Cymabay's Phase II Results Explanation: Science, Competition, And Price Action

| About: CymaBay Therapeutics (CBAY)

Summary

Positive top line results from phase II trial were reported for HoFH.

The stock price surged shortly, but quickly fell off to around -23%.

We go in depth to explain the counter-intuitive price action.

Brief Summary

Cymbay Therapeutics (NASDAQ:CBAY) recently released results from their phase II trial of MBX-8025 for Homozygous Familial hypercholesterolemia (HoFH) which is just a fancy acronym for people which have both parents displaying hypercholesterolemia, or high cholesterol. The drug acts by targeting a protein Peroxisome proliferator-activated receptor delta (PPAR-δ). This in turn switches on genes that are important for fatty-acid metabolism, with the end intended result of lower low-density lipoprotein (LDL) and LDL-cholesterol (LDL-C), additionally it has been shown to increase the "healthy cholestrol" found with high-density lipoprotein (HDL). Apologies for the acronyms.

Three Major Results

  • Top line results: LDL cholesterol was lowered up to 20%
  • Non-positive result: PCSK-9 was upregulated dramatically as a result from the drug
  • Choleostasis biomarkers showed positive responses for non-alcoholic steatohepatitis (NASH) indication

The top-line results were the major cause for the quick, but temporary stock price surge upwards. However, it is likely that the topline result was undermined by the PCSK-9 increase, and the confusing results published in regards to choleostasis.

Here, we're going to talk about PCSK-9 upregulation, the choleostasis biomarkers, the comparison to the FDA-approved Kynamro drug, the wild price swing, and the total summary of the trial results.

PCSK-9 Up-regulation

  • High levels of PCSK-9 usually indicate increased levels of LDL cholesterol, however, even with increased levels of PCSK-9, the results still showed a decrease in LDL cholesterol.
  • The company believes that PCSK-9 up-regulation is a limiting factor in the down-regulation of LDL-cholesterol.
  • PCSK-9 is more well-studied than PPAR-δ, and FDA-approved PCSK-9 inhibitors already exist, opening up combination therapy opportunities for Cymabay.
  • In Cymabay's corresponding conference call transcript, the company claims that PCSK-9 increases have been seen before, and these do not pose a safety risk.
  • If PCSK-9 up-regulation is dose dependent, this allows the company great leverage to lower PCSK-9, while still lowering LDL (since significant dose-dependence was observed)

Choleostasis biomarkers

What is surprising to us, however obviously anticipated by Cymabay, was the decrease in levels of alkaline phosphatase, gamma glutamyl transferase, and bilirubin. These are generally biomarkers doctors watch for liver function and liver disease progression. The company said two important things in regards to these findings:

  1. We believe that MBX-8025 has beneficial effects on liver function parameters which are related to Cholestasis.
  2. With regards to safety the current study was carried it under the review of data safety monitoring committee. The DSMC conducted an interim review and proposed no changes to the study [design]. Thus, it was completed as planned from onset.

Thus, what could be construed as negative results, are actually overall positive results in face of value for the company's drug and their future prospects.

In fact, the company is going to initiate an inexpensive pilot-study for MBX-8025 in patients with a PCSK-9 inhibitor use background to evaluate the hypothesis that this co-therapy will dramatically lower LDL cholesterol.

Comparison to the FDA-Approved Drug for Cholesterol, Kynamro

At first glance, Kynamro drug may seem superior in efficacy to MBX-8025, however deeper considerations are warranted. Here are some major points:

1. The average maximum decrease in LDL for Kynamro was ~25%, while with MBX-8025 it was ~20%

  • However, due to the higher average baseline in the MBX-8025 study, the mean absolute value decrease was greater with MBX-8025.

2. 18% of Kynamro patients discontinued use due to adverse events, in phase III, while 25% discontinued in MBX-8025

  • The discontinuations of MBX-8025 are still being investigated for cause, and it is unknown whether they were due to MBX-8025 directly.
  • A previous phase II of MBX-8025 already indicated it was well tolerated, had no reports of drug-related serious adverse events, and no emerging safety concerns.
  • The high LDL baseline in the MBX-8025 background indicates the study group is likely of weaker condition in comparison to Kynamro.
  • Kynamro has a warning label of liver-toxicity, which is as of yet not reported to be a problem for MBX-8025.
  • MBX-8025 is oral delivery, in comparison to injection for Kynamro.

Analysis of Price Action

Just a few days prior, Celator Pharmaceuticals (NASDAQ:CPXX) released positive phase 3 results for it's VYXEOS therapy. We reported on that before hand, and still hold CPXX. Most importantly to Cymbay, was the presence of Cohen's large and rather abrupt stake in CPXX the day before phase results were released. Cohen stood to make a 300% gain on the stock.

What likely followed were short-term holders back-tracking Cohen's holdings on small, binary-driven biotech stocks, and Cymbay is a holding of Cohen since December 2015 and having the most immediate catalyst. We thus can likely explain the massive upward change in volume on Wednesay, March 16th to be attributed to short-term holders looking to mimic CPXX profits. However, when results were more complicated than perfect, momentum quickly plummeted in a downwards trend, as day traders realized this would not be a 300% profit margin.

In premarket trading the day after data release, the stock was walked down from 1.57 to 1.40 (greater than a 10% drop) on very minimal volume, causing over-represented panic and exiting of the stock in open. Essentially, the forest was lost through the trees, and the idea of treating LDL-C conditions with MBX-8025 was demolished, likely by short-term holders and day traders.

Summary

While the results likely warrant additional research, and possibly additional exclusionary criteria for an MBX-8025 phase III trial the stock price has been oversold. The culmination of all results from their phase II indicated a positive outcome and direction, and thus we should have expected a modest stock price increase on news. However, it seems the market took the idea of not-positive-enough as negative. Something we have suffered a lot with lately in the biotech sector.

We expect a slow rise of the stock price over time as the market rationalizes the results from here, and realizes the company, and drug are still on stable footing.

Disclosure: I am/we are long CBAY.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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