Humanigen Inc. (NASDAQ: HGEN) released excellent news that their drug lenzilumab improved survival without the need for invasive mechanical ventilation (IMV) by 54% in hospitalized patients with COVID-19. This top-line data was statistically significant and met it primary endpoint. This positive news is the primary reason shares vaulted over 100% today to close at $21.61. Another underlying cause for the price spike was the notable increase in short interest in March which reached a record 3,953,816 with a days to cover ratio of 4.2.
Noticeably absent from social media was the short Mafia and Stat analyst Adam Feuerstein. It appears Feuerstein was busy this weekend promoting memes about CytoDyn Inc. (OTCMKTS: CYDY) and Northwest BioTherapeutics Inc. (OTCMKTS: NWBO) which is ripe for a readout soon. This excellent news coupled with a record short interest and no short mafia bashing created the perfect storm for a price increase, but investors need to be wary of extreme valuation because lenzilumab may be getting ahead of itself because there is a lot of competition.
Other stocks popping in the sector are CYDY and Relief Therapeutics (OTCMKTS: RLFTF) after their news announcement of their Phase 2/3 data. After hours HGEN announced a 5 million share secondary for manufacturing purposes.
Top Line Analysis
When COVID-19 patients require hospitalization it’s primarily because they are having difficulty breathing. Monoclonal antibodies like Regeneron Pharmaceuticals (NASDAQ: REGN) Covid Cocktail are designed to be use early and prevent the need for hospitalization. When used they are expected to reduce the hospitalization rate and death by 70%. The target market for lenzilumab is that patient that just got admitted to the hospital with breathing problems. Typically this type of patient has entered the inflammatory stage of the disease where the cytokine storm is starting to brew.
The trial enrolled 520 patients who had their experience blood oxygen saturation (SpO2) less than or equal to 94%, or needed some sort of non-invasive oxygen and were also hospitalized. Initially the studies primary endpoint was incidence of IMV and 28 day mortality, but that was changed after and interim analysis by the DSMC to Ventilator-free Survival at Day 28 so that the trial could meet its primary endpoint. They also bumped up enrollment to meet this endpoint, but not enough to power the study for mortality. Like many studies before them they saw a “favorable trend” in mortality of 9.6% versus 13.9% in the placebo arm but there was no mortality benefit. They also did well in terms of safety and no new SAE’s were observed or attributable to lenzilumab.
The primary endpoint was Ventilator-free survival and they saw increase in survival from 15.6% in the placebo arm to 22.1% in the lenzilumab arm which represented a 54% better chance of being off a ventilator in 28 days. In contrast CYDY’s drug leronlimab had a 92% survival rate at day 28 versus 71% in placebo. This was for a group of patients under 65 who took the underlying Standard of Care. (SOC). In the leronlimab study they did have a similar metric that was more restrictive than being ventilator free that measured the number of responder at day 28 that received 6 on the ordinal scale which is pretty much a discharge from the hospital. In that study the responders (survival) rate was 26.21% in placebo and 39.32% in the leronlimab arm which represents a 49% better chance of being out of the hospital. With this metric there was no p value but the odds ratio was 1.80 showing a favorable trend in the data.
The company also gave investors a solid indication that their trial followed their protocol. They noted that “the trial incorporated a diverse population with various comorbidities, most commonly a body mass index above 30 with is representative of a real-world, high-risk population.” What investors should take away from this statement is that they really didn’t cherry pick the data. This is what they wanted to convey in case the shorts woke up and decided to attack on this point. However, their omission of age was notable, because CYDY got tagged by the short mafia for making an age adjustment. In HGEN’s past trials they didn’t dose anyone over 70 and this seems to be one of the few regulatory issues that might come into the conversation. Age is clearly a factor in COVID-19 but perhaps not as much of a factor in moderate disease. So investors will still have to wait for more data to see if it of any benefit in the older population.
The Mechanism of Action (MOA) of lenzilumab is to target and neutralize circulating granulocyte-macrophage colony-stimulating factor (GM-CSF). During the infection certain T-cells secrete high levels of GM-CSF which aid in the trafficking of macrophages (myeloid cells) to the site of inflammation. The T-cells secrete interleukin-6 (IL-6), monocyte chemoattractant protein-1 (MCP-1), macrophage inflammatory protein 1 alpha (MIP-1alpha), Interferon gamma-induced protein 10 (IP-10) and IL-1. This leads to an inflammatory feedback loop. The cytokine storm is much larger than this handful of cytokines that lenzilumab essentially quiets, but it hits a broader target than the approved IL-6 inhibitor made by Roche Holdings (OTCMKTS: RHHBY). This is why lenzilumab is likely to get an EUA and could compete for market share with tocilizumab, and possibly overtake them.
Aviptadil Trial Update
RLFTF announced that it met the primary endpoint of successful recovery from respiratory failure at day 28 (p=.014) and day 60 (p=.013). They enrolled 196 patients in the trial of those 127 were patients that were baselined with High Flow Nasal Cannula (HFNC) versus 69 patients that were treated with mechanical or non-invasive ventilation and would meet the definition of a critical patient. In the overall patient population which was about 2/3rds severe, there was a 48% chance of recovery in the placebo versus 71% chance of recovery in the active arm. That is a 32% increase in recovery. By day 60 that increased to 55% in the placebo versus 75% in the active arm. These are great numbers but we need to put this into perspective. Leronlimab made by CYDY showed a 49% improvement of being out of the hospital versus lenzulimab which had a 54% chance of being off the respirator. While there is no true apples to apples comparison, the study that had the toughest and sickest patients, and the hardest primary endpoint was CYDY’s leronlimab. This study gets the benefit of the doubt.
The only other late stage drugs out there that are going after the cytokine storm are made by Ampio Pharmaceuticals (NASDAQ: AMPE) and CYDY. Both of these drugs are design to target a more encompassing ball of the cytokine storm. The new trial design for CYDY’s CD16 and CD17 study have yet to be unveiled but it’s clear that there were a lot of handicaps on the CD12 trial that was designed early in the pandemic. The biggest mystery is how the DSMC failed so miserably to change the endpoint and why they didn’t up the dosage or stick an intravenous in critically ill patients which should have been intuitively obvious. Leronlimab has a 10 day half-life and they only gave patient’s 2 doses, leaving them without any protection from day 20 – 28. All the other drugs had the benefit of the active ingredient in the blood stream during the 28 days but not leronlimab. Correcting this and getting a larger initial infusion in critical patients could really demonstrate how this drug could shine in widespread use. CYDY has also mentioned that it was seeking a regulatory approval with Brazil. It will be interesting to see if Brazil adopts both lenzilumab and leronlimab or selects one of the other. Based on the clinical trial result and the MOA leronlimab is the superior drug candidate and probably has less ties to United States pressure to keep it all for themselves.
Ampion is another amazing drug candidate that has shown some real promise in their clinical trials. It was just recently announced that inhaled Ampion demonstrated a huge reduction in mortality. Although not specifically stated, it appears that their AP-014 trial showed a 62% decrease in mortality. The mortality rate in the placebo arm was 21% versus 8% in the active arm. This was a small 40 patient randomized trial so there was no statistically significant data, but there were very strong safety and efficacy signals. Ampion patients had less hospital time. The average stay was 11 days versus only 7 days with Ampion. Saving 4 days in ICU is a huge cost savings and can dramatically increase the turnover of ICU beds if the pandemic heats up again. Patients on Ampion needed less oxygen too. Finally more patients getting Ampion were stable or demonstrated improvement over placebo. Clinical outcomes were seen as early as day 2 through day 5.
EUA Approval Likely
There is clearly an indication of efficacy that is statistically significant. Their top line results had a p=0.0365. It seems clear that lenzilumab is sitting pretty for an EUA from the FDA, but it is also looking at foreign regulatory agencies. The company said “we are also share these results with the US governmental agencies and other authorities worldwide.” Many of these foreign regulatory bodies look to the US FDA for leadership so it is still unclear how this is going to play out. Brazil has a huge problem, and this would be an ideal treatment to prevent the ICU’s from being strained even more. The trial enrolled patients in the USA and Brazil, which makes Brazil one of the top foreign contenders. The company will need to expand their market rapidly and deal with supply challenges globally. They currently have a partnership with Operation Warp Speed (OWS) which may keep a bulk of the product stateside. The key for future price appreciation is based on foreign announcements of marketing agreements and production. It’s pretty clear the US hasn’t been in a very sharing mood with its therapeutics and all the pharma’s that get help from OWS fall under that umbrella. Notable exceptions without OWS partnership are CYDY and AMPE.
The market capitalization of HGEN before the run-up was $1.2 billion at double the price is $2.4 billion. The market has clearly factored in an EUA at this price and it’s unlikely that they will fail to secure one, but there are a lot of potential competitors knocking on their door and were it not for a twist of fate in CYDY last trial it’s unlikely that HGEN would have garnered this much fanfare. The company traded 89 million shares well over its 55 mil outstanding shares. Manufacturing capacity is a concern so the 5 mil share raise after market is a net positive and should represent less than 10% dilution, but does give the shorts an easy out, which makes it unlikely for the stock to move above its recent highs in the short run. From the closing price $21.61, there is definitely room to move higher and break the intraday highs today if the company is able to secure additional partnerships outside of the United States. Brazil seems to be a lock for an approval because there is an enormous need in addition to the fact that did part of the trial in the country. What might seriously hold HGEN back in the future is the perception that is that it’s just a one hit wonder and not much of a platform drug. It has an ongoing Phase 2/3 study in Graft versus Host Disease (GvHD), but it really doesn’t stand a chance in that indication if CYDY’s drug leronlimab gets approval. Based on the MOA and efficacy a leronlimab approval will displace lenzilumab, so HGEN shareholders need to be prepared for the worst and might want to consider trimming into any more strength above $30 or hedge their bet by buying CYDY which has a more powerful platform technology and many more catalysts in the coming future.
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