With June being Alzheimer's & Brain Awareness month, this is the perfect time to focus on a recently formed public company focused on neurodegenerative diseases such as Alzheimer's and Parkinson's. Though newly public the company has a history in the field originally working on grants from a well established foundation and now focused on invested capital.
Cantabio Pharma (OTCQB:CTBO) came public via a merger with Gardedam Therapeutics back in December. The stock is already worth nearly $100 million based on promising therapies in these areas of unmet needs. Now the question is whether enough promise exists to warrant an investment in this small and risky biotech?
The scary part of neurodegenerative diseases are that they impact a lot of people with no current ability to prevent or even cure. The Alzheimer Association was formed in 1980, yet the disease continues to grow and is now listed as the 6th leading cause of death in the US. In fact, the disease is the only one listed in the top 10 causes of death that continues to grow.
Alz.org lists the disease as impacting 5.4 million Americans this year with a combined cost along with other dementias of $236 billion. The disease is expected to rapidly expand to more patients as the population continues to age with a projected impact of nearly 13.8 million Americans by 2050 without any medical breakthroughs.
Parkinson's disease is a brain disorder that progresses slowly in most people. The disease has impacted many famous people from the recently deceased Muhammad Ali to actor Michael J. Fox.
The disease is listed as the 14th highest cause of death in the US and impacts some five million people globally. Similar to Alzheimer, Parkinson's had the National Parkinson Foundation long ago, yet after 50 years in existence limited medical progress has been made in solving and curing the disease.
Cantabio lists the following global impacts of the generally unmet needs of these neurodegenerative diseases.
Source: Cantabio presentation
Michael J. Fox Foundation
The company originally obtained funding via two grants from the Michael J. Fox Foundation. The foundation was formed by famous actor Michael J. Fox and focuses on Parkinson's research. In the prime of his career, Michael was diagnosed with young-onset Parkinson's disease back in 1991 at the age of 30.
As the company states, the grants were to support the company's small molecule therapeutic prospect targeting the DJ-1 protein.
So clearly the company is targeting an area of unmet needs with a huge financial impact to the global economy. The question now is whether Cantabio has any drug candidates that can cure these unmet neurodegenerative diseases.
Cantabio is targeting small molecule pharmacological chaperones to stabilize the native functional form of selected protein targets. As well, the biotech is focused on protein delivery technologies that enables delivery of targeted proteins into a patients' brain to supplement their lowered functional in vivo levels.
The company is targeting a couple of therapies including the DJ-1 protein and the Aβ peptide. The targeting of the DJ-1 protein could yield added benefits including protection from oxidative stress and protein misfolding and aggregation. Selected compounds including CB101 and CB102 were shown to have a therapeutic effect in primary neuronal models of and in vivo models of Parkinson's Disease. As well, the CB201 program will work to deliver DJ-1 protein into the brain in order to enhance DJ-1 activity to reduce oxidative stress and protein misfolding.
The other therapeutic target is the aggregation and amyloid formation of Aβ peptide that is linked to the onset and progression of Alzheimer's disease. The use of small molecules to reduce and inhibit the aggregation process to prevent the formation of toxic oligomers. Cantabio has a unique screening approach that has successfully binded to monomeric Aβ where other approaches haven't worked.
The earliest drug candidate has an expected IND filing in 2017.
The company has partnerships with Purdue University and NovAlix. Cantabio recently announced the preclinical therapeutic program work with NovAlix on the development of small molecule chaperones that stabilize the Aβ peptide.
The company interestingly includes an executive team that all obtained Executive MBAs from the University of Cambridge along with practical experience in related medical research or financial backgrounds.
Besides the executives, the scientific advisors included Dr. Rochet that works for Purdue University and worked on the Michael J. Fox Foundation grants. As well, the advisors include Professor Franklin Algbirhio that is the Director of the Wolfson Brian Imaging Centre at the University of Cambridge.
The executive team clearly has competence in the field and contains the management credentials to run a public company that includes obtaining the necessary financing. As a note, the CFO spent seven years working M&A in med-tech and life sciences at GE Healthcare.
Naturally Weak Finances
The finances are possibly the biggest question market for the promising biotech. The company raised roughly $0.5 million recently, but Cantabio will need to raise serious amounts of money or form major partnerships to finish preclinical testing and fund clinical trials.
For the nine months ending December, Cantabio produced a roughly $320,000 loss from operations. The biotech only had $100,000 of cash on the balance sheet and will very likely use the current stock valuation to raise funds.
If anything, investors should hope the company does an offering of several million shares to raise at least $5 million in cash to fund operations and research for the next year or so.
Cantabio faces the normal risks of any small biotech including the ability to fund research and the risks of ultimate drug failure. The inability to meet positive results in future clinical tests would ultimately crush the stock and investor positions.
As well, the company faces numerous competition as the Alzheimer Association outlines several targets for future drugs and clinical trials. All of these efforts are far more advanced than those underway at Cantabio. Also, any loss of executive leadership or medical advisors could derail the development of the drug pipeline.
Most of the biggest pharma firms are involved in Alzheimer's including Biogen (NASDAQ:BIIB) that has Phase 3 studies ongoing for aducanumab. Maybe most concerning beyond the tough competition with a head start is that so many drug trials have failed. According to New Scientist, some promising new drugs are in the works, but over 100 trials have failed in the past suggesting the likelihood that a small biotech finds a cure for neurodegenerative diseases is a small possibility.
For now though, the biggest risk is obtaining short-term funding to move the drug pipeline forward via increased research spending and testing. An investor may wish to watch from the sidelines until funding is obtained first in order to reduce that portion of the risk from the equation.
The risk in the stock is elevated, but the small biotech has promising drug candidates in an area of extreme unmet needs and in need of workable solutions. Naturally, any investment is only appropriate for a very diversified portfolio with limited exposure to any small biotech.
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