Miami, FL – September 16, 2018 (EmergingGrowth.com NewsWire) — EmergingGrowth.com, a leading independent small cap media portal with an extensive history of providing unparalleled content for the Emerging Growth markets and companies, reports on CytoDyn, Inc. (OTCQB: CYDY)
CytoDyn’s Unveils CytoDyn 2.0 During Conference Call
- 93% suppression rate in 525mg after a 6 week induction period
- Projected 90% responder rates in new monotherapy trial design
- Unveiled prostate cancer prognostic generating $750 million in potential revenue
- CMC portion moving forward with BLA completion by Q1 2019
- Completion of ProstaGene acquisition in several weeks
- Licensing agreement or partnering “around the corner”
CytoDyn Inc (CYDY) hosted a shareholder conference call at 4PM EST on September 13, 2018. Leading the call was Dr. Pourhassan and Dr. Pestell followed by CFO Mr. Mulholland. The purpose of the call was a shareholder update and bring more transparency to the company. This is a must listen call as 5-6 press releases were embedded. The company seemed highly focused on showing how the ProstaGene acquisition was going to interface with the existing pipeline and the new role that Dr. Pestell was assuming as the interim Chief Medical Officer (CMO). Many of the investor questions during question and answer were finance centric. The presentation portion of the call lasted 30 minutes but the question and answer portion was close to an hour long. As a result so much was discussed this article will cover just the highlights. Overall the call had a very positive tone with investors congratulating management on the acquisition. They did in fact dissect the most recent seeking alpha articleand pointed out it was factual and that the tone didn’t match the facts. The tough questions came on the financing and the company didn’t walk away from any hard questions and gave many hints to their strategy forward, which included breaking the news of the likelihood of licensing.
Rationale for Therapy
During the dose escalation phase of the CD03 trial, much was learned. The company was able to push the responder’s rate from 40% to 70% simply by increasing the dosage increment 175mg. CYDY is now dosing the final 700mg cohort of the phase 3 study and released preliminary data based off of 25 people. The cohort was comprised of 12 patients that failed to achieve viral suppression at the 525mg level, and 13 new patients, all of which have achieved viral suppression within 5 weeks. The data suggests that the higher the dosage of drug, the quicker it drives a durable response. According to projections, in another week there shouldn’t be any further failures of viral suppression.
Dr. Pourhassan said “we are confident in the math.” This was used in the context that CYDY was reassured that they could get at least a 90%+ responder rate at a dosage of 700 mg of PRO 140. The confidence stems from the mining of the existing data at 525 mg which translated into a 93% success rate. Once a response is established, the durability of response is robust as demonstrated by 10 patients that have been dosed for over 2 years – and of that group, 6 are close to 4 years on a 350 mg dose.
New Monotherapy Trial – 6 Week Induction Followed by Maintenance
For most investors, the announcement of a new monotherapy trial appeared to be a negative surprise, on first reaction. Management did a good job explaining the new trial design and how it was going to be more robust than the existing design. The conference call essentially uncovered that the new trial would be more robust and use what was learned from the old trial for the design of a new trial that according to their model would meet the endpoints. The new pivotal monotherapy trial to be developed by key opinion leaders has an induction period followed by a 24 week maintenance period. This is less than the other trials 48 week period. The reason this is good is because after patients are stable for 6 weeks there is a very low probability of a viral rebound. CYDY plans to have the protocol completed and submitted to the FDA before the end of 2018. If the FDA accepts the trial design, CYDY is expecting a responder’s rate of over 90%. The pathway to approval requires CYDY to get combination therapy approved first and then file for a label extension.
$15 Million Raise in the Past 2 weeks and over $20 million in the past Quarter
In a recent 8-Kfiling CYDY sold 12,949,400 shares at $.50 with 50% warrant coverage at a $.75 exercise price. This raised approximately $6.5 million along with $8.4 million from a raise a week prior under identical terms also detailed in an 8-kfiling. In their last 10-K they had cash of $1.2 million ended the period May 31, 2018. Since their 10-K they have raised $1.0 million in a private placementon June 15, 2018, then $5.0 million via a convertible promissory noteat $.55. The terms have been successively getting better as they have raised $21 million since June 1, 2018 but it isn’t what investors characterize as non-dilutive financing. The company indicated their burn rate was $2.5 million per month which equates to $7.5 million burned over the past quarter.
Non-dilutive Financing via Multiple Licensing Pathways
Dr. Pestell was asked to elaborate on how his background and expertise might be utilized by CYDY. His answer for fund raising revolved around non-dilutive partnering and advancement into cancer indications. He truly believes that they can “change the paradigm in cancer.”
- Prostate Cancer Prognostic
On the conference call the highlight had to have been the multiple licensing opportunities. CYDY unveiled that in the acquisition of Prostagene was intellectual property that allows CYDY to license an extremely accurate prostate cancer prognostic that the competitor sells for $3,000. The company believes that in less than a year this could represent significant revenue given a base of 250,000 males that need a highly predicted test annually. Dr. Pestell commented that he was “fairly close to completing what is required for a licensing agreement in this technology which is 3 independent trials validating the high predicted value of the test. The test is 5-8 times better than the incumbent test which goes for $3000.” He summarized that this cancer test is “highly disruptive” and that he has been in touch with the main providers in this community.
- Mechanism of Action based Indications
Regarding Dr. Pestell’s work with other cancer companies, he noted that he was in very advanced stages of licensing discussion before the merger and put them on hold until the acquisition was completed and plans to fully re-engage the same party. This very advanced licensing prospect could bring in much needed funding to advance the expanded pipeline. This sort of non-dilutive financing is just what investors crave. This however, just represented one of multiple licensing opportunities. Dr Pestell indicated on the call that they had met all the prerequisites needed to license the cancer indications and noted that, before the acquisition, he was in advanced stages of negotiation regarding Triple Negative Breast Cancer (TNBC). Furthermore he suggested that they would be pursuing a Mechanism of Action type approval with the FDA similar in structure to what Merck (MRK) has done with Keytruda that will allow them to expand indications based on the Mechanism of Action (MOA).
BLA Filing Q1 2019 – Combination Therapy
The basis of the BLA is from the CD02 pivotal trial. This is a rolling BLA which means they can file it in sections. CYDY indicated they would have 2 sections completed by the end of 2018 and the final CMC section completed by Q1 2019. They review for completeness of content and then review the process.
ProstaGene Acquisition Closing in Several Weeks
CEO, Nader Pourhassan said the definitive agreement is signed and they expect to close it in “the next several weeks.” He also mentioned that as the interim CMO Dr Pestell was working toward “a quick start toward the clinical oncology trials.” CYDY met with it CRO, Amarex Clinical Research, to discuss advancing the studies for cancer indications starting off with Triple Negative Breast Cancer (TNBC). The primary reason for selecting TNBC is because it’s an unmet medical need. Women that have metastasis of TNBC typically only have a survival of 10 months. Dr. Pourhassan said the PRO 140 has the potential to “inhibit cancer metastasis.” They will file an Investigative New Drug (NDA) application for metastatic TNBC.
Takeover Target
Although not specifically mentioned that CYDY is in discussion with big pharma, there were various mentions by both Dr. Pourhassan and Dr. Pestell regarding big pharma. Twice during the call, Gilead Sciences, Inc. (NASDAQ: GILD) was mentioned in the context that the stock was trading low for seven years until it blossomed, and then again in reference to an article that mentioned this drug was a threat to Gilead’s $14 billion or ViiV’s $4 billion dollar revenue stream. Dr. Pestell mentioned that both Pfizer (NYSE: PFE) and Merck (NYSE: MRK) had CCR5 blockers but they had side effects which made their use impractical for cancer patients. The company also mentioned the new board member, Michael Krump, and that they were “using his financial expertise.” This comment might seem innocuous, but in context is seems like he might be the person that is handling any potential negotiations with big pharma.
The announcement of the higher responder’s rate during this call almost certainly means that they are in discussion with big pharma who would see that as a major competitive threat. Dr. Pourhassan said if”
“we have a higher responders rate then we are big time competition. […]
“do I think we are going to be acquired by somebody, big pharma perhaps? My guess would be absolutely! I believe partnering or licensing is around the corner in my opinion.”
Gilead Sciences, Inc. (NASDAQ: GILD), Glaxosmithkline (NYSE: GSK) and Johnson and Johnson (NYSE: JNJ) would be the top suitors. Merck & Co., Inc. (NYSE: MRK) and Pfizer, Inc. (NYSE: PFE) would be interested in the cancer franchise. Dr. Pourhassan also mentioned that none of their trials were on hold but it wouldn’t be proper to develop all these things at once when they could focus on HIV or TNBC and then “raise money in a few months from now when hopefully the stock would be at much higher levels.” From this statement it’s pretty clear that some sort of major catalyst is in the pipeline regarding HIV or TNBC. Dr. Pestell was also pressed by shareholders and remarked that his fiduciary responsibility was very important and that they were “in the end zone with HIV Trial and completing that is important” to look for the “shortest pathway toward a new revenue stream” and that it is “pragmatic” to stay focused on FDA approval and licensing agreements.
Both doctors seem to be in alignment that they are focused pursuing strategic drug companies that could result in a licensing deal. Dr. Pestell’s end zone comment seems to suggest that all the data that they need to get a deal in HIV is now in hand and that all that is left to do is simply negotiating the right deal. This sort of licensing deal is likely to what Dr. Pourhassan alluded to regarding his comments of a stock price at much higher levels. According to Biovid the acquisition or licence could be $1.2 billion or more.
Cancer Recap
Eventually tumors mature and and trigger the expression of CCR5 on the surface of cancer cells. Many different types of cancers such as breast, prostate, colon, pancreatic, and melanoma have CCR5 expression. CCR5 provides the tumor cell with a GPS functionality that contributes to cancer metastasis. CYDY gave PRO 140 to Dr. Pestell for research purposes and he discovered that PRO 140 bound to CCR5 blocked the Calcium signaling which stopped the cells metastasis and invasion. Merck and Pfizer just entered the field. The research team at ProstaGene have been in development for years and ready to rapidly expand the cancer indications.
Waterfall plot showing a 75% ORR using Maraviroc
TNBC Trial
ProstaGene’s strategy was to start by targeting one cancer such as TNBC and then once efficacy has been established and approved go after a mechanism of action based approval similar to the pathway that MRK took with Keytruda. TNBC is essentially the low hanging fruit because every patient that has TNBC also has CCR5 expression in their cancer. It’s also an unmet medical need because half the TNBC patients die within 10 months of diagnosis. According to Dr. Pestell, ProstaGene has “already written the trial” and has approached the “appropriate principal investigator” and “assembled a small team of public cancer centers.” He went on to say “there has been a lot of progress and planning of this trial.” Evidence of this planning can be seen below in an ongoing pilot study. He concluded his remarks on TNBC by discussing the secondary endpoint of circulating tumor cells and how their studies have shown that CCR5 is present on various cancers. The ability to monitor this circulating tumor cell number using the blood test helps manage metastatic cancer trials.
Breast Cancer Protocol using Maraviroc
Mouse Study Using a more toxic CCR5 Inhibitor (Maraviroc)
Breakthrough Therapy Designation – Combination Therapy
CYDY has applied and been rejected for Breakthrough Therapy Designation (BTD) 2 times but the third time may be a charm. In the past the requirements for BTD was meeting an unmet medical need and efficacy greater than the existing Standard of Care (SOC). The heavily treatment-experienced population of HIV patients that failed 3 or more retrovirals was exactly where PRO 140 worked best, but in March 2018 Trogarzo made by TaiMed Biologics USA corp received FDA approvalfor this patient population that affects 25,000 Americans. Trogarzo has a good safety profile with the most common reactions of diarrhea, dizziness, nausea, and rash. The most severe side effects include rash and changes in the immune system (immune reconstitution syndrome). The drug is administered bi weekly via intravenous infusion. The annual wholesale cost of Trogarzo is $118,000. After 24 weeks, the clinical trials affirmed a 43% undetectable viral load level in a patient population of 40. With the new trial data PRO 140 can re-submit its BTD and show the FDA an 81% responders rate after 24 weeks using the 350 mg level with an undetectable viral load. There are even less safety concerns with PRO 140 and the drug can be administered via a weekly subcutaneous injection. Both PRO 140 and Trogarzo are classified as entry inhibitors but PRO 140 targets the CCR5 receptor while Trogarzo targets the CD4+ receptor. CYDY reaffirmed on the call it will be filing for BTD shortly.
Near Term Catalysts
- Interim data from CD03 in 6-7 weeks leads to pivotal for monotherapy
- Application for Breakthrough Therapy Designation with new data
- Start pivotal monotherapy trial estimating 100 – 150 patients this year
- Licensing agreement for prognostic test
- Licensing agreement for HIV
- Additional Peer Reviewed literature
- Potential non-dilutive financing
- TNBC IND filing
Investment Considerations
The conference call highlighted many different investor topics ranging from the negative tone in an article to the breaking news of the emergence of a diagnostic company. Although the call was very positive there was so much to digest the market didn’t seem to react. The market even shrugged off an upgraded price target from HC Wainwright the following morning. So much is happening at this company this call could have been broken down into 5 or 6 press releases, but then investors would have missed the opportunity to meet Dr. Pestell. Dr. Pestell is the new crown jewel of the company that has the vision, the connections, and now the science to drive his agenda forward. His humble demeanor, deep understanding of the science, and passion to effect a new paradigm in the way we treat cancer is likely worth billions to big pharma. Dr. Pestell talked a lot on the call and just comes across as extremely credible, so when he discussed licensing opportunities so matter of factly, investors would be wise to heed his words.
CYDY is undergoing an extreme metamorphosis into “CytoDyn 2.0” as coined by Dr. Pestell during the call. Investors are choosing to look at having to do another monotherapy trial as negative when in fact it likely accelerates the process and the new data from CD03 monotherapy trial might lead to a breakthrough therapy designation. Instead of dwelling on past financings that led to dilution, investors should be looking at the licensing opportunities that seem imminent. If investors were to simply look at this company under a new lens as a platform technology that is assured revenue via a diagnostic in prostate cancer, as a phase 2 cancer company with 2 “shovel ready” indications, and a greater than 90% chance of approval as a monotherapy in HIV, they would see that a $150 million market cap based on 248 million shares outstanding is just too low.
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