CNA-C Suite Q&A

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AzurRx BioPharma Inc. AZRX Stock News

AzurRx BioPharma Inc. (NASDAQ: AZRX)

Since first covering AzurRx in December of 2016, many investors have asked me to further expand on the technology and methods that the company is developing to treat both chronic pancreatitis and cystic fibrosis. Because the company’s pipeline is actually far deeper than just developing treatments for those two indications, I reached out to AZRX management to allow them to provide a specific overview of the progress and technological differences being developed at the company.

In the first of a three part, C-Suite exclusive, AZRX’s management and medical team responded, in specific detail, to investor interest and questions.

Q. First off, thank you for taking the time to both respond to and explain the AZRX pipeline and technology.

As a primary clinical focus, AzurRx has said that the company is aiming to reduce the daily pill burden for patients that have either chronic pancreatitis or cystic fibrosis. What exactly do you mean?

Thank you for reaching out. Yes, AzurRx, with its MS1819 compound, aims to improve adherence to therapy and potentially treatment outcomes in patients with chronic pancreatitis and cystic fibrosis. The plan is to materially decrease the pancreatic enzyme replacement pill burden to 5 to 8 capsules per day with MS1819, down from over 25 capsules daily with existing porcine agents.

Q. What is the significance of pill burden reduction? Will the decrease have a material benefit other than just convenience and patient dosing compliance?

Pill burden has historically been an issue for patients and clinicians. Experience and data show that large pill requirements generally lead to poor compliance and are associated with poor treatment outcomes. Notable examples of where pill burden has been reduced, resulting in improved outcomes include HIV, hypertension, chronic kidney disease and diabetes.

In the early days of the HIV epidemic, patients took upwards of 40-50 pills a day with generally poor outcomes, compliance and polypharmacy related adverse events. Due to drug development advances, including novel co-formulations, the current standard of care broadly consists of treatment with a single pill once daily.

While the convenience benefit of once daily administration appears obvious, it is also clinically important. In one study, published in the Journal of Pharmacotherapy, patients with single tablet regimens (STR) had better outcomes than patients with multiple tablet regimens (MTR).

Q. So, single tablet measurements, or even a significantly reduced bill burden, may actually have more therapeutic affect?

In studies, STR patients were more adherent, had a lower risk of hospitalization and higher proportion of patients with viral suppression. Similarly, in another HIV study published in the journal Clinical Infectious Disease, the authors concluded “higher pill burden was associated with both lower adherence and worse virologic suppression.”Subsequently, in a meta-analysis of 19 studies of 6,312 people, higher pill burden was associated with lower rates of adherence (p=0.0004).There was also a significant association between higher pill burden and reduced chances of achieving virologic suppression (p<0.0001).Notable HIV products that offer reduced pill burden include Gilead’s set of once daily products; Atripla, Complera, Genvoya, Odefsey and Stribild. Also,ViiV’s (a partnership between GlaxoSmithKline and Pfizer) Triumeq is a once daily product.

Q. Some studies show that higher pill burdens may contribute to even worse clinical outcomes. Are the reports accurate?

In the treatment of hypertension, higher pill burden has also been linked with worse outcomes. Notably, a study of 17,000 adults, published at ASH 2014, showed that adherence among patients treated with single-pill therapy was 55.3%, compared with rates of 40.4% for patents with double-pill therapy and 32.6% for those on triple-pill therapy. The clear conclusion from these data is lower pill burden in the antihypertensive setting leads to improved adherence.

Q. There was a study of pill burden, in relation to kidney disease. Is AZRX tracking that study?

Absolutely. In chronic kidney disease, lower pill burden has been shown to be beneficial. In a study of 5,262 hemodialysis patients participating in the Dialysis Outcomes and Practice Patterns Study (DOPPS), it was demonstrated that patients prescribed a higher number of phosphate binder pills were more likely to have worse serum phosphorus levels. This supported the concept that non-adherence to large pill burdens can result in poor patient outcomes. Additionally, this study showed a clear pattern of rising non-adherence with increased pill burden in hemodialysis patients. Marketed phosphate binders that allow reduced pill burden include Fresenius’ Velphoro and Sanofi’s Renvela.

Q. Have there been any supporting studies to support the beneifts from a lower bill burden?

Yes, there is supporting research. From the Journal of General Internal Medicine, a study evaluated 9,170 people with diabetes treated with a fixed-dose combination product or two medications. Adherence to the treatment regimen was 12.8% higher the single-component arm versus the two medication arm. Combination Type II diabetes products include Merck’s Janumet, GlaxoSmithKline’s Avandamet, Takeda’s ACTOplus met and AztraZeneca’s Xigduo XR, which all provide reduced pill burden.

Q. Several investors were interested in getting more information about the lipase market and the potential for MS1819 to have a material impact in treating targeted indications. Can you elaborate on the market and benefits?

With the US pancreatic enzyme replacement market currently generating about $900 million in sales, MS1819 stands to have a sizable commercial presence. The reduction in pill burden associated with MS1819 is likely to confer a material adherence advantage to patients. This in turn should result in robust market uptake.

Q. Since we mentioned MS1819, AZRX’s lead candidate, can you provide some insight into that compound?

MS1819-SD is our lead therapeutic candidate. It’s a yeast based recombinant lipase intended to treat diseases in the pancreas, specifically exocrine pancreatic insufficiency (EPI) that is related to chronic pancreatitis (CP) and cystic fibrosis. We currently have an on-going phase II trial of MS1819-SD and are currently recruiting and treating patients in Australia and New Zealand, and we expect to publish initial efficacy results in the first half of 2017.

The phase I trial, like most, was geared to demonstrate positive safety and tolerability data, which we did. In addition to just showing safety, though, MS1819-SD also demonstrated the potential to provide a materially improved efficacy profile and dramatically reduced pill burden. In current treatment applications, it is not uncommon for patients to be prescribed up to 25- 40 pills per day to treat EPI, an issue that AZRX is intently focused upon changing. Current data suggests that an approved AZRX therapy may potentially offer patients the ability to ingest just 1-2 capsules per meal, and at the same time may benefit from an equal, or potentially greater therapeutic affect.

Q. Suggesting that the overall data from the on-going trial’s for MS1819-SD remains positive, how significant is the market potential for AZRX?

First, we expect that the trials will continue to demonstrate positive patient results. Assuming approval, AZRX will advance the product into a market that has the potential to treat over 100,000 patients in the U.S., and an additional 30,000 patients with EPI caused by cystic fibrosis. As we noted in prior releases, we are targeting the replacement of standard care, which is treatment with porcine replacement pills. In 2015, data estimated the market at $820 million in the U.S. alone, and roughly $1.5 billion dollars globally, this is according to market data provided by the National Pancreas Foundation.

Q. Finally, investors asked for detail about AZRX’s pipeline, specifically near term initiatives. Can you provide some color on that front?

Beyond MS1819-SD, AZRX’s next leading developmental stage agent is AZX1101, which also has broad market potential. AZX1101 is a complex biologic being developed to target and prevent hospital acquired bacterial infections. It’s mechanism works by inhibiting the activity of a broad range of antibiotics from acting within the GI tract. Data is showing that AZX1101 may prevent toxicity of intravenous antibiotics to gut bacteria, which may deliver a commercial market that holds enormous potential. Data published by the CDC estimates that over 1.7 million hospital associated infections are reported each year, and the results of these infections contribute to the death of almost 100,000 patients a year, and has an estimated annual cost burden to the health care system of roughly $11 billion per year.

It’s our goal to file an Investigational New Drug (IND) application for AZX1101 prior to the end of 2017, with a primary indication toward treating or preventing clostridium difficile infection. Beyond that indication, though, we expect that AZX1101 may also demonstrate broad and potentially lucrative applications for AZX1101 to treat a substantially higher number of bacterial infections.

End Interview

As previously noted, AZRX is well positioned to advance clinical initiatives on multiple fronts, taking advantage of potential drug approvals outside of the United States, which may offer a more streamlined process toward drug approval. With AZRX having a clinical presence, with on-going trials in countries such as Australia and New Zealand, the potential for expedited approval is in place, a decision that can allow AZRX to become a revenue generating company much sooner than expected.

Special thanks to the AZRX medical and management team for providing responses to investor questions, and ask investors to stay posted to CNA Finance for the second installment of this three part series.

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RegeneRx Biopharmaceuticals Inc RGRX Stock News

RegeneRx Biopharmaceuticals Inc (OTCMKTS: RGRX)

Recently, the CNA Finance team had an opportunity to speak with J.J Finkelstein, CEO of RegeneRx. Mr. Finkelstein has worked as an executive officer and consultant in the bioscience industry for the past 34 years, including serving from 1989 to 1996 as chief executive officer of Cryomedical Sciences, Inc., a publicly-traded medical device company. Prior to Cryomedical, he served as the CEO of RegeneRx from 1984-1989.

RGRX has been advancing upon an aggressive and potentially lucrative strategy lead by RGN-259 for dry eye syndrome. CNA Finance wanted to see just what was behind the action, so we went straight to the source. The following is a transcript of our interview:

Q: Describe the lead product at RGRX and where you are in the approval/commercialization process.

Our lead product is RGN-259, a sterile, preservative-free, eye drop developed for dry eye syndrome and other diseases and disorders of the cornea. RGN-259 represents a new approach to corneal healing and repair as it promotes cell migration, increases cell-to-cell contact and reduces apoptosis (cell death) and inflammation. We are conducting two phase 3 clinical trials through our U.S. joint venture, ReGenTree, LLC, one for the treatment of dry eye syndrome and the other for an “orphan” indication, neurotrophic keratitis (NK). Our goal is to complete both trials by the end of 2017. Our results will determine how we proceed with the regulatory process. It is likely that upon success, ReGenTree will either sell or license the asset to a major pharmaceutical company for commercialization in the U.S. in conjunction with the rights in Europe, which are still 100% owned by RegeneRx.

Q: How extensive is the patent protection around Tb4?

Patent protection is strong and we continue to submit patents around the world on our products. We have more than 75 total patents and patent applications within 14 patent families worldwide for Tb4, with expiries through 2031. Moreover, as an orphan drug, RGN-259 would benefit from 7 years of market exclusivity in the U.S. and 10 years in the EU.

Q: Your outsourced business model is an interesting approach, why did RGRX adopt this approach and what are the company’s cash needs under it?

An outsourced business model fits our technology, product candidates and needs very well. Since we are developing various product candidates around thymosin beta 4, a naturally occurring molecule, and have significant intellectual property, we felt very comfortable using vendors to perform and manage various aspects of our business. This includes preclinical studies, assay development, management of clinical trials, product formulation and other required services necessary to clinically develop a pharmaceutical product. Moreover, due to the significant world-wide interest in our product candidates, we have engaged in material transfer agreements (MTAs) with leading academic and medical institutions around the world that are interested in conducting research with our products.

These services and relationships allow us to not have to create a large and expensive infrastructure and, therefore, utilize less capital and be more flexible with our activities and budget. Currently we are spending approximately $110,000 per month to operate and have spent under $30 million in total to advance our products into phase 3. Our joint venture will probably spend another $30 million in getting RGN-259 through phase 3 and an NDA. This is much less than is typically the case for a pharmaceutical product that is based on a new chemical entity.

Q: Won’t this outsourced model constrain the company’s revenue growth potential when you reach commercialization?

It shouldn’t affect our revenue growth potential upon commercialization as our strategy has always been to sell or license our products to big pharma for commercialization. While we currently own 42% of ReGenTree, in addition to a royalty on commercial sales, we have no financial obligation through the clinical and regulatory process. We believe this is a great deal for RegeneRx. Also, as part of our strategy, we have engaged in other partnerships to develop our products in Asia, Europe and the U.S. Multiple partners allow us to create multiple paths toward commercialization. Currently we have three active partnerships, all of which are focused on clinical development of RGN-259 and RGN-137.

Q: What’s in the pipeline behind RGN – 259 eye drops?

We also have RGN-352, our injectable form of thymosin beta 4. It is being developed to treat systemic injuries, traumas, and disorders such as myocardial infarction, stroke, and peripheral neuropathy, helping repair or prevent tissue damage quickly after a damaging event. We are phase 2-ready with this product.

A third product is RGN-137, our dermal gel using thymosin beta 4 as the active ingredient. It is intended to be used to treat skin wounds, scarring and dermal disorders. We have conducted several early phase 2 clinical trials with promising results and our partner is moving forward with RGN-137 in the U.S. to treat a serious orphan disease, epidermolysis bullosa.

End Interview

CNA Finance works hard to uncover the next gems of investment opportunity. Mr. Finkelstein does offer a compelling case to consider the purchase of RegeneRx stock as part of an emerging growth portfolio.

With three real shots on goal and two Phase 3 studies in progress, RGRX is a stock that is well positioned with both near and long term catalysts. The outsourced model allows the company to conserve capital, allowing for maximization of the opportunities that are unique to RGRX’s shareholders.

Although all investments come with associated risk, RGRX appears to be in a comfortable position moving forward. As always, though, perform your own due diligence before making any aggressive investment decisions.

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Viking Investments Group, Inc. VKIN Stock News

Viking Investments Group, Inc. (“VKIN” or “Viking”) is taking an aggressive stance to reposition itself as a premier player within the oil and gas industry, undertaking an aggressive acquisition strategy planned for 2017 and beyond. Taking advantage of strong banking relationships and an already beefed up portfolio of producing assets, Viking may very well be on its way to accomplishing that goal.

While the oil and gas industry has met its share of frustrating times during the past few years, those hardships may have presented opportunities for VKIN to execute on its strategy to acquire revenue producing properties at attractive prices, and, in turn, increase both shareholder value and its capital base.

For investors that need an introduction, CNA Finance reached out to VKIN’s CEO, James A. Doris, LL.B, to get his insight into the current oil and gas market and to discuss his near term goals for VKIN. It is clear Mr. Doris is setting the course for a dramatically improved company, offering visibility and a well thought out plan intended to significantly increase the value of VKIN.

Q. Viking has been on the move of late, with changes in its corporate structure, management team and business strategy. For shareholders that might have been introduced to Viking a year ago, would it be fair to say that they need to get reacquainted?

JAD:Yes, absolutely. In the span of 12 months we have made 2 acquisitions, completed 3 financing transactions, formalized a relationship with a premier operating company in Kansas, and participated in negotiations and/or submitted bids for 5 other acquisitions (ranging from $12mm to $167.5mm), with support from various funding groups. From a compliance and professional services standpoint we also changed auditing firms, switching to a firm with considerable experience in providing services to public companies involved in oil & gas exploration.

Q. Getting reacquainted is important, but investors should acknowledge that companies like VKIN need to evolve to remain relevant, especially when opportunity is ripe. For both new and current investors, how is the Viking model going to be different in 2017 than it was in 2016?

JAD:Although we completed a couple of acquisitions in 2016, the past 12 months was more about putting key building blocks in place (e.g. contracting with a premier operating company; securing a credit facility with a commercial bank in the Energy Sector who wants to grow with us as we make more acquisitions in the Mid-Continent area; establishing relationships with investment banks and other funding groups who now want to assist us on future deals; achieving credibility in the marketplace amongst prospective vendors and brokers to generate deal flow). In 2017 our focus is going to be more narrow, i.e. simply assessing deals and buying assets that fit our investment model.

Q. Building on your focus to become a premier exploration and production company in the mid-Continent region, can you tell shareholders some of steps that Viking has already taken to establish the initial footprints in that region?

JAD:We have attracted attention to the “Viking” name in the area by purchasing a working interest in 6,000 acres of property in Kansas and Missouri, and by attempting to purchase other assets in Kansas, Oklahoma and Texas (we were not successful with those transactions, through no fault of Viking, but our participation in those negotiations have caused others to send us information on several other deals).Engaging S&B Operating, a subsidiary of KRDC, as our operator, has by itself generated a significant amount of deal flow.

Q. Many people don’t often think of Kansas and Missouri when the topic of exploration and production value arises. The truth is that each of these states may be extremely lucrative to your vision. Can you explain what prompted VKIN to potentially invest millions of dollars in that region?

JAD:Major oil companies proved decades ago that oil existed and could be produced from those States; however the volume was insufficient for the large companies to sustain a long-term presence (i.e. production volume was too low to pay exorbitant overhead of large organizations).So the market is fragmented, consisting for the most part of smaller operators, some of whom have no interest in deploying capital to develop acreage (i.e. drill) and others who may want to drill but don’t necessarily have the funds to do so, in particular given the drop in oil prices over the past two years. So, there is a tremendous opportunity to aggregate producing, long-life assets with significant development potential.

Q. So, if the Viking strategy is successful and the company begins to realize substantial revenue, would the focus turn toward leveraging that success and seeking growth through acquisition?

JAD: Yes, our growth strategy contemplates making several acquisitions over the next 18 to 24 months, adhering to our business model (i.e. target assets have to be generating positive cash-flow at today’s oil prices, and there has to be development potential).

Q. Acquisition requires strength in both capital resources and management. Is the expertise already in place at Viking or would you seek additional executive level experience to facilitate the growth?

JAD: We have a formidable group of professionals (e.g. operators, petroleum engineers and geophysicists) that have assisted the company over the past 12 months in assessing acquisition opportunities. We expect those relationships to continue. At the same time, to the extent we complete a transaction in a State outside of Kansas and Missouri, we will engage experts in those regions to operate and manage those assets on behalf of the company. Further, we are actively seeking professionals from various disciplines (e.g. investment banking, energy and compliance) to serve on our advisory board to assist with our long-term growth and governance initiatives.

Q. While growth may be part of the strategic plan. VKIN already has secured some sizable assets. Can you tell investors about existing assets and how those resources are able to be leveraged into near term acquisitions or partnerships?

JAD:We have a sizable acreage position (over 6,000 acres), and intend to implement a phase-1 drilling and maintenance program, subject to raising the necessary capital, to drill new wells to increase production and lower operating costs.

Q. The property and production assets are crucial, but so is the ability to raise capital. Does Viking have any agreements in place with commercial lenders or will the company look to raise capital in the equity markets?

JAD:We have a credit facility with CrossFirst Bank (the bank has offices in Kansas, Oklahoma and Texas), who wants to grow with us and increase the size of the existing facility to assist with acquisitions. We also have Placement Agent agreements with certain investment banks who have supported us on previous acquisition attempts and want to assist with future deals.

Q. So, you have let us know that VKIN has both the cash and production assets available for market. Importantly, though, does Viking have a channel in place to facilitate product sales?

JAD: All oil produced from our leases gets purchased, the price just varies from month to month depending on market rates.

With respect to acquisitions, we have extensive relationships throughout the United States and receive a steady flow of attractive opportunities, whether it be working interests, overrides or royalty interests.

Q. You have laid out a vision and strategy that can make Viking an established and valuable enterprise. As we know, though, the exploration and production field is competitive, and making prudent investments is essential. As the CEO, what assessments do you ensure are taken prior to consummating either a land purchase or interest agreement?

JAD:We assess a number of factors when evaluating an asset, including: geological formation, reservoir characteristics, historical production and operating costs, proximity to other producing leases, development potential, status of equipment, environmental issues, etc.

Q. Finally, there has been quite a bit of market volatility in regard to oil and mineral prices. Do you think that the current market is the sweet spot for new investment and would an invigorated economy boost your business outlook?

JAD:The volatility in oil prices in 2015 and 2016 has created a tremendous opportunity to purchase quality assets. Provided we remain disciplined and do not deviate from our investment model,i.e. buy assets generating positive cash flow at today’s prices with realistic development potential, and only engage in responsible drilling programs (i.e. no wild-catting or highly speculative ventures) we will have great long-term success.

End interview

With Viking concentrating on the mid-continent states to take advantage of opportunities in the oil and gas space, the company may very well find themselves able to take advantage of distressed properties that offer significant value in regard to oil and gas reserves. Unfortunately, “others pain” often becomes the “new investors” gain, and with VKIN having both the cash and management expertise to take advantage of current opportunities, the company may very well be in a position to return significant shareholder returns in the coming months.

Investors may be well served to keep an eye on VKIN throughout the first months of 2017, and if the company can generate some near term acquisitions, they may be able to leverage that growth into additional and long term value. With near term expectations high, the year may very well become quite interesting for Viking shareholders.

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Josh Disbrow head shot1 (1)

Aytu Bioscience Inc (OTCMKTS: AYTU)

Recently, the CNA Finance team had an opportunity to speak with Josh Disbrow, CEO of Aytu Bioscience. Josh Disbrow has been in the life sciences industry for over eighteen years across pharmaceuticals, diagnostics, and medical devices. Prior to forming Aytu BioScience, Josh was the Chief Operating Officer of Ampio Pharmaceuticals (NYSE MKT: AMPE) and led the Luoxis Diagnostics subsidiary. Luoxis was merged into Aytu in April 2015. Prior to joining Ampio in 2012, he served as Vice President of Commercial Operations at Arbor Pharmaceuticals.

Since 2015, Aytu has been advancing upon an aggressive and potentially lucrative strategy. CNA Finance wanted to see just what was behind the action, so we went straight to the source. The following is a transcript of our interview:

CNA: Aytu Bioscience is what many consider to be a hidden gem, especially for the treatment indications that the company is targeting within the urology space. Before we get deeper into the science, can you provide a brief synopsis of the relatively broad platform that Aytu is advancing?

JD: Absolutely, and I’m glad to spend this time with you to introduce Aytu to your readers.

In simplest terms, Aytu is a commercial stage, specialty pharmaceutical company focused on bringing innovative treatments and diagnostics to urologists around the world. The company has three commercialized, FDA-approved products that fill large needs within urology and have unique product profiles. These three products are commercialized in the U.S., and we have built a fully-integrated commercial infrastructure to support our sales efforts.

Natesto is our primary focus, as this represents the biggest opportunity to disrupt the market and improve patient care. Natesto is the only FDA-approved, nasally-administered testosterone, and it is indicated for the treatment of hypogonadism, or Low T. Natesto is entering the $2.4 billion testosterone replacement therapy (TRT) market, and it quite simply is a better product than any other therapy on the market.

Our second initiative is to advance ProstaScint. ProstaScint is an FDA-approved imaging agent that uniquely identifies prostate cancer cells in both newly diagnosed high-risk prostate cancer patients and patients suspected of recurrent disease. ProstaScint was acquired from Jazz Pharmaceuticals, and we believe ProstaScint will remain a mainstay of prostate cancer diagnostics.

Then we have Primsol, which is the company’s proprietary anti-infective indicated for the treatment of uncomplicated urinary tract infections. This is a product that we acquired global rights to from FSC Laboratories. Primsol is the only FDA-approved trimethoprim-only oral solution and offers a solution to patients who are either allergic to sulfa-containing antibiotics or have difficulty swallowing.

Finally, we are commercializing a diagnostic device called MiOXSYS® for male infertility, currently being marketed outside of the U.S. with its registered CE mark. MiOXSYS is a breakthrough medical device that assesses the health of semen through the detection of oxidative stress levels in men suspected of infertility. MiOXSYS does in three minutes what currently takes hours to perform – and it does it simply, conveniently, and more reliably than the current methods used around the world.

CNA: So, from a strategic and product standpoint, Aytu is not only well diversified, but also appears poised to be seizing upon opportunities within the urology space. Is there a reason for the intense focus in urology?

JD: Yes, and the question is very perceptive. Right now, the urology market remains largely untapped by “Big Pharma,” in that little attention is paid to many of the conditions urologists treat. At Aytu, we seek to build a strong presence in urology, as this represents a significant opportunity to bring attention to and serve the many significant conditions urologists treat. Also, from an execution standpoint, urology makes sense as a specialty that, if effectively deployed against, a company can command a leadership position with a relatively small commercial footprint. We don’t need thousands of sales people to be a substantial force within urology.

Additionally, urologists are forward-thinking innovators, and they remain open to collaborating with our industry. We believe we can efficiently deploy an impactful commercial infrastructure in urology given that urologists are concentrated in large metropolitan areas, often practice in large group practices, and treat significant conditions like Low T, prostate cancer, incontinence, UTIs, and male infertility. We believe urologists need a company dedicated to their needs, and Aytu seeks to build a broad partnership with urologists around the world.

CNA: Well, assuming that the urologists and others in the field do provide the support that Aytu expects, is there a certain strategy that the company has in place to take advantage of the attention?

JD: We do, and it’s relatively straight forward in design. Aytu’s core strategy is to focus on licensing and acquisition opportunities to build our pipeline. In a span of just 11 months, the company assembled our commercial-stage portfolio through efficient search and evaluation of unique products in urology. We don’t favor employing substantial in-house R&D. Rather, we seek opportunities that have largely been de-risked from both a clinical and regulatory perspective. Plenty of companies perform costly, time-intensive R&D, which presents significant enterprise risks that we seek to minimize. Instead, we take the commercial risk and seek to build products once they have achieved relevant clinical and regulatory milestones – most notably FDA approval.

Our strategy is to acquire or license undiscovered products that fill significant needs and can be efficiently commercialized through our urology-centric sales team, and in our short history we have been successful in building a critical mass of products and are now ready to scale.

CNA: Earlier, you mentioned four of the most promising opportunities for Aytu. Which products in that group do you think will provide the most near-term catalyst for Aytu?

JD: Well, I would definitely point to Natesto and MiOXSYS as two of our leading candidates. While all four of our products have unique, compelling attributes, Natesto and MiOXSYS are game changers in their respective categories.

Natesto is the only nasally-administered testosterone replacement therapy (TRT) in the world, and it is just now launching into the $2.4 billion U.S. TRT market through our U.S. sales force. Natesto is truly unique in that other TRT products are applied topically to the skin or via painful subcutaneous or intramuscular injections. Thus, a nasally-administered testosterone like Natesto represents a huge advance over the current state of the art. Topically applied testosterone products carry a substantial risk of skin transference, as they are applied directly to the man’s skin. In the event of casual contact with a female partner or child, there is a concern that the man could transfer this testosterone to his loved one. This is problematic. as testosterone can cause many unwanted male-trait-enhancing effects in women and children. For this reason, the FDA has assigned a black box warning to all topically applied TRTs. Natesto, as it is not applied to the skin by virtue of its nasal administration, does not have a black box warning. This alleviates a major safety concern while also dramatically improving the way testosterone is administered.

Another significant advantage for Natesto is that it is administered 2-3 times daily (1 pump in each nostril) and achieves maximum concentration within 40 minutes of the first administration. This is dramatically quicker than other methods, and because of the relatively short duration of action, patients have flexibility in achieving their optimal “T” levels throughout the day.

From an intellectual property perspective, Natesto is patented into the year 2024 with multiple strong patent families protecting it, and we have an exclusive license to the U.S. market for at least that long. Natesto stands to change the way urologists and Low T clinicians treat hypogonadism, and our prescription trends are already exceeding our expectations.

The second product that we are also excited about is MiOXSYS, which is now beginning to post revenues overseas. MiOXSYS is a CE Marked diagnostic device that will improve male infertility assessment. Quite literally, this small, portable system does in 3 minutes what takes a professional andrology laboratory 2-3 hours to do currently.

MiOXSYS puts male infertility assessment into the hands of the treating physician to get real-time results reporting a man’s oxidative status, which is the overall amount of oxidative stress in his semen – a leading cause of idiopathic male infertility.

Additionally, MiOXSYS has been shown to correlate with a man’s fertility status in peer-reviewed publications around the world, and we’re now building an ex-US distribution network and introducing the system to leading centers in andrology and urology. In parallel, we are pursuing regulatory clearance in the U.S. and are excited about the prospects for MiOXSYS to change the way semen analysis and infertility assessments are performed around the world.

CNA: Smart Investors want to be given a compelling reason to buy a stock, with many investors wanting to invest during the most opportune times. What would you tell potential investors that would cause them to consider an investment in Aytu stock?

JD: I can give quite a compelling argument to buy our shares. With three FDA-approved, commercialized products now launching through our U.S. sales force – along with a CE Marked medical device with sales ramping overseas, we believe we are tremendously undervalued and under the radar.

Very few companies that were just formed less than 18 months ago can boast a commercial portfolio of four products, a sales force that is now off and running, and patents that protect our lead assets for many years to come. We have all three, and we have a management team that has built and exited specialty pharmaceutical companies before. All of this said, we are just getting started with very early revenues just beginning to ramp. We believe Aytu is poised for substantial growth in the near term, with Natesto expected to drive the most revenue growth for the company.

CNA: Given that the company is expecting to ramp revenues, are there any near-term milestones that investors can look for in the coming months?

JD: Yes, on both fronts. We expect to report Natesto prescription sales in the coming two quarters as we get our sales force established and driving sales. The very early prescription trends are encouraging, and we expect to see sales ramping well beyond current levels. That would be the first potential catalyst.

Secondly, we also expect to expand our distribution for MiOXSYS outside the U.S. and expect to continue our dialogue with the FDA to enable a clinical study here in the U.S. and potential U.S. regulatory clearance. We would expect that the announcement on that front will drive additional shareholder value in the relative near term.

End Interview

CNA Finance works hard to uncover the next gems of investment opportunity. Although AYTU is a relative unknown stock flying well under the radar, the information provided by Mr. Disbrow does offer a compelling case to consider purchasing the stock as part of an emerging growth portfolio.

With four shots on goal for Aytu, and with two of them expected in the near-term time frame, the current share price may provide investors a nice opportunity to catch AYTU during its infancy, and may offer substantial upside. With the company already generating revenue, investors are provided some risk support as the company continues to push forward on expanding their markets and reach.

Although all investments come with associated risk, AYTU appears to be in a comfortable position moving forward. As always, though, perform your due diligence before making any aggressive investment decision.

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Athersys ATHX Stock News

Athersys, Inc. (NASDAQ: ATHX)

Athersys (ATHX) is an international biopharmaceutical company engaged in the discovery and development of therapies designed to extend and enhance the quality of human life. Athersys’ lead product development programs utilize MultiStem®, a proprietary “off the shelf” stem cell product that has shown promise for treating indications in the neurological, cardiovascular and inflammatory and immune disease areas, as well as certain other conditions.

The CNA Finance team went up close and personal with Dr. Gil Van Bokkelen to discuss the exciting and potentially transformational treatments that ATHX is currently developing.

Dr. Van Bokkelen has served as Chief Executive Officer and Chairman since August 2000. Dr. Van Bokkelen co-founded Athersys in 1995 and has served as Chief Executive Officer and Director since the Company’s founding. Prior to May 2006, he also served as the Company’s President. Dr. Van Bokkelen is also the Chairman of the Board of Governors for the National Center for Regenerative Medicine.

Q. Athersys may be one of the most misunderstood companies in the biotech sector, with institutional investors and others not fully grasping the data relevant to the company’s treatment for ischemic stroke, one of the biggest areas of unmet need in clinical medicine today. What have investors missed?

In general, investors tend to avoid focusing on things they don’t really understand. Regenerative medicine and cell therapy is still considered an emerging technology area, and a lot of people that heard all the early hype about the potential for stem cells became less enthusiastic when that didn’t immediately pan out. Consequently, over the past several years many investors haven’t really focused on the sector. As a result, many people have missed the substantial progress that we have made. Furthermore, stroke is regarded as a tricky area, because a lot of companies have tried to develop a novel therapy over the past 20 years, with little success. So a lot of people hear “stroke” or “cell therapy” and they just tune out. But that ignores how MultiStem, our off the shelf stem cell therapy, is fundamentally different from what people have tried to do in the past, and what we have accomplished.

In our view many investors have missed several important things. First, the data from our Phase 2 clinical trial evaluating the treatment of stroke victims with MultiStem demonstrates a favorable safety profile and promising evidence of effectiveness across a range of important clinical metrics – the things that patients, their families, regulators and clinicians care most about. Second, in contrast to the current treatments available to patients, such as the drug tPA or surgical interventions, which may only be used within several hours after the stroke has occurred, the treatment approach with MultiStem is very simple and much more practical than current standard of care. In fact, the results of the trial suggest stroke patients can be effectively treated up to 36 hours after a stroke has occurred, which would be very practical from a clinical perspective. Third, we have a technology that is uniquely scalable. This is essential to meeting the demands of a large unmet medical need for an area like stroke, which affects millions of patients every year. Fourth, we have a deep understanding of how the therapy works, and how it is fundamentally different from things that people have tried previously that didn’t work, which is critically important. Finally, we have established a clear and efficient regulatory path for obtaining approval.

Q. In April, 2015 investors were quick to react after ATHX missed its primary endpoint on its original phase 2 trial, which turned out to be a relatively simple issue to address. What did ATHX learn from the original phase 2 trial, specific perhaps to the optimum time to treat patients?

Essentially we learned that in order to achieve the desired therapeutic effect, we need to treat stroke patients with MultiStem within 36 hours of the stroke, which would represent a huge improvement over current treatments, which have to be used within several hours. However, the data also showed that when we treated patients beyond 36 hours, we missed the optimum treatment window, and patients didn’t benefit nearly as much as when they were treated earlier.

But it’s important to recognize that current treatments, tPA and surgical removal of the clot that caused the ischemic stroke, are used on less than 10% of all stroke victims based on the narrow treatment window and other limitations. In contrast, based on our clinical data, the treatment window with MultiStem, of up to 36 hours after the stroke has occurred, would be relevant to perhaps 90 – 95% of all stroke patients, because most stroke victims can get to the hospital in that time frame.

Q. So it sounds like establishing the appropriate time window for treatment is very important. Is this something that clinicians understand and agree with?

Absolutely. Physicians that treat stroke patients have recognized for a long time that “time is brain”, and early treatment is essential – that’s widely accepted and there really isn’t much debate about that. In fact, the early clinical trials with tPA actually failed because they needed to define the appropriate treatment window, which has now been established as within 4.5 hours after the stroke has occurred. Unfortunately, the vast majority of stroke patients don’t get to the hospital in that narrow time window, and so they can’t be treated with tPA. Surgical removal of the clot, or thrombectomy, must be done within 6 hours, so a bit further out, but this approach also has limitations in terms of the size and location of the stroke, so it’s not relevant to many patients. The combination of tPA and thrombectomy appears to be pretty effective, but once again, that will be limited to a small percentage of stroke patients – ultimately only a subset of those patients that get to the hospital fast enough after the stroke to be treated with tPA.

Q. So how was the time window for treatment with MultiStem established, and why is that important?

Our published preclinical data using animal models showed pretty clearly that we could treat with MultiStem 24 hours after the initial stroke event or even beyond that and see substantial recovery. The data also demonstrated earlier intervention is important to maximizing therapeutic benefit – reinforcing the longstanding clinical reality that time is an important factor. The multiple studies that were conducted also explained how the treatment was providing benefits, which occurs on several levels.

It’s important to recognize that we originally designed the MASTERS-1 trial to treat stroke patients within a window of 24 – 36 hours post stroke – well beyond the limits of the currently available treatments. The initial 24 hour window was used to identify patients that were exhibiting early substantial recovery, either because they experienced a Transient Ischemic Attack (or TIA), which is a temporary stroke, or because they had a small focal stroke and the body was able to compensate by upregulating blood flow in the surrounding blood vessels, or because the patient was successfully treated with tPA or surgical removal of the clot. The clinical team wanted to exclude those patients from participating in our study, to reduce the “background noise” in the placebo arm, which has been problematic in prior stroke studies. With other approaches people have tried, patients had to be enrolled immediately, and clinicians couldn’t tell which patients may have had a TIA, or were likely to recover without treatment. We didn’t want to have a lot of those patients in our study, because we really wanted to focus on the patients that aren’t recovering or being helped by current standard of care – in other words those patients with meaningful, durable neurological and motor skill deficits after the stroke. Those are the patients that are likely to have substantial long term disability, and the ones that really need help.

In the MASTERS-1 trial we had to rely on the bone marrow and cell transplant processing centers to prepare our product, because we didn’t have the “off the shelf” version ready to go quite yet. Unfortunately, most bone marrow and cell transplant processing centers only operate Monday through Friday, and are only open a few hours each day because the procedures are highly scheduled. But strokes can happen any day of the week, and at any time of day – they don’t happen on a convenient schedule. So unfortunately, we saw that we were missing a huge percentage of eligible patients for our trial, because many stroke victims had the stroke at the wrong time of day, or on wrong day of the week, when nobody was around to prepare the product in their treatment window. As a result, they couldn’t be enrolled in the trial.

So we either had to live with slow enrollment, or modify our treatment window. Ultimately, after discussing it with the clinical investigators at participating sites, we decided to extend the treatment window out to 48 hours in an effort to capture more of these patients. However, in the process, we learned an important lesson – we need to treat patients within 36 hours to achieve the desired therapeutic effect, and earlier treatment is better. In the upcoming studies where we have regulatory authorization and are now preparing for, we will be treating patients in a window of 18 – 36 hours after the stroke, which we and the independent clinical investigators feel is an optimal window for this trial, and also represents a very clinically practical time frame.

Q. So, in that sense, people looked primarily at an issue unrelated to the efficacy of MultiStem, not realizing that the data was caused by a logistical issue rather than efficacy of the MultiStem?

Exactly. A lot of people missed the main observations from the study, which included a good safety profile, and consistent evidence that treatment with MultiStem within 36 hours was associated with a substantial benefit. This was shown by the proportion of patients that achieved good or excellent recovery in each of the clinical evaluations conducted, lower rates of life threatening adverse events and mortality, and clear biomarker data that corroborates key aspects of the therapeutic hypothesis. Many people only heard “missed the endpoint”, and reacted to that.

But based on a lot of feedback we have received from clinicians, regulators and others that have reviewed the data, it’s clear that many people see it for what it is – a promising step forward that could ultimately redefine stroke care as we know it.

Q. Earlier this year the final results of the MASTERS-1 phase 2 trial were presented at the 2016 International Stroke Conference, which is the preeminent annual international clinical conference for the stroke field. That event seemed to have generated enthusiasm among clinicians and a more positive reaction among investors. Why is that?

The final one year data from the trial showed that patients treated with MultiStem were showing a much higher rate of “Excellent Outcome”, which in practical terms means that these patients were achieving essentially complete recovery in each of the three clinical assessments that were conducted for each patient. This includes the NIH Stroke Scale, modified Rankin Scale, and Barthel Index of activities of daily living. Among all subjects enrolled in the trial, clinicians saw that at one year after the stroke, nearly three times as many patients achieved an excellent score in each assessment, reflecting full and durable recovery after treatment with MultiStem, and this was statistically significant with a p = 0.02.

Furthermore, when stroke victims were treated with MultiStem in accordance with the original trial protocol, more than five times as many patients achieved an Excellent Outcome compared to those that received standard of care and placebo. That was statistically significant with a p = 0.001.

Importantly, clinicians participating in the study saw that 67.7% of patients treated within 36 hours of the stroke achieved an excellent score in the Barthel Index of activities of daily living at one year, which was substantially higher that the control group, and also statistically significant (p = 0.03). The Barthel Index focuses on the activities that most patients and their families care about, including being able to walk, eat, get dressed, go the bathroom, shower or bath, and conduct other activities independently without the need for assistance. Study investigators also saw that when patients were treated with MultiStem they experienced meaningful reductions in acute hospitalization, time in the Intensive Care Unit, and other things that really resonated with clinicians. This included a meaningful reduction in life threatening adverse events, fewer secondary infections and other events that delay or impede patient recovery, and lower mortality. Importantly, the biomarker data from the study was consistent with (and we believe corroborates) key aspects of the therapeutic hypothesis, and essentially this indicates the therapy is working the way we thought it would.

Q. So how does MultiStem achieve all that? What exactly is the therapeutic rationale for how the treatment works?

Great question. A key difference between MultiStem and traditional drugs is that the cells that make up our product are capable of promoting healing and tissue repair in multiple ways. Essentially we think of them like living drugs that dynamically react to the needs of the body. Traditional pharmaceuticals or biotechnology treatments are almost always designed to do only one, very specific thing. Unless it’s very quickly removing the clot that caused the stroke, we know that traditional single mode therapies are not really likely to help a stroke patient recover as much as they would like. A lot of prior studies provide evidence of that.

We have actually spent years working with outside independent experts in the field to develop a detailed understanding of how MultiStem behaves when it is administered in models of acute neurological injury, including stroke, traumatic brain injury, and other indications. The cells do multiple things in parallel, which we believe is critical to their effectiveness.

One of the key things that we and others independent labs have learned, is that our brain is essentially connected to another very important organ in our bodies, the spleen. We now understand that the spleen acts as an important immune reservoir, and contains cells that most of the time are not doing anything, other than quietly waiting for something bad to happen. However, following an injury to the brain, a powerful set of signals get sent to the spleen that causes hyperinflammation to occur – essentially because the immune system overreacts to the injury. Unfortunately, this results in a lot of additional damage to the brain, and that ultimately makes things much worse, and makes it much harder for the patient to recover.

Data from our published preclinical work has shown that if we administer MultiStem cell therapy in the appropriate time frame, which our clinical results demonstrate is within 36 hours, many of the cells actually home to the spleen, and they can neutralize that hyperinflammatory cascade before it creates a lot of permanent damage. Our research results also show that the cells stimulate important reparative pathways that we believe help patients get better over time.

Q. Based on these results, the FDA recently granted a Special Protocol Assessment, or SPA designation for a pivotal Phase 3 trial for the use of MultiStem to treat stroke patients. This puts an approval to treat Ischemic stroke right on the company’s doorstep. What did the FDA see that the market has not yet appeared to have factored into the share price?

We have always tried to be very systematic and meticulous regarding our development approach, including our interactions with the FDA and other regulators. Some companies treat the FDA as a hurdle or a problem they need to overcome, and we don’t see it that way. We believe the FDA and other regulators have a critically important role to help protect and ensure patient safety, and so our philosophy is to work with them in a collaborative and thoughtful manner. Anybody that has studied the history and origins of the agency should understand that a strong FDA is in the best interest of the public, because it helps to protect patient safety and well-being.

In contrast to what some people say, the FDA is also very supportive of the development of innovative medicines – but regulators want to make sure that those medicines are safe, well characterized, and meet appropriate standards. When the FDA sees something that they believe has the potential to address a serious area of unmet medical need, there are steps they can take to help expedite development. If you think about it, this makes perfect sense, because, just like everyone else, the people at the FDA want to see safer and more effective medicines developed to address areas of unmet medical need.

Following the completion of our Phase 2 trial, we presented our results to the FDA for their review and consideration. The FDA is very data centric – and we provided them with a lot of information regarding the safety and efficacy findings from the MASTERS-1 study. They then invited us to conduct a formal meeting, referred to as an “end of phase 2 meeting” to discuss the findings and the potential path forward. The review team was very thoughtful, supportive and encouraging. Ultimately from those discussions and the follow up activities, we were able to reach agreement with the FDA that was reflected in the SPA. The SPA is a written agreement that specifies that the study design, clinical endpoints, planned conduct and statistical analyses are acceptable to support a regulatory submission for approval of the MultiStem product for treating ischemic stroke patients if the study is successful. As defined in the SPA, we will run a 300 patient pivotal Phase 3 study that will evaluate administration of MultiStem to patients within 18 – 36 hours after a stroke has occurred, using well established clinical assessments. This study will be called the MASTERS-2 trial.

In essence, this lays out a clear path to achieving something that no company has ever been able to do – obtaining approval for a practical and scalable therapy for treating stroke that could provide benefit to a large proportion ischemic stroke victims. That would be a major achievement – for us, for patients and their families, and our shareholders.

Q. One of the concerns about cell therapy is that it is typically a complicated procedure that requires specialized facilities, or highly trained personnel to prepare the product. This can make the whole process challenging, especially for hospitals that don’t have those types of facilities. How is MultiStem different?

We believe that in addition to scalability and other factors, simplicity and ease of use are critical to product adoption. If it’s complicated, or requires a lot of specialized training or infrastructure, people will be less willing to use it.

In our case, we’ve created a very simple product format. We refer to MultiStem as an “off the shelf” therapy, and we have spent years refining and optimizing the product format, to make it very easy to use. The entire process essentially consists of four very straightforward steps. First, remove the product from the freezer where it is stored. Second, thaw the product. Third, transfer the product from the vial into an IV bag of saline. Four, administer the product to the patient.

As I said, the entire process for prepping the product is very simple, and can be done right in the hospital pharmacy, or in the hospital ward where patients are treated. It doesn’t require specialized infrastructure or a lot of training. When you combine that simplicity with being able to treat patients in a clinically practical time frame, and what we believe is a compelling safety and efficacy profile, we are confident we’ve created a strong foundation for success.

Q. You’ve mentioned scalability as being important. Why is that such a big issue?

Historically one of the big things that has prevented cell therapy from becoming a widespread clinical reality is the lack of scalability. In practical terms, it may be easiest to appreciate this in the context of what happens with a traditional bone marrow transplant procedure. For every patient that needs a transplant, you need to find an appropriately matched donor, which can be challenging. Furthermore, only enough cells are obtained from the matched donor to treat one patient. In most instances the patient also has to be immunosuppressed, to reduce the risk of complications. So the process is complicated, and really not scalable – one well matched donor for every patient that needs help. As a result, a lot of patients can’t get the treatments they need.

However in our case, because of the special and robust growth properties of the cells that make up MultiStem, we have demonstrated that we can produce the equivalent of millions of clinical doses using a modest amount of material from a single healthy, consenting donor. We’ve also demonstrated can also do this consistently across donors, so it’s reproducible.

Perhaps just as importantly, we have also shown in multiple clinical studies that we can administer MultiStem just like type-O blood. There is no need for tissue matching or immune suppression, and the product has shown very good safety, which is very important from a clinical and regulatory perspective.

Ultimately, scalability translates to the ability to provide a consistent, well characterized, well validated product, which we believe is critical. Furthermore, it allows us to treat a lot of patients, which in the case of stroke and other indications we are pursuing, is essential.

Q. Switching gears for a moment, Japan is experiencing a serious problem caused by a rapidly expanding aging population, and given that the risk of stroke increases with age, it has created a substantial public health issue there. Earlier this year you announced a partnership with a company in Japan, and recently you announced PMDA authorization to run a clinical trial there with your partner, Healios. What can you tell us about that?

Most of the world is experiencing a substantial increase in the elderly segment of the population. This is a predictable consequence of the aging baby-boom segment of the population, meaning people born in the post-World War II years. But what a lot of people haven’t really grasped is that this expansion of the elderly population has enormous consequences on healthcare systems around the world. That’s because the elderly are more susceptible to a whole host of aging related diseases and conditions, and stroke is among the most serious and common.

A rapidly expanding aging population poses serious financial and operational challenges to the national healthcare system in Japan, and also represents a huge social problem. In recognition of this, three years ago the Ministry of Health and the PMDA, which is the equivalent of the FDA in Japan, announced a new initiative designed to promote the accelerated development of innovative medicines that could help address the problems they face.

One of the main initiatives created a new, accelerated regulatory path specifically designed for regenerative medicine and cell therapies. Specifically, this new system makes it possible to run a single, well designed study and if the trial demonstrates robust and consistent safety, and evidence of therapeutic benefit, it makes it possible to obtain either conditional or full approval, as well as full reimbursement.

As we did with the FDA, we presented the results of the MASTERS-1 trial to the PMDA, and worked with Healios to define an appropriate clinical trial design. In September we announced that PMDA accepted the plan for the proposed confirmatory trial, and Healios intends to begin that study in early 2017. Like the MASTERS-2 trial, it will focus on treating ischemic stroke patients within 18 – 36 hours after the stroke has occurred. So essentially, if the study is consistent with our prior findings, our partner Healios could obtain approval in Japan. We have seen a lot of interest and excitement in the study in the stroke clinical community there, which is encouraging. Healios’ stock has appreciated pretty dramatically since we announced the partnership and the final results of the trial.

Q. So it sounds like the partnership and recent regulatory initiatives in Japan are pretty meaningful for both ATHX and Healios. Along those lines, does the recent announcement regarding the SPA impact your strategy outside of Japan? Are you looking to partner outside of Japan, and if so, do you think regulatory activities will help attract partnerships?

We are interested in partnering outside of Japan, and we are actively exploring opportunities. The regulatory environment does have an important impact on that, because a lot of potential partners fear the unknown, including what types of studies will have to be conducted in order to obtain approval. Historically, it’s usually the case that regulators require two, large pivotal studies, and that can be expensive and time consuming, especially if they are big trials. However, in our case, we have established a clear path to potential approval with the FDA, and we are now looking to obtain the same type of guidance from the European Medicines Agency, or EMA, and Health Canada. We’ve already had initial interactions with regulators in Europe and Canada, and we are very confident that everyone will be in alignment.

That’s important, because whether we do a broad international partnership, or a European only partnership, everyone needs to be clear on what the path to success looks like. Clearly establishing that we are one additional reasonably sized study away from being able to obtain approval is extremely valuable, and allows potential partners to map out what will be required from a development perspective. Obviously everyone recognizes that the market opportunity is enormous, and so the regulatory clarity helps define a very attractive risk benefit profile.

Q. To that effect, if ATHX simply kept North American rights, the market potential is enormous in and of itself. Again, talking price is premature, however, would it be appropriate to speculate that potential market could be worth billions of dollars per year?

I think that is very realistic, and perhaps even a bit conservative. We think of it this way – every year there are nearly 17 million people that suffer a stroke throughout the world, and roughly half of the survivors are left with substantial permanent disability. As I mentioned before, stroke is the leading cause of serious disability in the world. Some patients require full time institutional care, while others are dependent on family members to take care of them. In terms of quality of life and economic impact, it’s a huge burden, and very costly. A treatment that could alleviate a lot of that burden would clearly be very, very valuable.

Another way to think about is this – every year in North America, Europe and Japan, more than 2.2 million people suffer a stroke for the first time, and with the rapid growth in the elderly population as a result of the aging baby boomer segment that number is expected to go up in the years ahead. We know that the 36 hour time frame for MultiStem treatment is potentially relevant to the vast majority of stroke victims. However, if we only reached a million patients a year, which I think could be conservative, that could easily translate into an opportunity worth tens of billions of dollars a year, and obviously the value in North America would be a big piece of that. Even if people discount things because it’s stroke, or cell therapy, or for whatever reason, it’s a huge opportunity, and I don’t believe that value is reflected in our current stock price.

Q. From a financial standpoint, how much benefit is there in waiting for product approval instead of partnering prior to the study? Is there many millions in potential value lost by partnering too early?

Obviously, waiting to partner until after the pivotal study is successful would make the opportunity substantially more valuable, because it would essentially be completely de-risked at that point. However, we would then be responsible for covering the entire cost of the trial. In this case it’s not a huge trial, so that’s potentially doable, but there is a cost-benefit trade off. The concept of running a competitive partnering auction based on the successful phase 3 trial results is enticing, but we believe that partnering in advance of the trial could allow us to create a lot of value as well, so we are actively exploring that option, and although there are no guarantees, I’m optimistic.

Either way, partnering will create additional validation, and put us is a strong position. It’s also important to recognize the stroke program is not our only asset, and we have multiple ways to establish value enhancing partnerships.

Q. So how does ATHX intend to capitalize it’s way to success?

Good question. We have several ways to fund our core activities and key initiatives. First, as we have discussed, over the past couple of years in particular we have been successful at establishing partnerships that provide a meaningful amount of funding. As we announced on our recent earnings call, we have already generated more than $16 million in revenue from partnerships this year alone, and the vast majority of our programs are currently not partnered – so we have a lot of flexibility. Second, we have been very successful at obtaining grant funding to support our clinical and preclinical programs, including two of our ongoing clinical trials, and there are some interesting project financing initiatives that could be relevant as well. Third, we have an equity line in place with one of our institutional shareholders, which means that if we feel we need to obtain more modest amounts of capital, there is an easy and efficient way to do it. Finally, we have a shelf registration available, so we can always access the capital markets when we feel it’s appropriate.

Q. You mentioned other clinical programs, which is interesting. ATHX is clearly not a “one trick pony” as they say. In this discussion we’ve focused mainly on MultiStem for ischemic stroke, however, ATHX is also developing novel treatments for cardiovascular and inflammatory and immune conditions. Why is that important, and where are those programs currently?

Having spent a lot of time around hockey rinks, I think of it as a “multiple shots on goal” strategy. In my view we have a highly unusual, if not unprecedented opportunity, to develop MultiStem for several significant areas of unmet medical need. Success in any of those areas will have a big impact and create a lot of value for our shareholders. We know that in hockey not all the shots will go in, but if you get enough high quality shots, a few usually go in, and that’s how you win.

Currently we have two other active clinical programs, including an ongoing Phase 2 clinical trial for treating patients that have suffered a heart attack, and another study evaluating administration of MultiStem for patients suffering from Acute Respiratory Distress Syndrome, or ARDS. We expect data from both of those programs in 2017.

Previously we published our results from a Phase 1 trial evaluating MultiStem administration to heart attack patients, and those results were very promising in our view and a lot of other people have agreed with that. In fact, the NIH awarded us a $2.8 million grant to support the Phase 2 trial we are currently running, and that was a very competitive peer reviewed process. While substantial progress has been made in recent years, and thankfully people are more likely to survive a heart attack once it occurs, heart disease remains the leading cause of death. Many people that survive the initial heart attack are at risk of progressing to congestive heart failure, especially women. An increasingly obese and aging population isn’t exactly helping things. The economic and quality of life impact is huge – the American Heart Association has projected that within a few years, heart disease will have a cost of more than $1 trillion annually in the U.S.

In the pulmonary area, in the past couple of year we and our collaborators published results from a couple of very encouraging studies evaluating the administration of MultiStem in models of acute lung inflammation, which is the fundamental cause of ARDS. This is another challenging area where there is no effective treatment, and it affects hundreds of thousands of people a year. Our prior work led to our obtaining funding from both Innovate U.K. and the NIH to support the clinical trial we are now running. So AMI and ARDS are both examples of using grant funding or project financing to support important clinical trials, and we have numerous other examples of that.

Q. So it sounds like the company is positioned to achieve success in multiple areas. If you had one worry, what would it be?

I think we are pretty well positioned, but there are always challenges. Externalities and the “what if’s” can drive you nuts if you let them. My basic philosophy is that I try to keep the team focused on doing what we need to do to be successful, and not worry about things we can’t control. Paraphrasing Matt Damon in the movie “The Martian” – you solve the first challenge, then the next, and then the next until you’re home. There’s a lot of wisdom in that philosophy.

We have an incredible group at Athersys, and we aren’t afraid of big challenges. We are committed to establishing the company as an industry leader. I believe that success in any of the programs we are currently pursuing will enable us to achieve that.

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ENUM Stock

Wael Fayad, the Chairman, President and CEO of Enumeral Biomedical Holdings, is a veteran in the pharmaceutical industry with over two decades of experience.

Prior to joining Enumeral in September 2016, Wael has held senior positions at Novartis, Schering-Plough and most recently was Corporate Vice President, Global Business Development of Forest Laboratories. He holds a B.S. in biology from the American University of Beirut, and an M.B.A. from Concordia University.

Why did you decide to join Enumeral (ENUM)?

I joined Enumeral because I was attracted to the company’s science, powered by its proprietary platform, and the promise it holds to create significant value to shareholders and patients. Further, I joined Enumeral because I felt there was a very good fit with my skill set and background with what Enumeral needs to advance its business.

I have been in the industry for more than 23 years and I spent most of this time assessing risk and finding value in pharma and biotech so I know an underappreciated asset when I see one. Previously I spent 14 years at Forest Laboratories Inc. where I was most recently head of business development and alliance management. As you may know, Forest was acquired for $28 billion dollars in large part due to the pipeline we built through business development, so I have intimate knowledge of how to value assets and create value.

Based on my experience, I believe Enumeral has a platform that provides the opportunity for the company to unlock value across a host of applications. During my career, I have built an extensive network in the life science industry that I intend to leverage at Enumeral.

What have you focused on since you joined ENUM?

Enumeral is a promising company undergoing a transitional phase. During my diligence before I joined the company, it became clear to me that Enumeral has validated its platform as a discovery engine for new and potentially differentiated therapeutics but needed strong leadership to articulate a clear vision for the company and execute a strategy focused on creating value in the near and long term.

Working with colleagues at the company, we have put in place a plan that has four main components: 1) create near term value by advancing our pipeline to near term value inflection points, 2) prioritize partnering with pharma and biotech companies to support further funding of our business and validate our science, 3) secure funding to execute the plan, 4) put the company on strong footing for future capital raises or strategic options.

What assets or pipeline does Enumeral have?

Enumeral has a powerful platform for discovering potential best in class therapeutics and a promising pre-clinical pipeline in immuno oncology, one of the fastest growing markets in life sciences.

Visualize our platform as a precision tool focused on finding the proverbial needles in the haystack. These needles have the potential to represent breakthoughs or best in class therapeutics. The Enumeral platform has application in immuno oncology and other diseases mediated by the immune system. Crohn’s disease, psoriasis, rheumatoid arthritis and multiple sclerosis are among the auto-immune diseases that we could target going forward in addition to infectious diseases.

Enumeral has the potential to create value at the foundational level of the commercial life cycle. The building block for value creation in pharma and biotech is finding the right development candidate to justify the cost and time associated with the rigorous development process required for regulatory approval and commercialization. Enumeral has the potential to excel and distinguish itself at this foundational stage of drug development.

The core technology behind our platform is exclusively licensed to us from the Massachusetts Institute of Technology. Our immune profiling platform enables us to extensively interrogate the immune microenvironment, including from human disease tissue, to identify and validate potential drug candidates and understand disease processes to guide development. This puts us in a position to be at the center of the race in pharma and biotech to identify the next breakthroughs and this is a core element of our growth plan going forward.

Lead Program

Enumeral has 2 programs in the pre-clinical stage and several programs in discovery. Our lead program is ENUM244C8, which we refer to as C8, a monoclonal antibody against PD-1, a checkpoint inhibitor in the field of immuno oncology, which is one of the fastest growing markets in the industry.

C8 has distinct characteristics compared to other PD-1 inhibitors and therefore has the potential for differentiation in a very large and growing market. In contrast to other PD-1 inhibitors, C8 does not inhibit the binding of PDL-1 to PD-1, but renders the binding of PDL-1 ineffective in suppressing the immune response. While we don’t fully understand the implications of this, we are trying to further elucidate the profile of the drug in relevant pre-clinical models and we expect to have data before end of the year. We believe C8’s distinct binding profile provides a strong basis to investigate C8 in cancer patients.

We also have another program in preclinical research directed against TIM-3, another checkpoint inhibitor that has the potential for mono and combination therapy including with PD-1. We have identified a diverse series of antibodies and we are in the process of selecting a lead candidate for further development. Again, what we have been able to do here is identify a diverse library of TIM-3 antibodies that tells us that our platform is an excellent tool for discovering potential best in class therapeutics.

In addition, we have other programs in earlier stages of development.

What is Enumeral’s strategy to further develop its pipeline?

We want to develop our pipeline in a capital-efficient manner. The applications of Enumeral’s platform are too broad for us to exploit on our own. Therefore, partnerships and collaborations with other pharma and biotech companies are a core element of our growth strategy. This is an area that Enumeral can execute better in and this is why I am here.

We believe we will be successful in securing transformative deals for three main reasons: 1) new management has the right experience and a broad network of relationships among potential collaborators, 2) new R&D strategy is focused on value creation to make our pipeline more attractive to potential partners, and 3) prioritized partnering strategy that is broader in scope. In addition to partnering our development programs, we will also be seeking strategic research collaborations for discovering potential breakthrough or differentiated therapeutics through the utilization of our proprietary platform. Considering the broad applications of our platform, this significantly expands the potential universe of collaborations we can enter into in the near term.

Why should investors be interested in ENUM now?

I believe Enumeral is underappreciated and we are working very hard to change this picture. The company has advanced its pipeline and validated its platform but has not yet been successful in using this progress to enhance value for its shareholders by securing more corporate partnerships or further capitalizing the company. Investing in biotech is risky but the upside is enormous and all successful biotech companies became successful by pairing their science with a winning strategy and focused execution. We believe Enumeral has the ingredients for success and we are working on securing a financing plan to extend our runway and allow us to execute a turnaround plan to create value and position us for more strategic options in the future.

Some people ask me how you are going to create value without having products in the clinic. We don’t need to be in the clinic to create value. We know there is a big market for early stage biotech assets as evidenced by recent deals in several therapeutic areas including immuno oncology. Due to the race in pharma and biotech to find the next breakthrough or differentiated therapy, pre-clinical programs of interest are commanding significant upfront payments in many cases. We also see early stage biotech companies with market caps much larger than ours. So we see examples of how early stage companies can create value, and we believe that we have the platform, the pipeline and the right management team now in place to capitalize on this opportunity.

What are your three biggest hurdles as the CEO and how do you plan on addressing them to ensure return of value for ENUM investors?

Time is our best friend and our worst enemy. We are confident that with time we have the opportunity to move the business forward and create value for our stockholders, but we need to first inject cash into the company to enable us to execute our turnaround plan. As a new CEO, I needed to get up to speed quickly and put a plan in place that would help fund the company to create near term value and position us for further capitalization or other strategic options later. I feel good about the plan we have in place and believe we have the right team to execute it.

We also needed to improve awareness and credibility of the company with key stakeholders since the company has basically been flying under the radar screen. Having new, experienced, and well-networked management in place paired with a clear plan, makes us confident that we will succeed in this regard.

In addition, we believe that in order to realize our growth potential, we need to grow our institutional investor base. We feel confident that if we can execute our turnaround plan, we will be able to secure the institutional support we need for our longer term prospects.

What are the larger risks involved in investing in ENUM?

Like almost all emerging biotech companies, Enumeral is dependent on funding to execute its business plan. We have previously reported that we have cash to fund operations through November. Our number one priority is to secure funding to enable us to execute our turnaround plan. We are continuing to explore a range of potential transactions, which may include public or private equity offerings, debt financings, collaboration and licensing arrangements, and/or other strategic alternatives.

Also like other emerging biotech companies, we are dependent on generating positive data from our R&D pipeline to build value.

Our business risks are outlined in our SEC filings and investors should refer to these filings for full disclosure.

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Gevo Inc GEVO Stock News

Gevo, Inc. (NASDAQ: GEVO)

Earlier this morning, I had the pleasure of speaking with Dr. Pat Gruber again as part of our ongoing discussions with the company. Today, things went a bit differently. For this interview, I didn’t write a single question. Instead, I reached out to my friends on StockTwits to see what your questions were. At the end of the day, we ended up with tons of great questions. Many that I didn’t think GEVO would even answer at this point. Nonetheless, all questions were answered and I learned quite a bit about restructuring, Luverne, Lufthansa, and more! Keep in mind that if you would like your questions answered during the next interview, follow me on StockTwits and look for the messages surrounding the topic! I always give investors an opportunity to ask questions that are important to them.

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Gevo’s Pat Gruber Speaks On Recent Developments! Transcribed Below!

Keep in mind that I did not edit or change any questions in any way. I asked them as you sent them. Here’s what you asked about GEVO and what Pat had to offer in his answers:

Question – As a shareholder, with a sizeable % of my portfolio in GEVO and an average of 62 cents, should I be concerned with January 23rd?

Answer – This question’s come up before. We’re not doing our jobs if we get ourselves delisted. That’s being stupid on our part. And tell him happy birthday too!

Before we go on to the next question, I explained that the above question was asked by my buddy Brad on StockTwits and that it was his birthday. It’s awesome that Gruber didn’t mow over that fact and took some time to say happy birthday to Brad.

Question – Does Gevo currently have ASTM certification for their ATJ?

Answer – Yes, that’s the certification that was announced some time ago, earlier this year.

Question – Does GEVO currently have MIL-SPEC certification for their ATJ?

Answer No. That’s in process. There was one airplane that needed to be tested, and I just don’t remember which one it is – one of their advanced fighters – and they didn’t have time to test it until some time in the fall.  But I don’t know the schedule from there.

Question – Previously, there was a flight planned for Alaska Airlines using biofuel derived from woody biomass sometime in 2016. Is the flight still on schedule?

Answer – I do believe it’s going to happen… yes!

Question – If you had to rank the top 3 goals for GEVO over the next 12 months, what would they be?

Answer – Sign up customers on long-term off-take agreements so that we can build out the capacity of Luverne to supply isobutanol, iso-octane, and jet fuel. That would be the primary objective. We have to refinance our debt. That’s a must-do – we have to do it. And then get the capital needed to build out our plant at Luverne. Of course that’s why the off-take agreements and such would tie into that. The third one would be lining up the off-take for plants beyond Luverne. That’s our goals. I’m still working on them. I think those make pretty good sense. So, I wouldn’t write them in stone just yet, but they are kind of real pragmatic things we should be doing.

Question – American Airlines has hired Ocean Park to assist in evaluating alternative fuels. Has GEVO reached out?

Answer – Ocean Park knows us well.

I went on to ask if Pat thought that GEVO was part of that discussion at the moment.

Answer – There’s the stuff from vegetable oil that [company name] (I couldn’t hear it because I have the flu and happened to sniffle in this part of the recording) is doing and some of the others are doing. There’s that, and then we’re the only one with an economically viable solution that uses carbohydrates so far. One that has, basically, really super low technical risk. Isobutanol works and the jet fuel works. So, it would be inconceivable that we wouldn’t be considered.

Question – Pat tweeted on June 11th, “Isobutanol could qualify as an advanced biofuel under the Federal renewable fuel standard.” Has this been decided? Where does this stand?

Answer – I think it’s gonna be interesting to see. I can’t… I don’t have… The EPA has to come out with their ruling. So, one of the things that’s interesting about isobutanol is that other alcohols, even though they were made from corn, could be approved. That was written into the law way back when. So, they’ve just got to come out with the final ruling.

Question – Recently, your twitter page has been lighting up more. Especially over the past 2 months. I want to know if this is a new focus on using social media and can we expect more new efforts toward strong investor outreach using platforms like Facebook and Twitter?

Answer – We’re trying to learn, and that’s probably what Shawn said (I asked Shawn the question before Pat joined the conversation). Facebook, I don’t know that we’ll use Facebook. I don’t know… Shawn, do you have any thoughts on that?

Shawn – We won’t be on Facebook, but LinkedIn and Twitter will be the two primary social outlets.

Question – Do you feel that there are any airlines that are discouraged from pursuing contractual commitments with GEVO due to company uncertainty regarding financial stability and or Gevo’s inability to meet any current or near-term future demands for jet biofuel?

Answer – That’s a multi-part question. So, number one, does our balance sheet give cause to anyone? The answer is, not so far. And I don’t expect it to because our balance sheet keeps improving every month, pretty much. And I expect that as we refinance the company, that problem, that concern, will just be gone. I think Lufthansa is a great example, their idea to do a confirmed take or pay off take agreement, where if we make it, they buy it. The reason they do that is to give the investors that built our plant confidence that there’s someone out there who will take the product. So, I think that’s a good sign that people recognize that this is important.

In terms of meeting future demand… the industry… there aren’t that many ways to make a renewable based low carbon jet fuel. There just aren’t. They can do it from vegetable oil using HEFA, which a technology that [illegible company name] and ULP is commercializing. And there’s been a couple companies out there. SK recently did a big announcement with Jet Blue. They talked about it as the biggest thing ever. Well hell, the deal we did with Lufthansa is actually more gallons than what they announced. We did it and reported it as the 8 million gallons per year over a 5-year period. These guys did it on a blended basis and talked about it. And so, you know, it sounds like a giant number, but you know, OK fine, people are going to try to spin this stuff for their advantage.

So, the real issue is that there isn’t capacity today. And when they have these multi-carbons and you have to build them out, they are more expensive than conventional jet, especially when oil is at a really low barrel price. When you look a couple years out and say, “What will things be in the 24 to 36 month time frame?” where this stuff becomes relevant because that’s the soonest anyone can build real plants that are big, now it’s a different game. Even guys like us can have a cost-competitive jet fuel given the current biofuels policy. So, we are key on building out Luverne, and making sure that the upscale plant work comes along. I like isobutanol a lot. There’s a lot of demand for isobutanol, and with it, we’re going to do jet fuel. But, I don’t want to go from 75,000 gallons per year, like at our demo plant, to 50 million gallons per year at a giant plant, where it would be cost competitive with oil. I think we should do – it’s prudent to do – an intermediate step.  And the intermediate step is we build it out at Luverne and call it in the 5 to 10 million gallons per year kind of range, something like that.

The reason we would do that is to get really good at running these plants. We don’t have fundamental technology issues, but there’s always a learning curve when you build new things. We just want to make sure we understand it, especially like doing the recycles and who knows what pops up. But it’s also about how do you deliver the product in the supply chain? How do you do the blending? Where’s it go? What are exactly the steps along the way? That’s what we’re working on now is putting those together.

Question – Has GEVO found any opportunities to increase jet fuel production efficiency and output with existing capital?

Answer – It does depend. So, there’s potential options, but we’re going to have to raise capital to do it. So, if I interpret the question as can we get more out of the Silsbee plant? That doesn’t matter, its irrelevant. So, yes I could, but I’m more focused on iso-octane down there at the moment. Because jet fuel, it works, it’s proven, it’s ASTM approved, everyone looks at it and goes well yeah, OK, sure, you know, I get it. There’s no reason to buy it today per se. It already is proven. They want large quantities, that’s what people are focused on. Then, if I’m talking about where I get those larger quantities, now I have to build something to make that happen. In which case, whatever I build, that requires capital. And then it’s a question of what are the sources of capital. So, we’ll have to turn up the capital from somewhere, somehow, some way. That’s for sure. There’s multiple options.

Question – My thought is Pat can’t really tell pending info or give people an early heads up. So, if it were asked are there any buyout talks etc he will say “cannot speak on that.” But maybe it can be asked “what is not off of the table?” Would this be something that Pat is open to? I know he can’t say what exactly is on the table, but can he tell me what has not been taken off?

Answer – We’re open-minded to anything that is valuable to the shareholder base, broadly speaking, and the debt holders, and ourselves. You know… so, we’re open-minded to anything, and what’s interesting about this is we are at the point now where it’s unequivocal, our isobutanol technology works, it has potential, and all the rest. So, if it’s built out big scale, it’s going to work, technically and economically.  That’s what it looks like, and we can show that. And, there’s customers, there’s customer demand, and it’s growing, and we can prove that too.

On the jet fuel side, the jet fuel is one of the largest opportunities that is out there. And it’s a relatively simple product once you have approval. You know, of course that’s brutal. It takes several years. We’re one of the fortunate few that have approval. So, that’s something that creates opportunity and is surprising for people. Especially when the company sees that the airline industry is serious.

And then we have iso-octane as a product. And iso-octane is one of the ways where you can put lots of renewable carbon content into a gallon of gasoline. Because you have your normal gasoline and it’s got 10, 15 percent maybe something bigger, 30% ethanol. Well how about this. How about the other 70 to 90 percent being something like we make, and have it be economical. I like that. There’s a huge potential there.

So, we are on a sweet spot of technologies and products that have enormous market potential. These are not specialty products in the long run. That’s not lost on anybody. So we have a combination of technologies that work, large markets, and customers that are starting to sign up for off-take agreements. All that does is make us more attractive for all types of investors in all types of situations.

Now, we have to restructure our debt, though. That’s one thing that people to really pay duty to know that. It’s a current liability. Anyone that looks at our balance sheet knows it. We’re going to restructure it. We have to restructure it. And until we restructure it, there’s a lot of people watching going, “huh.”

I think we talked about this once before, but you know, there was a lot of times that we didn’t have so much cash in the balance sheet. Then you have guys looking at us going, “Gosh, I wonder if they go bankrupt, and if they do, I’m going to buy it really cheap.” You know, that’s how people think. So, screw them! How about this? How about… we’ll be successful, we’ll build the value of the company, and they can pay a real price if they’re interested. How about that?

Question – Someone is offloading millions of shares daily. Is this something that GEVO has investigated or for some reason, is part of?

Answer – I think you have a couple things. One of them is that the last PO we did, we sold warrants along with the stock, and so, at some point, we’ll have traded out the stock and they’ll have done warrants too. And one of the other deals was like that too. So it’s possible that that’s where they’re coming from. But in terms of specifics… so it doesn’t surprise me that there’s shares out there that are coming up. Whenever you have these warrant deals like we have, that happens and it’s just a question of when they come out.

Question – Congrats on the Lufthansa HOA. Can investors expect for the deal to be finalized in October?

Answer – You know, it’s going to take us a couple of months. So, we have… we’re working on getting the supply chains lined up and the details of it, and we’re making progress on it, but I don’t see it in October, no. It will take us a couple months, few months, to get done. One of the things that I’m keen on is that I would like to see more than one airline involved. It’s just a practical matter because I’m interested in selling beyond Luverne. I want large capacities of the jet fuel beyond Luverne. However, to get to large capacities, I’m telling everybody we’ve got to go through Luverne. And, Luverne’s got to become profitable too. That’s my criteria, that’s the discussion. So, we’re hanging tight to that.

Question – Any time positive news is released, it is followed by a public offering. Is this a trend that we can expect to continue and why?

Answer – We have to restructure our debt. So, I don’t know if it will continue or not. It depends on the situation, specifically, and what’s going on. And there’s different circumstances that would dictate one thing or the other. One of the things that people need to understand is that, by us having raised the money we did, we now have some leverage on our side in how we negotiate with debt holders. That’s a good thing versus our back being to the wall! So, this is all about restructuring our debt. Now remember, the last deal we took $11 million, a little over (it was $11.4 million), of debt off of the books in the last thing we did. So, we’re keen on getting rid of debt, restructuring it. So, it’s just we have to refinance the debt prior to the notes being due in March. We do. So that’s our focus, so that’s what drives us in doing these deals is figuring out how to get that done most effectively.

Question – There were reports last year that certain military tests hadn’t been completed yet which was halting possible military contracts. Have these tests been completed? If so, are there discussions taking place for any military contracts?

Answer – There was one more airplane platform to test – we covered that earlier. I don’t know that they’ve tested it. It was scheduled for the fall, and I don’t know if they’ve done it yet. And then, once that’s done, they would start to have the discussion to get on with military spec. There’s no impediment that’s fundamental, there’s no technical reason, no fundamental impediment that I’m aware of. And then, once that’s done, then to compete for a military contract, it is… you know, we’d have to bid on a project, and then the defense logistics agency has to inspect the plant at which it would be made.

Well, that is a chicken and egg problem. And we point out to them, well that’s really nice, but that’s stupid. Because, you know, what the hell, you want this, you say you want it, and you’re willing to pay the price for it. Oh, but you have to have the plant built in advance, and you wont certify the plant until you actually see it. So, you can’t guarantee anything. Are you crazy? Nobody does that! And so instead, we say yeah we can sell them some stuff, prove it, we have a plant at our Silsbee plant… sure. And that’s a start… [connection issues] … and we have the plant built out at Luverne so they can touch it and see it according to their government regulations.

So, it’s one of these things where it’s a … you know, it’s government man… it’s crazy!

Question – Hi Josh, thanks for the opportunity to submit questions. Not sure how you want to phrase this question, but my concern is that GEVO has done all the hard work to develop their products, but may be choosing the slow route to maximize the return on their investment. In order to beat the competition in this space, should they not focus on licensing their technology, vs. production, i.e. building a new plant which may only serve a small percentage of the growing demand for biofuel.

Answer – Our quest is to become a profitable company. So that’s number one and foremost. The route to do that is to make Luverne profitable. That is the route. That’s the fastest way we could do it because we already have a lot of the capital deployed, relatively incremental capital, to build it out for isobutanol and jet fuel. And so, that is the fastest route to profitability.

We are in discussions for licensing. And the licensing is interesting because this is the point of having people saying yes, I want tens of millions of gallons of jet fuel. One, that creates licensing demand. Or if Musket continues on the path, same thing! That creates demand and now we have more capacity demand than we could ever do at Luverne, and that creates licensing opportunity.

One of the things that we’ll be looking at is that when you license, suppose the margin is the $0.50 to $1 that we’ve always been talking about, and that is really what we’re still looking at. If we’re taking a licensing fee, [let’s say] a licensing fee would be like 5% of something. So, we’re going to get a fraction of the margin? That doesn’t lead to… you need enormous volumes in production to be successful at licensing. Enormous volumes on a fast growth in order to have a very successful licensing business.

Do we have potential to do that? Heck yeah! Of course! But it comes… we’ve got steps to do… You know it’s like licensing the jet fuel process, sure I can do it, take it in the shorts, cause it works. Sure, I could do it. But why would I give that margin away now when I can put it in my own pocket and make this profitable?

So, yes to licensing, that’s all part of it! And deals and working with people, all part of it. I think everyone we touch says, “You know, let’s build out Luverne first, that makes sense.” That makes it absolutely unequivocal that everything works at a large scale, and all the supply chains are in place. There is no risk once or ever at that point of any type. Then it is just cookie cutting. People get that.

You know, one of the things in contrast that someone may be wondering as an investor is that a lot of these companies talk about… they’ll just say, well we’re going to license. I’ve got news. Nobody licenses something that doesn’t work, that isn’t proven to work. Nobody does – that’s BS! And so, a lot of companies in our space talk about how we’re going to license this and we’re going to license that. Uh huh. OK. Show me! Good luck – just show me one! Show me one, I don’t know them. So it’s one of those things where everyone wants it that way, but it’s not the way the real world works.

We’re unusual in that we’re the furthest along in doing large scale biofuels that have these valuated properties that look to be economical. We’re the furthest along from hydrocarbons. There’s the oil seed guys. You know [illegible company name] has done a great job.  He’s done a great job on the biodiesel. You’ve got Nest doing a great job on the biodiesel, plus they’re doing some of the high [illegible] stuff for making jet fuel or diesel fuel and stuff like that. So those guys, those are all good.  They’re ready.  They’re good commercial licensing opportunities that make sense. Carbohydrates space? No!

Question – Poet inc is the largest ethanol producer in the US with 27 plants, and plans to build a cellulosic ethanol plant next to each one. Has GEVO had any substantial discussions with them?

Answer – Everybody in the industry, in ethanol, who’s big knows us and we have relationships. We have constructive relationships with… collaborative relationships.  They know us.  They can pick up the phone and talk to us and we can talk to them.

Question – The FAA Wants “1 billion gallons of drop in sustainable jet fuel by 2018” is this even possible? If so, how is GEVO able to participate in this growth?

Answer – That’s not possible.

At this point, my time was running out. So, I gave the floor to Pat, as always, to let GEVO investors in on anything we haven’t covered. Here’s what he had to say:

“I can say this… One of the things that’s really fun is, think of the discussion and how it’s changed over the last few months. A few months ago, I was talking about, look, we’re just going to work on surviving. This conversation is completely about how we grow and become profitable with real customers, real contracts, real business, real strategic partners, the whole bit! What a change huh? That’s shocking. And so, when I’m out talking to people, they look at us and go Oh my God, you’re a Phoenix!

What Do You Think?

Where do you think GEVO is headed? Join the discussion at StockTwits, Twitter, Facebook, or Google+!

[Image Courtesy of Flickr]

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