Endonovo Therapeutics (ENDV, Financial), is a biotechnology company currently developing bioelectronic devices and cell therapies for regenerative medicine. The company has two platforms under development referred to as Immunotronics and Cytotronics that utilize Time-Varying Electromagnetic Field (TVEMF) technology. While the company may not receive a lot of coverage, its innovative approach to developing novel treatments will soon propel it into the limelight.
For starters, the Immunotronics platform is a non-implantable, non-invasive bioelectronic device that is part of an emerging field known as bioelectronic medicine, which seeks to harness electrical signals in nerves and cells to alter the course of diseases and conditions. The main difference between Endonovo and medical device competitors is the latter primarily uses implantable electrical stimulators to control inflammation. The company’s initial concentration will be targeting inflammatory conditions in vital organs such as acute liver injury.
On the other hand, the Cytotronics platform uses TVEMF technology to grow and enhance the therapeutic potential of stem cells. This platform builds upon the original work carried out by NASA on the expansion of blood-forming stem cells, and its initial concentration is on the development of more effective mesenchymal stem cell therapies. The initial focus of this therapy will be for the treatment of Graft-Versus-Host disease (GVHD). The company is also working on expanding the use and effectiveness of cord blood stem cells using its bioelectronic approach. Lastly, Endonovo is using its Cytotronics platform to produce fully human biomolecules, such as growth factors and cytokines, from adult stem cells. The company is looking to develop this platform to produce next-generation biologics that use fully human proteins rather than recombinant forms.
The opportunity
The investment thesis for Endonovo is pretty straightforward and compelling for investors looking for high-risk, high-reward plays. The Immunotronics device, which will initially target inflammatory conditions in the liver, has a huge potential market according to research from BCC Research. In its most recent report on the global market for liver disease therapeutics, it states approximately $24.5 billion was spent in 2014 treating liver diseases and expects this figure to grow to $33.8 billion by 2019, registering a CAGR of 6.7%.
The major driving factors for this growth include increasing numbers of liver diseases like hepatocellular carcinoma as well as a rising geriatric population expected to further augment the market demand for therapies. In order to fully appreciate the opportunity in liver diseases treatment, look no further than Gilead Sciences (GILD, Financial), which made a surprising $11.2 billion acquisition of Pharmaset back in 2012.
At the time, Pharmaset was developing sofosbuvir for the treatment of hepatitis C at a time when the most viable treatment options (peginterferon and ribavirin) offered a 50-50 cure rate with a price tag of $20,000 per patient. Therefore, it’s not surprising that when Gilead finally launched Sovaldi offering cure rates of at least 90%, the drug was priced at $84,000 and raked in more than $10 billion in sales within a year. Following the commercial success of Sovaldi, more biotechs have joined the fray to bring new liver treatments to market, with Intercept Pharmaceutical’s OCA drug being one of the closely watched by investors.
In spite of the cut-throat competition to dominate the liver therapeutics market, I strongly believe Endonovo’s bioelectronic device could be a game changer considering what it has the potential to achieve. Pre-clinical studies have already shown the device was able to stimulate bone regeneration in rabbits that had an osteotomy performed, which under normal conditions would never heal. TVEMF technology was also shown in a pre-clinical model of acute inflammation to be a potent and effective anti-inflammatory device. Management has reiterated their confidence in replicating these results in subsequent clinical trials, which could prove to be the much needed lifeline for liver failure patients with no viable treatment options.
Moreover, the Cytotronics platform as mentioned earlier will initially focus on treating GVHD and expanding the use and effectiveness of cord blood stem cells and also has solid prospects going forward. Global spending on treating GVHD, a complication that can occur following a stem cell, bone marrow or tissue transplant wherein the newly transplanted donor cells attack the transplant recipient's body, was about $300 million in 2013 and is expected to grow at a CAGR of 12.8% to $545 million in 2023, according to research from Future Markets Insight.
The current medications used to treat GVHD are a combination of immunosuppressants, which weaken the donor immune system and have an average cost of treatment of about $200,000. One of the major side-effects of using these drugs is that they also increase the risk of deadly infections to the host and can lead to patients incurring higher medical bills. Sanofi (SNY, Financial), Johnson & Johnson and Roche have been able to gain quite a bit of market share with their GVHD treatments with the latter’s Rituxan set to become one of the best-selling treatments for the condition, according to GlobalData.
However, even with the considerable number of off-label therapies available for the treatment of GVHD, very few of these have been tested in large randomized clinical trials, which have resulted in vague treatment recommendations with the only available standard of care being intravenous methylprednisolone, which has failed to produce a complete response rate in more than 50% of patients. This bodes well for Endonovo since its cell based therapy will be able to use stem cells from the human umbilical cord that can be administered without the donor having to match the recipient.
Upcoming catalyst
While Endonovo’s prospects do indeed look promising, I have no doubt investors will be wondering what is going to catalyze the upward movement in the stock price. As a first step towards commercializing its Immunotronics platform, the company will look to submit for a Humanitarian Use Device (HUD) designation from the FDA for the treatment of acute liver failure. This is the equivalent of submitting for Orphan Drug Designation, but for a medical device instead of a drug. With less than 4,000 people developing acute liver failure yearly in the U.S., this qualifies as a rare disease and gives Endonovo the opportunity to bring the device to market much faster and at a fraction of the cost of bringing a new drug to market.
Management expects to receive approval before the end of the year, meaning more people will start noticing the company, most likely leading to an increase in its current $40 million valuation. Additionally, Endonovo has in the past revealed its intention of applying for an orphan drug designation for its Cytotronics platform since GVHD affects less than 400,000 people per year in the U.S. Although we have no idea yet of when exactly this particular application will be filed, the bioelectronics device approval may prove to be just enough to propel the company share price from penny stock status.
Financial position
The company had approximately $41,000 in cash by the end of FY2015 and has raised an additional $678,750 through the sale of equity and debt. The current liabilities, which stand at $7.5 million, exceed assets and with a considerable working capital deficit, the company will without a doubt be looking to raise more cash to fund future operations, so investors should be aware of the risk of possible dilution when investing in the stock.
It is, however, important to note that management has been taking significant steps to strengthen the company’s balance sheet by returning approximately 1.89 million unpaid shares to the company resulting from an equity purchase agreement with Kodiak Capital, as well as repurchasing more than $150,000 in convertible notes.
Summary
All in all, Endonovo seems to be an attractive play for investors looking to make substantial returns on their investments. Not only does the company’s technology have the potential to achieve breakthrough status, the upcoming FDA approval of the bioelectronic device will signal a new chapter in the company’s growth story. So far, the stock has gained 18% over the last three months, indicating investors keen to get in shouldn't wait for too long.
Authors note: I have not been compensated by any person in any way for preparing and publishing this report on this website. However, readers of this report as published herein, should be aware that I have been and may continue to be compensated for preparation of the same or similar report concerning the same Issuer for other websites or publications.
