De-Teasing Chris Wood’s “Epidemic-Ending” Diabetes Breakthrough

by Travis Johnson, Stock Gumshoe | March 8, 2021 12:23 pm

What's up with the 500-1,000% Gain predicted for Biotech Millionaire's July 2, 2021 Catalyst?

Here’s the lead-in for the ad that caught my eye this morning…

“3X Deadlier than COVID-19

“A Bigger, Silent Epidemic Is Wreaking Havoc on America
“And One Tiny East Coast Company Discovered the Breakthrough Treatment that Can Defeat It in 14 Days

“Estimates show investors who get in by July 2nd are poised to make Gains of 1,000% or More!”

The ad is signed by Chris Wood[1], and it leads in to an ad for the Biotech Millionaire newsletter he and Jake Weber produce for Mauldin Economics[2] ($1,895, 30 day refund period — kudos to them for offering that, most publishers don’t offer cash refunds on their $1,000+ publications).

This is all about Type 1 Diabetes (T1D), which used to be known as childhood or juvenile diabetes[3] — so that’s the chronic condition of insulin dependence, not the Type 2 Diabetes that is more commonly seen as preventable with lifestyle changes (diet[4], exercise, etc). More from the ad:

“America has around 1.6 million type 1 patients and more than 300,000 people become high-risk each year.

“Based on our low-ball estimates of what the drug may be priced at…

“We have a $5 billion per year market on our hands.”

OK, so that sounds impressive — I don’t know where they’re getting their “low-ball estimates” from, but getting some idea of the market potential is good.

And Wood gives a little backdrop on the drug, including some hints for us…

“Remember, type 1 diabetes happens when the immune system attacks the body by accident…

“Destroying beta cells in the pancreas and cutting off the supply of insulin.

“The immune system attacks beta cells using something called “autoantibodies.”

“Well, this diabetes breakthrough acts like a suit of armor against these autoantibodies…

“Protecting the insulin-producing beta cells in the pancreas….”

So we’ve got that, we’re told that it’s a 14-day treatment, and we have word that one of the patients in one of their trials has remained diabetes-free for eight years… and that “the FDA[5] recently granted it a ‘Breakthrough Therapy Designation.'”

Any other clues? We do get one, in the form of that catalyst date…

“… on July 2, 2021, a catalyst will send the little East Coast biotech company I’ve been talking about to the moon.

“On that fateful Wednesday, our comprehensive research shows us the FDA is going to approve their diabetes breakthrough…

“Which means the biotech company behind it will start advertising…

“Every hospital in the world will know about it…

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“And investor capital will come flowing in like a raging rapid.”

So based on that catalyst and the market potential, Wood and Weber say that “investors in this diabetes breakthrough stand to make a 500% gain over the coming months…. With 1,000% very possible as the drug rolls out around the world.” And Wood adds on that, “In over 20 years, I’ve never seen a biotech stock with this much certainty.”

So who is this? Thinkolator sez they’re teasing Provention Bio (PRVB)[6], which is waiting for FDA approval (they hope) for their drug Teplizumab, a monoclona antibody that preserves beta-cell function and reduces the need for insulin — they’re asking for approval to use the drug to delay onset of type 1 diabetes in individuals who are identified as “at risk” for that disease under some specific criteria. The initial patient cohort is quite small, but they’re hoping to expand on that as well to broaden the market, with another Phase 3 trial for newly diagnosed T1D patients enrolling this year (you can see their pipeline here[7]), but the crucial first step is getting that initial approval… and their PDUFA date is indeed July 2, so that’s coming pretty soon.

The PDUFA date is a goal, to be clear, it is not guaranteed — but the FDA usually responds near that date or before it. That’s a relic of the last time the drug approval process was updated by the FDA, in 1992, (PDUFA stands for Prescription Drug User Fee Act, and it essentially created a new system to speed up what was at the time an even slower drug approval process — pharma companies now pay fees to the FDA as part of the application process for marketing approval for new drugs, giving that agency the manpower and resources to handle an ever-increasing number of applications without getting more money from Congress, and in turn the FDA established target goals for their speed in processing those applications).

So that’s what biotech and pharma companies are talking about when they discuss their PDUFA dates — for a normal drug it’s ten months from when they submit their application for marketing approval (NDA, for New Drug Approval), and for a “breakthrough” drug or one that otherwise has a special status that expedites things, it’s typically a Priority Review of six months (in the 1980s, the average approval time was about three years). They announced that the FDA had accepted their submission on January 4[8], were granted Priority Review, and so now they’re waiting another four months or so to see what the FDA decides about their application.

And yes, Type 2 Diabetes is a much larger market, probably about 10X larger in terms of economic impact… but T2D can be delayed or prevented with lifestyle changes. That’s not really the case with Type 1 Diabetes (T1D), so this did receive the Breakthrough Therapy Designation[9] from both the US FDA and the EMA (European Medicines Administration). That doesn’t mean as much now that they’re in the final approval process, but that Breakthrough designation came in mid-2019 and it did very likely speed up the process of getting to this point.

I’m not a biotech guy, but it all looks very encouraging if we go by their press releases (that’s the job of a press release, of course, so it could be that I’m missing something). They just released another bit of extended data from their Phase 3 trials, and the headline is that this data extended the “delayed onset” by a year, on average — though I guess that extra year is not brand new, maybe it just wasn’t formally published before… they say 32.5 months now[10] and were saying “approximately three years” last Summer.[11]

So what’s going to happen when the FDA results come out? Well, I guess that depends what they are. This is still a small company, with a market cap of about $750 million (and after announcing their PDUFA date, they sold shares to raise another $100 million, which is part of the reason their shares came down in January), and I would assume that investors are predicting approval… but there’s no way to know what the market will be, and it’s pretty likely that it will be relatively slow to build up to a big commercial product. They indicate in their Investor Presentation that the initial focus is on people who have early indications of type 1 diabetes and also have a direct relative with T1D, which they say is about 30,000 people in the US. No idea what they might charge for the drug, but that will be the first indication… and then on some undetermined schedule, depending on progress and FDA approvals, they would like to reach the hundreds of thousands of at-risk people in the US and, they say, up to 2.3 million globally, with the possibility that there might also be multiple courses of treatment beyond the 14-day infusion they’re starting with. Frankly, that’s why I don’t often get involved in investing in biotech projects — beyond the fact that I’m not an expert on the science, and buying shares from people who probably know more about the science than I do is an uncomfortable situation, I also have a hard time fathoming the future pricing and market dynamics. They do say in their Investor Presentation[12] that they’ve been meeting with the major payers already (insurers, mostly), and that there’s a lot of enthusiasm and “pricing research” is underway.

But yes, type 1 diabetes is a big disease, and prevention would be a breakthrough, so if it turns out to be safe and feasible for very large populations in the years ahead, it seems likely that the owner of that kind of product should be able to justify a market capitalization of more than the current $750 million. Lots of uncertainties there, but if you’re dealing with a small biotech and a big disease you’re starting with some embedded leverage[13]… and it helps that this is not their only drug, they’ll both be trying to expand the universe for this drug and developing several others in their pipeline, including a second T1D drug, a lupus drug that will report some Phase 2 data later this year, and one project that is already partnered with Amgen (for celiac disease[14]).

I’m sure there are lots of things that could go wrong, Chris Wood is surely not infallible when it comes to picking biotech stocks (the only other teaser pitch from this newsletter that I’ve looked at is down about 30% in nine months[15]), and there is no guarantee that the first FDA approval, which is likely but far from 100%, will lead to a huge market acceptance and a “raging rapid” of profits for this company. It might, but it also sometimes takes many years for a biotech drug to find a larger market, particularly if it needs additional approvals along the way, and there’s so much investor speculation around those PDUFA dates that even success can lead to selling if those traders move on to the next idea.

When I say “likely,” by the way, that’s not a judgement on this drug, I’m just going by the averages[16] that more than 60% of drugs get approved on their first NDA review, and something like 80% eventually get approved even if they get delayed by a request for more data or more clinical trials — as of 2015, according to Statista[17], those numbers were about 63% and 83% for metabolic or autoimmune diseases and about 56% and 80% for endocrine diseases, which seem to be the general categories this drug could fall into (the hardest path to approval is for drugs in neurology or psychiatry, for what it’s worth). I don’t know anything about the competition, or what other treatments might also be in the pipeline from other companies who are fighting diabetes.

So I’ll leave it to you, dear reader — ready to bet on FDA approval and on what the commercial uptake of this drug for slowing the progress of Type 1 Diabetes will be? Think there will be a partnership deal for this drug or a takeover if big pharma smells a hit? There’s usually a fair amount of investor interest and betting around PDUFA dates when it comes to small biotechs, so you won’t be alone if you’re wagering with either a thumbs up or a thumbs down, but do know that the stock is likely to be very news driven over these next four months.

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