(Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.)
Neurotrope (OTC:NTRP[1] ) is a potentially interesting & differentiated play on the huge Alzheimer's angle with a unique pathway approach that may prove useful as either combination or monotherapy in a disease where very few agents have "silver bullet" status. Their pedigree of $100mm in R&D over the lifetime of the company, coupled with a seasoned management team and strong IP position potentially warrant a closer look. I believe that given the stage of its latest product, on the cusp of Phase II development (after compelling efficacy data in preclinical models), should warrant a closer look at current levels. Given the massive unmet need in Alzheimer's and other cognitive diseases, plus favorable demographics and no clear SOC winner to date, the market is wide open. While the company is clearly unproven and relatively early in development, a 3 year cash runway (i.e. no near term dilution), strong patent position, and innovative tech platform could make for a compelling hold into trial read outs later next year.
Background & History
Neurotrope is an innovative biotech focused on developing targeted treatments for Alzheimer's and other Neurodegenerative diseases. Neurotrope was formed for the primary purpose of commercializing certain technologies that were initially developed by Blanchette Rockefeller Neurosciences Institute ("BRNI"), for therapeutic or diagnostic applications for Alzheimer's or other cognitive dysfunctions. Over the last 13 years, the BRNI has invested $100mm through the portfolio. The company merged with BlueFlash Communications in August 2013 in a reverse merger[2] , and the stock was changed to NTRP (and company renamed Neurotrope) … the stock started trading this September.
Strong Financial Position after Recent Raise
NTRP recently completed a financing on October 9th that raised $1.08m, and has raised $21.9m over the last 3 private placements (in Feb, May, August '13) to complete the aggregate Series A offering at $23m. This cash position should be enough, at current burn rate, to last 3 years (burning $300k per month). What interested me about the raise was that there was no institutional or venture capital participation, and the money was raised entirely from high net worth individuals.
Innovative Technology Platform … with an IP Moat
The company has identified several drug prototypes which activate Protein Kinase C in a highly selective matter, which is believed to "re-boot" neurons in various animal models. This regeneration occurs due to the fresh expression of proteins critical to the maintenance and function of the nerve cell- resulting in improved memory and cognition functions. Activation of PKCe is believed to have a multimodal effect in reversing the key pathological processes that lead to the development of Alzheimer's Disease. Drugs effective in activating PKCe could delay the progression of Alzheimer's Disease and possibly restore cognitive and memory functions already damaged by the disease. The company has a strong patent position around the PKC activation pathway (53 pending/issued patents).
The BRNI approach exploits a complex pathway of biochemical events in the neuron that seem to be centrally orchestrated by PKCε. As shown in this picture, changes mediated by PKCε effectively converge in reversing the neuronal damage and loss central to the pathogenic process in Alzheimer's Disease.
(Click to enlarge)
Pipeline and Catalyst Pathway Overview
As outlined below[3] , NTRP's lead product Bryostatin is focused on Alzheimer's, with other indications earlier on, and is enrolling for its Phase II currently, with the trial expected to kick off next year and read out in 2015. In addition to bryostatin and the diagnostic test for Alzheimer's Disease, the company intends to pursue development of two other technology platforms developed by and licensed from BRNI: the first, a platform for transporting drugs into the brain through the "blood-brain-barrier," and the second, a group of drugs for enhancing cognition, mood and alertness for neuropsychiatric conditions
(Click to enlarge)
(Click to enlarge)
(Click to enlarge)
Risk/Reward and Overview
NTRP currently trades at $1.70, with a market cap of $37mm. The float consists of 22mm shares plus another 11mm insider shares, plus another 22m shares locked up for 1 year (from the raise), which equals 52mm shares. At the current cash position of $23mm, that equates to $0.40 per share in cash, or $1 per share in cash of the effective 1 year float. I ascribe the cash position to be the floor for the stock, so a -40% downside. Given the likely lack of events (no data read outs) for the next 6 months, it is unlikely to break through that floor, with the modest burn rate.
On the upside, the stock has trailed off on little news flow but did open up at $2.25 for trading , +32% from today's close. As the company gets on the road and gets the story out, it is likely to increase volume and attention on the trading end. On the fundamental side, there should be increased interest in the platform as the trial enrolls and further data comes out to supplement publications. Given the tremendous AD market ($15B) and likely positioning along the spectrum from Pfizer's (PFE[4] ) Aricept to Forest's (FRX[5] ) Namenda, etc. it is a "blue sky" position that is difficult to peg precisely, particularly for a product with such an early stage asset. Nevertheless, with $100m in R&D funding pumped in over a 10+ year period, I would think that a $100mm market cap valuation is not unreasonable given the strength of the pipeline & leadership team; such a valuation would be 3x multiple from here.
Along the way, however, liquidity and visibility will have to improve so it may be a volatile/choppy ride, and an interim holding period may not reach the target. Still, as a longer term play, it warrants a closer look.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)
References
- ^ Neurotrope (seekingalpha.com)
- ^ August 2013 in a reverse merger (www.neurotropebioscience.com)
- ^ outlined below (www.neurotropebioscience.com)
- ^ Pfizer Inc. (seekingalpha.com)
- ^ Forest Laboratories, Inc. (seekingalpha.com)
- ^ Neurotrope: Intriguing Play On Alzheimer's (seekingalpha.com)
0 comments:
Post a Comment