Soligenix, formally named Dor Biopharma, has changed their name. But has anything else changed? At first glance, Soligenix (OTC:SNGX) appears to be the old story of yet another fledgling biotech company, which burned through more than $100 million over 20 years and has nothing to show for itself except a NDA rejection from the FDA for their sole late pipeline drug, orBec. Like many small biotech companies, the other components of their pipeline appear to be in too early of a stage for approval of any kind before SNGX burns through its remaining funds. It is easy to assume that its destiny will be that of so many other biotech companies- a slow downward spiral into oblivion. Long term SNGX shareholders have seen a perpetually declining or stagnating share price, in the face of dilution and clinical trial failure. In the last few years, the share count has increased from about 90 million before the failed orBec application in 2007 to nearly 200 million shares due to its recent equity financings. With the 52 week low of 4 cents in the beginning of this year, in January of this year SNGX appeared to be suffering the same predicted fate as Cell Therapeutics (NASDAQ:CTIC) was facing at the same time: At this time, both SNGX and CTIC were perceived to be out of chances, out of money, out of time, and ultimately destined for bankruptcy and sale of their assets.
The comparison between SNGX and CTIC is an interesting one: CTIC never changed their name, but as you may know, CTIC bounced from its 5 cent low in January this year to a high of $2.23 in June, upon the release of results from its Pixantrone phase III trial and NDA filing. Although SNGX shares have appreciated from their low of 4 cents to 25 cents, they have not seen the level of interest and share appreciation that CTIC has. SNGX’s comparatively modest gains compared to CTIC can be in part explained by the fact that SNGX already filed an IND and was rejected; in contrast to CTIC who is awaiting on its April 2010 PDUFA decision date. So clearly massive speculation is fueling CTIC’s share price, and few are speculating on SNGX. However, timing with their name change, SNGX currently is beginning to enroll in a new, restructured phase III trial to again gain approval for orBec. So can SNGX make a CTIC style comeback? Indeed, a quick look at SNGX shows many similarities that poise SNGX for a CTIC type share price come-back with phase III trial news. However, a closer look under the SNGX and CTIC hood show marked differences that suggest SNGX has even a better chance at a CTIC style comeback than even CTIC itself ever did in the first place. Beyond this, the continued success of SNGX appears far more likely than the continued success of CTIC, given the history of CTIC management compared to SNGX management. As such, it is my opinion that SNGX investors will see far more return on their investment, both the form of short term share price appreciation, as well as a long term return on their equity stake.
In January 2009 before its comeback, CTIC’s balance sheet for the first quarter of 2009 showed a meager $1 million in cash and an astounding $119 million in long term debt. CTIC didn’t even have enough money to fund operations for 3 more months, and couldn’t possibly borrow any more to continue on in the middle of the credit crisis. The entire survival of CTIC was hinging on the phase III trial outcome of Pixantrone. As you may know, this was the comeback story of a lifetime: Down and nearly out, in its darkest hour, CTIC announces positive phase III results for its last chance and pulls itself out of the grave. For CTIC investors who bought shares in the pennies or even dimes range, they were handsomely rewarded for their appetite for risk. But past and current CTIC shareholders still have paid a price for all of the past transgressions of Cell Therapeutics: CTIC share count went from to nearly 15 million from its IPO in 1997 to 550 million shares in August 2009. This share count is not including the previous reverse splits. Accounting for all the capital structure changes, the split-adjusted share price for CTIC from about $650 in 1997 (reaching a high of about $3000 in the biotech run-up of 2000) to its current price of about $1.25; a -99.9% return from its highs. The current accumulated shareholder deficit for CTIC is a stomach wrenching $1.4 billion. CTIC has burned through almost $100 million per year, and offered nothing in the form of positive shareholder equity in return. Even now, it is hard to imagine that CTIC ever will show positive shareholder equity on the balance sheet, since they continue to exploit the shareholders to raise money to finance operations. Since the share price comeback, CTIC has been massively and diluting shareholders by converting $53 million in existing debt in exchange for common stock in May, selling 33 million more shares of common stock in July, followed by selling $30 million in preferred shares in August. An almost comical twist to this story is that in 2007, CTIC offered to buy SNGX for 29 million shares of CTIC stock. It is hard to applaud CTIC management for their ability to provide shareholder value; had they completed the acquisition of SNGX in 2007, perhaps I would not be so critical of CTIC's management.
In contrast to CTIC, SNGX does not have to make such valiant efforts to have a dramatic comeback. Maybe changing their name is indeed enough. The latest DORB 10Q shows nearly $5 million and cash and absolutely no long term debt whatsoever. DORB currently burns cash at a rate of about $1.5-1.7 million per year, allowing SNGX to survive 3 years off this $5MM; a far cry from CTIC’s last 3 months in January. This does not include the recent announcements of $10 million in NIH grants to be paid over the next 5 years, a recent private equity deal of $3 million, and a large ongoing partnerhsip and equity deal with Sigma Tau Pharmaceuticals worth up to $30 million to gain approval for orBec. Already, Sigma Tau has bought $10 million in equity in the form of SNGX common shares. So needless to say, SNGX is not going to run out of money for quite some time.
Even having 10 years in age beyond CTIC (from 1987 vs 1997 for CTIC), DORB only has an accumulated deficit of $100 million (compared to CTIC’s startling $1.4 billion). The equity deals do dilute shares, but in return give SNGX the partnership it needs to gain orBec approval. SNGX has not had any reverse splits, and even after the equity financing with Sigma Tau the current share count remains at about 200 million; a far cry from CTIC’s dilution. Both SNGX and CTIC currently only have one significant asset close to FDA approval and are both employing the same strategy: Focus on their most developed asset, gain approval in the US and Europe; and second to that continue on to develop their pipeline. They both intend to accomplish this by finding a niche indication for approval of their drugs in the US and EU. In the case of CTIC, they are trying to gain approval for Opaxio for the relatively rare ovarian and esophageal cancers, and Pixantrone for the relatively small group of refractory NHL patients. In the case of SNGX, they are trying to gain approval for orBec in GVHD and radiation induced enteritis.
So it seems that CTIC and SNGX are similar in their strengths, but SNGX does not many of the weaknesses CTIC does. So why are the market capitalizations so different? The current market capitalization of CTIC is about $700 million, compared to the current SNGX market capitalization of about $40 million. Yet like SNGX, CTIC has yet to bring pixantrone or any of their other of their current pipeline to approval. CTIC sold off their only money-making asset Zevalin to Spectrum Pharmaceuticals (NASDAQ:SPPI) this year, and besides Opaxio, has had no other drug in clinical trial. In contrast, SNGX continues to clinically develop orBec into other indications such as radiation induced GI inflammation in the DOR201 trial. SNGX continues to bring in significant revenue through government grants, and is clearly poising itself for more lucrative government contract revenue in the defense arena with its NIH-sponsored work on ricin vaccine, stemming from its successful work on botulism toxin vaccines (more on this below). SNGX also owns key patents to make injectable drugs into oral medications that could be licensed from major pharmaceutical companies.
To date, SNGX has managed to have the same or even greater level of success as CTIC, spending only about 7% as much cash. Even if CTIC pulls ahead of SNGX by gaining the pixantrone approval, the clinical data from the failed phase III trial of orBec strongly suggests that it will succeed this second time around as orBec increased survival 46-37% over placebo from 1-3 years after treatment. Unfortunately, this was not the outcome which determined approval, so the trial is being run again (more on this below). Utilizing the FDA's Orphan Drug program, SNGX has done all that it can to ensure that orBec will gain its indication quickly. Investors are not recognizing the potential in the orBec trial and other components of the SNGX pipeline, causing a disconnect of perceived shareholder value and a low price per share of SNGX stock. SNGX is in fact much better position than CTIC to give shareholders a larger return on their investment, since the approval of pixantrone is likely already priced into the cost of CTIC share; but the likely outcome of orBec approval is not priced into SNGX shares. If investors have placed a market cap of $700MM for CTIC, SNGX should be trading with a similar market capitalization; especially given the clean balance sheet, government and corporate partnerships, future pipelineprospects, and commitment to shareholder value.
What would it take to see SNGX to have a market cap similar to CTIC? Perhaps the name change is a good start; but clearly SNGX stock needs recognition of SNGX’s strong fundamentals by investors. As an OTC stock, SNGX does not have the exposure of NASDAQ listed CTIC. But as investors gain awareness of SNGX and its strengths, the share price will certainly appreciate. The dramatic run-up in price of CTIC shares can be attributed mainly to the buzz from retail investors about CTIC: The phase III trial results for pixantrone and the notice of intent to file a NDA for pixantrone were released in the middle of February when shares were trading at 5 cents. The share price didn’t budge much until March when an run-up to 35 cents was caused by investors newsletters and stock promoters announcing the results. The official announcement of their NDA filing for pixantrone caused a run-up to its 52 week high, fueled by eager investors and technical traders.
In contrast, SNGX hasn’t seen any net share price increase since the rejection of the orBec NDA. It has seen some appreciation in its share price since its February lows which have been consistent with the recovery of the markets as a whole. But it has yet to gain the attention that CTIC and share price appreciation. A technical trader would tell you that the SNGX chart shows strength all it needs is a little attention. Admittedly, SNGX does not have an impending PDUFA date for orBec like CTIC does for pixantrone (April 2010). However, with the continuing developments over the last year SNGX continues to show for all its programs, more and more attention is coming in. Given the strong technical signals of the SNGX chart and the steady stream of news coming from SNGX, a CTIC like feeding frenzy could begin and SNGX stock recovery could begin.
But despite the lack of frenzy surrounding SNGX, tens of millions of dollars continue to pour into SNGX from partners, investors groups and government grants. Why is this? Perhaps the individual investor should follow the cues of people who know what is going on inside the company best: The insiders, the National Institute of Health, Sigma Tau Pharmacueticals, and the private equity investors who are staking tens of millions on the success of SNGX. Clearly the smart money is already flowing into SNGX; now if the rest of us could follow suit, we will see a market cap of SNGX similar to CTIC. In order to see a dramatic comeback of SNGX share price like CTIC, retail investors need to move to where the institutional investors already have. In the case of SNGX, it should be even easier given the strong fundamentals of the company and their rich pipeline. The research and development activity of SNGX will hopefully lead to FDA approval of orBec and its other pipeline drugs, followed by profit generating drug sales.
Here is a description of SNGX's pipeline and lead clinical candiate orBec:
OrBec is a highly potent corticosteroid called beclomethasone dipropionate (BDP). BDP has been marketed in the U.S. and worldwide since the early 1970's . BDP is used in topical applications such as creams (eczema), and inhalers (asthma, allergies). Already marketed drugs which use BDP or a related compound have the names Beclometasone, Becotide, Qvar, Beconase, Vancenase, Propaderm, and others. SNGX owns IP rights for formulation to make it orally bioavailable. The problem with BDP is that since it is used topically, it cannot act on internal organs and tissues. What SNGX has done is developed it as a two-pill system with dual release characteristics that initially begins to release BDP in the stomach, and continues to release BDP as it travels down the GI tract for broader coverage in the intestines. Thus, orBec can be used various gastrointestinal tract inflammations, which is exactly where they are trying to get orBec approved. If approved by the FDA, orBec would be the first and only oral formulation of BDP available in the United States.
SNGX’s plan has been to market potential for orBec for the treatment of acute GI Graft-Vs-Host Disease (GVHD). GVHD occurs after any tissue from another donor is transplanted into a recipient. This includes all types organ transplants, but the main emphasis SNGX is pursuing is hematopoietic cell transplantations, which are performed after a patients immune system is wiped out from high dose chemotherapy. Since the GI tract is rich in immune cells, GVHD in the gut occurs in approximately 50% of hematopoietic cell transplantations. There is no effective treatment for this, so orBec received orphan drug designations in the US and in Europe for the treatment of acute GI GVHD, which provides for 7 and 10 years of post-approval market exclusivity, respectively. orBec has also been granted fast track designation by the FDA. In the US, orBec has been granted orphan drug designation for the prevention of acute GVHD.
SNGX completed the first orBec trials in 2006 and filed a new drug application (NDA) for oBec in GVHD in late 2006. The NDA was based on the results of the Phase 3 study which enrolled 129 patients across 16 leading HCT centers. The study’s primary endpoint was time-to-treatment failure through Day 50. In this study, orBec® did not achieve statistical significance in the study’s primary endpoint ([p-value 0.1177]) (it would likely need a p value of 0.1 or less, so it almost made it). However, it did achieve statistical significance in key secondary endpoints including the proportion of subjects GVHD-free at Day 50 (p-value 0.05) and Day 80 (p-value 0.005); the time-to-treatment failure through Day 80 (p-value 0.0226); a 66% reduction in mortality 200 days post-transplantation (p-value 0.0139); and a 46% reduction in mortality at 1-year post-randomization (p=0.04).
The FDA did not approve orBec since it did not reach its primary endpoint, but requested data from additional clinical trials to demonstrate the safety and efficacy of orBec for these secondary endpoints and other sections of the NDA. In response to gain approval, SNGX planned to begin a confirmatory Phase 3 clinical trial of orBec® for the treatment of acute GI GVHD in 2H 2009. This confirmatory trial was agreed to by the FDA through its Special Protocol Assessment (SPA) procedure. The primary endpoint of the study will be to replicate the statistically significant endpoint Treatment Failure rate at Day 80 from the previous Phase 3 study where a p-value of 0.005 was achieved.
So in a nutshell, SNGX has to perform another phase III trial with its primary endpoint being a secondary endpoint of the previous trial, which already showed success. This is why they are repeating it, with significant financial backing from investors, with approval being far more likely than not. SNGX sought the GVHD indication first because it could obtain Orphan Drug status, which gave SNGX exclusivity for up to 7 years after approval, and has significant tax benefits. This is a key part of the business strategy.
SNGX published the results of the failed trial in the prestigious journal Blood in 2007. Some interesting observations from the phase I-III trials were made which were not criteria in the NDA: Increased survival: OrBec(r) showed continued survival benefit at one year when compared to placebo. Overall, 18 patients (29%) in the orBec(r) group and 28 patients (42%) in the placebo group died within one year of randomization (46% reduction in mortality, hazard ratio 0.54, 95% CI: 0.30, 0.99, p=0.04). Similar results from the Phase 2 trial also demonstrated enhanced long-term survival benefit with orBec(r) versus placebo. In that study, at one year after randomization, 6 of 31 patients (19%) in the orBec(r) group while 9 of 29 patients (31%) in the placebo group had died (45% reduction in mortality, p=0.26). Pooling the survival data from both trials demonstrated that the survival benefit of orBec(r) treatment was sustained long after orBec(r) was discontinued and extended well beyond 3 years after the transplant. As of September 25, 2005, median follow-up of patients in the two trials was 3.5 years (placebo patients) and 3.6 years (orBec(r) patients), with a range of 10.6 months to 11.1 years. The risk of mortality was 37% lower for patients randomized to orBec(r) compared with placebo (hazard ratio 0.63, p=0.03, stratified log-rank test).
In simpler, more exciting terms, orBec increased survival 46-37% over placebo from 1-3 years after treatement. That is quite a robust result indeed, and shows how orBec is a potent drug for all the outcomes examined except for the predetermined outcome for which approval was based on.
SNGX is also exploring the features of several formulations of oral BDP in the setting of radiation injury, since one of the immediate consequences of radiation exposure is gastrointestinal inflammation and loss of intestinal epithelial functions. The local anti-inflammatory action of BDP is anticipated to mitigate the tissue damage following radiation exposure due to excessive influx of neutrophils and cellular damage caused by release of cytokines. The DOR202 Radiation Injury Therapy trial is currently in phase 1/2.
This trial is funded by a $0.5 million grant from NIH. It is designed as a multicenter, open-label, sequential, dose-escalation study in approximately 36 patients. Patients with rectal cancer who are scheduled to undergo concurrent radiation and chemotherapy prior to surgery will be enrolled in four dose groups. The objectives of the study are to evaluate the safety and maximal tolerated dose of escalating doses of DOR201, as well as the preliminary efficacy of DOR201 for prevention of signs and symptoms of acute radiation enteritis. The study is expected to be initiated in 2009.
SNGX has received a European patent for its Lipid Polymer Micelle (LPM(TM)) technology for the improved oral delivery of drugs (EP 1460992). The LPM(TM) technology is a platform technology that uses reverse micelles stabilized by polymers. In the LPM(TM) system, water-soluble drugs are contained in the water space in the core of the micelles and are protected against degradation. Preclinical results clearly show that it is a competitive system for oral delivery of drugs, especially those biotechnology products derived from synthetic peptide chemistry or recombinant DNA. SNGX anticipates proceeding towards clinical development of an oral form of the peptide hormone drug leuprolide using the LPM(TM) technology. Leuprolide is a synthetic peptide agonist of gonadotropin releasing hormone (GnRh) that is used in treatment of endometriosis in women and prostate cancer in men. Injectable forms of leuprolide, for which an oral delivery system has yet been developed, are marketed under tradenames such as Lupron and Eligard had worldwide sales of approximately $1.8 billion in 2006. The utilization of LPM techonology to create an oral form of these drugs will benefit the patients using them as well as DORB and the companies currently selling these drugs.
SNGX has also developed BT-VACC, a multivalent vaccine against botulinum toxin that is based on formulation technology and inherent properties of the attenuated forms of botulinum toxin. Botulinum toxin is a bacterial toxin that exists as seven serotypes, and is a neurotoxin that is considered the most potent toxin. Consequently, a vaccine will need to contain a majority of the seven serotypes expected to induce protection against those serotypes causing the most prevalent disease in humans. Protection against botulinum toxin is antibody mediated, and can be induced by vaccination with non-toxic subunits of each of the serotypes. SNGX is exploring the feasibility of combining at least three serotypes of the subunits for oral or nasal delivery. The oral delivery of botulinum toxin subunits is anticipated to result in a vaccine that induces not only systemic antibodies to prevent damage to peripheral nerve cells, but also antibodies at mucosal surfaces where they are expected to neutralize botulinum toxin prior to entry into the body.
SNGX’s progress with BT-VACC prompted a large investment from the National Insitute of Health in the form of a grant to develop a ricin toxin. RiVax is DOR's proprietary vaccine developed to protect against exposure to ricin toxin and is the most advanced vaccine product in the company's portfolio. With RiVax, DOR is the world leader in ricin toxin vaccine research. The immunogen in RiVax induces a protective immune response in animal One human Phase I clinical trial was completed, and a second trial is currently being conducted. The development of RiVax has been sponsored through a series of overlapping challenge grants (UC1) and cooperative grants (U01) from the NIH, granted to DOR and to the University of Texas Southwestern Medical Center (UTSW) where the vaccine originated. The second clinical trial is being supported by a grant from the FDA Orphan Products Division to UTSW. DOR and UTSW have collectively received approximately $15 million in grant funding from the NIH for RiVax. DORB will receive $9.4MM of the $15MM grant.
The results of the first Phase I human trial of RiVax established that the immunogen was safe and induced antibodies anticipated to protect humans from ricin exposure. The outcome of the study was published in the Proceedings of the National Academy of Sciences (Vitetta et al., 2006, PNAS, 105:2268-2273). The second trial, sponsored by the University of Texas, is currently evaluating a more potent formulation of RiVax that contains a conventional adjuvant (salts of aluminum), anticipated to result in higher antibody titers of longer duration in human subjects. SNGX has adapted the original manufacturing process for the immunogen contained in RiVax for large scale manufacturing and is further establishing correlates of the human immune response in non-human primates.
NOVEMBER UPDATE:
Princeton, NJ – November 13, 2009 - Soligenix, Inc., (Soligenix or the Company) (OTC BB: SNGX), formerly known as DOR BioPharma, Inc., a late-stage biotechnology company, announced today its financial results for the third quarter of 2009.
Note: Some of the content describing Soligenix clinical progress is paraphrased from SNGX press releases.
The author holds a position in SNGX. The author does not hold any position in CTIC or SPPI.
Disclaimer: This blog is an expression of my opinion on a particlular company or matter. I am not a financial advisor or professional analyst. This is not a solicitation to trade any security. Although I rely on company approved public documents and make all reasonable efforts to confirm the accuracy of my statements, the comments made in my articles should be considered only as opinion and should not be considered as current or as absolute fact. All investors are strongly encouraged to not rely entirely on any single opinion and perform their own due dilgence when investing. Investing in equities includes considerable risk, and investors should be prepared for the risk of capital loss.
· | The initiation of enrollment in its confirmatory Phase 3 randomized, double-blind, placebo-controlled, multicenter clinical trial evaluating orBec ® for the treatment of acute gastrointestinal Graft-versus-Host disease (GI GVHD). The initiation of this trial also triggered a $1 million milestone payment from Soligenix’s partner Sigma-Tau Pharmaceuticals, Inc. (Sigma-Tau). |
· | The appointment of Robert J. Rubin, MD, to its Board of Directors. |
· | The completion of a corporate name change to Soligenix, Inc. from DOR BioPharma, Inc. |
· | The completion of a $4.4 million financing with institutional investors including its partner Sigma-Tau. |
· | The award of a $9.4 million grant from the National Institute of Allergy and Infectious Diseases (NIAID), a division of the National Institutes of Health (NIH). This grant will fund, over a five-year period, the development of formulation and manufacturing processes for vaccines, including RiVax TM , that are stable at elevated temperatures. |
· | The award of a $500,000 NIH Small Business Innovation Research (SBIR) grant to support the conduct of a Phase 1/2 clinical trial evaluating SGX201, a time-release formulation of oral beclomethasone dipropionate (oral BDP), for the prevention of acute radiation enteritis. |
· | The granting of Orphan Drug Designation by the FDA’s Office of Orphan Products Development for oral BDP (beclomethasone 17,21-dipropionate, or orBec ® ) for the treatment of gastrointestinal symptoms associated with chronic GVHD. |