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Thursday, October 21, 2021

CytoDyn’s Robust Platform Technology Keeps Expanding Into Breakthrough Therapy Designation Territory

  • Leronlimab is an immunomodulator that targets many diseases
  • Multiple indications being pursued in parallel
  • Proven safety profile, novel mechanism of action, & ease of application enables quick label expansion strategy
  • Breakthrough Therapy Designation possible for cancer and Long-Haulers

CytoDyn (OTCMKTS: CYDY) has made a number of recent announcements that when examined together add up to significant progress and potential that is not reflected in the current stock price which values the company at just under $1.0 billion market cap.  Looking back over the last 12 to 18 months investors have witnessed CytoDyn move from being a one trick pony for HIV to a platform technology in cancer and a slew of other indications in the immunological category, with more in the future.  

Elements of a Platform Technology

A platform technology in drug development involves getting a therapeutic approved for one indication so that it derisks future development costs and allows for a label expansion.  Two examples of the most successful drug platform technologies are Merck’s KEYTRUDA with 31 approvals and Abbvie’s (ABBV) HUMIRA with 9.  KEYTRUDA generated $14.4 billion  and HUMIRA generated $19.8 billion in sales in 2020.  What is so fitting about these examples is leronlimab is a combination cancer drug and immunological drug, so it’s a cross between KEYTRUDA and HUMIRA.  If CYDY inks just one approval their drugs could quickly grow in magnitude because unlike MRK and ABBV who developed additional indications after the drug was approved, leronlimab’s other indications were done in parallel.  Investors seem to be sitting on the sidelines wondering which indication will hit first.  Leronlimab has 9 clinical trials on clinicaltrial.gov, 7 of which were started in 2020 including the cancer basket trial, metastatic Triple Negative Breast Cancer (mTNBC), NASH, Long-Haulers and Covid-19.  Most of these have results coming out this year.

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CYDY


Data from Drugs.com

If CYDY gets just one indication in cancer approved then it’s possible that they could follow an even steeper trajectory in obtaining follow-on indications in cancer.  The company has said in its latest press release that

“The positive advancement confirms leronlimab will be administered with a 700 mg dosage for patients in the mTNBC trial and Basket trial for 22 solid tumor cancers, as well as compassionate use, eIND and “right-to-try” patients.”  

It’s possible that over time CYDY could get enough cancer indications to rival MRK based on them defining the mechanism of action (MOA) of the drug. HUMIRA got its first indication approved in 2002 for Rheumatoid Arthritis and has been able to get 12 approvals over 19 years.  KEYTRUDA got its first approval in 2014 and has been able to get 29 approvals in 7 years.  The next platform drug player might even be able to do it quicker.   

Multiple Cancer Indications

The most recent press release also discussed the advancement of their triple negative breast cancer trial from a Phase 1b study to a Phase 2. This is important news that has not yet been digested by the investment community.  Phase 1b studies are about gradually increasing a drug’s dose to find the optimal safe dose.  The primary endpoint for phase 1b of the CytoDyn study was maximum tolerated dose (MTD).  CYDY just announced that there were no dose limiting toxicities associated with 700 mg.  This data establishes the maximum dose that could be available in the Phase 2 trial protocol.  Investor frustration in the cancer trials seems to be centered on the slow pace of enrollment to get safety data on something that was so intuitively obvious.  It took 1.5 years to garner 9 patients in the trial.  That frustration was also part of the friction that led to the termination of Dr. Pestell for designing a suboptimal trial that was detailed in the litigation.  

In contrast to the safety portion of the trial, the primary endpoint in CYDY’s Phase 2 is expected to be progression free survival (PFS) which is the most commonly used endpoint to measure efficacy in cancer trials.  Phase 2 trials are designed to flush out if the treatment works.  Leronlimab showed paradigm changing efficacy in mice models so it is expected to translate into positive human trials. These mouse models below show virtually a stoppage of metastasis.  The lack of any tumor growth in the mice demonstrates how amazing this drug is at stopping metastasis.

 

Breast Cancer Research Article

One of the things that would be required for a breakthrough therapy designation (BTD) is an elucidation on the Mechanism of Action (MOA).  The company has developed a great video on the mechanism of action and also did a TNBC presentation to academics that showed a 62% reduction in blood vessel area (p=.013) also known as angiogenesis.  It’s really easy to spot the noticeable lack of blood vessels supporting the tumor in leronlimab treated mice.  Although there are specific drugs like Avastin that are designed to target angiogenesis this was just a byproduct of the mechanism of action.  The amazing outcome was a 87% reduction in tumor burden compared to the control.   

Screenshot – TNBC Presentation

CytoDyn is well positioned for a BTD from the FDA if the soon to be released (2 weeks) trial results from the Phase 1 measure up to expectations.  The data is expected to confirm the number of responders and stable disease rate.  In the latest shareholder update, Dr. Scott Kelly, the chairman of CytoDyn, suggested that CytoDyn will eventually transform itself into an oncology company and this data point looks like it will be extremely positive.  Any positive Phase 1b result could have a multiplier effect on valuation.  Investors need to remember that there are 22 cancers in the basket trial which opens up even more potential in the future.  The potential for an oncology platform is significant as more studies show immune modulating drugs such as CCR5 antagonists as promising therapeutic targets.

Rising NASH Leader

CYDY also recently announced enrollment of their final patient, patient #60, in their NASH trial. NASH is the unicorn of diseases for pharma companies: a large multi-billion market with millions of people affected in the US alone.  Mouse studies conducted at the Cleveland Clinic showed leronlimab effectively “inhibited fatty liver development”, a precursor to NASH.  To date no drug has been approved.  Gilead Sciences (NASDAQ: GILD), French company Genfit (NASDAQ: GNFT), Intercept Pharmaceuticals (NASDAQ: ICPT) and, recently, NGM Pharmaceuticals (NYSE: NGM) all have failed trials.   An oral CCR2/CCR5 antagonist, cenicriviroc, showed strong phase 2 results but the phase 3 trial was halted by Allergan (NYSE: AGN) due to an underwhelming inflammation effect and a strong placebo effect making available data harder to interpret.  Galectin Therapeutics (NASDAQ: GALT) is developing the only drug that demonstrated efficacy in NASH. Unfortunately a conservative Phase 3 trial design and COVID-19 delays have pushed a top line read out into 2023 which could give time for CYDY to steal the lead with their Phase 2 readout provided they get drug approval on their MOA in 2022 and a label extension.   

As an immune modulating antibody, leronlimab has a much more pronounced effect against inflammation compared to small molecule drugs such as cencriviroc or marivoroc.  Unless the FDA surprises investors with a BTD, which is very possible, most are expecting that strong Phase 2 results released before the end of 2021 will precipitate a Phase 3 in early 2022.  This advancement should increase the value of CYDY significantly given the large market potential and lack of any approved therapeutic.  As HIV patients also are more susceptible to NASH, a platform drug that addresses both is of great interest.

HIV Franchise Forming

The HIV BLA submission is also expected to be fully submitted over the next couple of months.  Putting aside the drama of the submission process, leronlimab continues to have the potential of disrupting the HIV industry given the once a week injection, high effectiveness, and strong safety profile.  Gilead Sciences HIV combo pill, Biktarvy, which grew to $7.26 billion in 2020, has a black box warning, needs to be taken daily, and is not recommended for those with severe liver or kidney impairment.  The current BLA is in combination with HAART, which is a custom designed set of therapeutics for each patient to manage the viral load.  A monotherapy trial for CCR5-tropic HIV 1 infection showed a 92% reduction in viral load and no serious adverse effects. Once the BLA is approved, CYDY has stated they plan to apply for a label expansion for monotherapy.  Given that all newly infected HIV patients and approximately 70% of existing HIV cases are CCR5-tropic, CYDY’s platform has the potential of dominating the future of HIV therapy.

But wait, there’s more!  CYDY is also looking at the HIV prevention market.  The market is currently at about $3 billion and is expected to double by the end of the decade.  Gilead’s drug, Descovy, needs to be taken daily and has a host of side effects including nausea, worsening kidney function, and fat redistribution.  Leronlimab if proved through clinical study will have significant advantages at potentially a once a month only self-administered injection.  CYDY unveiled their strategy that they are exploring the launch of a prep study in Brazil possibly by the end of year.  Given the successful clinical trials which have earned a fast track designation from the FDA, BLA approval is a question of when, not if.   Under the steady hands of Dr. Recknor, investors should have much higher confidence in the BLA being submitted in 2021 with a PFUDA date in the first half of 2022.

Expanding Pipeline 

Graft vs Host Disease (GvHD)  is on the back burner for now but will be revisited in the coming year. CYDY has already received orphan drug status for this application which provides tax credits, fee waivers, and exclusivity for seven years.  The Phase 2 trial was modified in 2020 to allow all trial participants to receive leronlimab.  The potential market is expected to be $640M in 2026.  The company had 2 compassionate use cases with stroke and both stroke patients responded well to treatment.  

COVID-19 Trial Failures or Dose Justification?

Covid is still very much in play with the Delta and other variants causing a resurgence of infections.  In the US alone infections have doubled in the last three weeks.  While many bears on the message boards have claimed the mild/moderate and severe/critical trials were failures as they didn’t meet their primary endpoint, Phase 2 trials are exploratory in nature and serve to inform Phase 3 trial design.  Even Dr. Janet Woodcock, acting head of the FDA, stated the severe/critical trial was hypothesis forming and supports additional trials. Since additional trials are continuing the results could hardly be judged a failure.

These trials did help CYDY learn more about the dosage, frequency and method of application as well as showed that leronlimab appears to work extremely well if given over a long enough period of time.  The Phase 3 Brazil trials will soon start with the cards stacked in CytoDyn’s favor.  The critical trial has IV injection, four doses over four weeks, a sufficient number of patients with 1 to 1 drug vs control, and a primary endpoint of “time to recovery”.  This trial design is practically bulletproof because all the endpoints achieved statistical relevance in the Phase 2 in the USA.  Given the continued high number of Covid cases in Brazil and 45 trial sites, the trials should fill up rapidly and interim results should be out sometime by the end of year.  If anything close to last trial results of 82% pans out for critical patients, leronlimab will become the new standard of care for those that progress to critical.  The FDA statement on leronlimab has set this up nicely as the view that leronlimab has “no clinical benefit” will change to leronlimab has “significant clinical benefit” and the FDA will be compelled to respond with approval.  Becoming the standard of care for critical and possibly severe Covid will have a significant impact on CYDY’s valuation.  An even bigger market is Long-Hauler’s.  Preliminary results of the Phase 2 study were excellent, but failed to impress the market which wants to see the full results with biomarker data.  Since the biomarker data speaks to the MOA of the drug, the release should add to their valuation and increase the potential for a big pharma partner to participate in a Phase 3.  It also opens up the potential to go after other post viral syndromes such as chronic fatigue syndrome.

Other Blockbuster Indications

Possibilities seem endless with CCR5 implicated in strokes, Alzheimer’s, Parkinson’s, Lyme disease, MS and many other diseases.  CytoDyn has a paradox of choice given the growing number of diseases that appear to have CCR5 as a potential target for therapeutics.  Leronlimab’s unparalleled binding to CCR5, ease of application, and proven safety profile puts it in a strong position to become the standard of care in many of these over a multi year horizon.  They are getting closer to getting approval than ever including many with the potential of breakthrough designation including long haulers. Just one approval will enable label expansion opportunities and off-label uses.

Financial Analysis & Risks

One of the biggest risk factors is potential dilution but the company has issued around 622 million shares while there are only 800 million authorized.  In a worst case scenario this represents 22% dilution.  In the latest Proactive video the CEO said the company has enough cash to last through the year.  In April they raised $50 million in an above market offering at $10.00.  Based on their latest 10-Q they are burning about $6.5 million per month which would give them about 8 months of burn before they run out and confirms the CEO’s statement.  Management is also facing a challenge by an activist shareholder group called Advancing Leronlimab that appears to be composed of 2 ex-directors that were let go and both sued the company. If this group does get control of the company it may impair some of the drug trial development but the company is expected to get a major readout and file their BLA for HIV before the shareholder meeting expected in October.  If the BLA is filed it is widely expected they will be granted approval given the incredible safety profile of the drug.  So any potential upheaval would likely be after the company hits major drug development milestones.

There is a risk of a Refuse to File for the BLA, but most of those points should have been addressed in the upcoming filing.  Traditionally once the BLA is accepted there is a very high probability of success.  This is one of the supporting factors for a significantly higher stock price.         

Investment Summary

A number of investors have been critical of CYDY’s placing multiple bets but in reality CYDY is building a platform drug that has the potential of surpassing HUMIRA’s revenues.  HUMIRA is the number one drug in ABBV’s portfolio by far and has helped propel Abbvie’s market cap to over $200B.  We will see CYDY’s platform strategy start to unfold over the rest of 2021 as various trial results come in.  Given the current stock price there is significantly more upside than down for the patient investor that realizes it is still all about the science. We will be updating on CYDY when more details emerge so make sure you are subscribed to Microcapdaily so you know what’s going on with CYDY.

Disclosure: we hold no position in CYDY either long or short and we have not been compensated for this article.

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7 COMMENTS

  1. Excellent summary of an absurdly promising drug. Despite some missteps by the current mgmt the share price is mind-bogglingly low right now. With today’s cancer news, this stock is going to get very expensive soon.

  2. This article covers all the bases and shows how absurd the short position is in this drug. It also reveals how lethal the unwillingness to accept Leronlimab has been: many have died who did not have to die, and many more will. History will look back on the lack of speed in accepting and understanding the power of Leronlimab with astonishment and disgust.

  3. Great article. Could you also elaborate on the patent/IP situation with LL? Would that add to risk or can it be neglected as it will still take many years to full potential.

    • The key to the IP situation is that the BLA actually gives you 12 years of exclusive marketing protection. The patent is not as important as marketing exclusivity.

  4. Well balanced article on the future potential of leronlimab. There certainly have been a plethora of negative and inaccurate articles over recent months. Thanks for the thorough research.

    • LL has a bright future but it has been clouded by a massive misinformation campaign spearheaded by shorts and the Advancing Leronlimab crew. There is still tremendous risk in the stock but I characterize upside as risk. The one risk that is negligible and I hope this article brings light to the fact that the regulatory risk of approval is extremely small. This means you can almost count on an approval, but the question is when. Based on the trajectory of development it seems like a BTD is almost imminent.

  5. The big thing hampering the valuation is the markets perception that the FDA is not in their corner. The FDA statement was clearly political motivated when they claimed the drug didn’t have efficacy and market participants took this at face value instead of doing their own due diligence. It is because of this statement that people believe there is no possible way the company will get a fair shake from the FDA. The new data that was released was really remarkable and no matter how politically charged the FDA seems to be this particular news cannot be swept under the rug. Once a BTD is given then market participants will flood into the name realizing that the FDA wasn’t partisan and simply wanted more data.

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