drugs will only attract more attention to their unsurpassed suite of skills and technologies. The BXLT/Precision deal is a good example. In our view, universal OTS gene based cancer drugs have the potential to be the next class of billion dollar drugs and ZIOP is the leader.
    ZIOP is a BUY under 12 with a TARGET PRICE of 18

    Sentiment: Strong Buy

  • rob_cos rob_cos Mar 3, 2016 12:24 PM Flag

    Markets

    According to the United States Renal Data System, there were 661,648 patients with end-stage renal

    disease (ESRD) in the U.S. in 2013. Of those patients, 468,386 were on some form of dialysis, with

    most on hemodialysis. With hemodialysis treatment costing an average of $89,000 per patient

    annually in the U.S., the total cost of hemodialysis treatment in the U.S. is around $42 billion

    annually, with $34 billion of that amount accounted for through Medicare. A major problem with

    catheters is infection and thrombosis, with infection occurring in up to 54% of catheters and with up

    to 67% of infected catheters needing to be removed in hemodialysis patients. Studies have shown

    that the cost of placing a tunneled cuff catheter (TCC) is $13,000, and the cost of treating one TCCrelated

    episode of bacteremia can be as high as $45,000 but is typically around $25,000–$30,000.

    Clearly, this is a huge cost to the U.S. healthcare system and payers. There is an unmet medical need

    for an effective catheter lock solution that is not an antibiotic, as long-term use of antibiotics can

    result in antibiotic resistance. We think Neutrolin could be widely adopted as a prophylactic, as it has

    shown efficacy in clinical studies to date while reducing overall healthcare costs.

    CorMedix also plans to study Neutrolin in the oncology and total parenteral nutrition patient

    populations. According to the American Cancer Society (ACS), nearly 14.5 million people with a

    history of cancer were alive in the U.S. on January 1, 2014. Further, the ACS estimates that in 2016,

    there will be approximately 1.7 million new cases of cancer diagnosed in the U.S. Many of these

    patients require catheters for administration of chemotherapy drugs, to get more than one drug at a

    time, or to receive drugs that can cause damage to skin and muscle tissue if leaked, among other

    reasons. Approximately 40,000 people in the U.S. receive TPN at home. TPN is used both as shortterm

    and long-term therapy.

    In assessing the market for Neutrolin, it is useful to assess the number of days a patient has a central

    venous catheter in place. With about 468,000 patients on dialysis and most initiating with a catheter,

    the number of catheter days is quite large. A study published in the American Journal of Kidney

    Disease found that almost 80% of patients initiated dialysis with a catheter, with about 70% having a

    catheter at 90 days and almost 50% of those patients who initiated with only a catheter still only

    having a catheter at one year. We estimate that in the U.S. there could be up to about 85 million

    hemodialysis catheter days annually. In the ICU setting, research indicates that in the U.S. there are

    approximately 15 million CVC days annually. Reliable estimates for the number of catheter days in

    oncology and TPN are hard to come by. If about 10% of cancer patients receive intravenous

    chemotherapy, the number of oncology catheter days could be about 85 million annually. TPN

    patients could add approximately 4 million catheter days annually. CorMedix estimates that

    hemodialysis patients could use 0.44 vials of Neutrolin per day, oncology/TPN patients could use one

    vial of Neutrolin per day and two flushes, and ICU patients could use two vials of Neutrolin per day

    and five flushes.

    There are other catheter lock solutions on the market currently, including taurolidine citrate

    solutions and heparin solutions. There is a taurolidine citrate product with heparin or urokinase on

    the market in Europe called TauroLock, manufactured by TauroPharm of Germany. TauroLock comes

    in several formulations, including TauroLock, TauroLock-Hep 100, TauroLock-Hep 500, and

    TauroLock-U25.000. The TauroLock products are not approved for use in the U.S. DuraLock-C is

    another catheter lock solution; it has a CE Mark and is available in Europe. Manufactured by Medical

    Components (MedComp), DuraLock-C is composed of trisodium citrate, is an antimicrobial and antithrombosis

    solution, and is available in three concentrations. It is not approved for use in the U.S.

    IntraLock is another catheter lock solution available in Europe with a CE Mark; it is manufactured by

    Fresenius Medical Care, which operates dialysis centers across the world. IntraLock is a citrate 4%

    solution indicated for patients with CVCs and is an anti-thrombosis solution. According to the January

    2012 issue of Applied Microbiology and Biotechnology, the heparin market is estimated to be about

    $3 billion to $4 billion annually.

    Legal Action against TauroPharm

    CorMedix is currently involved in patent infringement litigation in Germany with TauroPharm GmbH

    and Tauro-Implant GmbH (TauroPharm), the manufacturer of TauroLock-Hep100 and TauroLock-

    Hep500 products. CorMedix alleges that TauroPharm is infringing on its European Patent 1 814 562

    B1, which was granted by the European Patent Office (EPO) on January 8, 2014, by manufacturing

    and distributing the aforementioned products. CorMedix also claims that TauroPharm is infringing

    upon NDP’s utility model DE 20 2005 022 124 U1. CorMedix licensed these patents from NDP.

    The District Court of Mannheim in Germany stayed both proceedings on May 8, 2015, finding that

    the manufacture and distribution of the TauroPharm products infringe on both patents. However,

    the district court did not issue an injunction, as it found there is a sufficient likelihood that the EPO or

    German Patent and Trademark Office (PTO) could find the patents invalid. We could see a ruling

    from the German PTO early this year. Oral proceedings related to EP 1,814,562 B1 were held on

    November 25, 2015. CorMedix expects the District Court of Cologne to issue an interim order in

    1Q16 that will provide an overview of the proceedings and the process going forward. CorMedix also

    expects that its claims that TauroPharm is in violation of the German Unfair Competition Act will not

    be ruled upon before 1H16.

    (Note: The author of this report is not acting in the capacity of an attorney, and the information

    contained herein is not intended to constitute legal advice. You should consult with your legal

    adviser as to any issues of law relating to the subject matter of this report.)

    License Agreement with NDP

    CorMedix acquired exclusive, worldwide rights to antimicrobial catheter lock solutions and other

    intellectual property from NDP in 2008. NDP originally licensed these technologies from Dr. Hans-

    Dietrich Polaschegg, Dr. Klaus Sodermann, and Dr. Johannes Reinmueller. CorMedix paid NDP

    $325,000 up-front and gave NDP a 5% equity stake in the company. CorMedix also agreed to make

    certain milestone payments to NDP based on regulatory approvals and sales, with the payments in

    the form of cash or stock depending on the milestone. In aggregate, the cash payments could total

    $3.0 million ($0.5 million has already been paid), and the stock awards could total 145,543 shares

    (36,386 shares have already been released).

    Financials

    Since inception, CorMedix has mainly funded its operations through the issuance of equity and debt.

    Although Neutrolin is sold in Europe, CorMedix has not generated sufficient revenue from sales to be

    profitable. The company has incurred losses from inception and expects to continue to incur losses

    as it develops Neutrolin for use in the U.S. and furthers commercialization in Europe. As of

    September 30, 2015, CorMedix had an accumulated deficit of $90.5 million.

    Prior to its initial public offering, CorMedix sold $14.4 million in convertible notes through private

    placements, which converted into 5,904,431 shares of common stock and 2,338,569 warrants to

    purchase common stock upon the IPO. In March 2010, CorMedix sold 1,925,000 units in an IPO,

    which consisted of two shares of CRMD common stock and a warrant to purchase one share of

    CRMD common stock, for $6.50 per unit, netting $10.5 million.

    In 2012, CorMedix issued 1,324 units (a one-year $1,000 principal 9% senior convertible note,

    convertible into shares of common stock at a conversion price of $0.35 per note, and a five-year

    redeemable warrant to purchase 3,310,000 shares of common stock at an initial exercise price of

    $0.40 per share) for net proceeds of $1.1 million through two private placement transactions. In

    February 2013, the company sold 761,429 shares of Series A nonvoting convertible preferred stock

    and a warrant to purchase up to 400,000 shares of common stock for gross proceeds of $0.5 million.

    Then, in May 2013, CorMedix sold $1.5 million of convertible notes and warrants to purchase up to

    750,000 shares of common stock. In October 2013, the company raised $3.0 million by issuing

    150,000 shares each of Series C-1 and C-2 nonvoting convertible preferred stock and 1,500,000

    warrants to purchase common stock. The Series A and C-1 preferred stock has since converted into

    shares of common stock.

    CorMedix raised net proceeds of $1.3 million in addition to the settlement of accounts payable and

    accrued expenses of $0.6 million through the issuance of 200,000 shares of Series C-3 nonvoting

    convertible preferred stock and warrants to purchase up to 1,000,000 shares of common stock.

    Later, in March 2014, the company raised net proceeds of approximately $6.7 million by selling

    2,960,000 shares of common stock and warrants to purchase up to 1,036,000 shares of common

    stock.

    In 2015 (as of September 30), CorMedix issued 4,723,191 shares of common stock through its at-themarket

    (ATM) program at a weighted average price of $6.00 per share. The ATM program, initiated

    in April 2015, allows the company from time to time to sell an aggregate of $40.0 million worth of

    common stock. CorMedix has approximately $12 million remaining on the ATM program. Together

    with the exercise of 4,581,783 warrants and 499,955 options, the company raised net proceeds of

    approximately $42.4 million in the nine months ended September 30, 2015.

    The company has a significant amount of warrants and options outstanding, which could cause

    dilution to current shareholders. As of September 30, 2015, CorMedix had options outstanding

    representing 3,151,712 shares of common stock and warrants outstanding representing 4,422,188

    shares of common stock.

    As of September 30, 2015, CorMedix had cash, cash equivalent, and short-term investments of $37.9

    million on the balance sheet. For FY14, R&D and G&A expenses were $1.3 million and $7.3 million,

    respectively, and we estimate FY15 R&D and G&A expenses of $7.6 million and $12.6 million,

    respectively. In FY14, CorMedix generated revenue of $0.2 million, and we forecast that it will

    generate the same amount for FY15. In FY16, we estimate that the company will generate $0.2

    million in sales. We forecast FY15 operating cash burn to be $13.0 million and FY16 operating cash

    burn to be $22.3 million. We think it is likely that CorMedix will continue to utilize the ATM product

    to raise cash as needed.

    Valuation

    We base our $7 price target on the NPV of our probability-adjusted sales forecasts for CorMedix’s

    Neutrolin product candidate for the prevention of CRBSIs in the hemodialysis, oncology/TPN, and

    ICU patient populations. Our price target includes a net cash value per share of $0.90. We also assign

    a value of $0.24 per share to CorMedix’s early-stage pipeline, including its CRMD004 product

    candidate. We forecast a 50% chance of approval for Neutrolin in the hemodialysis setting and a 20%

    chance of approval in the oncology/TPN and ICU settings.

    We forecast that Neutrolin will reach the market in 2018 for the hemodialysis indication. Our firstyear

    Neutrolin U.S. sales estimate in 2018 is $4.5 million, and we project sales in 2025 to grow to

    $1.6 billion after the projected approval in the oncology/TPN and ICU settings in 2019. We assign no

    value to the company’s sales in Europe. These revenue forecasts are the basis of the present value of

    our probability-adjusted sales forecasts, assuming a 20% discount rate and a price-to-sales multiple

    of 2.0x sales.

    Management1

    Randy Milby, chief executive officer. Mr. Milby was appointed chief executive officer in January

    2013. He joined CorMedix in May 2012 as chief operating officer. Previously, Mr. Milby was

    cofounder and a managing director of WaterStone Bridge, LLC, a healthcare consulting services firm.

    During his 11-year tenure at DuPont Company, he held several management positions, the most

    recent as global business director, Applied Biosciences. From 1998 through 1999, Mr. Milby was also

    a healthcare analyst at Goldman Sachs & Company. He received his pharmacy degree at the

    University of Kansas and his M.B.A. from Washington University, St. Louis.

    1 Source: Company reports

    Antony E. Pfaffle, M.D., chief scientific officer and cofounder. Mr. Pfaffle, M.D. has been a director

    of CorMedix since February 2007 and was appointed as interim chief scientific officer effective

    January 1, 2013, and chief scientific officer in July 2014. Dr. Pfaffle has been director of healthcare

    research at Bearing Circle Capital, L.P., an investment fund, since May 2007. He is an advisory

    medical director for ParagonRx, an Inventiv company specializing in drug and device risk evaluation

    and mitigation. He was a managing director at Paramount BioCapital, Inc. and senior vice president

    of business development at Paramount BioSciences, LLC from December 2005 to May 2007. Dr.

    Pfaffle was a principal and founder of Black Diamond Research, an investment research company,

    from July 2001 to December 2005. He is an internist who practiced nephrology at New York Hospital-

    Weill Cornell Medical Center, Lenox Hill Hospital, and Memorial Sloan-Kettering Cancer Center. Dr.

    Pfaffle received his M.D. from New York Medical College.

    James Altland, chief financial officer. Prior to his appointment at CorMedix, Mr. Altland served from

    February 2007 to May 2014 as senior vice president of finance and corporate development of

    Onconova Therapeutics, Inc., a pharmaceutical company headquartered in Newtown, Pennsylvania.

    Before joining Onconova, Mr. Altland was a partner with Tatum, a leading professional and interim

    services firm headquartered in New York, New York. Mr. Altland received his B.S. in accounting in

    1971 from the University of Akron.

    John Ortiz, vice president, regulatory affairs and quality assurance. Mr. Ortiz, who joined CorMedix

    in January 2015, has held executive positions in quality assurance/quality control and regulatory

    affairs at Johnson & Johnson’s domestic and international operations, Janssen Pharmaceutical, and

    Correvio LLC. In these roles, Mr. Ortiz oversaw the design of operations and quality control facilities,

    acquisition of innovative testing technologies, and quality management systems for pharmaceutical

    drugs and medical devices compliant with regulatory statutes and guidelines set by the U.S. Food

    and Drug Administration and EU Pharmaceutical Commission, as well as international operations in

    regions including the Asia-Pacific and Latin America. He has also directed interdisciplinary teams and

    functions related to the development of pharmaceutical products in diverse delivery systems, as well

    as the clinical and post-approval manufacturing and commercial distribution phases. Mr. Ortiz has

    more than 30 years of experience in the pharmaceutical industry.

    John L. (Jack) Armstrong, executive vice president, technical operations. Mr. Armstrong has more

    than 40 years of experience in the pharmaceutical industry with broad cross-functional experience in

    all facets of supply chain and quality assurance, and he has held a number of general management

    positions. Most recently, he was president of Correvio, a private company supplying products to

    more than 60 countries. Previously, Mr. Armstrong was president and chief executive officer of

    Genaera Corporation, senior vice president of Urocor Corporation, chief executive officer of Mills

    Biopharma, president of Endo (subsidiary of DuPont Merck), president of worldwide manufacturing

    for DuPont Merck, and vice president operation for Marion/Marion Merrill Dow. He has also held

    roles in manufacturing, quality assurance, and integrated business systems development.

    Sentiment: Strong Buy

  • ull FBR CRMD Initiation report "Neutrolin Is a Lock for Investors, in Our Opinion, CorMedix Coverage Initiated at an Outperform with initial target $7.00"

    2016 FBR & Co. Institutional Brokerage, Research, and Investment Banking


    Ed White

    Drew Levine, CFA

    Healthcare: Biotech

    CorMedix Inc. (CRMD – $1.76*) Coverage Initiated

    Bedminster, NJ

    Outperform
    March 3, 2016 Price Target: $7.00

    STOCK DATA

    Neutrolin Is a Lock for Investors, in Our Opinion

    Summary and Recommendation

    We are initiating coverage of CorMedix Inc. (CRMD) with an Outperform rating and

    a 12-month price target of $7 per share. The company’s lead product, Neutrolin, is

    approved for marketing in several European and Middle Eastern countries and is in

    Phase III development in the U.S. for the prevention of catheter-related bloodstream

    infections (CRBSIs). Neutrolin is a catheter lock solution that aims to prevent the

    triple threat of infection, thrombosis, and biofilm formation. There are currently no

    FDA-approved products for the prevention of CRBSIs in the patient populations that

    CorMedix is targeting, and the current standard of care, a heparin lock, is inadequate

    for the prevention of infection. We think that there is a large addressable market

    with an unmet medical need for Neutrolin, as more than half of catheters become

    infected, and treatment of a single case of TCC-related bacteremia costs between

    $25,000 and $30,000. In that vein, the FDA has designated Neutrolin a Qualified

    Infectious Disease Product (QIDP), which allows for priority review and frequent

    contact with the FDA.

    Key Points

    ■ Neutrolin is an antimicrobial, not an antibiotic. Taurolidine, an ingredient in

    Neutrolin, is an amino acid derivative with antimicrobial properties against

    a broad range of bacteria. To date, there has been no observed microbial

    resistance to taurolidine, unlike antibiotics used to treat or prevent CRBSIs.

    Widespread use of antibiotics could lead to antibiotic resistance and further

    infection, perpetuating a destructive cycle. In addition to its antimicrobial

    properties, Neutrolin also acts as an anticoagulant and prevents biofilm

    formation, something that no other products used as locks, such as heparin, can

    claim. We think clinical data with Neutrolin thus far has been compelling in its

    efficacy in preventing infection and thrombosis.

    ■ Pharmacoeconomic benefit likely to play an important role. In the

    hemodialysis setting, CMS sets a bundle price for all products and services

    administered for a patient. The question for Neutrolin will be around

    reimbursement of the product, as it will likely be more expensive than what

    providers currently use in this patient population. CorMedix is conducting a

    pharmacoeconomic benefit study concurrently with its Phase III LOCK-IT trial

    to assess whether Neutrolin could reduce infection and hospital stays. As

    mentioned above, a single case of TCC-related bacteremia could cost between

    $25,000 and $30,000. We think that providers will want to use Neutrolin and

    that payers, in particular CMS, will want the providers to use Neutrolin.

    ■ Undervalued stock with takeout potential. We believe CRMD stock is

    significantly undervalued compared to its current market cap. We see several

    overhangs on the stock—including the ongoing litigation against TauroPharm,

    reimbursement, and the failed sale process in 2015—that, once removed, could

    allow investors to reap returns. We think many investors fled after CorMedix

    began its Phase III LOCK-IT trial, as they had hoped for a sale of the company

    before conducting a costly trial. We view the current situation as providing an

    attractive entry point for investors, as we believe that the Phase III trial will be

    successful and that CorMedix will be acquired for a significant multiple from

    where the shares are currently trading.

    The DebateTM

    Debatable Point Our Thoughts Time Frame Impact

    Will the Phase III

    LOCK-IT trial be

    successful?

    A post-label expansion study of Neutrolin consisting of 35,285

    hemodialysis catheter days over a 15-month period showed

    infection and thrombosis rates of 0.127 and 0.095 per 1,000

    catheter days, compared with infection and thrombosis rates of

    3.5 and 2.5 per 1,000 catheter days observed in literature. This

    approximately 96% reduction in infection and thrombosis events is

    significant, in our opinion. CorMedix has indicated that the FDA

    will only require the company to show a 40% decrease in rate of

    infection to hit the primary endpoint of the study. The FDA has

    never approved a catheter lock solution to prevent CRBSIs, so

    there is a risk that the drug could not be approved, but we think

    requiring a 40% reduction gives CorMedix a wide berth for success

    in the trial. Furthermore, the FDA has encouraged the

    development of antimicrobial drugs and designated Neutrolin as a

    QIDP, which allows for priority review and frequent contact with

    the agency.

    12 to 18

    Months

    Will CorMedix be

    acquired?

    CorMedix engaged an investment bank to explore strategic

    opportunities for the company in early 2015. In July 2015, the

    company announced that it would conduct the Phase III LOCK-IT

    trial on its own, as nothing materialized from its engagement with

    the investment bank. While CorMedix did not sell itself prior to the

    LOCK-IT trial, we still think it is likely that the company could look

    to be acquired in the future, pending positive clinical results.

    2 Years+

    Investment Thesis

    We are initiating coverage of CorMedix Inc. with an Outperform rating based on our outlook for its

    Neutrolin product candidate in the U.S. We believe that Neutrolin could be efficacious in preventing

    the triple threat of infection, thrombosis, and biofilm formation in catheters used in the hemodialysis,

    oncology/TPN, and ICU/CCU patient populations. We believe that Neutrolin could both improve

    patient outcomes and provide a pharmacoeconomic benefit for the healthcare system.

    Valuation

    Our $7 price target represents a risk-adjusted value for the company's Neutrolin product candidate

    in the U.S. for the prevention of CRBSIs in the hemodialysis, oncology/TPN, and ICU/CCU patient

    populations. We also include $0.90 per share in net cash and $0.24 per share for the company's

    early-stage pipeline. We base our NPV on our probability-adjusted sales forecasts, assuming a 20%

    discount rate and a 2.0x price-to-sales multiple.

    Catalysts/Milestones

    ■ Interim analysis of Phase III LOCK-IT trial in mid 2016.

    ■ Initiation of Phase III LOCK-IT-200 trial in oncology/TPN in late 2016.

    ■ Expected completion of enrollment in Phase III LOCK-IT-100 trial in late 2016.

    Initiating Coverage with an Outperform Rating and $7 Price Target

    Summary of Our Call

    We are initiating coverage of CorMedix Inc. with an Outperform rating and a $7 price target, which is

    based on the NPV of our probability-adjusted global sales forecasts for the company’s Neutrolin and

    other early-stage candidates. Neutrolin is being developed to address catheter-related blood stream

    infections (CRBSIs). It is a novel formulation of taurolidine 1.35%, citrate 3.5%, and heparin 1,000

    u/mL that should enable catheters to operate safely and efficiently. The combination of these

    preventative solutions aims to decrease the threat of infection, thrombosis, and biofilm formation.

    CorMedix is currently conducting a Phase III trial for Neutrolin. In January 2015, the FDA granted the

    company Fast Track designation for Neutrolin for the prevention of CRBSI, and it designated

    Neutrolin as a Qualified Infectious Disease Product (QIDP) for CRBSIs in hemodialysis patients. The

    QIDP and Fast Track designations allow for priority review and frequent contact with the FDA

    regarding clinical trials. The QIDP designation could also allow for an additional five years of

    marketing exclusivity if approved in the U.S.

    In Phase II studies, Neutrolin reduced infection rates by 70%–100% in comparison to placebo. It was

    shown to decrease catheter failures and prolong catheter life, resulting in fewer infections,

    decreased hospital lengths of stay, and a reduced need for antibiotics. Neutrolin is registered and

    can be sold in several European countries and Saudi Arabia. A post-approval surveillance study was

    conducted at 12 dialysis centers in Germany. That study showed that Neutrolin reduced central

    venous catheter– (CVC) related complications of infection and thrombosis in hemodialysis patients.

    Patients reported no significant adverse drug reactions. Infection and thrombosis rates of 0.127 and

    0.095 per 1,000 catheter days were observed, which compared well to rates seen in literature.

    The company is currently enrolling individuals in the 632-patient pivotal Phase III LOCK-IT-100 trial.

    This is a multicenter, randomized, double-blind, placebo-controlled study being conducted in the

    U.S. to evaluate the efficacy and safety of Neutrolin in preventing CRBSIs in end-stage renal disease

    (ESRD) patients receiving hemodialysis therapy. The active control arm is heparin. The primary

    endpoint of the study is freedom from occurrence of CRBSIs, with a secondary endpoint of catheter

    patency, which is defined as the removal of the catheter due to dysfunction or any other reason. The

    company plans to conduct an interim analysis after half of the patients are enrolled or six months

    after the first patient is dosed, whichever comes first. The first patient was dosed in December. We

    expect to see data from the trial in 1H17 and think if data are positive, CorMedix could file an NDA

    with the FDA in mid 2017 and receive a decision in late 2017 or early 2018. If approved, we think

    CorMedix could launch Neutrolin in the U.S. in mid 2018. The company also plans to initiate a second

    pivotal Phase III trial in oncology/total parenteral nutrition patients in 2Q16. CorMedix received

    guidance from the FDA regarding the trial design and is in the process of finalizing the details with

    the FDA.

    CorMedix is conducting a pharmacoeconomic benefit study concurrently with its Phase III LOCK-IT

    trial to assess the benefit of Neutrolin compared to costs associated with standard of care. We think

    the results of this study will be important for Neutrolin’s prospects, as reimbursement is one of the

    uncertainties in the story. CMS pays for services and products administered for hemodialysis in a

    bundle, and the extra cost of Neutrolin could eat into providers’ bottom lines if the bundle price is

    not adjusted. Alternatively, it is possible that Neutrolin will be considered to be outside of the

    bundle, in which case reimbursement will not be an issue and providers would actually benefit from

    using the product. We think that the results of the pharmacoeconomic benefit study will be

    favorable to Neutrolin and that both providers and payers will see the benefit of using the product to

    prevent the costs associated with infection and more importantly, in our opinion, to improve patient

    outcomes.

    CorMedix has already begun discussions with CMS regarding reimbursement, and the company is

    cautiously optimistic about its prospects. As ESRD patients are taken care of under Medicare and

    Medicaid, the government would ultimately realize the benefit of the cost savings and could look

    favorably upon making sure Neutrolin is reimbursed as a separate product. There could be more

    © 2016 FBR & Co. Institutional Brokerage, Research, and Investment Banking

    Page 4

    guidance from CMS on reimbursement around July 4, 2016, with the final ruling coming on

    November 1, 2016, for 2017. If CMS does not provide guidance on reimbursement, it is possible that

    CorMedix could look to lobby members of Congress to appeal to CMS to reimburse Neutrolin

    separately, as the government passed the GAIN Act and would like to see more antimicrobial

    products on the market.

    CorMedix acquired the rights to Neutrolin from NDP, a predecessor company, in 2008. Another firm,

    TauroPharm, which is led by former employees of NDP, launched a product line called TauroLock in

    Europe that CorMedix believes infringes on the patents acquired from NDP. CorMedix believes

    TauroPharm is severely underpricing TauroLock and that the launch of TauroLock in Europe has

    significantly hampered CorMedix’s ability to market its Neutrolin product in Europe. We do note

    CorMedix’s lack of revenue from territories in which Neutrolin is approved. Legal action is ongoing,

    but we do not anticipate a resolution before 2019. As such, we assign little to no value to Neutrolin

    in Europe/the rest of the world (ROW). We believe CorMedix should focus on getting the product

    approved and commercialized in the U.S.

    In March 2015, CorMedix engaged investment bank Evercore to seek strategic opportunities for the

    company, including a sale. After the announcement of the engagement, and even a bit before, CRMD

    stock traded up, almost reaching $10 per share in April 2015. However, the excitement for investors

    regarding a potential exit waned, and in July 2015, the company announced that it intended to run

    its Phase III LOCK-IT trial by itself and was not going to be acquired at that time. The stock traded

    down in kind and has declined from the $4 level to the $1–$2 range. We think CorMedix is

    significantly undervalued at this time, as we believe its LOCK-IT trial of Neutrolin in hemodialysis

    patients will be positive, and ultimately, we believe the company will again put itself up for sale and

    be acquired.

    Product Pipeline

    Neutrolin

    Neutrolin is a novel formulation of taurolidine 1.35%, citrate 3.5%, and heparin 1,000 u/mL that

    provides a combination preventative solution to decrease the triple threat of infection, thrombosis,

    and biofilm formation. It has been approved for use in several European countries and is in clinical

    studies in the U.S. Taurolidine, an amino acid derivative with antimicrobial and antilipopolysaccharide

    properties has demonstrated broad antibacterial action against gram-positive

    bacteria, gram-negative bacteria, mycobacteria, and clinically relevant fungi. Heparin is a highly

    sulfated glycosaminoglycan that is widely used as an injectable anticoagulant, especially in several

    experimental and medical devices, which include test tubes and renal dialysis machines. The triple

    combination of Neutrolin aims to keep catheters operating safely and efficiently and to minimize

    infections and biofilm formation in oncology, hemodialysis, and intensive care patients. Central

    venous catheters and peripherally inserted central catheters are regularly used for access to the

    vasculature in hemodialysis, the administration of chemotherapy and basic fluids in cancer patients,

    long-term antibiotic therapy, and the treatment of total parenteral nutrition and critical

    care/intensive care patients.

    Upcoming Milestones

    Source: FBR Research and company reports

    Date Program Milestone

    April 2016 Neutrolin Initiation of pharmacoeconomic studies

    Mid 2016 Neutrolin Interim analysis of Phase III LOCK-IT-100 trial

    Late 2016 Neutrolin Initiation of Phase III LOCK-IT-200 trial in oncology/TPN

    Late 2016 Neutrolin Expected completion of enrollment in Phase III LOCK-IT-100 trial

    1H17 Neutrolin Data from Phase III LOCK-IT-100 trial

    Mid 2017 Neutrolin Potential NDA filing with FDA in hemodialysis patients

    Late 2017/Early 2018 Neutrolin Potential FDA decision on NDA filing

    Mid 2018 Neutrolin Expected launch of Neutrolin in the U.S.


    Phase II studies ranging from 158 to 1,000 CVC patient days demonstrated that Neutrolin reduced

    infection rates by approximately 70%–100% in comparison to placebo. Thus, in addition to

    decreasing the incidence of central line–associated blood stream infections (CLABSIs), Neutrolin

    decreased catheter failures and prolonged catheter life, which reduced the need for reinsertion and

    resulted in fewer infections and in less patient discomfort. Neutrolin also decreased the length of

    hospital stays and the need for local and systemic antibiotics, which are known to increase microbial

    resistance to those very antibiotics. Finally, Neutrolin demonstrated that it prevents inflammatory

    complications, a primary cause of morbidity in end-stage renal disease hemodialysis patients.

    In July 2013, CorMedix received CE Mark approval for Neutrolin and subsequently began the

    product’s commercial launch in Germany. Currently, Neutrolin is registered and can be sold in

    Austria, Germany, Italy, Malta, Saudi Arabia, and the Netherlands. Neutrolin has Class III CE Mark

    approval for use in the European Union and is currently in a Phase III clinical trial program in the U.S.

    The FDA granted CorMedix Fast Track designation for Neutrolin in January 2015 for the prevention of

    CRBSIs. Also in January 2015, the FDA designated Neutrolin as a Qualified Infectious Disease Product

    (QIDP) for CRBSIs in hemodialysis patients. The QIDP designation was born out of the Generating

    Antibiotics Incentives Now Act (GAIN Act), which was designed to encourage the development of

    antimicrobial drugs. The QIDP and Fast Track designations allow for priority review and frequent

    contact with the FDA regarding clinical trials. The QIDP designation could also allow for an additional

    five years of marketing exclusivity if approved.

    Post-Label Expansion Study

    A post-approval surveillance study was conducted to evaluate the use of Neutrolin in reducing

    infection and thrombosis in 200 hemodialysis patients. The study was conducted at 12 dialysis

    centers in Germany over a period of 15 months and included a total of 35,285 hemodialysis catheter

    days. The primary outcome measures of the study included number of catheter-related blood stream

    infections (CRBSIs per 1,000 CVC days) and number of premature CVC removals due to infection

    and/or thrombosis. Secondary outcome measures included biofilm formation in the CVCs. Patients

    were administered Neutrolin two to three times per week and monitored until either the catheter

    failed due to clotting or CRBSIs or the catheter was removed due to fistula maturation.

    Overall, the results supported the use of Neutrolin in reducing CVC-related complications of infection

    and thrombosis in hemodialysis patients. The drug was well tolerated, and the study reported no

    significant adverse reactions that led to the discontinuation of the drug. Two of the patients in the

    study experienced occasional transient dysgeusia, or lack of taste, which was not associated with any

    consequences. Infection and thrombosis rates of 0.127 and 0.095 per 1,000 catheter days were

    observed in the study, compared with rates of 3.5 and 2.5 per 1,000 catheter days observed in

    literature, which are 96% and 96.6% reductions in infection and thrombosis, respectively.

    Phase III LOCK-IT-100 Trial

    A pivotal Phase III multicenter, randomized, double-blind, placebo-controlled study is being

    conducted in the U.S. to evaluate the efficacy and safety of Neutrolin in preventing CRBSIs in endstage

    renal disease patients receiving hemodialysis therapy. On December 14, 2015, the company

    announced that the trial had enrolled and dosed its first patient. The study aims to enroll 632

    patients at 70 clinical sites and will evaluate the superiority of Neutrolin against the active control of

    heparin by documenting the incidence and time until the occurrence of CRBSI. The primary endpoint

    of the study is occurrence of CRBSIs, with a secondary endpoint of catheter patency, which is defined

    as the removal of the catheter due to dysfunction or any other reason. CorMedix has indicated that

    it will need to show at least a 40% reduction in the rate of infection to reach the primary endpoint.

    The company plans to conduct an interim analysis after half of the patients are enrolled or six

    months after the first patient is dosed, whichever comes first. We expect the trial to take about one

    year to enroll. We expect to see data from the trial in 1H17 and think that if data are positive,

    CorMedix could file an NDA with the FDA in mid 2017 and receive a decision in late 2017 or early

    2018. If approved, we think CorMedix could launch Neutrolin in the U.S. in mid 2018.

    The company also plans to initiate a second pivotal Phase III trial in oncology/total parenteral

    nutrition (TPN) patients in late 2016. The LOCK-IT-200 trial could enroll about 560 patients. In the

    oncology/TPN market, the product candidate will likely be a lock solution, as well as a flush solution.

    The lock solution will have a lower level of heparin than for the hemodialysis indication, and the flush

    solution will have no heparin. The company received guidance from the FDA regarding the trial

    design and is in the process of finalizing the details with the FDA.

    CRMD004

    CRMD004 is one of CorMedix’s preclinical assets that is currently being evaluated for several

    applications, including combinations with taurolidine, other antimicrobials, anticoagulants, or

    enzymes for use as a catheter lock. These potential application opportunities include antimicrobialresistant

    and soft tissue infections in immunosuppressed patients, wound closure materials

    especially where polymicrobial resistance is an issue, coating or integration into implanted devices,

    visco-supplementation for osteoarthritis, and composite nanofiber webs such as surgical meshes.

    In February 2016, Dr. Z. Paul Lorenc, FACS, a plastic surgeon on the faculty of Weill-Cornell University

    Medical College, gave a presentation at the 14th Annual South Beach Symposium regarding

    taurolidine’s efficacy against clinically significant microorganisms when incorporated into the matrix

    of a monofilament or multifilament suture. In in vitro tests, Dr. Lorenc observed that sutures

    incorporating taurolidine-loaded fibers resisted growth of bacteria and had the ability to kill common

    pathogens like Pseudomonas aeruginosa, Staphylococcus epidermidis, and Staphylococcus aureus.

    As mentioned previously, taurolidine is not an antibiotic; therefore, in addition to having no

    observed resistance by bacteria, it does not cause antibiotic resistance. There is a need for a nonantibiotic

    antimicrobial in the surgical site suture setting, as there are somewhere between 500,000

    and 750,000 infections related to surgical sites annually in the U.S.

  • 1.4 million shrs first hour vs most TOTAL vol days in the 2.7 million area with vol pickup into close yesterday continuing today. Blew through $8.74 intraday resistance (which is also 200 EMA) up 5% - another higher high/higher low day....




    Date Open High Low Close Volume Adj Close*
    Mar 1, 2016 8.08 8.54 7.90 8.52 4,602,500 8.52
    Feb 29, 2016 7.95 8.25 7.83 7.86 2,809,100 7.86
    Feb 26, 2016 7.79 8.05 7.32 7.84 2,744,800 7.84
    Feb 25, 2016 7.97 8.12 7.54 7.59 2,618,200 7.59

    Sentiment: Strong Buy

  • Citi Research
    24 February 2016 │ 65 pages Biotechnology
    North America │ United States
    Celgene Corporation (CELG)
    Highest growth stock with transformational pipeline that could
    help CELG grow through Revlimid patent cliff. Buy with $130 TP
    ƒÞ Top pick with the best growth & the highest quality pipeline — CELG is our top
    pick among biotech as we highlight 24% EPS growth in 2015-18E vs. pharma at
    12% and S&P at 9%. Also, we see 200% upside potential with the mid-stage
    pipeline, which could start emerging in 2016. If the pipeline works, we see FV of
    CELG at $170/sh by mid-2017. Revlimid patent settlement also removes overhang.
    ƒÞ Revlimid $350M to $750M upside to consensus in 2018-20 timeframe — We
    see duration increase with new combo treatments from current 16 months to 22
    months by 2020. We see $800M upside to $13B guidance for hematology franchise
    while the cons. is at $12.6B. For long term, in 2020E, consensus is still below
    guidance of “ $21B” sales at $19.7B while we see this at $22.5B.
    ƒÞ Our 25 new pipeline models indicate FV of CELG at $317/sh in the blue sky
    scenario — Our deep dive in pipeline indicates transformational value of CELG
    pipeline as we see I&I pipeline at $111/sh ($24/sh in model), Hematology/Oncology
    at $101/sh ($15/sh in model) & other at $18/sh (no value in model). A significant part
    of this is mid-stage pipeline, which will become clearer in next 12-18 months.
    Please ask for our pipeline deep dive model and app. This could provide CELG
    much-needed momentum during the potential biotech recovery phase.
    ƒÞ We like CELG's I&I franchise the most & see $35/sh upside by mid-2017 — Key
    catalysts – GED-301 endoscopy data in early ’17 (up $11/down $11), Ozanimod
    data in MS in 1H’17 (up $6-12/sh/down $6/sh), GED-301 data in UC (up
    $3/sh/limited downside), Otezla data in UC and atopic dermatitis (up $11/sh/no
    downside), CC-220 in Lupus ($4/sh upside/limited downside). We remain cautious
    on Revlimid DLBCL data in mid-16 due to lack of enrichment for ABC subtype pts.
    ƒÞ Valuation — Our $130/sh target price is based on DCF valuation with 9% discount
    rate, in line with peers and 2% terminal growth to account for pipeline.
    2015 was a roller coaster year for CELG just like any other biotech name. While the
    stock performed slightly ahead of peers, the absolute performance was a modest
    5.5% gain. This was worse than biotech indices BTK and NBI. However, the
    company did well to grow revenues and EPS through this period.
    Figure 1. Large-Cap Biotech 2015 performance vs. indices Figure 2. CELG absolute performance
    Source: Citi Research and FactSet Source: Citi Research and FactSet
    Celgene is the highest growth name on EPS in 2015-2018 timeframe
    and even revenues are expected to grow at 18% in this time period.
    Highest among $50B+ market cap bio-pharma peers
    Celgene is one of the highest growth names among peers and still growing at a
    double-digit rate. Even at a sizable base of $9B in 2015 revenues, the company
    has guided for 18% revenue CAGR by 2020 and 23% EPS CAGR.
    Figure 3. Celgene vs. Peers EPS growth, 2015-2018E Figure 4. Celgene vs. Peers Revenue growth, 2015-2018E
    Source: FactSet Source: FactSet

    Consensus continues to remain below long-term guidance despite
    company reaffirming guidance in early 2016.
    We note that consensus remains below company guidance for 2020 despite that the
    company has managed to at minimum meet its long-term guidance several times in
    the past. We are higher than the consensus and guidance on 2020 EPS as we are
    (10.4%)
    PM Summary – Highest growth stock in the
    large-cap biotech space. Transformational
    pipeline reading out in next 12-18 months
    modeling share buybacks while the guidance assumes constant share count of
    830M.
    Figure 5. Celgene 2020 EPS and Product Sales – Guidance/Consensus and Citi Estimates
    Source: Citi Research and FactSet
    The stock is trading at a discount to peers as well as its own growth
    The year-to-date weakness sets CELG up nicely as the stock seems to be trading
    at a discount to its growth. CELG is trading at a 4-14% discount to peers despite
    having a 68% higher 2015-2018 EPS growth rate. We believe this discount, coupled
    with an industry-leading growth rate, sets CELG well for outperformance in 2016-
    2017 timeframe.

  • Citi ""We see upside to CELG 2020 guidance....to both consensus and Citi ests"

    FULL REPORT POSTED ON CELG INVESTOR VILLAGE BOARD

  • Citi's Robyn K "REGN has the most medicare pricing risk if that is issue. CELG and GILD have the least exposure to this issue. "

  • Robyn K on Citi biotech call just now "CELG has the most pipeline upside 200%" CELG #1 REGN #2 BIIB #3"

AMGN
154.5186-1.8314(-1.17%)3:25 PMEDT