CytoDyn Inc. (OTCMKTS: CYDY) may have given one of its last updates as an OTC company yesterday and revealed a number of positive surprises. They could be saying hello NASDAQ, and hello EUA in the course of the next couple of weeks. The data from the trial is waiting to be unblinded next week, but the number of deaths are so low in comparison to the control populations that, statistically speaking, it is very difficult for them to fail this severe to critical trial. They are widely expected to meet their endpoint, but worries about dilution, insider selling, and the FDA reluctance to issue an EUA has been weighing on them.
Mortality Endpoint Analysis
Based on the number of deaths in the overall population in comparison to a similar population of placebo controlled trials, it is possible to determine if the trial is likely to meet statistical relevance and ultimately approval. Based on the placebo groups of this severe to critical patient population, mortality ranges from 23% to 37%. Using simulation software to calculate the threshold where the number of deaths is statistically relevant the chart below shows the leronlimab arm of the study could have between 45 – 49 deaths and still be statistically relevant. This means that leronlimab could have as high as an 18.85% mortality rate and still meet the 28 day all-cause mortality endpoint. Currently the entire study which includes the placebo and leronlimab arm has 87 deaths (22.3% mortality) with 5 more days to go. Without the statistics package this is just an educated guess, but this is where the news of the 87 deaths represents an extremely positive development.
During a conference call earlier in the year Pourhassan used an example of equal number deaths in each trial. He said equal deaths would be statistically relevant because of the 2:1 randomization leronlimab to placebo. His conclusion matches the results with the table. Assuming 90 deaths and the weighted mortality of 32.57% in the table it means 42 people died on placebo and 48 people died in the leronlimab arm. This means that if the endpoint is a 20% reduction in mortality the drug should be approved. It meets that test in this example, but it’s important to realize that remdesivir was approved on a clinically significant reduction in mortality of only 5.2%. These expected mortality results are much higher than any other drug, and after MesoBlast (NASDAQ: MESO) failed to meet its primary endpoint it happens to be the last drug in a phase 3 mortality trial that hasn’t had to water down the primary endpoint. There is a very high likelihood of approval because the Drug Safety Monitoring Committee (DSMC) let them finish their trial and agreed that the drug was meeting its endpoint of mortality.
On the call, the chairman Dr. Scott Kelly read testimonials of miraculous anecdotal recoveries in COVID-19 and cancer. The most interesting takeaway from the COVID-19 testimonial was the speed at which recovery happened in Europe. In just 3 days, the patient was starting the ECMO weaning process and had the ECMO tubes removed within 8 days. In an environment where ICU’s and ECMO machines are at max capacity it’s nice to have a drug that is as simple to administer as a shot. In Dr Yangs UCLA study 19 of 23 critical care patients survived. The mortality rate was 23%. Using this anecdotal data versus the other trials of the placebo group it’s easy for investors to see how likely leronlimab is to be approved. Looks like 33% mortality versus 23%.
The other thing to consider is that the FDA also granted the company an Open Label Extension (OLE) Arm to the CD-12 trial that has yet to read out. The company reported on the call that they were “crushed” with requests for eIND’s. These events have fostered the notion that the FDA is actually quite happy with what CYDY is doing and plans to follow them more.
The much anticipated uplisting will happen very shortly. The company has met the $4 stock threshold and now just needs to meet the shareholder equity requirement of $5 M. The company believes they can meet that easily. They have access to investment capital but are trying at the same time to minimize dilution which means staying clear of triggering any ratchet clauses under $10.00.
Since July investors have been patiently waiting for an uplisting and finally got a very positive response from the NASDAQ. CEO Pourhassan said “any item that they request will be handled immediately. I’m very optimistic that we could uplist as soon as we hear the next steps from NASDAQ.” Adding to the optimism was the CFO Mulholland, who alluded to the fact that as of last quarter they were $2.3 million short of the $5.0 million net equity requirement as well as the $4.00 minimum bid requirement. Mike Mulholland CytoDyn’s CFO said
“We have a plan to cure the shortfall in equity.”
The quarterly report is due to be filed by the 15th of January, and based on the equity infusion from a private investor and conversions of debt into equity the company should handily exceed their $5 million net equity requirement. Pourhassan assured investors that they have very quick access to capital and can raise whatever they need to ensure positive equity exists for an uplisting. CytoDyn is the number 1 volume traded stock on OTC Markets, so if they aren’t worthy of an uplisting who is? When you connect these dots the NASDAQ listing seems likely the week of January 18th assuming NASDAQ likes what they see on the 10-Q report. For the past 2 quarters it seems like NASDAQ was holding back and simply wanted to see a filing with a $5.0 million equity before they would grant an approval.
Pourhassan affirmed that the Philippine EUA deal was alive and well. The submission was supposed to be done by the end of the year, but that was based on a 2 week estimate provided by Chiral Pharma Corp. The reality of the situation was a voluminous request that they have complied with all but one final detail. This final detail is related to the eIND data. Pourhassan said
“The Philippines can give us Emergency Use Authorization . . . without finishing our CD12 data this month. If that happens we will start selling right now! Our manufacturing people are on alert to send vials immediately to the Philippines or any other country . . . We have half a million vials ready to go and another 700,000 vials can be made.”
The company expects to submit the EUA application by mid-January (10 days). Their sponsor Chiral Pharma Corp is planning to present it to the Philippine FDA and has been working diligently to get all the appropriate documentation in place. Once the application is made there is a very quick turnaround which is just a matter of days. Should they succeed in this project hundreds of millions or possibly billions of dollars in revenues could be recorded in the coming weeks.
Revenue Revenue Revenue
There was a considerable amount of talk about revenues. There are multiple pathways for them to record hundreds of million of sales in Q1. They are exploring ways of marketing the drug without CD12 data in places like Indonesia and Brazil that don’t require complete approval. This could lead to tens of millions of revenue in the coming days to weeks. They are also working with Turkey and Pakistan to sell the drug their. The Philippine connection seems to be the strongest revenue producing opportunity. They are also talking to Operation Warp Speed (OWS) which will need an EUA to get involved but would likely bring a pile of cash in the hundreds of millions. These opportunities leave them in an enviable position whereby they really don’t need to do any additional fund raising and take the risk of dilution completely off the table.
Unblinding the Data
The data is not due to be unblinded until approximately January 12th which represents 28 days from the date of the last enrollee. The company indicated that they will be locking the data next week, so that they can unblind it, and then apply their statistical analysis package to the clinical trial readout. The company indicated this analysis could take weeks, but that is really cautious disclosure language. If the data is overwhelmingly obvious like it has been to all the scientists, the anecdotal eIND’s, and latest compassionate use case then it’s clear the release will be within days of the unblinding. Investors should keep in mind that calculating the difference between the death rate is an easy to see answer when the differential is obvious. However a delay in the release of the data shouldn’t indicate the readout is bad, but going through a thorough analysis so they don’t make any mistake.
Breakthrough Therapy Designation (BTD) Update
As previously stated, the company said they needed 5 stage 4 patients that lived longer than 6 months to have the data they needed to approach the FDA about a BTD in their cancer basket trial. The company indicated there were a total of 9 patients that fit the criteria, and that those patients had zero CTC’s and very low CAML levels. The punchline is that they did it with NO SIDE EFFECTS. They are waiting to image the final CT’s and MRI’s before compiling the data. Their plan is to sit down with the FDA in January and about their plan for a BTD in basket cancer. Should they get a BTD this year it would be monumental. Putting things into perspective Keytruda works in around 40% of patients and extends life around 4-6 months, and has sales of around $11 billion
The company has 300,000 vials ready to go to the first government to grant them an approval. The other option allows them to sell it directly to a country. The current plan is for Samsung Biologics to manufacture 2.5 million vials in 2021 and 2022. Once the approvals started coming in they indicated that their priority would be to secure additional products from Samsung. .
Long Hauler / NASH / GvHD / Stroke Update
The long hauler trial is very much on investors minds. The protocol has not been fully established with respect to its primary endpoint. They discussed how the fatigue score might not be the best endpoint so they are working diligently with the FDA to wrap things up and get a patient dosed in the month of January. One investor asked how to sign up for the trial and Pourhassan informed them that the trial was overflowing. They believe there will be between 8 – 24 million long haulers to treat in the near future and they are currently the only company pursuing this indication. How to define long haulers and how to measure it.
The first patient was dosed in the NASH trial was on December 29th and there are 25 patients in screening and 20 patients scheduled for MRI and multiple sites getting set up to recruit. They are using a Proton Density and Fat Fraction (MRI)device to non-invasively measure the liver function. According to management the trial is going ahead faster than anticipated. The Graft versus Host Disease (GvHD) trial was held up due to the inability to find patients during the pandemic. Reports from a few stroke patients has been quite favorable and pointed to leronlimab accelerating the healing process.
The CEO went over the backstory of how the company finished their pivotal clinical trial over 2 years ago yet the BLA is still not finished. The company hired Maboob Rathman who has an impressive track record in filing BLA’s. They have a monumental task of filing BLA’s in Canada, the United Kingdom, and two in the United States. They are moving toward a rolling review, but the fact remains that the FDA has not really given them an easy road to follow. In June they didn’t need to issue a Refuse to File Letter and could have simply asked them to provide the safety data. The recent request for them to redo their receptor occupancy test is nonsensical at best. Although the CEO heralds the work of the FDA it’s clear that major headwinds are in play. It looks like approval is finally weeks away, but investors are concerned that the FDA might take away the punchbowl like they have done so many times before. This is a possible reason why the stock is trading at $5.50 instead of over $10.00. The good news for investors is that the CEO has put forth a credible plan that mitigates the risk of the FDA by applying to multiple health ministries in foreign countries.
Investor Wrap Up
The tone of the conference call was very strong. It’s clear that there are multiple catalysts in the coming days to weeks. The most obvious catalyst is the possibility of a NASDAQ uplisting. Although they didn’t blatantly say they were going to uplist it’s clear that the NASDAQ wants to peek at their quarterly filing before giving the green light next week. There is an avalanche of data to suggest the drug will be approved very shortly after the data is unblinded. The model in this article shows with an overwhelming degree of certainty that the 87 deaths in the trial means that they will nail their endpoint, but the anecdotal data suggests they will do much better than that. The revenue is about to flow in a major way and the Philippines EUA seems imminent. Should the company get traction in any sales, other regions should fall like dominos to their sales efforts.
At the moment, the biggest risk for investors is mispricing the drug because demand is incredibly high and they only have a limited inventory. It seems like they should be able to coax some more supply out of Samsung Biologics but they are competing against big pharma and their other drugs. On the investor call the management team presented a united front and had extreme conviction, which bodes well for investors. CytoDyn is a speculative investment with a binary type readout in the coming days to weeks. The only thing unusual about this binary readout is that there is very little downside compared to the upside. Investors could see $20+ per share which represents a $12 billion dollar valuation for a drug that takes dying from COVID-19 off the table.
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