FPMI: Industry Report PET Growth 20% Through 2021

Zacks Small Cap Research

By Brian Marckx, CFA

Q2 2013 10-Q Filed

FluoroPharma (OTC BB:FPMI) filed their 10-Q for the second quarter ending June 30, 2013.  Results remain mostly in-line with our numbers although operating expenses actually came in lower than our estimates.  Cash burn also remains within our expectations.

Q2 operating expenses were $1.1 million, flat from Q1 and lower than our $1.6 million estimate.  We continue to expect operating expenses to increase with clinical trials progression.  Q2 net loss and EPS were $1.2 million and ($0.05) compared to our $1.7 million and ($0.07) estimates.  Cash used in operating activities was $765k in Q2 and is averaging $719k/quarter through the first half of 2013 - which is lower than the average quarterly burn rate (~$825k) in 2012.

FluoroPharma continues to make progress with development of their pipeline while managing their financial resources.  Development timelines remain largely on-track with earlier expectations with data available from CardioPET and initiation of BFPET studies potentially happening by year-end.

In June the company announced that an internal review of additional data from their ongoing phase II clinical study of CardioPET supports earlier findings of excellent image quality.  CardioPET is being developed as a PET imaging agent to better diagnose acute and chronic coronary artery disease (CAD) in patients that can not undergo stress testing, among other potential indications.  The Belgian-based phase II trial is an open label study designed to assess safety and performance of CardioPET compared to SPECT myocardial perfusion imaging (MPI) agents and angiography.  As a reminder, on 2/28/2013 FPMI announced that the initial images from the phase II trial "show high resolution in the heart and provides extremely clear image quality".  While FPMI did not provide specifics on the images in the recent June press release, Dr. Manual Cerqueira, Chairman of the Department of Nuclear Medicine at the Cleveland Clinic was quoted and noted, "The images thus far obtained from CardioPET indicate excellent image quality. The immediate acquisition of images will be very efficient for patient work flow."  FPMI continues to expect to complete the study and have quantitative data available later this year. 

In early January FPMI announced that phase II trials of BFPET will be conducted at Massachusetts General Hospital.  Similar to the investigator-led study, the phase II study will compare BFPET to Rb-82 and/or traditional SPECT agents such as sestamibi which suffer from certain drawbacks such as high cost or comparably (relative to BFPET) lower image quality.  The study is expected to initiate by year-end.

We have made no material changes to our financial projections following Q2 results.  We think 2016 or 2017 could potentially be initial launch year of FPMI's first commercialized product.  We are maintaining our $2.35/share price target (validated with our DCF valuation) and Outperform rating. 

Industry Report: PET To Grow 20% Through 2021 Driven In Part By Cardiology

By just about all accounts, sales of PET scanners and PET radiopharmaceuticals and PET procedural volumes are expected to grow at a significant rate over the next several years.  This is a result of a number of factors including; PET's excellent image quality (particularly as compared to SPECT), greater availability of PET scanners, new applications for the use of PET in various specialties, an increasing focus on earlier intervention and personalized medicine and higher reimbursement (particularly as compared to PET).

A new industry report by Bio-Tech Systems was published in early August and provides updated estimates for the growth of PET and SPECT.  Of particular interest in the report in relation to FPMI's products are:

> While SPECT sales are forecast to grow at a CAGR of 10%-12% to $1.7 billion through 2021, PET is expected to grow at a CAGR of 20% to $4.7 billion through the same period.  Bio-Tech Systems notes, "This will stimulate more research and investment adding strength and stability to venture companies as well as those more established in the field."

>
Cardiac PET is expected to be a high growth area.  Bio-Tech Systems notes,

"PET cardiology will also benefit by an influx of new products for imaging myocardial perfusion and viability, allowing more effective treatment."

"
Ultimately, cardiology PET will be used to augment SPECT in a productive manner and create a new platform that explores the underlying causes of cardiac diseases permitting more effective treatment."

"PET perfusion agents for cardiology will offer capabilities for diagnosing complex cases and encourage more physicians to adopt this modality. Cardiology PET produces better images and offers higher reimbursement than traditional cardiology SPECT."

" PET procedures have benefited from the approval of new clinical indications and favorable reimbursement for cardiology procedures."

>
Alzeheimer's disease is also expected to be a catalyst to growth of PET through imaging of amyloid plaques.  FPMI's AZPET is in early development stage for directly imaging amyloid plaques which may then aid physicians in providing more directed treatment through personalized medicine.  Bio-Tech expects PET radiopharmaceuticals to gain more acceptance in the near term fueled by the increasing acceptance of between imaging and therapy. 

>
The report also mentions that new oncology radiopharmaceuticals should help fuel growth of both PET and SPECT.  Oncology could be a specialty that FPMI looks to enter in the future.  In March the company announced it received a patent covering metabolic markers for PET and SPECT, specific use for which includes tumor tissue activity. 

Heart Disease Trends Continue to Favor FPMI
&f the major private and public health organizations provide historical as well as projected figures on the proportion of a given population estimated to have heart disease and/or be at-risk.

FPMI's March 2013 investor presentation cites the Heart Disease and Stroke Statistical Update, which is one of the most widely recognized ongoing research pieces on the epidemic which is put together by the American Heart Association (AHA), the Centers for Disease Control and Prevention (CDC) and the National Institutes of Health (NIH).  The theme of the reports make it clear that heart disease is a problem that will not be going away anytime soon.  The report notes that while death rates from cardiovascular disease have declined, the burden remains high with coronary heart disease causing about 1 in every 6 deaths.  Risk factors such as hypertension (~35% of U.S. adults), smoking (23% of men, 18% of women), high cholesterol (15% of U.S. adults), and obesity (67% either overweight or obese) remain significant problems.

Other, less recognized studies, also clearly point heart disease as a long-term problem.  For example, F as in Fat: How Obesity Threatens America's Future 2012, a report by Trust for America's Health and the Robert Wood Johnson Foundation forecasts adult obesity rates and the likely resulting rise in obesity-related disease rates for each state through to the year 2030.  The study notes that, " If obesity rates continue on their current trajectories, by 2030, 13 states could have adult obesity rates above 60 percent, 39 states could have rates above 50 percent, and all 50 states could have rates above 44 percent."  Relative to what this could mean for obesity-related diseases, the study notes, "If states’ obesity rates continue on their current trajectories, the number of new cases of type 2 diabetes, coronary heart disease and stroke, hypertension and arthritis could increase 10 times between 2010 and 2020—and double again by 2030."

While all of these statistics point to a potentially huge long-term problem for the U.S. healthcare system, it is a problem that FPMI directly addresses and which the company will potentially capitalize on following the launch of their first novel molecular imaging agent - which we think could happen in 2016 or 2017.

Excellent Image Quality From Phase II

On 2/28/2013 FPMI announced that the initial images from phase II trials of their CardioPET imaging agent candidate "show high resolution in the heart and provides extremely clear image quality".  CardioPET is being developed as a PET imaging agent to better diagnose acute and chronic coronary artery disease (CAD) in patients that can not undergo stress testing, among other potential indications.

FPMI moved CardioPET into phase II following positive results from phase I trials (used to assess safety / tolerability) which consisted of 6 patients with diagnosed CAD and 15 normal healthy volunteers (i.e. - control group).  Phase I testing completed in April 2007 and demonstrated CardioPET was safe with no patients experiencing any adverse events.

FPMI brought on SGS Life Sciences to provide clinical research services for phase II trials which commenced late in 2012.  The Belgian-based phase II trial is an open label study designed to assess safety and performance of CardioPET compared to SPECT myocardial perfusion imaging (MPI) agents and angiography.  The trial is being conducted at two sites in Belgium.  Total enrollment is expected to consist of between 30 and 100 patients with known stable chronic coronary artery disease that can not undergo stress testing.  FPMI notes that they expect to have results in the second half of 2013. 

In the press release announcing the results of the recent images, Dr. Roland Hustinx, one of the investigators in the study, notes, "The (phase II) images obtained from CardioPET are high quality and agree with previous findings."

Then in June FPMI announced that an internal review of additional data from this study, noting that it supports earlier findings of excellent image quality.  While FPMI did not provide specifics on the images in the recent June press release, Dr. Manual Cerqueira, Chairman of the Department of Nuclear Medicine at the Cleveland Clinic was quoted and noted, "The images thus far obtained from CardioPET indicate excellent image quality. The immediate acquisition of images will be very efficient for patient work flow."  FPMI continues to expect to complete the study and have quantitative data available later this year. 

BFPET

As a reminder, FPMI has another PET imaging agent candidate in phase II trials.  BFPET  is FPMI's novel blood flow imaging agent being developed for use in conjunction with stress-testing for the detection of ischemic (reversibly damaged) and infarcted (irreversibly damaged) tissue within the myocardium in patients with suspected or proven chronic CAD.  In July and November 2012 FPMI announced image results from a 20-patient investigator-sponsored clinical trial conducted in China where patients with CAD were imaged using BFPET.

Alan Fishman, principal investigator of the BFPET phase I trial (completed in 2008), commented on the initial results of the China-based study released in July, noting that the "initial results are impressive.  Image quality obtained using PET is superb. BFPET shows clear diagnostic qualities as well as increased resolution, inherent in PET.  The initial images look spectacular and we are confident that when all the patients are imaged, the data will further support clinical development of the agent."  His confidence was further bolstered when additional data was available in November, noting "We saw a high level of agreement between the angiography, the SPECT and the BFPET images. These additional images demonstrate that BFPET shows clear diagnostic qualities as well as the increased resolution, inherent in PET."

In early January FPMI announced that phase II trials of BFPET will be conducted at Massachusetts General Hospital.  Similar to the investigator-led study, the phase II study will compare BFPET to Rb-82 and/or traditional SPECT agents such as sestamibi which suffer from certain drawbacks such as high cost or comparably (relative to BFPET) lower image quality.  The study is expected to initiate by year-end 2013.

We think that if all goes to plan, phase III trials could wrap up and an NDA filed by the end of 2015. This potentially puts BFPET on the U.S. market by 2016/2017.

A copy of the full research report can be downloaded here >> 
 FluoroPharma Report

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