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CytoDyn: Uncovering An Opportunity

Jun. 12, 2019 9:05 AM ETCytoDyn Inc. (CYDY)PGNX78 Comments


  • CytoDyn is moving their PRO 140 product candidate closer towards an FDA approval in HIV. I recall how I discovered CYDY and my plans for starting a speculative position.
  • PRO 140 has displayed remarkable results in HIV but the company continues to put the CCR5 antagonist on display in oncology and inflammatory indications.
  • I discuss some some of the potential downsides of investing CYDY, including the hazards of investing in OTC stocks.

I discovered CytoDyn (OTCQB:CYDY) when performing research for an article on Progenics Pharmaceuticals (PGNX). As I was reading through PGNX SEC filings, I saw a few references to Leronlimab (PRO 140), a fully humanized monoclonal antibody treatment for HIV that CytoDyn acquired from Progenics back in 2012. On the word of the deal, Progenics is to collect $5.0M upon FDA approval, along with a 5% royalty of net sales from CytoDyn. When performing research about the treatment, I uncovered a copious amount of positive analysis about PRO 140 from corresponding Seeking Alpha biotech writers. Indeed, CytoDyn has estimated a $3B market in combination with HAART and an $11B market as a monotherapy for HIV. Moreover, CytoDyn is looking to start or progress 8 pre-clinical studies for PRO 140 for the management of breast, colon, melanoma, pancreatic, prostate, lung, liver and stomach cancer.

Ultimately, I ended up investing in PGNX but I was captivated about the prospects of PRO 140 and CYDY market valuation. With the recent market sell-off, I am looking for a few more speculative biotechs that are on the brink of transformational growth. I believe CytoDyn fits these criteria and the recent company developments have moved CYDY to the top of my buy list. My goal is to lay out a case for a speculative buy ahead of the anticipated 2nd and 3rd portions of the BLA before the share price experiences a strong run-up towards an approval. In addition, I reveal my plans to manage that position moving into 2020. On the other hand, I will discuss my reasons for keeping my position size small and on a short leash for the remainder of 2019.

PRO 140 Overview

CytoDyn is a biopharmaceutical company that is focused on the clinical development and commercialization of their flagship product candidate

This article was written by

Biologics profile picture

Biologics is a full-time healthcare investor who developed a passion for biotech and life saving therapies after working in the medical field for years. His trade focus is around innovative companies developing breakthrough therapies and/or pharmaceuticals with catalysts for potential acquisitions.

He is the leader of the investing group Compounding Healthcare. Features of the group include: Several model healthcare portfolios, a weekly newsletter, a daily watchlist, and chat for dialogue and questions. Learn more.

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

I have no position in CYDY, however, I may enter a long position over the next 72 hours.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (78)

Biologics profile picture
Anyone listening to CC? Nader was shot out of a cannon this morning.
DSGX1 profile picture
Yep, NP seemed either very fired up or very delusional. Time will tell which one...
Biologics profile picture
Looks like Pestell is going to fight the termination in court.
Where do you see that?
Never mind, just saw the 8-K
Biologics profile picture
Another positive update this morning
Biologics profile picture
Stock appears to be range-bound.
Biologics profile picture
Did anyone listen to the CC?
I did. Rather enjoyed the independent drs view on leronlimab and their excitement. Here's a link to the replay

No need to bother with SeaOfsand's synopsis because it is incomplete and tries to accentuate a misspoken word by Nader. Listen for yourself to get the full gist.
SeaOfSand profile picture
bigJuicy, time to be more big than juicy ;-)

I added your idea finesand.wordpress.com/...

But you are correct, always listen to the original as well - thx for the link.
SeaOfSand profile picture
I didn't see the bankruptcy filing anywhere, and citing your own personal blog means nothing.

Termination for cause generally stipulates that RP did something so egregious that he had to be terminated almost immediately. Either extreme insubordination or unprofessional ethics in the work place are the 2 most probable. I know which one of those you'll lean towards because it fits your narrative and bias towards CYDY and your general overall negativity and thats ok, we all have our bias.

For me the fundamentals have not changed. They still have one of the top TNBC physicians on staff to carry out clinicals, the FDA has not rejected their HIV submission, and we will get an update on Tuesday's press conference of progress in the company.

I will reserve my judgement until I hear more.
SeaOfSand profile picture
Isn't it curious how all Pestell fans all of a sudden turn against him, based on CYDY's 8-K filing or PR w/o any detail?
Isn't it interesting to see how they all grasp for all potential stories to drag Pestell in the mud now, where he was their savior and reason to hold the stock despite NP's performance?
Yes, more information is required to make a judgement - but IMHO the probability of Pestell committing fraud is quite low.
Now further expecting kicking Pestell just happened and the 8-K has been filed in time - but now delivering the first TNBC injection is also quite interesting.
Add that NP all of a sudden believes that a scientist isn't required anyways in the last promotional video. Also look at his body language at the 3min mark when he got the _prepared_ question.
Whatever happened, it is not good for CYDY IMHO - losing the savior figure who had to turnaround the company on the new cancer track.
Oh I'm not dragging RP through the mud. I'm saying termination for cause (when I looked it up) generally has to be something bad enough to be let go fairly quickly. Seemingly more than just being late on an assignment. Neither of us knows what that is. I don't. I'm only sighting a few possible causes mentioned in an article I looked up on what "termination for cause" means. (I am not an HR expert, or legal expert so I had to look it up)

Your words of "It is over..." are extremely hyperbolic and premature. In no way has RP's termination changed the HIV path, or the imminence of the TNBC injection, or any of the other indications other than a new Dr will lead them. My guess is the hiring of the BOD Dr. Kelly and Dr. Welch as consultants is probably the result of the termination and we get them cheaper than RP's salary so that should help the cash burn some.

I'm holding my judgement until I hear more. Is it possible RP comes back and sues the company if the cause was in fact not just? absolutely a possibility. If that happens, that can change things because costs and capital for legalities and such could affect the companies bottom line.

I expect there to be questions on the conference call about this...although in reality I do expect Nader to dance around the subject as much as possible.

Until then, happy investing!
latest PR...although seeking alpha may post it later. Conference call next tuesday...and monotherapy meeting with the FDA has been granted.

JDL514 profile picture
Nice move
Biologics profile picture
$0.40 is still holding as support...setting small buy orders in this area.
JDL514 profile picture
when do we see this thing actually move though?!?
Biologics profile picture
Chart tells me to hit the buy again.
gaboury j profile picture
This must be one of the most compeling stories in biotech.If their oncology prospects pans out,this will be a once in a lifetime opportunity.If one is risk adverse,taking a position while possible would be my advice;looking for the perfect entry could be a mistake.On another note do you have an idea of such a pour valuation for bellicium.The succeeded in their latest study which opens a 500 million market opportunity in europe if one is to believe investor's presentation.Also their unique capacities of cell proliferation in car-t is impressive.I just don't understant this mute response of the market,makes little sense.Do you have any input or speculation on the latest trading and developements of the company?Thanks for your articles,great reads!
Biologics profile picture
@gaboury j BLCM is a headscratcher. I don't have a huge position in the company but it is starting to become a concern. They are going to have novel versions of cutting edge therapeutics. My guess the street believes gene editing will make stem cell obsolete in 3-5 years...so Rivo won't reach a high peak sales. But then again, it could all be manipulation and they just waiting for European launch numbers to confirm it is a buy.
Biologics profile picture
Another positive press release
I am an investor in CYDY but am very concerned that there is no sign of frugality on the part of the president who takes home a one million dollar salary. He could symbolically show the investors that he has reduced his salary down to 200K as a symbol to all of us that he is trying to achieve the miracle growth of CYDY by reducing costs along all lines. Additionally all officers and directors should do the same with salary reductions. Other cost reduction can be achieved by stopping all studies except for HIV. The company is jumping from one indication to another not unlike a quantum mechanics demonstration where the particles are everywhere but no where at the same time. Additional cost reduction can be achieved by stopping international travel costs and using internet technology like Zoom for conferencing. There is a need for someone like the CFO to budget the company while it awaits approval of the drug for HIV resistant patients. If that can't be achieved to save the company I for one would vote to drain the swamp and replace management with officers and directors who are frugal oriented.
Jannik Reiners profile picture
If they aren't able to close a deal with an upfront-payment until the amount raised in the TO (that is ~12m) is consumed, I tend to agree that they should take some cost-saving measures, though not at the expense of the clinical trials.
coinciding radio interview. a little more given on the TNBC delay, and sounds like they will consider another tender offer...unless of course a deal is completed giving enough cash. TNBC injection may help prod more people to cash in those warrants. www.moneytalkstation.com/...
Biologics profile picture
Getting a bump from Array buyout?
Downtown10 profile picture
Based on the nice overall day I’m having with my small, speculative drug stocks, that would be my guess.
More likely due to this news.

CytoDyn Signs Groundbreaking Memorandum of Understanding with Thai Red Cross AIDS Research Centre to Study Pre-Exposure Prophylaxis Use of Leronlimab (PRO 140) in People at High Risk of Acquiring HIV
Downtown10 profile picture
Really like the fact that the only cost to CYDY would be to supply leronlimab for the trial. Not sure, however, how a trial run by the Thai Red Cross AIDS Research Center would be viewed by the FDA. Could it lead to an FDA approval or would the FDA require a trial done more conventionally?
Jannik Reiners profile picture
Perhaps someone here can answer this question: Isn't there some sponsored health or biotech fund which Cytodyn could contact to get a 10-20M$ loan or direct investment - obviously, any amount would help. I am not sure the company is aware of every possiblity to get financing. On a quick search, I found e.g. the Global Health Investment Fund. The Bill&Melinda Gate Strategic Investment Fund would also be an ideal match, but unfortunately they don't accept unsolicited proposals.
Biologics profile picture
private placements can be a bit risky due to that fund or company becoming a major shareholder and could control the company. Management might be cautious about bringing in these types of investors.
Biologics profile picture
Thank you all for your comments. I have to admit, I am learning a great deal about the company through your conversation and experience as a shareholder.
So are you a CYDY shareholder now?
Biologics profile picture
no...sorry...I was referring to other shareholder experiences. I am still waiting for the overall market to find a direction...perhaps next week.
The CEO practically issues one video alternate day - it clearly seems pumping

you call it pumping, i call it promoting their drug
CYDY has history of delays - promising too much.

Will they file final part of BLA by Aug? Likely to slip

Then the big question is - who actually will sale the product. We have seen so many times, these tiny co do not have money to even hire sales force
Terry Chrisomalis profile picture
Good point U30017 but that falls back to the main point I have always made. They need more cash, and preferably from a partner. If they had substantial amount of cash I don't think there would have been so many delays. That's why I advocated for them to uplist few years ago on the NASDAQ. CEO refuses to do so, says he will do it organically on the OTC first.
Downtown10 profile picture
U30017, you are correct that small pharmas often have problems with selling a drug after FDA approval (and I have had the capital losses on other small pharmas I used to own to prove it). But here I think this would only apply to getting HIV patients who are happy with their current medications to change.

On the other hand, as sjacobs26 states above, there is a substantial population of HIV patients that have issues with resistance to one or more of their current medications. As long as doctors are made aware of the combo treatment using Leronlimab, I don’t think there will need to be a lot of “selling”, as the unmet need of that population should ensure robust sales to them.

But, like Terry above, I’m still hoping for a partnership as well.
Who has done a successful ramp up solely on OTC equity financing? Most deep pockets investors would stay away from OTCs because of the limited liquidity alone. Not counting board requirements, reporting and other due diligence limitations. This makes me very uncomfortable with the management and I'm in a dozen early stage biotechs.
I thought you authors are supposed to be researchers and throw a little analysis in as well. Saying that you found copious amounts of positive information from seeking Alpha authors does us no good. We have already read the same articles that you did. We are looking for X ternal information that we normally can’t get and certainly that we don’t already have. Thank you for your time
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