Adviser Soapbox
Nucryst's Nano Silver Lining
Josh Wolfe, Forbes/Wolfe Nanotech Report 11.09.06, 4:00 PM ET
Investors had been pinning their hopes on a drug from Massachusetts-based
Nucryst Pharmaceuticals aimed at getting rid of eczema, a form of atopic
dermatitis that afflicts more than 15 million Americans and has no known cure.
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The base for this product is Nucryst's slow-release nanocrystalline silver,
which is known to have impressive therapeutic effects, killing over 150
pathogens without any harmful side effects. The nanocrystalline silver,
packaged as Silcryst, is already widely used in dressings for serious
wounds and burns, distributed and marketed by Smith & Nephew (nyse:
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) under the name Acticoat.
On the market since 1998, Acticoat has been a major success for
Nucryst--that product alone would render the company profitable if it
wasn't pouring all its revenue back into R&D. Acticoat is used in hospitals
and burn centers in 30 countries around the world to treat life-threatening
burns and serious wounds like pressure ulcers, diabetic foot ulcers and
venous stasis ulcers.
"Acticoat has good year-over-year, quarter-to-quarter growth, more product
variations coming out on it and one of the best marketers in the world
behind it," says Wolff. "That's where all the cash flow is coming from."
So there's no question that the base technology works--the question is
whether it works when developed as a powder form to be used as a topical
cream for this particular condition. And the answer is that we still don't
know, because the results of the trial are simply not clear-cut. Nucryst is
conducting an in-depth analysis of the clinical trial results, after which
it will make a decision about whether to proceed with the development of NP
32101 for atopic dermatitis. Wolff says the decision should be made by the
end of the year.
Even if NP 32101 is eventually dropped for atopic dermatitis, it is still
possible that the drug will be useful in gastrointestinal disorders.
According to the company,
#################################
Nucryst has seen encouraging pre-clinical results in studies looking at the
efficacy of NP 32101 for treating inflammatory bowel disease, including
ulcerative colitis.
#############################
Note: The original Acticoat is silver impregnated nylon often used in
conjunction with a small electrical charge to release *silver ions* into a
wound or burn.
It's competitor "Silverlon" is also currently used extensively in
hospitals. {ken}
"Nucryst is continuing to analyze data from this study so that we can
evaluate options for our atopic dermatitis program with a complete
understanding of the study results," says President and CEO Scott H.
Gillis. "Based on our pre-clinical results in a variety of in vitro and in
vivo models and the consistently favorable safety data generated in all
clinical studies, we believe that NPI 32101 has the potential to treat
various inflammatory and infectious conditions. Therefore, we plan to
continue our efforts to develop NPI 32101 for a variety of disease conditions."
Even if Nucryst cans NP 32101 altogether, the long-term impact on the
company won't justify the market reaction. Acticoat is a strong enough
product that the company can afford to take some risks in R&D, choosing
potential revenues over profitability. And that's exactly what this kind of
company has to do. Armed with a thoroughly patented and successful base
product, it has to explore all the possible applications.
There are bound to be failures along the way. The company won't disclose
how much money has gone into NP 32101 thus far, but it's surely not enough
to warrant extreme alarm. In fact, dropping the drug at this point may end
up saving Nucryst money in the short-term, a silver lining (no pun
intended) that could hold it over until it recovers fully from the
long-term revenue loss.
In the meantime, Acticoat's success will continue to grow. And Nucryst will
continue to broaden the horizons of Silcryst technology. One large area of
possible penetration is in antimicrobial and anti-inflammatory coatings for
medical devices like stints, catheters and implants. And Nucryst might
apply its patented manufacturing process, which breaks the bulk silver down
and then builds it back up atom by atom into silver nanocrystals, to other
noble metals like gold and platinum for formulations to treat diseases as
diverse as arthritis and cancer. Medical devices and pharmaceuticals are
the company's two main platforms for extending its business as it moves
forward.
As the investigation into the results of the trial gets under way and the
waters calm, the market is likely to climb a bit to a more stable
equilibrium in the near-term.
"The stock is oversold, and as the dust settles, the third-quarter earnings
will be coming out with cash flow and revenues from Acticoat, and people
will value the stock based on that, and probably on the assumption that
atopic dermatitis is not going to come back," says Wolff. "Then, when the
results of the study to determine what happened in clinical trial are
released, the company will be in a position to determine whether to
continue down the atopic dermatitis route or not. If there's a positive
result, the stock may go up as they revitalize that particular product."
Investors need to think a bit longer-term here and realize that even if the
atopic dermatitis route turns out to be a dead end, the future of Nucryst
is still looking bright.
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