Innovation Pharmaceuticals Inc (IPIX)

[biodoc]

Biotech moves at what seems like a glacial pace but it is important not to take shortcuts to get to Phase 3. Phase 2 Prurisol was a limited proof of concept trial with extremely encouraging results. Optimization of dosage, however, was not achieved. Phase 2 trials involve fewer trial sites and much lower costs than pivotal Phase 3 trials. As a longterm investor, to me it makes more sense to better explore the strengths and limitations of Prurisol for mild, moderate, and severe plaque psoriasis before proceeding with Phase 3. If Leo can do a deal at this stage with good milestone payments then of course it makes sense to do the deal to reduce financial pressure. On the other hand, and ignoring all the folks who are clamoring for a deal tomorrow, Leo can greatly increase the value of a Prurisol deal by gaining additional information with at least one Phase 2b study.

Leo can address two huge markets. The first is the moderate/severe market which if I recall correctly addresses about 20% of psoriasis sufferers. Obviously, it's a crowded space with very expensive biologics and Celgene's orally available Otezla which is good but not great. Phase 2 data suggests that patients with moderate plaque psoriasis respond at a rate comparable to Otezla but with few side effects. A phase 2b could explore higher dose regimens (starting at 200mg/day) to explore the dose/response relationship and side effects. For all we know, 200 mg/day dose may just be touching into the range of efficacy or it may really be the sweet spot for dosing.

Second, the market for a well-tolerated oral treatment for mild psoriasis is huge and addresses a marginally met need. However, the trial design for studying treatment of mild psoriasis should, imo, not be based on a 2 point IGA reduction. A one point IGA improvement may be very satisfactory for those with mild disease. Perhaps more important is symptomatic relief for these patients. Was itching reduced? Are patients happy with the results compared to the many other treatments they have almost certainly tried? A Phase 2b for mild disease sets a different bar for success and symptomatic improvement in these patients opens a huge market for Cellceutix and a potentially much, much larger licensing opportunity.

One other note. The May 11 PR discussing the upcoming meeting with the FDA for hidradenitis suppurativa said the following:

Cellceutix previously filed the request, ultimately electing to hold off on clinical studies of Brilacidin for dermatological uses until several other clinical trials sponsored by the Company were completed or neared completion.

So Prurisol and Kevetrin have been completed. 'Several' makes me wonder if we are soon to hear something about B-OM. I may be reading into this too much.

It's biotech. Traders are gonna trade. Stock manipulation doesn't end with uplisting. The stock will move when many of us least expect it to and maybe not for any obvious reason. Leo is creating value with limited dilution and has established an enviable pipeline of potential products. In my mind, the biggest risk for Prurisol, Brilacidin, and Kevetrin is rushing into Phase 3 trials without having a good handle on dosing. Get it right in Phase 2a/b. It's worth it and I'm fine with waiting.