12/17/2014

Novogen Is Poised To Soar As A Major Partnership Announcement Is Imminent - Novogen Limited (NASDAQ:NVGN) | Seeking Alpha

Novogen Is Poised To Soar As A Major

Partnership Announcement Is Imminent

The Most Exciting Idea in Biotech

In mid-August I discussed[1] 9 Compelling Reasons to Own Opexa (NASDAQ:OPXA[2])
Therapeutics Right Now. The publication of that article coincided with the precise
bottom for Opexa shares, which have since rallied as much as 85%. Today I discuss a
company that has even more appreciable upside: Novogen (NASDAQ:NVGN[3]). In fact,
Novogen is the most exciting opportunity I have seen in the biotech sector in years. I
believe purchasing shares at these levels may be akin to buying Regeneron
(NASDAQ:REGN[4]) at $5 in 2005 (currently trading at $296) or Pharmacyclics
(NASDAQ:PCYC[5]) at $4 in 2011 (currently at $127). Below I discuss an immediate
under-the-radar catalyst that should send shares soaring, followed by a longer-term
investment thesis.

Imminent Deal in the Works

In his July letter to shareholders[6], CEO Graham Kelly advised investors to expect
"considerable potential news flow coming up over the next 12 months." A hidden jewel
shedding further light on this news flow is contained on page 27 of the executive
summary[7] of Novogen's annual report, released in the last week of September. The
company hints at two significant developments in the works. The first, regarding the
"acquisition of a novel drug technology[8]," was just recently announced[9]. More
significantly, the second announcement[10] involves an intention to announce a
"collaborative structure that will allow the Company to work towards its goal of
individualized chemotherapy." Rarely do investors get the chance to buy shares of a
company ahead of such a well-telegraphed announcement. This gem in the report
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appears to have been entirely overlooked by the market. I see no mention of it in any
article, on any blog, on Twitter, or any message board whatsoever. This news could hit
the tape at any moment, and will be announced by the end of the year[11] at the very
latest. My expectation is that a major pharmaceutical company with an extensive
background in ovarian cancer treatment, such as Merck (NYSE:MRK[12]) or Bristol Myers
(NYSE:BMY[13]), may partner with Novogen. Such a partnership would be pocket change
for any major pharma, and would represent a dirt-cheap option on the groundbreaking
science Novogen has exhibited thus far. Details follow of precisely how extraordinary
Novogen's drug platform has been to date.

Revolutionary Approach to Killing Cancer

"We firmly believe we are on the road to conquering cancer."
"We believe that we are on the verge of a quantum leap forward in
chemotherapy, with long-term remission across most forms of cancer a
realistic possibility."
These are the bold, impassioned words from the CEO of Novogen, an under-the-radar
company that may offer the best chance of eradicating multiple forms of cancer of any
early-stage company in existence today. Of the 13 anticancer drugs[14] the Food and
Drug Administration approved in 2012, only one may extend life by more than a median
of six months. Two extended life for only four to six weeks. Herceptin, Avastin, and
Zytiga have enhanced the market capitalizations of their respective manufacturers by
billions of dollars even though their drugs exhibit only marginal survival benefits[15].
In contrast, Novogen's approach to fighting cancer represents a new paradigm. Though
Novogen's initial focus[16] is on ovarian cancer and glioblastoma multiforme (GBM), its
ultimate mission is to "eradicate all cancer cells from the body, in all patients and
irrespective of the type of cancer, and to do that with minimal toxicity" and to be the
"principal supplier of drugs that provide long-term remission through the successful
control of the cancer stem cell." Cancer stem cells are the key to cancer's ability to grow,
spread, and survive attempts by the body and by oncologists to destroy it. They are
highly resistant to traditional means of combating cancers including chemotherapy and
radiotherapy. None of the current anti-cancer drugs shows any meaningful impact on
cancer stem cells. Novogen is at the vanguard of this exciting approach in the fight
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Novogen Is Poised To Soar As A Major Partnership Announcement Is Imminent - Novogen Limited (NASDAQ:NVGN) | Seeking Alpha

against cancer. Significantly, Novogen is seeing "little toxicity[17]" compared with the
ravages of traditional chemotherapy. Please click here[18] and here[19] for further details
on the intricacies of the revolutionary science behind the Novogen platform.

The Ultimate Endorsement

An article[20] in a local Australian paper earlier this year whose headline reads: "A
Willing Guinea Pig for Radical New Cancer Drug" details just how much faith CEO
Graham Kelly has in his company's drug. Kelly was suffering from advanced and
aggressive prostate cancer when he injected the earlier versions[21] of the company's
experimental drug on himself. Kelly is in complete remission and is feeling great; all
indications are that the experiment was a resounding success. Remarkably, the latest
incarnation of the drug is considered superior to the one Kelly used to treat his cancer.
Though Kelly does not advocate others replicate his radical experiment, it does provide
us with a unique human case study prior to actual clinical development of the drug.

Multiple Other Catalysts

In addition to the immediate "collaboration catalyst" discussed above, investors have
multiple other events that should lead to significant price appreciation. Novogen's April
newsletter[22] discusses its expectation for Breakthrough Designation from the FDA for
its CS-6 in 2014. Published on its website and largely unnoticed by the investment
community, Novogen's August corporate update is among the most bullish statements I
have ever encountered from a biotech company. CEO Kelly states in that letter that the
company's flagship drug CS-6 has "considerably greater potency than anything we have
encountered before." Kelly also affirms that the CS-6 program is on track to have all
necessary data in by November 2013 to be in clinical development in 1Q14. If these data
confirm the preliminary findings in February that launched Novogen's shares from $2 to
over $10, I would expect a similar parabolic move in the stock. Judging from the tenor of
management comments in the annual report and recent shareholder updates, I believe
this is a high probability event. I would expect to see "holy grail" type headlines in the
media reminiscent of Geron (NASDAQ:GERN[23]) or Entremed (NASDAQ:ENMD[24]) back
in the late 90s. Only this time, Novogen holds much more promise than those stories of
hope back in the day.

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Valuation
The market capitalization of Novogen is a mere $22 million. Yet, the promise of
Novogen's drug platform is exponentially higher than any other early stage biotech,
many of which are currently valued 10x higher than Novogen's capitalization. Evidenced
by the preliminary ovarian cancer[25] data that exceeded even the highest expectations,
Novogen clearly outshined Cyclacel's (NASDAQ:CYCC[26]) preclinical ovarian cancer
data[27], as one example. The Street is willing to assign multi-billion dollar market caps
to oncology bio-pharmas that focus on one drug for one cancer that may extend life by
only a few months. Even assigning an infinitesimal probability to the ultimate clinical
success of Novogen's drugs yields a market valuation far greater than where shares
currently trade. Rarely if ever have I seen the Street so grossly misprice a stock relative to
the prospects of the underlying company.

Risks
Is this story too good to be true? Shouldn't a company that could potentially eradicate
cancer be valued at $22 billion and not $22 million? As I have made quite clear, I believe
the Street is severely undervaluing Novogen shares due to lack of coverage and a
misunderstanding of the recently reincarnated company[28]. As with all early stage
biotechs, however, Novogen is a highly speculative investment, and human trials often
do not mirror what is found in the preclinical laboratory. Thus, even as I believe
Novogen will be a triple digit stock if human trials confirm the current data in the
coming years, this is a highly speculative investment. I also believe investor
confusion/misunderstanding has contributed to the depressed share price.

Insider Ownership and Financing

Top executives Graham Kelly and Andrew Heaton own over 12% of the company shares
on the Australian exchange. Hudson Bay Capital financed the Triazal Pharmaceuticals
transaction which enabled Novogen to acquire the transformative science currently
being tested. In a sign of confidence, Hudson Bay agreed to be repaid in stock only upon
the completion of three key milestones[29]: successful completion of a Phase 1a study,
grant of IND or Breakthrough status, and successful completion of a Phase 2 study. In
July, Novogen secured additional financing with Hudson Bay Capital under terms
"considerably more favorable" than those initially approved by shareholders in May.
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This financing is sufficient to take CS-6 well into the clinic.

Summary
We firmly believe that we are on the verge of changing forever how we treat
cancer. Not just any one form of cancer and not just with the goal of
prolonging life be weeks or months.
Novogen shares present a compelling speculative opportunity at these levels, whether
one's time horizon is a few months or multiple years. The principal intention of this
article is to shine a light on a hidden gem provided in the annual report; namely, that a
potentially groundbreaking collaboration is to be announced in the near future.
Additionally, November 2013 ovarian cancer data, 2014 Q1 clinical Ph1 initiation, and
2014 Breakthrough Designation status, represent additional catalysts for further share
appreciation. Preliminary studies demonstrate remarkable success at attacking
formidable cancer stem cells. If these exceptionally promising results are replicated in
clinical trials, Novogen may ultimately become the most valuable biotechnology
company in the marketplace. Unlike virtually every other major oncology-focused
company today, Novogen's mission is not merely to extend life by a few months, but is
resolutely focused on eradicating all forms of cancer in all patients -- complete
remission -- just as the CEO himself has experienced with his own drug. A noble,
ambitious goal indeed -- and one Novogen firmly believes it is on the road to fulfilling.

Links
1. http://seekingalpha.com/article/1638132-9-compelling-reasons-to-buy-opexatherapeutics-right-now
2. http://seekingalpha.com/symbol/opxa
3. http://seekingalpha.com/symbol/nvgn
4. http://seekingalpha.com/symbol/regn
5. http://seekingalpha.com/symbol/pcyc
6. http://novogen.com/wp-content/uploads/2013/07/Shareholder-Update-July2013.pdf
7. http://novogen.com/wp-content/uploads/2013/09/Executive-Summary-2013chrome-extension://iooicodkiihhpojmmeghjclgihfjdjhj/in_isolation/reformat.html

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Annual-Report1.pdf
8. http://novogen.com/wp-content/uploads/2013/09/Executive-Summary-2013Annual-Report1.pdf
9. http://novogen.com/wp-content/uploads/2013/10/Novogen-acquires-new-class-ofdrugs.pdf
10. http://novogen.com/wp-content/uploads/2013/09/Executive-Summary-2013Annual-Report1.pdf
11. http://novogen.com/wp-content/uploads/2013/09/Executive-Summary-2013Annual-Report1.pdf
12. http://seekingalpha.com/symbol/mrk
13. http://seekingalpha.com/symbol/bmy
14. http://opinionator.blogs.nytimes.com/2013/03/23/a-plan-to-fix-cancer-care/
15. http://novogen.com/wp-content/uploads/2013/09/Executive-Summary-2013Annual-Report1.pdf
16. http://novogen.com/there-is-a-lot-going-on/
17. http://novogen.com/wp-content/uploads/2013/09/Executive-Summary-2013Annual-Report1.pdf
18. http://novogen.com/wp-content/uploads/2013/09/Executive-Summary-2013Annual-Report1.pdf
19. http://novogen.com/ceo-explains-genscreen-deal/
20. http://www.heraldsun.com.au/business/in-the-black/boss-a-willing-guinea-pig-forradical-new-cancer-drug/story-fni0d787-1226692377405
21. http://novogen.com/why-are-we-targeting-cs-6-at-brain-cancer/
22. http://www.novogen.com/wp-content/uploads/2013/03/NEWSLETTER-1-2013.pdf
23. http://seekingalpha.com/symbol/gern
24. http://seekingalpha.com/symbol/enmd
25. http://www.proactiveinvestors.com.au/companies/news/39686/novogen-sharessoar-on-the-potential-of-its-experimental-anti-ovarian-cancer-drug-39686.html
26. http://seekingalpha.com/symbol/cycc
27. http://finance.yahoo.com/news/cyclacels-sapacitabine-reported-anti-tumor203000215.html
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28. http://novogen.com/ceo-welcome/
29. http://novogen.com/wp-content/uploads/2013/07/Ozequities-Newsletter-July2013.pdf

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