A series of recent landmark events in the marijuana and medical marijuana space, along with a revaluation of biotechs, are set to serve as triggers prompting the accumulation and rise of Nuvilex’s stock back to the levels enjoyed roughly 9 months ago.
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Trigger #4: Nuvilex Offers a very Compelling Opportunity at a Favorable Valuation---Just for its Core Biz
In our view, Nuvilex’s anti-cancer and diabetes initiatives alone warrant our recommendation on these shares. Plus, given recent trends in biotech, the potential valuation may prove to be too low. Since the start of 2014, investors are scrambling to find the next Intercept Pharmaceuticals (NASDAQ – ICPT) or Rexahn Pharmaceuticals (NYSE – RNN). ICPT jumped (literally) $300 in 2 days following favorable late-stage clinical trials for the treatment of liver disease. At one point last week, RNN more than tripled following the commencement of 2 early-stage trials. Interestingly, given their similar paths, we believe that Nuvilex and RNN, which currently trades at a $160M market cap, are great comps to one another, just like Merrimack (NASDAQ – MACK) and Threshold (NASDAQ – THLD), which also have enjoyed swift moves higher.
RNN is a pure anti-cancer biotech with drugs in the mid-stage phases of development to treat pancreatic cancer and renal cell carcinoma, and a drug in Phase I trials to treat various solid tumors.
Nuvilex is a biotechnology company with the rights to the novel Cell-in-a-BoxTM technology. In developing cancer treatments utilizing the Cell-in-a-Box™ live-cell encapsulation technology, living cells that are capable of converting anti-cancer drugs into their cancer-killing forms are enclosed in protective cellulose-based, pin-head-sized capsules that are implanted in or near a cancer tumor. Following implantation of the Cell-in-a-Box™ capsules; the anticancer drugs are then administered. The combination of the Cell-in-a-Box™ technology with the anti-cancer drug ifosfamide has been shown in Phase 1/2 trials conducted in the early 2000s to be very effective in treating patients with advanced inoperable pancreatic cancer. When the data from those trials were compared with historical data for Gemzar® (the only drug approved to date as a single agent for the treatment for advanced pancreatic cancer), the median survival time was increased to 11 months (from 5.7 months for Gemzar®) using Nuvilex’s treatment and the one-year survival rate with Nuvilex’s treatment (36%) was double that seen with Gemzar® (18%). Tumor sizes were also reduced from 25-50% in 4 out of 14 patients and no serious treatment-related side-effects were experienced using the Cell-in-a-Box™ plus ifosfamide combination. This is because only one-third the dose of ifosfamide normally employed in treating other forms of cancer was used in the trials because of the unique nature of the Cell-in-a-Box delivery system. Future trials are in the offing.
Although RNN currently has 3 drugs in various stages of clinical, Nuvilex is clearly the compelling buy. First, RNN has already concluded its run and fallen back to earth; but, its rise is a great comparator for what Nuvilex investors can potentially expect to experience, as development milestones such as clinical trial commencements, occur. Moreover, Nuvilex trades at less than half of RNN’s valuation which in our view is an unusually large discount, considering the value of the technology being used by Nuvilex and its overall market opportunity. Plus, this valuation clearly excludes any value for the potentially blockbuster medical marijuana subsidiary. Thus, biotech investors seeking the next great biotech mover would be wise to consider Nuvilex. After all, at current levels, it is as if the marijuana segment would be thrown in for free.
Trigger #5: No Contact High---Yet
Many medical marijuana stocks have had a big run early this year due in large part to the well-publicized legalization and sales progress in Colorado and Washington, as noted above. Interestingly, although Nuvilex has made major strides in its own right, the stock has not yet caught up with the rest of the space. For example, Nuvilex’s subsidiary, Medical Marijuana Sciences, Inc., has been building an impressive list of leaders to its critical Scientific Advisory Board. The Board’s experience with cannabinoids, cancer drugs and enzymology could prove to be invaluable in pursuing the goals of Medical Marijuana Sciences that include developing treatments, which employ constituents of Cannabis together with the Cell-in-a-Box™ cellulose-based live-cell encapsulation technology.
Based on our experience, since other stocks have already moved, many investors will seek to find stocks that have not yet run. In situations such as the current medical marijuana adoption cycle, all stocks tend to enjoy great accumulation. As a result, Nuvilex is primed to move higher.
The Bottom Line
A series of landmark events in the marijuana and medical marijuana space will serve as triggers prompting the accumulation and rise of Nuvilex’s stock back to the levels enjoyed roughly 9 months ago, given its exposure to the sector via its Medical Marijuana Sciences subsidiary. Separately, major moves in other anti-cancer stocks have enhanced their valuations and biotech investors are seeking to invest in the next biotech slated to move in concert with the launch of upcoming events. With a series of milestone events ahead for the Company, investors could enjoy huge moves as these milestones are achieved, as evidenced by the achievements of its peer group and the subsequent rises in their stock prices.
Trading at a paltry $74M market cap, we look for the stock to double during the first half of the year, as milestone events occur and the value of all companies in the medical marijuana space are adjusted higher.
We continue to rate these shares Speculative Buy with a $0.75 price target.
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Senior Analyst: Robert Goldman
Rob Goldman founded Goldman Small Cap Research in 2009 and has over 20 years of investment and company research experience as a senior research analyst and as a portfolio and mutual fund manager. During his tenure as a sell side analyst, Rob was a senior member of Piper Jaffray's Technology and Communications teams. Prior to joining Piper, Rob led Josephthal & Co.'s Washington-based Emerging Growth Research Group. In addition to his sell-side experience Rob served as Chief Investment Officer of a boutique investment management firm and Blue and White Investment Management, where he managed Small Cap Growth portfolios and The Blue and White Fund.
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