Nuvilex, Inc. (OTCQB: NVLX) Analyst Research Report

Analyst Research Report Written by Osman Ghani,

Chartered Financial Analyst

Osman Ghani is a CFA charter-holder and has prior experience in working in Investment banking, corporate finance, and business advisory services. His prior work experience includes working on a number of sectors including Healthcare, manufacturing, IT, real estate, financial services, and business services. He is currently completing his Phd in Finance from the Warwick Business School, University of Warwick, and has a undergraduate and graduate degrees in Accounting and Finance from the London School of Economics. He is also a qualified chartered accountant and a member of the Institute of Chartered Accountants in England and Wales, and he also holds the CAIA designation. 

February 24th, 2014

Ticker: NVLX

Recommendation: BUY

Current Price: $0.365   Target Price: $1.24


  • Nuvilex is a biotechnology company that holds rights to use proprietary cellulose based live cell encapsulation technology aimed at the treatment for cancers and diabetes.
  • Nuvilex’s Cell-in-a-Box technology alongside the anti-cancer drug ifosfamide has passed Phase 2 of clinical trials and is currently going into phase 3 trials.
  • The company acquired SG Austria, the cellulose-based live-cell encapsulation technology for the development of treatments for diabetes, which would make the need for daily insulin injections for diabetes sufferers obsolete.
  • We estimate that the current market price is undervalued and that the expected price should be closer to $1.24. This represents a 240% premium over the current market price.

Business Description

Nuvilex, Inc. (OTC: NLVX), a biotechnology company, holds rights to use a proprietary cellulose-based live-cell encapsulation technology, known as Cell-in-a-Box, for the development of treatments for cancers and for diabetes worldwide. The company was formerly known as, Inc. and changed its name to Nuvilex, Inc. in March 2009. Nuvilex, Inc. was founded in 1996 and is headquartered in Silver Spring, Maryland.

The company primarily focuses on the advancement of its treatment for advanced, inoperable pancreatic cancer that combines the Cell-in-a-Box technology with the anti-cancer drug ifosfamide. This treatment has completed Phase 1 and 2 clinical trials. The company, through its subsidiary, Medical Marijuana Sciences, Inc., uses constituents of Cannabis in developing treatments for cancer, particularly those that are difficult to treat.

Overview of the Global Pharmaceuticals Industry

According to Market Line, the global pharmaceuticals market grew by 3.5% in 2011 to reach a total value of $782.1 Billion.

According to Market Line, by 2016, the global pharmaceuticals market is expected to have a total value of $971.1 Billion, which represents an increase of 24.2% over the value in 2011.

Within the global pharmaceutical market, the largest segment, representing nearly 42.4% of the total value is the Americas.

Pfizer is the leading company in the global pharmaceutical industry, accounting for nearly 8.7% of the total value.

The market is characterized by strong buyer power, and the ease of market entry is strongly affected by the level of legal and regulatory factors present in each jurisdiction and geographical region.

The global pharmaceuticals market had total revenues of $782.1 Billion in 2011, representing a compound annual growth rate (CAGR) of 4.9% between 2007 and 2011. The European and Asia-Pacific markets grew with CAGRs of 3.1% and 8.8% respectively, to reach values of $224.8 billion and $217 billion in 2011.

The performance of the market is forecast to decelerate, with an anticipated CAGR of 4.4% for the five year period 2011-2016, which is expected to drive the market to a value of $971.1 billion by 2016. The European and Asia-Pacific markets will grow with CAGRs of 1.8% and 7.4%, and reach values of $246.2 billion and $310.2 billion in 2016.

Figure 1: Global pharmaceuticals market value (in $Billions)


Figure 2: Geographical Revenues



U.S Food and Drug Administration’s (FDA) Approval process:

The mission of FDA’s Centre for Drug Evaluation and Research (CDER) is to ensure that drugs marketed in the US are safe and effective. CDER does not test drugs, although the Centre’s Office of Testing and Research does conduct limited research in the areas of drug quality, safety, and effectiveness.

CDER is the largest of FDA’s five centers.  It has responsibility for both prescription and non-prescription or over-the-counter (OTC) drugs. The other four FDA centers have responsibility for medical and radiological devices, food, and cosmetics, biologics, and veterinary drugs. 

Some companies submit a new drug application (NDA) to introduce a new drug product into the U.S. Market.  It is the responsibility of the company seeking to market a drug to test it and submit evidence that it is safe and effective. A team of CDER physicians, statisticians, chemists, pharmacologists, and other scientists review the sponsor’s NDA containing the data and proposed labeling.

After obtaining promising data from laboratory studies, the developer takes the next step and submits an Investigational New Drug (IND) application to CDER.  Once the IND application is in effect, the drug sponsor can begin their clinical trials.  After a sponsor submits an IND application, it must wait 30 days before starting a clinical trial to allow FDA time to review the prospective study.  If FDA finds a problem, it can order a “clinical hold” to delay an investigation, or interrupt a clinical trial if problems occur during the study. 

Clinical trials are experiments that use human subjects to see whether a drug is effective, and what side effects it may cause. 

The drug sponsor should analyze the clinical trials data and conclude whether enough evidence exists for the drug’s safety and effectiveness to meet the FDA’s requirements for marketing approval.  The sponsor should then submit a New Drug Application (NDA) with full information on manufacturing specifications, stability and bio-availability data, method of analysis of each of the dosage forms the sponsor intends to market, packaging and labeling for both physician and consumer, and the results of any additional toxicological studies not already submitted in the Investigational New Drug application. 

When the patents or other periods of exclusivity on brand-name drugs expire, manufacturers can apply to the FDA to sell generic versions.

OTC drugs can be brought to the market following the NDA process as described above or under an OTC monograph. Each OTC drug monograph is a kind of “recipe book” covering acceptable ingredients, doses, formulations, labeling, and, in some cases, testing parameters. OTC drug monographs are continually updated to add additional ingredients and labeling as needed. Products conforming to a monograph may be marketed without FDA pre-approval. The NDA and monograph processes can be used to introduce new ingredients into the OTC marketplace.

Nuvilex Inc.

Nuvilex, Inc. (OTC: NLVX), a biotechnology company, holds rights to use a proprietary cellulose-based live-cell encapsulation technology, known as Cell-in-a-Box, for the development of treatments for cancers and for diabetes worldwide. The company primarily focuses on the advancement of its treatment for advanced, inoperable pancreatic cancer that combines the Cell-in-a-Box technology with the anti-cancer drug ifosfamide. This treatment has completed Phase 1 and 2 clinical trials. The company, through its subsidiary, Medical Marijuana Sciences, Inc., uses constituents of Cannabis in developing treatments for cancer, particularly that are difficult to treat.

The company’s operating history is stated in its most recent financial statements as: ‘The Company was founded as DJH International, Inc. on October 28, 1996. DJH was formed for the creation of software tracking for fresh fruits and vegetables. The Company changed its name to, Inc. following its October 2000 acquisition of Global Procurement Systems, Inc. This company was in a similar business as DJH. In October 2003, the Company acquired Ozone Safe Food, Inc., a similar company to the other two. The early mission of, Inc. was to provide methods and products to ensure safety of marketed fruits and vegetables worldwide. On February 4, 2004, shares of the common stock of the Company were registered with the SEC. The Common Stock began publicly trading on the OTC Bulletin Board quotation service under the trading symbol EFSF.

With low demand for its produce safety and software tracking products, the Company acquired Knock-Out Technologies, Ltd. in May 2004. This company was a developer of products using organic, non-toxic food based substances. In August 2005, the Company acquired MedElite, Inc. This company was the exclusive U.S. distributor of Talsyn -CI Scar Cream, a topical scar-reducing cream.

The Company sold Ozone Safe Food, Inc. in August 2005. In November 2006, the Company formed Cinnergen, Inc., a wholly owned subsidiary, to manufacture and market a nutritional supplement designed to promote healthy glucose metabolism. At  about the same time, the Company formed another wholly-owned subsidiary, purEffect, Inc., to manufacture and market four-step acne treatment trademarked purEffect. The Company licensed the marketing rights for purEffect to Charleston Kentrist 41 Direct, Inc. in March 2006.

The Company next formed I-Boost, Inc. in July 2007 to manufacture and market a food bar designed to improve the immune system. In March 2008, the Company formed another wholly owned subsidiary, Cinnechol, Inc., to market non-prescription nutritional supplements. In February 2009, the Company sold the purEffect TM rights to CK41 for equity and future royalties. Freedom-2 Holdings, Inc. was acquired in March 2009 to manufacture and market regular tattoo ink and Infinitink, a permanent tattoo ink designed to be removed more easily using conventional laser removal methods. These products were marketed through a wholly owned subsidiary, Freedom-2.

On January 20, 2009, the Company changed its name to Nuvilex, Inc. to better reflect its business operations. Its trading symbol on the OTC Bulletin Board was also changed to NVLX.

On May 26, 2011, the Company entered into an Asset Purchase Agreement with SG Austria Private Limited to purchase 100% of the assets and liabilities of SG Austria. As a result, Austrianova Singapore Private Limited and Bio Blue Bird AG, wholly-owned subsidiaries of SG Austria, were to become wholly owned subsidiaries of the Company on the condition that the Company pay SG Austria $2.5 million and 100,000,000 shares of its Common Stock and for the Company to receive 100,000 shares of Austrianova Singapore’s common stock and nine Bio Blue Bird bearer shares.

The acquisition of Bio Blue Bird provided the Company with exclusive, worldwide licenses to use a proprietary cellulose-based live-cell encapsulation technology for the development of treatments for all forms of cancer. As of October 31, 2013 the cost of these licenses of $1,549,427 has been recorded on the balance sheet as a long term asset. The licenses are pursuant to patents licensed from Bavarian Nordic A/S and GSF-Forschungszentrum fur Umwelt u. Gesundeit GmbH. These licenses enable the Company to carry out the research and development of cellulose-based live-cell encapsulation cancer treatments and allow for research and development of the cellulose-based encapsulation of virus-expressing cells for treating other diseases.

The first use of the cellulose-based live-cell encapsulation technology has been in development for the treatment of advanced, inoperable pancreatic cancer. In Phase 1 and 2 clinical trials carried out under the sponsorship of SG Austria’s predecessor, live cells capable of converting the well-known anti-cancer prodrug ifosfamide into its cancer-killing form were encapsulated using this novel technology. The capsules containing the ifosfamide-activating cells were locally implanted near the pancreatic tumor, and then ifosfamide was administered at 1/3 of its “normal” dose. By proceeding in this way, the amount of the active anti-cancer drug was increased directly in the tumor tissue. This ensured high efficacy with lower than usual doses of the chemotherapeutic agent; in turn, the lower than usual doses of ifosfamide employed allowed for significant reductions in the unpleasant and sometime detrimental side-effects normally associated with chemotherapy. This resulted in improved quality-of-life for the patients.

In July 2013, the Company also acquired from Austrianova Singapore the exclusive, worldwide license to use the cellulose-based live-cell encapsulation technology for the treatment of diabetes and the use of Austrianova Singapore’s “Cell-In-A-Box” trademark for this technology. The Company secured $1.5 million in funding through the sale of restricted stock to accredited investors at a fixed price of $0.15 per share, a premium to the market price per share at the time of the funding, to complete this acquisition. The Company utilized $1,000,000 of those funds to secure its exclusive, worldwide license to use the encapsulation technology for the treatment of diabetes by making its first required payment on October 30, 2013. The balance of the funds will be used for on-going preparations for the Company’s late-stage clinical trials in advanced, inoperable pancreatic cancer. In addition, a second and final payment of $1,000,000 for the licensing rights for diabetes is required to be paid to Austrianova Singapore by April 30, 2014.

In using the cellulose-based live-cell encapsulation technology, the Company believes that diabetes can be treated by encapsulating insulin-producing cells and then implanting these encapsulated cells into insulin-dependent individuals. The basis for this belief comes from preclinical animal studies carried out prior to the Company’s acquisition of the licensing rights to the technology for diabetes. In those studies, insulin-producing cells were encapsulated using the technology and the capsules were then implanted into diabetic animals. Shortly thereafter, the blood glucose levels of the animals became normal. In one study, the levels remained normal for six months. Because the insulin-producing cells were encapsulated in the cellulose-based capsules, they were protected from attack and rejection by the animals’ immune systems.

On February 11, 2013, Medical Marijuana Sciences, Inc. was incorporated in the State of Nevada and became a wholly-owned subsidiary of the Company. Medical Marijuana Sciences, Inc. is dedicated to the development of cancer treatments based upon the well-known chemical constituents of marijuana.   Nuvilex is exploring ways in which the Cell-in-a-Box technology may play a role in these efforts.

Pipeline Drugs

Nuvilex owns exclusive rights to a cancer treatment platform that has successfully completed Phase 2 clinical trials for inoperable pancreatic cancer. Nuvilex also owns rights to the same platform to treat diabetes, and the company also has a medical marijuana subsidiary slated to begin cancer research and development using cannabidiol. With each of the key target markets representing multi-billion-dollar opportunities, Nuvilex offers investors multiple opportunities for success and should trade at a much higher valuation which reflects its current development progress to date.

For a company like Nuvilex, raising the funds necessary to initiate future, advanced clinical trials will be a critical task. However, over the past few months, the company has successfully raised $3.0 million (in two $1.5 million tranches) that were at premiums to the prevailing stock price with negligible dilution to shareholders. The company has also been able to successfully reduce its debt by $2.2 million, thus strengthening the balance sheet further. The combination of successful recent equity raising alongside the reduction of debt, will allow the company to be in a better position to tap capital markets when and if it requires further funding as it reaches important milestones in 2014 and beyond.

The company has made important headway in its Mediccal Marijuana Sciences division. In Late 2013, the company announced that Dr. Mark Rabe, a leading figure in the emerging medical marijuana field, has joined MMS as Chairman of its Scientific Advisory Board. Dr. Rabe was formerly the Chief Medical Officer of California’s largest network of physician-owned medical cannabis evaluation centers where he hired and trained medical personnel, conducted research and supervised the recommendation of medical cannabis to over 100,000 patients in 20 clinics across California. This acquisition is expected to aid in the quick development of the division and its product offerings.

SG Austria successfully completed Phase 2 clinical trials for the Cell-in-a-Box technology to treat inoperable pancreatic cancer; less than 20% of all treatments that enter clinical trials successfully complete Phase 2 and begin Phase 3 trials. Given Phase 3 funding, Nuvilex would be in very strong position. Gemzar, which is produced by Eli Lilly (LLY) is currently the only FDA approved treatment method and provides Eli Lilly with approximately $10 billion in annual revenue. Celgene (CELG) was recently given FDA approval for its pancreatic cancer treatment for its Abraxane treatment, though the drug only showed marginal improvement in survival rates and time compared to Gemzar.

Gemzar is a member of a group of chemotherapy drugs known as anti-metabolites. These drugs prevent cells from making DNA and RNA, which inhibits cell growth and causes the cells to die. In comparison, the live-cell encapsulation technology used in Nuvilex’s pancreatic cancer treatment works to protect and maintain living drug-activating cells in close proximity to the cancer and serves to optimize the cancer-killing effect of the well-known cancer drug ifosfamide when both are used in combination. In addition to its efficacy against the primary tumour, the live-cell encapsulation/ifosfamide combination treatment may also have significant effects against pancreatic tumor cells that have migrated to the liver where they can form new tumors.

The data from clinical trials for Nuvilex’s pancreatic cancer treatment technology demonstrated an average survival of 44 weeks versus 28 weeks for Gemzar and 36% 1-year survival rate versus 18% as well. The live-cell encapsulation technology from Nuvilex, in combination with ifosfamide, has demonstrated to be nearly twice as effective as Gemzar in clinical trials. Also, the beneficial effects of Nuvilex’s pancreatic cancer treatment were accompanied by no treatment-associated side effects; this is not the case with Gemzar as its use can be accompanied by very severe side effects. (source:

In late 2013, Nuvilex also acquired the exclusive worldwide rights to use the cellulose-based live-cell encapsulation technology for the development of treatments for diabetes from SG Austria. The company stated in a press release ‘Nuvilex’s decision to make the acquisition stems in large part from the results of “proof-of-principle” studies in which cells that produce insulin were transplanted into diabetic animals. The diabetic animals had much higher than normal levels of glucose in their bloodstream and had a difficult time controlling their glucose levels, just as humans with diabetes do. In animals provided with the encapsulated cells, their blood glucose levels normalized and remained stable for the duration of one six-month study, indicating the encapsulated cells produced insulin in response to their higher than normal blood glucose levels. The cellulose-based capsules seem to have prevented the encapsulated cells from being attacked by the diabetic animals’ immune systems, even in the absence of immunosuppressive drugs. Therefore, the encapsulated cells appear to have acted as an artificial or replacement pancreas.’

Financial position

The company currently has a cash balance of $396,590 and a total debt balance of $625,000. The company did not report any revenue in the last four quarters and has shown a cumulative net loss of $11,029,000.

In February 2014, Lincoln Park Capital (LPC) purchased 8 million restricted shares of Nuvilex in exchange for an initial $2 million. The purchase was made in order to advance NVLX’s late-phase pancreatic cancer clinical trials. LPC made an investment in Elite Pharmaceuticals in April 2013 that saw the company’s share price rise by 500%, and such a beneficial effect is expected from NVLX as it enters the late-phase clinical trials and applies for FDA approval (Market wired).

Value of the company

Table 1: Estimated value per share.


We estimate the Net Present value of the portfolio by first estimating the potential total market for each product offering. We then assume the potential market penetration after 3 years assuming the product is offered to the market in 2017. We assume a discount rate of 35% per year in order to incorporate the risk associated with the cash flows.

We assume that the company will observe a similar net profit margin as its competitors of 7.3% of revenue (NYSE: ECL, and NASDAQ: NATR). This gives us an estimated NPV of $423 million from the Pancreatic treatment and $315 million from the Diabetes market. Combined, we estimate a potential net present value of the company at $737.53 million.

At present, the company has 593.41 million shares outstanding, this gives us an estimated value per share of $1.24.

This gives a premium over the current market price of 240%. We therefore recommend that the stock should be a BUY.


Nuvilex, Inc. (OTC: NLVX), a biotechnology company, holds rights to use a proprietary cellulose-based live-cell encapsulation technology, known as Cell-in-a-Box, for the development of treatments for cancers and for diabetes worldwide. The company primarily focuses on the advancement of its treatment for advanced, inoperable pancreatic cancer that combines the Cell-in-a-Box technology with the anti-cancer drug ifosfamide. This treatment has completed Phase 1 and 2 clinical trials. The company, through its subsidiary, Medical Marijuana Sciences, Inc., uses constituents of Cannabis in developing treatments for cancer, particularly that are difficult to treat.

The IP portfolio that NLVX has, the stages of FDA approval, and the potential for the commercialization of the product pipeline, gives us an estimated price per share of $1.24. This leads us to recommend that the company should be a BUY.



This report may contain certain forward-looking statements and information, as defined within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and is subject to the Safe Harbor created by those sections. This material contains statements about expected future events and/or financial results that are forward-looking in nature and subject to risks and uncertainties. Such forward-looking statements by definition involve risks, uncertainties and other factors, which may cause the actual results, performance or achievements of mentioned company to be materially different from the statements made herein.


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