Capricor Therapeutics Inc (CAPR)

[Camaro1093]

Nile Pushing Forward with CD-NP

http://finance.yahoo.com/news/Nile-Pushing-Forward-with-zacks-269750399.html?x=0&.v=1

Jason Napodano, CFA, On Friday March 5, 2010, 12:30 pm EST

On March 3, 2010, Nile Therapeutics (NasdaqCM: NLTX) reported financial results for the fourth quarter and full year 2009. Nile reported no revenues for the fourth quarter or full year 2009.

Net loss for the fourth quarter totaled $1.6 million, or $0.06 per diluted share. For the full-year 2009, Nile reported a net loss of approximately $7.9 million, or $0.31 per diluted share.

Nile exited 2009 with roughly $3.2 million in cash and investments. We believe this is sufficient cash to complete the ongoing phase II program and fund operations into the second half of the year.

Update on CD-NP

In June 2009, Nile initiated a phase II open-label, single-blind, placebo-control program designed to determine a safe and tolerable dose range of CD-NP that can be used in ADHF (acute decompensated heart failure) patients in the acute (presenting to the hospital) setting in combination with the standard of care (furosemide + vasoactive or inotropic agents).

The study was initially designed to enroll up to approximately 40 patients in 3 dose cohorts (1.25ng, 2.5ng, and 5ng/kg.min) of CD-NP over a 48 to 72-hour infusion. However, after dosing 7 subjects in the first cohort, four of whom received CD-NP at a dose level of 5 ng/kg/min and three of whom received placebo, Nile suspended enrollment of the study because the average blood pressure decrease in both the placebo and CD-NP patients was larger than predicted.

Management believes the greater-than-predicted response may have originated from the timing and quantity of concomitant medications (furosemide, nitro, etc.) versus the study of the drug in the acute setting, as well as from the inclusion of patients who were more susceptible to risks from blood pressure deviations.

It is important to know that ADHF patients often arrive at the hospital heavily medicated. Patients may be on oral medications including beta blockers, ACE inhibitors, anti-clotting agents, alpha blockers or statins. Physicians need to be careful when, and how much, they administer of any vasoactive drug. Care must be taken to make sure patients are not hypotensive prior to IV dosing of standard.

There is normally a drop in blood pressure following administration of furosemide, but the magnitude is manageable. It seems as though dosing CD-NP immediately following furosemide presents too great a hypotensive risk given the nature of the patient.

Therefore, management submitted to the FDA a protocol amendment to (1) modify the exclusion criteria relating to the timing and quantity of bolus IV furosemide administration acceptable in the first 24 hours upon hospital admission, (2) provide additional guidance on the concomitant use of vasoactive oral and IV medication, (3) increase the entry blood pressure range, and (4) add additional dose levels to be studied.

Following the FDA’s approval of the amended protocol, Nile began enrolling subjects in the 2nd and 3rd cohorts. As of March 1, 2010, enrollment is complete in the 1.25 ng/kg/min cohort. Enrollment is ongoing in the 2.5ng/kg/min cohort. So far there has been no substantial risk of hypotension in the 2nd or 3rd cohorts.

Nile also submitted a second protocol amendment to enable adding up to 3 additional cohorts. Management expects to test doses ranging from 3ng/kg/min up to 10ng/kg/min. This could increase the total enrollment of the study to approximately 75 patients. We expect full results from the expanded study to be available in the second half of 2010.

The Next Steps

Once the ongoing phase II program is complete, management plans to initiate a larger-scale phase IIb program during the second half of 2010. We expect this program to enroll roughly 300 patients.

We expect that management will seek to meet with the U.S. FDA to finalize the endpoints for this program following the analysis of the current phase II trial. We expect these endpoints to include relief of symptomatic dyspnea, as well as analysis of biomarkers for kidney function and ischemia, as well as safety assessments including risk of hypotension, renal function, cardiovascular events and mortality. The cost of this planned phase IIb program is estimated to be between $15 and $20 million.

Therefore, Management must secure financing for this phase IIb program later this year. There are essentially two options: form a developmental partnership or raise cash through the equity markets. The best option for shareholders of the near-term would be to sign a developmental partnership. This will provide the necessary funding for the phase IIb program without eliciting significant dilution. We look for this to take place in the third quarter 2010, assuming the current ongoing phase II program offers up encouraging results.

With a market capitalization of only $30 million, Nile Therapeutics shares are significantly under-valued. Recently, the stock has languished, most likely due to a lack of meaningful news-flow over the past few months or the knowledge on Wall Street that past drugs in this space have failed (see: J&J’s Natrecor, Merck’s rolofylline). But we have confidence in the ongoing phase II program.

We believe with positive data in hand, the company is worth at least $80 to $100 million. Taking the mid-range at $90 million, and then backing out the $20 million most likely required to fund the phase IIb program, we arrive at a value of $70 million for Nile Therapeutics. This equates to a price of $2.50 per share.