Protocol Deviations And The One Site to Rule Them All – AMPE

Our post last week on Freezergate 14, “Every Picture…” has caused quite a stir. Today Ampion (AMPE)  has issued a “Letter To Shareholders” available here attempting to gloss over some of the Freezergate ’14 issues.

Don’t worry shareholders, these things happen all the time and the FDA is “very positive” as this particularly choice bit suggests:

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Every Picture Tells A Story – AMPE, the (other) Dream Team & Raghuram Selvaraju

Today’s story begins with an aging office park, 500 arthritic Phase III subjects and a freezer that eats dreams. Welcome, dear readers, to the world of Ampio Pharmaceuticals (AMPE), the filthy reverse merger put together by Las-Vegas-based stock promoter Jens Dalsgaard, charming the market this week with tales from Freezergate ’14 (read more about Freezergate here).
Sell-side shill Raghuram Selvaraju, of Aegis Capital, brushed off Freezergate as an innocent distribution error in his report of 21 August 2014 (emphasis mine):

 This morning, Ampio Pharmaceuticals announced a delay in the data analysis of the STEP study due to the fact that the study drug (both AmpionTM and the placebo) were exposed to lower temperatures than permitted by the drug specifications during shipment to the clinical sites….During the review of all documentation following the unblinding of the study, the company’s independent Clinical Research Organization discovered that the drug product received at the clinical sites had been below the temperature requirement of 15 degrees Celsius and may have been frozen for some period of time.

Innocent enough? Hardly. All Ram is doing is regurgitating the company line, spinning what most certainly be failure into platitudes and excuses designed to keep suckers buying paper that likely is only worth the cash on the balance sheet, roughly $1.25 per share. But what really jumped out at us was a creative use of the plural (clinical sites?) and a funny definition of the word “independent”. We were recently in sunny SoCal and investigted this independent CRO, which just happened to share a wall with the study’s sole site and Principal Investigator (“PI”). Coincidence?

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Quick Take – Bye Bye Mark Ahn (GALE)

As tweeted last night by The Street.com’s Adam Feuerstein, the smug Mark Ahn is out at dreadful Galena Biopharmaceutical (GALE). Read more here.

The sell-side analysts whoring themselves out for banking business, like Needham’s moronic Chad Messer (read about him here and here) will now have to dust off the pads and kneel before newly promoted GALE CEO Mark Schwartz.

For those playing at home, the case to watch (or better yet send in an FOIA request) is:

In the Matter of Galena Biopharma, SEC File No. HO 12356 now known as  “In the Matter of Certain Stock Promotions”

No wonder the GALE-eediots have been so silent recently.

THE CONTENT CONTAINED IN THIS BLOG REPRESENTS ONLY THE OPINIONS OF THE AUTHOR. THE AUTHOR MAY HOLD EITHER LONG OR SHORT POSITIONS IN SECURITIES OF VARIOUS COMPANIES DISCUSSED IN THE BLOG. THIS COMMENTARY IN NO WAY CONSTITUTES INVESTMENT ADVICE, AND SHOULD NEVER BE RELIED ON IN MAKING AN INVESTMENT DECISION, EVER. THIS BLOG IS NOT A SOLICITATION OF BUSINESS: ALL INQUIRIES WILL BE IGNORED. THE CONTENT HEREIN IS INTENDED SOLELY FOR THE ENTERTAINMENT OF THE READER, AND THE AUTHOR.

Quick Take – Nanoviricides (NNVC)

Two great reads about reverse merger bio-turd Nanoviricides (NNVC).

First, check out Duff McDonald’s piece in the NY Observer, available here.

Then read these emails between NNVC CEO Eugene Seymour and some poor sap he is promising a seat on the BoD.

Finally, scratch your head as you try to contemplate just how monumentally stupid the investors in NNVC must be. Congratulations Dr. Seymour you found a group of morons even dumber than the GALE-eediots.

 

THE CONTENT CONTAINED IN THIS BLOG REPRESENTS ONLY THE OPINIONS OF THE AUTHOR. THE AUTHOR MAY HOLD EITHER LONG OR SHORT POSITIONS IN SECURITIES OF VARIOUS COMPANIES DISCUSSED IN THE BLOG. THIS COMMENTARY IN NO WAY CONSTITUTES INVESTMENT ADVICE, AND SHOULD NEVER BE RELIED ON IN MAKING AN INVESTMENT DECISION, EVER. THIS BLOG IS NOT A SOLICITATION OF BUSINESS: ALL INQUIRIES WILL BE IGNORED. THE CONTENT HEREIN IS INTENDED SOLELY FOR THE ENTERTAINMENT OF THE READER, AND THE AUTHOR.

 

Sell Side Shills, Chad Messer Edition, Part 2 – GALE

Yesterday we ripped apart just the very beginning of Chad Messer’s brilliantly insightful research note on Galena Biopharma (GALE). Catch up with it here. We continue with Part 2 of our series. Says Chad:

Fundamentals Remain Strong. Galena has 4 promising oncology-related products and management has executed well on their development thus far. This includes 2 specialty pharmaceutical products and 2 innovative cancer vaccines with blockbuster potential:

Well, we already know the fundamentals are not, and have never been, strong, but it is true that Galena has 4 products. We can even let Chad live with his delusion that the products are promising. After all, you totally could be a model, baby.

But the claim that management has executed well is just laughable. Firstly, Galena acquired the ho-hum fentanyl product, Abstral, after it had already been on the market for 2 years. GALE management had zero to do with its development…and as for sales, well, they were their own best customer in Q4. Galena picked up the second product, GALE-401 aka Anagrelide CR, in a tiny deal in January of this year, so it is unlikely that Mark Ahn and co have been able to work their execution magic. The last two products, NeuVax and the FBP vaccine were acquired through the fire sale of Apthera, after the failure of the NeuVax Phase 2 trials.

It is true that Galena management has advanced NeuVax into a Phase 3 trial, but what else were they going to do? In any event, it is one that seems to have been enrolling patients slower than expected. Chad, is that good execution or poor execution? Do you even know the difference?

Our intrepid analyst continues his note, with a breakdown of the products:

1) Abstral, a sublingual formulation of fentanyl for breakthrough cancer pain, is already on the market and exceeding initial launch expectations. Galena issued increased guidance for $11-15 million this year. We believe the drug has sales potential north of $50 million.

Chad is correct about two things. Abstral is a sublingual formulation of fentanyl (well, fentanyl citrate, but lets not split hairs) and Abstral already on the market. Good work. Unfortunately for Chad, the initial launch was in early 2011. Even if you believe the nonsensical spin that the “real” launch was somehow in late 2013, how could Galena have exceeded launch expectations when Q4 revenues were about 30% below Street consensus estimates? On the off chance that English is not Chad’s first language, the definition of “exceeding” is “to go beyond in quantity”. Does anyone think reporting sales below estimates is the same thing as going beyond them in quantity? Anyone?

Chad believes Abstral has sales potential north of $50mm. Given that in almost three full years (Feb 2011 to Dec 2013) on the market cumulative US sales of Abstral are about $8mm, is $50mm+ per annum a reasonable belief?

2) GALE-401, a controlled release anagrelide for essential thrombocytopenia, will enter a Phase II study this year and could be on the market by 2016. We estimate this product has sales potential in the low hundred millions.

Chad is truly reaching here. The entire market for anagrelide in 2013 was $89.6mm, and in 2012 $88.7mm. The market is dominated by generics. Brand-name Agrylin does only about $1mm a year in sales. Can someone please explain how GALE-401 will capture 110-400% of the existing market? Let’s move on.

3) NeuVax is in a pivotal study in breast cancer patients that will complete enrollment around 2Q and will report data in mid-2016. Previous Phase IIb data has shown the ability to delay disease recurrence in patients achieving an initial remission. NeuVax is also in a Phase IIb study in combination with Herceptin that is being run in collaboration with Roche and will soon to be in a Phase II study in gastric cancer being run and paid for by Dr. Reddy’s Laboratory.

The big mistake Chad makes is reading the Phase 2 study results. The study showed that NeuVax does not work. The data that Chad, and the other GALE-eediots, so desperately cling onto is from a data-mined retrospective sub-group analysis. Galena bulls confuse such post-hoc analysis with actual, valid, prospective trial results. Further, the rationale for the NeuVax Phase 3 trial makes no logical sense. A good explanation is available here, in a comment by Johnnyboy on Derek Lowe’s excellent blog, In The Pipeline.

Stunningly, Chad never mentions that the key (and only composition of matter) patent* for NeuVax expires in 2015. Before the Phase 3 study is even completed, and well before NeuVax would ever come to market. Further, Chad fails to disclose that Galena also has no foreign composition of matter patents. If by some remote lighting-strikes-plus-powerball-winning miracle the NeuVax Phase 3 trial is a success, every drug company in the world can easily, and legally, make generic NeuVax.

This makes the Dr. Reddy’s Laboratory partnership Chad mentions all the more frightening. Dr. Reddy’s is a large Indian generic drug company, one that will have plenty of in-house know how concerning NeuVax, which they could then easily produce and sell to the rest of the world, perfectly legally. Want to bet any sell side shills told that to their clients?

We’ll finish up our critical examination of Chad’s note next time. In the meantime, relax, take a 5 minute comedy break and enjoy the great John Witherspoon explaining all about ho-cakes, in “Hollywood Shuffle“. Because hoes got to eat too.

* GALE-eediots will cry out “But what about the American use patents?”…ok, what about them? Use patents are amazingly weak, easily challenged, and easy to work around. Even if upheld, American patients could simply drive to Canada or Mexico, fly to Costa Rica, or travel to anywhere else on the globe to get generic NeuVax for far cheaper than it would cost in the USA.

The content contained in this blog represents only the opinions of the author. The author may hold either long or short positions in securities of various companies discussed in the blog. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. This blog is not a solicitation of business: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.

Sell Side Shills, Chad Messer Edition, Part 1 – GALE

Why do we here at BuyersStrike! HQ think so poorly of sell-side analysts? Those sober-looking investment bank employees whose job is to, supposedly, give out insightful investment advice?

Because that is not really their job. Their job is to sell you, the investing public, something. That is why smart professionals ignore them, and call them by another name, “banking whores”.

Care for an example? Let’s deconstruct just the beginning bits of the dreadful Galena Biopharma (GALE) missive from Needham’s Chad Messer.

(Why Chad? Because we love The Chappelle Show here at HQ, and especially the Mad Real World skit, watch it again and again here, it sort of sums up Chad perfectly.)

Chad opens with a whopper:

Fundamentals Are Strong Despite Stock Promotion Overhang; Maintain BUY Rating

To which fundamentals could Chad possibly be referring? Galena has only one shipping product, the me-too fentanyl product Abstral. The consensus net revenue estimate for Q4 was $1.825mm. GALE reported net revenues of only $1.317mm, a miss of 27.84%. Only in the world of banking whores can a miss of almost 30% be considered a strong showing.

Revenues are not the only fundamental metric of course, there is also profitability. The mean estimate for Q4 EPS was a loss of 9c. GALE came through with a loss of 46c, a 400% miss to the downside. Maybe Chad doesn’t understand negative numbers? Moving on…

INVESTMENT HIGHLIGHTS: Galena currently holds $55.3 million in cash and expects ~$8 million/quarter in operating burn during 2014, leaving the company well capitalized.

Instead of going off of the audited financials in the 10K, Chad is hanging his hat on an odd figure that GALE trumpeted in the press release, mid-March cash of $55.3mm, Looking just at a single line item, unaudited cash, without examining the rest of the balance sheet is irresponsible.

A more fair, but still simplified, assessment would be as follows:

Audited cash of $47.8mm – debt of $9.9mm (ST + LT) = Net cash as of 12/31/13 $37.9mm. Given their stated burn of $8mm a quarter that gives the company just about 5 quarters of life left. In what fever-dream is that well-capitalized? Even that is a very brief, and irrationally optimistic, look at the balance sheet which skips over some glaring red flags which we will examine further.

One would like to think an analyst at a Wall Street bank would know how to read financial statements, and certainly could spot red flags. Here’s one a first semester accounting student could spot: Galena has Accounts Receivable (AR) of $3.7mm on only $1.3mm in sales, which gives a Days Sales Outstanding (DSO) calculation of a whopping 256 days. Lesson for you Chad, DSOs < 90 are good, > 90 are bad. C’mon, didn’t George teach you this?

Chad also fails to mention this red flag line item from the 10K:

Fair value of warrants potentially settleable in cash:  $48,965mm

A warrant liability greater than Galena’s audited cash balance, one which is potentially settleable in cash, and not a mention. Should the worst happen, settling this debt would leave Galena destitute. Still well-capitalized?

Nor does he mention the $5mm deferred tax liability, nor the contingent purchase price consideration liability of $6.8mm.

Chad is awfully silent about the Stockholder’s Equity line which dropped precipitously from $27.7mm at the end of 2012 all the way down to $5.9mm at the end of 2013.

Does anyone still think Galena is “well capitalized”?

More on Chad Messer’s intellectual musings next time, including his thoughts on Abstral, NeuVax, and his bizarre claim that “management has executed well”.

The content contained in this blog represents only the opinions of the author. The author may hold either long or short positions in securities of various companies discussed in the blog. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. This blog is not a solicitation of business: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.

Are they still the world’s worst drug dealers? – GALE

Soon the world should finally see an earnings release from our favorite purveyor of highly addicitve opiods, and developer of highly suspect cancer vaccines, Galena Biopharma (GALE).

Readers might recall that we examined the sales of Abstral, Galena’s sublingual fentanyl citrate tablets, in this post. We then drilled down into the sales numbers in this post, and discovered that GALE was essentially buying their own product.

So, in anticipation of the upcoming earnings release, lets look at independent sales data for the first two months of 2014.

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