TLT Business update... We met with management at the Marcum Microcap Conference held in New York City (June 1-2, 2016). The topic of discussion was how ready is the market to adopt the TLC-2000 device as well as the progress on the Phase 1B clinical trial involving TLD-1433.
Since the approval from the FDA and Health Canada for the TLC-2000 device in December 2015, the market adoption of the device has been slow and uneven. A couple of reasons could be attributed to this choppiness. Although the new generation device is updated and has the feedback technology, customers appear to be notoriously slow to adopt this device as they opt to wait until the wrinkles are ironed out. Feedback from current customers is that they are comfortable and happy with the current device; if they had recently purchased a new device then they do not intend to invest in another device immediately and/or the features of the TLC-2000 do not interest them enough. Further, they are skeptical of investing in a newer device that is also 1.5-2x more expensive than the TLC-1000 device. These reasons seem to indicate that the TLC-2000 is not attractive enough to consumers to drive upgrades. Although this comes as a disappointment to Theralase it could be temporary and the company plans to train and educate their sales team to help accelerate market adoption. We think as healthcare practitioners gain experience using the TLC-2000, adoption times are likely to shorten.
Health Canada requires biocompatible, mechanical and sterility testing of the fibre optic components of the TLC-3200 medical laser which is used to activate TLD-1433 that is absorbed into bladder cancer lesions. Theralase’s application (Investigational Testing Application - ITA) is almost ready for submission to Health Canada and expected to happen by mid-June 2016. Approval could be obtained by Q2 2016 if an expedited review status (15 days for response) is granted. Otherwise, a response is provided within 30 calendar days from the date of submission. Enrollment in the Phase Ib NMIBC clinical trial at UHN will commence immediately following ITA approval. This could happen by end of July 2016.
In the Phase Ib NMIBC clinical study, the bladders of three patients will be instilled with a low dose of TLD-1433 drug and then light activated using the TLC-3200 medical laser. These three subjects will be monitored for 30 days to ensure safety and tolerability of the procedure. If no adverse events are reported, then an additional six subjects will be enrolled into the study who will be instilled with a high dose of TLD-1433 followed by light activation. They will be monitored for six months. If safety and tolerability of the procedure is demonstrated in all of the nine subjects, the Phase Ib study results will be used to support Health Canada approval and a Phase II multi-center efficacy study for NMIBC will commence in Q2 2017 in Canada, the U.S. and Europe.
Valuation
We have updated our financial model following Q1 2016 numbers as well as management’s guidance. The choppiness in our revenue forecast for 2016 and 2017 is based on the expected gain from the newly hired sales force and the variability in seasonal sales. We expect sales of the TLC-2000 device to pick up steam in 2H 2016 and anticipate Theralase to show improved performance on net income and cash flow from commercialization of the TLC-2000 device in the coming years. Our fundamentals and outlook on Theralase remain intact.