Interesting article just posted on Seeking Alpha by Terry Chrisomalis.
The highlights:
Summary
Upcoming phase 3 combination data of Pro-140 with optimized background therapy could change the landscape of HIV treatment.
Pro-140 has shown to be safe with fewer side effects, and has shown to suppress viral load in a lot of patients for over 2 years as a monotherapy.
Gilead has a combo regimen of its own for one pill per day, but still remains with a lot of side effects.
A new treatment option is desperately needed for patients on ART therapy, because of side effects.
CytoDyn may need to raise additional cash in the coming months to support its clinical development and potential BLA filing of Pro-140 pending positive phase 3 combination data.
This idea was discussed in more depth with members of my private investing community, Biotech Analysis Central.
CytoDyn (OTCQB:CYDY) is expected to release its interim phase 3 data in the coming weeks. That presents a good opportunity for those looking to invest in a highly promising biotechnology company. According to the company's conference call back on October 19th, the data would be forthcoming from 4 to 6 weeks from that date. That means that there should be an interim look into the efficacy of the phase 3 trial treating HIV patients using Pro-140 within the next few weeks.
Phase 3 Trial
The phase 3 trial is testing Pro-140 in combination with optimized background therapy in treatment-experienced HIV-1 patients. These patients must have the CCR5 tropic version of HIV. The trial is recruiting a total of 50 patients in which it will evaluate if the primary endpoint has been met. Enrollment is not complete, but the FDA stated that it would allow the company the opportunity to perform an interim analysis on the first 40 patients to determine if the primary endpoint has been met. That means that data from the other 10 patients will come a month or later thereafter. The most important item to consider now is whether or not the phase 3 primary endpoint is achieved. The primary endpoint is looking for a proportion of patients who achieve a ≥ 0.5 log10 reduction in HIV-1 RNA viral load from baseline at the end of 1 week of treatment with Pro-140 in combination with background therapy. This trial is testing Pro-140 as a combination therapy. The hope is that such a combination treatment will reduce the need for a patient to remain on single ART therapy alone. I believe that Pro-140 has a good chance at success for reasons that I will describe below.
Prior Data
Why I think the phase 3 trial stands at a good chance for success is because of the progress of the patients in the phase 2b extension study. It was shown that weekly treatment with Pro 140 SC mg suppressed HIV-1 RNA levels below 40 copies/mL for > 40 weeks in 81.3% of patients (13 out of 16) and for > 2 years in 62.5% of patients (10 out of 16). Remember, this phase 2b extension study is for Pro-140 as a single agent therapy (no combination added). The phase 3 trial noted above is for Pro-140 in combination with optimized background therapy. That means that the combination therapy, in theory, should be substantially superior. Then again, the results from the phase 2b monotherapy of Pro-140 also support development for approval. That is why CytoDyn is also running another phase 3 study with Pro-140 being given as a monotherapy only. The downside is that the phase 3 monotherapy study has to recruit up to 300 patients. For now, the key is to see if Pro-140 in combination with optimized background therapy meets on the primary endpoint. The upcoming phase 3 results will be key to the success of CytoDyn.
New Treatment
The best part about Pro-140 is that it is given as a once a week self injectable treatment at home. Think of these HIV patients right now, that have to take pills everyday for the rest of their lives to keep their viral load suppressed. Even then, ART therapy has severe toxicity and side effects. That makes treatment with ART barely tolerable for patietns to take. On the other hand, Pro-140 has negligible toxicity, and no serious side effects/serious adverse events observed in over 200 patients treated across 7 different clinical trials.
Competitor
The current big competitor is Gilead (GILD). This company is working on combo therapies in order to improve the HIV treatment landscape itself. It has seen some amazing results in terms of efficacy, but it still has one major problem. The combo treatment has a lot of side effects. The combo treatment from this big pharma may not have serious adverse events, but it has a lot of side effects. For example, Bictegravir alone has nausea and diarrhea as side effects. When I looked up tenofovir alafenamide some side effects shown were: Diarrhea, upper respiratory tract infection, fatigue, nausea, and rash. Looking up Emtricitabine I found that some side effects include: Tiredness, trouble breathing, stomach pain with nausea and vomiting, dizziness and several others. This compares to Pro-140 which is a monoclonal antibody that has no side effects at all. I would think that a patient with HIV would prefer one injectable shot of Pro-140 per week as opposed to having to take a single pill everyday. In addition, I would be inclined to believe that a patient would prefer treatment that is free of the side effects I noted above.
Market Opportunity
CytoDyn has listed the combination therapy with Pro-140, which is set to report the phase 3 study in a few weeks, as being a $5 billion dollar market opportunity. That leaves the monotherapy potential of Pro-140 as an $11 billion market opportunity. I think that Pro-140 has a good chance at success. For starters, all the data shown to date has shown that the treatment reduces viral load below 40 copies/mL. There are at least 9 patients that have completed 2.5 years with Pro-140 as a monotherapy alone. This Pro-140 drug was acquired from Progenics (PGNX), therefore CytoDyn has to pay it a 5% royalty on net sales according to the agreement made should Pro-140 be approved by the FDA. If the phase 3 results are good and CytoDyn hits the primary endpoint then I am expecting Gilead Sciences to either partner with the company or buy it out. Gilead has been doing okay, but has had recent troubles with its Hepatitis C franchise. I doubt that Gilead will allow a small company like CytoDyn to enter its turf without doing something about it. It could leave the small-cap biotech alone, but if it does that will likely cripple sales for Gilead in its HIV franchise. Which is why I expect a high chance of a buyout of CytoDyn should it meet the primary endpoint of the phase 3 combination study.
Financials
The problem with CytoDyn is that it is a small-cap biotech stock that trades on the OTC. It has limited cash, and therefore is a huge risk of possible dilution occurring after positive phase 3 data (should the results be positive). According to the most recent 10-Q SEC filing, the company had ended August 31, 2017 with cash of $0.9 million. As I have stated if the results are good, then it is possible to expect some type of cash raise. Although, on the other hand with good data the company could also easily seek out a big pharma partner to foot the bill thereafter. The main point now is it highly depends on the upcoming phase 3 results on what will happen for the company in terms of its financials and its future.
Risks
Of course, the first risk is the dilution I noted above as CytoDyn is low on cash. The bigger risk would be whether or not the phase 3 data will succeed. I have high hopes that the trial will meet the primary endpoint of the study. The risk is that the prior trials were done with a small group of patients, therefore there is a chance that the phase 3 trial may not succeed. That is a risk to keep in mind. Still, I like the risk/reward scenario a lot because if it does succeed then the stock price will gap higher in the short-term. Another risk is that the company is thinking of enacting a reverse stock split to uplist to a higher stock exchange, and move away from the OTC. If that happens then it is possible for shares of investors to be reduced greatly.
Conclusion
I have high hopes that CytoDyn should succeed in its combination phase 3 study. If anything, patients need Pro-140 as a new treatment option. Not only is compliance with an injection better, one treatment per week, but it has less side effects. If this company succeeds then it will change the landscape for HIV treatment and I believe that's worth the risk/reward scenario. If the trial fails I expect the stock to tumble down to $0.25 to $30 cents per share. If it succeeds I can see it heading to $1.20 to $1.50 per share in the short-term.
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Terry Chrisomalis runs the Biotech Analysis Central pharmaceutical investment research service on Seeking Alpha Marketplace. If you like what you read here and would like to subscribe to my service, I'm currently offering a two-week free trial period for subscribers to take advantage of. Only the first 25 subscribers will get the lower legacy rate. If you want to secure your spot, please do so as soon as possible.
Disclosure: I am/we are long CYDY.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
