Todos Medical (OTCMKTS: TOMDF) was a value play before it started running recently based on sound fundamental analysis, and now investors are reaping the benefits. But the real question is: what is the company worth now and will the momentum continue? Could the company be a credible threat to Pfizer’s (NYSE: PFE) Paxlovid? The analysis is coming toward the end, but the stage needs to be set first.
The COVID Stocks Week in Review
The past few weeks saw a lot of volatility in the COVID-19 sector with the arrival of the Omicron variant. Merck’s (NYSE: MRK) announced that its drug was only 30% effective overall when reporting on a larger population that likely included more Delta cases. MRK was on track for its worst month since the pandemic started. Then Moderna (NASDAQ: MRNA), BioNTech (NASDAQ: BNTX), and Novavax (NASDAQ: NVAX) quickly announced their plans to come out with an omicron variant vaccine in early 2022 and start testing in the coming weeks. Johnson and Johnson (NYSE: JNJ) stood out from the pack after saying their testing was already under way. The markets took that news well and sent the shares of vaccine makers soaring. Pfizer (NYSE: PFE) also did quite well but they are in a special category because they have the leading vaccine as well as the leading oral antiviral. They took a more measured approach and were going to have a new vaccine ready in 100 days if the Omnicron variant is resistant to the current vaccine. Even monoclonal antibody maker Vir Biotechnology (NASDAQ: VIR) and DNA vaccine maker Inovio Pharmaceuticals (NASDAQ: INO) edged higher. Other second gen vaccine makers Gritstone (NASDAQ: GRTS), Generex Biotechnology (OTCMKTS: GNBT), and Vaxart (NASDAQ: VXRT) also rallied. It was a broad COVID-19 vaccine sector rally; the only one not benefitting seemed to be AstraZeneca (NYSE: AZN).
On the other hand, the small-cap COVID-19 therapeutics were a mixed bag, but for the most part down, as the vaccine makers seemed to suck up all the oxygen out of the air. CytoDyn (OTCMKS: CYDY) had a negative week as that stock seems to be inextricably correlated to Brazilian COVID-19 caseloads as investors await their clinical trial results despite the potential of 3 Breakthrough Therapy Designation (BTD) filings in a broad range of therapeutic indications in the works. Humanigen (NASDAQ: HGEN) had a decent week. Ampio Pharma (NASDAQ: AMPE) is still recovering from extended guidance on the company’s conference call that pushed clinical trial results to the 1st half of 2022. Relief Therapeutics (OTCMKTS: RLFTF) fared well considering its BTD for Aviptadil was denied.
Adamis Pharmaceuticals (NASDAQ: ADMP) and Atea Pharmaceuticals (NASDAQ: AVIR) had mixed performance as a group as investors are torn on the prospects of increasing need for oral antivirals but a total underperformance of the RdRp-targeting antivirals compared to the 3CL protease which is the Pfizer antiviral target.
Regenerative medicine companies focusing on late-stage disease such as Mesoblast (NASDAQ: MESO) and Athersys (NASDAQ: ATHX) were basically flat as the need for late-stage treatments might decrease, yet in the long term, COVID-19 is proving to be endemic yet again. Small cap COVID-19 bio stocks might be down due to sector underperformance (both small caps in general, healthcare in general, and small-cap biotech) this year coupled with end of year tax loss selling, presenting savvy investors with an opportunity to load up on their favorite small cap biotech stocks.
First Trust Biotech Index vs S&P 500
About Omicron, the New COVID-19 Scare
This variant was thought to have come from South Africa where it was first identified. It has now spread to the United Kingdom, Hong Kong, Israel, Botswana, and Australia. It was first detected on November 9th, and within 3 weeks the WHO has already labeled it as a variant of concern. To give perspective, the Delta variant was first identified in India in the month of October 2020 and it took 7 months to be labeled as a variant of concern. There are about 50 mutations to the virus and 32 are attributed to the spike protein, which begs the question of whether vaccines solely immunizing patients to the spike protein (and not immunizing to other parts of the virus) had any part in the evolution of this variant. Fauci warned this Sunday that the new variant was “troublesome” and could evade immunity from past infections and vaccines. He also cited the explosion in cases in South Africa after having an extended period of low infection rates. His predictable solution is for greater vaccinations and boosters despite his warning that the virus may be capable of evading immune protection.
The rates of spread of Omicron over the Delta variant in South America suggest it is highly transmissible. Dr Ulrich Elling, a molecular biologist, went on record saying Omicron “might be 500% more infectious than Delta. In mid November there were 100 cases and that has grown to 1200 cases as of Wednesday. Since it’s so new it is difficult to project how it will impact morbidity and mortality. There is also a theory that since the surge came from Gauteng province it was the result of a superspreader event. Dr. Angelique Coetzee initially raised the alarm about Omicron, but is characterizing the symptoms as “unusual but mild.” She explained that many suffered from “intense fatigue” but didn’t lose their sense of taste and smell. About half of her patients were vaccinated which means there is evidence that it has found its way around the vaccines.
Scientists like Prof Francois Balloux have theorized that Omicron came from an undiagnosed HIV patient, similarly to how Delta was theorized to emerge from immunocompromised patients. He explained that Omicron probably came through an event of recombination (two different viruses combining within the same cell, creating new progeny) rather than sequential accumulation (mutations adding up). He explained that all coronaviruses readily recombine between strains of the same species. In SARS-CoV-2 it has happened before but the strains petered out. This change appeared to be successful, but he commented that there was no evidence that it was more transmissible or virulent. He wrote this before November 25, 2021 so might not have had enough data to make an informed statement on transmissibility or mortality.
Analysis of the current data set suggests this is a very big deal and the early lack of any cases in the USA highlights CDC failures at surveillance testing. There are cases in 19 states but the CDC isn’t separating them out. Even a milder, more transmissible disease could overwhelm the healthcare system, especially if it is true that the milder disease can evade vaccination immunity. There is plenty of evidence with the high number of vaccinated people that have contracted the variant that it has evaded immune protection. Yes, studies will need to be conducted to determine how much this variant evades the immune system.
Isn’t this really a case of deja vu and simple math for most investors? Delta had 3 RBD (receptor binding domain) mutations and it was twice as infectious, Omicron has at least 32 in the spike protein, many clustered within the RBD. The knee jerk reaction was to create a whole new wave of vaccine candidates, which is why vaccine makers rallied so much, but are they the real solution? The market did react even more favorably to the top two oral antiviral companies, PFE and TOMDF, when news of the Omicron variant hit the tape. Perhaps the market participants are learning to better decipher the impact of COVID-19 to viable medical solutions and market strategies.
Pfizer and Todos Share the 3CL Protease Target
Inhibiting the 3CL protease is a proven target thanks to the research of Pfizer and Todos Medical. Both companies have presented excellent data with PFE’s phase 2/3 interim results and TOMDF’s observational study. Furthermore, there are consistencies within the data sets between both drugs Paxlovid and Tollovir including the fact that it would work on all variants. One big difference over Paxlovid is that Tollovir also has some anti-cytokine activity, so it can be used at any time of the disease progression. Tollovir was also in clinical trials for vaccinated and unvaccinated and people with underlying conditions and those with no underlying conditions. Basically, anyone who was in the hospital and got sick could receive Tollovir.
For some investors, there might be a perceived risk of a poor result in Todos Medical’s interim data due to their trial design. Pfizer and Merck only tested on unvaccinated people whereas Todos Medical would take anyone. On the surface that appears to be a weakness but the reality of the situation is that the only people making a fuss about this are the vaccine makers because it may expose a serious weakness. PFE surprised the world when they only filed an EUA for unvaccinated people with underlying medical conditions. With strong results, it’s inconceivable that they didn’t push for more unless they did the calculus regarding the cannibalization of their existing vaccine inventory. If Todo’s results are positive they could have an enormous market share that is much bigger than Pfizer’s.
Recently Todos Medical did an interview with Benzinga that really connected some dots on the science behind 3CL. The CEO Gerald Commissiong explained why 3CL protease is the most effective target in COVID-19 and explained how some of the cellular defense mechanisms work and how 3CL turns them off. By blocking 3CL it keeps the cellular defenses on making it harder for the virus to establish a foothold in the cell. He also highlighted some of the differences between Paxlovid and Tollvir, most notably the drug to drug interactions with ritonavir. He stressed the safety of an all-natural product versus a chemical entity. In the heart of the video he pointed out that they did a comparison to Pfizer’s and Merck’s drug in the lab. At the end, he talks about their new discovery which is the compound responsible for the inhibition. He said, “it’s not something that other people think it is.” There could be some very interesting patent news in the offing. The strength of his statement when asked if he plans on competing against Pfizer was the tell that investors should be looking toward. All indications are that the interim readout is going to be excellent and this video adds more excitement to the speculation. If their data is as good as Pfizers they should be eligible for a EUA and their safety record might make this a quick approval.
Handicapping the Runup
It’s pretty clear that the recent TOMDF rally was due to strong anticipation of positive clinical results in the company’s phase 2 study for Tollovir in hospitalized patients. Investors saw how well Pfizer’s Paxlovid worked and they want to be on board for the next leg higher, but this time with TOMDF.
Todos Medical has a market cap of about $60 million. Should the interim readout in the coming weeks not fail like it has done in every other hospitalized setting for oral therapeutics, the stock could reach a valuation over $1.0 billion which is the equivalent of $1.10. The next valuation hurdle is $100 million. Should they reach that valuation which is days away there could be an all out media blitz as news agencies can pick up the story since it crossed that $100 million threshold. The company’s social media channels are highly active and the CEO presents as extremely credible and a subject matter expert in COVID-19. Most phase 3 peers like AVIR with a failed drug have a market cap of $675 million. This one comparable alone shows how tremendously undervalued the name is and represents the next valuation hurdle. The company is looking to uplist to the NASDAQ and this current momentum could accelerate the process. This news could add to the frenzy. What investors should take away is that Todos is a very credible threat to Pfizer and how would the landscape be altered by the rise of another 3CL protease inhibitor in the coming weeks? Is that threat worth only $75 million or is it much more?
Will the Runup Continue
There are multiple reasons why the TOMDF runup will continue. First and foremost, there is a massive valuation disconnect between the billions of value of an approved COVID-19 antiviral and the company’s market camp. However, this disconnect has been due to the artificial selling pressure caused by a convertible noteholder churning through the note. It appears that this process is finally done and the buying pressure can bring TOMDF up to a reasonable valuation such as a few hundred million.
However, that’s not the only reason TOMDF shares are poised to rally higher. Unlike many drug development biotech companies, TOMDF has COVID-19 testing business with its own lab and automated equipment. The company has been securing testing contracts such as recent reference lab contracts announced for some schools in Georgia and New Jersey. While the company didn’t give guidance on the revenue potential for these contracts, it’s not that hard to guess how big these contracts can be for TOMDF. The press release states that the testing totals 1,000 PCR tests per day, and that these tests are reimbursed at a rate of $100. Todos’ lab is fully automated and can handle 20,000 PCR tests per day as well as 1,500 cPass neutralizing antibody tests per day, 5,000 COVID variant tests per day, and over 5,000 respiratory panel tests per day. If investors assume that the lab runs 5 days per week, or 250 days out of the year, that equates to $25 million in revenue from this one contract. However, the contract has the potential to ramp up to 5,000 PCR tests per day, which would be $125 million in revenue, way above TOMDF’s entire market cap, just based on one contract. If 5,000 tests are done 7 days a week, that would be about $175 million dollars in revenue. While it’s not clear if there is a revenue share in the contract, this is big money for Todo either way..
Furthermore, the company inked a deal with a European nutraceutical company to provide at least 500,000 bottles of Tollovid over the next 18 months, the oral nutraceutical form of Tollovir, for the nutraceutical distributor. This is on top of Tollovid sales directly from Todos. We know Tollovid goes for $100-$330 on Amazon, so assuming Todos gets just $30 from the product wholesale, this is another expected ~$15 million in revenue for Todos. Contrary to most drug developing microcap biotechs, this company has significant revenues coming in.
With this news in mind as well as the convertible note selling ceasing, it is clear that dilution is ending, revenue is beginning, and clinical results are imminent. The company is eyeing an uplist to the NYSE or NASDAQ soon, and it is expected that the shares will be locked up for an extended time. This would allow shares to rapidly continue upwards. With the artificial pressure on TOMDF shares gone, the company is due for a significant revaluation upwards, and this positive momentum should continue.
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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.