RedHill Biopharma Ltd (RDHL): RedHill's stock is recovering nicely from the recent equity financing that pulled in gross proceeds of $38 million late last year. With the closing of that offering, I project that RedHill exited 2016 with just shy of $70 million in cash. The current market value is approximately $170 million, meaning the net enterprise value of the company is only $100 million. I think this represents a compelling investment opportunity for investors as the company's pipeline is very intriguing.
In fact, RedHill's pipeline rivals that of larger biotech and specialty pharmaceutical companies. The company boasts twelve programs and eight drugs at various stages of clinical development, several of which are in Phase 3. The core focus is on gastrointestinal and inflammatory diseases, but management is making a strong push into cancer with some novel drugs in mid-stage trials.
The lead assets are RHB-104 for Crohn's disease and RHB-105 for H. pylori infection. RHB-104 is a proprietary and potentially groundbreaking oral antibiotic combination therapy with potent intracellular, anti-mycobacterial, and anti-inflammatory properties, currently undergoing a first Phase 3 study for Crohn’s (CD). The development of RHB-104 is based on increasing evidence supporting the hypothesis that Crohn’s disease is caused by Mycobacterium avium paratuberculosis (MAP) infection in susceptible patients. Investors will get a major update on RHB-104 around the middle of 2017 when an independent data safety monitoring board (DSMB) will review the ongoing trial for safety and potential early stoppage. A successful post-Phase 3 drug for CD is likely worth many multiples of the current $170 million market capitalization, so this is a potentially huge event for investors. My number one priority for meeting with management next week is to get an update on this program. For background, investors can see my detailed update from October. RedHill just recently reported Phase 2a data with RHB-104 in multiple sclerosis (MS) that demonstrated exciting proof-of-concept. For my analysis of that data, investors can see my update from December.
Other important assets for RedHill include RHB-105 and Bekinda®. RHB-105 is a proprietary oral triple-antibiotic for the treatment of H. pylori infection. In June 2015, RedHill successfully completed a Phase 3 clinical trial with RHB-105 called ERADICATE-Hp. ERADICATE-Hp was a randomized, double-blind, placebo-controlled study in 118 patients that took place at 13 centers in the U.S. Top-line results demonstrated RHB-105 was 89.4% effective in eradicating H. pylori infection. This was highly statistically superior over the placebo and the 70% benchmark use for statistical modeling (p <0.001). More importantly, following the 14 day treatment period, patients on placebo were allowed to receive a current standard of care. Follow-up analysis from this portion of the study showed these patients achieved only 63% eradication. Management is looking to start a confirmatory Phase 3 program with RHB-105 in 2017. I'm looking for an update on the status of this trial when I meet with the company.
I'm also looking for an update on the two ongoing Bekinda trials. Bekinda is an extended release formulation of ondansetron. Management expects to report data from an ongoing Phase 3 clinical trial for the treatment of acute gastroenteritis and gastritis - known as the GUARD Study - around the middle of 2017. GUARD is randomized, placebo-controlled, registration study designed to compare Bekinda to placebo in 320 patients age 12 to 85 years old with acute gastroenteritis or gastritis. The primary endpoint is the proportion of patients without vomiting and rescue medication from 30 minutes post dose over the subsequent 24 hours. With strong, statistically significant data demonstrating overwhelming efficacy, management may be in a position to file the NDA after only one Phase 3 study.
Beyond the Phase 3 study in gastroenteritis and gastritis, RedHill is also studying Bekinda in a Phase 2 trial for the treatment of diarrhea-predominant irritable bowel syndrome (IBS-D). The first patient in this trial was dosed in June 2016. The Phase 2 study is seeking to enroll 120 patients with IBS-D at 12 clinical sites in the U.S. Top-line results are expected around the middle of 2017.
The final topic it's imperative to discuss if you plan to meet with RedHill management is the company's recently announced agreement with Concordia to co-promote Donnatal® in the U.S. RedHill told investors in November 2016 that they entered into a non-binding term sheet with a pharmaceutical company as part of a potential strategic vertical integration plan to build a U.S. specialty pharmaceutical company by establishing a commercial presence and capabilities. Under the terms of the agreement signed early this week, RedHill will be responsible for certain promotional activities related to Donnatal in the U.S. Donnatal generated approximately $46 million in revenues for the first three quarters of 2016. RedHill is expected to share a percent of revenues generated in its territories with Concordia. I need to learn more about Donnatal and RedHill's plans with the drug. This is exciting potential news for investors in RedHill because Donnatal is approved for IBS and acute enterocolitis. It fits perfectly with Bekinda and even RHB-104 and RHB-105. I'm eager to hear more about the opportunity.
MabVax Therapeutics (MBVX): I'm looking forward to meeting with MabVax next week because I think this is one of the most under-appreciated cancer plays in small-cap biopharma. MabVax’s lead antibody product is HuMab-5B1, which targets the carbohydrate moiety sLeA. The company is taking advantage of the antibody’s high specificity and minimal off-target binding to develop it through multiple pathways: as a therapeutic (MVT-5873), an imaging agent (MVT-2163), and a radioimmunotherapy (MVT-1075) for patients with pancreatic cancer. MVT-5873 and MVT-2163 are currently in early-stage clinical studies. The radio-labeled MVT-1075 and a separate antibody-drug conjugate based on HuMab-5B1 are expected to enter the clinic in 2017.
MabVax' initial focus is on pancreatic cancer, a logical approach because sLeA is found in up to 92% of pancreatic cancers and its expression is correlated with more aggressive phenotypes. Pancreatic cancer is notoriously difficult to detect and even harder to treat, making it one of the most deadly forms of cancer. This is because pancreatic cancer typically has few if any symptoms early on, and it is not until it metastasizes to other parts of the body that patients begin to experience noticeable symptoms. There are no cost-effective screening strategies for early detection, like mammography or MRI for breast cancer or colonoscopy for colorectal cancer. Due to the fact it is rarely found before metastasizing, the five-year survival rate for patients with stage 3 or 4 pancreatic cancer is only 1-3%. MVT-2163 may be able to improve those abysmal numbers.
In November 2016, MabVax reported an interim update from an ongoing Phase 1 study that demonstrated the safety of MVT-7853 at three increasing dose levels by treating 16 patients at three concurrent clinical sites. Patient enrollment continues as of today. The company reports that seven patients (44%) achieved stable disease so far using the RECIST 1.1 criteria to evaluate tumor response rate and duration of response. Response rates lasted from three to eight months. A second Phase 1 trial with MVT-2163 is also progressing nicely, with early data demonstrating high target specificity. My update from November delves deeper into the data for investors.
I believe HuMab-5B1 has the potential to make a real impact due to its high specificity and efficacy in preclinical models, particularly as a radioimmunotherapy or antibody-drug conjugate product. The company's pipeline offers multiple shots on goal and synergistic products built off a novel platform. MabVax currently has a market cap of only $21 million! I plan to meet with management next week to get some additional color on the Phase 1 trial and an update on Part-2 of the trial that is designed to further assess antitumor activity and synergy with standard of care chemotherapy. I'm also eager to get an update on the status of the IND filing for MVT-1075.
HedgePath Pharma (HPPI): HedgePath is another under-the-radar cancer play that I'm expecting to have a big 2017. The company is currently conducting a Phase 2b trial with SUBA-Cap, an improved, patent-protected, oral capsule formulation of itraconazole for the treatment of solid tumors. Itraconazole is a powerful inhibitor of the Hedgehog pathway in human cells. This has broad implications for the treatment of cancer; in particular, basal cell carcinoma (BCC) where the pathway plays an apparently essential role in the development and growth of tumors. Two recently approved Hedgehog inhibitors, Roche's Erivedge® and Novartis' Odomzo® are indicated for the treatment of locally advanced or metastatic BCC, validating the market for HedgePath's SUBA-Cap product.
The Phase 2b trial is in subjects with basal cell carcinoma nevus syndrome (BCCNS). BCCNS is an autosomal dominant disorder characterized by the early appearance of basal cell carcinomas (often times dozens or even hundreds of lesions across the head, face, neck, chest, and back). Target enrollment for the Phase 2b trial is 40 patients with active BCCNS. For each subject, 10 to 15 of the largest lesions are selected by the investigator at baseline to represent a valid sample of overall lesions (target tumors).The longest diameters of these target tumors are then added together to create a "target tumor burden” number.
Because this is an open-label study, management has been able to provide ongoing updates from the trial to the market. The most recent update came in October 2016 and demonstrated impressive results for SUBA-Cap. Management conducted two separate interim analyses: (A) the change in target tumor burden for each subject (which is based on the change in the sum of the longest diameters of each subject’s target lesions) to measure the change in target tumor burden from baseline; and (B) the change in the longest diameter of all individual target lesions from baseline across all subjects in the study, which the company believes documents clinical impact.
On target tumor burden (see results), among the 18 subjects who have dosed for ≥ 16 weeks, 100% of the patients had a target tumor burden reduction. Importantly, target tumor burden did not increase in any subject and was reduced by greater than 30% in 11 of the 18 subjects (61%) with an average reduction of 61%. On changes in the longest diameter of individual target lesions (see results), the company conducted an interim analysis of 231 individual target lesions across all 18 subjects. All of these tumors were primary tumors, meaning none were metastatic lesions. The interim analyses showed that 31% of cancerous lesions have disappeared (complete response), an additional 30% have exhibited greater than a 30% reduction but less than 100% (partial response), and 38% have remained stable (< 20% increase and < 30% reduction).
These results compare very well to the aforementioned Erivedge and Odomzo. I'm excited to meet with management next week to see if they have any additional data to share from the ongoing Phase 2b trial. As noted above, target enrollment is 40 patients and I'm guessing the trial will complete enrollment in the first quarter 2017. The primary analyses are taking place at 16 weeks, so I'm expecting the company to provide another interim update and then full analysis of the data during the first and second quarter of 2017, respectively.
However, what I'd really like to get a sense of is if management thinks this data is sufficient to file for U.S. approval. This would not be unprecedented, as both Roche and Novartis were able to gain approval for their respective skin cancer drugs based on only Phase 2 data. HedgePath has already received Orphan Drug designation for SUBA-Cap for BCCNS. Given the strong interim safety and efficacy data, I would not be surprised to see the company also file for Breakthrough Therapy Designation as well. BTD would allow for the filing of a rolling NDA and further support the effort to gain early approval for SUBA-Cap.
This makes HedgePath a very intriguing investment opportunity today because if we assume that HedgePath's current trial is a registration-quality study, then positive data would likely send the shares above $300 million in market value. I believe the shares are cheap today because investors view the Phase 2b study as "Phase 2" instead of potentially pivotal. I also do not think the market expects BTD or understands the BCCNS opportunity. If I'm right, and HedgePath is worth $300 million in value, then this would result in a doubling of the share price in 2017 (see my model).
Exactus, Inc. (EXDI): Exactus Inc. is developing a handheld, point-of-care, rapid diagnostic for the detection of fibrinolysis called FibriLyzer™. FibriLyzer is the first point-of-care device delivering accurate measurements of fibrinolytic activity using a single drop of blood in only 30 seconds. The device requires minimal training and is highly efficient to perform, even during critical OR or ER procedures. This type of real-time information will help surgeons prevent damage to surrounding tissue (or death) due to a clot or bleeding risk, monitor for elevated risk of thrombotic events including myocardial infarction, stroke, deep-vein thrombosis, and pulmonary embolism, and monitor fibrinolytic activity during the administration of blood products or thrombotic and antithrombotic medications including TXA, tPA, or Factor XIIa.
Exactus Inc. is currently preparing for a pre-submission meeting with the U.S. FDA to take place in the fourth quarter 2016. The company is also working to complete cGMP manufacturing for the device and has contracted with one of the world's largest manufacturers of blood glucose meters to create a commercial supply of the FibriLyzer device. The business model is similar to blood glucose meters where the device will be sold at modest margins, and each high margin consumable test strips is offered at a very economical price. Given the expected low cost per test, a patient's fibrinolytic activity can be tested multiple times during surgery at very low cost to the hospital, potentially resulting in savings through a reduction in the use of blood products or thrombotic medications.
The FibriLyzer is a Class-II medical device, meaning it can gain U.S. FDA approval through the 510(k) pathway. 510(k)-enabling studies are expected to take place in early 2017 leading to the submission of the application during the second half of 2017. U.S. FDA and EU EMA clearance is anticipated during the first half of 2018. Exactus is working on follow-on products, including a FibriLyzer rtPA product that will pair the device with an infusion pump that will deliver thrombolytic medications based on real-time fibrinolytic activity.
There are several reasons why I like Exactus. Firstly, I see a tremendous opportunity for FibriLyzer, both regarding the size of the markets the company is going after and in the significant clinical void for this type of real-time, point-of-care data. An estimated 40+ million American's visit the ER each year, with 16+ million being admitted to the hospital. Roughly one-third of these individuals presents to the ER with trauma-induced coagulopathy. Existing diagnostic methods to monitor fibrinolytic activity, including ELT, TEG, and ROTEM, are highly inefficient and limited by the fact that they can be performed only at specialty centers by trained personnel, have poor reproducibility, and require fresh samples of blood for each subsequent test.
Secondly, Exactus has a significant opportunity outside of the ER, specifically in the ICU or OR with patients undergoing cardiovascular surgery, organ transplantation, orthopedic surgery, and obstetrics. These are enormous markets with patient populations measuring in the millions. Monitoring for risk of MI, stroke, PE, or DVT during cardiac surgery alone targets tens of millions of patients. Even at a very affordable price per strip, Exactus still has a billion-dollar opportunity with FibriLyzer.
Thirdly, this seems like the exact type of product a larger medical device manufacturer with a focused hospital and surgical sales force would be very interested in. Companies like Abbott, Roche, J&J, and Medtronic already play in this market and love the concept of a high margin, razor / razor blade consumable handheld device. The path to market is rather straightforward for a Class-II medical device like this, and if Exactus can start generating revenues with FibriLyzer in 2018, I do not think it will be too long before the company gets scooped up into a big med device conglomerate.
Finally, this is the quintessential "BioNap" type stock - micro-cap, unheard-of by the broader market, no sell-side coverage, but with excellent technology and the potential for enormous returns. I've met management and am confident in the path forward. I certainly see this as a tremendous upside opportunity and the timeframe looks very reasonable at likely less than two years to the first revenue. Cash is always a concern with these micro-cap ideas, but the company does have the first $1 million of the 510(k)-enabling study already funded, so the low cash balance is unlikely to impede the story over the near-term. I'm looking forward to meeting with management next week to get an update on the story and ask specific questions around funding and the timeline for the FDA pre-submission meeting.
Actinium Pharmaceuticals (ATNM): Actinium is a stock I think well-positioned for a breakout in 2017. The company has two clinical-stage programs, Iomab-B and Actimab-A. Iomab-B was licensed from the Fred Hutchinson Cancer Research Cancer and is currently in a pivotal Phase 3 clinical trial investigating the use as an induction and conditioning agent prior to a bone marrow transplant in elderly patients with relapsed or refractory Acute Myeloid Leukemia (AML). Actimab-A was licensed from the Memorial Sloan Kettering Cancer Center and is currently in a Phase 2 clinical trial investigating the use as an induction agent in newly diagnosed elderly patients with AML.
With respect to Iomab-B, the Phase 3 SIERRA trial initiated in July 2016. SIERRA is a randomized, controlled, multi-center study with a target enrollment of 150 patients with refractory or relapsed AML over the age of 55. Patients will be split equally between Iomab-B and (physician's choice) conventional conditioning prior to allogeneic hematopoietic stem cell transplantation, also known as bone marrow transplant (BMT). The primary endpoint of SIERRA is durable complete remission (dCR) at six months from BMT. Secondary outcome measures include overall survival (OS) at one-year and safety.
SIERRA presents investors several opportunities for updates throughout 2017. There are three data monitoring committee (DMC) reviews of the SIERRA planned during the course of the trial. The first DMC update is expected during the first half of 2017, followed by subsequent updates in the second half of 2017 and the first half of 2018. Top-line data are expected during the second half of 2018. Iomab-B targets a $900 million market opportunity and I see the easy potential for the company to capture 20-30% market share. I'd like to get an update from management on the pace of enrollment in SIERRA so far and try to nail down a better timeline for the first and second DMC review.
With respect to Actimab-A, a next-generation monoclonal antibody linked to radioactive actinium-225 (Ac-225), the Phase 2 trial is currently ongoing. The company presented Phase 1 data last month at the American Society of Hematology (ASH) annual meeting. Investors can read my update following the release of the ASH abstract for more detail on the data. For Actimab-A, I'd like to get management's sense on the pace of enrollment and whether the protocol changes instituted for Phase 2, including the removal of the LDAC and the inclusion of hydroxyurea to lower peripheral blast count prior to Actimab-A dosing, are having a positive effect.
I think Actinium's stock is positioned for a breakout year. The company is well financed and has several upcoming important catalysts that could drive the shares higher. I think misconceptions around the pipeline have created an intriguing buying opportunity in the shares. I'm looking forward to meeting with Actinium next week to get updates on both programs and see what type of partnership opportunities the company is evaluating for 2017.
There are several other names I'll be meeting with next week, but in the interest of keeping this article short, I cannot mention every single company. Instead, I plan to do post-JPM wrap-ups on all the above names (and the names from Part-1 of this piece) later in January and February - so stay tuned to the BioNap website for those updates. Also, be sure to sign up for my FREE weekly newsletter (click here to enter your email address) so you do not miss any articles! And finally, if anyone is going to be out in San Fran next week, please reach out! I'll be in town Sunday through Wednesday and would love to share a beer with some fellow biopharma investors.
Please see important information about BioNap, Inc. and our relationship with company's mentioned in this article in our Disclaimer.
BioNap is long shares of MBVX and EXDI.
BioNap is long shares of MBVX and EXDI.
We hold no position in shares of ATNM, RDHL, or HPPI as of this article, but reserve the right to establish a position in any name in the future.