Did The Medicines Company Trump Cellceutix And Others In A $1B-Plus Skin Infection Market?

| About: Cellceutix Corp. (CTIX)


Cellceutix's Brilacidin flagship one step antibiotic potentially simplifies patient results with a single dose possibly making Brilacidin the physician's first choice for fighting skin infections and oral mucositis.

Prior research suggests that Brilacidin can be effective against Gram-positive and Gram-negative infections, including drug-sensitive and drug-resistant strains, such as MRSA and VRE (resistant to vancomycin).

Cellceutix's Brilacidin, a new class of drug, has a half-life of only 13 to 16 hours, greatly reducing the chance of resistance developing.

Typical antibiotic regimes for treating Acute Bacterial Skin and Skin Structure Infections ("ABSSSI") have run about 7 - 14 days and often include twice daily infusions to treat serious infections. These long-winded treatments ultimately support the buildup of resistance as bacteria fortify themselves through mutations to render the drugs ineffective. There have been some major strides made in recent months, though, with biotechs advancing antibiotics that destroy bacterium faster than ever before. The Medicines Company (NASDAQ: MDCO) turned the industry on its head last week with the FDA approval of oritavancin, which will be marketed as Orbactiv, as the first drug ever approved as a single dose treatment. This new, one-shot treatment has to make other antibiotic makers nervous, right? Not so quick. There's a lot more to consider than just the approval of a drug that was fraught with delays in development that may have been shoe-horned into the market because of a tremendous need for new drugs.

The Other Players

Durata Pharmaceuticals' (NASDAQ: DRTX) Dalvance, a semi-synthetic lipoglycopeptide, was approved in May as a two-dose regimen: an initial 1000 mg dose followed a week later by another 500 mg dose. Cubist Pharmaceuticals (NASDAQ: CBST) won the FDA's blessing shortly after for Sivextro, an oxazolidinone that is shown effective both as an intravenous and oral therapy, for administration once a day for six days. Cubist outdid itself with Sivexstro coming in a day faster than its blockbuster antibiotic Cubicin (daptomycin, 2013 sales $1.1 billion). Dalvance and Sivextro, which came through the QIDP pathway under the GAIN Act, are indicated for Gram-positive bacteria, including MRSA (Methicillin-resistant Staphylococcus aureus), garnered the FDA's and investors' attention by shortening the dosing regimen.

Cellceutix (OTCQB:CTIX) is developing Brilacidin, its flagship drug in a novel class of antibiotics called defensin mimetics. Brilacidin is trailing its peers by clinical development timeline, but a Phase 2b trial of Brilacidin is completing enrollment this month and the upcoming data could make analysts reconsider the antibiotic hierarchy.

A Closer Look

Let me first say that there is a stark discrepancy in valuations of these companies and that can be attributed to a variety of factors that doesn't make for an "apples-to-apples" comparison at the overall corporate level. No one should try and make a direct comparison of emerging biotechs like Durata or Cellceutix to Cubist, when considering that Cubist generated $294.4 million in revenue in the second quarter and ended the quarter with $643.5 million in cash and cash equivalents on hand. Durata reported that they ended the second quarter with $34.7 million in the bank, which included a requisite loan of $15 million from PDL BioPharma upon the approval of Dalvance. Cellceutix has yet to file for Q2, but ended the first quarter with $5.15 million in cash, money that was drawn down from an original $10 million share purchase agreement from December 2012 and then upped to a new $20 million agreement in October 2013 that still had a balance of $18.4 million at the end of the first quarter. Further, Cellceutix is listed on the Over The Counter Exchange, which is generally regarded as carrying a much greater risk factor and discounted by Wall Street in placing valuations. When considering burn rates and number of clinical trials, Cellceutix actually outstrips its bigger brethren on cash management, but this is not an exercise in financials; it is an evaluation of antibiotics and the valuation that Wall Street places on compounds. Still, it's pertinent to note the underlying corporate fundamentals.

Back to the compounds.

Dalvance, while only requiring two doses, is a bit suspect because it requires the patient to return for treatment. If patients are non-compliant, it simply supports the buildup of drug resistance as bacteria can be weakened, but not totally destroyed only to come back tougher than before. Durata going it alone to market Dalvance in the U.S. and signing a license-and-supply deal with Angelini for only $15 million upfront to try and market the drug in 36 countries provides evidence of some skepticism around the drug and its ability to take market share from Cubist. Remember, Cubist already has a substantial sales team and footprint in the antibiotic space with its portfolio of marketed drugs.

Cubist is clearly the big dog on the block, and although the similar dosing regimens could lead to Cubist cannibalizing some of its own sales, that will washout over time. The company just reported that its earlier drug for treating ABSSSI, CUBICIN (daptomycin for injection) net product revenues were $234.7 million in the last quarter. Thomson Reuters forecasts Sivextro sales of $231 million by 2019. Cubist now has four antibiotics on the market, including Cubicin, Sivextro, Entereg (for gastrointestinal recovery after bowel surgery) and Dificid (for treating intestinal inflammation-related diarrhea). Investors also need to be in tune with ceftolazane/tazobactam, an antibiotic of Cubist to treat complicated urinary tract infections that has a PDUFA date of December 21. Because the drug treats Gram-negative infections, talk of blockbuster potential is already starting to surface.

The Medicine Company and Durata also face the grand challenge of concerns over the half-life of their drugs, both of which fall in the category of lipoglycopeptides. DataMonitor noted that while Orbactiv demonstrated non-inferiority to vancomycin in Phase 3 development and provides a therapeutic advantage to other lipoglycopeptides, such as Theravance's (NASDAQ: THRX) Vibativ and Durata's Dalvance, by shortening the dosing regimen, "the drug faces more safety and efficacy concerns due to its longer half-life."

The duration of action of a drug is known as its half-life. It's the period of time it takes for the concentration of the drug to be reduced by one-half, usually measured by the amount of the drug in plasma. It's logical that the dosing regimen of Dalvance was set at a one week increment because of its "long elimination half-life" of approximately 204 hours (8.5 days), meaning that one dose didn't completely kill the bacteria and systemic toxicity was a problem any time sooner than a second dose before the eighth day. Orbactiv has a half-life of a glaring 14 days, which certainly has the potential of complications for patients who are generally quite sick and often require additional medications. It's this long half-life that was probably the culprit in The Medicines Company not finding a suitor to partner in development or commercialization. It's also the reason that physicians may be reluctant to prescribe the drug.

Comparator Arms for Dalvance and Orbactiv Lacked Muscle

While Durata and The Medicine Company selected vancomycin, a generic antibiotic with a growing resistance issue, as the comparator drug in their trials, Cellceutix selected the Cubist blockbuster daptomycin (Cubicin), considered a superior drug to vancomycin, as its comparator. In the trial, Brilacidin is being administered as a single-dose regimen and a three-day regimen versus the standard seven-day therapy daptomycin. In antibiotic clinical trials, experimental drugs are measured as "not inferior to" the approved drug. If Brilacidin hits this point of comparison to daptomycin in any dosing scheme (especially a single dose), while demonstrating the drug to be safe and well tolerated, it will be a milestone moment, not only for Cellceutix, but also for antibiotics. The double-blind trial will be completed this month and no serious drug-related adverse events have been reported to date, based upon Cellceutix updates. If the data is positive, it's presumable that Brilacidin will qualify for expedited review programs as it positions for a pivotal Phase 3 trial, much like Dalvance and Sivextro did.

Cellceutix has not missed a beat in recognizing the half-life issues with Dalvance and Orbactiv. Its chief executive officer (Ehrlich) noted in a press release on Monday, "This means that the drug remains in a patient's system for a considerable period following dosing, which has the potential for contraindication with other medicines and questions concerning metabolism and drug resistance." Ehrlich noted that Brilacidin only has a half-life of 13-16 hours, which the company believes is an "ideal" half-life for efficacious treatment without running the risk of resistance developing.

Brilacidin also seems to have the potential to treat infections of broader scope that the aforementioned drugs. Prior research suggests that it can be effective against Gram-positive and Gram-negative infections, including drug-sensitive and drug-resistant strains, such as MRSA and VRE (resistant to vancomycin). Additionally, Cellceutix has said it intends to pursue ear and eye infections, as well as diabetic foot ulcer infections now that Brilacidin has been formulated to be stable at room temperature.

A single-treatment drug with a good safety profile that squashes concerns of patient compliance and odds of drug resistance forming would be the dream drug. While all the drugs mentioned are a absolutely a step up from what the antibiotic landscape looked like a year ago, only one company meets that possibility, Cellceutix.

With multiple 2014 catalysts approaching, investor interest should remain strong. Promising data could be a share price mover for the company, just as negative data could send shares lower. However, this is the pharmaceutical sector and such observations should be noted but not assumed as fact. Interested investors are advised to perform much additional research into Cellceutix before making their investment decisions. CTIX is quoted on the OTCQB, SEC filings, clinical data, competitor analysis and corporate press releases should all be considered in the decision making process.

Disclosure: The author is long CTIX. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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