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Development Momentum Accelerating in 2013

By Brian Marckx, CFA

2012 10-K Filed

FluoroPharma Medical (OTC BB:FPMI) filed their 10-K for the fourth quarter and year ending December 31, 2012 on March 28th.  Results remain in-line with our estimates with a slight uptick in operating expenses in Q4 (operating expenses had been tracking below our forecast for first nine months of the year, however).  Q4 operating expenses were $1.4 million compared to our $1.1 million estimate - the difference mostly related to non-cash stock compensation.  As has been the case in the past, management continues to do an impressive job keeping expenses down and cash burn to a minimum despite meaningful progress with development of the pipeline (including recently moving both CardioPET and BFPET into phase II trials, with initial images already coming from these studies) as well as with awareness-building and capital raising efforts.

Q4 and full year 2012 net loss and EPS were $1.4MM / ($0.06) and $4.2MM / ($0.18).  Cash used in operating activities was $830k in Q4 and $3.3MM for the full year.  FPMI exited 2012 with $1.3MM in cash and equivalents,  which was bolstered by $1.5MM raised in November via the sale of 1.8MM shares of common stock (@ $0.90/share).

Recent highlights in product development include two separate rounds of high quality images from a BFPET study being conducted in China and high quality initial images from the CardioPET phase II trial.  Relative to increasing visibility and awareness to industry leaders, FPMI's products were highlighted at two major scientific forums during Q3; the high quality BFPET images were presented in Baltimore at the Annual Scientific Session of the American Society of Nuclear Cardiology in a lecture titled, "Nuclear Cardiology in 2012 and Beyond: Can We Meet the Challenges" and earlier that week in Dublin, Ireland two abstracts describing FPMI's products were presented as posters at the World Molecular Imaging Congress.

Aside from adding the year 2016 to our model, we have made no material changes to our financial projections following the close of 2012.  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. 

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 myocardial perfusion imaging (MPI) 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 most 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."

We view this news as an obvious and significant positive for FPMI and their CardioPET candidate and our outlook remains highly positive on FPMI.  If all goes to plan phase II will wrap up in 2013 and phase III completed and an NDA filing potentially happening by the end of 2015.  U.S. launch could potentially happen by 2016.

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 are being 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.

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.

Heart Disease Trends Continue to Favor FPMI

Trends in heart disease are one of the most reported on statistics in health care due in large part to the pervasiveness of the problem, particularly in the U.S.  Many of 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.

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

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