Company Review – Calzada Limited

Disclaimer

This post is not exclusively a chart review, nor is it an investment recommendation. Such advice specific for your needs should be sought elsewhere.

Calzada was chosen for review because it illustrates the tortuous course faced by biotech stocks underwriting the cost of complex medical research. The biotechnology sector here in Australia (and in the United States) enjoyed unparalleled interest during 2013 on the back of the stellar performance of micro-cap stocks such as Allied Healthcare (Admedus) and Prana Biotechnology.

Calzada on the other hand has traded somewhat aimlessly. The interest is in the story of its principal product AOD-9604 and its use by the Essendon Australian Rules Football Club as an alleged performance enhancing drug.

Background Information about AOD-9604 developed by subsidiary Metabolic Pharmaceuticals Limited.

Peptides are amino-acid chains, many derived from more complex proteins such as the human hormones. They have become the latest glamour substances to be marketed in the pharmaceutical world for a whole universe of medical problems.

One such peptide was derived from human growth hormone by Biochemist, Professor Frank Ng, working at Monash University in the 1990’s. Initially it was known as Lipotropin, a product thought to be both catabolic (able to mobilize fat) and anabolic (able to build muscle).

Adelaide authority in obesity management, Professor Gary Wittert, after performing 5 of 6 studies on the product, believes that although it worked in mouse studies, it was ineffective in humans. These studies were carried out on 925 humans, and they established the safety of the product. Metabolic, now a subsidiary of Calzada Pharmaceutical;funded by Metabolic Pharmaceuticals,  it is listed on the Australian Stock Exchange, with the code CZD. They have spent $50 million since 1998 developing the drug.

In February 2011 in-vitro studies (ie in the laboratory) were performed at Mt Sinai hospital in Toronto, Canada. These showed that AOD-9604 stimulated bone formation in cell cultures using human mesenchymal (connective tissue) stem cells. In-vitro tests were also performed in March 2012 which showed improved repair of cartilage and muscle.

This created great interest amongst sports medicine and veterinary practitioners. Although the parent human growth hormone was officially banned in sport, no such ban at that time applied to AOD-9604. This led the Essendon football club. believing it was not illegal, to use it for its players on the recommendation of its sport performance scientist.

Calzada faced a dilemma. Official clinical trials had failed to demonstrate any clear-cut benefit, yet its product was now caught up in controversy over it being performance enhancing and illegal for use by sportsmen and women.

Happily for the company it has been able to sell its product on an “Over The Counter” basis to the veterinary, sports injury, health and body building communities. It has gained approval for marketing into the USA as a self-affirmed “Generally Recognized As Safe” (GRAS) product and is now legally sold in creams for the treatment of cellulite, added to foods and drinks, and available as dietary supplements, on the basis of promoting repair and growth.

On 28 January 2014 Calzada announced the issuing of a non-exclusive license to Australia’s largest compounding pharmacy, Australian  Custom Pharmaceuticals in Sydney. This should ensure  growing revenues as AOD-9604 is incorporated into a variety pharmaceutical preparations since production is now approved by the Therapeutic Goods Administration (TGA) with an extemporaneous compounding exemption. This should be a profitable outcome for Calzada at last.

Calzada’s other subsidiary is PolyNovo Biomaterials (PolyNovo), and it is still trialling its experimental product NovoSorb Biodegradable Temporising Matrix (BTM)

PolyNovo has funded ten years of in-vitro, animal, and human trials of NovoSorb as an adjunct material in the skin-grafting of burns; it is yet to achieve positive results. A further trial on five burns patients is about to be embarked on. The objective is to increase the formation of the more fibrous dermal structures, to resist subsequent graft contraction, and deformity.

NovoSorb is a biodegradable polyurethane foam developed by the CSIRO in Melbourne in 2000 which is thought to have applications for the management of a range of medical conditions.

A generation ago a non-degradable form of polyurethane foam was used for a time for breast augmentation with horrendous results. These implants excited an intense fibrotic response which created hardening and deformity.

NovoSorb is degradable however, and very well may be suitable for its intended uses. However after ten years of testing without a favourable outcome, it may be time to move on to other applications other than in the management of burns.

Market Appraisal of Calzada

Monthly chart since 1998

CZD Monthly chart

Weekly chart

Not a lot to excite

Not a lot to excite

The last high was at 13 cents 15/4/2011.

Since then the share-price has been mostly range bound, initially between 4 cents and 6 cents, but more recently between 6.5 and 8.5 cents.

It would take a break-out above this range to signal an impulsive trending move.

Fundamental data has not been taken into account, but with this licensing agreement, Calzada could be re-rated more favourably.



Categories: Business, Chart Analyses, Health and well-being, Technical Analysis

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8 replies

  1. Your evaluation of Calzada’s fundamentals contains profoundly incorrect statement presented as fact, and treads dangerously close to slander. You ought to pull it before you start hearing from lawyers.

    • Thanks for your comment John. If you would kindly advise me of the incorrect statement(s) I will gladly correct my error. I thought my post was factual with no reference to financial fundamentals, and positive to Calzada’s prospects.

  2. Let me begin with this:

    “Adelaide authority in obesity management, Professor Gary Wittert, after performing 5 of 6 studies on the product, believes that although it worked in mouse studies, it was ineffective in humans.” While it is undoubtedly true that Prof. Wittert believes that AOD9604 is ineffective in humans, many others disagree with his assessment, and it does little to boost his views to overstate his role in the AOD9604 trials. This is a mere distortion, however, not an outright misstatement of fact.

    then…

    “Happily for the company it has been able to sell its product on an “Over The Counter” basis to the veterinary, sports injury, health and body building communities.” To the best of my knowledge, this is an outright untruth. Neither Calzada nor their subsidiary, Metabolic Pharmaceuticals ever sold so much as a microgram of AOD9604 to anyone. They do not manufacture the compound and to not offer it for sale.

    and…

    “It has gained approval for marketing into the USA as a self-affirmed “Generally Recognized As Safe” (GRAS) product and is now legally sold in creams for the treatment of cellulite, added to foods and drinks, and available as dietary supplements, on the basis of promoting repair and growth.” While a conditional self-affirmed GRAS has indeed been granted in the United States, not all the conditionalities have yet been met and the GRAS status remains conditional. Under these circumstances it is unlikely in my opinion that any commercial entity in the US would actually use AOD9604 in any product offered for sale, and none has done so. I do understand that Phosphagenics includes AOD9604 in its anti cellulite cream in certain markets, but not in the US or Australia, and that use has nothing to do with GRAS status. AOD9604 is not “added to food and drinks” nor is it “available as a dietary supplement” in the US. I don’t know about Australia; I suppose if obtained from a compounding pharmacy, this could be possible, but it would be the most expensive dietary supplement in history, I expect.

    more…

    “PolyNovo has funded ten years of in-vitro, animal, and human trials of NovoSorb as an adjunct material in the skin-grafting of burns; it is yet to achieve positive results.” This is the most egregious and outrageous whopper in your analysis. You could not have done any research at all to reach this absurd conclusion. In point of fact, NovoSorb has had nothing but positive results. So much so, in fact that physicians at Royal Adelaide hospital petitioned the TGA to allow use of NovoSorb BTM in the treatment of deep surgical wounds in advance of its formal approval. This permission was just granted yesterday by the TGA, prompting this statement from one of the surgeons at RAH: ““The positive results to date from the clinical trial give me confidence in the NovoSorbTM BTM’s safe use in patients with the aim of improving free flap donor site outcomes.”

    But, this is recent. Perhaps you were unaware. Nevertheless you should have been aware of the successful outcome of the human trials of the BTM, completed last year, and the successful completion of the human trials of the negative pressure therapy dressing, now awaiting FDA marketing approval in the USA, expected this quarter.

    and—

    “A further trial on five burns patients is about to be embarked on.” This is not a “further” burns trial; it is the first. The implication of your writing is that this trial is just one more attempt to get positive results after all previous attempts have failed – “yet to achieve positive results,” as you put it. This is gratuitously deceptive.

    All prior trials have been required to establish the basis for gaining approval of the Ethics Committee to even begin the human burns trials. And in this they were most emphatically successful, so much so, in fact, that as noted above, the TGA has granted an exceptional authorization to the surgeons at RAH to begin using NovoSorb BTM in the treatment plans for patients with deep surgical wounds.

    finally…

    “PolySorb is degradable however, and very well may be suitable for its intended uses. However after ten years of testing without a favourable outcome, it may be time to move on to other applications other than in the management of burns.” Here you don’t even get the name of the product right. How complete could this research have been?

    And then, you go on to repeat your absurd assertion that ten years of testing has not resulted in a “favourable outcome”. This is simply bunk. Even a superficial review of the reposts of human trials of NovoSorb products would have put the lie to this sort of absurd mis-statement.

    I’d like to think that this all has been the result of lackadaisical research, and not on an intent to injure the reputation of Cazada. I certainly hope this is the case.

  3. Thank you John for this detailed response listing your objections to my post. I am sorry it has given rise to offense.

    My intention was to highlight the difficulties for biotech companies when the medical research results are equivocal. I have been pleased to learn that Calzada is able to derive an income through the royalties.

    As a matter of interest I wonder what was the regulatory verdict on AOD-9604? Is it considered to be performance enhancing, or has it been cleared for use by athletes? Are Professor Wittert’s findings suggesting it does not enhance performance not been accepted?

    I do not question Professor Greenwood’s careful research work on the NovoSorb product. He refers to the ten-years of preparatory studies which have established thus far the feasibility and safety of using NovoSorb but not until now its ability to promote dermal regeneration.

    My understanding is the same as yours, that this coming study of five patients will be the first to use NovoSorb in the management of burn injuries. The issue is not the successful conduct of the preparatory studies, but whether NovoSorb is able to improve the regeneration of the dermis in burn wounds. and reduce the incidence of burn wound contraction.

    So yes it remains my assertion that NovoSorb is yet to achieve positive results in the management of burns. NovoSorb remains unproven too inasmuch it has not been approved for routine burn management. As I understand the announcement of the approval of three Adelaide Plastic Surgeons to use NovoSorb, it was for the management of full-thickness free-flap defects, and not for the management of burns.

    You mention that the Royal Adelaide Hospital Ethics Committee has approved previous studies. This is as it should be, but it raises an issue of consent for future studies.

    I understand that NovoSorb is a polyurethane polymer. The present polymer may differ quite markedly from the polyurethrane of old which gave such horrendous results when used for breast enlargement, but this should be made plain to all volunteer subjects. The following questions are relevant.
    – Does the patient consent identify NovoSorb as polyurethane foam?
    – Will patients be made aware of the unsatisfactory results from implantation for breast enlargement?
    – How does NovoSorb differ from earlier materials used, and in what way?
    – Does NovoSorb undergo full degradation or might microscopic amounts be incorporated into the burn repair that could add to late scarring?

    I view my criticisms as being constructive and in the best interests of Calzada. I hope that others will see it this way as well.

  4. I wish I could believe that you are just doing your journalistic best, but I have a problem with what looks to me a lot like equivocation, and that makes me suspicious of your motives.

    A fair reading of your initial report leaves the clear impression that despite ten years of trying to develop NovoSorb as a burns treatment, there has been nothing but failure, so much so that you even suggest that PolyNovo (Calzada) ought to consider simply giving up.

    I can’t believe that this could be a mere accident of bad expression.

    I think you actually intended to leave that impression, and I have to wonder why. The truth is simple; the process of moving from a research material to a practical, usable product for treatment of human disease is an arduous, painstaking, step-by-step process that can take years. That this process could take ten years or longer isn’t news to any biotech investor, researcher or journalist.

    You also misquote me, and I can’t tell if this is just careless reading on your part, or an intentional misrepresentation. I tend to think the latter since you use the misrepresentation to make a point which an accurate quotation or reference would not have helped you with. Just for your reference hire is your quote” “You mention that the Royal Adelaide Hospital Ethics Committee has approved previous studies.” I mentioned no such thing. I only said that completion of the previous human trials were necessary prerequisites to Ethics Committee approval of the actual burns trial now set to begin.

    Your final points are questions that ought not be directed to me, but to Dr. Greenwood or to Dr. Tim Moore. I have no idea what the patient consent forms say or do not say. Do they reveal that NovoSorb is a urethane based material? I see no reason to keep that from the patients; after all it is common knowledge.

    Your gratuitous dragging out of a completely irrelevant usage of an old material with no linkage to NovoSorb save for the fact that it was a urethane based polymer, is similarly suspect. In the computing field, we refer to such journalistic tricks as FUD: fear, uncertainty and doubt. FUD is always spread by someone with an angle. I am still trying to figure yours.

    You ask, in fact, for someone to educate you as to how NovoSorb differs from earlier urethane polymers. Isn’t this something you ought to have researched first, before making questionable inferences? If you really want to know the answer to your question, and are capable of understanding the differences, why don’t you call Tim Moore, PolyNovo’s chief scientist and ask him; his PhD dissertation was in the field of bioerodiable polyurethanes; the title was “Design and Synthesis of Bioerodiable Thermoplastic Polyurethanes for Tissue Engineering”. Dr. Moore ought to be able to fill you in completely.

    As for your final question; this too, I am certain that Dr. Moore could answer, but I will say right now that you have no basis whatsoever for even suggesting that “microscopic amounts” might remain in the wound to cause later problems. Do you really mean to imply that this issue has not been fully researched in determination of the long-term safety profile of these materials?

    I really think that your original article and even your response to my pointing out serious factual errors could have been greatly helped by simply picking up a telephone and talking to the people who actually know.

    What you have done here is irresponsible journalism. There is no need to try to defend the indefensible. What is really called for is for you to make a reasonably serious attempt to obtain facts before publishing.

    • Dear John,

      Thank you for your response but I’m sorry that you impugn such bad motives to me. You are probably imagining me to be a professional journalist out to create trouble. The reality is quite different. I am not a journalist. I am a 77 year old retiree who only started blogging as an interest a year and a half ago. I am really quite a vulnerable target for you.

      My blog is free, there is no advertising, and I am lucky to attract 30-40 hits per day sharing my views with fellow investors. I presume you are a lawyer, but I can assure you that I pose no threat to the company reputation. My perspective is as a financial consumer and investor. I do not presume to be a professional financial adviser.

      Prior to retiring at the end of 2000 I was firstly a General Surgeon, then a Plastic and Reconstructive Surgeon for 33 years, so I am quite familiar with skin grafting and the management of burns. I am also familiar with the march of materials that have been used and discarded for breast enlargement. One of the worst was polyurethane foam. Its effects were so destructive to breast tissue that I cannot understand why there are attempts to now market silicone implants coated with polyurethane foam, made in Brazil. I concede that the new generation of polymers may be quite different in character, but so many materials have been introduced to the medical market, only to be withdrawn when complications not envisaged surfaced along with the law-suits.

      I am confident that Professor Greenwood is a careful researcher and agree that patient research may take years to come to fruition. But this research is funded by venture capital, and some investors in biotech stocks are “Mum and Dad” investors who need to know whether the research is coming up with the right answers. To my way of thinking the question to be put in the use of NovoSorb for managing burns is not whether it can be used in combination with skin grating, but whether there is any advantage in doing so. It must be demonstrated that NovoSorb improves dermal regeneration, and reduces the incidence of wound contraction, and that the risks are manageable. It is in using thinner split skin grafts for major burns that dermal regeneration becomes an important consideration.

      I guess it is the responsibility of the regulatory authorities to determine questions of safety, and it was unnecessary on my part to stick my nose into this question. But I feel a conscientious need to provide fellow investors with what I hope is objective, unbiased, but non-judgmental information. I believe I am careful in my investigations and can provide documentation for statements you challenge.

      It would be a privilege to speak to Dr Tim Moore about his pioneering work but I have no intention to write further on this topic and do not wish to waste his time. I would really value Professor Greenwood’s response to my concerns, but wish to call a halt to further argument or recrimination.

  5. is this a legit company ?

    • Thanks for putting the question. Calzada is certainly a legitimate company complying with all requirements for listing on the ASX. I believe the company is an ethical one too, has funded detailed research into AOD 9604, and is doing well finding revenue opportunities when the research results were equivocal. I remain sceptical however as to whether the product NovoSorb will prove to be a durable addition in the management of severe burns.

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