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DARA a drug stock with 10 bagger Potential according to Zachs

An Update on DARA Bio
Jason Napodano, CFA, On Thursday September 9, 2010, 5:36 pm EDT

KRN5500 Data Looks Strong

On September 8, 2010, DARA BioSciences (NasdaqCM: DARA) presented positive study results from its phase II dose escalation study with KRN5500 at the 13th World Congress on Pain. The multicenter, placebo-controlled phase II study was designed to evaluate the safety and efficacy of KRN5500 for treatment of neuropathic pain in patients with cancer.

Management used the Wilcoxon Rank Sum test to compare treatment differences in median changes from baseline in pain scores recorded by patients in a daily diary. Results show:

  • KRN5500 significantly reduced neuropathic pain when compared to placebo (27% vs. 0%; p = 0.03) when looking at best response to treatment regardless of dose or timing.
  • For the best response within 7 days of last treatment given, the difference was in favor of KRN5500, but was not statistically significant (16% vs. 0%; p=0.19).
  • In addition, regression analysis of the best response for each patient over doses showed a significant linear decrease in pain intensity with increase in dose (slope = -18.2; p = 0.009).
These results indicate that KRN5500 was effective in reducing pain in patients with chemotherapy induced peripheral neuropathy (CIPN) in a dose-response relationship. The data show that higher doses of KRN5500 result in greater reductions in pain over time. In addition, KRN5500 was generally well tolerated with adverse reactions limited to nausea and vomiting.

In April 2010, DARA Bio announced that it has entered into a clinical trial agreement on KRN5500 with the Division of Cancer Prevention (DCP), National Cancer Institute (NYSE:NCI), National Institutes of Health (NIH), for the treatment of Chemotherapy Induced Peripheral Neuropathy (CIPN) in patients with cancer. Under the terms of the collaboration, NCI will fund the studies and DARA will supply KRN5500 and placebo at costs plus expenses.

We note that DARA will supply (at cost) DCP-NCI with a new improved nano-emulsion formulation of KRN5500. The new formulation has been proved equivalent and is that is lyophilized to provide for easier dosing administration. The NCI will utilize its established national network of investigators (Community Clinical Oncology Program -- CCOP) to conduct the planed phase IIb study. We expect this program will begin in the second half of 2010.

With DCP-NCI handling the costs and expenses for the planned phase II program in CIPN, DARA is now free to explore additional indications with KRN5500, including post-herpetic neuralgia (PHN), diabetic peripheral neuropathy (DPN), and HIV-associated distal neuropathy (HIV-DSP). Management plans to use the proceeds from the SurgiVision IPO to fund the phase IIa proof-of-concept data on the next wave of indications for KRN5500.

We expect that these phase IIa programs will be similar to the phase IIa conducted in CIPN. That program was a 14-week (multi-center/double-blind) placebo-controlled dose escalation study that randomized 19 terminally ill cancer patients to receive treatment with either KRN5500 (n=12) or placebo (n=7) in doses ranging from 0.6 to 2.2 mg/m2.


DB959 Moving Forward

In March 2009, the U.S. FDA cleared DARA’s investigational new drug (NYSE:IND) application allowing management to commence phase I clinical testing of DB959 in humans. The phase I study will enroll approximately 75 volunteers and will be conducted at Quintiles' Overland Park facility. The main objectives are to determine the safety (maximum tolerated dose) and pharmacokinetics (pk) of single ascending oral doses of DB959. The company expects to report the results of the study during the second half of 2010 -- our best guess is September / October 2010.

DARA will also conduct a food-effect study in a sub-set of the 75 patients looking at the effects of taking dosing DB959 at mealtimes. We expect the trial to cost DARA roughly $1 million. The next step would be a phase Ib multiple ascending dose program to begin in late 2010 or early 2011. After that, a larger-scale phase II study in which DARA plans to study DB959 as both monotherapy and in combination with other standard glucose lowering agents such as metformin, dipeptidyl-peptidase IV (DPP-4) inhibitors and sulphonylureas (NYSE:SU).

DARA is also conducting a 2-year carcinogenicity program on DB959, as well as a 29-day toxicology study so that all the preclinical data can be analyzed and in hand by the time the company is ready to seek a development or out-license partner on DB959 in 2012. Management plans to use the proceeds from the SurgiVision IPO to fund these programs.


Stock Undervalued

DARA is currently trading with a market capitalization of only $7 million. We believe the company can secure a licensing and development partner on KRN5500 in the area of $25 million, with backend milestones totaling $250 to $300 million. We base this on historical deals for phase II molecules in neuropathic pain. We base this on three previous deals between large pharmaceutical companies and small biotech firms with similar stage molecules for neuropathic pain. These deals are outlined in our report.

Additionally, we believe that the company is progressing toward proof-of-concept data with phase I candidate, DB959, for type 2 diabetes. It’s our belief that DARA should be able to fetch $25 to $40 million as an upfront payment for KRN5500 sometime in the next several quarters.

DARA BIOSCIENCES INC (DARA): Read the Full Research Report

Disclosure: Long shares of DARA