Last summer, in Oppenheimer's Tel Aviv office, I met Steven Ratoff, chairman, CEO, and president of NovaDel Pharma Inc. (OTCBB: NVDL). This is a tiny biotechnology company employing just four people, but it has technology that could fire imaginations on Wall Street if it succeeds in obtaining FDA approval for its third product (the first two already have approval).
NovaDel has proven, patent-protected technology for taking existing drugs that come in tablet form and developing generic alternatives in the form of an oral spray. The target market is those people who are unable to swallow tablets. After several years of development and trials, NovaDel succeeded in obtaining FDA approval for two kinds of spray: one that replaces tablets for sleep disorders; and the other for angina.
Both these sprays have been on the market since the beginning of this year, after NovaDel signed licensing agreements in return for modest advances and royalties of about 15% of sales with two companies that distribute them in the US. The company expects to receive substantial revenue from these agreements only next year. But the great dream of the company and its investors is to come out with a spray as an alternative to the world's most famous pill, Viagra, as soon as Viagra producer Pfizer's (PFE) patents expire, which will be next year, according to NovaDel and other companies in the industry, although it is not certain that Pfizer will accept that without a fight.
NovaDel's share price is in cents: 11 cents today, compared with 5 cents last week, which, at the last count, gives a market cap of just $12 million, but the true market cap is around $20 million, if one takes into account the conversion of all the warrants it has issued over the years at fairly high conversion prices, most of them to the company's controlling shareholder, biotech investment fund ProQuest Investments, which has been its main funder.
Among other things, Ratoff was in Israel to raise money, because he heard that there were many investors here who were keen on adventures in biotech, oil and gas. According to rumor, he even offered his technology to Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) during his visit here, but the results of the meeting are unknown. The company has hardly any cash, and it raises funds all the time, massively diluting its investors. 2011 is supposed to be the year of the fulfillment of the great dream, but it also might not be, so anyone who invests in the stock should regard it as an investment in an option that could be wiped out.
According to the timetable the company reported to the SEC, it hopes that the FDA will allow it to start clinical trials very soon, on the basis of its successes in preliminary trials which it recently reported to the FDA. In the presentation at Oppenheimer, Ratoff explained that, apart from the spray form of Viagra being, in his opinion, preferable to tablets, he also hopes to demonstrate in trials that will be concluded by the end of the year that the spray is more effective than the equivalent tablet dosage, because of the speed at which the material is absorbed via the mouth.
If the trials are a success, the company will file an application for a new drug (NDA) at the end of the year, in the hope that it will obtain FDA approval next year, and start sales that is, if Viagra does become available to the generics industry without a legal battle with Pfizer. But NovaDel is aiming to sign a licensing agreement with one of the big companies this year, perhaps even before trials start, so that it will be able to finance the trials from the fat advance it hopes to receive.
Published by Globes [online], Israel business news - www.globes-online.com - on April 12, 2011
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