Soligenix's Most Recent Collaboration Increases Likelihood Of Clinical Success

| About: Soligenix, Inc. (SNGX)

Investments in development stage pharmaceuticals have a unique set of risks, matched with virtually unparalleled rewards for those fortunate enough, patient enough and/or educated enough to make the right decisions. Although there are many approaches to profitable investments for these potentially lucrative companies, early entry well in advance of expected catalysts can yield significant returns. While it is possible for large gains from well-known and widely-followed stocks, selections from under the radar companies can give interested investors the time to choose solid entry points without fear of having to "chase" a share price upward or having to make a quick entry before adequately completing their own due diligence. I believe I have found one such candidate possessing a unique combination of technology, drug pipeline, targeted market group and financials that may reward investors with solid gains if events unfold as they appear capable of doing in 2013 and beyond.

Soligenix Inc. (NASDAQ:SNGX) released its 2012 financials and corporate update on February 26th. In the filing, the company highlighted a recent acquisition it made in late 2012 in the form of a first-in-class innate defense regulator technology (IDR) known as SGX94, along with other key updates. Announced in an earlier December 18th press release, SGX94 is a novel drug that helps to regulate the body's innate immune response, specifically for inflammation and infection. In normal innate immune responses, inflammation may occur as a biological response to harmful stimuli such as pathogens, cuts or other irritants. This inflammation serves to increase the levels of leukocytes and plasma at the affected site to help the body protect and heal itself. However, prolonged or excessive inflammation can be counterproductive and can destroy the very cells the body was trying to heal or protect. SGX94, a water soluble, 5-amino acid peptide, is an IDR that serves as both an anti-inflammatory and anti-infective drug by acting on the regulatory molecule p62. The molecule's primary function is for signal transduction during activation and control of the innate defense system. Due to this mechanism, SGX94 is extremely broad spectrum in nature by treating the injury and pathogen but is not injury or pathogen specific. The potential for developing the drug to treat inflammation and attack pathogens could be a huge share price mover for Soligenix if its activity is proven and its market potential is more fully realized accompanied by promising clinical data.

A great fit for Soligenix's growing biotherapeutics and biodefense clinical pipelines, SGX94 will first be evaluated for treating oral mucositis due to chemoradiation under the clinical research name SGX942. Phase I clinical trial data of SGX942 administered to 84 healthy volunteers at multiple dosages intravenously indicated that the drug is safe and well-tolerated at therapeutic dosages. A Phase II proof of concept trial is being readied and will evaluate the novel drug via a double-blind, placebo-controlled clinical trial in approximately 75 subjects for the treatment of oral mucositis in head and neck cancer patients undergoing fractionated radiotherapy and/or chemotherapy. A significant milestone for the company, the trial is scheduled to initiate in 2H 2013. Depending on enrollment rate and evaluation schedule in the multicenter trial, data should be generated fairly quickly in this small patient set with data release expected in 2H 2014.

The oral mucositis indication represents a highly unmet clinical need and a potential $500M plus market opportunity. It manifests itself through ulceration and inflammation throughout the mouth, tongue, oropharynx and soft palate in patients receiving chemotherapy and/or radiotherapy. The condition is very painful and affects the patient's ability to eat and tolerate the treatment regimen, sometimes necessitating a change in regimen or reduction in dosage for the cancer treatment to be more tolerable. In severe cases, mucositis can cause infection and sepsis and necessitate the use of narcotics for pain control and parenteral nutrition (IV feeding). Most importantly, as it relates to SGX94's mechanism of action as an IDR, oral mucositis has been linked to the dysregulation of the innate defense system. The proof of concept trial for SGX942 will be important as it could indicate efficacy in mucositis for head and neck cancer, an unmet need with no approved drug. Importantly, this indication was already granted FDA Fast Track designation per a June 3rd press release.. The Fast Track designation is particularly significant as it is designed to facilitate and expedite the development process. Additionally, new drug applications for fast track development programs ordinarily are eligible for priority review, which imparts an abbreviated review time of approximately six months - thereby reducing costs and accelerating time to market and greatly affecting share price with less dilution and more near-term catalysts.

It is also important to note that SGX94 is a new chemical entity (NCE) and also benefits from an issued composition of matter patent that does not expire until 2028. Particularly pertinent for investors and healthcare providers, efficacy in mucositis in head and neck cancer could indicate that the drug is effective in mucositis in relation to a host of other cancers and indications, greatly multiplying its profit potential and the company's common share price.

On Monday, July 8th Soligenix announced a collaborative agreement highly relevant for the upcoming Phase II SGX942 trial. The collaboration is with SciClone Pharmaceuticals, a California-based, China-focused specialty pharmaceutical company with a growing product portfolio of therapies for cancer, infectious diseases, cardiovascular, urological, respiratory, and central nervous system disorders. SciClone had conducted two Phase II trials in 2010 and 2012 evaluating its oral mucositis candidate, SCV-07, for the treatment of the condition caused by chemoradiation therapy in head and neck cancer patients before terminating the programs. With specific terms of the collaboration not yet released, Soligenix will have access to SciClone's SCV-07 oral mucositis clinical and regulatory data library in exchange for commercialization rights in the People's Republic of China, including Hong Kong and Macau. In a win-win scenario for each company, Soligenix will evaluate the data in hopes of better designing the upcoming trial for the same indication and will use a favorite concept of mine by "learning from other's mistakes, rather than just their own." This lesson could potentially save time and associated costs by not repeating any mistakes that SciClone might have committed in its trials. Soligenix will also have access to associated blood sample evaluations that could provide biomarkers that may facilitate development of a diagnostic procedure to help predict which patients could be expected to develop severe oral mucositis based on their deoxyribonucleic acid (Private:DNA) signatures. Not only could such a tool be used to determine which patients might develop the condition due to the chemoradiation, but it could potentially be utilized to evaluate afflicted patients and their responses to the treatment regimen. The collaboration enables Soligenix to "hit the ground running" in the upcoming trial, with additional knowledge and data that will likely only serve to facilitate the trial's chances of success with less of the costly "trial and error" often required in such clinicals.

With much potential for SGX94 in mucositis and other inflammation-related diseases, the IDR technology also fits into Soligenix's biodefense pipeline by addressing infectious diseases. Not only does this increase the market potential for the drug, but it also makes the company eligible to receive Federal grants to fund part or all of the research for the biodefense indications. These grants could come via Department of Defense (DOD) funding, Nation Institutes of Health (NIH), Biomedical Advanced Research and Development Authority (BARDA), as well as the FDA. In preclinical (animal/murine) studies, SGX94 was shown to have activity against a broad range of pathogens including methicillin-resistant S. aureus (MRSA), K. pneumoniae, E.coli, P. aeruginosa, and B. pseudomallei. The drug also has been shown to enhance the effectiveness of antibiotics given at lower dosages. This synergistic behavior could reduce the side effects of these antibiotics and could also serve to reduce the costs associated with the antibiotics, extend the supply of the antibiotics that may be in short supply in times of biodefense events as well as possibly make the antibiotics more effective against normally resistant pathogens. In a technical description of SGX94 on the company's website, Soligenix details the targeted markets for SGX94 via adjunctive and stand-alone treatments. The therapy has the potential to tackle significant worldwide indications including antimicrobial/antibiotic ($22 billion), antiviral ($22 billion), anti-inflammatory ($58 billion) and anti-cancer ($50 billion) markets as well as a skin infection indication known as acute bacterial skin and skin structure infections (ABSSSI), which the company claims has a +$1B market.

SGX942 is the most recent addition to the company's stable of eight active development programs spanning biotherapeutics and vaccine/biodefense. An increased number of catalysts provides for more share-price moving events for the near and longer term, keeping investor interest strong. Typically this number of programs would mean significant costs, particularly for a development stage company. However, six of the eight therapies under development by Soligenix are funded either wholly or in part by NIH or FDA funding. For a look into the potential promise for the company, four of the programs in development have already garnered the FDA's Orphan Drug designation, with two additional ones likely to obtain the status due to the targeted indications.

As a development stage pharmaceutical company, the key at this time for maximizing shareholder gains will be a continuous flow of news and updates from the company with significant catalysts for the short, near and longer terms. By reviewing the company's recent news releases, the 2012 10K, other SEC filings, company presentation (the source of much of my research) and the company s website, I have composed a list of potential known catalysts for the year ahead. Remember, these are simply forecasted catalysts, with the potential for a host of unknown catalysts also possible in the form of partnerships, more acquisitions and additional grants/contracts. Known expected catalysts include:

  1. Four programs readying for or recently starting Phase II enrollment initiation
    • SGX942 for oral mucositis - 2H 2013 possible Orphan Drug designation and 2H 2013 Phase II trial initiation
    • SGX203 for pediatric Crohn's disease - June 28, 2013 Phase I/II trial enrollment completion and 2H Phase II/III initiation (including submitting applications for NIH SBIR and Orphan grants to support development in 2013/2014)
    • orBec® for chronic GI GVHD - 2013 Phase II initiation
    • SGX201 for acute radiation enteritis - 1H 2014 Phase II initiation
  2. Multiple new grant applications to be filed with some already awaiting decisions, including the February 2013 BARDA application for potential multi-million dollar contract proposal for gastrointestinal acute radiation syndrome (GI ARS)
  3. Continued discussions with the government agencies such as the Department of Defense for RiVax™ pursuant to RFI for a fully developed heat stable ricin toxin vaccine

Soligenix's market capitalization was $14.68 million as of markets close on Wednesay, July 17th with a closing share price of $1.20. The company's shares had been on a bullish trend since December's sub $0.60 lows, giving investors substantial returns on their investment during that time frame. However, a recent stock offering and market uncertainty put a bit of a damper on the bullish trend with shares now trading down almost 50% from its 52-week high of $2.13. The $7.1 million offering that priced 6.6 million shares of common stock at a price per share of $1.05 and 5-year warrants of 5.0 million shares of common stock with an exercise price of $1.65 per share should eliminate the need for financing for the remainder of 2013 and well into 2014. According to Q1 results released on May 3rd, the company's cash position at that time included $2.6 million. With the Q1 cash burn rate of approximately $1 million, I anticipate funds to last the company at least into Q3 2014 depending on the increased burn rate with the upcoming SGX942 Phase II trial enrollment initiation; however, this does not take into account any additional government grant and/or contract support the company may receive which could be significant. Although long-term shareholders' interests were recently diluted somewhat, I believe that they and particularly new investors can likely see large gains if interim SGX942 data is promising which could indicate successful treatment of oral mucositis not only in the chemoradiation patient set, but for many others as well. With solid and consistent news feed over 1H 2013, Soligenix should continue attracting investor attention in the weeks and months ahead. So far I see no evidence of the company wasting its funds. Instead I see an experienced management team that is leveraging its non-dilutive capital opportunities to maximize shareholder gains. Although additional stock offerings are likely at some point as the company progresses through its pipeline developments, I believe the science behind the company's technology is solid and the targeted market groups substantial, greatly increasing favorable terms for any potential financing if management pushes its pipeline convincingly.

Based on my due diligence of the company's growing pipeline and carefully thought out acquisitions and grant applications and grants already received, I like the prospects for a mid-term and long term investment in Soligenix, Inc. Like any development stage pharmaceutical company, the investment is certainly not without risk and is not advised for the risk averse. However, I believe that the diverse pipeline, large amount of non-dilutive funding and promising science make the potential rewards a compelling case for an investment. Interested investors should also carefully consider the risks associated with any pipeline failures, possible dilutive financing in the future, and potential stock illiquidity due to the company's OTCBB stock listing and under-the-radar status. Investors should monitor the company's stock chart carefully and ascertain a solid entry near current levels while its pipeline is still in relatively early stages of development and before the increased investor interest likely in the weeks ahead as events unfold. Depending on how the stock trades in the next few days, I plan on buying small blocks of shares with careful consideration of support/resistance levels, trading volume and stock momentum. As with any investment, I recommend risk-appropriate stop limits to limit downside and have entry and exit plans in place before initiating any position in this promising company.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in SNGX over the next 72 hours. 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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