Tuesday, June 29, 2010

Agora Financial Article - Lightbridge Announces Enormous Nuclear Energy Breakthrough by Patrick Cox

The attached article appeared recently in an independent journal, Agora Financial (agorafinancial.com) and we thought you would be interested. The author, Patrick Cox, is a very astute follower of the regenerative medicine field.

Dear Breakthrough Technology Reader,

It has been another historic week both for science and investors in breakthrough technologies. If you've getting the impression that things are accelerating, you are right.

Lightbridge Corp. (NASDAQ: LTBR) announced one of the biggest breakthroughs in nuclear power generation in decades. Essentially, Lightbridge has discovered a way to increase the yield of conventional nuclear power plants by 30%. This is, to use the cliche, a "game changer." It puts the cost of nuclear power on par with coal and natural gas-powered electrical power generation.

This is an absolutely stunning development, especially in the context of the worsening oil spill and the utterly insane political environment. Behind the scenes, by the way, the world's experts on oil spills and wetlands protection are aghast at the incompetence of the U.S. government. If I were a BP stockholder, I'd be thinking about suing the USA for unnecessarily increasing cleanup costs. I'll refrain from venting about the consequences of putting a bunch of utopian law professors in charge of our country, but I will link to an article in Canada'sFinancial Post.

That article is aptly titled "Avertible Catastrophe" and reflects the views of other engineers I've talked to about the spill. The Dutch, as you can read in the article, are indeed the world's unrivaled experts in this area. I've know this for years because I've researched issues related to the Everglades. The Dutch, with 20% of their country below sea level, are the undisputed leaders in wetlands science.

The American administration decided early on, however, to take a unilateral approach to this global environmental catastrophe. When offered help from the Netherlands only days into the spill, the geniuses in Washington, D.C., rejected the help because, apparently, it would have irritated American labor unions.

Regardless, I'd much rather dwell on the bigger and better news of the Lightbridge breakthrough. You'll notice, if you read their press release, that the company uses the word "transformational." They're not exaggerating.

I think that the best way to grasp the impact of this breakthrough is to imagine that we could increase the gas mileage of every car in the world by a third using a simple technological tweak. The Lightbridge breakthrough will, in fact, have a significant impact on the rate of U.S. and global economic growth.

I'll include the URL for the Lightbridge press release here, but you'll have to wait a week to get more details and the inside story. My colleague Ray Blanco and I spoke at length to Lightbridge CEO Seth Grae. Ray has written an overview of this dramatic development with plenty of information available no place else. I'll give that to you next week. We also have the transcript of the Seth Grae interview, which I'll try to find a way to make accessible to you.

RXi Targets Scarring for Early Profits

This week, however, I really need to bring you up-to-date with developments with a number of our other companies. First, I want to tell you some really good news about RXi Pharmaceuticals Corp. (NASDAQ: RXII).

As you know, RNA interference (RNAi) has delivered to humanity the control of gene expression. Using the RNAi mechanism, it is possible to turn genes on or off, increasing or decreasing the proteins that cause and cure almost every disease.

RNAi, however, is incredibly young and is still in the sorting-out stage. The big initial delivery problem, getting RNA interfering sequences past the body's defenses, is being cracked, however. I have no doubt that progress will continue to accelerate.

It was this confidence that led me, early on, to add the most important RNAi players to our portfolio. Now, we're seeing them develop real business strategies. This week, I'd like to brief you on a conversation I had with RXi's CEO and president, Noah Beerman. As background, I would remind you that quite recently, RXi announced successful delivery of their self-delivering rxRNA (sd-rxRNA) to dermal or skin targets.

Now we know why. The massive market for an anti-scarring drug is in RXi's sights. This is, in effect, a low-hanging fruit in the RNAi orchard. Because the skin is easily accessible, topical drug delivery mechanisms can be exploited. This not only simplifies application and delivery, it makes the drug more attractive both to doctors and patients.

According to RXi's estimates, the market for an anti-scarring product approaches $4 billion annually. This includes routine surgeries, but extends to burn and skin disease victims. I'm enormously pleased that the company has focused on a therapy that could come to market within a few years. It is exactly what this developing science needs to get it past the current downturn.

Though I really should give this topic more space, I'm going to keep this short and promise you more later. Today, I'll just excerpt a few important paragraphs from the company's press release:

Core Focus: RXi will focus its internal therapeutic development efforts in two main areas:
  1. In the area of dermatology, RXi is pursuing a program in anti-scarring. Anti-scarring is an attractive therapeutic indication with clear development precedent and limited competition for effective therapies. The company estimates that the U.S. potential market for skin scarring is up to $4 billion, with approximately 42 million skin-scarring surgical procedures annually. RXi's sd-rxRNA (self-delivering rxRNA) compounds have shown robust delivery and effective target silencing in skin using local administration. The company intends to select an anti-scarring development candidate in 2010 and file an IND in 2011. RXi's success with RNAi therapeutics in anti-scarring may provide additional opportunities in other dermatology applications as well as in anti-fibrotic indications including pulmonary fibrosis, liver fibrosis, acute spinal cord injury, ocular scarring and restenosis, which together encompass a potential market size of more than $16 billion.
  2. In the area of ophthalmology, RXi is moving forward with a program in retinal disorders. There are multiple retinal diseases with large unmet medical need that are not addressed with currently available therapies. These diseases include wet and dry age-related macular degeneration, diabetic retinopathy and diabetic macular edema, which together affect approximately 18 million people in the U.S., and which have an estimated market potential of up to $20 billion. RXi has shown data demonstrating unprecedented delivery and effective target silencing in the retina with sd-rxRNA compounds. By coupling its unique technology with existing and novel targets, and potentially multiple targets, the company believes it has the potential to develop next-generation treatments for retinal disorders. Further, the company believes that there is opportunity to potentially improve on existing therapies, extend the time required between doses and utilize new modes of administration for delivery to the eye. The company intends to select a retinal disorder development candidate in 2011.
Strategic Interest: RXi will explore additional indications through preclinical development that are of strategic interest to the company and may provide partnership opportunities.
  1. In the area of neurology, RXi is exploring indications accessible by spinal cord delivery of sd-rxRNA. Direct dosing to the spinal cord could be used for severe central nervous system or spinal cord diseases in both orphan and nonorphan indications, both of which have multibillion-dollar markets. RXi may also be able to leverage early proof-of-concept studies and collaborations to advance programs in this area. The company intends to advance potential candidates through preclinical studies as well as seek partners to help support further development.
  2. In the area of oncology, RXi will be concentrating initially on liver metastases and hepatocellular carcinoma using systemic delivery of sd-rxRNA or rxRNA compounds in combination with delivery vehicles. These two disease areas of high unmet need have a U.S. market potential of up to $3.2 billion and $800 million, respectively. With the ability to develop compounds against novel and multiple gene targets with a single treatment, RNAi has increasing potential in oncology given the emerging emphasis on multitargeted therapies. The unique features of sd-rxRNA may offer a new alternative to treating cancers which could lead to attractive product candidates to further advance in conjunction with partners.
Opportunistic Pursuit: RXi will continue to evaluate multiple opportunities and is prepared to engage in more active therapeutic development in cases where a program is funded by a partner or where RXi attains promising initial results. These opportunities could be in a variety of areas, such as hepatic (HCV), respiratory (asthma, COPD), oncology and others.

Pro-Pharmaceuticals Books First Order of Galectin Blockers

I said last week that I was going follow up on progress by Pro-Pharmaceuticals Inc. (OTCBB: PRWP). I didn't include the link then to their press release announcing the company's first order. So I'm doing that today.

I have enormous confidence in this company and intend to bring you more information very soon. I've set up time, in fact, to speak with their new chief medical officer, Dr. Peter G. Traber. Dr. Traber is not just the ex-chief medical officer for pharma giant GlaxoSmithKline. Traber was also senior vice president for clinical development and medical affairs responsible for global clinical trials. He was responsible for marketed and development drug safety evaluation. He is an internationally recognized authority on liver disease. I'll tell you more about the way Pro-Pharmaceuticals' drug Davanat addresses that huge market soon.

Incidentally, I believe Pro-Pharmaceuticals has emerged completely from its early corporate mistakes. I was aware of those problems and did the due diligence to assure myself that early errors were in the past. In fact, the company would not be the bargain it is today if not for early, but now rectified, missteps.

As of now, the individuals who had issues with the company are effectively gone from the picture. So I see clear skies ahead for this transformational company. Pro-Pharmaceuticals is not, of course, the only company in our portfolio that has recovered from early blunders.

Echometrix Adds Critical Tech Talent

Echometrix Inc. (OTCBB: EHMI) has also recovered from early missteps. In fact, I've known about the company for well over a year. That was when Peter Charles was asked by the investment group behind Echometrix to solve those very problems. Charles, as you may remember, was one of the Lightbridge players who helped get the company where it is today.

Despite past problems, I was enormously excited about the potential of the company. As I've said, the SMS texting market is still in its infancy. It has huge potential -- especially for cell phone technology such as parental controls (search Google News using the term "sexting" if you would like to understand why.)

Here is just one story about the political and legal pressures poised to make the company a winner. Specifically, the New York City Department of Education is proposing that students who engage in inappropriate texting even while at home be suspended from school. Clearly, parents need a way to monitor and prevent such expulsions. Clearly, as well, no one is better situated to provide such a solution than Echometrix.

A year ago, however, it was not yet clear that Charles would be able to straighten out the legal and management issues that troubled the company. I can't speak in detail now about those problems except to say they have been dealt with. An important step in that process was Charles' appointment to the board of directors in November last year.

Back then, even Charles didn't think the company was ready for a recommendation. He wanted to be sure the company's difficulties were behind it. And I believe they are. Charles told me recently about the addition of a top technology executive to the company's roster. This should accelerate strategic and technology planning and execution. I'll give you more information as it becomes public.

Keep in mind that the majority owner of Echometrix is a billion-dollar investment group. They put Charles into his position with the company because they understand its potential. They are also committed to seeing it succeed. You'll probably continue to hear rumors that confuse the company's past with current status, but that's typical. Unverified and inaccurate information flows freely on the Internet.

I would remind you of the completely discredited attacks on NanoViricides (OTCBB: NNVC). Don't get spooked when people spread rumors about small caps. Fear mongering is, in fact, an enormously profitable industry these days.

If, for example, you search using Google for "NanoViricides," the top paid search results imply that the company is a scam.

If you click through the links and pay for the analysis, however, the companies who are selling this will admit that NanoViricides is not a scam. By then, however, they have your money. Obviously, there's money to be made scaring potential investors, or these companies wouldn't continue paying for such ads.

Q&A with ISCO

International Stem Cell Corp. (OTCBB: ISCO) has also been the target of rumor campaigns. ISCO, incidentally, recently announced further positive IP news. Specifically, Advanced Cell Technology, Inc. (ACT) was just issued U.S. Patent Number 7736896 covering a method for producing retinal pigment epithelial cells. ISCO, however, had previously acquired rights to this technology from ACT, so the award solidifies their position in stem cell eye therapies.

ISCO's corneal research also got an unexpected boost last week, though it's not clear how many people know it yet. A stem cell breakthrough from Italy made quite a few headlines. The article that provoked the coverage was in the June 23 online version of The New England Journal of Medicine (NEJM). Specifically, it featured clinical research from professor Graziella Pellegrini et al. titled "Limbal Stem-Cell Therapy and Long-Term Corneal Regeneration." A helpful video by ABC News can be viewed here.

The coverage of the journal article is, however, incomplete. So let me put it in perspective.

The procedure made use of the well-established practice of extracting and cultivating limbal stem cells. Each of the patients, in effect, had stem cells removed from at least one eye. Once the adult stem cells were multiplied in the lab, they were applied to the cornea. There, they regenerated the corneal epithelium (the outermost thin layer of the cornea), restoring sight.

This is wonderful proof of the power of stem cells, but it doesn't represent a breakthrough in terms of basic science or investment possibilities. This is because the cost of extracting these surviving stem cells is very high. So is multiplying and reattaching them. The only reason the experiments were even allowed to proceed is that all the cell materials come from the subjects of the procedures. They would not have been allowed if, for example, scientists wanted to use the stem cells from one patient to treat another patient. Nor is it clear to what extent, if any, a company can patent these procedures.

On the other hand, the Italian procedures were most successful when they were combined with the implantation of replacement corneal structures. Those replacement corneas cannot be regenerated from limbal stem cells. In fact, they came from cadavers.

ISCO, however, is now able to grow them in the lab to produce cheaper, safer corneas. ISCO is involved in discussions with various companies to commercialize those parthenogenic corneal structures.

For most patients, who have enough of their own stem cells to regenerate the corneal epithelium, ISCO's corneas are all that are required to recover sight. Eventually, in fact, I suspect that ISCO will also have off-the-shelf limbal stem cells that will regenerate the corneal epithelial too. These cells would be from each of ISCO's cell bank lines. Now being established, it will include 50-100 cell lines that immune match most of the world's population. No other company has this ability to provide inexpensive stem cells for the masses.

Now allow me to debunk some of the rumors currently being spread about ISCO. Normally, as you know, I don't like to dignify these attacks, but I do make exceptions when it's important. I'm doing this, by the way, in a question-and-answer format that board chairman Ken Aldrich was kind enough to answer. The questions deal with some of the unfounded rumors circulating. If these don't concern you, feel free to skip them.
Q1. Did ISCO close its financing?

A1. Yes, they did a $10 million financing, and then used $2.5 million as part of a balance sheet cleanup that removed approximately $15 million of 10% preferred stock and still left them with an additional $7.5 million in cash on the balance sheet, in addition to whatever cash was already there.

Q2. Doesn't Socius hold a lot of preferred stock that will be a future burden to ISCO?

A2. No, all of that has been retired as part of the capital restructuring announced in an 8-K filed June 11, 2010. As a result, Socius and its predecessor company, Optimus, hold no preferred shares of ISCO at all.

Q3. Is the company running out of money?

A3. Based on the monthly "burn" rate of about $550,000 for the last 15 months ($562,000 for the last quarter), the proceeds of the company's most recent financing of $7.5 million after the repayment of the outstanding preferred stock of Socius and Optimus would give the company at least 12 months of "runway," even without any additional revenues from operations, licensing or partnerships.
I could go on, but this is pretty long. Next week, I'll have more on Lightbridge and Pro-Pharmaceuticals.

For transformational profits,

Patrick Cox

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