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Rosym   Monday, 11/13/17 12:05:09 PM
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HedgePath Pharmaceuticals - Undiscovered, Underfollowed, And Undervalued

SUBA-Itraconazole likely approved in the first half of 2019 for Basal Cell Carcinoma Nevus Syndrome; interim data looks extremely positive on efficacy and safety.

Potential best-in-class Hedgehog Inhibitor compared to Roche's Erivedge (vismodegib) and Sun Pharma's Odomzo (sonidegib), and a lot cheaper at an anticipated ~$60k/year vs. ~$150k/year for those drugs.

Equity capital raise, possible exchange uplisting from OTCQX, possible sell-side coverage, and initiation of second clinical trial in lung and/or prostate cancer in 2018 could all improve investor awareness.

Note: Be advised that this article contains medical imagery that some might consider graphic.


HedgePath Pharmaceuticals (OTCQX:HPPI) is a Tampa-based clinical stage biopharmaceutical company focused currently on repurposing the marketed antifungal drug itraconazole for new indications in oncology. HPPI recently announced enrollment completion of its Ph. II(b) trial of a proprietary SUBA-Itraconazole capsule in Basal Cell Carcinoma Nevus Syndrome (BCCNS). The company would like to file an NDA sometime in the second half of 2018 after a pre-NDA meeting with the FDA around the middle of 2018, barring any feedback from the FDA that suggests the Ph. II(b) data alone would not be sufficient for subsequent FDA approval. HPPI was granted Orphan Drug Designation for SUBA-Itraconazole for the treatment of patients with BCCNS in June 2016 due to a lack of any approved treatment for BCCNS currently.

HPPI was formed from the reorganization of Commonwealth Biotechnologies, Inc. following its exit from Chapter 11 voluntary bankruptcy in August 2013. Essentially, Commonwealth Biotechnologies was a corporate shell and private equity firm Hopkins Capital Group acquired the shell with a new business plan and focus on taking a long-used anti-fungal drug (itraconazole) and repurposing it for cancer treatment. HPPI currently trades on the OTCQX Market, though management could seek to uplist to the NASDAQ or NYSE.

As of 9/30/17, HPPI had ~370 million shares outstanding, and based on a closing price of $0.36/share on 11/7/17, the company's market cap is $133M. Assuming the exercise of all outstanding options and warrants, the fully diluted share count would be ~427 million and the company would receive an additional ~$6.4 million in cash proceeds from the exercises.

Itraconazole - Anti-Fungal Treatment and Now a Cancer Agent?

Itraconazole, a triazole antifungal sold by a number of generic companies now following Janssen Pharmaceuticals's patent expirations, is normally administered as capsules, tablets, or as an oral solution. It is widely used in the prevention and systemic treatment of a broad range of fungal infections, including aspergillosis, blastomycosis, candidiasis, and histoplasmosis. Importantly, Itraconazole is different from other azole antifungal agents in that it is the only inhibitor in this class that inhibits both the hedgehog signaling pathway (discussed later in the report) and angiogenesis. Quite a bit of clinical work with itraconazole has been conducted in dozens of trials over the years by various investigators in various cancers, including basal cell carcinoma (BCC), prostate cancer, Non-Small Cell Lung Cancer (NSCLC), breast cancer, ovarian cancer, and glioblastoma, just to name a few. Generally speaking, the conclusion from many of these trials, as best summarized in this journal article, was that itraconazole may be effective in cancer treatment either as monotherapy or in combination therapy, though certainly additional clinical work would be necessary to obtain FDA approval for such indications.

HPPI and Mayne Pharma Relationship

Shortly after HPPI was formed in August 2013, the company announced a Supply and License Agreement with Mayne Pharma International Pty Ltd (OTCPK:MAYNF), an Australian-based and ASX-listed specialty/generic pharmaceutical company, whereby HPPI was named the exclusive U.S. licensee of Mayne's SUBA-Itraconazole for the treatment of cancers and Mayne Pharma would be responsible for manufacturing its proprietary formulation of an improved version of itraconazole, termed SUBA-Itraconazole. Following a couple of rounds of equity financings in June 2014 and May 2015, HPPI began its Ph. II(b) clinical trial in BCCNS with SUBA-Itraconazole in September 2015.

The company recently announced that it completed its Ph. II(b) trial enrollment of 38 patients and was taking steps to lock the trial's database in preparations for a future meeting with the FDA in spring 2018 and, in all likelihood, a subsequent NDA filing in BCCNS thereafter. HPPI's regulatory strategy is driven by the 505(b)(2) regulatory pathway, given that itraconazole has already been approved for use in humans for anti-fungal applications and has a long history of safe and efficacious use in that regard and because the company is developing an improved version of itraconazole as an anti-cancer agent. HPPI either owns outright or has exclusive licenses regarding the use of SUBA-Itraconazole as an anti-cancer therapy as well as the manufacturing and composition of matter for SUBA-Itraconazole for anti-cancer therapy.

As stated before, HPPI is the exclusive U.S. licensee of SUBA-Itraconazole for the treatment of cancer from Mayne Pharma. While possibly a bit unknown here in the U.S., Mayne Pharma has a $1B market cap and generated ~$440M in revenue in its FY17 (ending 6/30/17), more than double its revenue in FY16. While Mayne Pharma has worldwide operations and revenue from many countries, it has been increasing its focus on the U.S. market over the past few years, especially in its generic division. It may be worth noting that Mayne Pharma is one of the defendants in the ongoing generic drug price-fixing litigation in the U.S. against many generic manufacturers.

Mayne Pharma's patented SUBA-Itraconazole is based on its SUBA (stands for "super bioavailability") drug delivery technology that:

1. Improves the solubility/absorption of SUBA-Itraconazole in the body and allows for 90% bioavailability vs. generic itraconazole's 55% bioavailability due to its polymer drug dispersion technology

2. Allows for SUBA-itraconazole absorption regardless of stomach acidity conditions or in patients with acid reflux and taking proton-pump inhibitors (such as Nexium or Prilosec)

3. Reduces the variability of SUBA-Itraconazole levels within and between patients compared to generic itraconazole

4. Allows SUBA-Itraconazole to be taken either with or without food or acidic beverages

Thus, all these factors contribute to SUBA-Itraconazole being well-suited for chronic use in treating cancer due to its improved absorption, predictable therapeutic levels and clinical response, and reduction in the active drug quantity needed to deliver the required therapeutic blood levels, which decreases the toxic side effects when compared to generic itraconazole.

Outside of the U.S., Mayne Pharma markets SUBA-Itraconazole in Australia as an improved anti-fungal treatment and has out-licensed it in over 15 countries around the world. One would expect Mayne Pharma or its license partners to seek regulatory approvals for SUBA-Itraconazole for cancer treatment indication(s) outside the U.S. following FDA approval, likely piggy-backing off of clinical work performed by HPPI in the U.S.

Beyond its role as the SUBA-Itraconazole manufacturer and supplier, Mayne Pharma is also the majority stockholder of HPPI and owns 53.4% of the common shares outstanding as of 9/30/17 and 51.7% of the company on a fully diluted basis assuming the exercise of all options and warrants. Mayne Pharma may terminate the Supply and License Agreement between HPPI and Mayne Pharma if HPPI fails to achieve regulatory approval to commercialize SUBA-Itraconazole in the U.S. by 12/31/18. The implications of these last two statements will be discussed towards the end of the report.

Basal Cell Carcinoma and Basal Cell Carcinoma Nevus Syndrome (BCCNS)

BCC accounts for ~80% of non-melanoma skin cancers diagnosed each year in the U.S., which means ~3.3 million BCC cases are diagnosed annually. BCC typically starts in the top layer of the skin and develops in areas regularly exposed to the sun and other forms of UV radiation, especially the neck and head areas. BCC is usually curable if the tumors are restricted to a small area of the skin, and surgical excision is the primary therapy used to treat BCC and has 5-year cure rates of 92-98%. Locally advanced BCC, or laBCC, refers to basal cancers that have not spread to other body parts but cannot be treated by surgery or radiation. It is estimated that laBCC occurs in 1%-10% of BCC patients, and that mBCC occurs in up to 0.5% of BCC patients. In HPPI's most recent 10-K, the company cites 65,000 BCC patients needing surgical treatment for facial tumors that require excision and potential plastic surgery, amounting to a $600 million potential market based on SUBA-Itraconazole's anticipated $5,000/month cost. Patients with mBCC have a median survival of 8 months.

BCCNS, sometimes referred to as Gorlin Syndrome or Gorlin-Goltz Syndrome, is a hereditary BCC disorder that affects an estimated 1 in 31,000 people. In the U.S., BCCNS is considered an orphan disease due to a patient population of just 10,000 people. The root cause of BCCNS is a genetic abnormality in the PTCH1 gene, which, for 90% of BCCNS patients, leads to a life-long formation of BCC tumors, often in the torso and facial areas (as seen in Figure 1), and numerous surgical excisions to remove such tumors. Repeated surgical excisions, especially those required in the facial region, are the standard of care in BCCNS and often lead to physical disfigurement and scarring. One of the primary characteristics of BCCNS is the development of multiple BCC tumors at an early age, often in adolescence, which is contrary to BCC, which often comes later in life after greater exposure to the sun during one's lifetime.

BCCNS is also responsible for the increased risk of development of other cancers early in a person's life, including medulloblastoma, breast cancer, non-Hodgkin's lymphoma, and ovarian cancer, not to mention other unique physical features as well (e.g., cleft palate, large head size, a protruding jaw, pitting in the palms of the hands/feet, skeletal abnormalities). Currently, there is no FDA approved therapy for BCCNS treatment, but since BCCNS patients may develop BCC symptoms much earlier in life than BCC patients, there is a great unmet need for a low-toxicity therapy to minimize surgical procedures and prevent new BCC lesions from forming. HPPI deems the BCCNS market to be a $300 million market opportunity in patients with High or Moderate tumor burdens (see Figure 2). Notably, this excludes the ~4,500 patients with Low Tumor Burden, which is almost half the 10,000 BCCNS patient population. It is unclear to what extent management thinks they can penetrate this Low Tumor Burden segment over time, but for starters, they are not including it in their initial total available market estimate.

Figure 2. Company's estimate of BCCNS Total Available Market (Source: HPPI's 8-K regulatory filing on 10/5/17)

Hedgehog Pathway

The Hedgehog signaling pathway transmits information to embryonic cells necessary for proper cell differentiation, growth, and survival. The appropriate activation of this molecular pathway plays an important role in the initiation, growth, and metastatic spread of many cancers, including both BCC and BCCNS, which represent the closest association with hedgehog signaling, as well as brain, GI, lung, breast, and prostate cancers. It is believed that abnormal activation of the hedgehog pathway leads to development of disease through the transformation of adult stem cells into cancer stem cells that give rise to the tumor.

Importantly, itraconazole inhibits the hedgehog pathway in a mechanism unique from other FDA-approved hedgehog inhibitors (vismodegib and sonidegib, discussed below). Furthermore, hedgehog signaling must be suppressed continuously to inhibit tumor development and growth. This is about as technical a discussion of the hedgehog pathway that is warranted for purposes of this investment article, but a more in-depth discussion of this pathway can be found here.

Competing Hedgehog Pathway Inhibitor Drugs

There are two Hedgehog Inhibitor oral drugs already approved for locally advanced BCC (laBCC) and/or metastatic BCC (mBCC): vismodegib and sonidegib.

Vismodegib (brand name: Erivedge) was developed by Genentech (a subsidiary of Roche (OTCQX:RHHBF)) and approved in January 2012 under the priority review program (i.e., six-month review time) of the FDA for patients with mBCC or laBCC that have recurred following surgery or who aren't candidates for surgery or radiation. Approval followed a single, single-arm Phase II trial with 104 patients enrolled and efficacy measured in 96 patients. The trial's primary endpoint was objective response rate (ORR), which measured 30% in patients with mBCC and 43% in patients with laBCC. All responses in the mBCC cohort (n=33) were partial responses. In the 63 patients with laBCC, 13 patients had complete responses (21%) and 14 patients had partial responses (22%). Adverse reactions occurring in more than 10% of patients were muscle spasms, alopecia (hair loss), dysgeusia (distorted taste), weight loss, fatigue, nausea, diarrhea, decreased appetite, constipation, vomiting, arthralgias (joint pain), and ageusia (loss of taste).

Grade 3 adverse reactions included weight loss, fatigue, muscle spasms, and decreased appetite. Of the patients in this trial, 21% were diagnosed with BCCNS, but importantly, 54% of these BCCNS patients dropped out of the trial due to intolerable side effects/toxicity. Vismodegib was the first FDA-approved drug for use in the advanced forms of the most common skin cancer (i.e., BCC). The recommended dose of vismodegib is one 150-mg capsule once daily, with or without food, and each capsule's average wholesale price (AWP) is $422 (or $154,000/year) vs. the initial price of $250/capsule. In 2016, vismodegib generated over $200M in worldwide net sales with 2/3 of this amount coming from the U.S. For what it's worth, here is the drug label for Erivedge.

Sonidegib (brand name: Odomzo) was developed by Novartis (and later sold to Sun Pharma in December 2016 for $175 million + milestone payments) and approved in July 2015 for laBCC that has recurred following surgery or radiation therapy. Similar to vismodegib, sonidegib was also approved after just a single, double-blinded Phase II trial (n=194 patients). There were two doses tested (n=66 @ 200mg and n=128 @ 800mg, both given once per day) in the sonidegib trial, but the higher dose had worse side effects/adverse events and more clinical discontinuations and dose interruptions from adverse events (not to mention a lower objective response rate of 45%), so only the 200 mg dose is FDA approved. As with vismodegib, the primary endpoint was objective response rate, and in the lower dose cohort of 66 patients, tumor reductions occurred in 38 patients (58%), three of which were complete response (5%).

Due to side effects and adverse reactions, 34% of patients in the 200mg cohort stopped treatment. At the 200mg approved dose, the most common side effects were muscle spasms, alopecia, dysgeusia, fatigue, nausea, diarrhea, decreased weight, decreased appetite, myalgia (muscle pain), abdominal pain, headaches, vomiting, and pruritus (itching). The recommended dose of sonidegib is one 200-mg capsule once daily on an empty stomach at least one hour before or two hours after a meal. Sonidegib's AWP cost per capsule is $402 (or $147,000/year). Odomzo revenue figures are a bit challenging to find, but the drug was apparently on an $80 million/year run rate in the U.S. as of 3Q16. For what it's worth, here is the drug label for Odomzo.

Additionally, both vismodegib and sonidegib come with a Black Box warning regarding embryo-fetal death and severe birth defects for pregnant patients. Neither vismodegib nor sonidegib are approved for BCCNS. It's also worth pointing out the low bioavailability of vismodegib (32%) and sonidegib (10%) in the body, which means higher-than-desired dosing is needed for efficacy, which also causes higher-than-desired side effects. By comparison, SUBA-Itraconazole has a 90% bioavailability.

Ph. II(b) Interim Data in BCCNS

As mentioned previously, HPPI recently completed enrollment of its open-label Ph. II(b) trial in BCCNS patients with its SUBA-Itraconazole oral capsule (150mg twice per day) at five treatment centers in the U.S. For those interested, here is the ClinicalTrials.gov database's webpage for HPPI's SUBA-Itraconazole BCCNS trial.

The primary endpoint of the trial is overall response rate (ORR) of BCC lesions up to 26 weeks, with a pre-specified threshold of 30% ORR. Secondary outcomes include safety/tolerance, duration of response, time to next surgical intervention, and number of new BCCs eligible for surgical removal, among others. Management previously released interim data updates in August 2016, October 2016, and May 2017 to go along with the recent update on Oct. 30, 2017.

Management expects to have top-line data available in December 2017 and, ideally, a pre-NDA submission meeting with the FDA around mid-2018. NDA submission would presumably soon follow this meeting at some point, barring any guidance from the FDA that is contrary to their feedback to date with the company, and assuming the final data package is consistent with the data the company has shared thus far.

HPPI enrolled 38 patients in the trial, and each patient was required to have at least 10 surgically eligible BCC tumors at the time of enrollment along with a history of prior BCC surgical excisions. In fact, the average patient in the trial had 195 BCC tumors removed from prior surgeries. In the Oct. 30, 2017, interim update, HPPI reported a 54% ORR (i.e., >30% reduction in tumor size) in 467 individual target tumors evaluated, including 28% of tumors that had a complete response (i.e., completely disappeared). Despite the extensive surgical history of the patients in the trial, just a single tumor of the 467 tumors analyzed required surgical excision.

Furthermore, the response rates has been quite durable, with 60% of responding lesions continuing to respond during ongoing treatment that exceeds one year on average. The patient dropout rate is just 11%, and the side effect profile has been very encouraging with no serious adverse events due to SUBA-Itraconazole or reports of hair loss, loss of taste, or disabling muscle cramps as seen with vismodegib and sonidegib, the other hedgehog inhibitors, in their trials. In its totality, this data seems quite superb: strong efficacy, a massive reduction in surgical excisions required vs. the patients' prior histories, and a relatively mild side-effect profile.

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