by DrKSSMDPhD | April 22, 2017 2:49 pm
[Ed. Note: Dr. KSS writes about medicine and biotech stocks for the Irregulars. He has agreed to our trading restrictions, chooses his own topics and his words and opinions are his own. You can see all of his past articles and most recent comments at his Stock Gumshoe page.]
In June 2016, we advanced ScyNexis ($SCYX) as a long investment idea in the antimicrobial space. While I remain with a long investment in $SCYX and have added to my original position, the position is down in value about 25 percent overall because of the company receiving from the FDA a clinical hold on lead drug SCY-078. The hold pertains only to the iv form of the drug, not the oral form.
Here is ScyNexis’s announcement of the clinical hold. In discussions at one of our monthly conference calls and in the biotech threads, we realized considerable confusion exists among investors about the events leading to the hold and how the hold can possibly be resolved. I contacted ScyNexis and arranged a conversation with Eric Francois (photo below). Francois is chief financial officer of $SCYX and was acting at the time as a media contact for the company because more senior officers were on the road at meetings. Francois joined management after ScyNexis moved from Durham, NC, where it was founded, to New Jersey to have better access to capital markets.
Francois received a BA in economics and an MA in marketing from Pantheon Sorbonne University in Paris, France. He cofounded technology start-up Topi, Inc. For six years, he was a director in Lazard’s Equity Capital Markets group; in that he role he advised biotechnology and healthcare companies and led capital raisings for them. He is plainspoken, lucid, animated. Francois is friendly and seems at ease with the jackhammering pace of northeastern US biotech start-ups with real intentions of succeeding. He was appointed in November 2015 and awarded options for 100,000 $SCYX shares; the strike price is underwater at present. He owns 15,000 company shares.
He got to the point of why I’d called: The iv formulation of SCY-078 is in FDA purgatory because of three thrombotic events deemed mild-to-moderate in severity. Recall that 078 is a drug originally developed by Merck ($MRK) which, after completing a few phase I studies on it, opted not to develop it further, possibly because of a prevailing perception at the time that the antifungal arsenal was sufficient. Merck phase-1 tested the agent on more than 300 patients and recorded no thrombotic events. But it’s important to recall that aside from oncology phase 1 trials, phase 1 subjects are healthy volunteers, not patients. For the FDA, any time a thrombotic event occurs in a healthy volunteer, the cause needs to be investigated and defined.
Why did ScyNexis elect to repeat phase 1 testing, or some aspects of it?
Francois explains that ScyNexis repeated some phase I testing of 078 because the company wanted to volunteers to have longer exposure to higher doses in pursuit of confirmation of safety. They’d been clued in to the fact that 078 isn’t perfect based on certain earlier observations. According to Francois, the iv form has a way of causing erythema and edema at small-bore peripheral iv insertion sites: “You can give it by peripheral iv, but you’re basically placing a new iv every day,” he said. 078 is not, strictly speaking, a vesicant, an agent that sloughs tissue if it escapes from a vein. But its imperfect performance led to the company doing its phase I using volunteers with PICC lines.
Because no study protocol had been available when we discussed this trial during our Gumshoe monthly conference call, we were left to speculate, and many of us were surprised at the idea of placing PICC lines in healthy volunteers….people of course who are being well-paid for their services, but who are being subjected to risk without possibility of benefit. PICC line placement is not intrinsically a high-risk procedure, but in some case series, 10-20 percent of patients with such lines can have adverse outcomes, including thrombosis, merely because of aspects of catheter placement, such as the position in which the innermost catheter tip lies. In cancer patients, who have PICC lines placed for chemotherapy and antibiotics, more than half experience a thrombotic event owing to the catheter, anything from upper extremity deep vein thrombosis to clots in the catheter tip. The essence of a PICC line is that peripherally, at is insertion site, it behaves much like a simple iv, yet it travels deeper so that its medication payload can be disgorged deep into central, presumably safer, veins. The alternative is a so-called central line, one that enters a central vein immediately upon placement. At least one recent meta-analysis suggests that PICC lines incur twice the risk of thrombotic events as central lines.
For the recentest ScyNexis phase 1 trial, the one that fetched the clinical hold, the company planned 10-day infusions over dose ranges that went higher than in Merck’s original phase 1 trials. Specifically, three patients received the highest dose in the trial, a dose higher than will be used in clinical practice, and these highest doses were achieved using a high-concentration form of 078. Only three patients received 078 in high-concentration form, and all three experienced the mild-moderate thrombotic events that precipitated the clinical hold.
Some incidental comments about these three patients include that all three were managed with two days of iv anticoagulation followed by conversion to warfarin (Coumadin, an oral anticoagulant) for several weeks. None had complications. In one case, had the patient not been in a medical setting (i.e., in a clinical trials unit), the thrombotic event would never have been picked up; the patient was asymptomatic but seen to have a tiny clot at the catheter tip on ultrasound. The most symptomatic of the three experienced shoulder pain on the side of catheter insertion, but was found to have the catheter tip in the inferior vena cava rather than in superior vena cava. The point here is that the symptoms experienced are hard to relate to the case’s facts, which is how clinical medicine commonly is. The third patient was experiencing bodily twinges of pain in diffuse sites almost reminiscent of so-called post-phlebitic syndrome, but investigators were inclined to ascribe this to anxiety. No patient had an untoward outcome, required extended admission, or had evidence of pulmonary embolism.
Francois describes the attitude given off by FDA regulators upon being informed of these three events as nonplussed. But the atmosphere at the time in the FDA was conflicted. The agency was exiting its Califf year and still reeling from that but also facing a new administration in the White House; the prevailing attitude was fear that anyone within the FDA might lose his or her job for the most nominal of reasons. Thus the FDA made no efforts at all to avoid what it claimed was a rulebook-mandated act even though the background story was weak: placement of iv SCY-078 on clinical hold.
Francois told me that ScyNexis has already held a type B meeting with the FDA over the hold, but has not received the FDA’s written minutes from that meeting. “We have a strong case,” he said, “and remain very confident.” He reminded me that the azole antifungals were dogged with thrombotic events during their clinical development, but that such events did not interfere with their accession to marketing approval. Like 078, voriconazole, for example, is preferred for administration via PICC if dosing is to be for multiple days because of what emerges at peripheral iv insertion sites when it’s given via that route.
According to Francois, ScyNexis’s next meeting with the FDA regarding the clinical hold will be during this quarter; as is customary corporate policy he’d prefer not to disclose the date lest shares be gamed. He notes the company is quite optimistic that the hold will be resolved at that meeting because of suggestions that ScyNexis has prepared. First, the high concentration will never see clinical use. The company is unaware of any factor regarding the chemistry of 078 that would cause it to create a zone of hypercoagulability at higher concentrations, however. Second, the company will recommend that infusion time be related to dose such that higher overall doses run in over longer intervals. The company does plan product labeling that recommends iv administration via either central line or PICC line. Francois didn’t recall what dose was administered to the three-patients getting high-concentration 078, but said it was higher than would ever plausibly be used in a clinical setting. Why the company felt inclined to dabble with doses in this range, given that trouble happened only when they went were they were planning never to go anyway, is uncertain, but the company is new and has a learning curve. One of medicine’s most notorious unwritten rules is that the likelihood a decision will boomerang back to result in your ridicule is inversely proportionate to how compelling the case was for that decision. Example: You colonoscope high-risk patients all day and all tolerate their procedures well, then at the end of the day you perforate the colon of a perfectly healthy 50-year-old man with four kids whose indication for colonoscopy was weak.
Could the FDA ask the company to perform another phase 1 trial? While anything is possible, we think that’s unlikely for two reasons. First the adverse events happened with infusions of drug in concentrations that need not ever be used clinically. Second, phase 1 studies subject patients to risk without benefit. As regards the morality of clinical trials, invoking more risk without benefit would be very hard to justify in this situation. One fact trumps all others: fungal sepsis still has a 60-70 percent mortality in the United States, and the FDA needs to move forward in allowing this company to develop one more agent to fight fungal sepsis.
ScyNexis continues to hold both QIDP and Fast Track designations for both the oral and iv forms of SCY-078. Francois alludes to the company being at a fever pitch now because of preliminary evidence that 078 has activity at clinically relevant doses against 16 isolates of Candida auris, a resistant fungus famed for causing hospital outbreaks, particularly in the northeastern US, and for leaping from person to person in hospitals, completely unlike other fungi. The company will be presenting more about its Candida auris story in Vienna during an industry symposium in April 2017. ScyNexis development plans for oral 078 are on track and proceeding. Francois hints that the company may be eyeing additional agents for its pipeline but refrains from saying more given the early stage of any such story.
The recentest insider purchase at ScyNexis was by CEO Marco Taglietti, MD, of 25,000 shares in December 2016. Taglietti now owns a total of 251,000 shares. While the clinical hold has driven short interest up to nearly 9 percent, ScyNexis appears frankly undervalued at its present market capitalization of $65M. Sanofi ($SFY) appears to have divested its stake in ScyNexis, but nearly two-thirds of shares are now owned by institutions. Potential corporate suitors for a well-tolerated efficacious safe iv and oral antifungal that works in the setting of amphotericin B, echinocandin and azole resistance would be no mystery: $MRK, Allergan ($AGN), Pfizer ($PFE), GlaxoSmithKline ($GSK).
In terms of competitive landscape, ScyNexis’s chief competition was from Cidara ($CDTX), and we expressed our strong favoritism for ScyNexis in that race long ago. Since then, Cidara’s lead agent has failed in vulovaginal candidiasis. While ScyNexis shares languish below $3 because of the FDA hold, I feel this hold is likely to be lifted by 30 June 2017, and that a 12-month price target of $13 is reasonable.
Disclosures: I have long positions in $SCYX, $MRK and $PFE but will not trade in them for 72 hours, reckoned in business days, after this column appears. I have never received anything of pecuniary value from any person or company presented by me at Stock Gumshoe. This column does not constitute investing advice and does not absolve you of your need to perform your own research before investing in any biotechnology issue. Diligence is due. Follow me on Twitter @KSSMDPhD.
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