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October 16, 2013

Pending Pancreatic Cancer Industry News to Spur Nuvilex

For the most part, biotech stocks have had a banner year. Until about a week ago, the bellwether biotech ETF iShares NASDAQ Biotechnology Index (NASDAQ - IBB) was up nearly 50% year to date. Then came the uncertainty of the government shutdown and looming budget showdown. This uncertainty prompted sales of biotech winners en masse last week, as investors elected to take profits---and quickly, but primarily in larger stocks rather than their small cap brethren. Following the sale of the larger cap biotechs, we sense a tide is shifting toward the purchase of small cap biotechs and pancreatic cancer treatment-focused ones in particular such as Nuvilex Inc. (OTCQB – NVLX - $0.122). 

Nearly 45,000 American are diagnosed with pancreatic cancer each year and with 38,000 deaths annually from the disease, pancreatic cancer is one of the deadliest of all cancers. In fact, the overall survival rate is also one of the lowest of all forms of cancer. Currently, there are only 3 drugs approved for treatment of the disease. But, there are some catalysts up ahead which could drive this group of small cap biotech stocks meaningfully higher.

For starters, Celgene (NASDAQ – CELG) will be releasing its 3Q13 results next week. Last month, the company was awarded FDA approval for its pancreatic cancer treatment despite demonstrating only an incremental increase in median survival time and one-year survival rate compared to the single-agent standard of care, gemcitabine, when its drug Abraxane was used in conjunction with gemcitabine. Investors can expect to get a glimpse of how Celgene is deploying the new product which should provide Nuvilex investors with intel as to what to expect if the Nuvilex treatment ultimately reaches this milestone.

Separately, Merrimack Pharmaceuticals, Inc. (NASDAQ – MACK - $3.54) whose leading drug candidate, MM-398, utilizes a novel approach to treating pancreatic cancer that could result in an FDA approval in 2014/2015, is also expected to release important news this quarter. The Company’s approach utilizes an old-line chemotherapy drug called irinotecan which is encapsulated into a liposome sphere (think of a bubble or cell membrane).  Navigating to the tumor site via blood flow, the sphere finds the tumor and treats it directly at the site.  Since the chemo drug can be encapsulated in a liposome and should target the tumor site only, it is expected that the effects of the drug against the tumor will be optimized. Unlike most chemotherapy delivery methods in which the drug can attack healthy cells along with cancer cells, this approach purportedly reduces the side effects dramatically while delivering more cancer-killing power, since its function is to reduce collateral damage.

If Nuvilex investors believe that this approach seems similar to that of Nuvilex, they aren’t too far off the mark. Nuvilex’s delivery system utilizes a live-cell encapsulation product in which the encapsulated cells have high activity of an enzyme that activates the widely used cancer prodrug ifosfamide.  Once the encapsulated cells are placed near the pancreas and thus the tumor itself, the ifosfamide is administered intravenously; this then becomes activated to its cancer-killing form at the tumor site, optimizing its attack on the tumor cells.   

Merrimack’s flagship is currently in Phase 3 clinical trial (named NAPOLI 1).  The company announced in August that it has completed enrollment for the trial (over 700 patients) and will announce its top-line (basic) results sometime in the fourth quarter of 2013.  The Phase 3 trial has 3 different treatment “arms;” these are (a) MM-398 by itself, (b) MM-398 plus the widely used cancer drugs 5-fluorouracil and leucovorin, and (c) 5-fluorouracil plus leucovorin without NN-398.   Regardless of the outcome of Merrimack’s Phase 3 trial, the news is likely a win-win for Nuvilex. If the results are strong, Merrimack’s approach could be a boon to Nuvilex. If they are not solid, it eliminates another potential competitor for the Company, considering Nuvilex has already demonstrated better results in its Phase 2 trials than any of the 3 currently FDA-approved chemotherapies for advanced, inoperable pancreatic cancer – all of this with little, if any,  treatment-related collateral damage.  Clearly, the key driver for the stock is news itself, which will place additional, favorable attention on Nuvilex’s prospects.

For more information, refer to our previous sponsored NVLX Reports, Updates and Hot Topics by visiting www.GoldmanResearch.com

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.

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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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