New Stock Play from JBEM777: CYDY Currently at $1.18
This is going to be a good one.
From JBEM777.
Since completing my due diligence on AVXL and TPIV nearly a year ago, I have continuously searched for a company that possessed many of the same characteristics. A company that was unrecognized by the majority of investors, in the early stages of clinical development, had upcoming data that would act as an inflection point, and possessed the science that could represent a paradigm shift in a significant market. Unfortunately, many of the companies at this stage have significant flaws such as questionable trial results, limited preclinical data, difficulty obtaining financing, or the potential market for their indication fails to warrant a higher valuation. In hindsight, AVXL and TPIV were not “perfect.” They had outstanding warrants, difficulty obtaining financing at times, and were in ether very early stages of clinical development. However, what they possessed was enough positive attributes and a risk/reward ratio that heavily favored the potential for exponential gains. They had the potential to be game changers and for many investors, they were life changers.
I believe that the next company I have chosen is in the likeness of AVXL and TPIV. It is a fully reporting OTC, which makes it relatively immune from the whimsical movements of the larger indices. It is in the later stages of clinical development, with all clinical trials at the P2B or P3 level. If successful, which data strongly suggests, it will replace the current standard of care in HIV treatment, a market measured at over $16 billion. The current market cap is $96 million and there exists the potential for the drug to have FDA approval in early 2017 based on already receiving Fast Track Designation. An abstract has been accepted for the P2B data release in June at one of the most renowned HIV conferences. Another P3 trial was initiated in October 2015 and within 4-6 weeks, the company will be able to provide a specific timeline in regards to data lock and release. An Orphan Drug Designation application is currently pending for an additional indication and the company expects a response from the FDA within the next two weeks. In addition, P2B and P3 trials were recently initiated and will have data readouts in 2016 and early 2017. Within 2 years, the company possesses to potential to revolutionize HIV treatment, becoming the new standard of care.
Charlie Sheen, diagnosed with HIV, was recently of the T.V. show “Dr. Oz” with the CEO of the company discussing this treatment and indicated that he is actively seeking participation in the company’s clinical trial and that if accepted, his treatment would be documented on subsequent episodes of the show. Furthermore, the company was recently able to generate over $20 million in a recent financing, which is sufficient to fund current clinical trials. Warrants from this financing will also likely generate additional funds for the company. The ability of a small OTC company to generate funding in this current life science market is a commendable feat in itself.
Personal Trading Strategy for this Pick: In the near future, the company will be releasing data from its P2B HIV treatment clinical program. The company has indicated that they will release this data at the 2016 American Association of Microbiology conference on June 20th, 2016. This data will validate the companies HIV treatment and the CEO has specifically stated that he wanted the data to be released in the highest profile manner possible at a respected scientific conference. Additionally, the company is expecting to receive notice of their ODD application within the next 2 weeks for an additional indication that should act as a short term value driver. I intend to hold my position through this data release and potentially longer if investor sentiment remains positive. I will also trade aggressively based on stock trading patterns in order to grow an even more substantial position. If there are any fundamental changes or information that influences my investment thesis, I will likely liquidate my position.
Recent Trading Action: For much of the year, the company has been trading between $.65-.85. There was a recent spike in January, in which the price nearly doubled based on news of their application for Break Through Designation and additional positive data released by the company. These events coincided with the biotech implosion and much of those gains have since eroded, though the stock does possess the ability to move quickly with even the slightest buying pressure. Since the company’s conference call and comments from the CEO on March 25th, the company has begun what I expect to be a very drastic, upward move before any pullback. I attempted to complete the due diligence much earlier, but unfortunately my work schedule has caused me to travel over the Easter holiday and I now sit in a hotel room in Florida at 12 am trying to complete the due diligence. Travel and recent price movement have made it difficult to purchase, thus my current price average is $.87
I suggest creating an investment strategy, price targets, and identifying their risk tolerance prior to taking a position.
*I want to make it very clear that this company requested a reverse split at their 2015 shareholder’s meeting. It was approved, but despite 8 months having gone by, they have yet to complete a reverse split. This was addressed in the most recent conference call with the CFO. He essentially stated that the company would prefer to up list on the NYSE with the $2 listing requirement or the NASDAQ with a $4 listing requirement, based upon organic growth. In the conference call, he specifically stated, “Based upon what we believe we have progressing in the months ahead, we hope to achieve at least one of those thresholds organically and exercising a reverse split at this time is not our highest priority.” In reality, the company will do what they need to do to meet their goals. As we have seen with a myriad of other companies (AVXL), a reverse split and up-listing prior to significant data has created the opportunity for exponential gains. The possibility of a reverse split only increases my enthusiasm for this company given the upcoming catalysts.
Market Cap: $96 million
Catalysts In the coming weeks and months, the company intends to release multiple data sets as well as update investors on their recent Orphan Drug Designation application. On Dec 22nd 2015, the company applied for Orphan Drug Designation for the use of PRO 140 in Graft vs Host Disease (GvHD). At the present time 93 days have passed since the application has been submitted. Current reports indicate that the FDA is currently 30 days behind in their ODD approval process and thus ODD approval is expected in the very near future. This trial was recently initiated and data is expected later in 2016.
On June 20th 2016, the company will release the full data set from their P2B trial using PRO 140 as a monotherapy. This event will occur at the American Association for Microbiology conference that runs June 16th-20th. The company has been holding this data for a period and has sought out the largest audience to present these results. The title of the abstract is “PRO 140 Sc Monotherapy Provides Long-term, Full Virologic Suppression in Hiv Patients.” Furthermore, the abstract for this presentation will first become available to the public on May 16th. Of particular note, there are ten presentations relating to HIV at this conference. Six of the presentations will be presented by representatives from Gilead, who currently have the HIV treatment market cornered. The fact that CytodDyn will be presenting their data in the same forum and stage as Gilead is significant in its self.
When specifically asked about this data in the most recent conference call, the CEO replied, “Let me state on record, our P2B monotherapy data has surprised us, our key opinion leaders, and the inventor of PRO 140…It will change the HIV treatment paradigm.”
The next catalyst investors can anticipate is the release of P3 data in which PRO 140 is used as an additional component to current AIDS treatment. This is a 300 patient trial that was initiated in October 2015 and the company has stated that a definitive timeline for the data release will be provided in the next four to six weeks. Once enrollment is complete, the data will be un-blinded after one week and data analysis will occur. The announcement of trial completion and data release will allow investors to determine to elect to hold through this P3 data readout or sell prior to the release.
The company also recently initiated a P3 trial of PRO 140 as a monotherapy, which would replace the current standard of HIV treatment, the HAART regime. HAART stands for Highly Active Antiretroviral Therapy and includes the various regimes used to control the proliferation of the AIDS virus within the human body. There are multiple mechanisms through which the virus is able to infect and replicate itself and each regime is based upon a variation of the replication process. Data from this study will become available in 2017. Based upon P2B data, monotherapy of PRO 140 efficacy has the ability to reduce the viral loads of the HIV virus in 67% of all AIDS patients to nearly 0. Thus, for long term investors, this company represents a compelling investment.
It should be noted that this is the trial that Charlie Sheen would like to participate in if he meets the selection criteria. If he were to be selected and his treatment subsequently documented on “Dr. Oz,” this would bring significant attention to the company. Please note that the financial numbers indicated in the article have been updated later in the due diligence.
I would also like to add that the company recently filed for Break Through Designation for their PRO 140 mono therapy indication for HIV treatment resistant patients. This application was denied by the FDA because the company had not completed a specific study focused on this population. In creating the application, the company utilized a subset of data from their P2B trial and had not completed a small trial on this specific population. The FDA agreed that this population does qualify for BTD but that a specific trial was needed to support the application. The company has not decided whether or not to complete this trial. It is stated that in the recent conference call that a small trial would be required and they company anticipates it would cost $3-4 million to complete.
I will provide a comprehensive summary of the company’s science below, which will provide a greater understanding into the scientific potential of this company.
A timeline of the company’s upcoming milestones is presented below: Ownership Summary After completing a private placement offering in January 2016, CytoDyn. had a total of 117,907,621 shares outstanding, along with warrants outstanding to purchase an additional 54,461,379 shares with exercise prices ranging from $0.50 to $1.15 per share. Following the private placement in January 2016, the following excerpt from the S1 filed on February 3, 2016 summarizes the beneficial ownership of CytoDyn, which includes those who own more than 5% of the company’s outstanding shares, directors, and officers:
Beneficial Ownership Table
The following table sets forth the beneficial ownership of our common stock as of January 29, 2016, by (i) each person or entity who is known by us to own beneficially more than 5 percent of the outstanding shares of our common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all of our current directors and executive officers as a group.
Name and Address of Beneficial Owner (1) Amount and Nature of Beneficial Ownership (2)
Percent of Total (2) (3)
Owners of more than 5 percent: Alpha Venture Capital Partners, L.P. 9,847,359
(4)
8.2
Directors and Executive Officers: Carl C. Dockery 9,918,832 (4) 8.2
Jordan G. Naydenov 4,309,742
(5) 3.6 Nader Z. Pourhassan 1,457,018 (6) 1.2 Anthony D. Caracciolo 586,179 (7)
Gregory A. Gould 331,676 (8)
Michael D. Mulholland 376,043 (9)
A. Bruce Montgomery 121,336 (10)
Denis R. Burger 203,116 (10) All Current Directors and Executive Officers as a Group (8 persons) 17,303,942 14.1 Less than 1% of the outstanding shares of our common stock. Unless otherwise indicated, the business address of each current director and executive officer is c/o CytoDyn Inc., 1111 Main Street, Suite 660, Vancouver, Washington 98660.
(2)Beneficial ownership includes shares of common stock as to which a person or group has sole or shared voting power or investment power. Shares of common stock subject to options and warrants that are exercisable currently or within 60 days of January 29, 2016, are deemed outstanding for purposes of computing the number of shares beneficially owned and percentage ownership of the person or group holding such options, warrants or convertible securities, but are not deemed outstanding for computing the percentage of any other person.
(3)Percentages are based on 117,907,641 shares of common stock outstanding as of January 29, 2016.
(4)Carl C. Dockery, as the manager of the General Partner of Alpha Venture Capital Partners, LP, has voting and dispositive power over these shares, which include (i) 230,769 shares of common stock directly held by Alpha Ventures Capital Fund, L.P.; (ii) 7,243,740 shares of common stock directly held by Alpha Ventures Capital Partners, L.P.; (iii) warrants held by Alpha Ventures Capital Partners, L.P. that are exercisable for 2,372,850 shares of common stock; and (iv) 71,473 shares of common stock subject to options held by Mr. Dockery.
(5)Includes: (i) 4,097,242 shares of common stock directly held by Mr. Naydenov; and (ii) 212,500 shares of common stock subject to options.
(6)Includes: (i) 60,056 shares of common stock directly held by Dr. Pourhassan; (ii) 375,000 shares of common stock beneficially owned by Dr. Pourhassan’s wife; (iii) 750 shares of common stock held in a retirement portfolio; and (iv) 1,021,212 shares of common stock subject to options held by Dr. Pourhassan. Excludes 954,000 shares of common stock subject to options that vest depending on the achievement of certain strategic milestones specified by our Board of Directors and documented in the relevant award agreements.
While the 14.1% listed above includes some warrants which are not currently included in the outstanding share count, pages 17-23 of the S1 linked below shows the following table which includes several shareholders that acquired shares during the recent private placement:
It is very difficult to determine exact institutional and insider ownership from this table, as many of these lines are duplications of the same shares disclosing both individuals and entity names and they included warrants. However, knowing that at least 33 million shares were purchased by institutions and insiders during the recent private placement in addition to the previously held shares by beneficial owners, we can conservatively estimate that at least 35-40% of the outstanding shares are held by insiders and institutions.
To be frank, the financial situation of this company does not posses the same financial characteristics such as larger companies like CALA or TRVN. More money will be needed to continue trials and warrants will likely have to be exercised to help generate the funds, much like AVXL and TPIV. My psychological drift and selection of stocks over the last year has influenced the type of companies in which I have completed my due diligence. I first chose high risk OTC companies with the possibility of exponential growth to very stable IBB/XBI dependent stocks that possessed many positive attributes such huge institutional ownership and recent insider buying. The selection of this company represents a return to my roots. High risk, limited downside, and the potential for exponential gains, regardless of market condition. Much like CPXX, which recently move from sub $2 to over $12 with their data release, this company has data that will represent a treatment paradigm shift for HIV treatment on a global scale and I expect share price to move accordingly.
Financial Position At the quarter ended November 30, 2015, CytoDyn had $3.25 million cash on hand. However, during January 2016, the company completed a private placement offering using Paulson Investment Company as the placement agent under which the company raised a total of over $20 million in cash by offering 33M shares of common stock. Included with this offering were 16,669,331 warrants with an exercise price of $0.75. The exercise of these warrants would provide the company with an additional $12.5 million in cash. With its current burn rate of roughly $1.5 million per month, the company now has sufficient cash to fund operations into mid-2017. The company’s share sale agreement with Paulson Investment Company has now concluded and the company is no longer issuing shares.
This cash raise was an extremely important development for CytoDyn Inc. given their relatively low cash position at November 30, 2015. This raise provides the company sufficient capital to fund their operations for the foreseeable future, well into 2017 at a minimum, and allows management to focus on the clinical development of their pipeline. This private placement is also quite significant as the current market environment has made it extremely difficult for companies within the biotechnology sector to raise capital. The fact that CytoDyn, a relatively unknown company that trades on the OTC, was able to raise funds through a respected investment bank in a private placement offering speaks volumes about how much potential their pipeline holds.
Company CytoDyn Inc. is a clinical-stage biotechnology company focused on the clinical development and potential commercialization of humanized monoclonal antibodies to treat Human Immunodeficiency Virus (“HIV”) infection. Their lead product candidate, PRO 140, belongs to a class of HIV therapies known as entry inhibitors. These therapies block HIV from entering into and infecting certain cells.
The company believes that monoclonal antibodies are a new emerging class of therapeutics for the treatment of HIV. Seven clinical trials demonstrating safety and efficacy for PRO 140 have been completed. Based on positive results from CytoDyn’s most recent Phase 2B clinical trial, the FDA approved the protocol for their first Phase 2b/3 pivotal study for PRO 140 as an adjunct therapy and they commenced the Phase 2b/3 trial and dosed the first patient in October 2015. This clinical trial potentially represents the company’s first path to market approval for PRO 140 and if successful, FDA approval could be obtained in 2017.
As I have mentioned earlier in my due diligence, Gilead has much of the HIV treatment market cornered. They have been successful in combining multiple drugs into a single pill, minimizing the pill load that patients for their daily regime. It is important to note that they are combining the current standard of care into a “smaller” dose rather that creating an alternative to HAART therapy. Additionally, the criteria set forth by the FDA for Gilead’s clinical trials was a viral load of less than 50/ml, which means there can be less than 50 copies of the HIV virus in each milliliter of blood. As evidenced below, PRO 140 has been able to surpass this standard in the largest subgroup of HIV patients, reducing the viral load to zero in man patients. The significance of this cannot be understated. http://www.dailykos.com/story/2013/4/10/1200735/-Gilead-s-New-FDA-Approved-HIV-Drug-Improves-Nothing-So-Naturally-It-Costs-A-Lot If PRO 140 proves to be successful in clinical trials, which previous results strongly suggest, it has the potential to replace the current standard of treatment for many HIV patients, addressing a market measured over $16 billion.
As a cost saving measure, the company has utilized a number agreements and licensing arraignments to outsource the development of PRO 140. This information is detailed below.
PRO 140 Acquisition and Licensing Arrangements
CytoDyn acquired PRO 140, as well as certain other related assets, including the existing inventory of PRO 140 bulk drug substance, intellectual property, and FDA regulatory filings, pursuant to an Asset Purchase Agreement, dated as of July 25, 2012 (between CytoDyn and Progenics). On October 16, 2012, the company paid $3,500,000 in cash to Progenics to close the acquisition transaction. They are also required to pay Progenics the following milestone payments and royalties: (i) $1,500,000 at the time of the first dosing in a U.S. Phase 3 trial or non-US equivalent; (ii) $5,000,000 at the time of the first U.S. new drug application approval by the FDA or other non-U.S. approval for the sale of PRO 140; and (iii) royalty payments of 5% of net sales during the period beginning on the date of the first commercial sale of PRO 140 until. Subsequent to the fiscal quarter ended November 30, 2015, the company paid the $1.5 million of such expenses owed to Progenics as a result of the first dosing in a U.S. Phase 3 trial.
Payments to Progenics are in addition to payments due under a Development and License Agreement, dated April 30, 1999, between Progenics and PDL, which was assigned to CytoDyn in the PRO 140 transaction, pursuant to which CytoDyn has an exclusive worldwide license to develop, make, have made, import, use, sell, offer to sell or have sold products that incorporate the humanized form of the PRO 140 antibody developed by PDL under the agreement and must pay additional milestone payments and royalties as follows: (i) $1,000,000 upon initiation of a Phase 3 clinical trial; (ii) $500,000 upon filing a Biologic License Application with the FDA or non-U.S. equivalent regulatory body; (iii) $500,000 upon FDA approval or approval by another non-U.S. equivalent regulatory body; and (iv) royalties of up to 7.5% of net sales for the longer of 10 years and the date of expiration of the last to expire licensed patent. The payment to PDL in the amount of $1,000,000 has already been made, thus the company has met all financial requirements to initiate their P3 trials.
Effective July 29, 2015, CytoDyn entered into a License Agreement with Lonza Sales AG (“Lonza”) covering Lonza’s “system know-how” technology with respect to CytoDyn’s use of proprietary cell lines to manufacture new PRO 140 material. Instead of creating their own lab to create PRO 140, the company has utilized a third party contractor to manufacture their drug. The Lonza Agreement received payment of £600,000 (approximately U.S. $915,000 at current exchange rates) on December 15, 2015, and a second payment of up to an additional £600,000 will be made by June 30, 2016. Future annual license fees and royalty rate will vary depending on whether the manufacture PRO 140 ourselves, utilize the third-party licensor as a contract manufacturer, or utilize an independent party as a contract manufacturer. Subsequent to the fiscal quarter ended November 30, 2015, CytoDyn paid in full US$915,000 of such accrued expense to such third-party licensor.
Pipeline
PRO 140
PRO 140 is an antibody that has shown promise as a powerful anti-viral agent while not being a chemically synthesized drug, which means fewer side effects, lower toxicity and less frequent dosing requirements, as compared to daily drug therapies currently in use. The PRO 140 antibody belongs to a class of HIV therapies known as entry inhibitors that block HIV from entering into and infecting certain cells. PRO 140 blocks HIV from entering a cell by binding to a molecule called the C-C chemokine receptor type 5 (“CCR5”), a normal cell surface co-receptor protein to which certain strains of HIV, referred to as “R5” strains, attach as part of HIV’s entry into a cell. This strain is present in 67% of patients with HIV, representing the vast majority of patients throughout the world.
PRO 140 is an antibody, and through preliminary, short-term trials show it has demonstrated efficacy without issues relating to toxicity and autoimmune resistance. Moreover, these trials suggest that PRO 140 does not affect the normal function of the CCR5 co-receptor for HIV. Instead, PRO 140 binds to a precise site on CCR5 that R5 strains of HIV use to enter the cell and, in doing so, inhibits the ability of these strains of HIV to infect the cell without affecting the cell’s normal function. The R5 strains of HIV currently represent approximately 67% of all HIV infections in the U.S. As a result, the company believes PRO 140 represents a distinct class of CCR5 inhibitors with advantageous virological and immunological properties and may provide a unique tool to treat HIV infected patients.
The company believes PRO 140 is uniquely positioned to address a growing HIV market as an alternative or in addition to current therapies, which are failing primarily due to drug resistance. In seven clinical trials previously conducted, PRO 140 was generally well tolerated, and no drug-related serious adverse events, or SAEs, or dose-proportional adverse events, or AEs, were reported. In addition, there were no dose-limiting toxicities or patterns of drug-related toxicities observed during these trials. The results of these studies established that PRO 140’s antiviral activity was potent, rapid, prolonged, dose-dependent, and statistically significant following a single dose. Because PRO 140’s mechanism of action (for a monoclonal antibody use in HIV) is a relatively new therapeutic approach, it provides a very useful method of suppressing the virus in treatment-experienced patients who have failed a prior HIV regimen and need new treatment options.
To date, PRO 140 has been tested and administered to test subjects either intravenously or as a subcutaneous injection. If PRO 140 is approved for use as an injectable by the FDA, it may nonetheless be an attractive and marketable therapeutic option for patients with healthy CCR5, particularly in the following scenarios:
-Patients with difficulty adhering to daily drug regimens;
-Patients who poorly tolerate existing therapies;
-Patients with compromised organ function, such as HCV (hepatitis C) co-infection;
-Patients with complex concomitant medical requirements; and
-Patients who choose not to start their highly active antiretroviral therapy (“HAART”) regimen immediately after being infected with HIV.
PRO 140 has demonstrated potent (as compared to existing treatments) antiretroviral activity and an encouraging safety profile in prior clinical testing, and that PRO 140 has the potential to be the first long-acting (weekly or every other week), self-administered HIV therapy, and that PRO 140 inhibit CCR5-tropic HIV while preserving CCR5’s natural activity. CytoDyn believes PRO 140 represents a distinct class of CCR5 inhibitors with unique virological and immunological properties and may provide another distinct tool to treat HIV-infected subjects.
Ongoing HIV-related clinical trials, described in greater detail below, have been designed to demonstrate the proof of concept that PRO 140 monotherapy can reduce the viral load in certain HIV-infected, treatment-experienced patients. Once the viral load is undetectable, weekly administration of PRO 140 can help maintain the lower viral load in about 50% of patients over an extended period of time (currently shown to be over one year). Based on the preliminary results of such studies, we believe that a PRO 140 treatment option could address the unmet medical need for therapy options for certain HIV-infected patients with uncontrolled viral load, despite conventional HAART treatments.
To facilitate their self-funded and sponsored clinical research plans and trials, the company has engaged Amarex Clinical Research, LLC (“Amarex”), as the principal contract research organization, to provide comprehensive clinical trial management services.
Current Clinical Trials
PRO 140 is currently being studied in four ongoing clinical trials:
•
The first ongoing clinical trial is an extension study of our Phase 2b treatment substitution trial, which was initially completed in January 2015. Several patients are continuing in extension studies of this monotherapy of a weekly injection of PRO 140. Results from these extension studies thus far indicate some patients are now reaching 14 to 17 months of suppressed viral load achieved through a successful monotherapy of PRO 140.
•
The second ongoing clinical trial is a pivotal Phase 2b/3 trial for PRO 140 as an adjunct therapy to existing HAART drug regimens. This 25-week pivotal trial with 300 patients is ongoing.
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The third ongoing clinical trial is led by Dr. Jeffrey Jacobson, M.D., Professor of Medicine, Microbiology and Immunology, Chief, Drexel University College of Medicine (“Drexel”), who has conducted prior research relating to PRO 140, and is continuing to pursue one clinical trial on a population of substance abuse HIV patients, which is partially funded through one grant awarded to Dr. Jacobson by the National Institutes of Health. Pursuant to a clinical trial agreement with us, Drexel is now carrying the investigational new drug application relating to this clinical trial.
•
The fourth ongoing trial of PRO 140 was recently initiated with a Phase 2 study for GvHD.
Each of the foregoing trials are described in turn below, other than the Drexel study, which is being administered by Drexel pursuant to the clinical trial agreement mentioned above are therefore precluded from commenting. Since the commencement of the Drexel study, however, CytoDyn has identified several additional clinical indications (both HIV and non-HIV related) and has initiated the additional clinical trials described below, which address far broader patient populations than the Drexel study. Accordingly, they believe that the Drexel study, with its narrow clinical indication, is now no longer material to their future prospects.
Phase 2b Treatment Substitution Trial for HIV, as Monotherapy
The first Phase 2b clinical trial of PRO 140 commenced in May 2014. This Phase 2b trial, referred to as a “treatment substitution” trial, investigated PRO 140 as a short-term treatment substitution (as a monotherapy of PRO 140) for existing HAART drug regimens.
The treatment substitution trial had two primary objectives: (1) to assess the efficacy of PRO 140 monotherapy for the maintenance of viral suppression after being used in substitution of a patient’s HAART regimen, and (2) to assess the clinical safety and tolerability parameters for PRO 140 following use in substitution of HAART. The study protocol required patients to be stable on HAART with patient’s viral load not more than 400 HIV RNA particles per milliliter of blood for two consecutive weeks. The trial design provided that patients would be shifted from HAART regimen to PRO 140 monotherapy for 12 weeks. PRO 140 was administered as a 350mg subcutaneous dosage weekly and participants were monitored for viral rebound on a weekly basis. Total treatment duration with PRO 140 was up to 14 weeks with one week overlap of existing retroviral regimen and PRO 140 at the beginning of the study period and also one week of overlap at the end for subjects who did not experience virologic failure, defined as a viral load above 400 HIV RNA particles per milliliter of blood for two consecutive weeks. An independent Data Safety Monitoring Board (“DSMB”) was required to monitor the study to ensure patient safety and to assess efficacy. The DSMB operates in conformance with the FDA guidelines for its independence. DSMB’s management and oversight of the trial was successfully completed in January 2015.
The Phase 2b treatment substitution clinical trial results through January 2015, (excluding patients who failed and were categorized by two different third-party tropism tests as having “dual/mix” virus, which indicates the presence of a combination of different strains of the virus and/or a strain that utilizes a different “CXCR4” coreceptor):
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98% of the patients passed 4 weeks of monotherapy;
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91% of the patients passed 6 weeks of monotherapy;
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82% of the patients passed 8 weeks of monotherapy; and
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70% of the patients passed 11 weeks of monotherapy (maximum allowable monotherapy without an extension study)
.
Because only patients who have HIV R5 virus exclusively can benefit from PRO 140, prior to enrollment in the study, each patient was required to take a DNA tropism test to determine whether the strain of HIV present in the patient was exclusively the R5 strain, making the patient a suitable candidate for PRO 140 therapy. The tropism test, however, is not accurate in patients with an undetectable viral load, which was one of the primary inclusion criteria for the Phase 2b trial. The occurrence of a number of viral rebounds due to inaccurate tropism screening, as demonstrated in the trial data, was not unexpected.
Phase 2b Extension Study
The extension study of the initial Phase 2b trial was designed to evaluate the efficacy, safety, and tolerability of PRO 140 monotherapy for the maintenance of viral suppression in subjects who completed 12 weeks of monotherapy in the initial Phase 2b treatment substitution trial without experiencing virologic failure. The objectives and endpoint definitions are the same for the Phase 2b extension study as they were for the initial Phase 2b treatment substitution trial, except that patients in the extension study were trained for weekly self-injection to be administered at home, and their viral load was monitored initially on a bi-weekly basis and then on a monthly basis later in the study.
For the Phase 2b extension study, 19 subjects were screened for participation and 16 were allowed to enter. 14 patients successfully passed 29 weeks PRO 140 monotherapy. Out of these 14 patients, 11 patients are currently ongoing and have completed up to 14 to 17 months of PRO 140 monotherapy without experiencing virologic failure (defined, as in the initial study, as a viral load above 400 HIV RNA particles per milliliter of blood for two consecutive weeks). Three patients discontinued the extension protocol due to either violating protocol design or missing weekly treatments. The trial is ongoing.
Of particular note, during this P2B study, the company identified the ideal PRO 140 concentration (Lc90) and patient population in which their drug is the most effective, those with the CCR5 variation of the AIDS virus. Within this sub group that has continued to participate in the extension trial, the virus has all been eradicated within their blood steam. Viral suppression, as considered by the FDA is a viral load >50 copies of the virus and was the threshold set for Gilead in the creation of their new QUAD4 pill, which is the current standard of care for HIV. Thus, as evidenced below, PRO 140 has the ability to provide superior viral load reduction with a once weekly injection.
Having established PRO 140 as a safe and efficacious substitution therapy in the Phase 2b trial and following the FDA’s clearance of a new trial protocol, CytoDyn initiated in mid-2015 a pivotal Phase 2b/3 trial for PR 140 as an “adjunct therapy” to existing HAART drug regimens. This 25-week pivotal trial with 300 patients is ongoing and the company will have a more efinintive timeline for the data release in 4-6 weeks. Data is anticipated by the 3rd quarter. They believe that, upon successful completion of this Phase 3 study, they will have the opportunity to seek accelerated approval for PRO 140 based on previously granted FDA fast-track candidate designation.
The Phase 3 adjunct therapy trial is designed to allow PRO 140 as a component of a HAART regimen for treatment experienced patients. HAART is the current standard of medical care for individuals with HIV. The study population includes treatment-experienced HIV-infected patients with CCR5-tropic virus with documented genotypic or phenotypic resistance to antiretroviral drugs within one or more drug classes, which is a second-line therapy, with additional conditions to include patients who have demonstrated evidence of HIV replication despite ongoing antiretroviral therapy and have limited treatment options. The treatment options may be limited as a result of drug antiretroviral class cross-resistance, documented treatment intolerance, potential for hypersensitivity to one or more antiretroviral drugs, or potential drug interactions with treatment for co-morbid conditions. Subjects will have two or more fully active, approved drugs available for construction of a viable alternative option.
Phase 2 Trial for Graft versus Host Disease
In June 2015, CytoDyn announced that recent Company-sponsored research data has expanded the potential clinical indications for PRO 140 to include certain inflammatory diseases, autoimmunity, transplantation and cancer.
The CCR5 receptor is expressed on a variety of cells that play a central role in inflammatory responses. The receptor is activated by a chemokine mediator called CCL5, which has been shown to be a central figure in many inflammatory disease processes. Blocking the interaction of CCL5 with the receptor CCR5 is believed to be of therapeutic benefit. PRO 140 targets the CCR5 receptor, binding to it in a way that prevents HIV from using it as an entry gateway without activating the immune function of the receptor. Recent research data indicate that PRO 140 also interferes with activation of the receptor by the mediator CCL5.
Following new research data relating to PRO 140’s mechanism of action, in October 2015, the company filed with the FDA an investigational new drug (or “IND”) application and a full protocol for a Phase 2 clinical trial for a transplantation indication called Graft versus Host Disease (or “GvHD”), as their first non-HIV clinical indication. GvHD is a life-threatening complication for patients undergoing stem cell transplants. The CCR5 receptor, the target for PRO 140, is an important mediator of GvHD, especially in the organ damage that is the usual cause of death. The only approved CCR5 inhibitor, Maraviroc, is currently in a Phase 2 study for GvHD indications, and results are expected in 2016. They believe that PRO 140 has significant advantages over Maraviroc in more favorable dosing and pharmacokinetics, less toxicity and side effects, and no direct stimulation (agonist activity) of the CCR5 receptor.
In December 2015, the company received clearance from the FDA to conduct a Phase 2 trial to evaluate the safety and efficacy of PRO 140 for prophylaxis of acute GvHD in patients with acute myeloid leukemia (“AML”) or myelodysplastic syndromes (“MDS”) undergoing allogeneic stem-cell transplantation. The trial is a 100-day study with 60 patients and was initiated earlier this year.
In late December 2015, they announced that they had filed with the FDA for designation of PRO 140 as an “orphan” drug, in connection with their GvHD Phase 2 trial. Designation as an “orphan” product provides potentially faster pathways to approval and other financial incentives for drugs and biologics that are intended for the safe and effective treatment, diagnosis or prevention of rare diseases or disorders that affect fewer than 200,000 people in the U.S.
Management
Nader Z. Pourhassan, Ph.D., President and CEO
Dr. Pourhassan became was named President and CEO of CytoDyn in September, 2011. Prior to that he served as the Managing Director of Business Development since June 2011. Prior to joining the Company from 2006 to 2008, Dr. Pourhassan was an instructor of Mechanical Engineering at The Center for Advanced Learning in Oregon, and from 2005 to 2006 was an instructor at Mount Hood Community College. After being an instructor in engineering and mathematics, he became a successful businessman while managing a family-owned export/import and manufacturing business. After Dr. Pourhassan became aware of the economic and humanitarian potential of Cytolin® — CytoDyn’s novel immune therapy for treating HIV/AIDS, he made it his priority to bring his considerable scientific, marketing, and management skills to CytoDyn as the Chief Operating Office in 2008.
Denis R. Burger, Ph.D., Vice Chairman and Chief Science Officer
Dr. Burger was appointed a Director in February 2014, named Vice Chairman in August 2014 and Chief Science Officer in January 2016. He is a life sciences executive with over 30 years of extensive scientific, operational and financial experience in the biotech industry. As CEO or chairman of several biotechnology companies, Dr. Burger has led numerous corporate financing transactions and public securities offerings and has experience leading R&D, GMP manufacturing and clinical development functional areas. Dr. Burger is currently a Director of Aptose Biosciences Inc., a cancer therapeutics, NASDAQ-listed company. Dr. Burger co-founded Trinity Biotech, a NASDAQ-listed diagnostic company, in June 1992, served as its Chairman from June 1992 to May 1995, and is currently lead independent director. Until March 2007, he was Chairman and Chief Executive Officer of AVI Biopharma Inc. (now Sarepta Therapeutics), a NASDAQ listed RNA therapeutics company. He was also a co-founder of Epitope Inc. (now Orasure Technologies, NASDAQ listed), serving as its Chairman from 1981 to 1990. Dr. Burger previously held a professorship in the Department of Microbiology and Immunology and Surgery (Surgical Oncology) at the Oregon Health and Sciences University in Portland
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Michael D. Mulholland, Chief Financial Officer, Treasurer and Corporate Secretary
Mr. Mulholland brings to CytoDyn more than 25 years of senior level financial leadership for public companies in the business services, retail and manufacturing industries. His broad experience includes strategic planning, corporate finance, including raising debt and equity capital, acquisitions, corporate restructurings, SEC reporting, risk management, investor relations and corporate governance matters. In addition to his financial management experience, Mr. Mulholland has also managed IP-asset development for the chemical inventions of a leading European scientific inventor for improving human health, working with IP counsel to evaluate and prosecute domestic and foreign patent applications. Most recently, from 2011-2012, he served as Chief Financial Officer of Nautilus, Inc., a NYSE-listed developer and marketer of fitness equipment. He previously was Co-Chief Financial Officer of Corporate Management Advisors, Inc., a private holding company of various businesses and investments, including a majority interest in a publicly held manufacturing company, from 2010 to 2011; Vice President of Finance of Gevity HR, Inc., a former Nasdaq-listed professional employer organization, from 2008 to 2009; Chief Financial Officer and Secretary of Barrett Business Services, Inc., a Nasdaq-listed business services firm, from 1994 to 2008; and Executive Vice President, Chief Financial Officer and Secretary of Sprouse-Reitz Stores Inc., a former publicly held retail company, from 1988 to 1994.
Nitya G. Ray, Ph.D., Senior Vice President - Manufacturing
Nitya G. Ray, Ph.D. joined CytoDyn in November, 2015 and is responsible for Process Development, Manufacturing, Supply Chain and Quality. Dr. Ray is an accomplished leader with 30 years of progressive, hands-on experience in diverse manufacturing platforms and product development, including biologics, antibody drug conjugates, engineered tissue therapeutics, small molecule and radiopharmaceutical drugs. Prior to joining CytoDyn, Dr. Ray served as Senior Vice President of Manufacturing at Progenics Pharmaceuticals, Inc. where he was responsible for Process Sciences, Manufacturing and Quality control. Prior to that, he served as Director of Bioprocess Development at Ortec International and held positions of increasing responsibility at Hoffmann-La Roche in the areas of GMP manufacturing and process development for engineered tissue therapeutics and biopharmaceuticals, and at Verax Corporation where he developed process technology for biopharmaceutical manufacturing.
Board of Directors
Anthony D. Caracciolo, Chairman
Mr. Caracciolo was appointed Chairman in June 2013, previously serving as a Director since December 2011. He also serves as Chair of the Compensation Committee. Mr. Caracciolo was formerly employed at Gilead Sciences, Inc. ("Gilead"), a research-based biopharmaceutical company that discovers, develops and commercializes innovative medicines in areas of unmet medical need, from 1997 until retiring in October of 2010. During his tenure, Mr. Caracciolo served as Senior Vice President, Manufacturing and Operations and was a senior member of Gilead's executive committee, which was responsible for the strategic and operational direction of Gilead. During Mr. Caracciolo's tenure at Gilead, Gilead grew from 300 employees to approximately 4,000 worldwide, with commercial activities in 38 countries. In addition, Gilead's sales rose from $200 million to over $7 billion. While at Gilead, Mr. Caracciolo had responsibilities of directing operational and strategic imperatives for two manufacturing sites, development of a portfolio of contract manufacturing organizations, producing over fifty percent of Gilead's commercial products, informational technology, compliance assurance associated with aseptic processing, product development, optimization, technology transfers, and supervision of over 600 employees at six global locations.
Nader Z. Pourhassan, Ph.D., President and CEO
Denis R. Burger, Ph.D., Vice Chairman and Chief Science Officer
Carl C. Dockery, Director
Mr. Dockery was appointed as a director of the Company on September 26, 2014. Mr. Dockery is a financial executive with over 30 years of experience as an executive in the insurance and reinsurance industry and more recently in 2006 as the founder of a registered investment advisory firm, Alpha Advisors, LLC. Mr. Dockery's 20-year career as an insurance executive began in 1988 as an officer and director of two related and closely held insurance companies, including serving as secretary of Crossroads Insurance Co. Ltd. of Bermuda and as vice president of Gulf Insurance Co. Ltd. of Grand Cayman. Familiar with the London reinsurance market, in the 1990s, Mr. Dockery worked at Lloyd's and the London Underwriting Centre brokering various types of reinsurance placements. Mr. Dockery graduated from Southeastern University with a Bachelor of Arts in Humanities.
Gregory A. Gould, CPA, Director
Mr. Gould currently serves as Chair of the Audit Committee and previously served as CytoDyn’s Chairman of the Board from July 2012 until June 2013. He has been a Director since March 2006 and a member of the company’s Audit Committee and Compensation Committee since May 2006. Mr. Gould was appointed Chief Financial Officer, Treasurer and Secretary of Ampio Pharmaceuticals, Inc. (NYSE MKT: AMPE) in June 2014. Prior to joining Ampio, he provided financial and operational consulting services to the biotech industry through his consulting company, Gould LLC from April 2012 until June 2014. Mr. Gould was Chief Financial Officer, Treasurer and Secretary of SeraCare from November 2006 until the company was sold to Linden Capital Partners in April 2012. During the period from July 2011 until April 2012, Mr. Gould also served as the Interim President and Chief Executive Officer of SeraCare Life Sciences. Mr. Gould has held several other executive positions at publicly traded life sciences companies including the Chief Financial Officer role at Atrix Laboratories, Inc., an emerging specialty pharmaceutical company focused on advanced drug delivery. During Mr. Gould’s tenure at Atrix, he was instrumental in the negotiation and sale of the company to QLT, Inc. for over $855 million. He also played a critical role in the management of several licensing agreements including the global licensing agreement with Sanofi-Synthelabo of the Eligard® products. Mr. Gould was the Chief Financial Officer at Colorado MedTech, Inc., a publicly traded medical device design and manufacturing company where he negotiated the transaction to sell the company to KRG Capital Partners.
A. Bruce Montgomery, M.D., Director
Dr. Montgomery was appointed as a director of the Company on September 27, 2013. Dr. Montgomery is a prominent biotech entrepreneur with an extensive background in product development and clinical studies. He is currently the Chief Executive Officer of Cardeas Pharma Corporation, a biotechnology firm focused on treatment of multidrug resistant bacteria causing pneumonia in patients on ventilation. Before joining Cardeas Pharma Corporation in 2010, Dr. Montgomery founded and was the Chief Executive Officer of Corus Pharma, Inc., a development stage pharmaceutical company, from 2001 until 2006. In 2006, Gilead acquired Corus Pharma, Inc., and Dr. Montgomery continued at Gilead, serving as Senior Vice President, Respiratory Therapeutics, from 2006 until 2010. He previously held positions in clinical development with PathoGenesis Corporation and Genentech. Dr. Montgomery is a board member of Alder Biotherapeutics and a Trustee for the Washington State Life Sciences Discovery Fund. He has previously served on the boards of ZymoGenetics, Inc., Pacific Science Center, and the Washington State Biotechnology BioMedical Association. Dr. Montgomery brings extensive pharmaceutical research, development, and patent experience to the Board, as well as his skills in fundraising and as a serial entrepreneur.
Jordan G. Naydenov, Director
Mr. Naydenov has been a Director of the Company since June 2009. Mr. Naydenov emigrated to the U.S. in 1982 from Bulgaria where he was a competitive gymnast. Mr. Naydenov purchased a gymnasium, Naydenov Gymnastics, which he parlayed into a successful business, and sold in 2005. Since 2001, he has served as the Vice President and a Director of Milara, Inc., since 2006 he has served as the Treasurer of Milara, Inc., and since 2006, he has served as a Director of Milara International. Milara Inc. and Milara International are leading providers of stencil and screen printing systems for the surface mount and semiconductor industries.
World - Class HIV Expert Advisors and Partnerships (These people Advise on CytoDyn Trial Deisgn)
John Toole, MD, PhD - Formerly with Gilead, Head of Truvada team
Robert Schooley, MD - Professor of Medicine, Chief of Division of Infectious Diseases, Academic Vice Chair Department of Medicine, University of California, San Diego
Paul Maddon, MD, PhD – Inventor of PRO 140; discovered CD4 and CCR5 interaction with HIV, Trustee of Columbia University
Technical Analysis
The trading pattern during the last few years suggest that the stock has been in an extended consolidation pattern.
The stock has declined from February spike, however, the stock has started moving sideways near the support line, which shows that the stock is consolidating well in these trading ranges.
Share price is currently trading right below key moving averages in daily/weekly charts. However, the charts show the presence of strong bullish patterns, which will be discussed in greater detail.
This stock is known to make strong Intraday/day moves. Using right indicators holds the key for technical analysis of this stock. Channel and Candlestick analysis can work excellent in working out exit strategy.
Given the impending catalyst, this stock has ability to provide significant gains. When taking into the account the trading pattern over the previous years, much like AVXL and TPIV, a significant catalysts is often all that is needed to start a significant move. Money flow, accumulation pattern, and sideways movements suggest the same.
Daily chart
Given the market conditions, this stock appears to be consolidating well around $.80 range. Technical indicators are healthy enough, that could provide some decent gains.
Trendline
CytoDyn has a strong price channel continuation which is visible in daily/weekly charts.
As you can see, price has been advancing and trading within the channel. This trend is considered bullish. The first warning of a trend change occurs when prices fall short of support line, and retest of new resistance. This channel continuation is very strong as you could see stock testing support/resistance lines, multiple times in a year.
Analyzing volume changes, and money flow, further affirm that accumulation has been occurring for a number of months.
MACD – As you can see from below chart, MACD histogram has crossed the zero line, suggesting movement of the MACD line above signal line.
If we look at RSI, there are very few instances in last 1 year, when this stock has acted like a momentum stock, pushing RSI below 20 or above 80 mark. The tendency for the stock to run with momentum is lower, although, probable.
Weekly chart
As clearly evidenced above, this stock has been consolidating for an extended duration. Given the upcoming catalysts, it does appear that fundamental developments may contribute to a potential upward movement.
Impact from sector fluctuations
Biotech started 2016 up more than 200% over the last 5 years, compared to the Nasdaq composite’s 85%, and some valuations were quite rich. That’s made bio/pharma an easy target for the “risk-off” mentality that’s impacting the broader markets. The biotech industry has corrected itself significantly in the last few months, and currently, appear to be in consolidation phase.
Due to the fact that CytoDyn hasn’t been following the sectors that have been trending over the years, which usually provides for the volatility of most OTC companies, the company stock has been rather illiquid and not influenced by large moves in the by the larger indices.
Summary
In the coming days, weeks, and months CytoDyn will be releasing data that could potentially revolutionize HIV treatment paradigm, creating a new standard of care. If successful, 67% of HIV patients will be able to replace their toxic, daily pill regime with a once weekly, self-administered injection. Data from the P2B will be presented at one of the largest scientific conferences on June 20th, with an abstract to be released on May 16th. ODD is expected at any time for the company’s second indication, GvHD and this should also act as a significant value driver. For frame of reference, the Alzheimer’s drug market is measured at approximately $3 billion per year, while the HIV market is assessed at $16 billion in the US alone. AVXL is currently trading at a market cap twice the size of CytoDyn while in earlier phase trials. With a market cap under $100 million and the possibility of replacing the standard of care in such a large market, CytoDyn is grossly undervalued by any standard. Fast Track Designation also creates the opportunity for PRO 140 to come to market in 2017. Additionally, if Charlie Sheen were to meet criteria for inclusion into this study and his treatment were to be documented on “Dr. Oz,” CytoDyn would become a very well-known company in a short amount of time. Furthermore, the recent capital raise of over $20 million ensures that the company has the ability to fund its current clinical trials well into 2017. While a reverse split is a possibility I expect it to be of little consequence and perhaps a value driver, much like AVXL, if data is overwhelmingly positive.
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Disclaimer:
I have never been paid or compensated by anyone for any stock I have ever traded, discussed, or blogged. Anything stated otherwise is false. I am held accountable to this statement by the SEC as any stock promoters, writers, or bloggers who do not disclose payment are in violation of the law. None of the information shared is to be construed as financial or investment advice. This information is not to be construed as an offer to buy or sell any security mentioned. All statements written are believed to be accurate. I strongly encourage you to do your own due diligence and consult an investment professional before making any investment decision. Acting on what any one writer, including myself has imparted to you is foolish. There are a plethora of things which can occur in lieu of any forward-looking statement I have made. Any stock in which I complete due diligence is subject to all manner of influences, which can change its value in dramatic fashion upwards or downwards.
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