This is not my first article on SCYNEXIS, Inc. (Scynexis) (NASDAQ:SCYX), as readers who follow my ideas may know. I have been pounding the table on Scynexis for two years now. Unfortunately, the stock took a beating with the rest of the anti-infectives sector. The stock doubled last week after releasing the FURI trial data where they literally hit it out of the ballpark. The stock is now up 3x from its recent lows, but I believe this story is just getting started.
Detail:
Scynexis is developing SCY-078, a new class of antifungal drugs, now given a brand name called Ibrexafungerp, by WHO. The company is targeting invasive fungal infections like invasive candidiasis and invasive aspergillosis as well as a more common fungal infection, vulvovaginal candidiasis.
(Scynexis: multi-timeframe common stock price chart, from TC2000)
The size of the problem, invasive candidiasis and aspergillosis:
- Invasive fungal infections are estimated to affect almost 600,000 patients worldwide every year.
- About 85% of these invasive fungal infections are caused by Candida and Aspergillus species.
- The annual incidence of invasive Candida infections worldwide is estimated at about 400,000 cases per year, and about 98,000 cases per year in the US.
- Invasive Candida infections have about 20% to 40% mortality rate.
Currently, invasive Candida infections are treated with intravenous Echinocandins like Caspofungin intravenously for about 5 to 7 days, followed by oral fluconazole for about two weeks. However, resistance to oral fluconazole is increasing.
Scynexis’ solution:
Ibrexafungerp (SCY-078) is a new class of antifungal agents called glucan synthase inhibitors. It has shown potent action against Candida and Aspergillus species, even in multi-drug resistant strains. The drug has shown activity against Candida and Aspergillus strains that are resistant to the currently available antifungal agents. Another advantage of the drug is that it has fungicidal (killing the fungi) action against Candida species compared to commonly used azoles, that are fungistatic (inhibit the growth of fungi). This fungicidal action is useful in invasive Candida infections.
The drug can also be used as a step-down oral antifungal agent for patients hospitalized with invasive Candida and Aspergillus infections (since the resistance to the current step-down therapy fluconazole is increasing).
(Ibrexafungerp: advantages over currently available antifungal agents)
Scynexis is positioning SCY-078 in resistant Candida infections, as an alternative and complementary to echinocandin regimens in invasive Candida infections, as an alternative to second-generation azoles in invasive Candida or Aspergillus infections, and as an alternative to polyenes like Amphotericin B for treatment of multi-drug-resistant Candida infections.
SCY-078 has fast track designation and Qualified Infectious Disease Product (QIDP) designation for invasive fungal infections in the U.S. It also has Orphan Drug designation in the U.S. for treatment of invasive candida infections.
FURI trial, the excellent data in treating refractory invasive candidiasis infections from oral Ibrexafungerp
FURI is a phase 3 open-label study evaluating oral ibrexafungerp as a salvage treatment in patients with difficult-to-treat mucocutaneous and invasive fungal infections that are refractory to or intolerant of currently available standards of care. Last week, interim data from the first 20 patients was released. Oral ibrexafungerp showed clinical benefits in 17 out of 20 patients (85%), with 11 patients achieving a complete or partial response and six patients a stable disease response. Two patients did not respond to ibrexafungerp treatment and the outcome for one patient was considered indeterminate.
The 20 patients whose data was released in this interim analysis suffered from a variety of severe conditions, including esophageal candidiasis, intra-abdominal abscesses, and oropharyngeal candidiasis, with the most common fungal species being Candida glabrata and Candida krusei, two highly resistant organisms. Ibrexafungerp treatment ranged from seven to 90 days, with a mean duration of 36.4 days (from the press release).
The clinical potential for oral ibrexafungerp was apparent from the two following clinical cases (from the press release):
“A 71-year-old male presented with a perforated duodenal ulcer and a retroperitoneal abscess showing positive culture for C. krusei, a notoriously difficult-to-treat and often multidrug-resistant fungal pathogen. After 19 days of unsuccessful intravenous therapy with an echinocandin (micafungin), the patient was enrolled in the FURI study. Treatment with oral ibrexafungerp for 17 days fully resolved the infection.”
“A 63-year-old male with a 10-year history of painful esophageal constriction and recurrent esophageal candidiasis required a percutaneous gastroenterostomy feeding tube due to the inability of the patient to swallow and eat. Multiple courses of antifungals were unsuccessful in treating this fluconazole-resistant C. glabrata infection, and the patient was enrolled in the FURI study with severe esophagitis at baseline. After 54 days of oral ibrexafungerp treatment, the infection fully resolved. The patient remained asymptomatic during the follow-up period and the feeding tube was able to be removed.”
Next steps for oral ibrexafungerp:
FURI was an open-label trial. However, Scynexis plans to apply for FDA approval oral ibrexafungerp for under LPAD pathway (limited pathway for antibacterial and antifungal drugs), so there will be no need for a randomized, placebo-controlled trial.
CARES trial, a promise for a cure against serious Candida Auris infections:
This open-label trial is testing oral ibrexafungerp for infections caused by Candida Auris, a serious public health threat per CDC. This candida infection is resistant to the currently available antifungal drugs, a level of resistance which has never been seen in candida species. In one case series from Columbia, the mortality rate was as high as 35%.
CARES study has enrolled several patients with Candida Auris infections treated with oral ibrexafungerp and is the first study to test an investigational antifungal agent in this infection. Interim data could be released in 2019.
If the study shows promising results, the management plans to apply for FDA approval under the LPAD pathway for this indication as well
Invasive aspergillosis program:
- There are estimated to be about 200,000 cases of invasive Aspergillus infections worldwide annually, and about 46,000 cases per year in the US.
- The mortality rate is even higher (40% to 50% even with treatment) in invasive aspergillosis.
Currently, invasive aspergillosis is usually treated with intravenous Voriconazole or Amphotericin B, followed by oral Voriconazole (total about 6 to 12 weeks of therapy). In spite of these approved treatments, the mortality rate is as high as 50%, thus showing the need for newer more effective therapies.
Oral ibrexafungerp has shown synergistic action with azoles in combination. In addition, it also has high penetration in lungs and has high activity against azole-resistant Aspergillus fumigatus.
Figure: Combination therapy with oral ibrexafungerp and isavuconazole resulted in better efficacy vs. monotherapy for all efficacy parameters, including significantly improved survival and pulmonary infarct score in a rabbit neutropenic model of pulmonary aspergillosis
A phase 2 oral ibrexafungerp study (planned enrollment of 60 patients) in combination with azoles is in the process of being initiated. We may expect interim data in 2020. A phase 3 study with a planned enrollment of 250 patients (comparing oral ibrexafungerp + standard of care, voriconazole with standard of care alone) is expected to start in 2020.
Vulvovaginal candidiasis program:
Vulvovaginal candidiasis, VVC, usually is caused by C. albicans but can occasionally be caused by other Candida sp. or yeasts. It is characterized by pruritus, vaginal soreness, dyspareunia, external dysuria, and abnormal vaginal discharge.
- An estimated 75% of women will have at least one episode of VVC in their lifetime.
- Approx. 40–45% women will have two or more episodes in their lifetime.
- Approx. 10–20% of women will have complicated VVC.
- Recurrent VVC, usually defined as four or more episodes of symptomatic VVC within 1 year, affects approx. 6-8% of women.
Moderate-severe VVC: approx. 1.6 million cases in the U.S.
Recurrent VVC: approx. 650K cases in the U.S.
The current first-line treatment for uncomplicated VVC is topical antifungals like miconazole. Oral fluconazole is the second line treatment but the cure rate is only 55%. There is no currently approved treatment for recurrent VVC.
Scynexis solution:
Oral ibrexafungerp showed higher sustained benefit than oral fluconazole at day 25 (70% vs. 50%) in the phase 2 DOVE study. 29% of patients on Fluconazole required rescue therapy vs. only 4% for Ibrexafungerp.
(Summary of the data from the phase 2b DOVE study in VVC)
Compared to fluconazole (fungistatic), Ibrexafungerp is fungicidal, has high penetration into the vaginal tissue and is effective in the low pH of the vaginal tissue.
A phase 3 program for Ibrexafungerp in acute VVC is planned to be started (two phase 3 studies), approx. 350 patients per study, showing superiority vs. placebo.NDA in acute VVC indication is expected in the second half of 2020. A single phase 3 study in recurrent VVC is also planned (350 patients, showing superiority vs. placebo). Ibrexafungerp has the potential to be the first approved agent for the prevention of recurrent VVC.
The IV form of Ibrexafungerp, current status:
Scynexis is also attempting to develop an iv form of Ibrexafungerp. The previous formulation of the drug had some side effects like thrombi due to which FDA placed a clinical hold on its trials. Scynexis stock cratered as a result of the FDA hold. On my previous discussion with Dr. Marco, CEO, he said that they were unsure if the thrombi were per se due to any thrombogenic properties of the drug or it could be related to very high concentrations of the infusion of the drug or even just due to the catheters through which the drug was being infused. Anyway, the management decided to develop a totally new liposomal formulation of iv Ibrexafungerp. At present, the management is still working on finding on right dose and infusion rate for the drug. I expect to hear some update on the ongoing phase 1 trial this year. If the iv form of Ibrexafungerp is also able to be successfully developed, it will add further to the revenues and virtually create a monopoly for Ibrexafungerp in treating invasive candida infections since there will be no more need for starting the patients on iv caspofungin. The patients with the infection can be just started on iv Ibrexafungerp and then switched to an oral form of the drug after a few days. This will completely change the current treatment paradigm for the treatment of these deadly fungal infections.
Intellectual property:
Various patents granted to SCY-078 are expected to extend until 2035. Under an agreement with Merck (NYSE: MRK), Merck will receive tiered royalties based on worldwide sales of SCY-078 and single-digit percentages of net sales for up to 10 years from the first commercial launch.
Management:
CEO and president, Marco Taglietti, MD: Former executive VP, research and development and chief medical officer of Forest Laboratories; former senior vice president, global research, and development at Stiefel laboratories; former vice president, worldwide clinical research, including anti-infectives at Schering-Plough Corporation.
Financials and valuation:
Cash reserves were $50M at Q3 2018 end and are expected as approx. $43M at the current operating cash burn rate of approx. $7M per quarter. Long-term debt is just $7.6M, so the balance sheet is healthy. The management asserts that they are well-funded till 2020.
Scynexis currently has a liquidation value of approx. $26.5M while it is trading at a market cap of just $57M. Investors are thus assigning a negligible value of just $30M to the pipeline which is ridiculous considering the future commercial potential of just the oral form of Ibrexafungerp.
The best comparator is fluconazole which had peak $1.2 billion in global sales. Ibrexafungerp has several advantages over fluconozole and just the oral form of Ibrexafungerp has the potential for $500 million to $1 billion peak sales just in the U.S. market.
Management estimates for peak sales:
VVC: $450M-500M (just in the U.S.)
Invasive fungal infections: $250M-400M (just in the U.S.)
Our own estimates:
| Indication | Peak market penetration | Probability | Year of peak sales | Peak, risk-adjusted revenue |
| Recurrent VVC | 25% (U.S.) | 65% | 2026 | $156M |
| Invasive candidiasis | 10% (U.S.) | 65% | 2025 | $65M |
| Acute VVC | 10% (U.S.) | 65% | 2026 | $25.6M |
(Members of the premium service can request a copy of the DCF valuation model.)
Thus, we estimate peak $247M in risk-adjusted revenue in 2026 (U.S.) for oral Ibrexafungerp. Please note that this number is risk-adjusted by the probability of 65% and we have used conservative market penetration rates. Once the probability of reaching the market increases with more development progress in the pipeline, the risk-adjusted revenue will also increase.
Using enterprise discounted cash flow method and the guidelines from the Pharmagellan guide, we estimated the risk-adjusted NPV for oral Ibrexafungerp in the above-mentioned indications as $345M using the cost of capital 15%. After adjusting for non-operating assets minus liabilities, we calculated the fair value for equity=$380M or $7.50/share using diluted stock count.
Another comparator for Ibrexafungerp is Cresemba (Astellas), which was launched in 2015 as a new antifungal drug for treating invasive mucormycosis and invasive aspergillosis (a smaller target market than Ibrexafungerp since it is not approved against candida infections). Cresemba belongs to the azole class of antifungals. Cresemba sales have already reached $77M in 2017 within less than 2 years of launch. Analyst peak sales estimate for Cresemba are $250M. The strong commercial launch of Cresemba illustrates the fact that there is a strong demand for newer and efficacious antifungal drugs. Using Cresemba's case study, I don't see any barriers in oral Ibrexafungerp reaching peak U.S. sales of $250M.
Notes from a conversation with the CEO, Dr. Marco Taglietti:
I had a 30-min conversation with Dr. Marco, CEO, who seemed very upbeat after the remarkable FURI trial data and some recovery in the shares after being beaten down so much. He is telling investors and analysts to include the oral Ibrexafungerp in their models. His estimates that just the oral form of Ibrexafungerp can achieve $1 billion in sales at the peak just in the U.S. Meanwhile, the company is working on finding the right dose and infusion for the iv form since they are adhering to the FDA advice to cause as little as infusion site reactions as possible. Currently, they are attempting to administer the iv form by a peripheral line though it would be much easier to give it through a central line which most of these terribly sick patients in the ICU have anyway (I have myself taken care of many of these patients as an intensivist). Even Cresemba is administered through a central line. So, I remain optimistic that while the oral form of Ibrexafungerp has already shown its efficacy and is ready for submission for regulatory approval, the development of an iv form will be an icing on the cake which will likely throw echinocandins like caspofungin out of business (Cancidas, the brand name for caspofungin had $402M U.S. sales in 2017).
In conclusion, Scynexis common stock is extremely undervalued even after the 3x runup in the stock price from its recent low. I expect the momentum to continue in 2019-20 through multiple catalysts like:
- CARES study in Candida Auris interim data in 2019
- Update on the development of iv form of Ibrexafungerp in 2019
- Update on the regulatory approval for oral Ibrexafungerp in treating invasive candida infections in 2019.
- Phase 3 data for oral Ibrexafungerp in acute VVC in 2020 followed by NDA submission.
Reiterating Buy rating on Scynexis common stock with price target $7.50 (2-3 year time-frame).
Risks in the investment:
Investing in development stage pharmaceutical companies is very risky and is not suitable for all investors. It is possible to lose the entire capital invested in a single company if the ongoing trials fail or if any other unexpected events like FDA hold due to an unexpected side effect occurs. It is suggested to adopt portfolio diversification and asset allocation using an expert financial advisor while investing in these high reward/high risk investments. Scynexis may need more capital to fund its operations even before the management estimate of 2020 which may put downward pressure on the common stock. Sometimes, if the financing terms are not favorable, it is even possible for the common stock to lose as much as 50%. It is possible that other competitors or new antifungals may emerge which may be better and thus, our sales forecasts may not be achieved.
Disclaimer:
This article represents my own opinion and is not a substitute for professional investment advice. It does not represent a solicitation to buy or sell any security. Investors should do their own research and consult their financial adviser before making any investment. Investing in equities, especially biotech stocks has the risk of significant losses and may not be suitable for all investors. While the sources of information and data in this article have been checked, their accuracy cannot be completely guaranteed.
I am/we are long SCYX.
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