Theralase: A Cancer Cure To Market By 2016?

Biotechnology investors often take a chance on a not-yet-approved treatment based on the huge reward they stand to gain if the treatment is successful in its clinical trials. However, the problem with this strategy is if the treatment is not successful, there is often very little downside protection to the value of their holdings. The "holy grail" of biotech investing therefore, is a company with a large amount of upside potential and a downside limit that will help a stock maintain value in the event of FDA failure, a company such as Theralase Technologies Inc., (TLT).

Theralase is a biotechnology company with two focus areas. The first is the design, development and manufacture of super pulsed, cold laser technology to treat chronic pain, sports injuries and wounds. The second is the commercialization of patented cancer treatment utilizing patented, light sensitive PDCs.  

Cold Laser Therapy

Theralase's current laser offerings fall under its TLC-1000 range, which generates approximately C$1.6M annually and is projected to generate approximately C$6.2M annually going forward. The TLC-1000 lasers use a plans to initiate a 30 patient Phase 1/2a clinical trial in Q1 201, for which the company is fully funded. Theralase's treatment meets the initial two criteria for breakthrough designation, which are that it targets a deadly disease and that the disease has no known cure. This is important because it means all the company needs to do is demonstrate safety and efficacy in a small sample of patients—the purpose of the planned Phase 1/2a trial—in order to get commercialization approval for the FDA. This could lead to the PDC treatment being available to patients by year-end 2015. Even if the FDA requires further data after the initial trial, a Phase 2b trial would likely cost less than $15M, which would be minimally dilutive to Theralase stock. Post approval, the ultimate goal is a partnership with big pharma during 2016.

A Recent Announcement

On Thursday, February 13, Theralase announced that a recently published scientific paper demonstrated that its PDCs significantly destroyed two types of bacteria in low oxygen atmospheres. This is a major breakthrough, not just for the company, but also for the entire solid tumor oncology field.
One of the main problems practitioners have in treating solid cancers is their tendency to be hypoxic, meaning they have been deprived of oxygen. This deprivation leads to aggressive metastasis and, in most cases, resistance to traditional standard of treatment (chemotherapy and radiotherapy). The ability of Theralase's PDCs to treat these hypoxic tumors presents the company not just with the opportunity to serve as a substitute treatment but also complimentary, as a post standard of care "sterilization" treatment to mitigate the chances of recurrence.

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Risks

Theralase already generates revenues from its TLC-1000 technology, which serves to offset much of the risk normally associated with biotechnology companies seeking FDA approval. The company is well financed as the result of an oversubscribed $3.15M equity financing round in November last year, has no debt and, assuming breakthrough designation for its PDC therapy, will not need to fund a drawn out approval process.

There is however, still a certain amount of risk associated with the company's stock. Primarily, this risk lies in the company's potential for failure to gain FDA approval for its PDC therapy. While breakthrough status reduces the cost of the process, it by no means eliminates it. Treatments that demonstrate efficacy in mouse trials often fail to replicate this efficacy in human trials.

Conclusion

Theralase's two-tier operations affords investors exposure to a potentially explosive growth opportunity, while also offering the benefits of a revenue generating, long established business. The company has demonstrated the efficacy of its breakthrough treatment in a mouse and, if the therapy receives FDA approval, could strike a high value partnership with big pharma within two years. Overall, Theralase looks dramatically undervalued at its current market capitalization. 

Written By: Ellie Rhodes