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Friday, June 28, 2013

Anthera Pharmaceuticals: A Great Long Term Risk/Reward

With Anthera Pharmaceuticals (ANTH) trading at near a 52 week low, investors are left wondering whether or not this is the start of a new trend? While Anthera may drop further based on an impending Nasdaq delisting, however, it appears as though investors are set up for strong upside potential over the long term. In the pharmaceutical sector few things are certain, and things can happen at any time that drastically change a stock price. Investing in the pharmaceutical sector is not for the risk adverse investor. If you are interested in the pharmaceutical sector, Anthera is definitely a company to consider based on its strong risk/reward profile.
Any investor taking an interest in investing in the long term should look at the clinical pipeline of a company. Anthera has a promising pipeline, which should help to drive the long term growth potential of the company.
(click to enlarge)
The pipeline at Anthera, according to the company
As you can see from the graphic above, Anthera has pipeline that is rather advanced. With the orphan designation in IgA Nephropathy and Phase III enrolling in Systemic Lupus Erythematosus it is easy to see why there is a large amount of long term potential at Anthera.
Blisibimod is the most advanced compound in Anthera's pipeline. It represents much of the long term future for Anthera, and should it be successful in clinical trials it represents a large amount of upside potential for investors. Just like with any drug trial anything can happen, however, it appears as though Blisibimod has set itself up to be very successful in upcoming clinical trials.
Systematic Lupus Erythematosus
Blisibimod is entering phase III trials in Systematic Lupus Erythematosus. The phase III trial design is very important for Anthera, indeed phase III trial design can sometimes be the difference between an FDA acceptance and an FDA Complete Response Letter (CRL). In the case of Anthera, there will be two Phase III clinical trials conducted. These trials will be named CHABLIS-SC1 and CHABLIS-SC2. Anthera recently announced the initiation of CHABLIS-SC1. According to the press release:
"The Phase 3 CHABLIS-SC1 study is a multicenter, placebo-controlled, randomized, double-blind study designed to evaluate the efficacy, safety, tolerability and immunogenicity of blisibimod in patients with clinically active SLE (SELENA-SLEDAI > 10) who have not achieved optimal resolution of their disease with corticosteroid use. The study will enroll patients from Latin America, Asia Pacific and Commonwealth of Independent States who will be randomized to receive blisibimod or placebo for 52 weeks after which they will have the option to receive blisibimod therapy in an open-label, long-term, follow-up safety study. The study will enroll approximately 400 patients and the primary endpoint will be a Systemic Lupus Erythematosus Response Index-8 (SRI-8). "
The relatively low enrollment of four hundred patients should be easily obtainable for Anthera. The trial protocol was developed based on discussions with the FDA, however, it is important to note that there is not a Special Protocol Assessment (SPA) in place in regards to the trials, which makes it possible that the FDA will later object to trial design and the endpoints. While I do believe that scenario to be unlikely, it is a factor that any informed investor would have to take into account before investing. Furthermore, Anthera's phase II study demonstrated that Blisibimod was successful in patients who had previously failed corticosteroid use. This conclusion was based on a subgroup analysis that was conducted by Anthera.
This leads us perfectly into talking about the subgroup analysis. Usually I am skeptical of any subgroup analysis in order to design a phase III trial, simply because there are many times where what happened in a subgroup in a phase II trial will not be repeated in a much larger phase III trial. In this case, however, it does appear as though the drug is destined to phase III failure because of the subgroup analysis.
Systematic Lupus Erythematosus already has a drug on the market. The distinction between Anthera's drug (should it ultimately be successful) and the current drug on the market will help to drive long term value towards Anthera. The other drug on the market is Benlysta, currently marketed by GlaxoSmithKline (GSK), and was developed based on a collaboration with Human Genome Sciences (which was later bought out by GSK for $3 billion).Benlysta has not been selling all that well, in 2012 the drug achieved sales of $106 million, which was a disappointment for investors based upon all of the hype surrounding Benlysta's launch. Benlysta sales have been hampered, primarily due to the pricing of the drug. This is especially prevelant in some European countries including Britain and Germany.
In order to succeed where Glaxo has so far been unable to succeed, Anthera is going to need to accomplish a few key things. First of all it is going to have to be successful in obtaining a label that helps to distinguish Blisibimod from Benlysta. Anthera is well aware of the need to have a distinguishing label, saying in their most recent conference call that:
"In parallel, we have conducted in-depth analysis of our own blisibimod PEARL-SC Phase II results. These combined analyses have proven to be very helpful in teasing out opportunities and guiding our own Phase III CHABLIS-SC1 trial design. Based on this analysis, eventual success of the CHABLIS-SC1 study could lead to an improved product label , better patient identification for initial product trials at launch and better success in penetrating and growing the SLE market."
Knowing about the need for unique labeling is important for long term oriented investors, as the company will need to stand out to really have a chance. It is also important for investors to note that Anthera has been conducting an analysis of Benlysta's phase III program in order to develop the CHABLIS-SC1 trial. While this would immediately sound encouraging to investors, it should be taken with a grain of salt given the idea that we do not know how much of an influence the Benlysta studies had upon Anthera's own study design.
Also, it is likely that Anthera will have to attract a large pharmaceutical partner in order to successfully market the drug in SLE. The problem is that it is possible that there would be less interest from large pharmaceutical companies, simply based on what has happened up to this point in regards to Benlysta.This actually sets Anthera up for an interesting position, in which it wants Benlysta to do well and to meet its projected sales expectations. Companies would then observe the market penetration of Benlysta and if Anthera's compound is successful in clinical trials, they might partner with Anthera in order to take a stab at the growing SLE market and to take on Benlysta. If Anthera were going to partner the drug, they would probably do it after the receipt of the Phase III data. This would be a long term oriented catalyst, given that the Phase III study has an estimated primary completion date of December 2015.
As CHABLIS-SC2 starts to come on line, according to the company they plan on meeting with the FDA next quarter in order to discuss the path forward. From the conference call, you can see that the CHABLIS-SC2 study is going to differ from the SC1 study.
Moving on to the status for the second lupus study. We hope to capitalize on the growing body of clinical evidence that blisibimod will provide significant benefit to lupus patients who have high levels of renal involvement, including patients with stable lupus nephritis/glomerulonephritis.
The CHABLIS-SC2 study could be what helps to separate Blisibimod from Benlysta. This study could provide Blisibimod with a broader label than Benlysta, and as such help to improve the market potential of the product.
The market potential for Blisibimod is very hard to predict, simply because it would depend upon the clinical results and the labeling for Blisibimod. While sales potential is hard to predict, it is definitely much more than Anthera's current $80.43 million market cap. The SLE market represents a very enticing market for long term oriented investors, should Anthera be successful in phase III testing, and obtaining FDA approval.
The following table is a rough sketch of the pending long term catalyst in regards to Blisibimod for the treatment of SLE.
Long term catalysts for Blisibimod in SLE
CatalystEstimated Time Frame
CHABLIS-SC1 CompletionDecember 2015
CHABLIS-SC2 Completion1Q 2016 (this is a guess based on how far behind CHABLIS-SC2 is in terms of initiating a clinical trial)
PartnershipHard to predict, either before the NDA or after FDA acceptance
NDA Filing3Q 2016 (this is conservative)
PDUFA3Q 2017 (assuming standard review)
This table was illustrative in regards to a couple of ideas. First of all, investors are not clear on how far behind CHABLIS-SC2 is, and exactly what the design specifications are. It is possible for SC2 to catch up to SC1 based on patient enrollment amongst other factors.
I am not, however, saying that these are the only catalysts in regards to Blisibimod and that investors should simply lock up their money until 2015 based on the hope that Blisibimod works. Blisibimod is also being pursued in other indications, which have the potential to be financially lucrative for Anthera, as well as has the potential to create some more catalysts for long term oriented investors.
IgA nephropathy (IgAN)
Anthera is also pursuing Blisibimod in a potential indication for IgA nephropathy. IgA nephropathy is a chronic immune renal disease that is typically characterized by proteinura and can sometimes progress to end stage renal disease. Blisibimod would have a relatively large market, should it be approved for the indication.
Anthera recently announced that it initiated a phase II trial called BRIGHT-SC for Blisibimod in IgA nephropathy. This clinical trial has the ability to provide near term catalysts for shareholders, as the trial progresses towards its completion. According to the press release (cited above), this trial appears as though it will be shorter:
"BRIGHT-SC is a multicenter, placebo-controlled, double-blind, Phase 2 clinical study that is expected to enroll at least 48 patients from Asia Pacific geographies. Patients will be randomized into one active treatment arm or one placebo arm. The primary endpoint of the study will be a reduction in proteinuria at 32 weeks. The Company plans to conduct an interim analysis of proteinuria after patients have completed 8 weeks of therapy. Secondary endpoints will include the effects of blisibimod on estimated Glomerular Filtration Rate (eGFR), plasma B cells, and other biomarkers of kidney disease."
The interim analysis at 8 weeks should help to provide a closer catalyst for shareholders. Also, it should not take all that long for Anthera to enroll at least 48 patients in the phase II trial. However, if Anthera increases the enrollment before seeing any of the data, it could be positive for shareholders as the more subjects in the Phase II trial would help to give shareholders more confidence in the Phase III development program. This trial was designed after a May meeting with the FDA. Anthera hopes to present interim data early next year.
The market opportunity for IgAN could be quite large for Anthera. Anthera estimates that there are 40,000 people in the United States affected by IgAN This number could actually be low because it seems as though IgAN is underdiagnosed due to the fact that it requires a biopsy, which is not normally completed for patients who have mild urinary abnormalities. The clinical development of Blisibimod in IgAN represents a significant catalyst for shareholders, and could help to drive long term shareprice growth. Significantly, according to the conference call Anthera estimates that there could be millions of people affected by IgAN in Asia, where the prevalence of the disease is much higher.
Another significant idea about the development of Blisibimod in IgAN is the fact that the disease is an orphan disease. What this means is that due to the fact that there are so few patients who have the disease, if the FDA grants orphan drug designation, the recipient will have market exclusivity for a certain time period as well as other benefits. Typically, orphan drugs can be quite profitable, as companies will substantially increase the price of the drug in the orphan indication, because they are the only drug on the market. This further increases the commercial potential of the IgAN indication for Anthera.
In order to provide readers with a full view of what the risk/reward is for this stock, it becomes necessary to address some of the risks associated with Anthera. If Blisibimod is found to not work in any of the indications above, the company would not be worth very much money at all. The company has taken a risk by having Blisibimod being the only drug in their pipeline, and if this drug is not successful Anthera would have to develop another pipeline essentially from scratch. Another risk associated with Anthera is that it could be harder for them to raise money given the fact that they might be delisted from the NASDAQ soon.
Financial Position
It appears as though Anthera has a rather stable financial position. At the end of March 31,2013 Anthera had $54.4 million in cash. The company mentioned that the amount of cash is "sufficient to deliver on a number of milestones over the next 12 to 18 months." I would expect this to be correct, as from operating activities, Anthera had a negative cash flow of approximately $10.63 million. This means that Anthera's cash pile should last roughly through the next five quarters assuming that the expenditures roughly stay the same, and assuming no unexpected revenue.
While it is concerning for any company to be cash flow negative, in the case of Anthera I am not overly concerned. Many development stage pharmaceutical companies operate at net losses until their first drug gets on the market (unfortunately, some companies never end up being positive). With this in mind, it is not unusual for Anthera to have a negative cash flow and a net negative in terms of operating expenses. With a cash pile of $54.4 million, the company has removed the immediate risk of dilution for shareholders who take a position. By the time that Anthera would have to raise more cash, it should be at much higher prices due to drug development, we should have Phase II results in IgAN in that time and have a pretty good idea about whether or not the phase III enrollment is on track in SLE.
Anthera is a very interesting long term proposition. While there may still be some short term downside in Anthera's shareprice, with Anthera trading near its 52 week low it appears as though this is a fantastic risk/reward opportunity for investors. Anthera's holdings have also been relatively stable, with institutional ownership of 48.93%, it appears as though Anthera will be a good long term investment. As Anthera progresses Blisibimod through the requisite clinical pipeline, there should be an appreciation in share price. Anthera appears to be a small cap stock with asymmetric long term upside potential.

Wednesday, June 26, 2013

Pharmaceutical Catalyst Update

Pharmaceutical Catalysts: What To Expect In The Next Few Months Update [Edit or Delete]0 comments
PDUFA dates can be substantial catalysts for any stocks that are focused on drug development. For small companies it can essentially be a make or break scenario, and the culmination of years of shareholder money as well as years of hard work by the companies. In my previous article I mentioned some possible run up candidates going into FDA panel decisions, as well as going into PDUFA dates. I promised an update to investors as to how these picks worked out, which I will provide below. However, there are a few lessons to be learned through looking at the historical pricing information that I would like to share with you:
1) FDA panel decisions vary widely in terms of runup potential
It appears as though the FDA panel decisions that were recommended often varied quite widely in terms of run up potential. While some of the panel decisions resulted in large catalyst events and large runups, others seem to have been a side note for investors, hardly causing for any runup at all. Often panel decisions can be very interesting for investors, and no one really knows which way they will go. FDA panels are when the FDA asks for the consultation of various people in the affected industries, usually the panel will consist of some doctors as well as other professionals. These panels render non-binding votes on a number of issues. While the panel votes are non-binding, the FDA does usually follow their panels. Unfortunately, panels can be very hard to predict, which is why I often advocate getting out before the FDA panel decision. One perfect example of panels being hard to predict was what happened with Dynavax Technologies (DVAX):
In Dynavax's panel, going in many investors thought that the vote was going to be positive (me included). From an efficacy standpoint, Dynavax's Hepatitis C Drug Heplisav was off the charts. However, there were safety concerns that were raised in the panel which were previously unforeseen by investors. Dynavax went on to receive a CRL based on the panel's concern that there was not enough data on safety, and it looks like Dynavax is going to have to conduct another clinical trial, the question for investors in Dynavax is simply how large the trial is going to have to be, and how long the trial is going to take. Dynavax for me, atleast, is a perfect example of why I dislike holding through FDA panel decisions.
2) After a negative panel vote, it is not very advantageous from a runup standpoint to get back into the stock
It would seem to make sense logically that after a negative panel vote (or one that would seem negative to the investment community), that there would be some investors buying in for the PDUFA date in the hopes that the FDA decision will not be the same as the panel decision. While the logic seems valid, there does not seem to be that great of an incentive for the investment community to actually execute this strategy. Buying a day after the panel vote at the closing price would have resulted in minimal gains in DVAX, the same goes for Titan Pharmaceuticals (TTNP.OB) if you counted the panel vote as negative. Note that for my calculations I assumed buying at the closing price the day after the FDA panel decision was announced, and selling at the closing price four days before the PDUFA date. Now, turning towards the results of my previous article.
For all of these results, I assumed buying on the closing price the day my article was published (March 22nd), and selling four regular days before the PDUFA date or the panel date depending on what I mentioned in the article. If the four day timeframe landed on a weekend, I generally went to the next trading day unless it was a long weekend (three days or more) where I would have sold the day before the long weekend began. When to sell before a PDUFA date is simply a matter of preference as to when you would want to sell going into a PDUFA date, I tend to hold closer to the line than I think I should. Also, please note that I did not include stocks that have not yet had their PDUFA date. For example Antares Pharmaceuticals (ATRS) which I recommended in my previous article, is not included in the results table.
For panel decisions, I went for a slightly different strategy (AVEO, DCTH and DEPO) for the ending price, I went out to seven trading days before the panel. This is due to the fact that the FDA will release briefing documents typically four to five days before the panel decision. I do not like to hold a stock going into the release of the briefing documents simply because if these documents are negative, than the stock will of course take a hit.
Results table from recommendations of previous article.
Stock TickerStarting Price (per share)Ending Price (per share)Gain/Loss (per share)
Sucampo (SCMP)$5.88$6.82+$0.94 (+15.9%)
Titan Pharmaceuticals$1.67$1.75+$0.08 (+4.7%)
Raptor Pharmaceuticals (RPTP)$5.68$6.67+$0.99 (+17.4%)
Delcath Systems (DCTH)$1.69$1.51-$0.18 (-10.7%)
Aveo Pharmaceuticals (AVEO)$7.50$8.27+$0.77(+10.27%)
DepoMed Inc. (DEPO)$5.76$5.71-$0.05 (-0.09%)
Flamel Technologies (FLML)$4.59$4.73+$0.14 (+3.05%)
Average of +5.79% gain. The Dow Jones Industrial Average from March 22nd, 2013 to the day of this article writing (June 24,2013) gained +1.9%. This means that these picks did beat the Dow by 3.89%.
While a 5.79% gain is great, it was not exactly what I was hoping for when writing the article. I was shooting for an average of around 7%. One risk with the Biorunup idea is the fact that there are other catalysts in between which could affect stock price.
While the results were still good, they were not exactly what I would have hoped for in terms of runup potential. It has been very interesting to wait these months and see exactly what kind of a runup investors experienced in these various companies. Some of these companies received extremely good news from the various committees and the FDA, while some of them received bad news. I try not to hold onto a company through the PDUFA date as anything can happen when the FDA is deciding the fate of a drug. I will create an updated biorunup calendar soon and present some more run up opportunities. These will be much further in advance, so hopefully, they will experience a larger run up. I hope that you have enjoyed this experience as much as I have, and continue to be interested in runup investing.
Disclosure: I am long ATRS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Monday, June 10, 2013

Savient Pharmaceuticals: Is the End Near?

Savient Pharmaceuticals (NASDAQ: SVNT) recently reported financial results for the first quarter. These results were rather disappointing to both analysts and shareholders, and do not paint a very bright picture for Savient moving forward.

The news at Savient was rather disappointing. In terms of revenue, analyst estimates were $5.65 million. Savient reported first quarter revenue of $4.69 million. Even more concerning about this revenue number is the fact that net sales of Krystexxa Quarter over Quarter actually decreased by 6%. Savient is relying upon Krystexxa for its hopes of future profitability, and having negative revenue growth does not bode well for the future prospects of the company. Savient's net loss came in at $24.4 million or $0.34 per share. The only bright side about Savient's net loss is that it was a decrease from the net loss from the same period in 2012. The decrease in net loss is mostly due to cost reductions as a result of a corporate restructuring.

Some more important numbers include the fact that the cost of goods sold actually rose by 106% to $3.6 million. According to the company: "the increase is primarily due to a $2.1 million charge to reserve Krystexxa finished goods and raw material inventory." The good news for shareholders is that it does not look as though the charge will be permanent going forward, however, for this quarter it made the margins shrink at a time when Savient could desperately use increasing margins. Finally the cash burn rate is a concern at Savient. Savient ended the quarter with $68.8 million in cash and cash equivalents. Now this sounds nice, except for when you compare to the prior quarter. For the prior quarter, Savient had cash and cash equivalents of $96.3 million. This represents a cash burn of $27.5 million. At this rate, Savient will be out of cash before the end of the next three quarters.

The risk of dilution in that scenario would be quite high. Savient is already burdened by an increase in interest associated with debt, due to additional interest due on its 2019 notes. Savient's interest expense increased by 55% to $7.1 million. As an interesting tidbit, this means that total revenue for the quarter at Savient does not even cover their interest expense, clearly something has to give. Furthermore, with Savient looking at a possible Nasdaq delisting, the diminutive nature needed to raise money would be even higher. It becomes harder to dilute stocks that are trading on the OTC, and it seems as though Savient shareholders would want to see more progress before they start forking over more money for the stock. There also becomes the question of who would want the stock? Savient has done a nice job up to this point of painting a rosy picture but with an alarming cash burn rate and decreasing revenue from its main product, it does not seem like any large institutional investors would want to pick up the stock.

The prospects at Savient look rather bleak. It appears as though Savient will have trouble conserving its cash burn rate, and that its revenues will not increase fast enough to bring Savient to profitability. With a pending delisting added to the mix, it seems as though Savient would have a hard time raising money in order to continue operating. Savient's future, unfortunately, looks rather negative.

Thursday, June 6, 2013

Neonode: A Potential Patent Play?

Neonode (NEON) has a very well developed business. They have been on a role recently, providing solutions for many large companies. With Neonode creeping ever closer towards profitability, it seems as though Neonode is well positioned as a company. However, there is the possibility that they would become even more well positioned, through the exploitation of their patent portfolio. Neonode holds some seminal patents, which could provide a very lucrative stream of revenue, should Neonode choose to start focusing on enforcement activities. To be clear, we are not talking about destroying the underlying business at Neonode, but simply choosing to essentially add an IP enforcement wing onto the current business model.
A very interesting development has been the fact that Neonode patented slide to unlock technology...three years before Apple (APPL). The fact that Neonode also commercially deployed this technology would only serve to strengthen the claims in Neonode's enforcement activities. For those of you who are unfamiliar with the patent litigation arena, let's take a step back. Neonode's patent would have priority over Apple's, as Neonode's is older and therefore the assumption is that Neonode had the idea before Apple. Even more interesting is the idea that a court in the UK in 2011 declared Apple's slide to unlock technology invalid, citing Neonode's 2004 phone which deployed slide to unlock technology. This would also mean that Apple knew about Neonode's invention, as they are now aware that Neonode deployed a similar device before Apple. As a matter of fact in Apple's recent patent application for slide to unlock technology they cited Neonode's patent. This is also important because that would mean that Apple was well aware of the issuance of Neonode's patent.This could open Apple up to the status of willful infringer under the law, which would substantially increase damages should a verdict come in against Apple. In February of 2012, Neonode was issued their patent. They were issued this patent, having initially filed for the patent in 2002, well in advance of Apple. This would make the patent relatively recent, which is always good in the field of IP litigation. The more recently the patent was issued, the longer until the expiration of the patent. Now, why would anyone care about the expiration date of a patent, well the answer is due to future royalties. Should Neonode sue they would undoubtedly seek future royalties for Apple's continued infringement. This would mean that Apple would either have to change their technology, or continue to pay Neonode a set royalty on sales until the expiration of Neonode's patent.
More significantly, Neonode has the pieces lined up for a potential IP litigation front. In their conference call they mentioned that "our Patent Counsel, Quinn Emanuel is in the later stages of independently evaluating our patents and helping us developing our IP strategy." This would suggest that Neonode is also seeing the value in the IP litigation front. Also of note is the fact that Quinn Emanuel is representing Neonode, Quinn Emanuel is a tier one lawfirm in patent litigation. What is even more compelling is that Quinn Emanuel advertises itself as trial lawyers, so why would a bunch of trial lawyers be coming together at Neonode? The logical conclusion is that Neonode is getting its proverbial ducks in a row to sue someone. Who we cannot really be sure, however, they have a large patent portfolio protecting their underlying technology platform. With lawyers like Quinn Emanuel working for Neonode, it is safe to expect that Neonode will soon be attempting to monetize some of their IP portfolio, as they should.
What makes Neonode an even more compelling IP investment is the fact that Neonode has a strong underlying business. This is very valued in the world of patent monetization, for examples look at the underlying businesses at Document Security (DSS) or the creation of one at MGT Capital (MGT.OB). This would help to provide a sort of cushion should Neondoe not be successful in its patent monetization case. It would essentially provide a base valuation, a luxury not present at some other monetization companies such as Vringo (VRNG). Furthermore, Neonode could be very successful as Quinn Emanuel claims to have a win rate of over 90%, odds like this have to be attractive to any investor in the monetization industry. Neonode is clearly very well positioned should it want to monetize its patents, to go along with its underlying business.
Neonode already has a very successful underlying business, and would be able to branch off into also licensing its IP portfolio. It is interesting, as the amount of IP related lawsuits seems to be soaring in the United States recently. Neonode could be experimenting with possibly shifting towards filing patent infringement lawsuits.

Titan Pharmaceuticals: Will Braeburn Throw in the Towel

Titan Pharmaceuticals (NASDAQOTC: TTNP) announced on Wednesday an amendment to its agreement with Braeburn Pharmaceuticals. This amendment specifies some very important concepts for Titan's shareholders. The amendment changed the termination clause in the agreement:
"The amendment primarily modifies certain of the agreement's termination provisions by providing Braeburn the right to terminate the license in the event significant additional clinical work or a material change to the product label will be required by the U.S. Food and Drug Administration (FDA) as a condition to approval of the New Drug Application (NDA) or if the NDA is not approved by June 30, 2014."

There are a few important parts of this agreement. The "in the event significant additional clinical work" is important, as Braeburn will be able to opt out if additional work is needed. Unfortunately, the press release does not define 'significant' additional clinical work. However, given Titan's CRL had the following quote:
The CRL states that the FDA cannot approve the application in its present form. The FDA has requested additional data supporting the efficacy of Probuphine, including:
  • The ability of Probuphine to provide opioid blockade of relevant doses of agonists
  • The effect of higher doses of Probuphine, ideally doses more closely approximating the blood plasma levels associated with sublingual doses of buprenorphine of 12 to 16 mg / day
  • Human factors testing of the training associated with Probuphine’s insertion and removal
The CRL also included recommendations regarding product labeling and the implementation of the Risk Evaluation and Mitigation Strategy (REMS)."
It looks as though the FDA may look for additional clinical trials if it is going to want to know about the 12 to 16mg/ day dosage point. If Titan has to conduct additional clinical trials, expect for Braeburn to find an excuse to get out of its partnership with Titan.
Furthermore, it is not entirely certain that the label will not change as the press release even says that the CRL also included recommendations regarding product labeling. As you notice above, if the product label changes, Braeburn has the right to abandon ship. This possible change could also provide a scenario for Braeburn to leave.
However, the most important part of Braeburn's amendment, and why I personally believe that Braeburn will abandon the partnership is the part about an NDA being approved by June 30, 2014. Given the current timeline for FDA submissions, the likelihood of the FDA even reviewing the NDA by that time is relatively low. It would depend upon Titan getting a favorable classification for the response, as well as Titan not having to conduct any additional clinical trials. It is unlikely that Titan will be able to draw up its response in time for a possible approval by June 30, 2014 and thus Braeburn's hand will be strengthened. However, in this scenario an interesting possibility exists. If the review is not completed by June 30th Braeburn could possibly renegotiate the terms of the partnership with Titan to be much more favorable to Braeburn, otherwise Braeburn could threaten to leave the partnership and stick Titan with a product for which Titan will have to find a marketing partner. This strategy could work out for Titan in the end, or it could end up horribly for Titan. 

Only time will tell what Braeburn will end up doing about its relationship with Titan. One thing is clear though; Braeburn is looking for a way out if the relationship does not work done. Braeburn has found its ticket out of the relationship, and the question will simply come down to the FDA, Titan, and Braeburn to see if this partnership will last. This amendment reminds me a great deal of what happened to Alexza Pharmaceuticals (NASDAQ: ALXA)  with their previous partnership before finding in my opinion an even better partnership. Overall, this could work out for Titan either way, but for right now it seems to be out of Titan's hands and solely dependent upon what the FDA chooses to require. 

Document Security Systems: The Importance of a Settlement with Jive Software and Broadvision

Document Security Systems (DSS) has been on a tear of press releases over the past month. For a quick background, Bascom Research is a wholly owned subsidiary of Lexington Technology group. Lexington Technology has entered into a definitive merger agreement with Document. Bascom Research filed a patent infringement lawsuit versus Facebook (FB), LinkedIn (LNKD), Jive Software (JIVE), Broadvision (BVSN) and Novell. This patent infringement lawsuit has been the center of a few recent press releases by Document Security, announcing settlement agreements with Defendants. These settlement agreements are sure to be good for investors in Document.
Document Security Systems announced that their soon to be subsidiary, Lexington Technology Group, settled with a Defendant in the Bascom Patent case. Unfortunately, the press release did not state which Defendant the settlement was with. The settlement granted an effective 4% royalty rate, per the press release. This settlement is with Broadvision. Although not stated in the press release, this can easily be found through a court filing available here. The settlement with Broadvision will likely provide only minimal revenue.
As of March 28th, Broadvision was listed with a market cap of $41.93 million. While the settlement grants an effective 4% royalty rate, keep in mind that this royalty rate applies only to a certain product from Broadvision, its Clearvale products. It is unclear how much of Broadvision's revenue is derived from its Clearvale products, but the product did not have any revenue in 2011, and likely did not bring in a large amount of revenue in 2012. This being said, Broadvision does seem to be scaling up its Clearvale products platform, saying in its most recent conference call discussing earnings that:
In this release, we enhance Clearvale's ability to control distribution and display of view only documents. Extend our integration capabilities with Microsoft SharePoint, and added many other security features required by our enterprise customers.
The enhanced Clearvale capabilities will also be added to our BroadVision 9 solution, announced last quarter to offer a unified and integrated engagement solutions based on Clearvale's social and mobile capabilities, and [K2 e-business] or relationship management platform, which is BroadVision's personalization and transaction management solution.
The fact that Broadvision is enhancing Clearvale can only benefit Lexington Technology and DSS, as thanks to the effective 4% royalty rate, the more sales that Broadvision obtains, the more money that DSS/Lexington will ultimately receive.
Also from the same conference call is a hint at the sales of the Clearvale product so far:
At BroadVision, we invest, create greater choices and options for our valued customers. In Q1, we did 25 Clearvale partner and paid customer transactions
Accoring to the conference call, Broadvision believes the bookings may provide significant upside in the future. With this in mind, and the fact that Broadvision according to recent quarterly filings does appear to be unprofitable, having posted a net loss of $2.1 million in the first quarter of this year. The revenue appears to be minimal out of the Clearvale product suite, and therefore seems to be minimal revenue to Lexington/ DSS. However, in the world of patent litigation or in any world money helps, so this revenue to Lexington, no matter how minimal, should help to offset some of the litigation costs with Novell, Facebook and LinkedIn.
On top of that, Lexington recently announced a settlement with asecond Defendant in the Bascom Patent case. This settlement provides for Lexington to receive an effective royalty rate of approximately 5%. This settlement appears to be with Jive Software, according to arecent court filing. Of the two, it seems as though Document/Lexington did much better with Jive, getting a higher royalty rate against the larger company. As of May 28th, Jive had a market cap according toYahoo Finance of $1.10 Billion. The complaint seems to specifically allege infringement based on Jive's API product line. According to its recent press release announcing earnings for the first quarter, Jive had product revenues of $30.7 million. Unfortunately, Jive does not seem to break down the numbers in their conference call. However, similarly to the other settlement, any revenue that is obtained by Lexington/DSS as a result of this lawsuit will help to further finance their legal actions against the rest of the Defendants. However, besides revenue why would these early settlements be important?
For an example of why this could be so important we can easily recall the days when Vringo (VRNG) announced a partial settlement with AOL(AOL). In the case of Vringo, they ended up winning a jury verdict against all of the Defendants in the case, including Google (GOOG) and AOL amongst others. The partial settlement well in advance of the trial provided minimal revenues to Vringo, but the symbolic nature of a settlement was much more revealing.
Now, jumping back to the DSS news, this settlement serves a few purposes. First of all, both of the Defendants are essentially acknowledging that the patents are valid and enforceable. If the Defendants had any beliefs that the patents were not valid and enforceable, they would probably have continued litigation and pushed hard for the judge to dismiss the case. This is a very important caveat in a patent litigation case, as if a patent is not valid and enforceable often the judge will not even let the jury hear the case.
This settlement is also important because it provides a starting base for determining what the patents would realistically be worth in terms of royalties during a jury trial. By providing a licensing history of 4-5% of the revenue for infringement, Document would be setting itself up nicely for arguing for an even larger royalty in post-trial infringement due to the changed bargaining positions of the parties involved in the litigation. Obviously, if Bascom Research wins its case than its hand will be considerably strengthened when determining ongoing royalties. Providing a licensing history will help the jury to determine reasonable damages, should they ultimately come to the conclusion that the other Defendants infringed upon the Bascom Research's Patents.
In addition to the impressive news of a partial settlement, Lexington and subsequently DSS have a very important date for their patent infringement lawsuit coming up. Lexington previously announced a markman hearing date for October 2nd, 2013. For those of you less familiar with what a markman hearing is, it is a time where both sides have presented their proposed language that a jury will hear as to what the patent covers. The judge will ultimately rule on which language will be presented to a jury. Obviously, the Plaintiff would like as broad of language as possible, as that would mean more chances for a finding of infringement from a jury. Whereas the Defense would like a very narrow definition, as it will be easier to argue that no infringement occurred. This date is very important for patent litigation, and often stocks will run up if they receive a favorable markman ruling for an example see ParkerVision (PRKR). This date will help to get a feeling for DSS about where its case will stand. The language will be very important for both sides in the sense that it will determine how they tailor their arguments to the jury. Turning back towards the settlement, the fact that a Defendant chose to settle even before the markman hearing would suggest that the infringement was pretty obvious no matter how the patent would be interpreted by the court. Given the recent settlement, I would say that there is a good chance for DSS to be successful in terms of their markman hearing.

The settlement helps to further entrench DSS shareholders, and can help to reassure shareholders that the patent litigation will ultimately be successful. While patent litigation is inherently a risky business, the settlement can be nothing but good news for DSS shareholders, which should help to encourage some other Defendants to analyze the validity of Document's claims and whether or not it would be cheaper to settle. The settlement should help to solidify the positions of long term shareholders, and helps to provide the idea that Document will be successful in their patent infringement lawsuit. We can only hope to see a repeat of the Vringo scenario for DSS shareholders and ultimately see a jury verdict in favor of DSS.