Miami Beach, Jun 19, 2019 (Issuewire.com) - Spherix Inc. (NasdaqCM: SPEX) is making an impressive mark as a company able to identify and take advantage of compelling investment opportunities in the biotech space. Already well entrenched into several ongoing preclinical programs, SPEX is leveraging at least three opportunities to bring to market therapeutic treatments that target acute myeloid leukemia (AML), acute lymphoblastic leukemia (ALL), and pancreatic cancer.

Moreover, as the title implies, the two primary SPEX assets are already proving valuable from a financial perspective, with one of their publicly traded investments adding more than $14 million to the SPEX balance sheet as of June 14th, and the other bringing to the company two promising drugs that are advancing through clinical trials intending to target multi-billion dollar disease indications.

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Their publicly traded investments can be followed on the Nasdaq Capital Markets, where simple math can provide the daily ebb and flow of the asset. SPEX's other accretive purchase, a 20% ownership stake in CBM BioPharma can be lucrative as well. That deal not only brings two innovative drugs under the SPEX umbrella, but the terms are structured in a way that will allow SPEX to benefit from dividend distributions as CBM sells some of its SPEX holdings, allowing SPEX to bypass the capital markets which can be brutal to small companies in need of cash. However, SPEX may be spared the misery.

As part of the CBM Biopharma deal, any sale of SPEX stock by CBM would likely trigger a cash dividend for which SPEX would be a beneficiary of 20% of that distribution. That provision makes the deal attractive for several reasons, but the most appealing part from the financial perspective is that SPEX will be positioned to receive substantial amounts of capital through non-dilutive means. And, for an emerging company, having the means to keep away from the capital markets can eliminate the clouds of uncertainty that often place a lid on stock price performance.

Two Primary Assets Will Keep the Engines Churning

Beyond its two performing assets, SPEX completed a recapitalization in May of 2019 that leaves the company with just over two million shares outstanding, marketable securities above $14 million, and total debt of less than one million dollars. More importantly, the low-float capital structure allows SPEX to leverage their ambitions aggressively, and with a book value of more than $15 million at current asset share price levels, coupled against low debt levels, the company may be in its best position ever to advance not only its ongoing clinical trials but to add additional assets as the company looks to add to its growing arsenal of innovative drug properties.

And, the assets to market cap disconnect is offering opportunity. At roughly $2.80 per share and with only about two-million shares outstanding, more than $8 million of value is missing from the company's most current market cap valuation. Well, it's not missing, it's just getting overlooked. And, the gap may be starting to close.

Furthermore, the properties acquired from CBM BioPharma are already progressing through the preclinical phase and each has the promise to attract partnership or licensing deals from both, KPC34, to treat both acute myeloid leukemia (AML) and acute lymphoblastic leukemia (ALL), and DHA-dFdC to treat pancreatic cancer indications.

Spherix Is On The Growth Track Through Successful Investments

The business model at Spherix Inc. can be traced back to 1967 as a company focused on cultivating scientific research. Since then, the company has evolved alongside changing markets and technological innovations allowing SPEX to become a more diversified company that can leverage balance sheet strengths to develop and advance innovative ideas and products intended to provide multiple sources of revenue and to target multi-billion dollar market opportunities.

At SPEX, 2018 proved to be a transformative year for the company, and they have been successful in building value through identifying and investing in the promise of development stage companies. In particular, the ownership stakes that are highlighted in its regulatory filings provides marketable assets that significantly dwarf its current market cap and provide to SPEX a unique opportunity to leverage its assets to develop additional selective opportunities.

Furthermore, while the drugs from CBM bring extreme promise, the terms of the CBM BioPharma transaction are attractive as well, and many investors appear to have overlooked the accretive structure of the deal. The deal did two things. First, the terms provided for SPEX to buy the assets of CBM BioPharma. And, second, the agreement allowed SPEX to purchased a 20% stake in CBM. Thus, what investors apparently missed in the announcement is that when CBM sells their shares of SPEX, which they will eventually do, a cash dividend will likely be announced that would entitle SPEX will receive 20% of the distribution. That distribution can effectively serve as a cash raise without dilution for SPEX in the form of a dividend, and more importantly, those distributions can potentially increase in size as SPEX stock appreciates. Perhaps the most appreciable part of the agreement from an investors perspective is that the deal structure can ultimately provide SPEX with more capital than initially invested in consummating the transaction. Taking into account SPEX, CBM, and the shareholders, the deal is a win-win-win proposition.

Spherix Purchases The Assets Of CBM BioPharma, KPC34 and DHA-dFdC Included

The final version of the CBM deal was announced in May of 2019 with SPEX entering into an asset-purchase agreement with CBM BioPharma, a privately held pharmaceutical company with exclusive drug development rights from world-renowned partners including Wake Forest Innovations and the University of Texas at Austin. The deal is mutually beneficial and can be quickly accretive to SPEX, setting the price of the assets at $8 million, and includes a 20% equity stake in CBM. From a SPEX shareholders perspective, the deal makes excellent financial sense.

First, the price of the assets was lowered by roughly $7 million from its original agreement, and second, the 20% ownership stake will position SPEX to receive cash dividends from the sale of SPEX stock by CBM. Although any sale of stock can cause overhead pressure on the shares, the details of the deal were smartly prepared. Specific provisions provide tax breaks to CBM, and it also delivers working capital to SPEX in non-dilutive fashion. And, as the share price of SPEX increases, so will the dividends. But, the deal brings more than drug assets and potential non-dilutive financing.

The CBM deal brings to SPEX a team of experienced drug development scientists, as well as an experienced Chief Scientific Officer, that will work to advance the CBM BioPharma platform that is targeting the treatment of severe diseases, including acute myeloid leukemia (AML), acute lymphoblastic leukemia (ALL) and pancreatic cancer. Thus, not only is SPEX getting a set of innovative drugs, but they also get the team behind them to keep the transition of ownership seamless and the pace of the current trials maintained.

Moreover, it's important to note that each drug is already demonstrating promising preclinical results that may ultimately offer a better therapeutic option for patients needing a better treatment outcome. Here are a few reasons why:

KPC34 To Treat AML and ALL

KPC34 is already showing promising results in preclinical studies to treat Acute Myeloid Leukemia (AML) and Acute Lymphoblastic Leukemia (ALL). Tweaked by the team at the Wake Forest School of Medicine, KPC34 is proving itself as a potential next-generation treatment by demonstrating an impressive ability to overcome multiple resistance challenges associated with the current treatment options. Preclinical data and supporting industry publications describe its effectiveness in treating AML relapse cases, and in animal studies, the drug has demonstrated the ability to increase the lifespan of mice treated with KPC34 significantly.

The study further showed that KPC34's novel properties resulted in improved pharmacokinetics compared to gemcitabine and demonstrated a unique ability to overcome leukemic chemoresistance to cytarabine by bypassing the need for ENT-1 uptake and dCK activation. The analysis further highlighted the benefit that KPC34 can be administered orally, and has shown predictability to cross the blood-brain barrier, which allows it to target CNS-infiltrating leukemia's.

Multiple publications support the possibility of KPC34 to treat the AML and ALL patient market effectively, and through the CBM asset purchase, SPEX may be well-positioned to expedite the studies by keeping the clinical team together and having the capital to asses multiple treatment indications. Moreover, because of the low patient population, SPEX may be able to target FDA approval through an orphan drug designation that can provide expedited review and seven years of exclusivity from the approval date of the new drug.

DHA-dFdC Targets Pancreatic Cancer

Spherix's second promising drug, DHA-dFdC, is licensed from the University of Texas at Austin and is targeting the treatment of pancreatic cancer. Pancreatic cancer is the third leading cause of cancer-related death in the United States and is expected to take the number two position by 2020.

Statistics provided by the Hirshberg Foundation for Pancreatic Cancer research indicate that the disease has the highest mortality rate with roughly 91% of all patients succumbing to the cancer within five years of diagnosis and more than 78% dying within its first year of diagnosis. Moreover, they note that pancreatic cancer is one of the few diseases for which survival rates have not improved over nearly four decades of research, with current treatment options that include surgery, radiation therapy, and chemotherapy only serving as a means to extend survival or relieve symptoms, but lacking the therapeutic properties to eradicate the disease.

What the scientific team under SPEX leadership is working to prove is that DHA-dFdC can become the next-generation of chemotherapy treatment for advanced pancreatic cancer. The drugs promise is drawing attention from studies at the University of Texas at Austin that has demonstrated positive results in preclinical animal studies that show its ability to inhibit tumor growth in clinically relevant transgenic animal studies.

In addition, research data also shows that DHA-dFdC can inhibit pancreatic cancer cell growth, can overcome tumor cell resistance, is well tolerated in preclinical toxicity studies, and may stimulate immunogenic cell death to activate host antitumor immunity. The drug is a product of more than a decades worth of experience by the scientists at the University of Texas who are focused on discovering next-generation chemotherapeutic agents that can more effectively treat pancreatic tumors and overcome tumor resistance.

Building Value Through Smart Acquisitions

With an asset base that is growing, SPEX is on track to emerge as a significant revenue generating company by monetizing opportunity from its more than 200 patents, its diversified portfolio of businesses and technology-based interests, and it's balance sheet strength that provides additional opportunity for near-term acquisitions.

And as noted previously, current filings show SPEX to have roughly two-million shares of stock outstanding, assets of just under $15 million and total liabilities of only $982,000. Moreover, the investments made by SPEX into other publicly traded companies continue to generate more value as those share prices increase, which has been the case since May of this year. In fact, those investments have risen to the point that SPEX's balance sheet has outgrown its current market cap by more than $8 million. And, because markets eventually correct themselves, it's a price to book ratio gap that will likely close as more investors get introduced to Spherix, Inc. and its promising pipeline of drugs.

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