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August 12, 2013

Is a Breast Cancer Treatment a Sleeper Blockbuster for Nuvilex?

nuvilexIt is only logical that Nuvilex Inc.’s (OTCQB – NVLX - $0.17 – Spec Buy) live-cell encapsulation platform to treat patients with inoperable pancreatic cancer has garnered a great deal of press and accolades in the mainstream press and industry journals, since the therapy has already successfully completed Phase II clinical trials.  However, now that the recently announced exclusive rights acquisition to treat all forms of cancer via this platform has had an opportunity to set in for Nuvilex investors and observers alike, it is a great time to lift up the hood and take a closer look at the engine.

When one lifts up the hood, one realizes that a sleeping giant in the form of highly successful animal trials to treat mammary tumors may emerge as a real blockbuster for Nuvilex.  This pronouncement should in no way be interpreted as a condemnation of the progress of and prospects for the pancreatic cancer treatment, which offers huge potential and is the Firm’s flagship. On the contrary, it is just reasonable to assume that if Nuvilex is able to move a human trial for breast cancer forward, there is a strong likelihood that given its profile, this treatment would be afforded an even higher valuation than the pancreatic cancer therapy. 

Prevention and treatment of breast cancer that is diagnosed in 200,000 women and kills over 40,000 in the U.S. alone each year is now a multi-billion dollar industry unto itself, highlighted by mammograms, other tests, involvement of multiple non-profit organizations, etc.  Moreover, breast cancer appears to be affecting younger and younger women each year. As a result, when firms gain even modest success in their quest for ever more effective treatment for breast cancer, their stocks enjoy huge gains.

For example, Synta Pharmaceuticals (NASDAQ –SNTA) recently announced early and favorable results from a Phase II clinical trial.  Specifically, the Company announced preliminary treatment results from just 15 patients as compared with the expected 70 patients to be enrolled in the trial.  Although management may have jumped the gun, the Street ate it up. Synta’s shares rose 40% for the day, which is equivalent to $140M worth of market value. If Synta’s preliminary and incomplete Phase II breast cancer results are worth a $140M jump, what is the value of Nuvilex’s completed Phase II pancreatic cancer trials? More important, as Nuvilex moves ahead, and is able to post strong results for human breast cancer trials, would it also be worth over $100M in market cap?  On an equal playing field, it would appear likely to even the casual observer.

It should be noted that results of the aforementioned Nuvilex Phase I/II clinical trial involving dogs with spontaneously-occurring mammary tumors were remarkably similar to its well-known human Phase II pancreatic cancer trial. In the trial, cyclophosphamide was chosen as the pro-drug instead of the ifosfamide used in the pancreatic trials, since the former is often used for the treatment of mammary cancer in dogs as well as breast cancer in humans. However, since both cyclophosphamide and ifosfamide are “sister” drugs and are converted to their cancer-killing forms in the same way, the same type of encapsulated cells were used in both the pancreatic and mammary cancer studies.  As in the human pancreatic cancer trials, the capsules were well tolerated in the mammary cancer trials, with no major safety issues. Importantly, greater degrees of tumor shrinkage were observed in those dogs treated with encapsulated cells as well as the pro-drug versus those receiving cyclophosphamide alone.  In the case of a dog diagnosed with two tumors, the tumor that did not receive encapsulated cells but received cyclophosphamide alone was reduced by only 14% while the tumor receiving encapsulated cells plus cyclophosphamide showed a 70% reduction in tumor volume.

Therefore, it is evident that the results of this animal trial could lead to a future successful human breast cancer clinical trial that utilizes the Company’s live-cell encapsulation platform.  Such success would likely result in positive share gains rivaling that of Synta and other firms focused on treating breast cancer, providing the Company and its shareholders with the makings of a real blockbuster.

Senior Analyst: Robert Goldman
Rob Goldman 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.

Analyst Certification
I, Robert Goldman, hereby certify that the view expressed in this research report accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the recommendations or views expressed in this research report.

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