AspenBio Pharma, Inc.
(Public, NASDAQ:APPY)
AspenBio Pharma is about the embark on the most critical journey the company has ever faced since inception, with three important company developments awaiting announcements all within the next two weeks. At the forefront is the pivotal, stand alone 800 patient clinical trial result which is due in the first week of May for their flagship product, AppyScore, the first blood-based test designed to aid in the evaluation of appendicitis, tapping a $1B market. Interestingly enough, few sources have noticed the vast potential of its flagship product, as its seemed to find a way to tiptoe past the jungle of hype usually generated from pending FDA decisions. With Human Genome Sciences (NASDAQ:HGSI) and Dendreon Corporation (NASDAQ:DNDN) stealing the spotlight last year, investors and institutions were left looking for water in a desert that seemed to have ran dry, that is until Aspen showed up.
Shares of Aspen took a dive in early 2009 falling from $7.78 to a mere $1.04 as disappointment hit when the company announced that the FDA required patient count in its pivotal stand alone trial to increase from 600 to 800, leaving a myriad of opportunities for investors to scoop up cheap shares. Since then, it has rebounded to nearly $3 today, opening the doors for further gains as we enter the key development stages. With a sound share structure, and low float in place of only 27.6M shares, technical analysis experts have agreed a rebound to the 200 DMA of $4.10 is imminent, thus a Strong Buy rating has been put in place.
Firstly, it is important to highlight Aspen as a potential takeover or merger target, with partnerships looming nearby due to the recent acquisition of two very important executive board members in John Landon, and Steve Laundry. These individuals were instrumental in the success of their past companies, and it is becoming evidently clear that management and insiders at APPY are becoming increasingly optimistic about the pending pivotal results behind Aspen’s flagship product.
The recent appointment of John Landon to the Board provides experience in the diagnostics industry and suggests APPY could become a takeover target as Mr. Landon served on the Board of Cholestech and Digene before they were sold to Inverness Medical and Qiagen, respectively.
Additionally, APPY has also strengthened their leadership by adding Steve Lundy as the new CEO. He brings over twenty years’ experience in the medical device and diagnostic industry. He has successfully led the commercial launch of several novel diagnostic assays including the first molecular test for Methicillin-resistant Staphylococcus aureus. He has also been instrumental in transactions involving the sale or merger of several diagnostic companies to larger life sciences entities. Most recently Mr. Lundy served as CEO of MicroPhage, Inc. Previously, he has held senior executive roles at Vermillion, Inc. and GeneOhm which was acquired by Becton Dickinson.
AppyScore is attempting to become the first blood-based test designed to aid in the evaluation of patients suspected of having acute appendicitis, and all in a time of 45 minutes. Now, compare that to CT scans which take 5 to 7 hours, which leaves patients with a high probability of the appendix rupturing and causing a severe infection, leading to possible death. When looking at the facts, it is easy to see why the AppyScore is a medical breakthrough waiting to happen. Not only does it target a $1B market within North America, where nearly 10% of the population suffers from this condition, but if this pivotal trial and 510(k) application see positive results, it could very well become a medical standard in every hospital around the world, and that’s quite a fascinating opportunity to be had, especially when Aspen currently trades with a highly undervalued market cap of merely $100M.
On 2/9/10, APPY reported conclusions from tits pre-planned independent, interim analysis of an ongoing supplemental trial of AppyScore, the first blood-based test designed to aid in the evaluation of patients suspected of having acute appendicitis, and outline the next steps for its AppyScore 510(k) ifling with the FDA. Based on this, approximately 800 patients were enrolled in this stand alone pivotal clinical trial on 3/23/10. APPY estimates that May 4th to 18th the data analysis will be available to include in its pending 510(k) submission to the FDA which will also come in 2Q10.
Also, APPY is developing a faster, 15-minute version of the test (ELISA format) which will follow the initial version and result in a second 510(k) filing to be completed and filed within the next two weeks to keep in line with the previous submissions. Earlier this year the company announced that they have entered into a strategic manufacturing relationship with BBInternational (BBI) to complete commercial development and manufacture of the AppyScore consumable test cassette. The ELISA format of the AppyScore Test is currently in clinical trials for clearance by the FDA and is designed to aid in the evaluation of patients suspected of having acute appendicitis.
Truly remarkeable is their results from a 471 patient study conducted at multiple hospital sites under appropriate Institutional Review Board Approvals and patient consent. Out of 471 patients, 100 were normal presumably healthy control donors. The 100 normal AppyScore control individuals were used to characterize and confirm the blood level of the proprietary biomarker used in AppyScore in normal healthy individuals. The remaining 371 were patients who entered to the emergency rooms with abdominal pain, with appendicitis as a possible diagnosis. A total of 97 of 311 or 31% of patients had pathology-confirmed appendicitis in the study. AppyScore was able to correctly identify 95 of 97 patients with pathology-confirmed appendicitis. This exceptionally high sensitivity level of 98% for detecting the actual disease condition is considered statistically significant (95% CI = 93% to 99.9%). In addition, the combination of using the data from AppyScore in conjunction with a CT scan resulted in a specificity of 99% (95% CI = 97% to 99.9%).
APPY also has an animal health segment and signed a deal with Novartis (NASDAQ:NVS) Animal Health earlier last year in April for exclusive licensing and commercialization of BoviPure LH and BoviPure FSH. The two animal health products are produced by recombinant DNA [rDNA] technology, which offers advantages such as increased potency, increased stability, no risk of disease transmission as with animal-based hormones, and lower manufacturing cost.
From a financial standpoint, APPY is well positioned with about $18M in cash, $26M in total assets, $6M in total liabilities, 31M shares outstanding, and 34.8M fully diluted shares. Insider and institutional ownership are significant at 23% and 40%, respectively, while the short interest declined to 99,600 as of mid-April. The Company has a very low burn rate of about $1.9M per quarter, which is much lower than most development-stage bio-pharma companies of its size.
Technical Analysis
From a technical standpoint, APPY seems to be on the verge of a major rebound, with slight resistance holding it back around the $3.00 range. Once the bulls push beyond this point, this level should become the new support as it makes its way towards the key 200 DMA resistance of $4.10. These key levels should be reached rather easily upon positive clinical updates on its AppyScore medical device, especially considering they should be three events all being announced one after the other within a two week span.
Currently, shares trade at a highly undervalued price of $2.85, due largely in part from the large fall in early 2009 from a change in their stand alone pivotal trial that was required from the FDA. This leaves plenty of opportunity to scoop up cheap shares as traders await a “natural gap” fill back to the 200 DMA of $4.10, which should proceed in the coming weeks.
Relative Strength Index represents increasing buying pressure as it currently resides in a neutral position of neither being overbought nor oversold. Moving onto other oscillators, the MACD divergence currently remains flat-lined around the 0 mark, showcasing a stock on the verge of a breakout should buying pressure continue.
Lastly, Full Stochastics moving upwards confirms that the oscillators indicate the Bulls are beginning to enter back into the stock, which will lead to increased shareholder value as we wait the much anticipated developments of their flagship product.
In conclusion, what you get is a stock trading around the $100M market cap which is on the verge of revolutionizing a $1B North America unmet need within the Appendicitis diagnostics market, which could very well see partnerships and mergers to bring their technology on a worldwide scale. A rise back to the $10-15 price per share level isn’t out of the question given that positive results come in from their stand alone pivotal 800 patient clinical trial for AppyScore.
Disclosure: Long APPY
“On 2/9/10, APPY reported conclusions from tits pre-planned independent…”
nice!
[...] corner down Wall Street, and not without merit [see company description below]. We first wrote a report entitled “Is AspenBio Pharma Next To Follow In The Footsteps Of Dendreon (DNDN) and Human [...]
[...] corner down Wall Street, and not without merit [see company description below]. We first wrote a report entitled “Is AspenBio Pharma Next To Follow In The Footsteps Of Dendreon (DNDN) and Human [...]
you reference the 471 patient study that demonstrated a sensitivity of 98%…..why not acknowledge that this was the pilot study. you make no reference to the pivotal trial released by the company on January 20, 2009 in which AppyScore demonstrated a sensitivity of only 83% at the pre-specified cut off AppyScore of 20. In a retrospective data analysis, the sensitivity increased to 89% at an AppyScore of 15 but thats well below the 98% you refer to in your note.
[...] in this stand alone pivotal clinical trial on 3/23/10. APPY estimates that May 4th to 18th the data analysis will be available to include in its pending 510(k) submission to the FDA which will also [...]
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