GSK (NYSE: GSK) has a new mission and that mission is to go after major medical conditions that have no treatment. The spinoff of Haleon on July 18th frees them to focus on biotech and their pipeline. The timing of this spinoff is auspicious because biotechs are at unsustainably low values. GSK's potential influx of ~8.8 billion in cash proceeds could be used to scoop up a number of undervalued biotechs. GSK, in a move in stark contrast to its strategy just 6 years ago, is essentially building its pipeline in infectious diseases HIV, Oncology, and Immunology. This is such a unique combination and the top company that fits all 4 of those boxes is CytoDyn Inc.(OTCMKTS: CYDY).
Haleon Spinoff
GSK is spinning off its consumer healthcare business into a new publicly traded company called Haleon, to be listed on the London Stock Exchange with ADRs in the U.S. The new company will focus entirely on consumer healthcare, “with clear purpose to deliver better everyday health with humanity.” The company markets a notable portfolio of leading brands many will recognize, including the toothpaste Sensodyne, the NSAIDs Panadol, Advil and Voltaren, the cold medication Theraflu, nasal decongestant Otrivin, and multivitamin Centrum. GSK is expected to retain 20% of the new, independently-formed Haleon’s stock. All of this will allow GSK’s board and executives to focus primarily on cutting-edge technologies in the aforementioned categories. GSK’s CEO has her eyes set on the future of healthcare and has been actively championing the new direction, as seen in this motivational video.https://twitter.com/i/status/1534893029697507334
GSK’s Recent Activity in Immuno-Oncology
GSK in 2016 switched to a vaccine and consumer healthcare focus a few years ago according to its former CEO’s opinion that immuno-oncology and biologics pricing were too high and were not cost effective for global care—therefore being poor long-term businesses. This sparked criticism from some investors and GSK has been playing catchup in the last few years getting back on track in the future of immuno-oncology; in April 2021, the company got its PD-1 inhibitor, Jemperli, approved for dMMR endometrial cancer, the 7th to be approved in the U.S., about 4 ½ years after Merck (NYSE: MRK) got its first approval for Keytruda. Since GSK is so far behind, they are forced to be different instead of the first or largest on the market, meaning that they need to go after different targets to offer to patients an alternative to the PD-1/L1 inhibitors and their combinations. And GSK has the cash and is willing to pay to acquire these immuno-oncology assets; according to FiercePharma:
“Jemperli came to GSK by way of its $5.1 billion acquisition of Tesaro in late 2018. The deal was a testament to GSK CEO Emma Walmsley’s renewed commitment to oncology since the British drugmaker traded off its cancer portfolio for Novartis’ non-flu vaccine business in 2015.”
GSK is combining a TIM-3 inhibitor and an ICOS receptor agonist with its PD-1 inhibitor as part of its strategy in various cancers, and another underexplored target it is working on is its LAG-3 inhibitor. The company is aiming to enable the immune system to target and destroy all types of cancers through personalized approaches in treatment, and as such have started to explore the CD266 axis, which includes the CD96, PVRIG, and TIGIT immune checkpoints—targets that competitively bind to CD155 and CD112 which are on tumor cells. Blocking these checkpoints enables T cell and NK cell stimulation via CD226-to-CD155 or CD226-to-CD112 binding. These approaches as well as others will be necessary to eradicate a broad range of cancers, which may vary from patient to patient even in the same category of cancer.TIGIT, the Next Step Towards Successful Combination Immune Checkpoint Therapy in Cancer
CytoDyn a Perfect Fit for a GSK Rollup
Even after the $5 billion Tesaro buyout, GSK’s CEO stated that “Our No. 1 priority is to continue to strengthen the pipeline, be that organically or inorganically.”The company’s core areas include respiratory, HIV, immuno-inflammation and oncology, and the company is well known for its vaccines. Its main issue is that it lacks promising late stage immuno-inflammation and immuno-oncology drugs. CytoDyn remains a rare case of acquiring a company with a primary asset that can address all of the focus points of GSK’s new strategy post-spinoff. Not only that; it has a number of phase 2 indications and a BLA for its HIV entry inhibitor is expected to submit to the FDA for approval in 2023.One look at GSK’s oncology pipeline and one can see that they lack mid-to-late stage immuno-oncology assets, with a PARP inhibitor and Tesaro’s PD-1 inhibitor front and center in their pipeline. The company recently had its anti-BCMA therapy approved for multiple myeloma (MM) as they have put significant focus on MM and blood cancers in recent years. However, beyond that, the breadth of promising assets, particularly in later stages of development or for any solid tumors, is weak. Due to this, the company could use leronlimab as a promising solid tumor immunotherapy candidate to beef up its pipeline; indeed, CytoDyn has released early results showing almost 10x overall survival (OS) in mTNBC patients that had failed 2 lines of prior therapy. TNBC is a very aggressive form of breast cancer. These early results point to considerably better efficacy than Gilead’s Troldelvy, for which they paid $21 billion to acquire in their acquisition of Immunomedics a few years ago.The fact is that CytoDyn fits across the breadth of GSK’s strategy and core areas of focus, with promising indications in HIV, cancer, COVID-19, NASH, and other immunologically-related conditions.
GSK Buying Back Into Immuno-Oncology
GSK bought its way back into the immuno-oncology world with its purchase of Tesaro for their PD-1 inhibitor, but it still needs to find a solution for each and every patient and PD-1 inhibitors aren’t working for all patients, even with combination therapy. There are a few other checkpoints besides PD-1 that are powerful enough to compete in monotherapy options and build a therapy’s “backbone” like PD-1s. One of the most promising options is the CCR5 axis, with CytoDyn’s leronlimab taking the lead as the best CCR5 inhibitor. The CCR5/CCL5 axis is more exciting than the PD-1 inhibitor as a backbone for cancer immunotherapy since the CCR5 axis is implicated not just in immunosuppression and T cell exhaustion like PD-1, but also autocrine and paracrine tumor growth, extracellular matrix (ECM) remodeling, cancer metastasis and migration, as well as cancer stem cell expansion, DNA damage repair (synergizing with chemo), metabolic reprogramming, and angiogenesis. The theory in addressing a wide variety of issues in cancer translates to preclinical models where leronlimab was shown to synergize with doxorubicin and reduce lung metastasis by 98% in xenografted mice.CCR5 mediates the functions of various immune cells including T cells, macrophages, eosinophils, MDSCs, microglia, and dendritic cells, promoting cell differentiation and migration. In some cancers, tumor epithelial cells can develop overexpression of CCR5 under oncogenic transformation to home towards metastatic sites. CCR5 also facilitates protumoral immune cell takeover of the tumor microenvironment, mobilizing regulatory T cells, myeloid-derived suppressor cells (MDSCs), and tumor-associated macrophages (TAMs). All these mechanisms in combination make CCR5 a target with much more potential than PD-1, even though the PD-1 inhibitors like Ketruda do tens of billions in sales annually.Leronlimab is currently in a basket phase 2 trial for various solid tumors and a phase 1b/2 for triple-negative breast cancer (TNBC), the most deadly form of breast cancer and the primary reason Immunomedics was bought by Gilead (NASDAQ: GILD) for over $20 billion recently as it received approval for a new therapy in TNBC. There are other cancer trials using CCR5 inhibitors: maraviroc (Pfizer’s small molecule CCR5 inhibitor) and vicriviroc (Merck’s CCR5 inhibitor) in combination with other checkpoint inhibitors like Keytruda and Opdivo in various cancers. However, given leronlimab’s outperformance in HIV and superior receptor coverage and safety profile, leronlimab stands out as the most desirable CCR5 inhibitor and one that isn’t already owned by another large pharma.
Immunology
GSK only has one NASH program. They have a HSD17B13 silencer, which encodes THE 17β-HSD type 13 enzyme. 17β-HSD13 is a liver-enriched, hepatocyte-specific protein that is found in higher levels in patients with non-alcoholic fatty liver disease (NAFLD) and it enhances lipogenesis, furthering fatty liver. However, there are some issues associated with this target for NASH therapy. Mainly, HSD17B13 gene knockout mouse models didn’t protect the livers of mice in NASH models induced by high-fat and alcohol-induced steatotic damage, while one study showed that HSD17B13 deficient mice developed late-onset fatty liver when being fed normal food. While population studies have found correlations between this gene and liver disease in humans, there is a lack of placebo-controlled clinical research suggesting that this approach is valid. In addition, GSK is going to need to address multiple aspects of NASH—steatosis and inflammation as well as, potentially, fibrosis.CytoDyn recently release leronlimab’s NASH01 results at EASL (European Association for the Study of the Liver). The study was short but despite that, showed improvements in metabolic and inflammatory factors, with the one dose of leronlimab improving PDFF and cT1. This drug might be a perfect drug to put into combination with other NASH drugs to add to GSK’s immunology portfolio. It is also very common for HIV patients to develop NASH; HIV drugs usually have adverse effects on the liver rather than improving the liver, which would set leronlimab apart in the HIV field.Leronlimab is also a potential therapy for other immunological diseases that GSK is focused on such as neurodegenerative disease and rheumatoid arthritis. The drug is in preclinical testing in multiple sclerosis and the company has also been contacted “by multiple academic institutions for access to the drug to conduct preclinical studies in glioblastoma multiforme, Alzheimer's disease, and others,” so the drug is a pipeline or a platform in and of itself.
Infectious Disease
While GSK is already heavily invested in HIV treatments with its subsidiary, ViiV Healthcare, 100% focused on HIV, it lacks what is called an entry inhibitor of HIV. The HIV landscape is dominated by combination treatments since HIV mutates and replicates so easily. This along with its target, CD4+ immune cells, makes it very difficult, rather impossible, for the body to eradicate it via immune response, and it makes it difficult for any single antiviral to address the disease without the virus escaping around the treatment and developing resistance to one drug. CytoDyn is close to submitting a BLA for leronlimab in HIV combination treatment; however, the drug has generated fantastic long-term as well as combo and monotherapy results to date. Combination therapy response rates for treatment-experienced individuals was 81% and monotherapy patients experienced a 95% response rate with optimal dosing in an investigative trial. Long-term monotherapy patients have not experienced resistance in 8 years of therapy, but only recently not receiving drugs because of cost considerations for the company. With leronlimab’s safety and tolerability profile as well as its potential to treat NASH, significant comorbidity for up to 50% of HIV patients, leronlimab could carve out for itself a significant chunk of the $20 billion HIV market size in the U.S. (perhaps $30 billion worldwide).Leronlimab is powerful enough that the company is also going after an HIV cure with a recently received $5 million grant using an AAV vector encoding leronlimab.Leronlimab also shows promise in treating hospitalized COVID-19 patients as well as long haulers. In a phase 3 study, leronlimab was able to reduce hospitalization days and mortality when adjusted for age, and it also synergized with the standard of care dexamethasone. CytoDyn’s new phase 3 trial in Brazil is using improved dosing, using IV administration as well as a 4-week dosing schedule as opposed to 2 weeks, and then measuring outcomes at 28 days. The CD12 trial they ran showed an 81% mortality benefit at 2 weeks.GSK has some irons in the COVID-19 fire. First, the company collaborated with Vir Biotechnology to produce neutralizing antibody treatments for patients with mild-to-moderate COVID-19 disease. The thing is these antibodies typically only work for patients in the first stages of hospitalization, who need oxygen. Once they have progressed into a pathology that is primarily of inflammation and lung damage and not so much acute viral infection, antibodies are typically not effective to deal with the inflammation. GSK also has provided adjuvant to Sanofi (NASDAQ: SNY) and worked with other companies to develop vaccines such as Medicago (now Mitsubishi (OTCMKTS: MSBHF)) and SK Bioscience (KRX: 302440). Finally, the company is working with CureVac (NASDAQ: CVAC) to develop mRNA COVID-19 vaccines and antibodies. However, what the company is lacking is an effective antiviral or late-stage therapeutic such as an immunomodulatory agent. Leronlimab would be a perfect fit for a late-stage therapeutic.
Following the Breadcrumbs
Now that the GSK and CYDY’s potential synergies are well established, it's important to look at the breadcrumb trail left in the wake of EASL and how it all starts to make sense. These breadcrumbs have invigorated the retail investor base.
- Female Leadership Needed to Represent Breast Cancer
The brutal reality is that men simply can’t sell a breast cancer solution as effectively as a woman. To make a noticeable impact, the figurehead needs to be a woman. The Chairman of CytoDyn is Tanya Urbach and she comes across as a strong female leader, but imagine for a moment having Emma Walmsley the CEO of GSK on the stage talking about the potential of leronlimab in breast cancer. Her motivational video demonstrates her executive presence and it's not hard to envision her as a leader in the fight against breast cancer. There could also be a female-type alliance happening to go after breast cancer in a meaningful way. With such a strong showing in mTNBC, it is reasonable to think that these two females could join forces to get it done. Regardless, a female is needed in this role and whether a joint venture is established or a buyout, female representation would exist.
- GSK Pipeline Hungers for Fresh Ideas
On many of the social media boards, an old but relevant article resurfaced detailing GSK’s development plan. The reality of the situation is that too many breadcrumbs were pointing to GSK as a partner or more and that excited the animal spirits of investors yesterday, moving the stock up 30%+. The post indicates GSK is planning on scrapping 30 development programs and getting out of rare diseases. They want to focus on 4 main areas: HIV/Infectious disease oncology and immuno-inflammation. With CYDY’s pipeline, this is the ideal fit for GSK.
- CytoDyns Corporate Culture Aligning with GSK
The GSK influence starts with Alok Krishen who is currently the head of biostatistics for CytoDyn but he spent 28 years at GSK so clearly any work he does is going to be well received and considered vetted by GSK. There were 6 board seats last year and with all the reshuffling there are 4 now leaving 2 vacancies. These vacancies are open board seats and would be great negotiating leverage for an acquirer or a joint venture with some deep pockets. Another way to look at this is that it makes a merger more palatable for both sides because the directors at CYDY wouldn't fear losing their job. On the last shareholder call, Dr. Kelly was asked directly about GSK as a potential partner. He correctly commented that he was unable to talk about any ongoing partnership discussions but then he spent the next 5 minutes discussing the details of GSK new manufacturing facility and the pipeline with expert-like knowledge. This is just more evidence of the understanding of the GSK corporate culture and what they are about.The new director of GSK’s R&D taking over on Augu st 1st, 2022 is none other than Tony Wood. Tony who discovered Pfizer’s HIV drug Maraviroc, so clearly he is interested in HIV entry inhibitors, of which leronlimab is arguably the best. He has since been lured to GSK in 2017 as their chief scientific officer. He will assume the added position as the Head of R&D for GSK. Dr. Wood is very familiar with Cytodyn’s Leronlimab as it was one of Maraviroc's main competitors in trials for the HIV market and is a CCR5 antagonist just like maraviroc.
- Early Arrival of Poster Presenter in London - HQ of GSK
Dr Mazen Noureddin is a specialist in NASH and NAFLD and part of CytoDyn’s scientific advisory board. There were 1700 invitees to the EASL conference. There were 130 briefings and only 4 poster presentations with CytoDyn being one of them. This was a major win in terms of notoriety but there is a feeling that it also caught the eye of GSK and other pharmas. He presented on June 25th, but arrived considerably early based on his tweet. Speculation on the message boards is that he has meeting scheduled with big pharma in London. The top two london big pharms are GSK and AstraZeneca (NASDAQ: AZN). Additionally, the patent for Methods of treating coronavirus infection is significant and would be of great interest to big pharma.
- New President Cyrus Arman - Dealmaking Potential
When the new president was announced there really wasn’t much fanfare, but investors on the message boards seem to be paying more attention to his resume as they start to realize that the GSK potential really makes sense. Dr. Arman has an extensive business background in biotech and was a business officer for Nible Therapeutics and a Corporate Development and Strategy for Amgen and Neuvogen. He also worked on the funding side for BioVega Capital a life sciences hedge fund. His resume shows he had an MS degree in biomedical engineering, a Ph.D. in neuroscience, and an MBA from UCLA. This makes him extremely competent to negotiate a partnership or even a merger with big pharma. The terms of his appointment to formalize him as the CEO in 6 months don’t seem to be a coincidence. If they are pursuing a partnership or merger his leadership is an absolute prerequisite when dealing with big pharma because they don't seem to like to deal with committees and want a decision maker. This open slot in the CEO position is very merger friendly as it provides another open negotiation deal point that allows big pharma the ability to install their own person or take on Dr. Arman.
- Stock-Based Compensation
In the investor conference call, the CFO Antonio Migliarese was quick to point out that compensation was primarily stock-based now and used as part of a cash preservation strategy. What is so telling about this breadcrumb is that biweekly investors are alerted with SEC Form 4 filing and stock awards to employees. The shorts are crying dilution, but the ability of the company to attract employees under these circumstances is not only a sign of belief in what they are doing but also an indication that they know something big is coming. These employees would be prohibited from buying in the open market knowing a deal is going down but to preserve cash this could be a winning strategy for them to reap great rewards. The employees are aligned with shareholders interested to get a deal done and get the BLA filed as timely as possible otherwise they don't eat.
Possible Buyout Scenario
The difficulty of investing in CytoDyn is the stock price’s volatility. Shares rocketed from $0.30 in late 2019 to almost $10 at the height of the COVID-19 pandemic when it was suspected that CytoDyn might receive a EUA for leronlimab for COVID-19. However, since then, the company has been strong-armed by the FDA, and failed to get its HIV BLA through the FDA since their CRO messed up the filing and withheld data from CytoDyn, in breach of contract. These issues coupled with capital raises and deflation of speculative assets and the stock market overall have put immense pressure on shares and as such, it is highly likely that shareholders would approve a $10/share buyout.
Catalysts
- Removal of Clinical Hold HIV & COVID-19 - imminent
- BLA Filing - HIV Combination Therapy
- Arbitration Ruling with Amerex - by April 2023
- HIV Cure Primate - Study Initiation
- NASH Partnership
- Long Hauler Endpoint & Trial Design
- NIH Grant for Long COVID-19
- Brazil Covid Unblinding if statics warrant
- Additional mTNBC data release
Risks
This article has a lot of speculation about a GSK partnership or buyout. While investors can ponder the potential its inadvisable to buy the equity based on that point alone. The all-clear isn’t sounding on CYDY yet either because they still have leronlimab on clinical hold. Big pharma like GSK is unlikely to invest or partner with a drug on clinical hold. They simply don't need to take those risks. The company also pledged its patent for a $6.0 million bond from former director David Welch. A release with a clean title would be needed to secure a deal. The cash position of the company is weak with over the $19 million mark that they just secured in recent fundraising. Samsung Biologics is still owed a payment of $16 million and another payment of $19 million and could have recourse back to the company. They have a proxy vote scheduled for August 31, 2022, for increasing the authorized share count by an additional 350 million shares. The biggest risk and potential cloud over the company is the clinical hold. The FDA has required CYDY to submit the safety data in the proper format and if this process drags out or becomes delayed, it could further squeeze CytoDyn’s bank account.
Investment Summary
CytoDyn has been brutalized by many factions but somehow they have survived despite all odds. The current stock price is a product of the short mafia, Feuerstein's hit pieces, DOJ & SEC investigational cloud, and unprecedented letters by the FDA. This led management to take draconian steps to eliminate any promotional material and completely cut off corporate communications while searching for new management. A revitalized company is taking shape. Management is extremely focused and wants to partner a number of indications with big pharma instead of the go-it-alone strategy that was pursued by Pourhassan.The GSK spinoff is fueling speculation on who is next, and investors are seeing loaves of bread where breadcrumbs exist because they know how undervalued the stock has become. Many investors know the drug works and the p-values associated with each indication. The biggest weight holding the company valuation down is the clinical hold, which casts doubt on CytoDyn’s holy grail asset, leronlimab. If lifted, the stock could quickly regain its status as a unicorn and the company would show a reestablished working relationship with the FDA. Whether GSK has CYDY in its sights or not will be answered in the coming months, but in the meantime, the stock looks like it is in play and bouncing hard off a technical bottom as investors speculate on GSK and the lifting of the clinical hold.When the clinical hold is lifted, the written-off indications the drug is being developed for (HIV, mTNBC and other cancers, COVID, MS, and NASH) will come back into play and investors will remember why, just a short time ago, investors were willing to pay up to $5-10 for this platform technology before cancer or NASH results were known. This could be an enormous value infection point, but in the meantime, the breadcrumbs show how perfect leronlimab and the corprate culture fit are for GSK. The deal makes too much sense—the fit is so ideal it cannot be ignored. This is what is capturing investors’ minds as they see the breadcrumbs. If GSK shows any interest at all it could be soon and investors are going to want to be fully loaded for this kind of surprise event.
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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.
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