Alphastox.com recently published a feature on iCO Therapeutics Inc. enjoy the read
Dear Alphastox Subscribers,In these tough market conditions, it is always very important to diversify your holdings. Since March of 2012, the market has been taking a beating, and investors’ appetite for small, grassroot junior exploration deals are slim to none. The market has been burned time and time again by these unproven stories that retail and institutional investors are less excited about taking a long shot on a property in the middle of nowhere hoping for a bonanza drill hole. Over the last few months, many investors we work with are looking into a new sector, one that has been flying under the radar for the past few months now but has been returning double to triple digit returns to investors that have been following the trend. That sector is called the biotech sector.We have been following the biotech sector for a little while here and we keep seeing exponential returns for good products. The Nasdaq biotech index has been up over 33% YTD and is looking to continue its trend. We believe we have found a great company with a lot of short-term upside potential called iCo Therapeutics (ICO) on the TSX Venture Exchange.iCo Therapeutics is a Vancouver, BC based biotech company headed by Andrew Rae (CEO) and John Meekison (CFO) – both are seasoned veterans of the Health Care space and present a rare combination of technical expertise and capital markets backgrounds. Andrew is a former Health Care analyst and John is a former Health Care investment banker. The company has three assets. Its lead asset (ICO-007) is currently in the largest Phase II trial of its kind in the US with interim data expected before the end of 2012. Some of the top eye centers in the US alongside the top clinicians are involved in the trial.
Assets: ICO-007: A treatment for diabetes related blindness (Diabetic Macular Edema or DME) is currently in a 208 patient Phase II trial in the US. This particular condition affects approximately 1 in 3 people with diabetes and is the leading cause of blindness in working age adults. Needless to say with the global diabetes epidemic this is a growing problem in the developed world and the emerging markets such as India and China. iCo is currently partnered with ISIS Pharmaceuticals who own approximately a 9.7% stake in iCo. The company licensed this drug from ISIS and has worldwide use of it and has exclusive rights. iCo doesn’t owe ISIS any payments until Phase III which shouldn’t be a problem considering management is looking for a sale of the asset after phase II. The Phase II trial is being sponsored/funded in large by the Juvenile Diabetes Research Foundation (JDRF) – the single largest funder of Diabetes research in the world. This should not go overlooked because the JDRF also funded Roche’s drug Lucentis. Interim data from the trial is expected in the coming weeks. For more information visit the trial’s official website:
https://com.us5.list-manage.com/track/click?u=95719943a1821b57689e12e4d&id=8fc9a8ed48&e=d2b90aeec8. ICO-008: A molecule that has multiple potential uses including eye related indications and systemic (rest of the body) indications. In 2010, iCo out-licensed the systemic indications (and retained the eye related indications) to a private Israeli firm: Immune Pharmaceuticals for $500k upfront and $32+MM in milestones. In addition to the cash consideration and milestones, iCo also got a 6% equity stake in Immune. Immune has recently announced a NASDAQ RTO that will close in early 2013 – this go public event will be very good for iCo, as Immune pushes forward with the development of ICO-008 and as the milestone payments start flowing into iCo. ICO-009: An oral drug delivery system/platform. This delivery systems potentially allows for oral delivery of therapies that can currently only be delivered by IV. The IV delivery is not practical in many situations due to its enormous costs (ie lack of resources in the third world). This particular asset has been funded almost entirely via non-dilutive funding and earlier this year iCo received $1.1MM from the Gates Foundation and the Canadian Federal Government. The reason we got involved with iCo is because we see huge potential here. The problem with most biotech companies is that it takes 3-4 years before any clinical trials and catalysts come about because of all the associated research and development costs. iCo has already gone through its R&D, has already completed a Phase I clinical trial and is now awaiting their interim Phase II data for ICO-007. We see huge potential for iCo in the short term and are recommending it to our clients for the following reasons:
Number 1: This has been one of the only companies on the venture exchange that has gone up steadily from $0.20-$0.78 with no major setbacks. Even when they hit some institutional selling after their $0.45 private placement they did back in July 2012, they were able to find the buyers and clean up the stock which is very important. Management never pulled out their bids and let this stock dwindle which is very different from many juniors. Currently the company is trading at a $35 million market cap which represents upside of 5-10x based on the comparables and deals that have been done in this space.
Number 2: The scary thing about many biotech companies is that many of them spend all their cash developing one asset, and if it doesn’t have a successful clinical trial, investors will see the stock plummet drastically because the asset is now worthless and the company has no cash or prospects. However, iCo has three assets which reduces its risk and still has $1.7 million in cash in the treasury. Their secondary asset, iCo-0078 is very interesting as well and iCo is looking to be heavily rewarded once Immune Pharmaceuticals goes public and its 6% equity stake is quantifiable and the milestone payments start coming in and generating cash flow.
Number 3: All indications are the Phase II trial is moving ahead as planned. iCo’s management is working hard towards a transaction in the New Year. iCo tested 15 patients in Phase I and saw retinal thickness reductions ranging from 149 microns to 743 microns depending on the dosage the patient received. This might not mean too much to a regular investor who isn’t too familiar with the space but the interesting part about this is that there was a similar company called MacuSight which transacted with Santen (a Japanese Pharmaceutical company) for $50 million dollars upon demonstrating a reduction in retinal thickness of approximately 50 microns in a Phase I trial .iCo has already proven that it reduces the swelling by a lot more than that and has advanced with a large Phase II.
Number 4: iCo’s successful and experienced management team can put investors at ease knowing that their investment is in good hands. Andrew Rae, iCo’s CEO, is constantly marketing this story and has been on the road meeting with different pharmaceutical companies in the U.S. and Europe. Noel Hall, a non-executive director, was the co-founder of Aspreva, which was bought out for $915 million and Douglas Janzen, non-executive director, was the former president and CEO of Cardiome. The depth in its management and executive team exemplifies the quality of its assets.
iCo is expecting interim data results to be coming out in early Q1 2013 which will bode as a major catalyst for the stock. Watch for additional catalysts in Q1-Q3. Investors should look at getting into iCo now before these results are out.