$Bob's and Jbem's Bitchin' Bios

[jbem777]

Glioblastoma Data Trade

READ THE DUE DILIGENCE FIRST. If you make an investing decision without first educating yourself you will be sorely disappointed. If you decide to take a position, be smart, don’t go bonkers and drop your whole portfolio in it on a 50% spike. That’s pure idiocy and can and will result in substantial losses. There are many things you can’t predict or control for and as retail investors we can attempt to do thorough research and make educated decisions.

Given the recent market volatility, I have been searching for potential investments that have imminent catalysts with defined dates to trade around. Once a defined catalyst date is found, and to further minimize risk, I then look for some indications that the data release will be positive. Often times, companies run open-label studies or incorporate an adaptive trial design that allows them to have some insight into the safety and efficacy of their trials. Previous data releases, statements made during presentations, comments found in conference call transcripts, or recent insider buying are all tools that I use to gain greater insight into the nature of a company’s data. I believe I have found a company that embodies some of these characteristics, which will be presenting data next week.

Personal Trading Strategy: At the present time, I view this stock as short-term catalyst play, but will reassess my trading strategy once data is released. The company trades on the OTC and their current financial situation prevents me from considering this a long term play at the present time. There are a number of warrants that are close to being “in the money” which could generate substantial cash inflows for the company if the data presented is positive and other fundamental developments occur. Its situation is similar to that of AVXL and TPIV, in which the exercise of warrants created the funding to further fund clinical trials. It is severely under-valued by the market and if data is compelling, there exists the opportunity for substantial gains. Other companies, targeting similar indications, have market caps at 10x-15x’s greater than this company. Given their status on the OTC, please be advised of the risks. Due to the impending catalyst and anticipated trading window, I will provide a shorter version of my due diligence.

Glioblastoma: Here is a brief description of glioblastoma and the current standard of care.

“According to the Cancer Research Institute, Glioblastomas are one of the most aggressive types of brain cancer, with most patients failing to reach the one year survival mark and few living to see three years following diagnosis. For newly diagnosed GBM patients treated under the current standard of care, median progression free survival is 6.9 months and median overall survival is 14.6 months. Only 25% of newly diagnosed patients survive for 24 months and less than 10% survive more than 5 years. With approximately 16,000 newly diagnosed patients and 10,000 deaths from the disease in the US alone, there is a dire need to improve the standard of care.”

“The current standard of care consists of Temodar as the chemotherapeutic agent in chemoradiative therapy as a first line treatment. Temodar received approval in 2005 for the treatment of newly diagnosed GBM on the basis that it improved overall survival by 2.5 months. In 2009, the FDA approved Avastin as a second line treatment for patients with disease progression following treatment with temodar. Avastin's approval was based off an improvement in progression free survival.”

With 16,000 newly diagnosed patients every year, the GBM market is measured in the billions.

Link to Seeking Alpha article used as reference

Company: GenSpera

http://www.genspera.com/

Ticker: GNSZ

Company Presentation:

http://content.stockpr.com/genspera/media/1b477f30380df7446e7713b892c8827e.pdf

The CEO will also be interviewed to day on RadioMD. A link to their website can be found here.

https://twitter.com/GenSperaNews?ref_src=twsrc^google|twcamp^serp|twgr^author

Current Share Price: $.72

Outstanding Shares: 37.1 million

Float: 26 million

Market Cap: $25.3 million

Ownership: Insiders and institutions own approximately 11,082,065 shares or 29.8% of the company. In the recent offering, Sabby Management purchased almost 3 million shares and warrants. If you would like to see a comprehensive list of who owns shares in the company, it can be found on their most recent registration statement.
http://www.sec.gov/Archives/edgar/data/1421204/000114420415047360/v416962_s1.htm

Catalyst: Interim Phase 2 Glioblastoma data and an update on “corporate partnership progress” will be presented at the Rodman & Renshaw Investors Conference on September 9th. The top-line data readout for the P2 trial is in Q1 2016.

http://finance.yahoo.com/news/genspera-present-rodman-renshaw-17th-123000950.html

This data was initially scheduled to be presented at the Society for Neuro-Oncology meeting on November 19th 2015. However, the company recently decided to present the data months earlier at an investor conference as well as provide a “partnership” update. This is an interesting change, but I believe that this change in data release and update may be a significant value driver for the company. The CEO has made clear that it intends to partner another one of its products for liver cancer by the end of the year and will likely provide some insight into this process on the 9th. Since this announcement, there has been a substantial increase in the trading volume.
For those involved in AVXL from the beginning, you know that their data was initially scheduled to be released in September, but they moved the date up to July. We all know how that ended up and this appears to be a very similar situation with GenSpera.

http://finance.yahoo.com/news/genspera-phase-ii-abstract-accepted-123000953.html

Financial Position: As of June 30, 2015, Genspera had $121k in cash. However, in July 2015, the company issued a private placement of 3,591,278 shares of common stock, the majority of which were purchased by Sabby Management, which netted them an additional $2.2 million. Each unit of the offering consisted of one share of common stock at $.70, one warrant at $.70 that expires in 18 months, and one warrant at $.80 that expires in 5 years. The company burns roughly $1.3 million per quarter, and thus, per the company’s 10Q, they expect this cash to fund their operations for 3-6 months.

Prior the offering at June 30, 2015, the company had a total of 18,549,724 warrants outstanding with a weighted average exercise price of $1.51. When adding an additional 7 million warrants from this offering, the company is left with roughly 25 million warrants outstanding for an average exercise price of approximately $1.30 per share.

Interestingly, in the most recent offering, only $2.2M in cash was raised, which is a paltry sum for a life sciences company. Possible explanations for the size of this offering could include: 1) They were unable find buyers for their shares, 2) They anticipate a partnership in the near-term with upfront cash to fund operations (more on that later), 3) They anticipate share price appreciation in the coming months that will allow the exercise of outstanding warrants, or 4) A combination of these factors.

Company Background: Typically I would like to provide a summary of the company and what it has going on. However, the well renowned and respected Seeking Alpha & Zack’s contributor Jason Napodano, CFA, recently completed a thorough, non-biased review of the company, clinical development, and market potential. I am not going to “re-invent the wheel” as he delivers a superior product and thus, I strongly suggest that his analysis be reviewed.


http://scr.zacks.com/files/Zacks-GNSZ-Initiation-June-2015-_-NapodanoBautz_v002_n63gvp.pdf

I would like, however, to present some of the “tells” that I have utilized when creating my thesis and investment decision. First, the company moved the interim glioblastoma data release to an investor conference from a scientific conference later in the year. Presenting data at these types of conferences is uncommon and thus the recent announcement piqued my interest. Why would a company move up a data release and want to present this data to a room full of investors? You don’t fill a room full of investors and then present “bad” data. Second, the CEO has been dropping hints of partnership for months. The phase 2 liver cancer trial completed earlier this year and the company has repeatedly stated that they will be continuing this program with a partner. Now, I take CEO statements of partnerships with a healthy dose of salt, but GenSpera’s CEO has taken actions and made statements that suggest a partnership may be imminent. In July, the CEO made two posts on his company’s blog discussing their rationale for partnership as well as the company’s recent partnership activities. One quote of particular interest is as follows:

“GenSpera has been actively engaged in this partnering process for over two years since the beginning of Phase II clinical trials in liver cancer. We started early because we knew that comfort in the validity of our science and clinical data would be generated as potential partners could see data develop and become familiar with our management team. It is personally gratifying to me to learn that there are well-respected companies in our industry who also see the commercial potential for mipsagargin, and are closely tracking our clinical trials.”

These posts can be found here:

http://www.thechairmansblog.com/genspera/craig-dionne/why-partner-part-one/
http://www.thechairmansblog.com/genspera/craig-dionne/why-partner-part-two/

On August 12, 2015, Craig Dionne, chief executive officer of GenSpera, Inc. (the “Company”) participated as a guest on Reddit’s “Ask Me Anything.” A transcript of this can be found below, but I would like to highlight some of his comments.

http://www.sec.gov/Archives/edgar/data/1421204/000114420415049971/v418319_ex99-01.htm

Q: “When are you planning to begin Phase 3 Liver Trials?”
A: “We plan to begin the next liver study in late 2015 or early 2016 depending upon where we stand with a potential corporate partner at that time.”
Q: “Can you explain how your brain cancer trials are progressing?”
A: “…We saw such good data and we have announced the expanded enrollment and the second stage is underway.”

These statements, coupled with the change in data release date suggests that investors may hear significant information at the Rodman & Renshaw conference. I firmly believe the data presented will be positive and remain cautiously optimistic on the development of a partnership. Please keep in mind that biotech CEO’s often talk a big story.

Articles:

http://finance.yahoo.com/news/gnsz-looking-partnership-deal-second-194500634.html

http://seekingalpha.com/article/2944176-gensperas-mipsagargin-phase-2-results-impress

http://seekingalpha.com/article/3039246-genspera-contends-in-the-prodrug-space-reaching-phase-3

Summary: The defined data release at the Rodman & Renshaw conference on September 9th provides an excellent opportunity for investors. The company has decided to move the data release forward two months and present the data at a conference of potential investors. I would hardly expect the company to do so if the data they have so far received is anything less than stellar. This suggests to me, that investors will likely receive a positive press release announcing the data on either September 9th or 10th. The company has also made it clear that they are currently seeking a partnership and have been in these discussion for two years. After reviewing SEC forms, corporate presentations, and earning reports, at no time has the CEO made reference to updating investors on “corporate partnership progress.” This change could possibly indicate that some progress has been made and a partnership may be signed in the near future. Positive data alone could be a significant value driver and partnership could add additional further momentum to any share price movement. GenSpera has already presented positive results in liver cancer and it is very likely to present positive data for glioblastoma. Liver cancer and glioblastoma represent a market in excess of $2.5 billion, and with a paltry market cap of $25 million, the company remains grossly undervalued and unappreciated by the market.

Final Thoughts: GenSpera provides an excellent trading opportunity in the coming days. Market volatility continues and the key to making money during these periods is to minimize risk and find opportunities with a high chance of success. With a defined catalyst date, investors and longer term shareholders have the potential to make nice returns, given that the data and information presented is positive. As I have detailed above, there are strong indicators that GenSpera will be presenting positive data as well as other fundamental developments. GenSpera does have its merits , but their current cash situation prevents me from generating a long-term thesis at this time, though this could change in the coming weeks. Interestingly, GenSpera is in a roughly similar situation to AVXL and TPIV prior to their substantial price appreciation. AVXL and TPIV both possessed adequate funds, but were hardly in a position to fund further clinical trials without the execution their warrants. However, much like GenSpera, they had a warrant structure that provided more funds with their share price appreciation. As evidenced in previous trades, buying well below the warrant execution price, in severely undervalued companies, with significant catalysts on deck, is a good bet for a profitable trade.

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Disclaimer:

I have never been paid or compensated by anyone for any stock I have ever traded, discussed, or blogged. Anything stated otherwise is false. I am held accountable to this statement by the SEC as any stock promoters, writers, or bloggers who do not disclose payment are in violation of the law. None of the information shared is to be construed as financial or investment advice. This information is not to be construed as an offer to buy or sell any security mentioned. All statements written are believed to be accurate. I strongly encourage you to do your own due diligence and consult an investment professional before making any investment decision. Acting on what any one writer, including myself has imparted to you is foolish. There are a plethora of things which can occur in lieu of any forward-looking statement I have made. Any stock in which I complete due diligence is subject to all manner of influences, which can change its value in dramatic fashion upwards or downwards.