Seeking Alpha

Steven Cordovano's  Instablog

Steven Cordovano
Send Message
Currently a partner of HarborView Capital Management LLC, I have been in the business since 1984 where I started in the capital markets division of Shearson Lehman Brothers. From 1994 until 2005 I was the General Partner of Gulfstream Partners L.P. The fund strategy was a long/short equity... More
  • Soligenix, Inc.

    Investors are drawn to the biotechnology sector in search of outsized returns, but today’s speculative spirit seems to have matured somewhat as the quest for upside has been tempered with the additional requirement for less risk.  It obviously takes a lot of work to root out biotech opportunities where there are large potential returns with greater chances of success.  Soligenix (OTCQB:SNGX) is one of these special, special situations and one of the best kept secrets in biotech.

    While not devoid of uncertainty, Soligenix is poised for substantial growth and success and an investment in the company--currently enrolling a confirmatory Phase 3 clinical trial, is analogous to having the exam questions the night before the test. 

    Recent developments include:

    ·Initiated enrollment in its confirmatory Phase 3 of orBec® for the treatment of   acute GI GVHD

    ·35% royalty generating North American partnership with Sigma-Tau Pharmaceuticals for orBec

    ·Corporate name change to Soligenix, Inc. from DOR BioPharma, Inc.

    ·Completed a $4.4 million financing with its partner Sigma-Tau and institutional investors.

    ·Awarded a $9.4 million grant from the NIH for RiVax and its biodefense business.

    ·Awarded a $500,000 NIH grant to support a clinical trial in radiation enteritis with its research compound SGX201 (oral BDP).

    ·Awarded Orphan Drug Designation for orBec in chronic GI GVHD.



    Previously known as DOR BioPharma, Inc., Soligenix is a biotechnology company developing products to treat the gastrointestinal side effects of cancer treatments and vaccines for bioterrorism.  Its lead compound, orBec® is a topically active corticosteroid currently in a confirmatory Phase 3 clinical trial for the treatment of acute GI GVHD.

     After having missed several projected NDA filing dates, Chris Schaber, PhD (formerly COO with Discovery Labs) was hired as a consultant to perform a regulatory review on the NDA because at the time, the filing was late and still incomplete.  

     Dr. Schaber was ultimately hired as CEO in August of 2006 and the Company subsequently filed the NDA after providing the FDA with additional long term mortality data on orBec.  During his career, Dr. Schaber has overseen multiple Phase 3 clinical trials--all which were successful.  In addition to his positive assessment of the prospects for approval of orBec, Dr. Schaber was drawn to Soligenix because his own father had recently been diagnosed with multiple myeloma and was facing the realities of helping him through the stem cell transplantation process, and was well aware of the potential risk of GI GVHD.

    While the company has faced some tough years in the past, management has begun to work more creatively at minimizing dilution and the recently partnership with Sigma-Tau is confirmation of this.  The company has a very simple capital structure with no debt or preferred stock.


    Oral beclomethasone dipropionate (BDP), the active ingredient in orBec is a corticosteroid that works topically against inflammatory disorders at mucosal surfaces.    The drug has demonstrated activity in acute Graft-Versus-Host-Disease (GVHD) which affects the entire GI tract and can occur after hematopoietic cell transplantation (NASDAQ:HCT).  Typically, the disorder manifests itself in the GI tract where orBec is beneficial because it reduces exposure to systemically delivered steroids which in turn reduces the incidence of infections while preserving the graft- versus-leukemia effect.  This is a very important part of the orBec story.  The graft versus-leukemia effect means that some GVHD is actually beneficial to the patient as donor lymphocytes assist in the killing of cancer cells. 

    orBec is a 2-pill system that contains 1 mg each of BDP.  One pill is an immediate release tablet and the other is enteric coated for delayed release in the lower GI tract.  Each 2-pill dose is taken 4 times per day for a total of 8 mgs per day.  This 2-pill system delivers coverage to the entire GI tract from the stomach through the colon.

    BDP, the active ingredient in orBec is a known compound and has been previously approved by the FDA for other indications such as asthma (Becloforte:  Glaxo), rhinitis (Beconase:  Glaxo) and psoriasis (Propaderm:   Glaxo, others) in other dosage forms. BDP is a very potent topical steroid which gives unique properties in treating conditions in the gastro intestinal tract.


    Gastrointestinal Graft versus Host Disease is an unmet medical need and considered an Orphan Disease.  It generally occurs in blood cancer patients who undergo bone marrow or stem cell transplantation.  Symptoms can include anorexia, vomiting, bloody stool and necrosis of endothelial cells.  The disease occurs when the immune cells from another person (the donor) are put into a patient whose own immune system can’t eliminate the foreign cells (allogeneic).  This creates an inflammatory response that can damage epithelial cells of various organs in the body--typically in the GI tract, but also affects the skin and liver.

    The current standard of care is treatment by systemic corticosteroids (either prednisone or methyl prednisone).  There are various grades of the condition that are identified by the number of organ systems affected.  Grade III and IV are the most severe and deadly as there can be significant gastrointestinal, bacterial translocation, intestinal fluid and loss of protein.  Mortality is also prevalent in Grade II but is likely caused by the side effects of the treatment which suppresses the immune system and neutrophil function resulting in potential infections.

    GI GVHD is commonly multi-episodic which under the current standard of care requires continuous treatments of immunosuppressant systemic corticosteroids.   

    It is very important to understand two things with regard to orBec: 

    1. A certain amount of graft versus-leukemia effect is desirous to eliminate the underlying malignancy but high dose prednisone inhibits this effect.  And,

    2. Due to its topical activity, orBec has been shown to preserve the graft-versus-leukemia effect due the prednisone sparing properties.


    There are over 10,000 allogeneic hematopoietic stem cell transplants each year in the US..   GI GVHD affects approximately 50% of allogeneic transplant patients and approximately 5% of autologous transplant patients.  The associated mortality rate is approximately 25% at 200 days post transplant.

    Phase 2 Trial

    In the single-center randomized double-blind, placebo-controlled Phase 2 study, the primary endpoint was the clinically relevant determination of whether GI GVHD patients at Day 30 (the end of treatment) had a durable GVHD treatment response as measured by whether or not they were able to consume at least 70% of their estimated caloric requirement. The response rate at 30 days (the primary endpoint) was 71% in the orBec treatment arm versus 55% in the control group for a statistically significant p-value of 0.02.  Also, at 40 days (10 days after end of orBec treatment) 52% of patients were meeting the caloric intake requirement versus only 17% in the control group.  This result demonstrated a durable and lasting effect of orBec even beyond the treatment period. 

    Phase 3 Trial

    Soligenix’s Phase 3 trial was a multicenter randomized, double blind, placebo controlled trial that treated 129 allogeneic HCT recipients with Grade II GI GVHD.  The same basic protocol was followed as in the Phase 2 trial.  Although orBec did not achieve statistical significance in the primary endpoint of this trial, namely the time-to-treatment failure through Day 50 (p-value 0.117), orBec did achieve statistical significance in other key secondary endpoints such as the proportion of patients free of GVHD at Day 50 (p-value 0.05) and Day 80 (p-value 0.005) and the time-to-treatment failure through Day 80 (p-value 0.022). These endpoints are more clinically relevant.

    There was also a 66% reduction in mortality among patients randomized to orBec at 200 days post-transplant with only 5 patient (8%) deaths in the orBec group compared to 16 patient (24%) deaths in the placebo group (p-value 0.013). 

    Even more impressively, at one year after randomization in the pivotal Phase 3 trial, 18 patients (29%) in the orBec group and 28 patients (42%) in the placebo group died (p-value 0.04).  This demonstrates that orBec not only had an effect on patients’ acute GI GVHD, but also had an effect on their underlying cancer.  These data further support the hypothesis that orBec would in fact enhance the positive effects of that transplant (noted above as the graft-versus-leukemia effect).  

    What Went Wrong?

    On May 9, 2007 the Oncology Drug Advisory Committee discussed orBec for the treatment of GVHD.   Based primarily on the missed primary end point, the panel voted against substantial evidence of efficacy 7 votes to 2.  The FDA ensured the outcome of this vote by dictating to the panel their specific definition of substantial evidence of efficacy which is comprised of two successful controlled clinical trials.  With the missed primary endpoint, the panel could not vote in favor of orBec despite all the efficacy and safety it had demonstrated.     

    This was further complicated by the attempt to overlay strict statistical methodology that in this case overemphasized the importance of a primary end point even though the primary endpoint was essentially clinically meaningless. Interestingly, only one of the doctors on the panel had experience with GVHD and he was one of the 2 votes in support of approval. 

    As the conversation between Advisory Panel Chairperson Maha Hussain and Nancy Scher--a Medical Officer with CDER, the Division of Oncology Drug Products demonstrates, the panel was concerned with “lowering the bar,” and regardless of the clinical outcomes, missing the primary end point in their minds tainted the results:

    “CHAIRPERSON HUSSAIN: I have a question to the FDA. Either of the presenters could take it. Understanding that the day 80 time-to-failures or number of failures was a secondary endpoint, but in reality it is just an extension of time, so why is it not good enough?

    DR. SCHER: I guess the answer is statistical.

    CHAIRPERSON HUSSAIN: I guess I understand it’s statistical. I understand that party line of failing primary endpoint, therefore everything is exploratory otherwise.”*

    *US Food and Drug Administration Center for Drug Evaluation and Research (CDER), Oncologic Drugs Advisory Committee Meeting Transcript, Wednesday May 9, 2007, pg 265.

    Some have speculated that it might actually have been due to the fact that the agency was under fire from Dendreon interest groups because Provenge (a prostate cancer drug that also missed its primary endpoint in a Phase 3 trial) had been turned down the same day as the orBec panel meeting and that the agency was trying to send a message that a missed primary endpoint, regardless of any other meaningful data you have, is a fatal flaw.

    Mortality Rates

    Irrespective of why or what caused the company to miss its primary end point, orBec has demonstrated outstanding mortality data as published in the January 2007 issue of the peer-reviewed journal Blood.  The percentage reduction in mortality as reported in the Phase 3 trial was 66% and 55% in the Phase 2.  More astounding, orBec achieved a 94% reduction in mortality among mismatched donors at 200 days post transplant in the Phase 3 trial.  In other words, only 4% of mismatched orBec patients died versus 42% of the patients who received the placebo.   orBec is the only drug in over 3 decades of GVHD clinical research that has been shown to both treat GI GVHD’s symptoms and actually reduce mortality.

    Rationale for Investment in Soligenix

    Soligenix has obtained an SPA for a confirmatory Phase 3 pivotal trial (recently initiated enrollment) which will be almost the exact design as the previous Phase 3 but with the new primary end point being Treatment Failure Rate at Study Day 80 (previous p-value of .005).  Additionally, Soligenix has agreement from the EMEA that the current confirmatory Phase 3 trial would suffice for European approval.  The confirmatory Phase 3 is a multicenter trial with 166 patients enrolled and powered at 90%. 

    The design of this new confirmatory clinical trial and Soligenix’s choice of the new primary endpoint are the foundation for the investment rationale.  In my opinion Soligenix has delivered to its shareholders a value proposition built around the absolutely correct design of the Phase 3 clinical trial.  Importantly, Soligenix has anchored this design using extensive clinical data obtained from its previous Phase 3 study.  The company has essentially eliminated the question they got wrong on the previous test and are now going into the final exam armed with questions that they have already answered correctly.

    Furthermore, even putting aside orBec’s prior clinical success and the $7.5MM in cash on the balance sheet as of September 30th (and an additional $1MM received from Sigma-Tau for starting the Phase 3), at the current market cap of approximately $40MM the stock seems inexpensive for a company with an orphan drug in a fully funded Phase 3 trial with other indications beginning soon and a marketing deal already in place that has a 35% royalty.

    Sigma-Tau Partnership

    Soligenix has a signed marketing agreement in place with Sigma-Tau Pharmaceuticals, Inc., a U.S.-based, wholly owned subsidiary of the Sigma-Tau Group which is dedicated solely to the global development and commercialization of medicines for patients with rare diseases.  Sigma-Tau will launch orBec in the North America and pay $10MM in milestone payments with $1MM now due that the enrollment of the first patient in the Phase III clinical trial has occurred.  Because there are only around 15 major transplant centers that do 60% of all transplants in the US, investors should anticipate a very rapid launch post approval.  The company also was able to negotiate a healthy 35% net royalty on US sales of orBec (and with a similar rate expected in the EU).

    Other Indications for orBec/oral BDP

    GVHD Prophylaxis

    Soligenix is nearing completion on this 138 patient Phase 2 study and expects the announcement of results in the first half of 2010.  Approval in this indication would effectively double the market for the orBec.  This study is almost entirely funded by a National Institutes of Health (NIH) grant.  However, as was speculated by members of the FDA panel meeting, if orBec gains approval for treatment of GI GVHD, it will be highly likely that it will be used off-label for prevention of GVHD. 

    Panel member Joanne Mortimer, M.D., Professor of Clinical Medicine and Medical Director at the Moores UCSD Cancer Center highlighted this when discussing the possibility of a prophylactic study as an alternative approach to another phase 3 trial for orBec:

     “DR. MORTIMER: … My suggestion was going to be a prophylactic study, but also it seems to me that the biggest selling point of this drug is that it minimizes toxicity of steroids. However the study is designed, a comparison of this agent against steroids, if you demonstrate an improved toxicity profile, I can’t but imagine that it would move farther up in line for the indication indicated here today.”*

     *US Food and Drug Administration Center for Drug Evaluation and Research (CDER), Oncologic Drugs Advisory Committee Meeting Transcript, Wednesday May 9, 2007, pgs 328-329.

    Radiation Enteritis

    Radiation Enteritis is a swelling of the inner lining of the small intestine that occurs after cancer radiation treatments commonly associated with cervical, uterine or rectal cancers given the proximity of the radiation treatment to the small intestine. 

    The company has cleared their IND with the FDA and has been granted Fast Track status. The trial Phase 1/2 trial will begin enrollment sometime before the end of the year and is partially funded by a $500,000 NIH grant.  The balance of this trial not covered by the NIH grant will be paid for by Sigma-Tau.

    Chronic GI GVHD

    The company is planning a Phase 2 protocol and expects to initiate the trial in the second half of 2010.

    Crohn’s Disease

    The single largest potential market for Soligenix could be Crohn’s Disease which is similar to GVHD in that it is an inflammatory disease that can affect any part of the gastrointestinal tract.  It is actually classified as an inflammatory bowel disease, but unlike GVHD, Crohn’s is an autoimmune disease and not a complication of HCT.   This indication will require an expansion of the company’s scientific advisory board and more extensive planning of dose ranging studies before Soligenix can formally inaugurate their Crohn’s program.

    There are strong indications that oral BDP will have success in this indication given that topically applied Budesonide has already been shown to improve symptoms and is the standard of care.  Since Crohn’s can present at various points in the entire intestinal tract, oral BDP’s advantage may be that it will have a two pronged effect on the disease--both topical and systemic (oral BDP is approximately 35% bioavailable) and can treat both the upper and lower GI.

    Approximate Worldwide Market Sizes

    Treatment of GI GVHD ~5,000 patients per year (US):  $100MM per year

    Prevention of GVHD ~10,000 patients per year (US):  $200MM per year (inclusive of Treatment of GI GVHD)

    Chronic GI GVHD ~2,500 patients per year (US):  $50MM per year

    Radiation Enteritis ~50,000 patients per year (US):  $200MM per year

    Crohn’s Disease~ 500,000 patients in the US with 100,000 pediatric cases per year:  >$500MM per year.



    RiVaxTM is Soligenix’s proprietary vaccine developed to protect against exposure to ricin toxin. With RiVax, Soligenix is the world leader in ricin toxin vaccine research. There currently are no vaccines available to prevent or treat ricin poisoning. One human Phase 1 clinical trial has been completed with and a second trial now in progress with results expected in the first half of 2010.

    The potential use of ricin toxin as a biological weapon of mass destruction has been highlighted in an FBI Bioterrorism report released in 2007 entitled Terrorism 2002-2005, which states that, “Ricin and the bacterial agent anthrax are emerging as the most prevalent agents involved in WMD investigations” (

    Soligenix has recently been awarded a $9.4 Million grant from the NIH which will fund the development, formulation and manufacturing processes for vaccines, including RiVax, that are stable at elevated temperatures.

    The company has received approximately $25 million in government funded development grants to date for RiVax.  Soligenix’s biodefense business is cash flow positive and completely supported by the grants.  This means that investors will realize all the benefits of potential advancements in its biodefense technology without having to suffer any dilution as a result of raising money to support the research.



    Christopher Schaber, PhD, CEO, has over 20 years of experience with companies such as Discovery Labs (NYSE:COO), The Liposome Company and Wyeth Ayerst

    Evan Myrianthopoulos, CFO, has 14 years of experience with CVL Advisors Group, Discovery Labs (NASDAQ:CFO) and Paramount Capital.

    Brian Hamilton, MD PhD, CMO, has worked for over 30 years with companies such as Astra, USA, Wyeth and Akermes.

    Robert Brey, PhD, CSO, has over 27 years experience with Lederle-Praxis (American Cyanamid) and Vaxcel, Inc.


    While it is always difficult to value biotech companies prior to an approved indication, Soligenix had almost a direct comp in Osiris Therapeutics which was the only other public company with trials to treat Crohn’s disease and GVHD.  Both of Osiris’ trials failed to show efficacy, but prior to the failures the market valued Osiris at approximately $600MM.

    Using $100MM for the available worldwide market for the treatment of  GI  GVHD and applying a 3 multiple to the a blended  35% (US and expected EU) net royalty and discounting it back by 20% yields a valuation of $292MM or $1.22 per fully diluted shares (240 million).  This assumes commercial sales beginning in 2 years and goes through 2019 when orBec's first patent expires.

    Furthermore, this gives no value to all of the other indications which are currently in the works:  Prevention of GVHD, Radiation Enteritis, Chronic GI GVHD, Crohn’s Disease and RiVax. 


    It is not that often that a company has 2 randomized, double-blind, placebo controlled trials demonstrating the effectiveness of a compound before entering a confirmatory Phase 3 trial.  OrBec has unquestionably been shown to treat the side effects of GI GVHD after hematopoietic stem cell transplants and it has shown efficacy regardless of type of patient conditioning or the type of stem cell donor. 

    If that were not enough, it is highly likely in my opinion that the unique 2-pill formulation of orBec (which gives it the ability to reach the entire intestinal tract from the stomach to the rectum) gives it a great degree of probability to address the other intestinal inflammatory disorders--some of which, like Crohn’s Disease, possess market opportunities many times larger than GI GVHD.

    One final consideration is that orBec actually has the potential to expand the overall market for stem cell transplantation.  Because of the drug’s unique ability to treat GI GVHD effectively in the non-myeloablative and mismatched donor transplant groups (which tend to be older and sicker), doctors may now be more likely to recommend transplants for these patients that heretofore would not have been considered viable candidates.  While this remains to be seen, an expansion of usage obviously has the potential to deliver further value to shareholders.

    In summation, given orBec’s positive clinical history, investors can be somewhat reassured that Soligenix has very high odds of a successful outcome in the confirmatory Phase 3 trial.  Now that they have worked out most of the issues with the FDA and ironed out the kinks from the previous pivotal trial, knowing the answers to the test questions should give Soligenix the strong likelihood of acing the final exam!

    Disclosure: Long Soligenix

    Disclosure: Long Soligenix
    Tags: Soligenix
    Dec 01 2:03 PM | Link | Comment!
Full index of posts »
Latest Followers
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.