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Sunday, August 23, 2009

MELA - Speculative Second Half 2009 Stock

MELA had a very interesting article in Barrons this weekend. The success of this stock will depend on FDA approval, which is due by the end of the year. It is an all or nothing trade (FDA approval stock could go up 50%, FDA denial stock would tank), but one worth researching. Here is the article.

Taking Aim at Skin Cancer By NEIL A. MARTIN

If approved by the FDA, the handheld MelaFind device made by Electro-Optical Sciences will revolutionize the way patients are screened for skin cancer. Look for earlier detection and fewer unnecessary biopsies. Video: Taking Aim at Skin Cancer

ONE OF THE MOST CRITICAL decisions a dermatologist can make is whether a mark on a patient's skin might be melanoma, the deadliest form of skin cancer. Until now, doctors have been forced to rely largely on their own vision, sometimes aided by a dermascope -- a hand-held magnifying glass with a light to illuminate the skin area -- to decide whether a spot or wart merits a biopsy. It involves a lot of guesswork -- and untold numbers of unnecessary biopsies.

"Skin cancer is approaching epidemic proportions," says Dr. Joseph V. Gulfo, chief executive of EOS. He thinks the company's new tool will boost the rate of early detections and reduce unnecessary biopsies.

A small Irvington, N.Y.-based medical device maker may have a better approach. Electro-Optical Sciences (ticker: MELA) has developed a computer-assisted device, currently under expedited review by the Food and Drug Administration, that could revolutionize the way doctors screen patients for cancer, and transform the Nasdaq-listed firm into a powerhouse in medical devices. If all goes according to plan, its shares could surge at least 50%.

The device, called MelaFind, consists of a hand-held imaging "gun" that emits 10 different wavelengths of light to capture images of suspect pigmented skin lesions. Because MelaFind can see where the clinician cannot -- up to 2.5 millimeters below the skin's surface -- it is expected to help catch melanomas much earlier, without the need for as many biopsies, which is good news for most patients fearful about body scarring from the procedure.

Right now, for every 30 or 50 biopsies they order up, most doctors find just one case of melanoma. The hope for MelaFind is that it will more frequently rule out melanoma before a biopsy is performed, thanks to a database of some 9,000 pigmented skin lesions. Dermatologists say it could reduce to about seven the number of biopsies performed for finding one case of melanoma.

"There will still always be the need for the experience and judgment of the dermatologist," says Doris Day, Assistant Professor of Dermatology at the NYU Langone Medical Center. "But this is a very welcomed and useful additional tool in helping us identify melanomas with greater accuracy."

MelaFind comes none too soon. Melanoma is the deadliest form of skin cancer, responsible for killing one person an hour and accounting for 80% of all skin cancer deaths. It is also the fastest growing, with over 150,000 new cases reported annually in the U.S., partly the result of excessive sun-worshiping. Hundreds of thousands of other patients visit doctors out of fear that a mole or wart might be melanoma, experts say.

"Skin cancer is approaching epidemic proportions," asserts Joseph V. Gulfo, EOS's chief executive. "Early detection is the key to survival. But medical tools to help doctors detect the malignancy have been lacking, at least until now. We believe we have found the answer in MelaFind."

THE ACCURACY OF MELAFIND'S analysis was borne out by a pivotal Phase 3 study last February. Conducted at seven locations across the U.S., the study included 1,831 pigmented skin lesions from 1,383 patients, making it the largest prospective study conducted in melanoma detection. MelaFind's specificity, or ability to accurately rule out the disease, was 2.5 times greater than that of dermatologists. The company's volatile common shares skyrocketed 80%, from $3.53 to $6.36, the day the results were announced. They've lately been trading at $7.68.

"The device has the potential to save lives like nothing we have seen in this field," says Day, who has no connection to Electro-Optical Sciences. "With the incidence of melanoma on the rise, the machine may be that much more important for the everyday practice of dermatology."

The company has already won some big fans on Wall Street. "Once the general public catches on about the ease, simplicity and accuracy of the instrument and the added benefit of avoiding unnecessary biopsies, EOS' business will shift to a higher gear," says Jeb Besser, portfolio manager with Manchester Management, a Boston hedge fund that has held EOS' shares since it went public in 2005.

Roth Capital Partners analyst Matt Dolan figures sales of the devices could hit $10 million the first year, then climb to $40 million.

Nasdaq-listed Electro-Optical Sciences is taking some of the guesswork out of the way doctors detect melanoma. Barron's Neil Martin reports.

Still, with FDA approval still pending, the stock is clearly speculative. The company now has no product on the market, no revenues and no earnings. It has had to rely on dilutive equity financings, including a $15 million deal a month ago. It now has about $21 million of cash, enough to last more than a year, given its current quarterly cash-burn rate of about $4-million-to-$5 million.

"When dealing with the FDA, there is never a sure thing, but this is probably as close to that as you are going to get," says analyst Dalton Chandler with Needham Securities. "In addition to expedited review, which means a decision within 180 days, the company has additional clinical data that look compelling and will be presented to a panel of dermatological experts in a special FDA panel meeting, probably sometime this fall.

The Bottom Line:

If MelaFind passes FDA muster, medical device maker ESO could see its share price go from near $8 to $12.
"Best bet is formal approval by the end of the year or early 2010," say Chandler. He rates MELA a Buy with a price target of $12.

See the Article


ชัยรัตน์ said...

Wow! your website have the great information about stock is
.I'm sure I will be back again.

financial spread betting said...

looks like they were right

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