CytoDyn Inc. (OTMKTS: CYDY) announced discussions with 3 regulatory agencies after an unblinding of the data on February 22, 2021, and the price fell precipitously on the open primarily due to a tweet by the Night King of Biotech known as Adam Feuerstein. His tweet was just 16 minutes after CYDY’s press release and insinuated that SEC regulators should suspend trading in the stock of CYDY for not disclosing material information to shareholders. Before investors listen to anything this STAT News reporter says they should consider the complete and utter lies that were printed on February 5, 2021 where the editor had to make an immediate clarification that the Chairman’s wife actually didn’t sell stock but filed a form 144 with an intent to sell. It is absolutely amazing he still has a job after a scandal that could land him in court, but that’s just par for the course in the tabloid business. Any investors mistaking him for a real journalist might want to read an article about his cyber bullying tactics.
Feuerstein’s tactics play right into the hands of investors who fear that a delay means that there is something wrong with the results. A delay in announcing top line results was expected. In an interview the CEO, Nader Pourhassan said that the FDA asked for a review of the data before disclosing the results. Typically it’s smart play to stay on the FDA’s good side, so it’s completely in line with expectations that Nader would choose to keep partially analyzed data out of the public domain to avoid any corrections later one that could potentially cast doubt on the credibility well after the data was thoroughly analyzed. Lately the FDA has been treating the company well. Investors may have forgotten, but they approved the drug for eIND and Open Label Extension (OLE) use. A straw poll of doctors using leronlimab under OLE revealed there was extremely high demand to get into the trial. What Feuerstein probably didn’t want to consider is that the FDA is under extreme pressure to come up with a solution without the harsh glare of the world’s eyes watching them as they discuss a drug that has been saving lives. Thousands of people are dying every day and the world is waiting for some therapeutic option to take dying off the table. If the FDA approves this drug they need to be absolutely certain of the data, and don’t need the media spotlight dictating their actions as has happened time after time . If the company announced the actual results like Feuerstein wanted, enough people would be able to discern the voracity of the data, and those families of dying patients would be demanding immediate action.
While it seems almost a prerequisite that management knows just how well the drug did, they are keeping the final data under wraps until they can negotiate the best path forward with multiple regulatory agencies. Many investors and Feuerstein may have missed the fact that CYDY did make a material disclosure. They insinuated that the drug worked, and in fact worked so well that they are “discussing” it with the FDA, the MHRA, and Health Canada. Here is the quote from CEO Nader Pourhassan
“We are eager to reach a conclusion in our discussions with all the regulatory agencies for the path going forward and will release the details of our data and the results of our discussions with regulatory agencies in the coming weeks.”
Pourhassan’s one sentence statement needs to be parsed extremely carefully. Pourhassan is “eager” and this eagerness came AFTER the data was unblinded. What CEO would be eager to discuss bad data? That simply isn’t plausible, which means of course that they have good data that they are discussing this positive data with the 3 regulatory bodies. The next part of the sentence talks about a “conclusion” in their “discussions.” This means that discussions have been going on for some time and he expects one or more of the 3 regulatory bodies to reach a rapid conclusion with CYDY. The final concept for investors to parse is his statement about “results of our discussions.” They chose the word results which is plural, not the singular result, which means they are expecting more than one discussion to end with a “path forward.”
- Good Data from CD12 trial
- Discussions with 3 regulatory bodies
- Timeline to wrap up discussions is 2 to 3 weeks
- Multiple paths forward due to good results
Why is Adam up to his old tricks again? This is his pattern of wretched behavior, which has earned him the scorn of countless investors. The STAT News reporter built a following on bashing biotechs where the probabilities are in his favor. Since conventional wisdom holds that 90% of all biotech trials fail, it really takes little skill to develop a modest track record by constantly predicting failure. His favorite time to bash is when the odds are with him on a topline readout. Since the start of COVID-19, not one drug has had a clean win in topline data. A clean win means a drug that meets the primary endpoint with statistical relevance and no modification of its endpoint after the trial starts. In the case of CytoDyn’s CD-12 trial its primary endpoint is 28 day all-cause mortality, and did not need to change the trial design or endpoints the way every other drug trial did.
The odds are overwhelming that leronlimab hit its primary endpoint. As it has been shown on many discussion board posts, all it will take for cydy to hit statistical significance in reducing mortality is for the placebo arm to have had 30% or higher mortality. Investors know from recent trial results like the one from Relief Therapeutics Holdings (OTCMKTS: RLFTF) and Roche Holdings (OTCMKTS: RBBHY) and others that the placebo arm for similar patients has been materially higher than 30%. This fact should give investors confidence that the results, far from being a failure, are a resounding success .
In addition, investors should expect a cluster bomb of wins on the secondary endpoint. If CYDY had to resort to secondary endpoints to prove their efficacy that would give the STAT writer the ammunition he needs to sow the seeds of doubt that the trial was a failure. But he would be wrong about that because the FDA would approve the drug based on its effectiveness in improving all those secondary outcomes like improving clinical outcomes. So it’s understandable why Feurerstein lashed out the way he did with little to no basis for his tweet. If he had been following the progress of the company he would have known better.
1. Failure to Meet the primary endpoint. While it is possible this is almost a preposterous outcome if investors believe in statistics. There was statistically relevant mild to moderate data that showed a reduction in the NEWS2 score. The data in Dr. Yang’s UCLA study demonstrated a very low mortality rate of 23% in very sick critical care patients. Dr. Lelazari classified people in Dr. Yang’s study as people who are “at death’s door.” If investors believe the disease from moderate to “at death’s door” is a result of the cytokine storm then they will also realize that these are two extremes of where the drug works. That means the sweet spot in between, which is the severe to critical patient population, will have statistical relevance. Investors have the choice of believing statistics or believing the conjecture of a tabloid blogger who moonlights as a biotech analyst.
The DSMC is also a factor to consider when looking at whether or not there was a failure of the primary endpoint. Anything can happen in a clinical trial but there were 45 deaths midway and then 87 right toward the end of the trial. This shows a consistency in death which is the primary endpoint of the study. The DSMC said that they were likely to meet their primary endpoint. If they don’t for some strange reason then the whole concept of the DSMC needs to be reevaluated because they failed the world and could have recommended more people in the clinical trial.
2. Missed the Primary Endpoint but hit Many Secondary Endpoints. It’s very possible that the standard of care (SOC) improved so much that it pushed the median survival of these severe to critical patients further out in time. For example, instead of people dying within 22 days they might now be dying in 32 days. When measuring 28 day all cause mortality that could create issues in meeting the primary endpoint. What is so interesting is that the DSMC added a new endpoint of 42 day survival the last time they looked at the data so if that was a factor in the study it would be nullified. The reason missing the primary endpoint is no big deal is that even though this is a secondary endpoint it’s a mortality endpoint and if they find statistical significance in any survival number at any point during the disease the drug will be a shoe in for approval.
There is more to the story here and it gets better because there could be a supportive OLE trial that helps support the readout. It has been about a month and if they were recruiting at the rate of 20 per day when they stopped the OLE might be higher. Assuming this rate started kicking in at the beginning of the year that is over 1000 more patients that have taken leronlimab.
3. Met the Primary Endpoint. In this situation whether they met the endpoint or crushed it doesn’t really matter because the ultimate goal is an approval. There is no such thing as a blowout approval or a photo finish approval. So investors need to take solace in knowing that the biomarkers and scores really don’t matter. What matters is meeting the endpoints and reaching statistical significance. For example, Roche Holdings (OTCMKTS: RBBHY) and Regeneron (NASDAQ: REGN) received approval in the UK in January 2021 for its repurposed arthritis drugs called Actemra (tociluzimab) and Kevzara (sarilumab). Results showed only a 24% improvement over the SOC. The mortality rate in the SOC was 35.8% versus 28% for Actemra and 22.2% for Kevzara. Investors should keep in mind the mortality rate in Dr. Yang’s trial was 23%. Although there was no control group this cohort of people was much sicker than any of the controlled trials, and put up numbers envious of most drug candidates.
Investors need to get real and understand how phenomenal that last press release was. The CEO essentially told investors they’ve seen the data (unblinded) and have an approvable drug by referencing their ongoing discussions with 3 regulatory agencies. The power that Feuerstein’s words have over common sense are baffling. If the CEO of REGN issued a similar press release the stock might have doubled. The investors that are discounting Pourhassan’s words do so at their own peril. These are also the investors that should know that when a drug company files their BLA there is a 99% probability of approval assuming it has a good safety profile. The odds are even greater than 99% if that drug company is in an active discussion with the FDA.
The Real Prize – Approval
While many armchair investors pontificate whether or not the drug will be approved the long term investors are realizing that this negotiation with the FDA could be covering multiple fronts. It’s expected that this time is being spent negotiating an expanded Emergency Use Access (EUA) that ranges from moderate to severe to critical. The two to three weeks the company is taking for confidential discussions with the regulatory agency demonstrates that there is probably something deeper than that going on and here is a list of possibilities and they all include an approval of some sort.
- HIV Back in Play: Perhaps HIV is part of the discussion again. Investors should have realized that CYDY had a fully formatted BLA ready to go in April 2020, and for some strange reason is wasting time on a silly receptor occupancy test. Why on earth the FDA cares about testing to see if the drug will work before administration is baffling. Especially since it would only apply to 5% of the population because the responder’s rate in HIV is over 95%.
- Leveraging Foreign Approval: It is possible that CYDY is using their leverage of foreign approval as a renegotiating point for existing indications in exchange for its remaining supply of leronlimab. They might even be playing the regulatory agencies against each other and letting them sweeten the pot for their supply of leronlimab in exchange for quick regulatory approval. In the UK if the drug is approved for HIV they can use it immediately in COVID-19.
- Label extension Strategy: Another possible strategy is for CYDY to push for approval in HIV and treat COVID-19 as a label extension. No this will never happen! Just the opposite
- Breakthrough Therapy Designation (BTD): CYDY indicated that BTD was coming soon and the timing seems right to approach the FDA for their BTD in cancer. The company indicated that additional testing was to be submitted to the agency. Perhaps the company finished the tests and is using these two weeks to present data to the FDA. These are all possibilities that all lead to one thing. APPROVAL
- Long Hauler Trial: The long hauler trial should start soon and there seemed to be a lot of back and forth with respect to the endpoint. The company could use these discussions to get the trial finalized. At last count there was a 200 patient backlog and only 2 clinical trial sites.
- Moderate Approval: If the data from the severe to critical trial is good the company might try to negotiate a dual approval because during the summer after top line results were out the FDA seemed adamant about getting more data.
- NASDAQ Uplisting: Since leronlimab is clearly destined for approval, that announcement is better suited to a major exchange like the NASDAQ. If a NASDAQ listing comes before the topline data is released investors might be giddy and read between the lines because there seems to be little question that an uplisting would take place without an approval.
Cytodyn’s press release completely derisked the approval process. The news was short and concise, but excellent. The unblinding is a material event that was extremely welcome and ended being positive enough for CYDY to engage multiple regulatory agencies at once. The only unknowns are the extent of the approvals and which countries will get it.
Investors should be betting on approval, and not Adam Feuerstein’s foul analysis. A stock price of $4.00 is factoring in failure and creates one heck of a buying opportunity for the longs that only have to wait 2 – 3 weeks to prove their investment thesis that the stock is worth many multiples of the current price.
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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.