There aren’t many members of the Forbes 400 that are as actively involved in the small and microcap space as is Dr. Phillip Frost. The billionaire biotech entrepreneur has taken high profile positions in microcaps ranging from military drone operators to protein shake retailers, and he's one of the guys traders and investors at this end of the market love to piggyback. Often, his presence alone is enough to drive positive sentiment in a company with which he's associated, and while all his positions aren’t winners, there have been some great returns over the years.With this in mind, here's one he's building a position in: BioCardia Inc (OTCMKTS:BCDA).For those not familiar with the company, it's a fifteen-year-old biotech and pharma entity that just recently went public by way of reverse merger. And that's the case here.BioCardia tried to raise money immediately post merger, but didn’t have much luck based on weak markets, and that's when Frost stepped in. Now the company has put out a fresh letter to shareholders, and among other things, it addressed exactly what we expected it to – a near term trial initiation.The company is currently valued at just shy of $200 million, so ahead of the trial initiation, the question is, can the trial add value, and is there justification to picking up an exposure ahead of it kicking off?We've got some consolidated finances reported as part of a recent 8-K, from which we can get an idea of revenues from legacy products. For the three months ended September 30, BioCardia generated $117K revenues from its currently approved devices, down from $210K a year earlier. The same pattern underpins the nine months to September 30 periods. The only explanation for the decline comes as follows:
"due primarily to a reduction in sales volumes for Morph products."
The Morph products are one range of two currently approved (the other being the Helix products), and we're not too concerned with a dip in revenues for these products now. Why? Because the biotherapeutics (the investigational products) by far outweigh the potential of Morph, so we expect this potential to account for the lion's share of valuation going forward.Which brings us to the trial. It's worth mentioning right off the bat that while the company hasn’t actually disclosed its cash holding, it expects that the cash resulting from the merger and related activities (Frost played a big part in this) will be sufficient to run through late 2018. The trial is expected to kick off late this year or early next, with topline expected by 2019, so the assumption here is that the company has the trial fully funded. This takes some dilution risk off the table.The trial is investigating what's called the CardiAMP Cell Therapy System, or CardiAMP. It's essentially a stem cell treatment designed to strengthen and rebuild heart muscle tissue in patients with high cardiovascular risk. Data to date has been strong. In a phase I clinical trial of 20 patients (the TABMMI trial) and a phase II placebo-controlled trial of 30 patients (the TACHFT-BMC Trial) CardiAMP cells demonstrated a sound safety profile in heart failure patients, and the latter trial demonstrated a decent efficacy profile, in terms of both quality of life and functional capacity.The upcoming phase III (the protocol for which the FDA has approved) is attempting to build on these phase II data, and in turn, underpin a regulatory submission (assumption: this submission will come mid 2019).So what's our bottom line?This is an interesting one. The company has a decade and a half of operational activity, and that sets it apart from many of the OTC stocks right now in biotech, as does the fact that its poised to undertake a phase III. Not only that, but the phase III is fully funded, and there's smart money investment by way of Frost on the books. As a risk limited exposure, it looks to be a nice play.We will be updating our subscribers as soon as we know more. For the latest updates on BCDA, sign up below!Disclosure: We have no position in BCDA and have not been compensated for this article.
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