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ARWR: Catalyst-Rich Summer Upcoming…

2 days 1 hour ago

By David Bautz, PhD

NASDAQ:ARWR

READ THE FULL ARWR RESEARCH REPORT

<_span_style3d_22_text-decoration3a_ _underline3b_22_="">Business Update

Catalyst-Rich Summer Ahead for Arrowhead

Arrowhead Pharmaceuticals Inc (NASDAQ:ARWR) is developing medicines that cause gene silencing using RNA interference (RNAi), a specific means of inhibiting the expression of genes and stopping the production of a specific protein. The company has a deep and diverse pipeline consisting of the following development product candidates, including eight in-house programs and six partnered drugs, four with Johnson and Johnson (JNJ), one with Amgen (AMGN), and one with Takeda.

This summer, we anticipate the following catalysts:

1) Initiate two Phase 2b studies of ARO-APOC3 in patients with hypertriglyceridemia and a Phase 3 study in patients with familial chylomicronemia syndrome (FCS)

2) Initiate a Phase 2b study of ARO-ANG3 in patients with mixed dyslipidemia (elevated triglycerides and LDL cholesterol)

3) Announce interim results from the ARO-ENaC first-in-human study

4) Present full 48-week biopsy results for ARO-AAT from the AROAAT2002 open label study at a scientific conference

5) Announce interim results from the ARO-HSD first-in-human study

6) Announce initial interim results from the ARO-HIF2 first-in-human study

7) File a CTA for ARO-DUX4, the company’s recently announced first muscle-targeted RNAi candidate as a potential treatment for facioscapulohumeral muscular dystrophy

8) Announced preclinical data for ARO-DUX4 at the FSHD Society International Research Congress

9) Announce additional pulmonary programs that are in the IND-enabling stage

ARO-AAT

ARO-AAT is being developed as a treatment for the rare genetic liver disease alpha-1-antitrypsin (AAT) deficiency. This program was granted Fast Track status by the FDA in June 2019 (which was in addition to Orphan Drug designation in the U.S. and E.U. granted in early 2018). In October 2020, Arrowhead announced a collaboration with Takeda Pharmaceuticals in which the companies will co-develop ARO-AAT and co-commercialize the drug in the U.S., if approved, with a 50/50 profit-sharing structure. Arrowhead received an upfront payment of $300 million and is eligible to receive potential development, regulatory, and commercial milestones of up to $740 million. Takeda is responsible for commercialization outside the U.S. and Arrowhead is eligible to receive royalties of 20-25% on net sales.

Arrowhead is currently conducting the SEQUOIA Phase 2/3 trial and the AROAAT2002 open label study. The company recently announced interim 48-week liver biopsy results from the AROAAT2002 study.

• For cohort 2 (n=5), the results showed that 4/5 patients achieved a 1-stage or greater improvement in Metavir fibrosis stage, with no worsening of fibrosis in the fifth patient. In addition, all five patients had reductions in histological globule assessment scores. Lastly, total intra-hepatic mutant AAT protein (Z-AAT) decreased by 77-97%.

• For cohort 1 (n=4), after only 24-weeks of treatment 2/4 patients achieved a 1-stage or greater improvement in Metavir fibrosis stage (both patients who showed improvement entered the study with F4 cirrhosis). In addition, all four patients had reductions in histological globule assessment scores and total intra-hepatic Z-AAT decreased by 72-95%.

These results are incredibly encouraging and show that when Z-AAT protein is cleared the liver has the ability to heal, including in patients with severe liver disease (cirrhosis). We anticipate additional details for these results being presented at an upcoming scientific meeting. In addition, based on these results we believe the company will likely approach regulators to discuss accelerating the development of ARO-AAT.

ARO-ENaC

ARO-ENaC targets the epithelial sodium channel (ENaC) and is being developed for the treatment of cystic fibrosis (CF). CF patients have reduced clearance of dehydrated mucus due to a defect in the CFTR gene that conducts chloride ions across epithelial cell membranes. The lack of Cl- movement and continued activity of ENaC promotes the dehydration of mucus, however inhibiting the activity of ENaC improves this condition.

Multiple studies validate ENaC as a target in CF. A mutation that increases ENaC activity in patients with a mutation in only one CFTR allele (CFTR+/-) causes atypical CF, thus suggesting that decreased ENaC activity could decrease CF pathophysiology (Rauh et al., 2010). A loss-of-function mutation in ENaC in pseudohypoaldosteronism (PAH) results in no sodium absorption from airway surfaces, a volume of airway surface liquid that is more than twice the normal value, and an increase in mucociliary clearance compared to healthy individuals (Kerem et al., 1999). Lastly, CF patients with a homozygous F508del mutation who live into their fifth or sixth decade of life were identified and found to have mutations in ENaC genes (Agrawal et al., 2017).

Thus far, Arrowhead has shown in preclinical models that ARO-ENaC can durably silence pulmonary αENaC expression in a dose dependent manner in rats and preserves lung clearance in a sheep mucostatic model of CF. While there have been many advancements in the treatment of CF patients, opportunities still exist to help those patients that either a) don’t respond to standard of care therapies and/or b) to enhance the response for those on standard of care therapies. Importantly, treatment targeting ENaC can be used in all CF patients, regardless of genotype.

The company is currently conducting a Phase 1/2 clinical trial in 24 healthy volunteers and up to 24 CF patients. Thus far, dosing has completed in all single-dose healthy volunteers and the company is pleased with the safety and tolerability seen thus far. This is important as previous ENaC small molecule inhibitors have been dose limited by toxicity.

We anticipate FEV1 and lung clearance index (LCI) data from the first dosing levels in CF patients and ENaC knockdown data in healthy volunteers in mid-2021. Results will only be available for a small number of CF patients (n=4 in the first cohort), thus interpreting FEV1 and LCI data may be difficult from this early readout based on the high level of variability typical for those outcomes. However, ENaC knockdown in healthy volunteers should be easier to interpret. The company is hoping to see 50% knockdown because the long-lived CF patients with heterozygous mutations in ENaC (comparable to a 50% knockdown) showed a clinically meaningful benefit, however it remains to be seen what level of knockdown will be necessary to see a clinically meaningful benefit.

ARO-HIF2

ARO-HIF2 is designed to treat clear cell renal cell carcinoma (ccRCC) and targets hypoxia inducible factor 2α (HIF2α). Approximately 74,000 cases of kidney cancer were diagnosed in 2019, with approximately 70-80% of those being ccRCC. The Von Hippel-Lindau (VHL) tumor suppressor gene is inactivated in the majority of ccRCC cases. Phosphorylated VHL controls the degradation of HIFs, and numerous studies have shown that the overexpression of HIF2α is a driver of ccRCC. Thus, suppression of HIF2α may be a good target for treating ccRCC.

ARO-HIF2 was studied in a mouse model of ccRCC that utilizes the cell line A498, which contains a VHL mutation and overexpresses HIF2α. The following graph shows that both 13 mg/kg and 26 mg/kg ARO-HIF2 controlled tumor growth, with tumor volumes similar to what was seen on Day 1. In addition, levels of HIF2α mRNA were decreased 86.2% and 91.1% compared to vehicle control, showing excellent target engagement.

Arrowhead is currently conducting a Phase 1b dose-finding trial in three cohorts with at least six patients per cohort. Dosing has completed in two of the three cohorts. We anticipate HIF2α knockdown data based on pre- and post-treatment biopsies in mid-2021, and just as with ARO-ENaC, management believes that 50% knockdown would be a positive signal for the program. The company is also evaluating preliminary efficacy data, but it is likely too soon to derive anything meaningful on PFS or ORR outcomes.

ARO-HSD

ARO-HSD targets hydroxysteroid 17β-dehydrogenase 13 (HSD17B13), a member of the HSD17B family that is markedly upregulated in patients and mice with non-alcoholic fatty liver disease (NAFLD) (Su et al, 2019). Loss-of-function mutations in HSD17B13 provide the strongest known protection against non-alcoholic steatohepatitis (NASH) cirrhosis, alcoholic hepatitis, and cirrhosis (Abul-Husn et al., 2018). In the CDAA (choline-deficient, methionine-reduced, 60% fat) mouse model of NASH, once-weekly treatment with 3 mg/kg ARO-HSD resulted in decreased steatosis, inflammation, and hepatocyte degeneration along with inhibition of liver fibrosis.

Arrowhead is conducting a Phase 1/2 single and multiple dose-escalating study and have completed the single dose portion in healthy volunteers’ cohorts and completed dosing in two of the four multiple-dose cohorts in patients with NASH or suspected NASH. Due to the fact that HSD17B13 is not a secreted protein the only way to assess proper target engagement is through liver biopsies and we anticipate biopsy data in mid-2021. In contrast to other agents in development for NASH, we don’t anticipate any effect on liver fat, but at this point will instead be interested in the depth and duration of knockdown of HSD17B13.

ARO-DUX4

ARO-DUX4 is Arrowhead’s first muscle targeted program and is being developed for the treatment of facioscapulohumeral muscular dystrophy (FSHD). FSHD is a rare genetic disorder characterized by progressive muscle weakness and degeneration most notably in the face, shoulders, and upper arms, however it usually causes weakness in multiple muscle groups all over the body. The disease is caused by the inappropriate expression of the transcription factor double homeobox protein 4 gene (DUX4)(Gabriëls et al., 1999). Normally, hypermethylation of the end of chromosome 4 (known as D4Z4) keeps DUX4 silenced. However, in FSHD patients, hypomethylation of this region prevents DUX4 from being silenced. Aberrant expression of DUX4 dysregulates a number of different signaling pathways that culminates in cytotoxicity, particularly in muscle cells.

We anticipate the company presenting preclinical data for ARO-DUX4 in mid-2021 and filing for regulatory approval to initiate clinical studies in the third quarter of 2021. ARO-DUX4 fits with the company’s objectives to move RNAi outside of liver-specific targets and also target genes for which there is believed to be a clear cause for a specific disease.

ARO-APOC3 and ARO-ANG3

ARO-APOC3 and ARO-ANG3 are Arrowhead’s two wholly-owned cardiometabolic candidates. Please see our previous report for a discussion of the clinical trial data generated thus far for each of those programs. Over the next few months we anticipate the company initiating two Phase 2b clinical trials and a Phase 3 clinical trial for ARO-APOC3: a Phase 2b trial in patients with triglycerides >500 mg/dL, a Phase 2b trial in patients with triglycerides between 150 mg/dL and 500 mg/dL, and a Phase 3 trial in patients with familial chyolomicronemia syndrome (FCS). For ARO-ANG3, the company will be initiating a Phase 2b clinical trial in patients with elevated triglycerides and elevated LDL cholesterol. We anticipate all of those trials initiating over the next few months.

Financial Update

On May 4, 2021, Arrowhead announced financial results for the second quarter of fiscal year 2021 that ended March 31, 2021. The company reported revenue of approximately $32.8 million for the second quarter of fiscal year 2021 compared to approximately $23.5 million for the second quarter of fiscal year 2020. This revenue consists of the recognition of $25.4 million associated with the Takeda License Agreement and the recognition of a portion of the $252.7 million associated with the agreement with Janssen.

R&D expenses for the three-month period ending March 31, 2021 were $44.7 million compared to $29.4 million for the three-month period ending March 31, 2020. The increase was primarily due to increased salaries, facilities costs, and non-cash stock-based compensation. G&A expenses for the second quarter of fiscal year’s 2021 and 2020 were $16.3 million.

Arrowhead exited the second quarter of fiscal year 2021 with approximately $549.0 million in cash, cash equivalents, and investments. As of April 30, 2021, Arrowhead had approximately 104.1 million shares outstanding and, when factoring in stock options and restricted stock units, a fully diluted share count of approximately 111.7 million.

Conclusion

We look forward to the numerous data readouts, trial initiations, and presentations that are anticipated over the next few months. In particular, we will be interested in what type of knockdown ARO-ENaC is capable of, although we continue to believe there will be too few CF patients analyzed to gain any insight into changes in FEV. In addition, we look forward to the initial data from the ARO-HSD and ARO-HIF2 first-in-human studies. Our valuation for Arrowhead remains at $100, with the potential for further upside if there are positive results later this year from ARO-ENaC, ARO-HIF2, and/or ARO-HSD.

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DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks provides and Zacks receives quarterly payments totaling a maximum fee of $40,000 annually for these services. Full Disclaimer HERE.

PKKFF: Major Customer Wins In Q4 Could Result in Revenues Doubling in 2021

3 days 21 hours ago

By Lisa Thompson

OTC:PKKFF

READ THE FULL PKKFF RESEARCH REPORT

➢ Peak Fintech Group (OTC:PKKFF) operates a lending platform in China that matches lending institutions and borrowers and earns a fee of between one and four percent of the value of those loans. It targets primarily small and micro businesses. Much of what it does involves financing inventory and as a result it has great visibility, in some cases going out months, and lots of repeat business.

➢ Since its launch in 2018, it has grown to a $65 million revenue run rate and we expect it could reach $90 million in annual revenues this year. Despite the pandemic, Peak reported revenue growth of 265% in 2020, while its losses to common shareholders increased to $1.9 million from losses of $1.3 million on a non-GAAP basis. It reached and surpassed its target $40 million in revenues, but fell short of its original $4 million EBITDA target.

➢ In February it filed to list on NASDAQ and shareholders authorized a reverse split of between 2:1 and 5:1 at the discretion of the board.

➢ It recently closed deals with a large Chinese electronics wholesale distributor (Beijing Dianjing Company aka BDC) and packaged foods wholesale distributor Beijing Jingying Corporate Management Ltd, both of whom can add a large volume of transactions to Peak’s platform. Customers of these two entities can use its platform to match with lenders for funding inventory purchases.

➢ Peak plans to launch its lending platform in Canada by the end of the year giving customers of both countries the ability to finance trade, while allowing Peak to generate Canadian currency with which to pay royalties.

➢ Compared to its fintech peers who trade at an average of 12.6 times enterprise value to 2021 estimated revenues, Peak is currently trading at an enterprise value US$352 million or only 4.8 times EV/sales using a 2021 revenue estimate of US$73.1 million. With a longer track record and more visibility we believe Peak will be able to trade closer to its peers and given its growth should be a much more valuable company next year.

Peak Fintech finished the year strong and with significant activity in Q4 to indicate that 2021 should be a stellar year. It added huge new customers and new city centers that should reap high volumes once new customers are onboarded. Despite growing 276% in Q4, Peak Fintech’s Q4 revenues fell short of our overly optimistic forecasts going into the typically strong fourth quarter. The company still beat its goal of reaching over $40 million in sales for the year by reporting $42 million, up 259%. It reported negative EBITDA for the year of $1.9 million versus a positive $1.5 million in 2019. The company was down to $3.3 million in cash (including the bank’s cash) as of April 30, 2021 but with less than $300,000 in debt as of December 31, 2020. The current capital raise of up to $15 million should alleviate the cash crunch.

For 2021 we are leaving the revenue estimate at $90 million until we get further insight from management after leaving the quiet period after the financing. This number is predicated on the company getting a cash infusion to fund working capital, some of which will be achieved with its current capital raise and some through the exercise of warrants and options. We expect significant revenue growth from Peak’s joint venture with BDC and the referral program from Beijing Jingying that was only signed in November. Those two will contribute in Q1 2021 lessening seasonality but hampered by unlimited cash to fund working capital.

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OIIM: Q1 Revenues Grow 49% and Q2 is Expected to Beat Q1, Despite Supply Chain Issues

5 days 3 hours ago

By Lisa Thompson

NASDAQ:OIIM

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Friday O2Micro (NASDAQ:OIIM) announced another quarterly revenue record at $23.2 million and expects to beat that number again in Q2. For Q2 2021, O2Micro expects revenues between $23.2 million and $25.1 million or a midpoint of $24.2 million, which would be growth of 40% year over year. Usually Q1 revenues decline from Q4 due to seasonality in TVs, but this year growth in battery-powered devices made up for the typical dip in TV sales.

Looking at the last four quarters and the approximate split, revenues break out:

So for three quarters in a row, Industrial, which we assume is battery management, is bigger than Consumer, which is primarily TVs. This quarter Industrial grew about 86% and even consumer grew 23%. Both sectors typically see a seasonal drop in Q1, but industrial not only did not drop off a typical 13%, it grew 13% sequentially. In addition this high growth segment was about 61% of total sales, proving revenue acceleration growth potential.

This year supply chain issues external to O2Micro will gate revenues. While it has delivered to its customers as promised, customers are increasingly not being able to source other components needed to build their products. So in 2021 this problem will weigh on O2Micro’s sales, not demand or their ability to supply. O2Micro cited Ford as an example of the phenomena---having to reduce the build of cars 50% in Q2 from lack of semiconductor components.

Battery management is the star this year as shown by 86% growth year over year in Q1. The company is growing with the market as well as moving up the chain to larger battery powered devices with larger cell count and higher content battery management going forward. The more power the device needs the more important it is to get the most out of the batteries as well as recharge them faster and more safely. The company is having great success with vacuums and ebikes and is working to develop solutions for e-vehicles that require more complicated algorithms to support many more cells and multiple battery packs that all need to communicate.

Longer term we are excited about the company position in the newest upcoming technology for TV, which is mini LEDs. Although this is currently a very expensive technology and only being deployed for high-end notebooks, it is expected to move up the size chain starting with HDR monitors for gaming where its features are most appreciated then to high-end TVs. However this technology is the future and ultimately all monitors and TVs will be built using them. O2Micro is the leader in this and is currently working with the Japanese and Korean pioneers on designs. It is working on patenting its technology in this area. Given its leading edge technology the company believes it will pick up market share as this transition occurs.

Mini LED are 1% the size of a of conventional LED package. It means a designer can fit 100 of them in the same space and achieve much higher resolution with a much higher contrast ratio. So the monitor is not going to have a single driver, but one driver IC combined with a lot of the driving capability which increases the packaging, the size and the content meaning O2Micro can sell much more product. The smaller size will also demand an integrated MOSFET where O2Micro can provide. Multi-scan technology will also be deployed to reduce motion-blur. Currently most LCD monitors refresh pixels top to bottom. Multi–scan methodology can do up to 32 scans instead of just the one scan, reducing motion blur and halo effect. This technology is also just starting to be used in professional monitors and will eventually find its way into TVs and increase O2Micro’s ASPs.

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SQFT: Balance Sheet Strengthening Measures Support Initiatives To Enhance Portfolio

1 week 1 day ago

By M. Marin

NASDAQ:SQFT

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<_span_style3d_22_text-decoration3a_ _underline3b_22_="">Measures Streamline and Strengthen Balance Sheet, Enhancing Financial Flexibility

Presidio Property Trust (NASDAQ:SQFT), an internally-managed REIT that has a diversified portfolio of commercial and industrial properties and model homes, remains committed to deleveraging and continues to strengthen its balance sheet. 1Q21, SQFT paid roughly $7.7 million remaining on promissory notes prior to their quarter-end maturity. The company used cash and proceeds of property sales to pare the debt. With the repayment in full of the notes, earlier elimination of preferred shares and $11.5 million in cash at year-end 2020, SQFT believes it is poised for growth in 2021 and beyond.

Debt reduction has been a key target for SQFT. The company generally finances its investment in its property portfolio through secured asset-backed mortgage loans, but has initiated deleveraging measures regarding corporate debt. Moreover, in order to enhance its financial flexibility and potentially add liquidity if needed, the company also amended its shelf registration earlier this month. Under the shelf filing, the company can raise up to $200 million.

The company ended 2020 with $11.5 million in cash, cash equivalents and restricted cash, as noted. Moreover, SQFT continues to analyze its real estate portfolio for opportunities to dispose of assets in order to realize gains with which to reinvest in its portfolio; SQFT generated just under $15 million in proceeds from asset sales in 2021 through March 30.

Same-store rental revenue steady in 2020…

Separately, SQFT recorded 2020 revenue of $24.4 million, down 15% from $28.6 million in 2019, primarily reflecting the sale of several properties in 2019 and 1Q20. On a same-store basis, however, rental revenue of $19.6 million was down only 1.7% year-over-year and occupancy of 83.2% at the end of 2020 was higher than 80.8% on the same basis in 2019.

… Supporting SQFT’s Strategy to Target Smaller, Growing Markets

The company believes that smaller markets it targets have been more stable during the COVID-19 pandemic than larger metropolitan markets, in part because of lower reliance on public transportation. Moreover, the company’s strategy targets smaller regional markets that are characterized by population and economic growth.

Characteristics of Presidio’s target markets include higher growth in demand for housing, industrial and office space than national average growth rates. These are important factors behind the company’s high occupancy rates, which have remained above 83%, throughout the pandemic.

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PLX: Pandemic Backup Impedes FDA Site Survey

1 week 2 days ago

John Vandermosten, CFA

NYSE:PLX

Following the anticipated April 27th target action date for its investigational candidate, Protalix Biotherapeutics, Inc. (NYSE:PLX) announced that the FDA had issued a Complete Response Letter (CRL) related to the submission of PRX-102.1 Protalix and Chiesi Global Rare Disease submitted the Biologics License Application (BLA) for the PEGylated enzyme and received acceptance of receipt in August 2020. Priority review was granted which normally provides for a six month appraisal of the BLA. Initially, the FDA issued a target action date of January 27, 2021, but in late November extended the date to April 27.

An ongoing outstanding item related to PRX-102 approval has been the required inspection for Protalix’ manufacturing facility and that of a third party that performs fill and finish processes. Due to pandemic -related travel restrictions, inspections have been delayed, especially those performed overseas. It had been unclear if the agency would temporarily waive the inspection due to the unmet need for Fabry patients and the backlog the agency has for inspections on account of the pandemic.

In a follow up press release on April 28th, Protalix provided additional details on the contents of the CRL. The FDA did not raise any issues related to the safety or efficacy of the drug, but rather attributed the unfortunate letter to its inability to conduct an on-site inspection for the manufacturing facility in Israel and ongoing review of the third-party facility in Europe.

Protalix’ April 28th communication indicated that primary competitor Fabrazyme was recently converted to full approval, which, for nearly 20 years, was approved based on surrogate endpoints. This is important as it may alter PRX-102’s priority review designation – a status granted to drugs that offer major advances in treatment or provide a treatment where no adequate therapy exists. Priority review is provided to drug candidates that show evidence of significant improvements in safety or effectiveness when compared to standard of care. Now that Fabrazyme is fully approved, PRX-102 may no longer be eligible for expedited status, which could raise the hurdle required for approval. Despite this, we believe that the evidence presented so far strongly supports the approval of PRX-102.

FDA CRLs Have Become Common

Several CRLs have been issued recently. While we have not reviewed them all, we do believe that their frequency is indicative of an FDA that has too many obligations and insufficient resources to comply with its mandate. There have been a number of delays to initial target action dates attributable to what we believe to be demands on the agency related to the pandemic and the allocation of resources to this global predicament. As COVID vaccines take their effect, the impact from the pandemic lessens and travel resumes, we anticipate the FDA will catch up. However, we believe outstanding submissions for all sponsors are at greater risk of delay independent of the safety and efficacy of the underlying drug.

We performed a quick review of PDUFA calendars examining the outcomes related to the assigned PDUFA dates. Since January 1st, we identified 29 target action dates with at least 11 of them either receiving a CRL or no response from the FDA on the indicated date. The trend appears to have worsened over the last 30 days with eight of ten PDUFA dates missed, CRLed or delayed.

Next Steps

Following the issuance of a CRL, there are several steps that are common for all candidates. The sponsor has 90 days following the issuance of a CRL to schedule a Type A meeting with the FDA to cover any questions related to the letter. When the sponsor makes the request, the FDA has 30 days to hold the meeting, after which notes from the gathering will be provided. Explained in the CRL and clarified in the meeting, the FDA will outline the steps needed to address the discrepancies presented. In general, these could include additional trials, further questions, bridging studies among other needs. When the requested deliverables are ready, the sponsor may then resubmit the application which will then be considered a Class 1 or Class 2 resubmission. A Class 1 resubmission offers a two month turnaround time and generally deals with simpler issues such as labeling, stability and safety updates, discussion of post-marketing requirements, assay validation data, minor reanalysis, final release testing or other minor issues. A Class 2 resubmission is any item that does not fall under Class 1 and/or requires presentation to an advisory committee and requires a six month turnaround time.

Based on our reading of the press release, it appears that the only discrepancies that exist are related to FDA inspections. Solving the discrepancies appears to be outside of the influence of Protalix and in our opinion not a justification for a CRL. We have noted that the FDA appears to have insufficient resources to meet its mission according to the timelines and performance benchmarks required by the Prescription Drug User Fee Act (PDUFA). Given these limitations, the agency appears to be forced to issue a CRL when it is unable to comply with the requirements for approval.

Normally, we anticipate a several month delay to the approval process when a CRL is issued. In this case it appears that addressing the defect relies on the FDA performing an on-site visit. Assuming that the inspection could take place in the next two months, followed by a resubmission the subsequent month and classification as a Class 1 resubmission, there is a minimum of five to six months before an approval could be granted. This timeline could be extended and we expect further clarity on this matter following the notes from an anticipated Type A meeting.

Clinical Trial Results for PRX-102

PRX–102 is a recombinant α-Galactosidase-A enzyme. Protalix uses its ProCellEx platform to express the enzyme and then chemically modifies it via surface pegylation. Protein sub-units are covalently bound via chemical cross-linking using short PEG moieties, resulting in a molecule with unique therapeutic longevity in the body. In clinical studies, PRX–102 has demonstrated a circulatory half-life of approximately 80 hours. Due to the chronic nature of Fabry, patients must receive IV infusion of enzyme replacement therapy every two weeks, which is a significant burden. PRX-102, with its extended half-life, aims not only to be more effective, but also reduce the frequency of doctors’ visits by Fabry patients.

Three Phase III studies were launched to support regulatory approval of PRX-102 around the globe, designated BRIDGE, BALANCE and BRIGHT. After a release of topline results in May 2020, the BRIDGE trial provided final results on December 30, reiterating its findings of a substantial improvement in renal function. See our March 31 report for details on trial outcomes.

We expect to see interim results from the BALANCE study in the next few weeks and no later than mid-May. The data will remain blinded but safety is expected to be confirmed in the head to head, double blind study in comparison with Fabrazyme. Confirmation of safety in this 78-subject trial will provide additional support for regulatory approval and full results, if favorable, may provide justification of favoring PRX-102 over Fabrazyme.

Summary

We are disappointed to see the issuance of a CRL for PLX-102 and believe that the delay is attributable to the lack of sufficient resources at the FDA. Our perspective is founded on the information provided in Protalix’ follow up press release, on other delays we have seen to target action dates and the high number of CRLs issued to other sponsors.

While this is definitely a bump in the road for Protalix, it does not appear to be related to the safety or efficacy of PRX-102, but rather to the FDA’s inability to perform an on-site inspection due to pandemic-related travel restrictions. We are hopeful that the issues will be addressed in a matter of months, but we do need additional clarity that should be available following the anticipated Type A meeting between Protalix and the FDA. As for now we will reserve judgment until further information is available. In our experience, the hit to valuation for a delay of several months is minimal as long as the probability of ultimate commercialization is not impaired.

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DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks provides and Zacks receives quarterly payments totaling a maximum fee of $40,000 annually for these services. Full Disclaimer HERE.

________________________

1. Also referred to by its generic name, pegunigalsidase alfa.

2. FDA Calendar – FDA Tracker, Zacks Analyst Research

3. Protalix Corporate Presentation March 2021

4. Source: Protalix 2020 Form 10-K

MHH: Mastech Digital Reports Q1 2021 With Record Hires and Nearly $16 Million in Bookings

1 week 2 days ago

By Lisa Thompson

NYSE:MHH

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Despite a tepid Q1, green shoots are appearing predicting growth going forward. Both of Mastech’s (NYSE:MHH) business segments pointed to signs of improving business. In IT staffing the company hired 99 new billable consultants, resulting in 9% sequential growth—a new company record. This may not result in 9% sequential revenue growth for this segment in Q2, but it should definitely result in a meaningful sequential improvement. After suffering contract delays and an elongated sales cycle, business at Data & Analytics is also picking up. It was able to book near $16 million in new contracts in the quarter, the second largest amount on record. Customers are aggressively moving to the cloud to become more nimble and D&A is booking business helping companies prepare their systems to move, helping them once they have moved, and also with cloud data governance. In Q1 the company added one multi-year contract Center of Excellence client with another expected to be signed imminently.

Q1 resulted in revenues of $49.8 million down 1% from $50.4 million in Q1 2020. While gross margins improved, spending increased resulting in non-GAAP earnings decrease of 17%. As expected revenues picked up sequentially and IT staffing revenues were shown to have hit bottom in Q4 2020.

Gross margin was 25.7% versus 25.2% a year ago and 26.8% in Q4 2020; gross margin dollars increased 0.7%. Margins are expected to continue to improve going forward as revenues increase and as synergies and cost cutting measures at AmberLeaf continue to take full effect.

Looking at the two segments reveals, IT staffing decreased 4.8% to $41.0 million and was 82% of revenues. It had 1,167 billable consultants compared to 1,100 the year before and 1,068 in the fourth quarter of 2020. Gross margin for this segment declined to 21.4% from 21.5% last year and 22.2% in Q4 2020. Data and analytics increased with the addition of AmberLeaf. It reported growth of 19% to $8.8 million versus $7.4 million. Gross margins also declined in this segment to 45.7% from 47.1% a year ago mostly due to AmberLeaf’s lower margins. Gross margin dollars for this segment increased 15.4%.

SG&A increased sequentially by $957,000 as the company brought forward some spending to support future growth. It added in sales and recruiting. SG&A was $10.9 million compared to $10.2 million a year ago. AmberLeaf also added expenses versus last year’s quarter.

Operating income decreased 24.5% to $1.9 million versus $2.5 million and margin declined to 3.8% from 4.9% a year ago.

Other expense increased to $232,000 compared to $226,000 a year ago despite lower debt levels.

For the quarter the tax rate was 27%, higher than the 25% we expected. Stock option exercises affect the rate.

GAAP net income was $1.2 million, down 36% from a year ago. On a non-GAAP basis it was $2.2 million down only 17%. GAAP EPS was $0.10 diluted compared to $0.17 a year ago and $0.29 in Q4 2020. On a non-GAAP basis it was $0.19 versus $0.23. The fully diluted share count stayed at 12.0 million sequentially but up 2.8% year over year.

Balance Sheet

The company ended the quarter with $7.2 million in cash, a quick ratio of 1.9xs, working capital of $20.9 million, and debt of $16.2 million. It increased debt $10 million to buy AmberLeaf, and paid down $1 million of it this quarter. It paid $9.5 million in cash to buy AmberLeaf on October 1st.

Estimates

For 2021 we are tweaking revenues up to $214 million, but reducing EPS estimates down to a non-GAAP $0.98 per share based on higher than expected spending on operating expenses to support growth.

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BCLI: Continuing to Receive Feedback on Next Steps for NurOwn®…

1 week 2 days ago

By David Bautz, PhD

NASDAQ:BCLI

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<_span_style3d_22_text-decoration3a_ _underline3b_22_="">Business Update

Continuing to Consult on Potential Paths Forward for NurOwn® in ALS

BrainStorm Cell Therapeutics, Inc. (NASDAQ:BCLI) has completed a Phase 3 clinical trial for NurOwn as a treatment for amyotrophic lateral sclerosis (ALS) and in November 2020 announced topline results showing that the trial did not reach statistical significance for the primary endpoint, a responder analysis examining the percentage of participants that experienced a 1.25 point per month improvement in the post-treatment Amyotrophic Lateral Sclerosis Functional Rating Scale – Revised (ALSFRS-R) slope. However, an analysis of a pre-specified subgroup of patients with ALSFRS-R scores ≥ 35, of which approximately 30% of trial participants were included, showed a clinically meaningful treatment response with NurOwn with 34.6% of responders compared to 15.6% of responders in placebo-treated participants (P=0.288).

On February 22, 2021, BrainStorm announced feedback from the FDA following a meeting with senior leadership in which the agency concluded from their initial review of the Phase 3 data that it does not provide the threshold of substantial evidence that the FDA is seeking to support a Biologics License Application (BLA). The FDA also advised that the recommendation does not preclude BrainStorm from proceeding with a BLA submission.

In the near-term, we anticipate the company submitting a publication on the Phase 3 ALS results to a peer-reviewed journal in the near future and presentations at upcoming scientific conferences throughout the year. The company is continuing to meet with regulatory consultants, ALS advocacy groups, physicians, and potential strategic partners to determine the best path forward, which may include an FDA BLA submission, a regulatory submission in other geographies, and/or other regulatory and business options.

Positive Proof-of-Concept Data for NurOwn in Progressive MS

On March 24, 2021, BrainStorm Cell Therapeutics, Inc. (BCLI) announced positive proof-of-concept data for NurOwn in patients with progressive multiple sclerosis (MS). The trial achieved the primary endpoint of safety and encouraging results were seen in multiple secondary, functional endpoints.

The Phase 2 trial was a multicenter, open label trial that enrolled 20 patients, with 18 treated and 16 completing the study. Two of the enrolled patients decided against continuing in the trial before dosing began, with one patient withdrawing following dosing due to non-specific symptoms and another due to back/leg pain. Following a 10-week run-in period, patients were dosed with 1-1.25 x 106 MSC-NTF cells three times at 2-month intervals. Patients were followed for 28 weeks following the first treatment. The secondary functional endpoints examined included:

• Timed 25-Foot Walking Speed (T25FW): Scoring is the average of two trials. A patient is directed to walk 25 feet quickly and as safely as possible from one marked end to the other. The patient then walks back the same distance.

• 9-Hole Peg Test (9-HPT): This test is administered by patients taking pegs from a container, one by one, and placing them in holes as quickly as possible. The patient then removes the pegs one by one and puts them back in the container. Both dominant and non-dominant hands are tested.

• Low Contrast Letter Acuity (LCLA): This is similar to a standard eye chart test but instead of black letters on a white background (100% contrast), low contrast levels are used and the number of letters identified is scored.

• Symbol Digit Modality Test (SDMT): Using a reference key, a test subject has 90 seconds to pair specific numbers with given geometric figures. It is a simple substitution task that normal adults can easily perform and can be utilized to detect changes in cognitive functioning over time.

• 12-item Multiple Sclerosis Walking Scale (MSWS-12): This is a self-reported measure of the impact of MS on a patient’s walking ability.

Baseline characteristics for study participants showed that the mean age was 47, 56% were female, and the mean baseline Expanded Disability Status Scale (EDSS) score was 5.4. The results of the trial were compared to a matched clinical cohort of 48 patients from the Comprehensive Longitudinal Investigations in MS at the Brigham & Woman’s Hospital (CLIMB Study) (Gauthier et al., 2006).

Highlights from the topline results of secondary functional outcomes include:

• 14% and 13% of NurOwn-treated patients showed a 25% improvement in T25FW and 9-HPT, respectively, compared to 0% from the matched cohort from the CLIMB registry.

• 38% of NurOwn-treated patients showed a ≥10-point improvement in the MSWS-12 (CLIMB cohort not analyzed for this outcome).

• 47% of NurOwn-treated patients showed a ≥8-letter improvement in the LCLA (CLIMB cohort not analyzed for this outcome).

• 67% of NurOwn-treated patients showed a ≥3-point improvement in the SDMT (BrainStorm is waiting on the results for SDMT for the CLIMB cohort).

• On average, there was a 10% improvement in T25FW and a 4.8% improvement on the 9-HPT for NurOwn-treated patients, compared to a 1.8% and 1.4% worsening, respectively, in the matched control group from the CLIMB registry.

Previous trials of MS drugs have noted an association between loss of vision, as measured by the LCLA, and diminished quality of life (Chahin et al., 2015), thus the improvements in vision seen in almost half the patients treated with NurOwn are particularly noteworthy.

We anticipate the company presenting the full data set at an upcoming scientific conference and publishing the results in a peer reviewed journal article later this year. Additional analyses that the company has not yet completed include detailed cerebrospinal fluid (CSF) and blood biomarker analyses along with MRI analyses (brain lesions, brain volume, etc.).

Financial Update

On April 26, 2021, BrainStorm announced financial results for the first quarter of 2021. As anticipated, the company did not report any revenues during the first quarter of 2021. Net R&D expenses for the first quarter of 2021 were $4.3 million, compared to $6.0 million during the first quarter of 2020. The decrease was primarily due to lower clinical trial costs and stock-based compensation. Excluding participation from the Israeli Innovation Authority (IIA) and proceeds received under the hospital exemption regulatory pathway, R&D expenses were $4.8 million in the first quarter of 2021 compared to $7.1 million in the first quarter of 2020. G&A expenses for the first quarter of 2021 were $2.6 million compared to $2.4 million for the first quarter of 2020. The increase was primarily due to increased compensation and consultant expenses.

The company exited the first quarter of 2021 with approximately $40 million in cash, cash equivalents, and short-term deposits. In addition, BrainStorm has approximately $16 million available in untapped ATM capacity. As of April 23, 2021, BrainStorm had approximately 36.3 million common shares outstanding and, when factoring in stock options and warrants, a fully diluted share count of approximately 43.3 million.

Conclusion

We continue to be in a “wait and see” mode regarding the future of NurOwn in ALS as the company continues to meet with advisors and ALS advocates before deciding the best path forward. We also look forward to the publication of the Phase 3 results so that we can have a look at the totality of the data. The Phase 2 results for NurOwn in progressive MS were encouraging and we look forward to additional details regarding the next step for that program along with the Alzheimer’s program later this year. With no changes to our model the valuation remains at $11.

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TRC: Recent Court Rulings Are Positive For Advancing Development Plans

1 week 2 days ago

By M. Marin

NYSE:TRC

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Tejon Ranch Company (NYSE:TRC) recently announced that a Los Angeles Superior court has approved the majority of its Environmental Impact Report (EIR) for the Centennial master planned mixed use community. In addition, objections raised in a lawsuit challenging the development of Grapevine were rejected earlier this year by a court ruling in TRC’s favor.

TRC also has received approval to develop multi-family apartments within the Tejon Ranch Commerce Center (TRCC). Recently granted Kern County approvals authorize TRC to develop up to 495 multi-family residences in thirteen apartment buildings just north of the Outlets at Tejon.

TRC is a real estate-development company that aims to monetize its land-based assets, In addition to three planned master developments and other real estate projects, the company currently derives revenue from the Tejon Ranch Commercial Center (TRCC), farming and ranching, among other activities. Management believes that its development plans fulfill important needs, including addressing the need for more housing in California, job creation and responsible development that is coordinated with conservationist goals.

The company expects its development efforts to create both permanent and development-related jobs. Centennial, for instance, is expected to create more than 23,000 permanent jobs on site and nearly 25,000 construction jobs. TRC also expects its master planned mixed-use residential communities to include measures to conserve water and minimize carbon footprints.

The company's 2020 operating results were impacted by the economic downturn and business disruptions caused by the COVID-19 pandemic. Total revenue declined 24% year-over-year to $37.8 million. TRC reported a 2020 net loss attributable to common stockholders of $747,000 or ($0.03) per share compared to net income of $10.6 million or EPS of $0.40 in 2019.

With cash and equivalents of $55.3 million plus marketable securities of $2.8 million at year-end 2020 and a commitment to conserving capital if the pandemic continues to constrain revenue, the company remains well-capitalized. The company also reduced long-term debt to $52.6 million from $57.5 million at year-end 2019.

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BRGGF: A Pure Play B2B Provider in Online Gaming

1 week 3 days ago

By Lisa Thompson

OTC:BRGGF

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Bragg Gaming (OTC:BRGGF) is a B2B platform provider for igaming that is predominantly focused on providing exclusive content on its in-house developed RGS in addition to casino aggregation and offering a fully customizable platform. It operates primarily in Europe but is located in Canada and hopes to penetrate the US market and win business in the soon-to-be-legalized Canadian market. It has highly experienced and connected management and board members that should be able to parlay their backgrounds into future customer wins. Due to its high percent of sales in Germany, where new regulation is imminent, it is trading at a significant discount to its peers affording investors a unique buying opportunity.

KEY POINTS

• Bragg Gaming is an EBITDA positive, US$345 million (fully diluted) market cap company with approximately $34 million (€28 million) in cash and no debt. Guidance is for it to generate US$57 million in revenue this year (or 5.5 times EV to sales), flat with 2020 revenues and US$32 million in 2019, with a positive EBITDA of US$5.1 million. Next year it is to conservatively reach US$52 million or €44 million in revenues.

• It plans to grow organically and through acquisition. It is actively pursuing deals to acquire game studios, to add desirable proprietary content and make it more competitive in North American markets. Owning the content would also increase margins for the company; game studios typically operate at 70% gross margins. Rather than being just a distributor, owning the content will allow it to capture 100% of the gross margin. Bragg is also interested in a more competitive sportsbook offering.

• Bragg valuation is well below its peers who trade at 8.6xs EV/Sales because of its obscurity to US investors, and its heavy dependence on Germany that is undergoing a switch to regulated igaming. It recently listed on the Toronto Stock Exchange, but in the US it trades on the OTCQX. On March 29th it announced it has filed an application to list its common shares on the Nasdaq Stock Market and is voting on April 29th on a reverse split of up to 15:1 to meet the minimum price requirement of the exchange. The split will take effect a minimum of five business days prior to listing on Nasdaq, but not before satisfying all of NASDAQ’s other requirements.

• It is also less well known because its operations are mainly in Europe (it reports financials in Euros) and it has no US or Canadian (where igaming is still illegal) revenues. That should change as it pursues opportunities primarily in the soon to be legalized Canadian market, where it is well-positioned, and the US, where it made its first inroad and its current customers are gaining entry.

• Bragg is the only public pure play B2B platform provider. As such, it exhibits considerable operating leverage, which should provide it with greater earnings growth than revenue growth. Its revenues are variable and based on a percent of net gaming revenues of its customers, while its costs are mostly fixed.

• The company paid out its final consideration for the purchase of Oryx in Q1 2021 and will no longer report “loss on remeasurement of consideration” that has been distorting net income reporting since Q2 of 2019. The acquisition has now been paid for in full. We expect the company to pursue further acquisitions to diversify its product offerings and geographic reach and to bring more content in-house.

• Before these short-term problems resolve, investors have an exceptional opportunity to buy Bragg stock well below the valuations of its peers. A year from now, we expect Bragg will not only show accelerated growth but should trade in line with the rest of the online gambling industry. Providers and investors should reap both growth and multiple expansion.

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EEIQ: Expanding A Successful Model To New Markets and New Channels

1 week 3 days ago

By M. Marin

NASDAQ:EEIQ

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Elite Education Group (NASDAQ:EEIQ) believes that by providing an end-to-end solution for students seeking to study abroad, including language training to help students improve English language proficiency, preparatory services to help with the application process to gain admission to its partnered university, as well as a full range of solutions while students are at the destination university, the company makes it possible for Chinese students who might not otherwise pursue international study to do so. Elite aims to be a one-stop solution to make it easier for candidates to prepare for and apply for international study and then complete study abroad.

The number of Chinese international students in the U.S. grew by a roughly 11% CAGR from 2009 to 2019. Chinese students represented roughly 33% of the U.S. international student population, according to IIE, and form the largest population of students studying internationally. Thus, the student body represents an important addressable market for EEIQ. The growth in Chinese students studying abroad has been dramatic as China’s GDP has increased.

Expanding Partnerships With Additional Universities In New Markets

Elite’s partnership with Miami University (MU) of Ohio, one of the oldest U.S. public universities, has led to a 20% CAGR in the numbers of enrolled students since 2013. The company intends to replicate this successful partnership at universities in other nations (U.K., Canada, Australia and others) to increase its enrollments and boost revenue. For instance, Elite has established a partnership with the University of Northumbria at Newcastle and begun recruiting for students to study at this academic institution.

The company also has an online education platform in partnerships with MU and the University of Northumbria. Proceeds of the company's recent IPO are earmarked to advance this initiative.

Expanding Services To New Markets

The company also plans to offer its services in additional Asian markets for students who want to study in the U.S., the U.K., Canada and potentially other nations. Elite intends to replicate the success it has enjoyed with its China-MU model with new projects in markets in Southeast Asia.

By making it easier for students from a growing number of countries to navigate the application process and then to facilitate their living and studying situations when they arrive at their international destinations, EEIQ expects to fuel revenue growth.

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ELYS: 2020 Shows Importance of Omni-Channel Strategy

1 week 4 days ago

By M. Marin

NASDAQ:ELYS

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Elys Game Technology (NASDAQ:ELYS) recently announced 2020 results. Turnover, or betting handle, has grown from about $122 million in 2016 to $574 million in 2020, which represents a CAGR of 47% as the company’s expansion accelerates. Despite the impact of COVID-19, 2020 turnover of $574 million was up 26.5% compared to $454 million in 2019, as ELYS has both expanded its bricks-and-mortar footprint and intends to integrate with a growing number of online operators.

Benefits of Omni-Channel Strategy

The 2020 turnover metric represents an important milestone for ELYS, as it meets its $500+ million target despite the challenges of the global pandemic. The company’s ability to reach this level also validates its omni-channel strategy that combines both online and land-based retail betting.

Players have shifted from bricks-and-mortar to online during the pandemic, with the advance in web-based gross gaming revenue. ELYS’s turnover is expected to continue to rise as the company pursues expansion initiatives. Management believes the Elys platform is highly scalable and can continue to support its growth initiatives and expansion, reflecting the company’s entrance into new markets combined with potential M&A transactions and the anticipated growth of the e-sports sector.

International Expansion Advancing, With U.S. Launch Expected in 2021

The company operates in the international leisure gaming industry and is a licensed gaming operator in Italy, offering a variety of lottery, casino and sports betting options there through both an onsite physical retail channel and a digital platform via its proprietary betting software, the Elys Game Board, that is integrated with a built-in player gaming account management system and sports book. We believe recent initiatives highlight the importance of the company’s growth strategy and of the North American market to that growth strategy.

The company targets expansion in North America and has laid the infrastructure for operating in what is expected to be a rapid growth market by opening a North American office, expanding its management team and forging relationships with local operators. In the U.S., inaugural markets for Elys are Montana and Washington, DC. ELYS has formed agreements with both tribal and non-tribal gaming operators in both markets to deploy the Elys platform in both channels, subject to Elys obtaining the required regulatory certification, licensing and approvals. ELYS targets launching operations in Washington, D.C. in 2Q21, subject to licensing applications achieving approval.

Industry forecasts support expectation of significant market opportunity in the U.S. For example, Morningstar forecasts that U.S. sports betting can reach $6.2 billion in industry revenue by 2024. Other industry forecasts are even higher, supporting ELYS’s expectation that the U.S. sports betting and online gaming market represents a sizable opportunity for its platform.

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TGMGF: Theta Gold Mines - Management Prioritizes Development of Underground Mines; Maiden Reserve & Pre-Feasibility Study Completed

1 week 4 days ago

By Steven Ralston, CFA

OTCQB:TGMGF | ASX:TGM

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Theta Gold Mines (OTCQB:TGMGF) (ASX:TGM) is a junior mining company on the cusp of becoming a gold producer by targeting high-grade, near-surface gold deposits in the brownfield Pilgrims Rest and Sabie Gold Fields in South Africa. Management plans to employ modern mining and gold processing techniques to produce approximately 353,000 oz. Au during Phase 1 of management’s Integrated Mine Strategy. The development approach is based on targeting higher-grade, near-surface, underground deposits. Over the past 6 months, management has focused on converting an easily accessible portion of the company’s substantial underground Mineral Resource into a Mine Reserve.

A Maiden Underground Mining Reserve and Pre-Feasibility Study (PFS) for the near-surface Beta, Frankfort and CDM (Clewer, Dukes & Morgenzon) mines were released in mid-April. The work for the completion of the PFS contributed to a significant increase in the company’s Ore Mine Reserve. In addition, the company’s Total Mineral Resource increased.

Maiden Underground Mining Reserve

The Maiden Underground Mining Reserve added 418,850 oz Au (average grade of 5.49 g/t) to the company’s existing Open Pit Mine Reserve bringing the Total Ore Reserve (Underground & Open Pit) to 579,460 oz Au (average grade of 3.98 g/t), of which 8,160 oz Au (at the Frankfort Mine) is classified as Proved and the remainder as Probable. The Open Pit Project Ore Reserve is 160,610 oz Au (2.31 g/t Au at a 0.4 g/t Au cut-off). The Ore Reserve calculation considered only Indicated Mineral Resources.

The upgrading of resources resulted in Measured & Indicated Mineral Resources most recently increasing 4.6% to 1,668,200 oz Au since May 2019 and up 130% since June 2014.

Theta Gold’s Total Mineral Resource (Measured, Indicated, and Inferred) is now 6.105 million oz Au.

Pre-Feasibility Study on Underground Reserve

The PFS included details of the modern mining methods that should dramatically improve rate of production and the grade of the recovered ore, along with reducing development costs and waste rock.

Modern Mining Methods

Historically, conventional manual (mining by hand) methods were utilized to extract ore from gold reefs in the Eastern Transvaal Gold Fields. Manual operations are time-consuming with low levels of ore extraction. The potential use of normal-sized mining equipment is not economical due to the ore’s average grade.

Modern methods employ mechanized equipment. In Theta’s case, the preferred method for large scale underground mining of large yet narrow, flat dipping gold reef systems (which are prevalent at Pilgrims Rest and the Sabie Gold Fields) is Mechanized Long Hole Stoping.

Production drill holes can be selectively drilled by low-profile drilling rigs in a predetermined pattern that takes into account varying ore thicknesses and dips. Low-profile mechanized equipment can accurately cut gold reefs, in the 60-cm to 6-meter range, and in some cases, reef systems that are narrower than 60 cm.

The planned mining process entails drilling 15m long blast holes with five holes being blasted at a time. Thereafter, stope cleaning is completed with low profile scrapers or by waterjet. Load-Haul-Dump (LHD) equipment then loads and transports the ore to underground conveyor belt systems, which transport the ore to the surface. Executed properly, the planned daily advance should be three meters.

The result is higher grade ore since only the channel width of the ore body is mined. The end result of processing higher grade ore is that cost efficiency per ounce improves dramatically. In addition, since less ore is transported to the mill (like the Sandvick low-profile LHD loader), intra-mine transportation costs are reduced. Furthermore, an added benefit is that the life of the tailings dam is lengthened, since less ore and post-processing waste are produced.

Modern Gold Processing Methods

Modern gold processing techniques are expected to enhance the gold recovery rate, including ultrafine grinding and Intense CIL. Select results of a metallurgical study from a 450 kg bulk sampling program were announced in November 2020. Average gold recovery rates between 91% and 94% for some of the bulk composites from the Rietfontein, Beta and Vaalhoek Mines were well above management’s expectations. Other metallurgical testwork was completed on the more complex ore from the Frankfort Mine. Based on the metallurgical testwork conducted to date, the PFS incorporates an expected recovery rate of 84%.

Management plans on upgrading and refurbishing the existing gold process plant in a flexible and modular manner so that it can to accommodate a variety of ores, each of which requiring different treatment solutions. The front-end (crushing) and back-end (CIL, elution, gold room and tailings) infrastructure is to be shared. Initially, the components to process ROM ore from the Beta Mine will be completed, which will follow the configuration of a conventional CIL (Carbon-in-Leach) process. Initially, the existing tailings facility will be re-commissioned and utilized. Metallurgical studies will continue to be conducted in order to further to refine the design.

By utilizing modern mining methods and gold processing techniques, the All-In Sustaining Cost (AISC) over the Life of Mine (LoM) is projected to be only US$905 per oz Au, or in the bottom quartile for South Africa producers. The prior extensive development of these brownfield mines and the advantageous location of near-surface, high-grade gold reefs also contribute to the expected low cost status.

Management plans on constructing a new gold processing plant on the already-approved plant & tailings facility footprint and initially producing at a rate of approximately 60,000 oz Au annually from nearby ore sources through shallow underground hard rock mining. Longer-term, over the ensuing five years, management anticipates increasing production rate to 160,000 oz Au annually from six mine locations.

Utilizing the Maiden Mineral Reserve, the PFS estimates that the Beta, Frankfort and CDM mines can recover 353,012 ounces Au over a Life of Mine (LoM) of 7.67 years, assuming an 84% process recovery rate of the 418,845 ounces Au ROM ore. Total capital costs are estimated to be US$78.5 million. The IRR (at a 5% discount rate) is estimated to be 82% at a gold price of US $1,570 per ounce. The average LOM all-in sustaining cost (operating costs and capital expenditures) is calculated to be US$905 per ounce Au. The PFS assumes ZAR/USD exchange rate of 15.9. The PFS anticipates a pre-production period of 23 months for rehabilitating existing and constructing new processing plant infrastructure, after which the pay-back period is estimated to be 13 months from the time the first gold is poured.

Although the Phase 1 underground mines are already permitted in most respects, regulatory approval for underground mining will require amendments to the Environmental Management Plan and the Environmental Assessment Statement. An amended mine works program and the related environmental authorizations will be submitted for approvals.

Revised Timetable

The open-pit permitting process is taking longer than anticipated, in part due to the COVID-19 pandemic delaying the approval process at various South African regulatory departments. In addition, the company’s April 2021 Investor Presentation indicates that gold production will be initially sourced from higher-grade feed from the underground Beta Mine with first gold pour occurring in about 23 months (see image below). The management team is currently refining the company’s development strategy in light of the delay in the open pit permitting process. Management plans to communicate further details during the upcoming months.

We expect the stock of Theta Gold Mines to react to upcoming announcements concerning

• advancement of a PFS on the Rietfontein Mine

◦ upgrade Indicated Resources to reserve status, increasing the Mining Reserve

◦ define new Inferred Resources

• progress toward refurbishing the CIL processing plant

◦ plant design

◦ metallurgical updates

Further Details of Maiden Underground Mining Reserve

On April 8, 2021, Theta Gold Mines announced the company’s Maiden Underground Mining Reserve for the Beta, Frankfort and CDM (Clewer, Dukes & Morgenzon) mines. Collectively, these underground deposits are now referred to as the TGME Underground Project. The Proved and Probable Underground Ore Reserves are estimated to be 418,850 oz gold (2,366 Kt with an average grade of 5.49 g/t).

Combined with the Ore Reserves for Theta Open-Pit Project, the company’s current total Mining Reserve is 579,460 oz gold (4,530 Kt with an average grade of 3.98 g/t).

The Total Mineral Resource (JORC 2012) increased slightly to 6.11 million oz Au (45.5 Mt grading at 4.17 g/t Au) as the new underground reserve was derived from a 63% conversion of the Indicated Resource in the easily accessible gold underground areas of the Beta Mine.

Roughly 95% of the Mining Reserve is situated within 3 km of the location of the central processing plant.

Next PFS Project – Rietfontein Mine

Management is now planning the Rietfontein Mine to be the subject of the company’s next Pre-Feasibility Study. Currently, the estimated Mineral Resources at the the Rietfontein Mine are 242,200 oz gold (grading 8.2 g/t Au) in the Indicated category and 537,600 oz gold (grading 14.0 g/t Au) in the Inferred category. As with the Beta, Frankfort and CDM Mines, management believes that a significant percentage of the Indicated Resource can be upgraded to Reserve status. In addition, metallurgical test work of bulk samples was recently completed in November 2020.

Management is targeting that the Scoping Study on the Rietfontein Mine (completed in February 2017 and revised in September 2018) can be upgraded to a Pre-Feasibility Study by the end of the third quarter of this year. It is expected that the PFS would be additive to Theta’s Mining Reserve and hence, would further increase the company’s potential production profile.

Valuation

Based on our calculation of share value of attributable resources, our target for Theta Gold Mines stock is $0.69. Our calculation of share value of attributable resources is based on the ascertained net asset value of each property, which is determined by adjusting the value of estimated resources for the expected recovery rate and mining/processing costs.

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QLGN: IND Filing for QN-165 as COVID-19 Treatment Expected in 2H21

1 week 5 days ago

By David Bautz, PhD

NASDAQ:QLGN

READ THE FULL QLGN RESEARCH REPORT

<_span_style3d_22_text-decoration3a_ _underline3b_22_="">Business Update

IND Filing for QN-165 (formerly AS1411) for Treatment of COVID-19 in 2H21

Qualigen Therapeutics, Inc. (NASDAQ:QLGN) is developing QN-165 (formerly AS1411) as a treatment for COVID-19. In October 2020, the company completed a positive pre-IND meeting with the U.S. FDA regarding QN-165’s development pathway. QN-165 is a DNA aptamer that has exhibited antiviral activity in multiple in vitro assays against different viruses. The following manuscripts show that QN-165 is active against a number of different RNA viruses, including dengue virus, human immunodeficiency virus (HIV), and respiratory syncytial virus (RSV). We believe that the following studies provide proof-of-concept for QN-165 as an anti-viral agent, nucleolin as an antiviral target, and justify testing QN-165 as a treatment for SARS-CoV-2 infection.

Balinsky et al., 2013: The dengue virus capsid protein is a structural component of the infectious virion, and it interacts with and colocalizes with nucleolin. Both knockdown of nucleolin expression with siRNA and treatment with AS1411 caused a significant reduction in viral titers following dengue virus infection. There was no change in viral RNA or protein levels at early time points post-infection, thus nucleolin is likely involved in viral morphogenesis.

Perrone et al., 2016: Cell-surface nucleolin is a low-affinity co-receptor for HIV on target cells, thus since AS1411 binds to nucleolin it was tested as a potential anti-HIV therapy. AS1411 inhibited HIV attachment and entry into target cells along with antiviral activity without displaying cytotoxicity.

Mastrangelo et al., 2017: Following administration of AS1411 to RSV-infected mice and rats there was a reduction in lung viral titers, decreased airway inflammation, and decreased IL-4/IFN-g ratios compared to untreated, infected animals.

The company will be performing a small (n=6+) Phase 1b study to confirm the dose level before proceeding directly into a Phase 2a trial with a targeted enrollment of approximately 500 patients. Patients who are admitted to the hospital with COVID-19 but have not yet progressed to respiratory failure will be randomized 1:1 to receive standard of care therapy (e.g., remdesivir, corticosteroids, etc.) along with QN-165 or placebo. The primary endpoint will examine time to release from the hospital, along with multiple secondary endpoints (e.g., viral load, disease progression, etc.). An interim analysis will be performed after 100 patients are treated and if the trials are successful, it may lead the company to seek emergency use authorization (EUA).

Update on QN-247 (formerly ALAN)

QN-247 (formerly ALAN or AS1411-GNP) is an aptamer-based anticancer compound composed of QN-165 attached to gold nanoparticles (GNPs). Previous preclinical studies showed that QN-247 was stable in aqueous and serum-containing solutions, had superior cellular uptake, and increased antiproliferative effects compared to unconjugated QN-165.

In March 2021, Qualigen entered into a Material Evaluation and Option Agreement with the University College London (UCL) to evaluate the use of QN-247 with G-quadruplex binders (GQBs) developed by Professor Stephen Neidle and colleagues at UCL. Previously published research showed a GQB exhibited potent activity in human gemcitabine-resistant pancreatic cancer cells (Ahmed et al., 2020). The use of a GQB along with QN-247 may potentiate its activity against pancreatic cancer and represents another significant potential indication for QN-247.

The company is planning to target acute myeloid leukemia (AML) as a first indication for QN-247. IND-enabling studies are currently ongoing and we anticipate those studies concluding in the second half of 2021 and an IND being filed in the first half of 2022.

Update on RAS-F

In July 2020, Qualigen announced an agreement with the University of Louisville for intellectual property covering the “RAS-F” family of RAS protein-protein interaction inhibitor small molecule drug candidates. The company is currently evaluating this group of compounds to identify a lead development candidate as a therapeutic against a range of cancers.

There are three human RAS genes (HRAS, KRAS, and NRAS) that encode four similar RAS proteins that function as transducers to connect cell surface receptors with intracellular signaling pathways (Pylayeva-Gupta et al., 2011).

RAS mutations are found at varying rates across many different types of cancers, with KRAS mutations found most frequently (86%) followed by NRAS (11%) and HRAS (3%), with the overall range of any RAS mutation occurring in approximately 9-30% of all tumor samples sequenced (Cox et al., 2014).

In an effort to develop a treatment for RAS-driven cancer, researchers at the University of Louisville screened a library of two million compounds to identify small molecules that would inhibit the protein-protein interaction between RAS and effector proteins. Qualigen is currently continuing to identify a lead drug candidate with IND-enabling studies expected to complete in the second half of 2021 and an IND expected to be filed in the first half of 2022.

Update on FastPack System

The company’s FastPack diagnostic system is a proprietary platform that provides rapid and accurate immunoassay testing results. It consists of the FastPack Analyzer and FastPack test pouches that includes a single-use, disposable foil packet containing the FastPack reagent chemistry. The company currently markets 10 assays, including tests for prostate cancer, thyroid function, metabolic disorders, and research applications. FastPack products are now available in approximately 1,000 physician offices worldwide. Since launching in 2001, cumulative sales of FastPack products has exceeded $100 million.

In January 2021, Qualigen announced the achievement of a milestone event that triggered a payment obligation from Yi Xin Duan Jishu (Suzhou) Ltd. related to the initiation of technology transfer of the FastPack system. In October 2020, the company announced that Yi Xin will develop, manufacture, and sell new generations of diagnostic test systems and has the rights to manufacture and sell FastPack diagnostic products in China.

While Qualigen will continue to sell FastPack products, the main focus of the company will be on the development of therapeutics for cancer and infectious diseases.

Update on STARS™

The same core technologies that were developed for the FastPack system are the basis for the company’s expansion into a therapeutic application for removing disease associated agents from a patient’s blood, the Selective Target Antigen Removal System (STARS). STARS consists of a membrane targeted with a capture reagent inside of a cartridge and is expected to be used with conventional dialysis and hemofiltration machines. Examples of agents that could potentially be removed with STARS include immune checkpoints, metastatic cells, and inflammatory factors. STARS could also potentially be used to treat infectious diseases by removing circulating viruses. In August 2020, the company increased its IP protection for STARS as it was issued U.S. Patent 10,744,257. Qualigen is beginning development of STARS, which includes an analysis of whether to advance it along or through a partnership.

Financial Update

On March 31, 2021, Qualigen filed form 10-KT with financial results for the nine months ending December 31, 2020 following the company changing its fiscal year-end from March 31 to December 31. During the nine months ending Dec. 31, 2020 the company recorded revenues of $2.9 million compared to $5.6 million during fiscal year 2020 ending Mar. 31, 2020. The decrease was related to both the current period only covering nine months and a reduction in sales to Sekisui, the company’s primary distributor, due to a decreased number of patient visits to physician offices because of the COVID-19 pandemic. All revenue was derived from the sale of diagnostic products.

G&A expenses were $7.1 million during the transition period compared to $1.5 million during fiscal year 2020. The increase was primarily due to increased stock-based compensation, professional fees, insurance expenses, payroll, and overhead costs. R&D expenses were $3.3 million during the transition period compared to $1.2 million during fiscal year 2020. The increase was primarily attributable to increased spending on the therapeutics pipeline.

As of December 31, 2020, Qualigen had approximately $24 million in cash and cash equivalents. This was due in part to a $12 million private placement the company closed in December 2020. We estimate that Qualigen has sufficient capital to finance operations into the second quarter of 2022. As of March 15, 2021, the company had approximately 28.8 million shares outstanding and, when factoring in stock options and warrants, a fully diluted share count of approximately 44.3 million.

Conclusion

We look forward to additional updates regarding the upcoming clinical trial of QN-165 in COVID-19 patients, which we believe the company will provide upon filing of the IND in the second half of 2021. In addition, we anticipate additional updates for QN-247 and the RAS-F programs later in the year. We have accounted for the financing in December and moved our DCF model ahead one year and our valuation remains at $10 per share.

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MNOV: Milestone Payments from Legacy Gene Therapy Assets...

1 week 5 days ago

By David Bautz, PhD

NASDAQ:MNOV

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<_span_style3d_22_text-decoration3a_ _underline3b_22_="">Business Update

Milestone Payments from AAV Assets

On April 22, 2021, MediciNova, Inc. (NASDAQ:MNOV) announced the receipt of two milestone payments that totaled $4 million as a result of the successful achievement of two clinical development milestones for a gene therapy product based on adeno-associated virus (AAV) vector technology. The AAV technology was developed by Avigen, Inc., which MediciNova acquired in 2009. In 2005, Avigen signed an assignment agreement with Genzyme Corporation, now a subsidiary of Sanofi, for the AAV technology and a large family of patents that included milestone and royalty payments for any products covered by the claims of those patents. In 2014, MediciNova received a $6 million milestone payment from Genzyme related to a gene therapy program under this agreement.

Gene therapy is an exciting area of research as it is becoming possible to replace defective genes that cause debilitating diseases that were once very difficult, if not impossible, to treat. There are a number of vectors available to deliver genes inside of cells, including adenoviruses, AAV, retroviruses, and lentiviruses. AAV is a non-enveloped virus that is able to infect both dividing and non-dividing cells. It contains a small, single-stranded DNA genome that is approximately 4.8 kilobases, which is approximately the limit for the size of a gene that can packaged efficiently inside it. The genes delivered by AAV persist as extra-chromosomal episomes in the nucleus of transduced cells and do not integrate into host genomes (Choi et al., 2006). However, transgene expression is potentially long lasting when delivered by AAV, which is an advantage over other vectors such as adenovirus.

Thus far, the FDA has approved two products that utilize AAV as a vector, with a third submission receiving a CRL due to additional data requirements:

• Luxturna® (voretigene neparvovec-rzyl): In December 2017, the FDA approved Luxterna for the treatment of patients with confirmed biallelic RPE65 mutation-associated retinal dystrophy, a genetic retinal disorder that affects approximately 1,000 to 2,000 patients in the U.S. Revenues for Luxturna were $38 million in 2020 (EvaluatePharma).

• Zolgensma® (onasemnogene abeparvovec-xioi): In May 2019, the FDA approved Zolgensma for the treatment of spinal muscular atrophy (SMA) in pediatric patients less than two years old. SMA is caused by a rare mutation in the survival motor neuron 1 gene. Novartis reported revenues for Zolgensma of $920 million in 2020 with projected revenues of $2 billion in 2025 (EvaluatePharma).

• Valoctocogene roxaparvovec: In August 2020, the FDA issued a complete response letter (CRL) to Biomarin for its severe hemophilia A treatment. The CRL was in regard to additional clinical trial data the agency requested and was not related to any safety issues from the AAV vector.

In December 2020, REGENXBIO, Inc. sold a portion of the royalty rights from the net sales of Zolgensma (derived from its AAV technology) to Healthcare Royalty Management, LLC for $200 million. REGENXBIO received $61.6 million in royalties from the sale of Zolgensma in 2020 (approximately 6.7%). We believe this is an excellent example of how a company can monetize rights to approved AAV products.

Conclusion

The rights to the AAV assets that MediciNova acquired from Avigen represent underappreciated upside potential for investors as not many are even aware of their existence. We do not have access to the unredacted agreement between Avigen and Genzyme, thus we do not know the exact amounts that are possible for milestone and royalty payments, or even which specific products in development are covered by the agreement, however the fact that MediciNova recently received two payments for clinical development milestones is very encouraging and means that the potential exists for these payments to occur again in the future. Our valuation remains at $26.50.

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MDNA: Targeting ‘Cold’ Tumors with Dual Cytokine

2 weeks 2 days ago

By David Bautz, PhD

NASDAQ:MDNA

READ THE FULL MDNA RESEARCH REPORT

<_span_style3d_22_text-decoration3a_ _underline3b_22_="">Business Update

Preclinical Data for MDNA19-MDNA413 Presented at AACR 2021

On April 12, 2021, Medicenna Therapeutics Corp. (NASDAQ:MDNA) announced the presentation of preclinical data for MDNA19-MDNA413, an IL-2/IL-13 dual specific cytokine derived from the company’s BiSKITs™ (Bi-function SuperKines as ImmunoTherapies) platform. A copy of the poster can be found here.

MDNA19-MDNA413 is designed to target immunologically ‘cold’ tumors through modulation of the tumor microenvironment, which includes low CD8+ and natural killer (NK) cells, high T regulatory cell counts, and increased numbers of immunosuppressive myeloid cells, including both tumor associated macrophages (TAM) and myeloid derived suppressor cells (MDSCs), both of which overexpress the Type 2 IL-4 receptor. The MDNA19 portion of the molecule binds with the intermediate affinity IL-2 receptor (CD122/CD132) to promote activation of CD8+ and NK cells, while the MDNA413 portion binds to the Type 2 IL-4 receptor to prevent TAM and MDSC suppression of T cells.

The following table shows that MDNA19-MDNA413 maintains similar affinity to naïve CD8+ T cells, NK cells, and regulatory T cells as MDNA19, with both of them having higher affinity than recombinant human IL-2 for CD8+ T cells and NK cells and lower affinity for regulatory T cells (as shown through a lower and higher EC50, respectively).

MDNA19-MDNA413 inhibits both IL-4 and IL-13 signaling via the alpha-1 subunit of the Type 2 IL-4 receptor in a similar manner to MDNA413. The following figure shows decreased STAT6 activity (which is a marker for IL-4/IL-13 signaling) with increasing concentrations of MDNA19-MDNA413, which is similar to MDNA413 inhibition.

The decreased IL-13 signaling leads to a decrease in M2a polarization of macrophages. The M2a phenotype is associated with a pro-tumoral environment and influences multiple areas of tumor growth, including cell survival, proliferation, and invasiveness (Najafi et al., 2019). The following figure shows the percentage of CD209 positive cells, which is a marker for M2a macrophages, decreases with increasing concentration of MDNA19-MDNA413 or MDNA413.

Conclusion

The results for MDNA19-MDNA413 are very encouraging and show that Medicenna is building a diverse pipeline of superkine assets. The ability to modulate multiple signaling pathways with enhanced cytokines offers a huge opportunity to target different oncogenic pathways as well as other diseases where immunomodulation could benefit patients.

While work continues on the BiSKITs platform, we anticipate Medicenna initiating a Phase 1/2a clinical trial of MDNA11 in the U.K. in mid-2021, and it is conceivable we could see initial data before the end of 2021. However, MDNA11 represents only the ‘tip of the iceberg’ for the company’s superkine platform and we anxiously await updates throughout the year on additional programs the company will be prioritizing. With no changes to our model the valuation remains at $12 per share.

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VQSLF: Strengthening Balance Sheet & Momentum Support Optimistic Outlook

2 weeks 3 days ago

By M. Marin

OTC:VQSLF | TSX:VQS.V

READ THE FULL VQSLF RESEARCH REPORT

VIQ Solutions (OTC:VQSLF) (TSX:VQS.V) reported 4Q20 results earlier this month, with revenue of $7.8 million up 28% year-over-year. The economic influence of the COVID-19 pandemic continues to have an impact on results and contributed to lower gross margins (38.1% versus 39.3% in 4Q19). For the full year, however, VIQ registered a gross profit margin of 50.9% compared to 43.1% in 2019.

VIQ met its four key objectives in 2020, which included cross-selling a range of products and services to increase wallet share from existing customers. The company’s new $30M contract with Queensland, Australia is an example.

Objectives:

➢ Improve the quality of its revenue by further transitioning to recurring SaaS accounts

➢ Grow its client base organically and via strategic M&A

➢ Cross-sell a range of products and services to increase wallet share from existing customers

➢ Migrate customers to the VIQ cloud computing infrastructure

VIQ has made substantial investments in technology and infrastructure in order to strengthen the platform and enable scale as the company grows in its four key targeted verticals and to launch what the company calls “VIQ 3.0,” the next-gen phase of the company and its growth strategy. The company has broadened its product portfolio with the introduction of FirstDraft, CapturePro Conference, CapturePro On-the-Go, and MobileMic Pro. VIQ believes it can capture a greater share of wallet from existing customers and add new customers with its expanding product portfolio.

VIQ has also restructured and strengthened its management team in order to support anticipated growth. VIQ also consolidated its global operations to obtain operating efficiencies and ensure standardization across its various business and geographic operations, resulting in estimated annual cost saving of about $1 million.

Strengthened Balance Sheet Enhances Financial Flexibility

The company also strengthened its balance sheet in 2020 through the conversion of convertible notes from debt to equity and a November 2020 capital raise. VIQ ended 2020 with $16.8 million in cash, which we believe provides enhanced flexibility to support anticipated growth in 2021 and ahead of a targeted uplisting to a U.S. national exchange. The company has met several NASDAQ listing requirements; VIQ;s goal is to complete the uplisting to NASDAQ this year.

Anticipate Further M&A in 2021

Consistent with VIQ’s long-term strategy to enhance organic growth with complementary acquisitions, the company targets at least two acquisitions in 2021 to add transformative technology that will enable VIQ to accelerate the monetization of the digital content its platform generates and possibly expand its geographic footprint.

The company has indicated the likelihood that more than a third of the recent capital raised would be earmarked for potential strategic accretive acquisitions to enhance and accelerate growth.

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MDXG: Last Patients, Last Visits in Late-stage Trials

2 weeks 3 days ago

By John Vandermosten, CFA

NASDAQ:MDXG

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<_span_style3d_22_text-decoration3a_ _underline3b_22_="">Last Patients, Last Visits in Late-stage Trials

What’s New

On April 19, 2021, MiMedx Group, Inc. (NASDAQ:MDXG) announced that three late stage trials in MiMedx’ pipeline had recently achieved important milestones. All patients in the Phase III studies for AmnioFix Injectable in plantar fasciitis (PF) and Achilles tendonitis (AT) have completed their last clinical visits. The Phase IIb trial for AmnioFix Injectable in knee osteoarthritis (KOA) has completed the recording of all clinical effectiveness endpoints. Next steps for the programs include a planned review and statistical analysis of data for all three trials.

The PF, AT and KOA trials are evaluating AminoFix Injectable, which uses MiMedx’ micronized dehydrated Human Amnion Chorion Membrane (mdHACM). Following completion of the planned review and statistical analysis of data, MiMedx expects to share top-line data this summer and will begin planning a Phase III in KOA assuming data are supportive. A biologics license application (BLA) is expected to be submitted for PF in 1H:22; however, due to trial design, a BLA for AT is not expected. Data from the AT trial will be used to support safety of the product. Next steps for the PF program include:

➣ Closing sites

➣ Cleaning the data

➣ Locking database

➣ Conducting statistical analysis

➣ Meeting with the FDA

➣ BLA submission

Prescience Point Capital Management Board Nominations

Prescience Point Capital Management recently announced that it will nominate four directors to MiMedx board at the 2021 Annual Meeting. The Louisiana-based asset manager owns ~8.1% of the shares outstanding. When accounting for the Series B Convertibles and adjusting for their ultimate conversion to equity, ownership drops to ~6.6%. Prescience contends that EW Healthcare’s interests may conflict with those of other shareholders and that MiMedx management has not provided sufficient information regarding the opportunities for AmnioFix in Knee Osteoarthritis.

We remind investors that data is not yet available for the Phase II study in KOA and that even if favorable information is generated and AmnioFix progresses to Phase III, there remain many hurdles to cross, including the approval of a BLA before commercialization may begin. Based on several independent studies that have been conducted on clinical trial success rates, only about half of products that enter Phase III are eventually approved, supporting a conservative stance by management at the current stage of development.

Prescience disagrees with other efforts and initiatives taken by management which can be found in a news release and letter to shareholders made public on April 16, 2021. If all of Prescience’s board members are added, they will hold four of nine seats (44% representation), compared with their 6% ownership adjusting for Series B conversion. MiMedx acknowledged the receipt of the director nominations in an April 16 press release.

MiMedx’ largest holder is Essex Woodlands Health Ventures (EW Healthcare), which, on an as converted basis, owns about ~17% of shares outstanding. As part of their investment they have secured the right to appoint two directors to the board as long as they hold in excess of 10% of the shares in equity or on an as-converted basis. The board members appointed by EW Healthcare are Martin P. Sutter and William A. Hawkins, III.

Based on our review and excluding holdings by Vanguard, the only other holder above 2% is RTW Investments with a 2.4% interest (2.0% with Series B conversion). While Vanguard is reported to hold over half the shares outstanding, we believe this may be inflated by shares owned by individual investors held in Vanguard’s name.

Clinical Pipeline

MiMedx Clinical Pipeline1

 

MiMedx has three clinical development programs underway, in knee osteoarthritis, plantar fasciitis and Achilles tendonitis. These indications have annual prevalence rates of 4-6%, ~1% and ~60,000 respectively in the United States. While the AmnioFix injectable has been used in non-homologous applications, we believe that with supportive data and the FDA’s assent, penetration into these markets can be substantially increased. Adjacent markets, such as in other joints and tendons, may be expansion opportunities. To date there have been no reports of direct adverse reactions related to human uses of amniotic membrane products supporting a durable safety record and a strong rationale for eventual approval of ongoing studies.

AminoFix (mdHACM)

MiMedx’ Purion® process, in use since 2006, is a patented method for the aseptic processing of human amnion/chorion, sourced from human placental tissue, which involves gentle cleansing, lamination of the amnion and chorion, dehydration and terminal sterilization of the tissues under controlled conditions.

AmnioFix is available in sheet and particulate forms in various sizes. AmnioFix injectable comprises micronized dehydrated human amnion/chorion membrane. The product is semi-permeable, providing a protective barrier that supports the healing cascade and facilitates development of granulation tissue, depending on use and application. It has a five-year shelf life and is stored at room temperature.

MiMedx holds a strong position in the wound care market with a supportive set of preclinical and clinical work demonstrating safety and efficacy for the company’s portfolio of products. With additional studies underway, new product launches and a favorable demographic trend, we anticipate double digit growth in the second half of 2022. We see a high degree of probability that the trials will be successful thereby supporting even greater penetration for AmnioFix and related products.

Key reasons to own MiMedx shares:

➣ Existing high margin business in placental and umbilical cord tissue products

◦ EpiFix

◦ EpiCord

◦ EpiCord Expandable

◦ AmnioFix

◦ AmnioFill

◦ AmnioCord

◦ EpiBurn

➣ Products recognized by payors

◦ EpiFix on largest US health insurer formulary for diabetic foot ulcers

◦ EpiFix and EpiCord allografts eligible for coverage by Medicare Administrative Contractors

➣ International growth opportunities

◦ Japan – anticipated approval mid-2021

◦ United Kingdom – approved, reimbursement in process

◦ Germany – approved, reimbursement in process

➣ Development candidates

◦ Plantar fasciitis – Phase III

◦ Achilles tendonitis – Phase III

◦ Knee Osteoarthritis – Phase II

Designated as a Regenerative Medicine Advanced Therapy (RMAT) by FDA

◦ Multiple preclinical advanced would care development projects

➣ Investigation and expenses related to prior management misconduct are largely complete

Summary:

MiMedx is a biotechnology company operating in the wound care and regenerative medicine spaces, with both commercialized and in-development assets. Completing the final events in the three most advanced trials is an important achievement. We expect the standard checklist of events to be completed for BLA submission for PF and for the start of a Phase III in KOA to take place over the next several months. We also expect an update on company performance and the status of enforcement discretion in the upcoming quarterly report which should occur in the next few weeks. We recently initiated on MiMedx and maintain our valuation of $16.00 per share. For details on the company’s products, development portfolio and our valuation assumptions and methodology, please see our initiation.

SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR. 

DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks provides and Zacks receives quarterly payments totaling a maximum fee of $40,000 annually for these services. Full Disclaimer HERE.

________________________

1. MiMedx March 2021 HCW Global Life Sciences Conference, Corporate Presentation

BMRA: COVID-19 Test Contributes to More Than Doubling Of Revenue in 3Q FY21

2 weeks 3 days ago

By M. Marin

NASDAQ:BMRA

READ THE FULL BMRA RESEARCH REPORT

<_span_style3d_22_text-decoration3a_ _underline3b_22_="">COVID-19 Test Contributes to More Than Doubling Of Revenue in 3Q FY21

Biomerica (NASDAQ:BMRA) recently reported Q3 fiscal 2021 results. BMRA’s focus in 2020-21 has included extending its expertise and technology to develop and commercialize COVID-19 diagnostics. Revenue in 3Q FY 2021 more than doubled to $3.62 million, largely the result of initial sales of the company’s new COVID-19 antigen rapid test in Europe after BMRA received CE Mark approval in January 2021. We believe this both creates a new revenue stream and also offers proof-of-concept of the versatility and applicability of the company’s technology and IP.

Planning to Expand Markets For COVID-19 Test

BMRA has been shipping the test in the EU, as noted, leveraging its existing distribution network. BMRA is optimistic about sales of the COVID-19 test and is working to expand into additional markets. We believe the global need to test for the virus is likely to persist even with rising vaccination rates. The FDA is reviewing the company’s EUA submission for U.S. sales.

Measures to Strengthen Balance Sheet

The company also took measures to simplify and strengthen its balance sheet in 3Q FY 2021. Following the conversion of preferred shares in January, BMRA now has no preferred shares outstanding. BMRA also issued 158,889 shares under its shelf registration, raising net proceeds of about $1.0 million. The company ended 3Q with cash & equivalents of $5.27 million to continue advancing its InFoods platform and support overall growth.

InFoods Study Moving Forward; Data Expected in 2H 2021

BMRA continues to advance the InFoods clinical trial. The company anticipates that results from the endpoint trial will lead to partnership discussions with larger market participants and also advance the inFoods path to potential FDA clearance. The total direct and indirect cost of IBS has been estimated at $30 billion annually in the U.S. market alone. As a diagnostic-guided therapy (not a drug), InFoods does not have the side effects drugs often have and can be used alone and/or as part of a drug therapy program.

IBS symptoms frequently are triggered when people eat specific foods. Trigger foods vary from patient-to-patient and are specific for each individual patient. For instance, one person might be able to consume broccoli with no problem but milk or eggs trigger discomfort and symptoms, while another person might be fine with milk but cannot tolerate broccoli. Eliminating trigger foods from the patient’s diet is expected to alleviate IBS symptoms, discomfort and pain. Utilizing an antibody-guided blood test, the InFoods® technology identifies foods that trigger IBS symptoms and pain in order to help create a dietary regime designed to minimize ongoing occurrence of symptoms.

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DSS Reports 2020 Revenue Growth of 12% Despite a Pandemic

2 weeks 5 days ago

By Lisa Thompson

NYSE:DSS

READ THE FULL DSS RESEARCH REPORT

DSS (NYSE:DSS) continues its march to higher revenues and profits by moving out of unprofitable businesses and opportunistically moving into new ones. 2020 revenues reached $17.4 million, growing 12% while gross margin on a continuing operations basis increased 19%. However the operating loss increased to $10.7 million from $2.6 million. Fully diluted GAAP EPS on a continuing basis was $0.59 compared to a loss of $3.05 a year ago.

Since the quarter ended, DSS increased its position in Sharing Services Global to 48.8% and at any point it may pull the trigger to go over 50% at which point it will be consolidated with DSS. In its latest quarter ending January 31, 2021 it generated $14.3 million in sales. Since sales have been declining at SSG, it is difficult to estimate what is inclusion could contribute to DSS going forward, but with its $57 million dollar run rate it could easily be more than DSS’s current revenues.

Q4 2020 Earnings Results

Total revenues for the quarter were $5.9 million versus a restated $5.7 million a year ago, up 3.5%.

Printed product sales were $4.6 million versus a restated $4.8 million in Q4 2019. Walgreens’ business continued weak but is back to about 80% of what it was. Despite the decline at Walgreens, the company made up for its decline by sales to its new higher margin customers. Commercial and security printing grew $98,000 year over year and was also up sequentially.

Technology sales, services, and licensing grew 5.8% to $765,000. AuthentiGuard was $555,000 of that, and flat with last year. AuthentiGuard’s major customer resumed some production, but it still below former levels. It is difficult to get any new customers to start implementation due to lockdowns across the globe.

RBC Life Sciences reported revenues of $533,000 up from $172,000 a year ago, but down from Q3, as Q3 had a lot of backlog fulfillment from Q2 orders. It is expected to show sequential improvement throughout the year.

Gross margins were 29.9% down from last year’s restated 56.5%, and down from Q3’s 36.7% due to product mix; gross margin dollars were also down to $1.8 million from $2.1 million.

Operating expenses were a huge $8.0 million up sequentially from $3.9 million in Q3 and compared to a restated $2.4 million in 2019. SG&A contained a bonus accrual of $4.3 million for the company’s Chairman. With out that expenses still almost doubled to $4.1 million. This increase was from adding the direct marketing business. We expect that Q1 should show expenses closer to that of Q3 2020.

This fourth quarter DSS’s 32.6% of Sharing Services Global’s net income in its October quarter, reported as a new line item in other income, was $604,000. DSS reports its share of net income on a two-month lag basis. It had no Services income in its September quarter. SSG has already reported its quarter ending January 31, 2021. It had net income $2.4 million in the quarter meaning DSS would report 32.6% or $778,254 as its share in Q1 2021 that goes up to 48.8% in Q2 with the incremental stock purchase. Sharing has stated it will be changing its fiscal year to a calendar year going forward and its quarter’s will be aligned with DSS.

Other expenses contained a one-time unrealized gain on marketable securities of $2.2 million from Alset and REIT stock price changes as well as the rest of its stock portfolio.

Minority interest was a reversal of $788,000 that was caused by a gain from purchase price accounting from Impact BioMedical offset somewhat from expenses at the REIT.

The company again reported its net loss broken down by continuing operations and discontinued operations. The loss from continuing operations was $3.4 million versus a $209,000 loss last year and discontinued operations added $34,000 this quarter versus $51,000 in 2019.

Loss to common shareholders was $2.6 million versus a loss of $209,000 last year. The fully diluted GAAP Loss per share was $0.44 versus a loss of $0.18 a year ago. Non-GAAP it was a loss per share of $0.98 versus a loss of $0.14 last year. The shares outstanding increased 419% to 6.0 million primary shares. Primary shares outstanding as of March 16, 2021 were 27,670,125.

Balance Sheet

On December 31, 2020 the company had $5.2 million in cash, working capital of $3.6 million and debt of $2.3 million. It owns 64,207,378 shares (32.6%) of Sharing Services Global (OTC: SHRG) on the December balance sheet for $12.2 million. DSS owns 127,179,311 ordinary shares of Alset International Limited (formerly Singapore eDevelopment) (Ticker: 40V.SI) a publicly listed company on the Singapore Exchange. In October, the company purchased 200,000 shares of Presidio Property Trust (NASDAQ:SQFT) at the IPO price of $5.00 per share. On December 31, it was worth $4.24 per share and on March 31, $3.66. Because of these prices changes at Alset and Presidio, we believe the company could report a loss on marketable securities in Q1 of $1 million.

Since the quarter ended, the company did two capital raises. On Jan. 19, 2021 DSS sold 7,666,666 shares at $3.60 per share for gross proceeds of approximately $27.6 million and on February 8, 2021, it sold another 14,167,247 shares at $2.80 p with gross proceeds of approximately $39.7 million. It now has approximately $50 million in cash and 27.7 million shares outstanding.

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NEXCF: Revenues Beat Q4 Estimates With 181% Growth

2 weeks 5 days ago

By Lisa Thompson

OTC:NEXCF

READ THE FULL NEXCF RESEARCH REPORT

NexTech (OTC:NEXCF) actually had a better quarter than we estimated with revenues virtually at the number is had been touting for bookings for Q4. Some of the confusion was from the difference between bookings and revenues and some by the fact that the company has changed the definition of bookings to exclude the eCommerce business going forward. The bookings number reported for Q4 2020 of $2.5 million now refers to just the AR business. In Q4 2020, eCommerce had an excellent Christmas with its sales up 88% from last year and going by cost of sales as an indicator, almost double its sales from Q3 2020. On the earnings call management let us know to expect another record revenue quarter in Q1 2021—surprising given it is sequentially after the Christmas quarter, and the large portion of sales from eCommerce in Q4 2020. The company is already at a $28 million revenue run rate.

NexTech said it plans to double its sales force in Q2, which has already been increased over the past few months with heavy hitters across the globe. After six months from hire, salesmen typically hit their strides and we should see results from here on out from previous hires.

In addition to the remote conference business, we are looking for the company to start to sell AR ads on its ad network and to monetize its hologram technology. As a result the percent of revenues from AR products will grow as the year progresses and should easily reach management’s stated projection of 50% of total revenues for the year.

We are raising our revenue estimate for the year to $40 million and believe the company is well on its way to meeting or beating that. Our initial revenue estimate for 2022 is $67 million.

Q4 2020 Results

For the fourth quarter, NexTech announced revenues of $7.0 million, up 181% over last year and 50% sequentially. For the first time, the company gave segment breakdowns. These three segments are for eCommerce, Technology Services, and Renewable Software Licenses. The first is from product sales, primarily the vacuum business. It contributed $4.6 million in the quarter compared to $2.4 million a year ago, up 88%. Technology services are the revenues from everything that was not product sales minus revenues booked from software licenses, which are all from Jolokia who may contract with customers for longer than a single event. For example, a trade show would sign a contract for a show plus keeping the show up and available for a number events after the show occurred. In the quarter, $1.8 million of revenues came from Jolokia according to the SEDAR filing. This was 26% of sales compared to 21% of total sales in Q3 2020.

Gross margins were 48.2% of revenues or $3.4 million compared to 66.4% and $1.7 million a year ago and 63.4% or $3.0 million in Q3 2020. The decline in margin was due to product discounts during the competitive Christmas season as well as compensation associated with virtual events.

Operating expenses were $10.8 million compared to $8.3 million last year’s four month quarter. Of this, $1.3 million stock-based compensation compared to less than $84,000 last year. For the first time the company broke out stock-based compensation on the income statement, which renders operating categories unable to be compared to previous periods.

The operating loss was $7.5 million compared to $6.7 million a year ago and $4.7 million in Q3 2020. The net loss was $7.3 million versus $6.7 million and EPS loss was $0.09 compared to $0.12. Primary shares outstanding were 74.7 million for the period, up 38%.

The company showed an operating cash flow loss of $4.6 million for the quarter and free cash flow usage of $5.7 million. With $20 million currently in the bank, the company has plenty of runway at this cash burn level. The company has no intention of becoming cash positive for the foreseeable future.

Balance Sheet Update

NexTech ended the December quarter with $10.7 million in cash, $2.5 million in Bitcoin, working capital of $13.6 million, and no debt or convertible debentures. As of April 15, 2021 there were 81,407,809 primary shares outstanding. The fully diluted share count using the treasury stock method is now approximately 84.4 million shares. The company raised money in April and now has approximately $22 million in cash and is operating at approximately a $2 million per month cash burn rate.

SUBSCRIBE TO ZACKS SMALL CAP RESEARCH to receive our articles and reports emailed directly to you each morning. Please visit our website for additional information on Zacks SCR. 

DISCLOSURE: Zacks SCR has received compensation from the issuer directly, from an investment manager, or from an investor relations consulting firm, engaged by the issuer, for providing research coverage for a period of no less than one year. Research articles, as seen here, are part of the service Zacks provides and Zacks receives quarterly payments totaling a maximum fee of $40,000 annually for these services. Full Disclaimer HERE.

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