Access Pharma (OTC: ACCP): A Cancer Biotech Call Option Trade Print
Wednesday, 27 May 2009 09:35

The cancer biotech space has attracted the interest of investors, traders, and diversified healthcare giants this year with Johnson & Johnson (NYSE: JNJ) announcing a $1B cash tender offer for Cougar Biotech (NASDAQ: CGRB) last week and Roche's (VTX: ROG) (OTC: RHHBY) mega-deal to acquire full control of Genentech earlier this year. In addition, positive clinical trial results for Dendreon's (NASDAQ: DNDN) Provenge and stock price turnarounds from the brink of zero at Cell Therapeutics (NASDAQ: CTIC) have fueled interest in the small and micro-cap cancer bio-pharma space among investors and traders looking for the next big trade.
Access Pharma (OTC: ACCP.OB) is an emerging bio-pharma company which is focusing on the development of a late-stage, diversified oncology pipeline in addition to an FDA approved treatment for a common side effect of some cancer treatments known as mucositis (painful sores in the mouth and GI mucosal lining). Up to 40% of all patients receiving chemotherapy and/or radiation therapy develop moderate to severe mucositis, and almost all patients receiving radiotherapy for head and neck cancer and

those undergoing stem cell transplantation develop mucositis. Updated clinical practice guidelines for the prevention and

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treatment of mucositis recommend the use of a preventive oral care regimen as part of routine supportive care along with a therapeutic oral care regimen if mucositis develops.

Valued at roughly $30M on a fully diluted basis, ACCP has multiple shots at goal in its clinical pipeline in addition to a reduced risk profile because the compounds in development are improved versions of existing drugs with established mechanisms of action. With a stock price that has hovered in the $1.30-$1.50 range over the past several weeks, ACCP represents a call option trade despite having a FDA approved treatment for mucositis and

a deep pipeline (relative to its small market cap) of promising compounds focused on the treatment of cancer.

MuGard is the Company's FDA-approved product which functions like a liquid Band-Aid to protect the lining of the oral cavity in cancer patients who develop mucositis as a side effect of radiation or chemotherapy. By 3Q09, the product will be launched in all major global markets with estimated peak sales of $350M and a scaled royalty rate of 20-25% (which translates into royalties of $70M for ACCP based on marketing partner peak sales estimates, which is over 2X the current market cap). Access has already announced marketing agreements with SpePharm for the EU, Milestone for the U.S., JCOM in Korea, and RHEI for China and other Southeast Asian countries.

On 5/27/09, ACCP announced that MuGard(TM), its proprietary oral mucositis product has been launched in Germany, Italy, UK, Greece, and the Nordic countries by its European commercial partner, SpePharm, a pan-European specialty pharmaceutical company dedicated to the provision of high medical value medicines in supportive and critical care. The Company has previously announced commercialization agreements in North America, China and eight Southeast Asian countries and Korea, and is actively seeking additional marketing partners in other regions; MuGard expects commercial launches in these regions throughout the remainder of 2009 as manufacturing and reimbursement gets established regionally.

MuGard is a polymer solution which provides a protective coating for the oral cavity when swirled gently around the mouth that could be expanded into related markets, including dental applications, oral surgery, and other related medical interventions requiring protection of the oral mucosa. The product is formulated as a ready-to-use viscous liquid which is easy to use and carries the added benefit of preventing the incidence of mucositis. In patients receiving radiation therapy for head and neck cancer, 42% of patients using MuGard Rinse did not develop significant mucositis, as compared to just 9% in a historical control group.

A very promising, next-generation platinum anti-cancer compound in the Company's pipeline is known as ProLindac, which includes a proprietary nano-polymer delivery vehicle that allows for over 10X the dose of platinum to be delivered to cancer cells with a much better safety profile compared to standard platinum-based drugs which cause significant and cumulative neurotoxicity. The unique nano-polymer delivery system selectively releases the platinum in a targeted manner to cancer cells, which reside at a low pH (acidic).

ProLindac is meant to be a safer, more effective replacement for Eloxatin (oxaliplatin), which posted estimated global sales of $2.5B in 2008 for Sanofi-Aventis (NYSE:SNY). In addition to having more side effects than ProLindac, Eloxatin is available on an off-patent basis in Europe. ACCP also employs Esteban Cvitkovic as their director of oncology R&D - who has over 30 years of experience in this area and played a key role at SNY in the development and approval of Eloxatin.

Preliminary data from a Phase 2 clinical trial in patients with relapsed ovarian cancer demonstrated that over 12X the dose of ProLindac was delivered compared to Eloxatin and the final data from this trial is still pending. Despite the much larger platinum dose delivered by ProLindac, the drug demonstrated an excellent safety profile in the trial among patients receiving nine or more cycles of therapy.

Thiarabine is the Company's next-generation nucleoside analogue (e.g. fludarabine, cladrabine) designed for the treatment of blood-based cancers such as lymphoma and leukemia. Once again, ACCP is working with the leader in this field - in this case, Dr. Hagop Kantarjian, who is Head of the Leukemia Department at the M.D. Anderson Cancer Center in Houston (which is the primary treatment centre in the U.S. for leukaemia and lymphoma). The Company is currently finalizing clinical trial protocols based on previously gathered data to evaluate the drug in a variety of leukaemia and lymphoma subtypes.

ACCP also has a monoclonal antibody (MAb) with encouraging preclinical results in comparison to Roche's Avastin. Angiolix targets a specific portion of a protein called lactadherin that is only expressed on solid tumors. Angiolix has a dual mechanism of action, which includes (1) inhibiting angiogenesis (blood vessel proliferation which feeds tumor growth) via the lactadherin target and (2) inducing a process known as apoptosis or programmed cell death in cancer cells which are dividing and growing in an unregulated manner. Unlike Avastin, Angiolix has an anti-proliferative effect on cancer cells when used by itself in addition to when it is used in combination with other chemo drugs.

The Company also offers a nano-polymer drug delivery system for the oral administration of large molecules such as insulin, human growth hormone (hGH), and erythropoietin (EPO). This novel delivery mechanism utilizes the body's vitamin B12 absorption system in a Trojan Horse manner with the potential to eliminate the need for injections. This drug delivery technology involves coating a nano-particle with a B12 analog (cobalamin) that binds to intrinsic factor in the gut and triggers binding to cellular receptors which absorb the entire package and its contents of large molecule drugs not normally available by oral administration (e.g. insulin, hGH, EPO). This process increases the cellular uptake in the gut of such large molecule drugs by a factor of 1,000X to 1,000,000X.

Given a very low cash burn rate of about $4M per year, a diverse/late-stage pipeline, extensive partnership agreement, and the pending global commercialization of MuGard by 3Q09 with a 20-25% royalty rate on worldwide sales, the current market valuation of around $30M does not appear to fully account for both the breadth and depth of the pipeline in addition to the large commercial markets the compounds are designed to serve. If MuGard reaches just $20M in global sales at a 20% royalty rate, this alone would cover the current low rate of cash burn itself.

Please visit the research section of or the Company's landing page at to view or download the PDF stock research reports written by Griffin Securities, in addition to links and articles for ACCP.

Disclosure: Long ACCP.

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