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
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.