Access Update- #51

But as my friend Todd Harrison is fond of saying, “the news is best at the top and worst at the bottom.” And the news is quite bad right now. A major American industry on the verge of collapse, hundreds of thousands of workers laid off and a projected disastrous holiday season for retailers.

All of this pessimism has taken our stocks and the rest of the market significantly lower. But it’s important to realize that none of the stocks in our portfolio have been impacted by news specific to the company.

What we’re seeing is simply a buyers’ strike.

With the avalanche of negativity every single day, it’s understandable that investors (especially the institutions that are facing waves of redemptions) have hunkered down and are not buying speculative names right now. If I thought there were problems with any of our names, I would recommend selling and taking our loss. But we’re still eagerly waiting for our catalysts.

We’re looking forward to Electro-Optical Sciences (Nasdaq: MELA) releasing their phase III trial results within the next six weeks. We’ll also receive preliminary results from Synta Pharmaceuticals (Nasdaq: SNTA) before the year is through. If MELA proves in phase III trials that it has an accurate diagnostic tool for melanoma and that SNTA has a therapy for the disease, the stocks will move sharply

And more significantly, the likelihood for huge gains over the next couple of years increases dramatically.

Today, Synta announced that the first patient in its prostate cancer study has been dosed with elesclomol. The hormone refractory version of the disease is high in reactive oxygen species (ROS), which is what elesclomol targets. By ramping up the level of ROS in cancer cells already containing high levels, elesclomol essentially blows them apart, leaving healthy cells intact.

Competitive Threats?

Shares of ViroPharma (Nasdaq: VPHM) were hit last week on news of competition for Vancocin. It now seems that investors have realized that the drug, OPT-80 treats mild to moderate c.difficile disease whereas Vancocin is used for severe cases.

However, I don’t believe doctors are going to experiment on their severely ill patients with a new drug when Vancocin has been used safely and effectively for years.

Today we received word of a potential competitor for Cytori Therapeutics (Nasdaq: CYTX). However, the reality of competition is probably years away.

Tissue Genesis announced that its TGI 1200 Cell Isolation System has been approved in Europe. Bioheart (Nasdaq: BHRT) will distribute the systems for physicians studying its use in heart disease. It is not likely to be used to treat patients any time soon.

The TGI system is similar to Cytori’s Celution in that it harvests stem cells from the patients’ fat tissue, separates them and reintroduces the cells into the body.

It should be noted that it took Cytori two years to have a commercially available product after receiving approval in Europe. Considering the competitive product will be used for heart disease, I would expect it will take even longer for TGI to hit the market.

Cytori is currently in clinical trials with Celution in cardiovascular disease, so it is possible that the new product will be competitive some day. At this point TGI 1200 has not been used in clinical trials, giving Cytori an advantage.

We are encouraged by the traction that Celution is getting in Europe and Asia as more doctors are using the device not only for breast reconstruction following lumpectomy, but also for augmentation and even facial filler.

Earlier in the week, the FDA ordered that the label on the fillers include warnings of long lasting side effects. This could ultimately be a positive for Cytori. While it’s still very early in the game for Cytori in the facial filler area, the warnings could move some physicians toward using the Celution System rather than synthetic fillers.

New Reco Soon

This market is tough. But we’ve got some great stocks that are revolutionizing the way medicine is practiced. Right after Thanksgiving, I should be out with my next recommendation.

I know it’s tough to think about buying stocks here, but this is precisely the time you should be thinking about it – when no one else wants to.

The company we’ll be adding has a stellar balance sheet, so we don’t need to worry about it running out of cash any time soon. It has innovative products (with no competition in its newest one), spectacular management and a major catalyst coming up in the next few months. I’ll keep you posted on the timing, but it should be out in the first week of December.

Have a great weekend.

Marc Lichtenfeld
Director of Research
Access Research Group

Current Portfoli

Name: SIGA Technologies
Symbol: SIGA
Current Price:$2.04
Comments: Buy up to $4.00

Name: Synta Pharmaceuticals
Symbol: SNTA
Current Price: $4.67
Comments: Buy up to $13.00

Name: ViroPharma
Symbol: VPHM
Current Price: $11.00
Comments: Buy up to $12.50

Name: Cytori Therapeutics
Symbol: CYTX
Current Price: $2.06
Comments: Buy up to $8

Name: Electro-Optical Sciences
Symbol: MELA
Current Price: $2.42
Comments: Buy up to $5.75