CytoDyn Inc (OTCMKTS:CYDY) just presented at the LD Micro Main Event, and the company is trading down on the post presentation session. It’s around 10% off pre-presentation prices, but there’s very little to support a decline, and in fact, some substantial support for the opposite action.
We sat in on the presentation, and here’s our interpretation what’s important for shareholders and anyone considering an exposure going forward. First, a quick introduction to the company.
CytoDyn is (for now) an HIV focus entity, developing an asset called PRO-140, in a couple of phase III trials. One of the trial is a combination therapy study, and the other a monotherapy study. The former is the quickest route to market (and therefore presents us with the nearest term catalysts) while the latter is the real blockbuster target if it can navigate its way to an FDA green light, although it’s far tougher, and will take more time, than the combo indication.
Current SOC in HIV patients is a combination of pills, called HAART. A physician picks two pills from one group and one from another (five total groups) and the patient takes them until they stop working (as dictated by resistance). Once a patient becomes resistant to four out of the five groups, they have no options. This is why HIV has such a low suppression rate (around 30% of total US patients). Additionally, the drugs are toxic, and have some pretty nasty side effects.
PRO-140 is a novel MOA. In order to replicate, HIV needs to enter the T cells. To do this, it needs to first bind to two receptors on the surface of the T cell. PRO-140 binds to one of these receptors, essentially blocking the HIV virus from getting in and – in turn – from replicating.
The company has spent the last couple of years going back and forth with the FDA, and this is probably the key point we picked up on from the presentation – the FDA is serving up some highly favorable conditions for approval in both the mono and the combo therapy. The combo is a 30 patient trial with a one-week efficacy measure. That’s unheard of in HIV. The mono is a 48-week trial with 300 patients. Again, that’s extremely low compared to some of the HAART approval requirements. Additionally, instead of having to conduct a separate safety study for the combo, the FDA has allowed the company to use the data generated from the mono study as supportive of safety in the combo application.
So what are we looking for going forward?
There are a number of catalysts to watch out for, each of which has the potential to inject some upside momentum into the company. The first patient should be dosed before the end of this quarter. During the first quarter of next year, primary endpoint data from the combo therapy should hit press. This latter catalyst is going to be huge if the endpoint hits. There’s also the chance for an orphan drug designation during the first quarter, and the initiation of a non-HIV study, a phase II in GvHD, during the same period.
The takeaway here is that this company has a very favorable path to commercialization in the HIV space, both as a monotherapy and a combination therapy, and its product (based on data to date) looks promising. There’s capital risk, as ever, and dilution is going to take a chunk of per share value over the coming twelve months, but if the data hits, we should see a rise in market cap that easily negates any value lost through dilution.
It’s also nice to have someone as famous as Charlie Sheen on board (unofficially, of course) as a spokesman.
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Disclosure: We have no position in CYDY and have not been compensated for this article.