Targeted Strategies for Today's Evolving Markets

Mission Market Pulse

 

 

Cryoport, Inc. (CYRX)

Cryoport, Inc. has developed one of the most comprehensive solution platforms available today in the life sciences-focused cryogenic logistics space, with a suite of proprietary technologies such as its signature Cryoport Express® (http://dtn.fm/jGrs5) dry vapor dewars for materials that need to be kept at frozen temperatures, as well as its Cryoportal™ logistics management platform and SmartPak II™ continuous, geo-sensing monitoring system (http://dtn.fm/53nP7). Reinforced by a rock-solid commitment to 24/7 customer support and cold chain logistics consulting spanning risk assessment, lane qualification and process flow – the company's portfolio of industry-leading technologies has propelled CYRX to the forefront of the sector, allowing the company to secure such sweetheart deals as the recent strategic partnership with $2.4 billion market cap, diversified metals manufacturing giant, Worthington Industries (NYSE: WOR).

This partnership will see Worthington's CryoScience by Taylor Wharton Division, one of the most influential and competent manufacturers in the space today, designing and manufacturing biostorage and logistics hardware for CYRX's life sciences solutions. It's the kind of cozy deal that will open big doors for the company, granting its already much sought after cold chain logistics solutions the ability to satisfy a much broader client mix, and enabling the company to dynamically scale support for proliferating client commercialization efforts.

Cryoport is no stranger to marching into the gap like this, as news of the Worthington partnership came just days after the company's April 2016 announcement regarding the launch of its new Temperature Controlled Logistics Consulting Division, which was organized to answer feverish demand from a global and burgeoning cellular-based therapies market. The deluge of cell-based immunotherapy technologies currently in the soon-to-be $2.45 trillion-plus personalized medicine pipeline (http://dtn.fm/rm0Kj) has created a perfect storm for storage and transportation logistics players, and only a tiny handful of key players, such as CYRX, are positioned to capitalize on runaway demand for the kind of planning and strategies needed to help effectively develop and deploy temperature sensitive/personalized therapies.

The broader global cryogenic equipment market is on-track to hit upwards of $25 billion by 2022 (http://dtn.fm/VwY57), with the Asia-Pacific region seen as the strongest segment at around $7.83 billion projected by 2019 (http://dtn.fm/sa9FD). This is a target-rich environment for a company like Cryoport, which is actively working in regenerative medicine in support of some 64 different clinical trials, including Perseus PCI's Phase II2b melanoma and ovarian cancer clinical trial, as well as ImmunoCellular Therapeutics' (NYSE: IMUC) registrational Phase III clinical trial of ICT-107 immunotherapy in aggressive brain cancer, which spans 400-plus newly-diagnosed glioblastoma patients at 120 sites throughout North America and Europe.

Any questions as to just how capable Cryoport is when it comes to securing additional traction within the space, should be quickly put to rest by one look at the company's earlier deal in March of 2016 with one of the planet's undisputed leaders in logistics, UPS (NYSE: UPS). The UPS launching of its biotech, pharma, and medical device industry-tailored Temperature True® Cryo solution in Europe, which allows customers to keep products at -150°C for 10 days using Cryoport Express containers' dry vapor liquid nitrogen technology, gives CYRX access to the global network of 51 UPS healthcare-dedicated facilities, and sets the company up for continued success alongside UPS, which serves more than 220 countries and territories worldwide.

 

 

Elephant Talk Communications Corp. (ETAK)

Divestitures are a way for a company to manage its portfolio of assets. As companies grow, they may find they are trying to focus on too many lines of business and that they must close some operational business units in order to focus on more profitable lines. This is a problem that conglomerates may face. Companies may also sell off business lines if they are under financial duress. For example, an automobile manufacturer that sees a significant and prolonged drop in competitiveness may sell off its financing division in order to pay for the development of a new line of vehicles. In a March 2016 press release, Elephant Talk Communications Corp. (NYSE MKT: ETAK) announced an update on its divestiture of wholly-owned subsidiary, ValidSoft Limited (together with its wholly-owned subsidiary ValidSoft Limited UK, "ValidSoft").

On March 22, 2016, Elephant Talk provided Cross River Initiatives LLC with a notice of default on the binding letter agreement dated February 17, 2016, between Cross River and the company concerning the proposed purchase of ValidSoft and governing certain important matters relating to the interim financing of ValidSoft's business and operations. While Elephant Talk will not totally foreclose consummating the ValidSoft sale transaction with Cross River as originally contemplated, the company will no longer give preference or exclusivity to the buyer. The Elephant Talk team is working with an investment bank to evaluate strategic options regarding the planned divestiture of ValidSoft.

Hal Turner, executive chairman of the board of Elephant Talk, commented in a press release, "While we continue to have ongoing discussions with Cross River concerning the proposed purchase of ValidSoft, in the best interest of our shareholders, we cannot extend Cross River preference or exclusivity. We are working with an investment bank to evaluate strategic alternatives for the asset and remain optimistic that a transaction will be consummated in line with the company's stated restructuring activities. Despite the setback in the divestiture of ValidSoft, the company's restructuring plan is otherwise progressing on track and further details will be forthcoming on our earnings release and conference call later this month."

Elephant Talk has developed a proprietary software and telecoms platform to provide cloud-based mobile network solutions to communications services providers (MNOs, MVNOs); enterprise and government/education organizations; and application/content and retail providers.

ValidSoft secures transactions using personal authentication and device assurance. ValidSoft enables its customers to enhance their security while improving their user experience, utilizing its multi-factor authentication platform, Voice Biometric engine and Device Trust technology, all of which may be used as 'stand-alone' services or integrated into multi-vendor solutions. ValidSoft serves multiple clients across the financial services, government and enterprise sectors and is the only company to have been granted four European Privacy Seals, reflecting its commitment to strong data privacy.

 

 

Elio Motors, Inc. (ELIO)

In May 2016, Elio Motors, Inc. announced the completion of the fourth and final stage of engineering for its highly-anticipated E-Series vehicles, including the finalized chassis design. This milestone is significant in Elio's progress toward the commercial launch of its three-wheeled vehicle, as it opens the door for real-world vehicle validation and ride dynamics testing and calibration. Moving forward, the company will depend on a seasoned, eight-person build team to hand craft vehicles from its newly-established Pilot Operations Center in Livonia, Michigan, in order to complete a variety of aerodynamic, safety and durability tests ahead of the start of commercial production.

"Once our E-Series vehicles emerge from the pilot build, the Chassis team will conduct ride and handling development tuning to refine the vehicle's driving characteristics prior to commercial production," Jeff Johnston, vice president of engineering for Elio, stated in yesterday's news release.

The design of Elio's E-Series includes a number of innovative features meant to reduce noise and vibration while increasing the comfort of the ride for both drivers and passengers. In particular, Johnston highlights the vehicle's independent suspension system, which consists of unequal upper and lower control arms incorporating a coil-over shock absorber that's reminiscent of the suspension systems used in some of the world's leading performance vehicles. This suspension allows Elio to maintain a lower profile for improved aerodynamics and lighter weight.

"This achievement, which is the final step in our engineering process for the E-Series of vehicles, further validates the flexibility and agility of our Elio Motors-supplier product development process," Paul Elio, founder and chief executive officer of Elio Motors, stated in the associated news release. "Roush, which joined the team in January 2016, has done a tremendous job on the design of the chassis and suspension, as well as managing the overall engineering process working at what seems like lightning speed."

Elio has been aggressive in pushing toward production of the E-Series. The company launched its first national advertising campaign in early 2016 to increase awareness and generate additional vehicle reservations. To date, Elio has recorded more than 52,400 reservations for its E-Series, capitalizing on a host of marketable features such as record fuel economy of 84 miles per gallon and a targeted base price of just $6,800.

These efforts have had a noticeable impact on the company's financial position. During a busy first quarter of 2016, Elio successfully raised nearly $17 million in a Regulation A+ stock sale on the StartEngine Crowdfunding platform. Regulation A+, a ruling stemming from the 2012 Jumpstart Our Business Startups (JOBS) Act, allows businesses to raise up to $50 million in funding from both accredited and non-accredited investors. With this move, Elio became the first U.S.-based organization in history to raise capital using Regulation A+, as well as the first to have its shares publicly traded when it listed on the OTCQX Best Market in February 2016.

 

 

Lucas Energy, Inc. (LEI)

Houston-based Lucas Energy, Inc. is an asset-rich, independent oil and gas company, developing significant acreage positions in the Eagle Ford and Austin Chalk resource plays in South Texas. Since 2013, the company has undergone significant corporate changes that included the restructuring of its management team, capital structure, and overarching strategic vision. A look at where the company is now positioned shows the fruits of those alterations.

Lucas Energy currently has working interests spanning more than 10,000 net acres in South Texas with proved reserves valued at $112 million, in addition to probable reserves of approximately $60 million, according to a reserve report conducted in 2014. The company maintains an "aggressive growth posture" in developing its leaseholds as it seeks to achieve its potential in terms of both size and scope of operations.

In Q3 2016, Lucas Energy achieved what CEO Anthony Schnur, who joined the company in 2012, calls "transformational." In the company's Q3 earnings release, Schnur said the company has found ways to navigate the challenging commodity environment and identify growth opportunities through strategic acquisition. In accordance with this strategy, Schnur also referenced the company's Segundo Resources asset purchase.

"We have also been successful in enhancing our liquidity by amending our line of credit with Silver Star Oil Company ("Silver Star"), followed by the subsequent sale of an additional $200,000 of convertible notes under the line of credit," he said. "We are currently discussing potential financing transactions that would fulfill our near-term capital requirements as well as our planned asset acquisition, which we believe, if finalized and completed, will ensure the future viability of the Company. While the current commodity price environment continues to be challenging to our operations, it may also create opportunities to expand our footprint through attractive acquisitions, funding permitting."

Per the Segundo transaction, Lucas Energy will acquire working interests in undeveloped acreage and producing Hunton properties, which currently produce in excess of 1,200 net barrels of oil equivalent per day (BOE/d).

According to a recent corporate presentation, the Hunton play is found in a limestone formation stretching nearly 3 million acres in Oklahoma and surrounding states, characterized by high quality oil and high BTU content natural gas production. The acquisition also provides the opportunity for increased reserves and production, and will result in a corporate name change.

"Following the closing of this transaction, we intend to drill six initial wells and have identified 50 drilling locations in the Hunton assets we are acquiring. As previously mentioned, we will also be changing our company name to Camber Energy, Inc. when the transaction is completed," Schnur stated in a previous news release.

Executing plans of this nature inherently take capital and, in April 2016, Lucas Energy secured $15 million of equity capital to fund its growth initiative as it works to finalize the Segundo Resources transaction.

"This placement demonstrates confidence in the future of Lucas Energy as we progress towards closing on the Segundo Resources asset purchase," Schnur stated in a press release announcing the funding. "Having received this commitment establishes some certainty that we can initiate growth and development activities upon closing the acquisition."

 

 

MannKind Corp. (MNKD)

We live in a business world characterized by an immediate, never-ceasing deluge of information. A veritable tsunami of opinions, perspectives, scoped analysis, and technical speculation hits us in the face every hour of the day, seven days each week, for 365 days out of the year. On any given subject, if you name a position, chances are that someone, touted as an expert in some circle or circles, has argued it as if it were fact or a foregone conclusion. But history is written by the contrarians, by underdogs and innovators who understood the raw force of demand present in the markets of their time, and assembled the requisite capital, expertise, materials, and technology to execute.

While the talking heads have been busy panning diabetes and cancer-focused inhalable therapeutics, developer MannKind Corporation (NASDAQ: MNKD), after an EPS miss for Q4 that shrugged off the Zacks Research consensus of only a $0.05 loss, it is important to look at the bigger picture. The big picture here is about the core technologies and how they can address unmet and underserved demand in the market. It's a long-term success story in the making and it is a good one. It's not just under reportage of how significant French biopharma giant Sanofi's (NYSE: SNY) marketing agreement pullout in January 2016 was in terms of overall financial performance for the company and its commercial success with its novel inhalable insulin product Afrezza, or that to many observers Sanofi was clearly dragging their feet with marketing efforts, it's that MannKind is far more than some one-trick pony.

Nevertheless, Afrezza is a significantly good trick considering the projections for diabetes incidence rates worldwide, with seven million more patients per year added to the rolls, and the fact that both the drug and delivery mechanism are categorically different than anything that has come to market hitherto. Afrezza is an ultra-rapid-acting insulin in powder form created for primary use as a pre-meal adult insulin in type one and two diabetics, engineered to be used in conjunction with existing treatments in order to help squash post-meal blood spikes. While famous for being the first company daring enough to throw its hat in the inhalable insulin ring since the spectacular failure of Pfizer (NYSE: PFE) that culminated back in 2007's Exubera market withdrawal, MannKind is also the company that engineered the Technosphere® formulation and drug delivery platform behind the efficacy of Afreeza (based on acid-induced self-assembly of fumaryl diketopiperazine molecules), an extremely versatile breath-powered drug delivery platform that allows for inhalable variants of indications currently available only via injection.

The capacity to formulate Technosphere microparticles from a wide range of drugs with varying physicochemical characteristics does far more for MNKD than to merely enable its inhaler-based delivery technologies, like the proprietary, small form factor (and therefore discrete), yet hugely efficient Dreamboat® inhaler (http://dtn.fm/6aXEI). This technology opens up the potential for MNKD to become a formulation and delivery mechanism powerhouse for numerous existing drugs. Technosphere microparticles offer vastly improved bioavailability characteristics and avoid the common problem with many drugs, which experience dosage degradation in peripheral circulation. While simultaneously avoiding the hepatic (of or relating to the liver) first-pass effect typical in orally administered drugs (and most readily observable in drugs such as morphine), where a significant portion of the administered drug is lost before it ever reaches the target, due to intestinal and hepatic degradation of the dose. The highly efficient and versatile Technosphere platform is able to produce formulations which closely mimic the pharmacokinetics of intraarterial administration (injection directly into an artery), and also offers a bold new pathway for vehicle-controlled (much like a placebo, but with better data fidelity/feedback) clinical studies to be conducted using "blanks," or Technosphere microparticles onto which no drug in the 500 to 140,000 Da range of molecular weight (note the breadth of molecular weight range) has been adsorbed. Some intelligent analysts in the investment community have noted similar issues for MNKD's flagship product that cropped up during the poor reception of Pfizer's Exubera, such as the novelty of inhalable insulin for both doctors and insurers leading to slow adoption rates, as well as bureaucratic red tape that hindered uptake by users, even when they knew about and wanted to switch to an easier to use form of insulin. A few analysts have even speculated that the entrenched logistics behind the gargantuan diabetes care devices market, which is on track to hit nearly $11 billion in North America alone by 2019 (according to a recent report published by Mordor Intelligence) and includes glucose monitoring and delivery devices such as syringes, may even be actively sandbagging the emergence of an inhalable insulin, as it represents something of an end-run on much of the space. Whether or not Sanofi helped maintain the status quo and never had any intention of really getting Afrezza into the hands of what will likely be some 380 million diabetics by 2025, or whether the EPS consensus was faulty – one thing is certain: Afrezza has failed to make the impact that its ease of use, pharmacokinetics, and the glowing comments of its lucky recipients would otherwise indicate.

Management actually sees the Sanofi split as a plus, with MNKD regaining control of its baby and being able to give it the much needed tender loving care it requires marketing-wise, in order to ignite a revolution among diabetics at the point of purchase. Let's not forget that inhalable insulin represents a sea-change for everyone in the healthcare ecosystem either, especially the end users, who have been conditioned to think about insulin as an injectable drug over countless decades. Afrezza only launched in February of 2015 and with lukewarm marketing efforts (including huge delays, direct-to-consumer ad vaporware, and allegations about a hiring freeze on sales reps for Afrezza), as well as the drug being somewhat hamstrung initially on the insurance side of the equation, it's no wonder MannKind can't wait to get their hands on the reigns again. The company has even launched a significant effort to master the sales approach and pricing strategy it will need to make Afrezza the blockbuster that management and its diehard investors have longed for.

But let's not concern ourselves too long with the mystery as to why an inhalable insulin, which a majority of users generally felt helped them more readily address the lifestyle complications associated with administering diabetic medications, (whether because it was inhalable, the inhaler was tiny, or it allowed them to dose right at the table in a restaurant, etc.) failed to go viral – and get back to the core takeaway that most investors should be focused on: the intrinsic value of the company's IP, and its current market position.

Greek poet and mercenary Archilochus once said that the "fox knows many tricks, but the hedgehog only one: one good one," referring to the spiny mammals' ability to curl itself into a ball of spikes as being somewhat superior to the complex trickery and cunning of the fox. It is an apt comparison for MannKind's market position with Afrezza, but investors should be looking closely at the company's underlying platform technologies for drug formulation and delivery, as well as things like the Receptor Life Sciences collaboration and license agreement, designed to exploit the company's inhaled formulation technologies.

Similarly, the retention of Michael Castagna (Pharm.D) as CCO, to spearhead the Afrezza commercialization campaign and liaise directly with CEO Pfeffer, speaks volumes about how seriously the company intends to leverage its exceptional market position in inhalable insulin. Former VP of Global Lifecycle Management and Global Commercial Lead for a nine-drug portfolio at biotech giant Amgen (NASDAQ: AMGN), as well as Executive Director for Bristol-Myers Squibb's (NYSE: BMY) immunology franchise during the launch and re-launch of its Orencia rheumatoid arthritis offerings, Castagna is by all accounts the right man to plant the Afrezza flag in spectacular fashion.

The EPS miss is logical given everything that transpired in late 2014 and during 2015, there is far more to the company than most talking heads consider and MNKD's Technosphere dry powder delivery platform and formulation technologies could reshape the industry as we have known it, via patient-friendly, and needle-free devices for a wide variety of drugs, presented in ultra-rapid absorption form. But if you listen to the loudest voices who are screaming that the sky is falling all over again with Afrezza and that MNKD is doomed with its inhalable insulin play, you would think that the company's flagship was all there is to this story. Naturally, many investors are quite often wed into a failed marriage of associations as a result of listening to such loud voices and end up struggling like muppets, ultimately weighed down by a dead-end momentum play portfolio.

Not knowing where to turn for accurate, over-the-horizon radar, which looks at the underlying fundamentals of a company, the vast majority of investors eventually become traders. They become caught up in the process of neurotically shaving points based on the latest buzz, never holding onto anything longer than the officially prognosticated, CNBC pundit consensus-verified sell-by date. This is probably why the smallcap and microcap space scares the hell out of so many people, especially when it comes to biopharma R&D plays whose ramp up phase is notoriously costly, which are really long-haul bets on the tech fundamentals in most cases (and let's face it, the average talking head knows very little about biotechnology). Whether the sector big boys like it or not, we have crossed the Rubicon with inhalable insulin, and Afreeza is likely here to stay. The patients love it, it seems to help them regulate their glucose levels more easily, it's easier to deploy, and it appeals to self-conscious consumers (or even those who simply prefer to be discreet). Reasons alone enough to keep Afreeza on the scene, but it is the efficacy of the underlying formulation technology when it comes to addressing post-meal spikes in a smoother fashion that will probably make it a late-game comeback kid.

 

 

NanoViricides, Inc. (NNVC)

Connecticut-based NanoViricides, Inc. is a development stage company working on what it considers to be the next great advance in immunotherapeutics: nanoviricide biomimetic technology.

A nanoviricide is a unique antiviral agent designed to fool a virus into attaching to it in the same way that a virus normally attaches to the receptors of a cell surface. Once the virus is attached, the nanoviricide wraps around the virus, causing the virus to lose its surface proteins, which are used to bind to cells. The nanoviricide goes on to dismantle and destroy the virus without immune system assistance. What virus a nanoviricide goes after is programmed into the nanoviricide.

The company is developing virus-specific nanoviricide drug candidates against influenza, HIV/AIDS, cold sores and herpes infection, viral eye diseases, and dengue viruses, and its candidates are demonstrating high levels of drug effectiveness. Product candidates are based on TheraCour® technology, invented and developed by company president and founder Anil R. Diwan, PhD. The company holds an exclusive, worldwide license to this technology for its antiviral drugs. The technology is protected by two broad international patent applications that cover compositions of matter, processes of manufacture, methods of use, and fields of use. Additional patent applications are expected, and NanoViricides intends to patent each drug separately, as well.

NanoViricides works with independent researchers at leading academic, private, and government laboratories, performing tests against viral targets, and providing unbiased data on drug candidates. In addition to drug development, the company has put together a world-class team to design, build, and validate a state-of-the-art manufacturing facility for the production of human clinical batches of nanoviricide drug substances.

 

 

Overstock.com, Inc. (OSTK)

Overstock.com, Inc. is an online retailer based in Salt Lake City, Utah, that sells a wide variety of products at low prices. Originally founded in early 1999, the company's goal was to be the premier seller of excess inventory on the web. Today, Overstock.com has expanded beyond selling surplus inventory to offer a huge selection of consumer goods ranging from furniture and home décor to automobiles. In an effort to better represent this shift in business strategy, the company acquired the O.co URL in January 2011 and began incorporating it into parts of its brand, including, most notably, its international and mobile businesses.

In the past, Overstock.com has proven itself adept at adapting to evolving market trends, as demonstrated by its success in the mobile space. In early 2016, the company announced that its mobile app was named the Web Marketing Association's Best Shopping Mobile Application at the 2015 Mobile Web Awards. This was the fourth consecutive year in which the company's mobile app has been honored. In total, the Overstock.com app has been downloaded more than five million times, with 76 percent of mobile users becoming repeat customers.

Capitalizing on the sustained growth of the digital commerce space, Overstock.com has achieved profitable results for the past four years. In 2015, the company reported total revenues of $1.7 billion, marking an increase of 11 percent over the previous year. Overstock.com's net income for the fiscal year totaled $2.4 million. As of December 31, 2015, the company reported cash and cash equivalents of $170.3 million.

Overstock.com has since made considerable progress toward building on its strong financial growth. For more than two years, the company has been involved with the crypto currency Bitcoin in an effort to gain familiarity with the highly disruptive potential of blockchain technology. At the 41st Annual International Futures Industry Conference, Overstock.com, through majority-owned subsidiary t0.com, demonstrated the results of these efforts when it announced plans to complete the world's first public offering using proprietary blockchain technology. The company previously issued the world's first private blockchain crypto-bond in June 2015.

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