Healthcare Sector Expertise
National has developed a unique area of expertise in the healthcare sector, drawing upon the deep knowledge base of our bankers, analysts and advisors as well as practitioners in major research and medical centers around the country. National’s healthcare banking team has a track record of successful financings of R&D and clinical stage biotech and medical device companies targeting unmet medical needs in significant markets including cancer, pain management, diabetes, cardiovascular, autoimmune, neurological, and digestive conditions.
Our retail and institutional investors benefit from our team’s ability to identify and finance private and public life sciences and medical technology companies through a wide range of transaction structures including straight equity, convertibles, and notes in Stage A raises, pre-listing bridge financings, IPOs, Follow-Ons, CMPOs, and RDOs.
Healthcare Sector Coverage
National broadly covers the healthcare sector but maintains a particular focus on micro and small cap companies developing drugs to treat cancer, microbial infection, and pain. We also maintain dedicated coverage of several medical device companies.
Healthcare spending currently accounts for almost 20% of US GDP, higher than any other nation by a wide margin. The healthcare sector is expected to continue to thrive given increasing pressure on the FDA to accelerate its pace of drug application review, the JOBS Act, as well as ongoing political efforts to reduce the cost of healthcare. These dynamics have encouraged ever-higher numbers of micro and small cap healthcare companies.
We believe that through our due diligence and increasing number of healthcare investment opportunities, investors can continue to find attractive investment option in the sector.
Aerpio Pharmaceuticals, Inc. (ARPO: NEUTRAL)
March 18, 2019– This morning, Aerpio announced that its Phase 2b TIME-2b trial demonstrated that AKB-9778 twice daily failed to achieve its primary endpoint of the percentage of patients with an improvement of 2 or more steps in the study eye diabetic retinopathy severity score (DRSS) compared to placebo. Once daily AKB-9778 performed similar to placebo. There was also no differential in the rate of progression to either DME or PDR in 12 months for AKB-9778 versus placebo. TIME-2b showed trends in favor of AKB- 9778 relating to DRSS improvements for study and fellow eyes, but they were far from the statistical significance threshold. Given the trial failure, and thus the increased risk, and longer time, to potential commercialization, we are downgrading shares to NEUTRAL from BUY.
Akebia Therapeutics, Inc. (AKBA: Buy, $18 PT)
March 19, 2019– Vadadustat recently succeeded in its Phase 3 Japanese program, and we expect partner MTPC to file a NDA later this year; potential regulatory and commercial milestones from MTPC are $40M and $175M, respectively, and Akebia received $10M in milestones from MTPC in 2018. Akebia continues enrollment of the Phase 3 INNO2VATE program for DD-CKD, with enrollment completed in the larger (n=3554) conversion INNO2VATE trial, enrollment to complete in the smaller (n=350) correction INNO2VATE trial early in 2Q19, and topline results from both trials expected 2Q20, subject to accrual of MACE events. Enrollment should complete for both Phase 3 PRO2TECT trials by YE19 (total n=3700), and topline results are expected in mid-2020, subject to accrual of MACE events.
Assembly Biosciences, Inc. (ASMB: Buy, $70 PT)
March 1, 2019– Assembly completed enrollment for both of its 24-week Phase 2a trials with its core protein allosteric modulator (CpAM)
ABI-H0731 given in combination with a standard of care polymerase inhibitor. Trial 201 (viral antigen trial) aims to show that ABI-H0731 can inhibit generation of cccDNA as measured by a decline in surrogate markers of cccDNA in previously treated HBeAg-negative and HBeAg-positive patients, and trial 202 (viral load trial) aims to show the antiviral effect of ABI-H0731 in treatment naïve patients. We expect interim and final data releases from both studies over the course of 2019 (initial data in 2Q19 and final 24-week data in 2H19), and all patients have the option to roll over into a 1 year open label extension study on the same combination therapy.
Avenue Therapeutics, Inc. (ATXI: Buy, $14 PT)
March 12, 2019– Avenue reported 4Q18 results and provided clinical and operational updates. The company reported $2.7M in cash, which when combined with the expected $35M from InvaGen in 1Q19 and the additional $7M potential line of credit, is sufficient to fund the company into early 2021, in our estimate, which importantly is when the company should have fulfilled the requirements for its full acquisition at around $13.92 per share.
AVEO Pharmaceuticals, Inc. (AVEO:SELL $0 PT)
April 8, 2019– We strongly reiterate our Sell rating and $0 target price,
given our view that Aveo will burn through its cash in about 2 years and that ficlatuzumab remains a high risk product, especially given evidence in the medical literature showing how cytarabine alone can generate response rates in AML patients that are similar to response rates recently presented at AACR for combination treatment with cytarabine and ficlatuzumab. We also attribute the recent rise in Aveo’s share price in part to internet posts by BlueLion (March 27 and reposted by SeekingAlpha on April 2; https://seekingalpha.com/article/4252417-aveo-acquisition-rumors-resuscitatestock), that tried to start an unsubstantiated Aveo acquisition rumor, and by Zacks (March 29; https://www.zacks.com/stock/news/367531/aveo-pharmaceuticals-aveo-to-file-nda-for-fotivda-with-fda), that titled its post such as to assume a tivozanib NDA filing would occur, but offered no useful supporting evidence in the post. In our view, these misleading posts need to end and Aveo needs to be seen as it should be, as having very little chance for success.
Checkpoint Therapeutics (CKPT: Buy, $18 PT)
March 15, 2019– Checkpoint reported 4Q18 financial results and provided clinical and operational updates, reporting a cash position of $22M, which should fund operations through 1Q20, as per our projections, as we expect actual cash burn to be about $18M for 2019. Therefore, Checkpoint has enough cash runway to release initial PD-L1 clinical data, additional EGFRi data, and evaluate potential partnerships for one or both assets over the coming months.
Exellxis, Inc. (EXEL: Buy, $42 PT)
Feruary 22, 2019 — Heron announced 4Q18 financial results, reporting $28.8M in net chemotherapy-induced nausea and vomiting (CINV)
franchise revenue ($5.4M of Sustol and $23.4M of Cinvanti; up 187% YoY and up 46% QoQ), resulting in EPS of $(0.63). Heron ended 4Q18 with a strong cash position of $332.4M, which is enough to fund operations to profitability, as per our projections, and reiterate its 2019 net revenue guidance, from only the CINV franchise, of a range of $115-120M, which we find to be conservative and therefore have modeled about $133M in CINV franchise revenue. We model HTX-011 sales to beging in 2Q19, with the drug becoming the dominant revenue line item in 2020. Given that HTX-011’s clinical development is now complete, in our view, we have reduced R&D spend about 20% for 2019 versus 2018.
Eyenovia, Inc. (EYEN: Buy, $12 PT)
March 27, 2019 — Eyenovia recently announced positive results from its MIST-1 and MIST-2 Phase 3 trials with MicroStat, a product expected to target at least the estimated 80M annual US pharmacologic mydriasis (pupil dilation) treatments. The MIST-1 (n=64) primary endpoint was mean change in baseline pupil diameter at 35 minutes, where MicroStat showed a superior dilation effect compared to either of its 2 drug components (tropicamide and phenylephrine) given alone. MIST-2 (n=70) was a superiority trial over placebo with the same primary endpoint, and all treatments were delivered using Eyenovia’s proprietary Optejet dispenser. We expect Eyenovia to present detailed MIST-2 results at the American Academy of Cataract and Retinal Surgery (ASCRS) meeting in 2Q19. Once Eyenovia generates 12 month stability data for MicroStat, it should be able to file a NDA in mid-2020, with approval and commercial launch expected in mid-2021.
Heron Therapeutics, Inc. (HRTX: Buy, $42 PT)
March 11, 2019– This morning, Heron announced results from a follow-up trial to its prior larger HTX-011 Phase 3 trial in bunionectomy that was completed early last year. Of the 31 patients undergoing bunionectomy, all of whom received HTX-011 combined with an OTC analgesic (acetaminophen or ibuprofen) and fit the same entry criteria as the Phase 3 trial, 77% did not require opioid rescue medication to manage postoperative pain through 72 hours post-surgery. This compares to the original Phase 3 trial results where 29% receiving HTX-011 alone, 11% receiving bupivacaine, and 2% receiving placebo were opioid free over 72 hours. The same 77% of patients also did not require opioid rescue medication through the total 28 day post-surgery followup period.
Innovate Biopharmaceuticals, Inc. (INNT: Buy, $27 PT)
March 19, 2019– Yesterday, Innovate released 4Q18 financial results and provided clinical and operational updates, reporting a YE18 cash position
of $5.7M. Innovate also recently raised additional net proceeds of $9.6M from the sale of about 4.3M shares at $2.33 per share, and 100% warrant coverage for 1 year warrants striking at $4, plus 60% warrant coverage for 5 year warrants that will be exercisable on the 6 month anniversary of their issuance at a price equal to the greater of (a) 125% of the VWAP of the common stock for the 20 day period prior to the closing date of the private placement and (b) the closing price of the common stock immediately prior to the closing date of the private placement. Innovate can call the 1 year warrants for cash if the VWAP of the common stock exceeds $5.25 for 10 consecutive days following their issue dates.
Inovio, Inc. (INO: Buy, $12 PT)
April 3, 2019– Yesterday, we hosted several meetings with Inovio management and we present the highlights below. Much of the discussion centered around the Phase 3 program for VGX-3100 in cervical dysplasia, to read out in 2H20, and the Phase 2 data expected over 2019 from trials with INO-5401/INO-9012 (glioblastoma and bladder cancer trial; in combination with checkpoint inhibitors) and VGX-3100 (vulvar dysplasia and anal dysplasia). The timing for release of Phase 2 data from trials with MEDI0457 (head & neck cancer and HPV-related cancers) is more difficult to predict, as that is controlled by AstraZeneca (NYSE: AZN-NR-$41.59). Inovio’s pro forma cash of $157M should fund operations through 2020, as per our projections.
Mustang Bio, Inc. (MBIO: Buy, $21 PT)
March 18, 2019– Mustang expects to initiate a multicenter Phase 1/2 trial in 2H19 for MB-102 in acute myeloid leukemia (AML), blastic plasmacytoid dendritic cell neoplasm (BPDCN) and high-risk myelodysplastic syndrome. In 4Q18, Mustang released additional safety and efficacy results from a Phase 1 MB-102 trial in relapsed or refractory AML and BPDCN at an AACR Special Conference on Tumor Immunology and Immunotherapy. Data from 2 additional patients were reported (1 AML and 1 BPDCN patient), showing complete responses (CRs) in both patients, bringing the total number of CRs to 5 from the 9 patients evaluated (7 heavily pretreated AML, 2 BPDCN), with 3 of the 5 CRs in the 5 AML patients given the higher MB-102 dose, and the other 2 CRs in both BPDCN patients. In 4Q18, the FDA granted Orphan Drug Designation to MB-102 for BPDCN.
Pacira Pharmaceuticals, Inc. (PCRX: Sell, $15 PT)
March 5, 2019– This morning, Pacira announced its intent to acquire MyoScience, which markets the iovera system, an FDAapproved non-opioid treatment that alleviates pain via cryoanalgesia (intense focus of cold to a specific nerve to reduce its pain signaling for several months). We view this move ($120M upfront, $100M in potential future sales and regulatory milestone payments through 2023 – 50% of which could potentially be paid in Pacira stock, no royalties) as an indication that Pacira sees the need to diversify its product offerings as swiftly as possible prior to HTX-011 potentially entering the market later this year with what we view will be a superior label on 3 counts: dosing convenience, opioid sparing claims, and magnitude of pain control. The deal is expected to close
in April and be accretive to the bottom line in 2H20.
PolarityTE, Inc. (PTE: Sell, $5 PT)
March 18, 2019– This morning, PolarityTE reported 4Q18 financial results and provided clinical and operational updates, reporting a YE18 cash position of $61.8M, which cannot fund operations through calendar 2019, as per our projections. PolarityTE recorded SkinTE revenue of only $210k for November and December, which when augmented by 50% to approximate a full quarter of sales, is still a sequential drop from FY4Q18, and the SkinTE gross profit margin sequentially worsened as well. We reiterate our SELL rating and $5 TP, given what we view to be poor financial results released today and our pessimistic outlook for the company.
Progenics Pharmaceuticals, Inc. (PGNX: Buy, $9 PT)
March 14, 2019– This morning, Progenics reported 4Q18 financial results, with cash of $137.7M, which should fund the company to profitability, by our projections. Relistor sales of $21M yielded $3.2M in royalty revenue to Progenics. Despite the royalty drop from 3Q18 being due to a favorable 1-time adjustment in 3Q18, followed by a planned inventory reduction over 4Q18, we have trimmed our Relistor projections. We lowered our TP to $9 from $11, mostly due to our lowered sales projections for Relistor and Azedra.
ProQR Therapeutics, Inc. (PRQR: Buy, $23 PT)
February 27, 2019– This morning, ProQR announced 4Q18 results and provided clinical and operational updates, reporting a YE18 cash position of €105.6M, enough to fund operations through the end of 2020, as per our projections. ProQR benefitted from several positive events that occurred during and after 4Q18. Earlier this quarter, ProQR reached an agreement with the FDA on the design of its pivotal Phase 2/3 ILLUMINATE trial, which should start in 1H19, with interim data expected around YE20. Also this quarter, the FDA granted Fast Track designation for QR-421a for Usher syndrome type 2 and non-syndromic retinitis pigmentosa (RP) due to mutations in exon 13 of the USH2A gene, and in 4Q18, the FDA cleared the IND for QR-421a for both of these indications.
Scynexis, Inc. (SCYX: Buy, $6 PT)
April 8, 2019– Interim data on the first 20 FURI trial patients was reported, where IBX showed a clinical benefit in 17 patients (11 CR or PR, 6 SD, 2 PD, 1 indeterminate response). IBX was well-tolerated, with the most common TRAEs being gastrointestinal, no deaths due to progressive fungal disease, and no protocol changes due to toxicity. FURI enrolled patients with proven or probable, invasive or severe mucocutaneous candidiasis who failed, could not tolerate, or had toxicity to standard-of-care antifungal treatment. Strains successfully treated with IBX included C. glabrata, C. krusei, C. albicans, C. parapsilosis. Infection types included esophageal candidiasis, intra-abdominal abscesses, and oropharyngeal candidiasis, candidemia and endocarditis, and mediastinitis.
Stemline Therapeutics, Inc. (STML: Buy, $31 PT)
December 7, 2018– At the recent ASH conference, Stemline presented longer term pivotal Elzonris data, demonstrating that median overall survival (OS) has not yet been reached in the 29 first-line patients treated with 12 ug/kg/day Elzonris. Median follow up is now 23 (range of 0.2 – 41) months in a patient population that would otherwise have a median OS of about 1 year. Safety results were also updated, with no additional treatment related adverse events (TRAEs) despite longer treatment duration.
Urogen Pharma LTD (URGN: Buy, $70 PT)
February 29, 2019– This morning, UroGen reported 4Q18 financial results and provided clinical and operational updates, reporting a strong current cash position of $263.2M (includes recently raised net proceeds of $162M) that should fund the company through 2021, well beyond the expected US launch of UGN-101 in 2020.