Access Pharma (OTC:ACCP): Low Valuation, Big Potential Print E-mail
Wednesday, 06 May 2009 17:41 - Access Pharma (OTC:ACCP): Low Valuation, Big PotentialWith shares of Cell Therapeutics (NASDAQ:CTIC) staging the most astonishing comeback I have ever witnessed while rising from 8 cents at the time of my original article in early February to as high as $1.85 during intraday trading today and closing at $1.27 - I went in search of another out-of-favor name in the cancer biotech space.

Access Pharma (OTC:ACCP) 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 side effect of some cancer treatments known as mucositis (painful sores in the mouth and GI mucosal lining). Valued at roughly $30M, 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.

The Company has completed six partnerships within the past 18 months with more expected to follow as ACCP seeks to mitigate the inherent risk of the clinical development process. ACCP has assembled a diverse and experienced team of executives and consultants while insiders own a significant (50%) stake to ensure their interests are aligned with shareholders.

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 (based on marketing partner estimates) and a scaled royalty rate of 20-25% (i.e. over $70M royalties on peak sales which is over 2X the current market cap).

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 (VTX:ROG) (OTC:RHHBY) 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.

The 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.

ACCP anticipates an expense of $2M and about 12-15 months to get an IND filed to initiate clinical trials in humans; although this timeline could be shortened if such trials were conducted outside of the U.S. A long-acting, basal insulin product (similar to Lantus) is the most advanced in terms of achieving oral bioavailability of 80-90% after initially achieving results in the 30-40% range. hGH, which is about 3X larger than insulin on a molecular basis, is currently in the 30-40% bioavailability range in preclinical animal models.

The Company has about 22M total shares of common stock, including 11.3M shares outstanding and 10.6M shares of common stock under preferred shares - please note the financial data providers such as Yahoo and Google Finance only include the 11.3M shares in their calculations of market cap and other metrics. ACCP has a $5.5M note due at the end of 2011, which is convertible at a price of $27.50 per share.

ACCP projects that it will have sufficient liquidity into 2010 based on its current cash/equivalents ($2.7M at year-end) and expected upfront, royalty, and milestone payments. During 2H09, the Company plans to start multiple clinical trials for ProLindac and thiarabine, in addition to selling off its anti-infective dermatology assets (EcoNail, Pexiganan).

The final Phase 2 ovarian cancer trial results are also pending and ACCP is engaged in ongoing discussions for either regional or a global partnership deal for the drug in addition to initiating Phase 2 studies of the drug in combination with other chemo drugs (paclitaxel, gemcitabine). ACCP is seeking to transition from OTC to re-list on a national exchange such as Nasdaq in order to increase its visibility and liquidity for investors.

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, 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 to view or download the PDF stock research reports for ACCP written by Griffin Securities.

Disclosure: No positions.

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