Zalicus release confirms bullish sentiment Print E-mail
By M.E.Garza   
Monday, 10 January 2011 12:39

Monday, Zalicus (Nasdaq:ZLCS) released an update that clearly confirms analyst recommendations that Zalicus could be headed higher.

Zalicus announced this morning that its oncology research collaborator, Novartis, was extending their contract by a year to May 2012, sending shares up 11% in early trading. We've been following the Zalicus story since early December and shares have appreciated well over 125% since our initial report. Here are some quick notes to consider:

I. Collaborations:

On the collaboration front, shareholders were surprised to learn that Amgen, whose first contract expired in September, have moved into a second phase suggesting the pharma giant really does have a keen interest in Zalicus’s technology and pipeline. We state it this way because the original contract was for the first nine months of 2010 and it looked like a test-drive (so to speak) of the newly improved cuHTS. With Amgen hanging around, it being a buy-out suitor is greatly increased.

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Furthermore, shareholders learned that Novartis extended the to-expire May 2011 contract until May 2012. These extensions were written into the original contract in 2009 as optional. This means Novartis must be very pleased with the results it is getting running its entire oncology library through the cuHTS technology closed-by to their own facility in Cambridge, MA. Like Amgen, Novartis remains on the front-burner as a buy-out suitor given Todd Foley’s relationship on the Zalicus’ Board of Directors who is also Managing Director at MPM Asset Management LLC over the MPM-Novartis Strategic Funds. One rumor floating on the message boards references $4.22 / share as a Novartis floating-bid (this is unconfirmed).

II. Pipeline:

This drew considerable attention for a number of reasons.

First, Synavive’s phase 2B clinical design almost looks identical to the one recently completed by Sanofi-Aventis/Fovea for Prednisporin. The phase 2B study is going to have 5 arms, have the usual protocols, enlist 250 patients, but the real surprise is the study is only targeting 12 weeks (with a year extension). As a combination therapy, Synavive like Prednisporin is proving Zalicus’s unique position move its combinatorial platform through clinical trials at a pace not seen before. Shareholders should receive news on Synavive no later than early autumn.

Second, Zalicus announced it is filing an IND for “Selected Z944, a lead Ion channel compound, to advance into IND-enabling toxicology studies prior to the initiation of a Phase 1 study in 2011 and identified multiple other preclinical compounds that are being evaluated for additional clinical starts in 2011”

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Long-term investors were surprised to learn it is a T-type vs N-type, though Zalicus is experimenting with numerous potential candidates including sodium and calcium ion channels. But the big news here is, not only has Zalicus filed the IND for one drug candidate, the press release revealed for the first-time that they have “Multiple other Ion channel compounds, including both calcium and sodium channel blockers, are being evaluated for potential additional clinical starts in 2011” (IBID). This would exponentially increase the company’s overall value. Novartis and Amgen must be attuned to this.

Monday news confirms that the company is carefully executing on its strategic plan to become a leader in the pain and inflammation space. Volume and price action on Monday was very volatile as the company’s shares rose.

Disclosure: No Positions

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