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Bellus Health: Coughing Its Way To Being Swallowed By Big Pharma

Mar. 01, 2018 5:05 PM ETBELLUS Health Inc. (BLUSF)
Daron Evans profile picture
Daron Evans


  • Bellus Health's lead drug, BLU-5937, is potentially a best-in-class P2X3 antagonist for chronic cough.
  • Merck purchased Afferent Pharma for their P2X3 antagonist for $500M up front, and $750M in milestones.
  • The major side effect of Merck’s drug, Gefapixant (or MK-7264) is the loss of taste sensation in over 70% of patients at the effective dose in a Phase 2 study.
  • BLU-5937 has a 1,000 higher selectivity for cough receptor (P2X3) versus the taste receptor (P2X2/3), which should avoid the class side effect.

Bellus Health (OTCPK:BLUSF) is a Canadian biotech trading on the TSX under the ticker, BLU, and the US OTC under the ticker BLUSF. BLUSF is developing a treatment for chronic cough, BLU-5937, that has the potential to be best-in-class – with the only other drug in the class being developed by Merck, Gefapixant (or MK-7264). Merck has set the start date of the Phase 3, 720 patient study for March 2018, and has therefore obtained FDA consent for the end-point and power required for approval. Merck purchased the compound prior to the completion of a Phase 2 study (rare timing) for $1.25 billion in biobucks. Biobucks is slang for deals that have milestone components – this deal had $500 million up-front and up to $750 million in additional milestone payments. Given the clear big pharma demand, paved regulatory path to market and the potential mechanistic advantage; I believe that this Company is a hidden gem among the vast swath of microcap biotech companies.

Strategic Transformation

In early 2016, the Company was developing KIACTA™, a treatment for Amyloid A amyloidosis. The Phase III study met a milestone in January 2016 when the study achieved 120 patient events linked to the deterioration of kidney function. At the end of the first quarter 2016, they highlighted the following:

  • Completion of the KIACTA™ Phase 3 Confirmatory Study for the treatment of AA amyloidosis in January 2016; top-line results expected in Q2 2016;
  • Issued 7.3 million common shares on January 1, 2016 to settle convertible notes, as scheduled, further simplifying the Company’s capital structure;
  • Concluded the quarter with cash, cash equivalents and short-term investments totaling $9.0 million.

The Phase III study did not reach its end-point. On 6/6/2016, BLUSF (OTC Markets) closed at $2.03. Following the announcement, the stock closed at $0.29, going as low as $0.19 in the pursuing weeks.

This article was written by

Daron Evans profile picture
Mr. Evans is a private investor who focuses primarily on life science opportunities.

Analyst’s Disclosure: I am/we are long BLUSF. 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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