Cytogen: High Tech Diagnosis

07/16/2004 12:00 am EST

Focus:

Tobin Smith

Founder and Chief Research Analyst, NBT Equity Group

"At ChangeWave Investing we like stocks that are underloved and overlooked by the investment community," says Tobin Smith. "Our latest pickCytogencould be our next winner based on this contrary theme." Here's his review of the high-tech medical firm.

"Applied molecular imaging is a major new billion-dollar wave in diagnostic medicine. The cost-benefit equation of using MRI to diagnose disease without invasive procedures is unbeatable. In-vivo diagnosis is simply great medical economics and great medicine. Cytogen (CYTO NASDAQ) is an old company with lots of new plays on the applied molecular imaging wave. This $30 million a year company is not profitable for now. The company has exclusive US marketing rights to Combidex, an ultrasmall superparamagnetic iron oxide contrast agent for magnetic resonance imaging of lymph nodes that is pending clearance by the FDA. We assume that the FDA will approve Combidex by the end of summer.

"But that’s not the whole story for Cytogen. There’s more good news. CYTO rose sharply in recent trading following data from a small clinical trial of its pain drug that appeared to demonstrate survival benefits when used with chemotherapy in prostate cancer patients whose disease had spread to the bone. Quadramet is a therapeutic radiopharmaceutical that is already approved as a non-narcotic pain medication for bone metastases associated with several types of cancer. But preliminary data presented at the meeting of the Society of Nuclear Medicine pointed to Quadramet's potential anti-cancer, as well as pain relief, benefits. This is great news for late-stage prostate cancer victims. Cytogen officials believe that Quadramet could prove to be an important adjunctive therapy for targeting bone metastases in advanced cancer patients.

"The company is also seeing strong sales growth in NMP22 BladderChek (a point-of-care, in vitro, diagnostic test for bladder cancer). Cytogen's pipeline also includes fully human monoclonal antibodies and cancer vaccines based on PSMA (prostate specific membrane antigen) technology, which was exclusively licensed from Memorial Sloan-Kettering Cancer Center. Cytogen also conducts research in cellular signaling through its AxCell Biosciences research division. If their AxCell Biosciences division gets strong results from their PSMA vaccines, this could be a home run. Overall, Cytogen is fantastically positioned to ride the applied molecular imaging wave, and holds real promise in direct cancer treatments and vaccines. With a few more breakout drugs, CYTO could be a true legacy company. The stock is a buy for a long-term, speculative portfolio."

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