Amarantus BioScience Holdings, Inc. (OTCQB:AMBS): Come on, you didn't really expect us to write an article on biotech stocks in 2015 without mentioning Amarantus did you? Our take on the story is that there is simply too much going on at Amarantus to keep the stock under ten cents for much longer. Throughout 2014, Amarantus CEO Gerald Commissiong built a pretty impressive pipeline of products. In 2015, it's time to start delivering on stated goals. We'll take them one at a time for investors.
For the diagnostic LymPro, a rapid blood test to predict risk and onset of Alzheimer's disease, the goals are simple: generate sales from the clinical and research use market. Amarantus launched LymPro into this market in late 2014. We've done some back of the envelope calculations on the size of the "RUO" market and conclude it's roughly a $180 million opportunity. If Amarantus can capture 10% of the market, then LymPro has roughly $20 million in sales potential on this initial launch. Management's goal is to expand LymPro under CLIA, a potential $500 million opportunity, and eventually seek PMA approval for LymPro into the broader market. With PMA approval, LymPro could be a blockbuster diagnostic, but that is a long-way away. For 2015, if the company can generate meaningful sales into the RUO market, we think it helps drive the stock higher. Amarantus is talking about spinning out LymPro into a separately traded diagnostic division in 2015. To do that, we believe the company needs to package LymPro with another rapid diagnostic product in CNS. This will be something to watch for investors.
For eltoprazine, a product that Amarantus only acquired about a year ago, the goal is to start Phase 2b study in Parkinson's disease levodopa-induced dyskinesia (PD-LID) imminently. Eltoprazine is a selective 5-HT1A/1B partial receptor agonist previously studied for the alleviation of involuntary movements, including dyskinesias, in Parkinson's disease patients who experience side-effects of their levodopa medication. In fact, the Michael J. Fox Foundation (MJFF) has funded human clinical proof-of-concept studies with eltoprazine as recently as 2012. We think starting the Phase 2b trial legitimizes Amarantus as a clinical research story. Prior to eltoprazine, the only therapeutics under development at Amarantus was MANF, which we discuss below. With eltoprazine, the company can now talk about generating late-stage human data with an asset that could eventually be worth more than the entire company is trading for right now. We do not know if Amarantus will have data from the Phase 2b study with eltoprazine in 2015, but starting the trial at least gives investors a real reason to invest in the story.
The same can be said about the recently acquired Engineered Skin Substitute (ESS) product. ESS, previously known as PermaDerm, is a tissue-engineered skin substitute prepared from a patient's own (autologous) skin cells. It is a living-tissue human-derived product; not synthetic or harvested from human cadavers or derived from animals. It is also the only skin substitute product available that contains both epidermal and dermal layers of skin. Amarantus' goal is to initiate a Phase 2a clinical study with ESS in the second quarter 2015. This trial has already been listed on ClinicalTrials.gov (NCT01655407). This is an Orphan Drug.
Similar to eltoprazine, proof-of-concept is there, but it is hard for us to predict whether or not ESS will be a success. But also similar to eltoprazine, we think just starting the trial is a positive step forward for the company. Amarantus' CEO has done an excellent job of rolling-up out-of-favor assets for very little upfront cost. But now it is time to execute on the strategy of generating clinical data for inflection, and you can't have data if you don't have a trial! So the fact that Amarantus plans to start both a Phase 2b with eltoprazine and Phase 2a with ESS speaks volumes to us about credibility. Investors are not going to invest in a story where the pipeline is stagnant. We think valuation inflection from eltoprazine and ESS clearly come with the data, but for investors in Amarantus' stock - currently trading at eight cents - it's a major positive to see clinical trials initiated.
Speaking of credibility, the recent news that the U.S. FDA granted MANF an Orphan Drug designation for Retinitis Pigmentosa (RP) in late December 2014 was a huge win for Amarantus. The company prepared and filed the application itself, and received a positive response from the agency in impressive time. Amarantus no doubt seeks additional Orphan Drug indications for MANF in ocular indications. In fact, an application for retinal artery occlusion (RAO) is currently pending.
The more management can deliver on these goals, the better we expect Amarantus' stock to do in 2015. Amarantus is now loaded with catalysts. Certainly the company could use more cash, but at eight cents a share we simply feel there is too much going on to keep this stock down for much longer.
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