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ARCA Biopharma (NASDAQ: ABIO) had a great trading day based on news that it was going to repurpose one of its existing drugs AB201 to treat COVID Associated Coagulopathy (CAC), which is essentially abnormal blood clotting in COVID-19 patients.  If abnormal blood clotting seems dangerous it’s because a blood clot in the brain is called a  stroke, a clot in the heart is called a heart attack, and a clot in the lungs is called a pulmonary embolism.  All these conditions can typically result in a hospital stay.  This condition surfaced after Mount Sinai researchers found 5 young COVID-19 patients who suffered large vessel strokes over a 2-week period.  This New England Journal of Medicine(NEJM) article listed coagulopathy and endothelial dysfunction as a complication of COVID-19.  Coagulopathy affects the younger COVID patients in a different way than older patients.  

Miniscule Market Size of Coagulopathy

The prevalence of coagulopathy in younger people has not been determined, however this does not represent a huge market opportunity and there appear to be solutions in the immediate future.  In a recent Forbes article investigators from Weill Cornell Medicine looked back at their data from 393 COVID-19 patients and noted that “clotting complications were seen in just over 7% of patients, a number typical for ICU patients in the pre-COVID-19 era.  What’s unclear is whether this low figure will be reflective of the remainder of their patient experience related to clotting at their institution as the pandemic continues.”

Singling out CAC as a disease indication is a brilliant way to accelerate ARCA Biopharma’s pipeline because it is in fact an viable disease indication, but treatments like heparin currently used at the University of Miami exist to treat the clotting risk for COVID-19 patients.  The awareness of this complication has also prompted doctors to start testing their patients to look for this indication. According to the American Hematology Society the best way to treat any coagulopathies is through “treatment of the underlying condition.”  

COVID-19 is a Rantes Disease not an Viral Disease

A recent article in preprint called Disruption of the CCL5/RANTES-CCR5 Pathway Restores Immune Homeostasis and Reduces Plasma Viral Load in Critical COVID-19 explains the coagulopathy and the results of a potential treatment.  This journal article is very powerful in that it explains COVID-19 in excruciating detail.  The article has essentially elucidated the complete pathogenesis of the disease.  The article highlights that 

“Platelet activation, which leads to the initiation of the coagulation cascade, can be triggered by chemokines including CCL5, suggesting that leronlimab treatment may be beneficial beyond its immunomodulatory effects on inflammation and hemostasis in COVID-19 patients.”

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The lack of results in Gilead Sciences (NASDAQ: GILD) remdesivir clinical trials highlights that this is not a viral disease.  The virus peaks in the body within 5 days so common sense tells us that giving a viral inhibitor when the virus is already on the way down makes little sense given the toxic profile of remdesivir.  In a desperation to do something remedesir was declared as the standard of care by Anthony Fauci.  

The most promising treatment in development is CytoDyn’s (OTCMKTS: CYDY) leronlimab.  This is a drug with an incredible safety profile of 800+ patients without any SAE’s related to the drug.  It’s a monoclonal antibody that can be self-injected weekly.  Rantes is what drives the pathogenesis of the disease and is responsible for 5 times the normal levels in mild to moderate patients and over 100 times to severe and critical patients.  Leonlimab is a CCR5 inhibitor and blocks the rantes which is responsible for the cytokine storm among other things.  The reason researchers like Dr. Patterson believe this drug works is because in the severest of patients trial results showed a restoration of the blood levels or a quieting of the cytokine storm 3 days after injection.  All this was explained in the journal article and has been documented in clinical trial results that have trickled out from compassionate use trials.  This is why patients like Samantha Mottet took to the airwaves to educate people.  For the most part this drug has been ignored by the administration and been given marching order to complete the trial.  Its expected enrollment will be completed in two weeks so speculation of the most important regulatory action to take place on the planet is largely being ignored by investors.   CYDY will be the next to readout on a COVID-19 therapy and preliminary journal articles indicate it works.      

About Recombinant Nematode Anticoagulant Protein c2 (rNAPc2)

Before the announcement it’s safe to say that no investors were even aware that nNAPc2 was in the ABIO’s arsenal of drug candidates.  A little research uncovered a phase 2 clinical trial by ABIO in 2006 for the elimination of MACE/TIMI 32 in coronary disease.  It’s unclear what the results of the study were except the company’s statements along with the journal articles that suggest use of the drug is relatively safe.  This drug was also used in clinical trialscira 2008 to prevent the metastasis of colon cancer. The company suspended development of the product.  After the Ebola Epidemic in 2014-15 a journal article came out discussing possible therapeutics and rNAPc2 was on the list. Although not cited in the press release this is clearly the basis of their theory to use it in COVID-19.       

Approval Strategy and Pipeline

The concept of repurposing a drug for COVID-19 is not new.  But ARCA Biopharma’s approach is on target in that the FDA is far more likely to give them leeway in dosing COVID-19 patients because they have to be selective.  The press release highlighted they have 700 patients worth of phase 2 safety data to rely upon.  The company is proposing an adaptive phase 2b/3 clinical trial.  The only thing concerning was the company’s comments that they were planning on filing an IND in the third quarter of 2020.  This is a process that should take 4 – 6 weeks which technically puts them in the Q3.  It’s unclear why they used language that was over conservative, but the SEC has shut down companies in the OTC and NASDAQ that have mentioned COVID-19 treatments regardless of whether or not they had viable treatment or testing options.  In the press release they also were sure to mention “pending FDA concurrence and obtain trial funding, ARCA estimates initiating late-stage clinical testing of AB201 in the second half of 2020.”

The other drugs in ABIO’s pipeline are for orphan drugs with genetic mutations.  They are going after the general disease indications of Atrial Fibrillation (AF) and Chronic Heart Failure (CHF) that have genetic subpopulations.  The company only has one phase 2 asset with an interim analysis in 1H2022.  

Financial Analysis

Before the announcement ABIO had $6.7 million in cash and this represented $4.62/ share in cash yet was trading at $4.00.  The market was giving no value to the enterprise value of the company.  The primary reason might be attributable to the fact that the market they were targeting was the orphan drug market with low numbers of patients.  They have a burn rate of $1.3 million per quarter and seemed to have enough cash for the next 18 months.  On May 7th they filed an S-3 to sell $75 million that was effective on May 20th which means that management may capitalize on this price appreciation and conduct an offering in the very near term.  In an aforementioned quote to their press release expect to see this in very short order.  There are only 1.76 million shares fully diluted so trading 83.6 million shares in one day represents 60 times the outstanding share count that got the attention of investors and led to a repricing of the security.  

Investment Summary The company is clearly repurposing a drug for use in COVID-19 that clearly has some theoretical potential but the question remains is if they will get to the finish line one time.  There is definitely a risk of an offering that was clearly telegraphed.  The massive price move is likely attributed to a massive short squeeze with a low floating stock.  It appears the security has been repriced, but the lack of catalysts beyond COVID-19 make this unlikely to appreciate in the long term. A potential bright spot is that they might be able to develop the product enough to entice a licensing partner.  Ahead of them in the COVID-19 race is CYDY with their monoclonal antibody in the top slot about to overtake GILD and remdesivir.  ABIO seems fairly valued, but as an investor there is clearly more potential in CYDY if you are looking to capitalize on a COVID-19 treatment.   

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