Can-Fite's Rheumatoid Arthritis Drug Faces Off With Methotrexate In Phase III Trial For $40 Billion Market

| About: Can-Fite Biopharma (CANF)
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Leading drug piclidenoson for RA enters pivotal Phase III trials.

A watershed moment for Can-Fite stemming from good data in prior studies.

Questions remain if piclidenoson works in larger clinical trials.

If successful, Can-Fite could rise to top of first-line RA treatment options.

Searching for medicine's answer to seemingly lost causes inspires passion in biotechnology. Hard to treat rare diseases comprise one category; another, more common, are lifelong maladies with drugs that work but bring on a host of terrible toxic effects. Rheumatoid arthritis (RA) comes to mind in the second group, but this may soon change. Last month, Can-Fite Biopharma Ltd. (NYSEMKT:CANF) marked a major milestone with approval from the European Medicines Agency (EMA) on the design of Can-Fite's pivotal Phase III trial for oral compound CF101 (renamed piclidenoson), an A3 adenosine receptor agonist implicated in tissue inflammation, for RA. Two trials, the first expected to commence soon, will both go against commonly used methotrexate (MTX), a typical and suboptimal first-line therapy.

A face-off study was Europe's idea as it looks for a good alternative to MTX, whose immune suppression leads to expensive downstream medical issues, loss of effectiveness, and often, patient abandonment of the drug. Piclidenoson need only work as well as MTX; a better side effect profile for Can-Fite's drug, I believe, will prove a winning ticket to EU approval and replace a bad drug with something better to be used as soon as patients are diagnosed.

An elegant trial design: 12 weeks of piclidenoson, MTX or placebo in 500 patients worldwide. Piclidenoson will be given in 1 mg and 2 mg doses twice daily versus placebo; MTX or placebo will be given once weekly. A National Rheumatoid Arthritis Society scoring system to assess the number of tender or swollen joints will be done at week 12, looking for low disease activity, the trial's primary endpoint. Secondary endpoints will be a separate score - one from the American College of Rheumatology (ACR) at various measures of therapeutic efficacy. Studies will extend to 24 weeks to test longer-term safety and efficacy.

Source: Can-Fite

A prior Phase IIb study using piclidenoson in RA was successful (see chart). The drug was pitted against placebo in 79 RA patients and primary efficacy endpoints, using ACR scores, were handily met. There was no evidence of immunosuppression and tolerability/safety was good. Can-Fite developed a biomarker for the A3 adenosine receptor that was used to screen patients so only the best responders were enrolled. The same biomarker will be applied in the upcoming Phase III, making for a more defined clinical trial population and more efficient testing, translating to quicker results with less expense.

RA is big business: drugs are expected to show worldwide revenue of nearly $40 billion next year because 1.5 million Americans and 1% of the global population suffer. As all current drugs for RA inhibit the immune system, follow-on ailments cost $14 billion per year.

Which RA medicines, present or evolving, should be used first is up to debate. MTX appears to be top choice upon patient presentation, but the biologics - Humira by AbbVie Inc. (NYSE:ABBV) and Enbrel by Amgen Inc. (NASDAQ:AMGN) in particular - often replace MTX when diagnosis of RA is found. Both also dampen the immune system to stop pain but lead to other problems, mostly high susceptibility to infection, sometimes fatal.

Relatively new to RA, Xeljanz, made by Pfizer Inc. (NYSE:PFE) in pill form, is the first drug to halt a biochemical process specific to immune response using the Janus kinase pathway (JAK) to reduce joint inflammation. Xeljanz in RA is considered equal in effectiveness to Humira and Enbrel, though side effect profiles for Xeljanz are worse. The latter two gold standards, far from being well-tolerated, can cause flu-like symptoms, irregular breathing and erratic heartbeat. Xeljanz ups the danger ante: potential for lymphoma, ruptured stomach, white blood cell suppression and liver damage. Europe said no to Xeljanz, twice. Post-marketing studies of Xeljanz show high levels of a protein known to damage kidneys and the potential for heart disease. Four clinical trial patients died from Xeljanz. High levels of cholesterol, not the good kind, have been observed. This is not a nice drug. Yet doctors ignore risks and prescribe away, giving Xeljanz a 2016 annualized sales run rate of almost $800 million.

A pre-revenue company, Can-Fite showed first-quarter (ended March 31) top-line reflecting part of an upfront payment from Cipher Pharmaceuticals, one of its corporate partners. Research and development, not surprisingly, grew to $1.1 million versus $620,000 in the same period last year as the company prepares for its large Phase III of piclidenoson in RA. General and administrative costs moderated slightly, from $660,000 to $630,000 due to lower use of consulting services. Net loss widened from ($0.03)/ADR to ($.13)/ADR. Cash recorded in the quarter was $15 million, giving Can-Fite a little over two years of runway at its quarterly burn rate, annualized.

All small-cap stock risks apply: low trading volume that could cause volatility, news flow based on binary events that make or break, and little research coverage. Smaller trial results may not give the same results in larger ones. Geopolitical instability may shroud shares. Specifically, CF101 for glaucoma did not reach its primary endpoint, possibly giving investors pause about the same compound's success in RA. However, more testing has been done in RA. Trial and error, a component of any new biologic, has resulted in exceptional data that allows Can-Fite's drug to move forward.

With Can-Fite, investors are treated to an overlooked, undervalued company with rare opportunity to become a first-line defense in one of the world's hardest diseases to treat without consequence. Studies look to be quick and efficient, with timely data read-out. Can-Fite's EMA backing should signal great confidence in that institution's belief in piclidenoson as a viable replacement to a drug physicians scorn but, without alternatives, are forced to use.

Disclosure: I am/we are long CANF.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.