|DARA May Be An Easy Double [updated]|
|By Chris Fields|
|Friday, 19 February 2010 10:04|
Yesterday, we alerted subscribers to DARA Biosciences, Inc. (NasdaqCM: DARA) and interest may just be getting started.DARA is positioned to deliver strong news on their pipeline products over the first half of the year which will be positive for investors who have not seen consistent updates from the company due to the funding issues over the past year. The company has their strong phase II drug, KRN5500, which is a novel spicaymycin derivative for the potential treatment of neuropathic pain in cancer patients. DARA also has other promising preclinical candidates such as DB959, a unique first-in-class dual peroxisome proliferator-activated receptor (PPAR) delta/gamma agonist with potential activity in controlling blood sugars levels, cholesterol, and triglycerides.
The opportunity with DARA is based on the fact that the company was on the verge of bankruptcy throughout 2008 and early 2009 prior to the appointment of Richard Franco as CEO. The company has been rebuilding after their drug talabostat was discontinued in Phase III advanced non-small cell lung cancer. The company had to scale back significantly down to only 5 employees while they spent a majority of 2008 rebuilding their management, board of directors, and focusing on growing their pipeline. The stock really struggled to stay on the Nasdaq in 2008 as they had no clinical news or developments worthy to keep investor interest until 2009 when Richard Franco rejoined the company and Chairman & CEO. The main goals that Mr. Franco had were to advance the pipeline and secure funding to grow that pipeline. The company has been able to secure funding through private placements and secondary offerings. The company has a Phase II CIPN candidate, KRN5500, that has delivered some positive data in May 2009. The company’s goal is to launch their Phase IIb program, with hopes to partner with a mid to large size company with entry into this cancer space.
The valuation for the company seems low for DARA as they have recently improved the financial position of their company and their clinical milestones seem within reach of the company. The intellectual property is very strong as the company has rights to 71 patents and 58 pending applications worldwide. DARA’s focus has been to take these clinical candidates through the proof-of-concept and then partner for upfront cash and milestone and royalty payment. DARA has a strong intellectual property with significant product potential in the area of potential metabolic and inflammatory products. The most immediate and advanced candidate is KRN5500 and DB959.
DARA has solid potential with key catalysts in the short-term to get this to over $1.50/share based on analyst assessments.
A forward-looking event will propel this forward because it is a guarantee that will occur. DARA has an 8% stake in a medical company called Surgivision who is scheduled to do an IPO in the March (1st qtr) or April (2nd qtr) of 2010. The current market cap of DARA at .48 is only 21 million. The company holds 1.6 million shares of Surgivision and 500K in warrants at .80. The company has a lock-up period on selling the shares till June 2010. This holdings in Surgivision will give the company an immediate cash infusion that is non-dilutive. At $10/share of surgivision the 2.1 million shares would add 21 million in cash. Double the current market cap of 21 million. The company already has 4 mllion in cash so the additional cash would help them fund clinical trials of their pipeline products (KRN5500). That values their pipeline at only 17 million with 25 million in cash.
The company is expecting to present their top-line Phase II data with KRN5500 at ASCO this year. Analysts have started covering the company as 2 have recently joined the fray. The first to cover was Zacks.com and Jason Napodano w/a target of $1.60:
DARA is well positioned for a partnership with mid size to larger pharma because they have products that have strong intellectual property. They have 2 cleared INDs with the US FDA for their KRN5500 which is a novel spicamycin derivative for the treatment of neuropathin pain. Their phase 2a HUMAN PROOF OF CONCEPT trial were completed last year. The Phase 2a trials showed clinical results statistically significant for the Primary Endpoint of Pain Reduction (p=0.03): http://www.clinicaltrial.gov/ct2/show/NCT00474916
They will be starting their 2b trials soon. They also have their FIRST-In-CLASS drug DB959 for the treatment of type 2 diabetes. Their Phase 1 trial is scheduled for the first quarter of 2010.
The company has Milestones in 2010 of :
Completing their Phase 1 study for DB959
Completing improved formulation of KRN 5500
Complete “Bridging” Studies for KRN5500
Initiate Phase 2B for KRN5500
Publish manuscript of Phase 2a study results of KRN5500
Complete Strategic Alliance and obtain a partnership in the first quarter of 2010.
The first half of 2010 will be filled with a lot of strong opportunities for DARA as the company looks to leverage its investment in Surgivision, increase the number of clinical trials for pipeline products, and find a partner to license its therapy to in the first half of 2010.
Disclosure: Long DARA