By Anita Dushyanth, PhD

TSX:TLT.V
OTC:TLTFF

On April 2, 2015 Theralase (TLT.V) (TLTFF) announced that they had initiated discussions with Health Canada (HC) in a pre-Clinical Trial Application (pre-CTA) meeting. A complete CTA must be filed with and approved by HC prior to commencing any clinical trial in Canada. This application is very similar to the pre-IND application prepared for the FDA in the U.S.

In their pre-submission meeting with Health Canada Dr. Roger Dumoulin-White, President and CEO of Theralase, presented the preclinical data for the lead Photo Dynamic Compound (PDC), TLD-1433. TLD-1433, one of a new generation of unique light-activated anti-cancer compounds, is specifically developed for the indication of Non-Muscle-Invasive Bladder Cancer (NMIBC), with a primary outcome measure of patient safety and tolerability and a secondary outcome of efficacy. Management also reviewed the manufacturing process and clinical trial protocol for the planned Phase Ib program.

HC provided sufficient guidance in fine-tuning Theralase’s clinical trial design involving the PDT technology, which will benefit Theralase’s goal of a successful outcome. If things move along as planned, the Phase Ib clinical trial is expected to receive Health Canada CTA approval in 3Q2015. Theralase anticipates commencing patient enrollment for human clinical studies in NMIBC in 4Q2015. The company anticipates enrolling nine subjects for their clinical trials.

In October 2014, Theralase collaborated with Sigma-Aldrich Corporation’s (SIAL) custom manufacturing services business unit SAFC® Commercial to manufacture PDCs. As per the terms of the agreement, SAFC has agreed to manufacture both a 100-gram pre-Good Manufacturing Practice (pre-GMP) batch and finally a 500-gram GMP batch of the PDC. On April 9, 2015 Theralase announced that it has now successfully completed a major milestone by having TLD-1433 successfully manufactured to pre-commercial quantities. This quantity is expected to be used in toxicology analyses, a key requirement for Health Canada CTA approval. Theralase intends to have a second pre-commercial batch manufactured in 2Q2015, which will further optimize the manufacturing process. This batch is expected to be suitable for final sterilization and packaging into individual patient doses for safety and efficacy evaluation through Health Canada.

Theralase’s development initiatives: Theralase obtained approximately $6.3M USD equivalent (25M shares at $0.32/share) from this round of equity financing which closed in early March. The capital raised will be used to commence their two most important projects slated for 2015, the TLC-2000 and the TLC-3000. This amount also offers a significant buffer for operational overruns.

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TLC-2000 Roll-out: The TLC-2000 biofeedback therapeutic laser system possesses patented Cell SensingTM technology, which allows the instrument to deliver exact doses of light energy to precise depths of target tissue. The company has filed for Health Canada approval via a Class 3 Medical Device License application, the approval of which is expected within approximately 75 days of submission implying expected final approval around April 2015.

We anticipate FDA and CE Mark filings of the TLC-2000 system to be submitted by Q1 2015. Pending approval, management expects to launch this system in Canada in April 2015 and in the U.S. and Europe by Q3 2015. Based on management s prior guidance we had expected sales of TLC-2000 device to commence at the end of 2014. However, due to the aforementioned reasons, initial roll out of TLC-2000 has been slightly delayed. Revenue has been somewhat softer than anticipated in the past year and been primarily driven by sales of the TLC-1000 device. We believe this trend will continue up until TLC-2000 rolls out. Based on management s guidance we anticipate an improvement in top line revenues from 2H 2015 onwards.

Valuation: 2015 looks to be an exciting year for Theralase. The near term milestones include the clinical trials for bladder cancer treatment in humans commencing in mid-2015 as well as the TLC-2000 roll-out in Q2/Q3. Based on the slight delay in expected launch, we have pushed out our revenue estimates for the TLC-2000 device from Dec 2014 to Q2 2015. We believe Theralase can become successful in the long term with the launch of the TLC-2000 device this year as well as with their PDT technology if and when it reaches commercialization. We are optimistic about the PDC technology and given the successful clinical trials thus far, we believe that this technology could become the standard for cancer treatment.

Theralase is expected to burn cash of about $3M as they prepare to launch TLC-2000 in the U.S. and Europe in the second and third quarter this year. The bulk of this amount will likely be used in the second half of 2015 due to ramping up of the inventory and increase in sales and marketing expenses. However, with the newly raised funds we think the company has enough cash to support their operations for the coming years. We expect sales to improve through the second half of 2015 and significant revenue ramp up in 2016 helping Theralase turn cash flow positive. Our outlook is still intact and we maintain our Buy rating on Theralase.

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