Great RLFTF article out today: Relief Therapeutics Discovers A Promising COVID-19 Killer Aug. 11, 2020 9:25 AM ET|19 comments | About: Relief Therapeutics Holding AG (RLFTF), Includes: ATHX, CTSO, CYDY, GILD, HGEN, INO, MESO, MRNA, NVAX, VIR Summary Relief Therapeutics is in advanced clinical trials with their drug RLF-100 which aims to halt COVID-19 and reverse its devastating effects;
Just-released Compassionate Use results showed stunning results: ventilator-dependent Covid-19 patients with deadly co-morbidities coming off the ventilator and returning home in only five days after treatment with RLF-100;
Relief Therapeutic's RLF-100 is both easy to manufacture at scale and inexpensive, meaning that success in clinical trials could translate to rapid worldwide production and availability;
If in-progress clinical trials reflect the Compassionate Use results, RLF-100 will likely garner immediate approval and shares could go much higher.
Relief Therapeutics Holdings AG (OTCPK:RLFTF) is a Swiss Company that trades on the U.S. OTC Exchange in addition to its Swiss Stock Exchange Listing (RLF). Only a week ago, Relief Therapeutics was trading under .10 per share. It was the rediscovery of the properties of their drug RLF-100, a proprietary synthetic form of Vasoactive Intestinal Polypeptide (VIP) also known as aviptadil, which has led to the justifiable interest in the company.
In a previous article, I described my rationale for following potential Covid-19 therapeutics over potential vaccines, and the progression of the disease from viral to immunologic that has served to categorize the various approaches to fighting Covid-19 and its effects. I won’t repeat that discussion here, as I'm eager to get to the point that Relief Therapeutics’ drug is the most promising that I have encountered to tackle Covid-19 in four months of research.
Let’s start with the latest results, then get to the science, followed by Relief Therapeutics’ corporate structure, management and balance sheet.
The Results So Far On August 2, 2020, Relief Therapeutics announced a report from doctors at Houston Methodist Hospital that RLF-100 “showed rapid recovery from respiratory failure in the most critically ill patients with COVID-19.”
At the same time, unaffiliated independent researchers working in Brazil reported that VIP inhibits the replication of SARS-CoV-2 virus in human lung cells and immune cells.
The release from Relief and NeuroRx further stated:
The report describes a 54-year-old man who developed COVID-19 while being treated for rejection of a double lung transplant and who came off a ventilator within four days. Similar results were subsequently seen in more than 15 patients [emphasis mine] treated under emergency use IND and an FDA expanded access protocol, which is open to patients too ill to be admitted to the ongoing Phase 2/3 FDA trial.
Patients with Critical COVID-19 were seen to have a rapid clearing of classic pneumonitis findings on x-ray, accompanied by an improvement in blood oxygen and a 50% or greater average decrease in laboratory markers associated with COVID-19 inflammation.
Professor Jonathan Javitt, Chairman and CEO of Relief’s U.S. partner NeuroRx stated,
No other antiviral agent has demonstrated rapid recovery from viral infection and demonstrated laboratory inhibition of viral replication.
Per the pre-print report authored by doctors at the Houston Methodist Pulmonary Transplant Center and the Houston Methodist Department of Academic Pulmonology, the patient was suffering from rejection of his double-lung transplant, and then on top of this was diagnosed with COVID-19. Despite the use of all currently available therapies (with the exception of Remdesivir due to the patient's chronic kidney disease), the patient’s condition continued to decline. Within 24 hours of treatment, substantial improvement in oxygen saturation and radiographic improvement in characteristic COVID-19 pneumonitis was noted. He was discharged from intensive care in 5 days after the third infusion and went home on room air.
I read this paper numerous times, because what is specifically so promising to me is the patient’s initial condition and of course their rapid recovery time. Double lung transplant rejection and COVID-19 seems to have been vanquished at the same time by RLF-100.
Could this mean that RLF-100 might have a role in preventing transplant rejection as well? The paper’s authors indicate they think so. They write:
VIP may have been particularly beneficial in the setting of AMR [Antibody-Mediated Rejection] following lung transplantation based on prior reports that VIP preserves the function of lung allografts. VIP is a potent anti-cytokine in the lung that provides key defense against numerous forms of acute lung injury.
If this is the case, we are talking about an additional important role for RLF-100, AMR. This is a situation that can occur with organ transplants, such as lungs, liver, and kidney, causing organ failure. But right now, the focus necessarily must be on COVID-19.
We need clinical trial results to make an educated decision about whether RLF-100 can be successful in fighting COVID-19. Recent results from the expanded access trial have been stunning and very exciting. Further confirmation could be an absolute victory for the world. Not only could we have a drug that can vastly reduce death and disability from COVID-19, Relief Therapeutics reports that RLF-100 is relatively easy to produce, and far less expensive than many competing therapeutics. This means a drug with rapid global availability and accessibility, even impoverished nations with a vast need for cost-effective medications.
Aviptadil has seen prior success in ARDS induced by sepsis, according to Relief Therapeutics. The company states that in a Phase I trial
…8 patients with severe ARDS on mechanical ventilation were treated with ascending doses of VIP. Seven of the 8 patients were successfully extubated and were alive at the five-day timepoint. Six left the hospital and one died of an unrelated cardiac event. [source: Relief Therapeutics Website]
On July 16, 2020, Relief Therapeutics and NeuroRx announced that the Data Monitoring Committee conducted a planned review of the first 30 patients treated in the Phase II/III Fast Track trial (Intravenous Aviptadil for Critical COVID-19 With Respiratory Failure (COVID-AIV)). Per the release:
The committee determined that the study appeared capable of reaching a statistically significant endpoint within its 144 patient sample size and voted for the study to continue until its next scheduled evaluation in four weeks.
This appears to be a tremendous vote of confidence from the Data Monitoring Committee. Not only did they recommend that the study continue, after only 30 patients they determined that statistical significance appears to be reachable within the 144 patients in the trial. According to Relief Therapeutics and NeuroRx, “[the] Data Monitoring Committee determined that so far RLF-100 has generated no drug-related Serious Adverse Events or other safety concerns that would mandate stopping.”
Of note, the Data Monitoring Committee is composed of the following individuals: 1. Professor Alfred Sommer, MD, MHS, Dean Emeritus of the Johns Hopkins Bloomberg School of Public Health; 2. Professor Rita Colwell, PhD, former Director of the National Science Foundation; and 3. Congressman Andy Harris, MD, MHS (MD District 1), also part-time Professor of Anesthesia and Critical Care at Johns Hopkins School of Medicine.
Coming Data Points Based upon the companies’ July 16 release, the DMC will evaluate the patient data in the Phase II/III Critical patient study again “in four weeks,” which puts the next possible data release on about August 13, Thursday of this week.
The Science First I’d like to go step-by-step and describe how COVID-19 is believed to attack the body, and then describe RLF-100’s proposed method of action.
How COVID-19 attacks the body and causes disabilities:
COVID-19 attacks type 2 alveolar cells (AT-II) in the lungs, intruding by binding to ACE2 receptors on the AT-II cells. Once inside, COVID-19 replicates millions of viral particles, ultimately causing cell rupture; These AT-II cells are key to protecting the ability of the lung cells to engage in the gas transfer process, getting oxygen into the bloodstream, by secreting pulmonary surfactant, lowers surface tension at the air/liquid interface within the alveoli, which protects the alveoli during the crucial oxygen transfer process and prevents the alveoli from collapse. The destruction of these AT-II lung cells by COVID-19 reduces the production of pulmonary surfactants, decreasing lung function because oxygen is no longer being transferred into the blood, and carbon dioxide is no longer being transferred out of your lungs by the alveoli. [Gas Exchange summary video]. This gas exchange is essential for survival. COVID-19’s occupancy of the ACE2 receptor might also affect Angiotensin II conversion, increasing vasoconstriction and blood pressure, and cytokine release from angiotensin receptor (ATR-1) expressing cells. The Cytokine Release Syndrome (CRS), also known as the Cytokine Storm, which is the body’s out-of-control immune system activation as a result of the COVID-19 invasion, further weakens the walls of blood cells and allows for leakage of fluids into the lungs, causing the lungs to fill with fluid (pulmonary edema). Pulmonary edema further incapacitates the alveoli and prevents normal oxygen transfer. In summary, COVID-19 directly targets and incapacitates certain lung cells, causing a domino effect of severe trauma to the lungs, and the body’s response via an out of control immune system response can further exacerbate the trauma.
As we all know too well, a solution has been elusive.
With RLF-100, a solution may be at hand.
What is RLF-100 and how does it fight COVID-19? RLF-100, also known as aviptadil, is Relief Therapeutics’ synthetic form of Vasoactive Intestinal Polypeptide (VIP). VIP is an endogenous polypeptide, endogenous meaning it originates within the human body. A polypeptide is generally a large number of amino acids bonded together in a chain, to form a substance such as a protein. Other Examples of polypeptides are insulin and growth hormone.
Here is how Relief Therapeutics and NeuroRx describe the function of RLF-100:
VIP binds to VPAC1 receptors on the pulmonary Alveolar Type II (ATII) cell. ATII cells comprise only 5% of lung epithelial cells but are critical for oxygen transfer, surfactant production, and maintenance of Alveolar Type 1 cells. 70% of VIP binds to this receptor. The Type II cell is also the cell selectively attacked by the SARS-CoV-2 virus via the ACE2 surface receptor.
Nonclinical studies demonstrate that VIP is highly concentrated in the lung and specifically bound to the ATII cell, where it prevents NMDA-induced caspase-3 activation in the lung, inhibits IL6 and TNFa production, protects against HCl-induced pulmonary edema, and upregulates surfactant production, These and other effects have been observed in numerous animal model systems of lung injury in mice, rats, guinea pigs, sheep, swine, and dogs. In these models, Aviptadil restores barrier function at the endothelial/alveolar interface and thereby protects the lung and other organs from failure.” [source: Clinical Trial NCT04311697]
In their most recent clinical trial description for the “Inhaled Aviptadil for the Treatment of Moderate and Severe COVID-19” trial, NeuroRx and Relief state:
Vasoactive Intestinal Peptide (VIP) is known to target the VPAC1 receptor of the ATII cell and to protect that cell against all manner of injuries, including smoke inhalation, exposure to stomach acid, and exposure to infectious agents. VIP prevents apoptosis, blocks cytokines, lowers TNFa levels, reverses CD4/CD8 ratio, and reduces cough and dyspnea in nonclinical and clinical studies.
In keeping with the Brazil scientists’ recent discovery that VIP suppresses the ability of SARS-CoV-2 to replicate in human lung cells[1], RLF-100 could essentially render COVID-19 powerless.
The method of action of RLF-100 can be summarized as follows:
After binding to the AT-II epithelial lung cells at the cells’ surface receptors, RLF-100 does the following:
suppresses replication of the SARS-CoV-2 virus in human lung cells; prevents damage to the lung alveoli gas exchange process; upregulates the surfactant production ability and epithelium replenishment ability of the AT-II cells, protecting lung cells from damage; prevents hypertension and vasoconstriction that leads to alveoli cell wall weakening and pulmonary edema; Potentially vital to the effects of RLF-100 is that it inhibits various pro-inflammatory cytokines in the lungs, possibly halting and/or reversing the cytokine storm. RLF-100 also reverses the CD4/CD8 ratio, which is a measure of the strength of the immune system. VIP - Mechanism of Action Source: Javitt: Vasoactive Intestinal Peptide treats Respiratory Failure in COVID-19 by rescuing the Alveolar Type II cell
Does the experience of doctors treating patients with COVID-19 parallel the theorized progression of the disease and provide a rationale for the use of RLF-100?
Per Dr. Javitt:
Early COVID-19 lung injury is characterized by a remarkable degree of hypoxia in the absence of overwhelming pneumonia, suggesting a primary injury to the pulmonary gas-exchange mechanism. Patients frequently report “crackling sounds” while attempting to breathe, consistent with the theory that loss of surfactant and alveolar gas exchange is an early hallmark of COVID-19. Unlike synthetic anti- cytokines, such as anti-IL6 drugs, VIP is shown to have a specific role in preserving surfactant production in the lung (Li 2004, Li 2010) and in protecting type 2 alveolar cells.
Relief Therapeutics' COVID-19 Clinical Trials Relief Therapeutics has partnered with a private U.S.-based company, NeuroRx, to conduct two multicenter, quadruple masked, placebo controlled clinical trials in patients with lung injury associated with COVID-19, with an expanded access compassionate use “trial”:
1. Intravenous Aviptadil for Critical COVID-19 With Respiratory Failure (COVID-AIV) (NCT04311697)
3. Inhaled Aviptadil for the Treatment of Moderate and Severe COVID-19 (AVIDCOVID-2) (NCT04360096)
The first trial will end at an estimated enrollment of 144 participants. This trial began recruitment on May 15, 2020. The primary outcome measures are 1. Mortality at 5 days, with follow up through 30 days, and 2. the PaO2:FiO2 ratio (over 5 days, with follow up “through the end of telemetry monitoring." [A P/F ratio less than 300 indicates respiratory failure. Here is a guide to calculate the P/F ratio.] The two secondary outcome measures are 1. TNF alpha levels as measured in a hospital lab, and 2. Multi-System organ failure free days.
As evidenced by the endpoints, this trial is for patients on the verge of the point of no return.
COVID-AIV began at 4 locations: UC Irvine, University of Miami, University of Louisville, and Houston Methodist Hospital. It has recently expanded to 7 locations, now including NYU Langone Medical Center, Thomas Jefferson University in Philadelphia, and Rambam Health Care Campus in Haifa, Israel.
Per Dr. Javitt’s pre-print, this trial has as of July 22, 2020 recruited over 60 patients, which is nearing the halfway point.
Relief Therapeutics is also aiming to treat those even further toward the point of no return, with their second clinical trial, SAMICARE. SAMICARE is really an open label expanded access compassionate use trial, open to:
Patients with Critical COVID-19 and respiratory failure who are ineligible for enrollment in NCT04311697, who live more than 50 miles from an existing collaborating research center, or who are already hospitalized and cannot safely be transferred to a collaborating research facility may be considered for expanded access by the sponsor.
SAMICARE is also recruiting at through the 4 locations where COVID-AIV is located. UC Irvine, University of Miami, University of Louisville, and Houston Methodist Hospital.
The third trial will recruit moderate and severe COVID-19 patients who have not developed respiratory failure. They will be treated with nebulized RLF-100 using an FDA 501(NYSE:K) cleared mesh nebulizer 3 times daily plus Standard of Care vs. placebo nebulizer 3 times daily. Estimated enrollment is 288 patients. The primary outcome measure is progression to Acute Respiratory Distress Syndrome (NASDAQ:ARDS), defined as the need for mechanical ventilation. The secondary outcome measures are blood oxygenation levels, the dyspnea level on the RDP Dyspnea Scale (0 = no shortness of breath and 10 = extremely severe shortness of breath, so severe that the patient must stop the activity), and distance walked in six minutes. All measures are over 28 days.
Safety In regards to safety, VIP has a long history of use as an injectable erectile dysfunction (NYSE:ED) medication. In 1999, a clinical trial of 304 patients using VIP (combined with phentolamine mesylate) resulted in only 9 patients dropping out because of adverse events. In addition, per Dr. Javitt’s paper:
VIP…completed four- species toxicology and safety pharmacology studies in both intravenous and inhaled dosage. Phase 2 trials in sarcoidosis (Prasse 2010), pulmonary hypertension (Leuchte 2008), pulmonary fibrosis, and allergy/asthma document that VIP has no major toxicities when inhaled at doses of 300µg/day.
Corporate Structure, Balance Sheet, and Management Team Relief Therapeutics is a Switzerland domiciled company, with an extremely lean operating structure and an extremely large number of shares outstanding.
Outstanding Shares: 2,113,919,272 (as of December 31, 2019) Outstanding Vested Options: 70,530,000 (as of December 31, 2019) Outstanding Warrants: 590,000,000 (as at 31 December 2019) Market Capitalization: Approximately $1.3 Billion / Fully diluted approximately $1.7 Billion Source: Relief Therapeutics 2019 Annual Report Normally, I wouldn’t look twice at a company with this many outstanding shares. However, the company’s advancement of their drug in COVID-19 changed my mind.
Other researchers will also point out that Relief Therapeutics only had a couple Swiss francs to rub together at the end of 2019. This is true. I predict this and the massive share count will be a huge issue with skeptics. A counterpoint to the doubt is the science. What market cap should a company with an effective drug that beats COVID-19 have? Is RLF-100 effective? Could it bring the world out of its human and economic crisis?
Financials On April 30, 2020, Relief Therapeutics announced the publication of its 2019 annual report. The following financials were reported:
General and administrative expenses for the entire 2019 year decreased to 946,000 Swiss francs (about $1.03 Million USD) compared to 1’050 Swiss francs (about $1.145 Million) in 2018 mainly due to a reduction in the number of employees and their reduced compensation.
The EBITDA in 2019 was 861,000 Swiss francs ($938,000 USD) compared to 483,000 Swiss francs ($526,490 USD) in the previous year.
The net loss for 2019 was 7.46 Million Swiss francs ($8.13 Million USD) compared to 436,000 Swiss francs ($475,240 USD) in 2018, mainly driven by an impairment expense of 11.2 Million Swiss francs ($12.21 Million USD) recorded on the carrying value of intangible assets.
Relief Therapeutics reported they received debt financing from its main shareholder GEM Global Yield Fund LLC of 600,000 Swiss francs ($654,000 USD) to finance operating activities in 2019. Cash and cash equivalents amounted to 137,000 Swiss francs ($149,330 USD) at December 31, 2019.
In and August 7,2020 interview with Swiss publication The Market NZZ, Relief Therapeutics' Chairman Dr. Raghuram (Ram) Selvaraju stated that Relief Therapeutics currently has 3 Million Swiss francs ($3.27 Million USD) in available cash. He estimates the current clinical trial program (including the critical COVID-19 study and the upcoming inhaled study) will probably cost between $17-23 Million Swiss francs ($18.5-$25.1 Million USD). Of that amount, he stated they have already spent close to $4 Million Swiss francs ($4.36 Million USD). So, the remaining trial expenses will cost between $13-$19 Million Swiss francs ($14.7-$20.7 Million USD).
Alleviating liquidity concerns, the chairman stated, "We have access to a share subscription facility from which we can draw. With the currently high liquidity in our stock we have sufficient access to capital to fund these studies on our own."
Per the Annual Report Relief Therapeutics has a “Share Subscription Facility with an open credit line up to 43.8 million [$47.7 Million USD] and equity transactions with investors including our main investor Global Emerging Markets (NYSEARCA:GEM), which confirmed a commitment to pursue the route initiated and support ongoing projects for the benefit of patients and shareholders.”
Important to note that Global Emerging Markets Global Yield Fund LLC SCS (GEM) owned almost 30% of Relief Therapeutics’ shares as of the end of last year. According to GEM, they are is a $3.4 Billion alternative investment group focused on emerging markets.
Two things for investors to consider here are as follows:
What will GEM do with all of its shares? If GEM sells its shares, how will that effect Relief’s stock? I believe that Relief Therapeutics will be tapping its Share Subscription Facility with GEM in order to fund its trials. I believe that GEM, a long-time investor in Relief Therapeutics and a funder of NeuroRx has a long-term approach to investing. Relief Therapeutics has a funding source that benefits greatly from the stock price of Relief rising, specifically because they own so many shares. The Share Subscription Facility by its nature means dilution, and dilution can have the effect of suppressing stock performance as more supply is fed into the market. If RLF-100 delivers as per the compassionate use results, I believe that will make up for any increase in share supply. There will doubtless be an offering, though once the company has money for trials, that necessity will be behind the company.
While Relief Therapeutics is by any measure a “penny stock”, I have done very well in the past by 1) concentrating on questions of product viability rather than stock price, 2) “betting on the jockey, not on the horse”, and 3) taking advantage of timing to make an investment.
I’m so happy to be able to use the below quote, because it encapsulates perfectly what I want to express and allows me to bring a global mega cap biotech into the discussion in a tangential way:
As you know, you go to war with the Army you have. They’re not the Army you might want or wish to have at a later time.
– Defense Secretary Donald Rumsfeld, December 8, 2004, Kuwait. Rumsfeld was visiting U.S. troops headed to Iraq, and a soldier pleaded for more armor on their vehicles, which were being repeatedly destroyed by IEDs. Rumsfeld said the above in response.
Many people denounced Rumsfeld for the statement. It seemed callous, insensitive, and dismissive of the sacrifices that our U.S. soldiers were making. (That’s what I thought when I heard him say it.)
Now, I really wanted to use that Rumsfeld quote in the context of Relief Therapeutics and COVID-19 because of this little known fact:
Donald Rumsfeld was Chairman of the Board of Gilead Sciences (GILD) from 1997 to 2001. In 1997, Gilead’s stock price was .77 cents per share, and in 2001 it was $2.60 per share. Gilead, maker of Remdesivir, was only .77 cents per share in 1997. Now, Gilead is at about $70 per share.
Sometimes, the savior of the global economy doesn’t check all the boxes. Too many shares outstanding. Wrong stock exchange. But you go to war with the army you have. We are in the worst pandemic since the Spanish Flu in 1918. Thankfully, now we have potential solutions that are being proven the only way they can be: blinded, placebo controlled trials. We’ll soon know if RLF-100 meets the challenge.
Intellectual Property Relief Therapeutics has an issued U.S. patent (US8,178.489B2) and EU coverage for its synthetic formulation of aviptadil to improve stability among other benefits. Because VIP is a naturally occurring peptide, I believe it would be conceivable for another company to come up with another formulation method and produce VIP. However: 1.) Relief Therapeutics (with NeuroRx) is conducting the registered FDA trials, that means that if approved, only Relief Therapeutics would have the right to market aviptadil in the U.S. for a given condition; and 2.) RLF-100 has Orphan Drug designation in the U.S. and Europe. That means that even if RLF-100 weren’t patented (which it is), by funding the trial process and moving the drug through the FDA, if approved Relief Therapeutics will be entitled to exclusive rights to market RLF-100 in the U.S. for a term of 7 years. If for some reason RLF-100 isn’t accorded 7 year exclusivity, there are also 5 year and 3 year exclusivity periods based on different considerations. [source: FDA]
Management Team A board of directors under a chairman of the board runs relief Therapeutics. After Relief Therapeutics sold one of its divisions off recently, its CEO left after that transaction. They largely operate through the use of outside contractors on an as needed basis. The Chairman, Dr. Raghuram (Ram) Selvaraju has a Bachelor of Science in Biological Sciences and Technical Writing from Carnegie Mellon University, a Ph.D. in Cellular Immunology and Molecular Neuroscience, a Master’s of Science in Molecular Biology from the University of Geneva in Switzerland, and an M.B.A. from Cornell University’s accelerated one-year program for scientists and engineers. He is an accomplished research analyst on Wall Street.
In researching Dr. Selvaraju’s Wall Street career, I noticed that he has worked at many of the firms that frequently do offerings for small caps and riskier biotechs: H.C. Wainwright, Rodman & Renshaw, MLV & Co., Aegis, Noble Financial Group. However, you have to look at his record. It is terrific. In fact, he’s rated #63 out of 6,881 Analysts, and 73 out of 14,456 overall. He’s a one percenter.
Ram Selvaraju - TipRanksSource: TipRanks.com
A ranking such as this is hard to maintain, being that Dr. Selvaraju doesn’t necessarily get to pick the companies he rates.
About NeuroRx, Inc.
When researching private healthcare company NeuroRx, Relief Therapeutics partner in shepherding RLF-100 through U.S. FDA registered clinical trials and hopefully through approval, I’m struck by the high caliber of talent from both big pharma and government.
NeuroRx’s description of themselves reads:
NeuroRx draws upon more than 100 years of collective drug development experience and is led by former senior executives of Johnson & Johnson, BMS, Eli Lilly, Pfizer, and Sunovion. In addition to its work on RLF-100, NeuroRx has been awarded Breakthrough Therapy Designation and a Special Protocol Agreement to develop NRX-101 for the treatment of suicidal bipolar depression and is currently in phase 3 trials. Its Board of Directors and Advisors includes Hon. Sherry Glied, former Assistant Secretary, U.S. Dept. of Health and Human Services; Mr. Chaim Hurvitz, former President of the Teva International Group, Lt. Gen. HR McMaster, the 23rd National Security Advisor, Wayne Pines, former Associate Commissioner of the U.S. Food and Drug Administration, Judge Abraham Sofaer, and Daniel Troy, former Chief Counsel, U.S. Food and Drug Administration. [source: Press Releases]
NeuroRx’s CEO is Jonathan C. Javitt, M.D., M.P.H. His biography reads as follows:
Dr. Javitt has played leadership roles in seven successful healthcare IT and biopharma startups with public exits. He has additionally led drug-development engagements for Merck, Allergan, Pharmacia, Novartis, and Pfizer. He was appointed to healthcare leadership roles under Presidents Reagan, George H.W. Bush, Clinton, and George W. Bush. In the latter role he was commissioned to lead the White House policy for universal adoption of Health IT and establishment of the Office of the National Coordinator. He is a graduate of Princeton University, Cornell University Medical College, Harvard School of Public Health, the Wills Eye Hospital, and Johns Hopkins Medical School. Dr. Javitt has published more than 200 scientific works in the areas of health outcomes and pharmacoeconomics that have been cited by more than 16,000 people.
Dr. Javitt also serves as the Study Chair of the three clinical trials being run for RLF-100, and he authored another pre-print paper entitled “Perspective: The Potential Role of Vasoactive Intestinal Peptide in treating COVID-19” which I highly recommended for a detailed view of the science behind the use of RLF-100 in COVID-19.
Speaking of government contacts, for the first time in their August 3, 2020 press release, Relief and NeuroRx revealed that RLF-100:
…is being developed as a Material Threat Medical Countermeasure in cooperation with the National Institutes of Health and other federal agencies.”
It seems that NeuroRx’s members with government experience might already be assisting Relief Therapeutics with gaining government funding.
I don’t have access to the specifics of the relationship between Relief Therapeutics and NeuroRx, and what the compensation structure is, but in my valuation discussion below I have assumed that a large portion of sales will go to manufacturing, distribution, and marketing partners.
Valuation In the abstract of Dr. Javitt’s pre-print, “Vasoactive Intestinal Peptide treats Respiratory Failure in COVID-19 by rescuing the Alveolar Type II cell” one statement stands out to me that is most compelling as to valuation:
Because of its lack of toxicity and low cost of manufacture compared to proprietary biologics, VIP may be uniquely attractive to those focused on global countermeasures against COVID-19.
Coming up with a valuation is difficult because there are many unknown variables, “known unknowns” as it were, to quote Gilead’s former Chairman Rumsfeld again. In my estimates of valuation I’m going to make a wild assumption from the outset: that RLF-100 is successful in receiving approval globally for the treatment of COVID-19 in both critical and mild to moderate patients (preventing their progression to critical).
Relief Therapeutics has not to my knowledge decided pricing that a dose of RLF-100 will be. In critical patients, IV administration 50 -150 pmol/kg/hr over 12 hours is the process. In the mild to moderate trial, patients will receive nebulized RLF-100, 100 micrograms 3x daily.
However, according to Relief and NeuroRx, the cost of manufacture is low, and of course the dosing amounts mentioned above are extremely low. That could result in a high margin to Relief Therapeutics, even after manufacture, fill/finish and distribution agreements are necessarily struck.
How many doses will be required globally? If, over the course of the pandemic (estimated at 5 years), only 1% of the world’s population (76 Million people) will require dosing with RLF-100, either to prevent worsening of their condition, to recover from a critical condition, or even as a prophylaxis, that would equal 228 Million doses (at an average of 3 doses per patient). If each treatment dose results in only $50 to Relief Therapeutics net, that equals $11.4 Billion in net income over 5 years, or $2.28 Billion per year on average. Assuming dilution of 600 million more shares and applying a price to earnings ratio of 18 on that and you have a share price of around $18 per share.
Of course this could be way off the mark, mainly because of the aforementioned missing inputs such as cost of manufacture and dosage price. I think only 1% of the world’s population over 5 years is a quite conservative estimate of usage requirements.
It’s hard not to look at the valuations of various companies going after a vaccine to try to guess at a valuation for Relief Therapeutics:
Company
Market Capitalization
Moderna (MRNA)
$29 Billion
Novavax (NVAX)
$8.7 Billion
Inovio (INO)
$3.2 Billion
Vir Biotechnology (VIR)
$6.53 Billion
The Emergency Use Approval (EUA) of Remdesivir by the FDA added $10 Billion to Gilead’s market cap overnight when it was first announced. And as we all know, Remdesivir has only been shown to be effective in reducing hospital stays by about 4 days. It also comes with side effects, contraindications, and a median price tag of $2,730 per treatment course if you average the insured and uninsured price.
Adding a $10 Billion market cap to Relief Therapeutics gives us a stock price of about $5 per share, and a total market cap of about $12 Billion.
In the previously mentioned interview with Zurich-based publication, The Market NZZ, Relief's Chairman Dr. Selvaraju had some valuable commentary that reflects his perspective on valuation:
Q: Ram, at the beginning of the year, the market capitalization of Relief stood at merely CHF 2 mio [million]. In the past week, the value has grown to more than CHF 1bn. This surge was driven by hopes that Relief has a drug candidate – RLF-100 (Aviptadil) – that showed in first clinical trials a rapid recovery from respiratory failure in the most critically ill patients with Covid-19.In addition,independent researchers have reported that Aviptadil blocked replication of theSars-CoV-2in human lung cells and monocytes.How does that feel?
A: I believe the attention we are getting now is a function of the severity and the global nature of the Covid-19 pandemic. And, it is a function of the fact that we have been fortunate enough to move a clinical program ahead very quickly: We have now started to see evidence that the drug is working. Many other people have tried things in Covid-19 and didn't get very far. That reflects, how challenging it is to treat this disease and how rare it is to identify a therapeutic that actually can have an impact. That is driving the attention on our stock now.
Q: In order to justify the current market value well in excess of CHF 1 bn, Relief must be building up a profit potential of more than CHF 100 mio. [million] per year that is realizable for at least 10 years in a row.Is this realistic?
A: That is very realistic. The Covid-19 pandemic has officially infected 19 Mio. [million] people worldwide. However, that is a gross underestimate of the actual figure. The official numbers reflect only how much testing is done. The number of people that get sick and face respiratory difficulties is somewhere between one and five percent. That might not sound like an impressive statistic. But given the numbers of tens of millions of people infected, this is a sizable population, particularly if you look at the relative benefit of our drug: If it saves lives, how do you put a price on that?
Q: What are your revenue expectations?
A: If the drug is approved there are three scenarios: Assume it is approved in an environment in which Covid-19 disappears very quickly. I think we can almost totally rule out that scenario. It looks more like that the problem is actually getting worse. The second scenario is an approval for the drug while the disease persists for several more years, but eventually goes away. In that context, we think it is quite likely that peak annual sales of RLF-100 would be much higher than the CHF 100 Mio. [million] annual figure mentioned in your question. The pricing depends on the competitive landscape and the question if there are effective vaccines available etc. In this base scenario and with effective vaccines available, it will take several years to deploy them. Our drug would have four to six years of potential deployment for those patients who get severely ill – and it could generate hundreds of millions of dollars per year during that timeframe.
Conclusion We all know that biotech investing can be a risky proposition. We must be rational, skeptical, and cautious at all times when investing. There are times when one decides to put their risk capital to work. I have done so with Relief Therapeutics.
Throughout this piece, I have tried to point out the risks, uncertainties and to give a fair picture of Relief Therapeutics and its prospects.
As COVID-19 continues to spread in an uncontrolled manner in various countries including the U.S. and experts in virology and vaccines caution that a viable vaccine still won’t be a panacea. If it is as effective as the yearly flu vaccine, that means that 40-50% of those vaccinated will have protection. That leaves nearly half of the population unprotected, not to mention those who don’t get vaccinated. A recent survey indicated at least 20% U.S. residents will refuse to get vaccinated.
Therapeutics are clearly needed to help stop this destructive force, and I believe that the science behind RLF-100 is sensible, the lung cell target is rational, and the method of action theorized matches up extremely well with the effects of the virus. If RLF-100 is successful, the low cost to manufacture and relative ease of manufacture will be a boon not just to the comparatively wealthy U.S., but to the entire world.
Disclosure: I am/we are long RLFTF. 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.
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