AEMD: DAPRA Revenue, Operational Progress Continues - Analyst Blog
14 Février 2013 - 11:48AM
Zacks
By Brian Marckx, CFA
10-Q Filed for Fiscal Q3 2013 (12/31/2012)
Aethlon Medical (OTC BB:AEMD) filed their 10-Q for
their fiscal Q3 2013 ending 12/31/2012. Results remain very
much within our expectations with moderate revenue booked from the
DARPA contract and operating expenses and share count just about
dead-on where we modeled them. The booked revenue in the
quarter relates to the first (milestone 2.3.3.1 - described below)
of eight milestones encompassing the second year of the DARPA
contract which AEMD was awarded in the Summer of 2012.
Subsequent to the end of fiscal Q3 (12/31/2012) AEMD invoiced for
the second milestone under this year-2 contract in the amount of
$196k.
Milestone 2.3.3.1 – Build the ADAPT capture cartridges with the
identified affinity agents. Measure the rate of capture of the
specific targets from in ex vivo recirculation experiments from
cell culture and blood. The milestone payment was $208,781.
Management considers this milestone to be substantive as it was not
dependent on the passage of time nor was it based solely on another
party's efforts. We demonstrated that we were able build the ADAPT
capture cartridges with the identified affinity agents and to
measure the rate of capture of the specific targets from in ex vivo
recirculation experiments from cell culture and blood. The report
was accepted by the contracting officer's representative and the
invoice was submitted thereafter.
As we noted previously, during fiscal Q2 AEMD completed work on
the final three milestones (all three of which are meaningful as
they relate to the utility of Hemopurifier in removing and
measuring targeted toxins from the blood and/or represent progress
towards initiation of human studies) related to the initial
12-month DARPA contract.
AEMD continues to make progress on other fronts as well
including submitting an IDE to FDA for approval to commence a small
U.S. study, initiated compassionate use treatment at Medacity,
awareness-building efforts through presentations at key conferences
(Biotech Showcase, Int'l Conference on Dialysis,
RetailInvestorConferences.com, MD Anderson Cancer Center), raising
additional capital, and cleaning up the balance sheet (including
retiring o/s debt through conversion/swaps to equity).
Q3 revenue of $209k (vs. $358 E) represents the first milestone
under the second year of the DARPA contract which is worth up to
$1.6MM. Through 12/31/2012 and to-date (including the most
recent invoice) AEMD invoiced for $2.18MM and $2.38MM,
respectively, under the DARPA contracts. As a reminder, DARPA
has the option of entering into the remainder of the proposed
contract for years three through five, which would pay Aethlon up
to an additional $3.2 million, annual payments under which would
range between $775k and $1.6 million.
Q3 operating expenses were $1.1 million, coming in slightly
better than where we had modeled them. Net income and EPS of
$314k and $0.00 were ahead of our ($1.11) million and ($0.01) due
to the benefit of a $1.38 million (non-cash) revaluation of
derivative liability.
Cash
Aethlon exited fiscal Q3 (12/31/2012) with $108k in cash and
equivalents, compared to $272k at the end of the prior quarter
(9/30/2012). Cash used in operations was $662k in Q3 ($1.6MM
in 9 months ending 12/31/2012), compared to $595k used in Q2 and
$1.84 million in fiscal 2012.
Q3 ending cash balance benefitted from Aethlon raising
approximately $498k from the sale of 7.87 million common shares in
three separate transactions during the quarter. AEMD sold
another $205k (3.2MM shares @ $0.064) worth of restricted shares
subsequent to Q3 quarter end.
Despite being in default on the majority of their debt
obligations (although they have recently successfully converted
some debt to common stock), Aethlon continues to be successful in
raising piecemeal capital to finance operations. We think
this speaks positively to the ongoing investor interest in the
company and faith in the potential for the Hemopurifier. And
while the additional recent financing and revenue from the year-2
DARPA contract should provide some breathing room, as we've noted
in the past Aethlon will need to raise a substantial amount of
cash, enter into partnering arrangements or score additional
valuable contracts/grants (which could include the potentially
valuable DARPA systems integrator contract) in order to maintain
operations for the longer-term.
IDE Submitted Seeking Approval of U.S. Feasibility
Study
In early January 2013 AEMD announced that they submitted an
Investigational Device Exemption (IDE) to the FDA seeking approval
to commence a 10-patient safety and effectiveness feasibility study
of Hemopurifier. We view this as a meaningful step towards
AEMD's goal of bringing Hemopurifier to the U.S. market. The
company notes that data from the recent and ongoing studies at
hospitals in India were used to support the IDE submission and also
included HCV capture data, the latter which that the FDA had
requested at a pre-IDE meeting in 2011.
The proposed trial, which we expect would begin shortly
following an approval by FDA of the IDE, would enroll 10 end stage
renal disease patients infected with HCV and be conducted by the
Renal Research Institute, a partnership between Fresenius Medical
Care (FMS), a leader in dialysis products and services, and Beth
Israel Medical Center in NYC.
AEMD recently noted that since their IDE submission they
received comments and study design considerations back from the FDA
and are now preparing a response. The hope is that this will
lead to the initiation of the study.
Compassionate Use Program at Medicity to Commence
Aethlon announced in early December that they initiated a
compassionate use program at the Medicity Institute in India using
Hemopurifier therapy in the treatment of HCV. As a reminder,
earlier in 2012 the Medicity IRB approved use of Hemopurifier in a
compassionate use program and in early October AEMD announced the
protocol that will govern treatment under this program.
The initiation of treatment under compassionate use marks AEMD's
initial foray into commercialization of Hemopurifier. The
press release detailed the treatment pricing ($7,235 for 3-day
treatment, $2,295 each add'l day) and reiterates the previously
announced protocol and inclusion/exclusion criteria.
Subsequent to this announcement, AEMD also noted that the
compassionate use program was expanded to include individuals that
experience a viral breakthrough during standard of care drug
therapy.
As we've noted in earlier investor notes, the compassionate use
program should provide AEMD with another revenue stream (albeit
likely minimal, particularly at the outset) and potentially more
importantly, will increase the overall patient experience and
treatment volume which could bode well for increasing awareness of
Hemopurifier therapy and further bolster credibility of the
technology.
Treatment under this program is open to patients worldwide and
could potentially draw individuals from outside of India, including
the U.S. and Europe - AEMD notes Medicity is a leading center for
medical tourism.
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