CytoDyn (OTCMKTS: CYDY) Bolts Higher On Mexican Approval Chatter

Yesterday CytoDyn Inc. (OTCMKTS: CYDY) moved up 27% on the completion of a Memorandum of Understanding with the NIH of Mexico to conduct a phase 3 …

Yesterday CytoDyn Inc. (OTCMKTS: CYDY) moved up 27% on the completion of a Memorandum of Understanding with the NIH of Mexico to conduct a phase 3 trial of only 25 patients for severe and critically ill COVID-19 patients.  With the recent runup, the market is starting to catch on that there appears to be a very high likelihood of approval for their lead drug candidate leronlimab.  This greater probability of approval is likely being factored into the stock price. In May STAT’s announcement that Gilead Sciences (NASDAQ: GILD) Remdesivir might be a viable treatment moved the stock $10 billion in market cap and had a ripple effect through the rest of the stock market.  Yesterday CYDY occupied the number 2 spot on the OTC’s most active slot and traded 18,052,864 shares that resulted in $143 million of dollar volume.  It was eclipsed by TenCent Holdings (OTCMKTS: TCEHY) with $159 million dollar volume. CYDY is in a coveted position compared to any other COVID-19 treatment, because they have a filed BLA on hand with a stellar safety profile so they don’t need to do extensive trials to prove their worth.  

CytoDyn’s CEO Nader Pourhassan commented on the clinical trial design.  

“The anecdotal data received by CytoDyn (from over 70 COVID-19 critical patients who were treated under EIND in the U.S.) has impressed the NIH of Mexico and we believe with a small Phase 3 trial of only 25 patients, leronlimab could receive approval in Mexico very quickly. This Phase 3 trial is similar to our Phase 3 trial protocol in the U.S., with the exception of the number of patients.”

High Likelihood of Approval

There are now 3 highly anticipated readouts in COVID-19 due in the coming weeks.  The first readout is expected after June 30th which represents over 28 days from the last dosing of the patient. On June 1st 2020 the CEO announced that the 50th patient was enrolled in the severe phase 3 trial and that an interim readout would happen.  The last day of the last patient in this interim cohort was yesterday.  In all likelihood the company has a good idea of how many people died in the study and once all the paperwork is completed they are in the zone to release the results.  The mild to moderate trial finished the week of June 15th where the company indicated that the people that passed the screening process would be dosed and this would add power to the study.  These patients were primarily measured on a scoring scale by the hospital and had blood work taken.  According to CytoDyn, results from this study could be out in the next few weeks.  Enrollment in the severe trial is also continuing and when it is completed it will also read out in a month after completion.  Based on the increased pace of enrollment due to the relaxation of enrollment criteria, that study could finish enrollment in the coming days to weeks.  

The UCLA study completed by Dr Yang actually gave investors a sneak peak at the controlled trial.  The trial consisted of 31 emergency IND patients from Southern California that were severely ill and critical and intubated.  Out of the 31 patients 6 died and this represents a total mortality rate of 19.3% however, the inclusion of the critical patient is not a fair comparison to CytoDyn’s severe COVID-19 trial.  The results are better if you look at just the 20 severely ill patients, only 3 died which represented a mortality rate of 15% but even that is not a fair comparator to the patients that were recruited in the severe trial.  For a quick reference comparison, the placebo group in the NIAID study of Remdesivir had a mortality rate of 11.9% but this had a mix of primarily mild to moderate patients. It’s very difficult to gage the mortality rate in a patient population when age and comorbidities are so influential. The best mortality rates in this severe patient population are estimated to be between 25 – 45% and based on race, age, and underlying comorbidities.  In a science daily report compiled by UK researchers 26% of all COVID-19 hospitalizations resulted in death and this assumed that a third of the people were still in the hospital over a period of 72 days.  This 26% mortality is perhaps the best case scenario.     

The bottom line is the mortality rate really depends on the age and comorbidities of the patient mix.  Absent that information investors can handicap the results using a best case worst case scenario.  The interim data for the severe trial will consist of 50 total patients with 33 in the active drug arm and 17 in the placebo arm.  Assuming the best case scenario in the placebo arm 5 patients are expected to die.  Assuming the worst case scenario 5 patients are expected to die in the active arm.  On a Proactive video Dr Pourhassan explained how a tie in the study is actually an approvable endpoint because it’s two to one randomization.  Extrapolated out 10 would have died in the placebo group versus 5 in the active arm which is a 50% reduction in mortality rate.  It is important to realize the apocalyptic worst case scenario that is being assumed here.  That is a testament to how well the drug performed on an anecdotal basis. 

In an interview Dr. Patterson was quoted.    

“Anecdotes don’t come off life support.”

The data is far from anecdotal. There are over 70 emergency IND’s for COVID-19 and the company researched if there were any other drugs that had as many as them and the closed had 20 emergency IND’s.   

The Politics of Mexico

It’s no surprise that President Trump appears to be antagonistic with respect to immigration or the Mexican people.  The last thing that Trump wants is for Mexico to import a lifesaving COVID-19 drug that was made in America.  His American’s first ideology could actually accelerate.  This works as leverage on the administration to approve the drug. The Mexican NIH is proposing a 25 patient trial of severe patients using a similar protocol to the phase 3 trial in the USA.  The company mentioned that they are “both very motivated to initiate this trial quickly to help mitigate the devastation of the COVID-19 pandemic on the citizens of Mexico.”  This trial seems more like a check box, and that the train has left the station for a Mexican approval.  In the press release they talked about how the anecdotal data “impressed the NIH of Mexico” and how it “could receive approval in Mexico very quickly.”  This move starts the clock on Mexican approval and if dosing is announced in the coming days the FDA won’t have much time to delay an approval in the USA.  If the FDA doesn’t act, the Trump administration could use the power of the podium to force the issue very much like they did with remdesivir.  This is an election year and nothing will get votes like ending the specter of death from the disease.    

Investment Summary

SPECIAL NOTE: At the time of writing this there was a vicious bear raid on the company with no news.  The stock has had an amazing run and the shorts capitalized on it.  Their basis appears to be $9.83 which was major short term resistance or was their planned entry point.  Over 40 million shares have traded today representing one of the highest traded days with over $300 million in dollar volume leading all of OTC Markets.  Given the strong fundamentals and high likelihood of approval it’s reasonable to expect price to appreciate to new highs regardless of this short attack.  

The Mexico deal should put a tremendous amount of pressure on the FDA to agree to speedy approval.  CytoDyn is one of the few companies to read out in the month of July so many eyes are going to be looking at the results.  It’s very rare to know the result of the study before they come out, but this drug is an exception which Dr. Lalezari pointed out in an interview.  Looking at the compassionate use trials as a worst case scenario predicts a favorable outcome in the severe trial and bodes extremely well in the mild to moderate trial.  The market through GILD past moves has clearly telegraphed a COVID-19 approval is worth $10 billion which roughly represent $20 price appreciation in CYDY stock should it be approved.  The anecdotal emergency IND data is very convincing and predicts a huge reduction in mortality rate which should lead to a very quick approval.  Should the FDA require more data the consolation for hitting their endpoint of reducing mortality should be an Breakthrough Therapy Designation (BTD) which is also typically worth about $10 billion for fatal diseases.  The bottom line is that it’s very unlikely in a presidential election year that Trump can let Mexico get approval first and based on the quickest pace of development that only gives the FDA about 4-6 weeks to make a decision before the Mexican NIH is ready to act.  Mexican approval on on only 25 patients is a layup for leronlimab which has done it time and time again in far worse patients.  When making your investment decision investors should remember ANECDOTES DON’T COME OFF LIFE SUPPORT!   He told you it works, but the question is if you believe him.

Recent video of Doctor weighing in on how well the drug works.

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Disclosure: Insider Financial and its owners do not have a position in the stocks posted and have posted this article for free without editorial input. This article was written by a guest contributor and solely reflects his opinions.

CytoDyn (OTCMKTS: CYDY) Bolts Higher On Mexican Approval Chatter
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