Orphan drug status
Big advantage in pharma
Can make a cash cow
Big advantage in pharma
Can make a cash cow
Thursday, January 10, 2013
Ohr Pharmaceutical (OHRP) Developing Squalamine
Ohr Pharmaceutical (OHRP) might be on to something. Their main project right now is a squalamine eye drop solution to treat age-related macular degeneration (wet AMD). The topical application of this solution is a different modality from the injection treatment that presently dominates the market. The mere thought of injecting something into a patient's eyeball probably gives sufferers the creeps, so an eye drop solution is an easier bridge for a patient to cross. About 200,000 new wet AMD cases are diagnosed each year but I can't find a comparable price for the competing injection, so it's hard to estimate the value of this part of the market.
The eye drop drug is in Phase 2 trials and its intravenous application with ovarian cancer patients has received orphan drug status, a key regulatory advantage. The incidence of occurrence of both wet-AMD and ovarian cancer will determine the total size of the market for this drug. About 20,000 new cases of ovarian cancer occur each year but Ohr's squalamine drug was applied in conjunction with carboplatin in its Phase 2 study, so if they have a combined effect then patients will need insurance coverage for both drugs. Generic versions of carboplatin are available and the price per dose was over $9000 in 2006. Using that as a comparable price, I can estimate first-year sales for the ovarian cancer market of $180M. That is generous and comes with caveats. My estimate works if Ohr's squalamine drug makes it to FDA approval, and if every new ovarian cancer patient gets a dual dose regimen (which in turn depends on doctors' inclination to prescribe it and insurance companies' coverage).
Let's not ignore the other drugs in their pipeline. Their AVR-118 drug aims to treat cancer cachexia, for which most treatments have been ineffective. That seems to be a potentially larger market than the market for ovarian cancer drugs and the competitive field is devoid of approved drugs. If AVR-118 is a winner, Ohr will dominate the cachexia treatment field.
I like Ohr's strong management team. The CEO and chief scientist have been through multiple rounds of drug development. I don't know whether Ohr's drugs will ultimately win FDA approval but I am impressed with the positioning and progress of the two drugs mentioned above. I'll check back on this one in about a year.
Full disclosure: No position in OHRP at this time.
The eye drop drug is in Phase 2 trials and its intravenous application with ovarian cancer patients has received orphan drug status, a key regulatory advantage. The incidence of occurrence of both wet-AMD and ovarian cancer will determine the total size of the market for this drug. About 20,000 new cases of ovarian cancer occur each year but Ohr's squalamine drug was applied in conjunction with carboplatin in its Phase 2 study, so if they have a combined effect then patients will need insurance coverage for both drugs. Generic versions of carboplatin are available and the price per dose was over $9000 in 2006. Using that as a comparable price, I can estimate first-year sales for the ovarian cancer market of $180M. That is generous and comes with caveats. My estimate works if Ohr's squalamine drug makes it to FDA approval, and if every new ovarian cancer patient gets a dual dose regimen (which in turn depends on doctors' inclination to prescribe it and insurance companies' coverage).
Let's not ignore the other drugs in their pipeline. Their AVR-118 drug aims to treat cancer cachexia, for which most treatments have been ineffective. That seems to be a potentially larger market than the market for ovarian cancer drugs and the competitive field is devoid of approved drugs. If AVR-118 is a winner, Ohr will dominate the cachexia treatment field.
I like Ohr's strong management team. The CEO and chief scientist have been through multiple rounds of drug development. I don't know whether Ohr's drugs will ultimately win FDA approval but I am impressed with the positioning and progress of the two drugs mentioned above. I'll check back on this one in about a year.
Full disclosure: No position in OHRP at this time.
Wednesday, January 09, 2013
Tuesday, January 08, 2013
Monday, January 07, 2013
The Limerick of Finance for 01/07/13
Technology transfer is great
Marketing innovation can't wait
New gadgets and such
Don't cost all that much
Go commercial before it's too late
Marketing innovation can't wait
New gadgets and such
Don't cost all that much
Go commercial before it's too late
Sunday, January 06, 2013
Saturday, January 05, 2013
Friday, January 04, 2013
Thursday, January 03, 2013
St. Elias Mines Under A Dime
It's easy to say that St. Elias Mines (SLI.V) is in mining but that's hard to prove since they're not running any producing mines. The backgrounds of their management team make little obvious sense for mining. The CEO has no obvious education or work experience in geology or mining, although she does have some video tips on career success that also shed no light whatsoever on mining. There's also a paralegal and a couple of perennial board members on the team who have no apparent background in mining. Hey, how's that working out for you folks?
They have a dozen projects but not much progress of note at any of them. I see a lot of noted comments on the project pages like "drilling suspended" and "available for option" indicating either lack of economically significant discoveries or lack of funding to initiate exploration. Junior miners that pursue discovery models create value by optioning off development rights to larger miners; they can use the cash to keep exploring or spin off an optioned project into a stand-alone producer. Lack of progress is common with many projects in such a model but success is required at some point to justify further investor interest.
St. Elias has pretty much been a penny stock since its debut in 1998, except for a stretch from March 2010 to January 2012 when it was up over a buck, then over two bucks, then back down to about a buck. Now the share price is under a dime. I look for junior miners that have the ability to create lasting fundamental value, and I'm not going to look at St. Elias Mines again.
Full disclosure: No position in St Elias Mines at this time.
They have a dozen projects but not much progress of note at any of them. I see a lot of noted comments on the project pages like "drilling suspended" and "available for option" indicating either lack of economically significant discoveries or lack of funding to initiate exploration. Junior miners that pursue discovery models create value by optioning off development rights to larger miners; they can use the cash to keep exploring or spin off an optioned project into a stand-alone producer. Lack of progress is common with many projects in such a model but success is required at some point to justify further investor interest.
St. Elias has pretty much been a penny stock since its debut in 1998, except for a stretch from March 2010 to January 2012 when it was up over a buck, then over two bucks, then back down to about a buck. Now the share price is under a dime. I look for junior miners that have the ability to create lasting fundamental value, and I'm not going to look at St. Elias Mines again.
Full disclosure: No position in St Elias Mines at this time.
MAG Silver (MVG) In Mexico
MAG Silver (MVG / MAG.TO) mines silver in Mexico. I've never been south of the border but I hear there's lots of tortillas down there, plus attractive women. I don't know whether MAG Silver employs attractive Mexican women but if they do they should pay them in pesos rather then tortillas.
I have no quibble with the management team because they have the proper backgrounds. They have a lot of projects in play. The Cinco de Mayo project's MII resources look low at first glance but the moly grades actually exceed the average grades found in porphyry copper deposits. The rest of their projects may show promise after more exploration but it's too early to tell.
Their Q3 financial statement for 2012 reveals US$44M in cash on hand, but they'll need much more than that to complete several simultaneous drill programs. The diverse project portfolio requires a look at fundamentals from a value perspective. Their FCF is severely negative and so is their five-year average ROE.
I can't understand why the market values MAG Silver at over $10/share when they've been losing money since 2008. Inferred grades only get you to the threshold of a production decision. I could understand the optimistic valuation if one of their larger projects were close to starting production but I can't be so optimistic with so many other undeveloped properties eating up capital.
Full disclosure: No position in MAG Silver at this time.
I have no quibble with the management team because they have the proper backgrounds. They have a lot of projects in play. The Cinco de Mayo project's MII resources look low at first glance but the moly grades actually exceed the average grades found in porphyry copper deposits. The rest of their projects may show promise after more exploration but it's too early to tell.
Their Q3 financial statement for 2012 reveals US$44M in cash on hand, but they'll need much more than that to complete several simultaneous drill programs. The diverse project portfolio requires a look at fundamentals from a value perspective. Their FCF is severely negative and so is their five-year average ROE.
I can't understand why the market values MAG Silver at over $10/share when they've been losing money since 2008. Inferred grades only get you to the threshold of a production decision. I could understand the optimistic valuation if one of their larger projects were close to starting production but I can't be so optimistic with so many other undeveloped properties eating up capital.
Full disclosure: No position in MAG Silver at this time.
Wednesday, January 02, 2013
Silver Lake Resources (SVLKF) Mines Australian Gold
Silver Lake Resources (SVLKF / SLR.AX) mines gold in Australia. Did I ever mention that I visited Australia in 2001? I didn't go to any gold mines but I met other multinational executives in Melbourne. What a nice town. I didn't date any Australian women. Next time I'm down there I'll have to check out some of these gold miners. In the meantime I'll just have to settle for their financial numbers.
My regular readers know that Australian company management nomenclatures sometimes throw me for a loop. The Silver Lake team looks solid even though there's no clear "CEO" title. I can live with the lack of translatable titles when the whole team is steeped in geology and mining engineering.
This is an established mining company, so a project-by-project comparison is less useful than a fundamental evaluation that encompasses the whole company's multi-project performance over time. Their net income for the past three years has been consistent and they have no long-term debt. FCF turned positive in their 2012 annual statement after having been negative for two years prior. I can understand the need to invest in new infrastructure at developmental stage projects but at some point this will hurt net earnings if they can't put new properties into production. Their five-year ROE is pretty remarkable at 19.12%.
I'm pleased with the quality grades from Silver Lake's operating mines. They need to keep their company-wide cash cost of production far below US$600/oz if they are to create value in the long term.
Full disclosure: No position in Silver Lake Resources at this time.
Tuesday, January 01, 2013
Max IRA Contribution Upped To $5500 For 2013, No Confiscation In Sight
Investors need to check out the IRS rules for tax-advantaged retirement accounts in 2013. One notable item is the increased cap for IRA contributions, now $5500. I made the maximum contribution to my IRA this morning for tax year 2013.
I've been seeing a lot of chatter on the Web lately about national plans to confiscate personal retirement accounts or force their holders to purchase government bonds. I have not uncovered any official record of any such plan under consideration at any level of government. One prominent economist has made a series of public proposals advocating a mandatory annuity-based account system but the political blogosphere has somehow magnified her ideas into a looming threat of confiscation. Calm down, people. Confiscation of IRAs and 401(k)s would be far more disruptive to the U.S. financial sector than FDR's gold confiscation. Mutual fund companies and big banks would cry uncle at the lost fee income and their lobbyists would be out in force. I doubt that any compromise proposal to custody mandatory annuity accounts with the few politically favored big banks would satisfy any Wall Street concerns over lost fee revenue. Any way I slice this one, I just don't think confiscation is any more than a very remote "black swan."
Congress has also considered methods of encouraging contributions to IRAs. Recent hearings considered new incentives that would make retirement account contributions easier. The Administration is even proposing tax credits that will encourage small employers to enroll employees in IRAs.
People can relax for now. A replay of the 2008 financial crisis may put a lot of untouchable ideas back on the table but taking away IRAs isn't likely to be one of them. I suspect that removing their tax exemption or tax deferral would be within the realm of extreme possibility, but even that would occur before outright confiscation (or forced conversion to bond-buying managed annuities) would ever be considered. I made my IRA contribution this year with the risk of eventual taxation in mind, and I would prefer to earn tax-free capital gains while they're available.
I've been seeing a lot of chatter on the Web lately about national plans to confiscate personal retirement accounts or force their holders to purchase government bonds. I have not uncovered any official record of any such plan under consideration at any level of government. One prominent economist has made a series of public proposals advocating a mandatory annuity-based account system but the political blogosphere has somehow magnified her ideas into a looming threat of confiscation. Calm down, people. Confiscation of IRAs and 401(k)s would be far more disruptive to the U.S. financial sector than FDR's gold confiscation. Mutual fund companies and big banks would cry uncle at the lost fee income and their lobbyists would be out in force. I doubt that any compromise proposal to custody mandatory annuity accounts with the few politically favored big banks would satisfy any Wall Street concerns over lost fee revenue. Any way I slice this one, I just don't think confiscation is any more than a very remote "black swan."
Congress has also considered methods of encouraging contributions to IRAs. Recent hearings considered new incentives that would make retirement account contributions easier. The Administration is even proposing tax credits that will encourage small employers to enroll employees in IRAs.
People can relax for now. A replay of the 2008 financial crisis may put a lot of untouchable ideas back on the table but taking away IRAs isn't likely to be one of them. I suspect that removing their tax exemption or tax deferral would be within the realm of extreme possibility, but even that would occur before outright confiscation (or forced conversion to bond-buying managed annuities) would ever be considered. I made my IRA contribution this year with the risk of eventual taxation in mind, and I would prefer to earn tax-free capital gains while they're available.
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