Why accumulating LPath at these price levels could pay off in both the near and long term Print E-mail
By M.E.Garza   
Tuesday, 19 June 2012 00:00
icon_tradethesisHere is one of the stocks we told our premium subscribers to put on their short term buy-and-hold list yesterday. It's a stock that the market had great enthusiasm for earlier in the year -- Lpath (NASDAQ:LPTN)-- after investors learned that Pfizer was interested in taking out the firm pending results from two Phase II trials in which they were partners. In fact, there is a new, summary article with the latest developments that also spells out some details about the current Pfizer partnership and their second "time-limited right of first refusal for a different drug candidate, ASONEP™."

Speculators buying Lpath, Inc. in anticipation of key catalysts

Lpath: A Solid Pipeline with Good PPS

Video Analysis of this trade from Investors Hub

Earlier this year, in January, the Company temporarily suspended dosing patients in its PEDigree and Nexus trials because a third-party vendor was found not in compliance with FDA's current Good Manufacturing Practice (cGMP) requirements during the period that the iSONEP clinical vials were filled. Representatives from both Lpath and Pfizer were shocked to learn that the FDA reaching far enough into the trials in which iSONEP™ is being tested as a treatment for wet AMD (Nexus) and a related complication called Pigmented Epithelial Detachment (PEDigree) and ordering that dosing be stopped.

In recent SEC filings, Lpath has told investors that they expect both trials will be open for enrollment again in Q3 of 2012. The company was to submit the necessary documentation regarding the new drug material to the FDA by June and we feel that news regarding this and other important developments may not be far off. If the trials kick-off again, then investor interest should return in anticipation of results.

In addition, the BioMedReports FDA Calendar shows several other key catalysts which will likely breathe life and attention back into the stock, especially given the number of analysts who like the stock and their pipeline potential. In fact, prior to the FDA's decision to stop Phase II dosing, the (buyout) target price on the stock was $8-- roughly a $500 million market cap and 10x the value of where shares trade today-- which is approximately where Pfizer would do a deal to take out the company, if they decided to, following the various upcoming Phase II trials.



The downside risk, we feel, is minimal. The chart tells us that the stock has pretty much hit rock bottom. The last three candles give us a strong indication that the stock may be at a bottom here, but the way we see it,  given all the pending news and milestones, the stock may be getting ready to start moving.

The company has already announced that three Phase II trials are pending to be launched in 2012-- including one for a pre-clinical candidate (Asonep for Multiple Sclerosis) which is expected to jump straight to Phase II.  In each of those pending new trails for which Pfizer has the rights of first refusal.

For now we see this as a nice short term trade with the potential to double in price before running into some of the overhang which may be there from the last financing at around the $1.10-$1.15 price level. We watched trading on this one Monday and we saw some enthusiastic buying- including several big block buys. The price, as we suspected, stayed in the same range. As more speculators take positions ahead of the trial re-start, shares should continue to climb in value nicely.

Low-risk, high reward is the key here. If you go down the Company's summary page on Yahoo Finance, you will find many enthusiastic articles about the company and their biolipid platform. Someone mentioned to me via email yesterday that pSivida Corp. (Nasdaq:PSDV) is also developing some drug delivery products for treatment of back-of-the-eye diseases and that Pfizer is also rolling the dice with them. The takeaway here is that Big Pharma likes to hedge their bets and it is clear that Pfizer is targeting both these firms because these eye disease markets are slated to undergo rapid expansion due to the aging demographics of the U.S. population. According to one analyst, who gave LPath an $8 price target, it is estimated that nearly 10 million people suffer from AMD in the U.S., many of whom are not currently receiving therapy. The difference here is that existing drugs all focus on inhibiting neovascularization or blood vessel growth within the eye. Lpath's approach not only attenuates the permeability of the retina, but also blocks inflammation and fibrosis, potentially enabling their iSONEP™ drug candidater to impact parameters that currently available drugs cannot ameliorate.

Again, we see lots of upside with very limited downside at these price levels, particularly given the upcoming important catalysts, potential new milestone payments and data we've seen from earlier trials involving Lpath's ImmuneY2™ platform, which identifies and optimizes monoclonal antibodies against specific bioactive lipids (thus enabling such antibodies to be developed as potential therapeutic agents aimed at various fibrotic, autoimmune, neurodegenerative, and ophthalmologic disorders).


Disclosure: Long LPTN




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