by DrKSSMDPhD | June 6, 2016 11:49 pm
We’ve palavered much over the past two years about investing in makers of novel antibiotics….and had success with our long ideas Durata (now a unit of Allergan $AGN) and CellCeutix ($CTIX). Achaogen ($AKAO) remains a stock we love, and we predict investor rewards there in due course. We all know the familiar mantras here: antibiotics drive the development of antibiotic resistance in a morbid two-step dance, and so despite medicine’s considerable advancements in providing new drugs to kill bacteria (there are now perhaps two dozen classes of robust antibiotics), clinical medicine thirsts for more. Bacteria resistant to our best antibiotics, if not to all antibiotics, now no longer shock us when they are reported.
But antibiotics are only one front in the antimicrobial wars. Sick patients also succumb to fungi. A perception, a mistaken one, abounds that bacteria are the fiercer enemy. They aren’t. An inpatient spikes a fever, and the doctor orders blood cultures. When the doctor gets a call soon after, as (s)he often does, that those cultures are growing fungus, physicians feel a sense of terror, of doom. The patient is far sicker now than before, and prospects for survival have dimmed sharply. Comparing the antibiotic industry with the antifungal industry is, to me, a lot like comparing the automotive and bicycle industries. Cars continuously incorporate new technologies, and a new model car is a vastly tricked out beast compared with my 12-year-old car. And yet the hottest new model of bicycle strikes me as scarcely an improvement on the Trek mountain bike I rode in medical school. The difference is so stark that globally, the biotech industry merits an F for failing to keep up in the antifungal space.
Comes now before us for review a company prepared to take up the slack. That company is ScyNexis ($SCYX), formerly of brainy biotech breeder city Durham, NC, and now newly headquartered in New Jersey.
What you need to know:
(1) ScyNexis’s new drug inhibits antifungal enzymes that assemble a critical molecular structure in fungi, a so-called beta-1,3-D-glucan. Beta-1,3-D-glucans are ubiquitous among fungi, but NEVER occur in mammals. Poison the machinery that makes them, and you have a nifty way of snuffing out fungi without harming those infected by them.
ScyNexis’s new agent, SCY-078, is not the only such agent on the market. An important drug called caspofungin (and members of its drug class, echinocandins) also block beta-1,3-D-glucan formation. However, these drugs are available only in intravenous formulations. ScyNexis’s drug is available in both iv and oral pill forms, and the pill form is highly bioavailable and very effective. This is not the norm in antifungal therapy! Better yet, evidence from clinical trials to date suggests that ScyNexis’s drug works in fungal isolates that resist caspofungin.
The most widely used in-hospital i.v. antifungal is a monstrous medication: amphotericin B. Google its side effects and you’ll see what I mean. I have actually cried at the bedside of patients when I have to inform them that I need to initiate treatment with amphotericin B. There’s a reason they call it “amphoterrible”! Yet ScyNexis’s drug is well-tolerated and without much host toxicity.
(2) These are key risk factors for getting fungal infections: (a) being a recent recipient of multiple antibiotics; (b) being nourished by total parenteral nutrition, as very sick patients commonly are; (c) increasing duration of hospitalization. Risk also rises with duration of antibiotic therapy.
To some extent, bacteria keep fungi at bay. They secrete antifungal substances and compete for nutrients. Kill them, however, and opportunistic fungal growth is favored. The present-day story of bacteria and antibiotics is one of alarming bacterial resistance to antibiotics….which means that more people get more antibiotics for longer than ever in human history. I hope you can grasp why this fact alone means that inpatients are at higher risk for bloodstream fungal infections that at any prior time.
(3) The competitive landscape: On behalf of readers, I spent approximately 90 minutes poring over antifungal trials at clinicaltrials.gov. Everything I saw, except for ScyNexis, was derivative, dull or disappointingly boring….refinements of doses and administration routes of existing agents, comparator trials of existing agents. Ho hum. ScyNexis has no meaningful competition. Doubtless there are start-up preclinical programs, but ScyNexis has several years of lead time now.
(4) At this writing, the market cap of $SCYX is just under $60M, and we regard it as quite undervalued. 79 percent of the float is owned by institutions and mutual funds. Fidelity has a 14 percent stake. Two biotech venture firms we admire have stakes: Broadfin Capital and Foresite Capital Management. We have come to revere Foresite, and believe it is making among the very most prescient and discerning investments in biotechnology these days. $SCYX CEO Marco Taglietti, MD, owns 124,754 shares and has been steadily adding of late. Taglietti’s officers are buying. Sanofi ($SNY) owns 14 percent of the outstanding shares, and Glaxo ($GSK) owns 6 percent. Short interest is less than 1 percent.
You can view ScyNexis’s current corporate slide deck presentation here.
(5) ScyNexis is wrapping up a phase 2 study comparing SCY-078 at two dose levels with fluconazole for vulvovaginal candidiasis. No present regimen has FDA approval for treatment of this condition. We predict that this trial, which should report at any time, will disclose SCY-078 superiority.
(6) The company’s most important trial is phase 2 and still enrolling: it’s a large multicenter dose-finding trial of oral SCY-078 vs investigator’s choice of fluconazole or micafungin for invasive candidiasis. Invasive candidiasis is having a positive blood culture for a Candida species (which can portend death) or a culture from an otherwise sterile body site with a Candida species. It’s a gutsy trial….an oral (and not i.v.) investigational drug for fungal sepsis, but things are going well. ScyNexis has fast-track and QIDP designation for SCY-078 in this indication and for invasive aspergillosis (very deadly). Trial sites include fine institutions: several premier centers in Texas; Johns Hopkins; Duke; Montefiore: Washington University.
(7) Risks include the fact that the iv formulation of SCY-078 remains in phase 1 trials and could show problematic toxicity. The company will have to execute phase 3 trials to submit a New Drug Application, and will need to raise capital before that time. However, as of 31 Dec 2015, it had $49M cash on hand. I estimate cash burn at about $30M per year. Phase 3 trials in its indications will be rather quick, but not inexpensive. ScyNexis last did a secondary stock offering in April 2015.
(8) In May 2016, ScyNexis received Orphan Drug Designation for SCY-078 use in invasive candidiasis. Frankly, that flummoxes me: invasive candidiasis seems commoner to me than the league of orphan situations. But who am I to argue with the omniscient FDA? The FDA does have rule-bending latitude for agents it wants to succeed (take a hint).
(9) Review of $SCYX share price chart suggest it has recently put in a bottom and has turned.
(10) Three biotech analysts follow $SCYX and have placed 12-month price targets on it of $16. At this writing it trades at just over $4. My personal price target is $12 in 12 months. HN score B because $SCYX pipeline includes a single chemical entity, albeit in iv and oral forms.
Disclosures: This column is neither a solicitation nor a recommendation that you purchase shares of $SCYX. Of equities mentioned in the column, I have long positions in $AKAO, $AGN and $SCYX. I have no short positions or options. I have received nothing of pecuniary value from any person or company ever discussed by me at Stock Gumshoe Biotech. I will not trade in any named equity for 72 hours, reckoned in business days, after this column appears. Follow me at Twitter @KSSMDPhD.
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