“The $10 billion jackpot awaiting whoever can stamp out the flu… and one small player that has the inside track”

by Travis Johnson, Stock Gumshoe | September 6, 2012 2:28 pm

Sniffing out Patrick Cox's pick that comes with a "chorus of angels singing"

If you ever want a dose of optimism, just read through (or listen to) any of the ads for Breakthrough Technology Alert[1] — Patrick Cox[2] will have you swelling with rosy thoughts about a future without disease or hardship, with a nice dose of 1,000,000% returns thrown in … that, after all, is the raison d’etre of the microcap biotech or technology newsletter, no one goes into these kinds of picks looking for a 10% return, a dividend, or stable growth, they’re scratching off lottery tickets and hoping for a massive return that lets them retire early — or at least get bragging rights at the next cocktail party.

The key, of course, is that you’re hoping your favorite stock picker is a little bit better at seeing through the little scratch off tickets with his X-ray vision, or prognosticating the winning numbers in the Powerball drawing … perhaps because he has great contacts in the industry, or is a scientific expert, or simply has some trading strategy that works better. Most of them fail most of the time, we suspect, but every once in a while there is that massive, fortune-making gain that keeps us salivating.

And knocking out influenza[3] would, of course, ring the register quite nicely even for a mega-billion-dollar pharmaceutical company … so if a teensy little company can do it, well, one can be forgiven for entertaining thoughts of yacht-shopping. The common variety flu is, after all, one of the most widespread diseases that everyone wants a cure for and, even though most versions are not all that dangerous for healthy people, it’s also among the top ten killer diseases even in the developed world… and the one that spreads most easily and presents the constant threat of a killer pandemic if it mutates in an ugly way.

So what’s the new teaser pick from Cox?

Well, we learn about it in a recent free email newsletter from Agora[4] (his publisher) that many readers have sent our way — here are a few excerpts:

“‘If I could provide a soundtrack with this letter,’ Patrick Cox writes, ‘you’d hear a chorus of angels singing now.’

“‘Seriously,’ says Patrick, ‘this drug has the potential to change world history and accelerate global progress measurably. That, however, is only the beginning.'”

“… a discovery that has the potential to tame not only the flu — but all viruses threatening human health….

“The most recent update: The drug no longer has to be injected. It can be taken orally and is nearly as effective. As you’ll see, this changes everything.

“‘Now that we know this drug for influenza can be delivered orally,’ writes Patrick, ‘the odds are that an HIV[5] ligand that can survive will also be identified. That would be the end of AIDS as we know it, which would lift Africa[6] out of the dark ages. Global domestic product would be kicked up a notch, which would benefit everybody by increasing trade and wealth internationally.'”

So it’s not even just about curing the flu and preventing future pandemics, it’s also about lifting a continent out of poverty and causing the angels to sing.

Here’s a bit more, in case you weren’t drooling yet:

“‘I think that it is entirely reasonable to assume that 30 million people would take a treatment for a dangerous flu that would end symptoms in just an hour or two — every year. Insurance[7] companies would pay for the vast majority of uses.

“‘So $100 times 30 million uses is $3 billion a year,’ Patrick writes. ‘Double that for the European market and double it again for the world and you have potential sales easily exceeding $10 billion annually.

“‘Remember, this is an extremely inexpensive drug to manufacture when scaled up, so most of that revenue would fall into the profits column. When a pandemic hits, you would double sales… at least.

“‘The reason I say ‘at least’ is that an orally deliverable drug would work for flu prophylaxis, or prevention,’ Patrick continues. ‘Remember, this drug consists of big molecules compared with small molecule proteins. They are not metabolized and persist in the blood system for an extremely long time, perhaps months.

“‘This means that many people who are not at high risk for the flu would probably take the drug as soon as a pandemic hit anyway.

“‘Regulatory approval, of course, is the last hurdle before this world-changing technology comes to market,’ he writes. ‘Even that hurdle could be bypassed by going to a contract manufacturer if the next pandemic hits before the company is ready to manufacture on a mass scale.

“‘I hear angels singing again,’ Patrick concludes, ‘accompanied by the sound of cash register bells.'”

I guess by the “bypass regulatory hurdles” bit he means that if we get a pandemic, the FDA[8] and CDC might just skip human trials and manufacture the drug immediately for mass dispersal … which seems like a bit of a leap but is probably possible. Probably more reasonable to consider this is a “regular” drug and think about it as having to go through the standard FDA approval process before you’re allowed to buy it at your local CVS.

So what is it? Well, from the clues presented I’m quite sure that Cox is again teasing the little company NanoViricides (NNVC), which does indeed have a drug delivery program called FluCide that’s been showing dramatic results in animal studies.

Animals as in “not humans,” just to clarify — the FDA hasn’t cleared them for clinical trials yet, though they are apparently moving forward with planning for a Phase 1 clinical trial in Australia[9], so, absent any kind of force majeure that causes the government to step in and produce FluCide in a panic, it’s going to be many years before this gets approved for mass consumption. And by “before,” we should always remember for drug candidates, I mean “if.” It generally takes a minimum of five years for the trial and approval process after you’ve gotten FDA approval to do human clinical trials, and more often 7-10 years or so, and, while the “odds” don’t necessarily mean much since some drugs are far more prospective than others, the chance of a drug making it through to approval is probably less than 10% even after it has been approved to start a Phase 1 trial.

That’s general background, though, and we all know it’s a long and hard process — as does Patrick Cox, to be sure. So is this one a better candidate than the average little biotech with a compound, a hope, and a dream?

Well, it does have some things going in its favor — it fights a pandemic threat, so it probably gets plenty of government interest and funding; it has a huge addressable market of unmet needs in potentially fighting pretty much all viruses; it is a platform technology, so there is more than one potential way for the company to commercialize their idea and technology; and it has shown excellent results in animal studies against the current standard of care. And they did just this week release results that say the oral delivery of FluCide actually works better than the intravenous delivery[10], as well as performing substantially better than Tamiflu[11], the current standard influenza drug — but they also spread the announcement about those results over four separate press releases over four weeks, so they clearly know that a big part of their investor relations job is marketing at this point. Those announcements seemed to bring about as much of a pop to the stock price as did their pre-IND meeting (that’s a meeting with the FDA to discuss the possible design of human clinical trials before actually applying) and their patent grant and the subsequent Patrick Cox chatter about the stock in the Spring.

The good animal results in their testing so far don’t guarantee anything, of course, or tell us that NanoViricides should be worth ten billion dollars, or even a million dollars, it all depends on how you handicap a process that is in its very early days. If you think that their FluCide program will lead to a marketable drug within the next five or six years, then you can certainly argue that it’s worth substantially more than the $100 million or so that the market values NNVC at today … but that’s obviously speculation. Perhaps profitable speculation, and the reason that folks look for fortunes in biotech penny stocks is that the profits really are remarkable when the starts line up in the right order for you, but these don’t tend to be the kind of thing you want to bet the college fund on. They did announce recently that they have enough cash on hand to cover about two years of work after raising $5 million in an offering earlier in the Summer, which won’t get them through to any kind of real revenue-generating milestone but might get them through to starting Phase 1 trials on FluCide or to partnership deals to cover the cost of future clinical trials … assuming everything in the lab continues to look promising.

And of course, their basic technology is new and is nanotechnology[12], so there is, I would guess, a substantial risk that the FDA will be very worried about approving what is basically an antiviral[13] nanomachine that destroys viral cells — or that there turn out to be some wacky side effects that we can’t imagine. They explain the technology here[14] if you’d like more detail.

We’ve covered NNVC in the past, and I know we’ve seen both interested and very skeptical comments before from knowledgeable followers of this space, so feel free to chime in if you’ve got an opinion.

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