NUPATHE (PATH) Due Dilligence

Alert: I bought $PATH. Will write about it tomorrow

NuPathe (PATH) is my next catalyst pick, I believe we could see a 50% move or more in the stock price to the upside by Jan. 17th.  I have also noticed many people are not too happy about their recent finance deal but I like it. Their patch has a lot of potential and with proper cash on hand, the company has better resources to assure the FDA the manufacturing issue has been taken care of.

On 7/31 PATH announced NDA was accepted, PDUFA date 1/17/13.

FDA Accepts NuPathe's Migraine Patch NDA Resubmission for Filing

PDUFA Date of January 17, 2013

CONSHOHOCKEN, PA--(Marketwire - Jul 31, 2012) -  NuPathe Inc. (NASDAQ: PATH), a biopharmaceutical company focused on the development and commercialization of branded therapeutics for diseases of the central nervous system, today announced that the company's New Drug Application (NDA) resubmission for its migraine patch (NP101) has been accepted for filing by the U.S. Food and Drug Administration (FDA). NuPathe has received a Prescription Drug User Fee Act (PDUFA) date, the target date for the FDA to complete its review of the NDA, of January 17, 2013.

"As important as FDA acceptance of our NDA resubmission is for NuPathe, we believe it's even more significant for the millions of migraine patients who suffer from headache pain and debilitating migraine-related nausea," said Armando Anido, chief executive officer of NuPathe. "We look forward to working closely with the FDA to complete its review and to bringing our innovative new treatment option to migraine patients in 2013."

About the Migraine Patch (NP101 or Zelrix)
Zecurity (NP101) is an active, single-use, transdermal patch in development for the treatment of migraine. If approved, it will be the first transdermal patch for the treatment of migraine. The patch actively delivers sumatriptan, the most widely prescribed migraine medication. In three clinical trials involving more than 10,000 applications, NP101 offered patients fast onset and sustained relief of debilitating migraine symptoms including headache pain and migraine-related nausea (MRN). Because NP101 delivers sumatriptan transdermally, it may be an attractive treatment option for many frequent MRN sufferers and those patients who experience gastroparesis, a slowing of gastric absorption. The patch utilizes SmartRelief, NuPathe's proprietary transdermal delivery technology that allows the rapid yet tightly controlled transport of medication through the skin using a process called iontophoresis. As a result, in NP101 clinical trials there was a low incidence of triptan sensations that include chest tightness, flushing and feelings of pressure and numbness.

Zecurity received a CRL last time around from the FDA, with the main reason being safety in the manufacturing process. The former CEO did not understand that it takes money to make money and "cheaped" out by going using a 3rd party basically " unapproved" manufacturer. This cash raise should assure the FDA that the manufacturing process will not be overly cheap and untrusted -- in my opinion.

The market potential for Zecurity is large:  The US and European markets for anti-migraine drugs are projected to exceed $3.2 billion and $734 million, respectively, by 2015. The potential market is very big for this one. Approval for this product would likely see a triple in the stock price from here in my opinion.

PATH IPO'D a couple of years ago at $10 a share, with company insiders believing its patch would be a slam dunk for FDA approval -- it should have been if not for the poor job the former CEO did by cheaping out on the manufacturing process.

I strongly feel that come January, Zercurity receives approval this time around.

Armando Anido: New CEO of PATH, replaced Jane Hollingsworth, who resigned her executive post and seat of the board of directors.

Anido's primary focus is to get Zercurity approved --period. He even laid off half of PATH'S employees,  and suspended all other pipelined drugs research -- This is what a good CEO should be doing -- coming in and fixing the mess Jan caused, assuring the company gains the vialibility and revenues from Zecurity, so it can then start up its other promising drugs in its pipeline. Again, in my strongest opinion, this is GOOD CEO strategy, and something I would do myself. (I've talked about this concerning Pluristem (PSTI) on my show)

Anido joined Auxilium in 2006 and grew sales from $42M in 2005, to over $260M in 2011, increasing market capitalization from $200M to over $900M during his tenure as CEO.

I like to bet on jockeys more than horses, and this guy has a proven track record of success.

Google this guy.

In three clinical trials involving more than 10,000 applications, Zecurity offered patients fast onset and sustained relief of debilitating migraine symptoms including headache pain and migraine-related nausea (MRN). This is important because insurance companies have always supported sumatriptan based solutions for Migraine sufferers. The patch is novel in the fact there is no stomach absorption or potential liver toxicity.

The potential market is very big for this one. Approval for this product would likely see a triple in the stock price from here in my opinion.

Because of this, I strongly feel we will see a run-up approaching $5 to $6 a share for this one, possibly higher. My main reason is that the current market cap is just way too low.Should be more in line with $300M market cap based on zecurity -- even with the new financing.

The company recently did financing to bring its cash up to 28M. This should assure Zecurity gains approval this time around.

Let's do the numbers:

Shares Outstanding:14.74M
Float:5.21M
% Held by Insiders:59.31%

The current market cap is $48.94M -- absurdly too low.

 

On September 25, 2012, NuPathe Inc. entered into a Securities Purchase Agreement (the
“Purchase Agreement”) with certain qualified institutional purchasers and individual investors
(the “Investors”) pursuant to which we agreed to sell to the Investors units of our securities (the
“Units”) for an aggregate purchase price of $28.0 million (the “Proposed Financing”). The per
Unit purchase price for the Units will be $2.00, and each Unit will consist of (i) one one thousandth
(1/1,000) of a share of to-be designated Series A Preferred Stock (the “Series A
Preferred Stock”), which will initially be convertible into one share of our common stock (the
“Common Stock”), and (B) one warrant (the “Warrants”) to purchase a share of our Common
Stock at an initial exercise price of $2.00 per share.

Under our Restated Certificate of Incorporation and the Delaware General Corporation
Law, our Board of Directors has authority to issue the Units in the Proposed Financing without
stockholder approval. However, under NASDAQ Stock Market Rules, stockholder approval is
required for the issuance, other than in a public offering, of securities convertible into common
stock at a price less than the greater of book or market value if the securities are convertible into
20% or more of an issuer’s common stock. Since the conversion and exercise terms of the Series
A Preferred Stock and Warrants, respectively, would entitle the Investors to acquire more than
20% of our outstanding Common Stock at a price less than the greater of book or market value as
of the date of the Purchase Agreement, the Proposed Financing requires stockholder approval
under NASDAQ Stock Market Rules. However, NASDAQ Stock Market Rules contain an
exception to this stockholder approval requirement “if the delay in securing stockholder approval
would seriously jeopardize the financial viability of the company.”

Again, it's not an offering per say. These financiers want a piece of the billions of dollars pie. They don't make squat selling their shares now, which they cannot anyways. The CEO is a "turn-around" guy, not a wrecker of companies -- again, check his record.

These investors will be gaining 3 seats on the board of directors-- why? because they are going to be owning a krap-ton of PATH shares. Under the agreement, these investors have to follow black scholes method of warrant and stock exercise conversion. This means they can only sell their stock over a period of 5 years. There is one exception here in the deal:

If PATH receives FDA approval for its patch  mid January of this year, the investors can sell their entire lot at once if they so choose to. That would be fine with me as the stock would go sky high anyways.

To reiterate, the new CEO is a proven winner. Jan on the other hand, let the company's money situation get dangerously low, the new CEO did not have the time to work out a premium deal because of this. The company's single focus now is getting the patch approved.

More to follow..

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4 thoughts on “NUPATHE (PATH) Due Dilligence

  1. Thanks, Scott. Liked the pipeline of NuPathe for some time. Guess I’ve been waiting for someone of your stature to have reason for buying. Thank you as always.

  2. also the market cap is presently not 48.94m$…with the financing, 14m shares were added…the Q filed on 8.14 had 14.76m o/s….so that brings us to 28.76m…@ 3.25/share we’re sitting at 93$m cap

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