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CohBar - The Pioneer In Mitochondrial Drugs

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About: CohBar, Inc. (CWBR)
by: Michael Murphy, CFA
Summary

CohBar has discovered and patented much of the mitochondrial genome.

Mitochondria-based drugs can treat many of the diseases of aging.

CohBar's first human clinical trial results are due in 2020.

CohBar (CWBR) is a development-stage biotech company focused on drugs based on mitochondria-based therapeutics (MBTs), an emerging class of drugs with the potential to treat a wide range of diseases associated with aging and metabolic dysfunction, including non-alcoholic steatohepatitis (NASH), obesity, type 2 diabetes, cancer, atherosclerosis, cardiovascular disease, fibrosis, neurodegenerative diseases such as Alzheimer's disease, and eventually aging itself. The company has applied for over 65 patents.

The stock is down 80% from its all-time high in January 2018, yet it has moved its lead drug into human clinical trials and has several preclinical programs in progress. This is an opportunity to own a leading company in a whole new therapeutic area at less than a $100 million market capitalization.

Dr. Pinchas Cohen, M.D., is the Dean of the USC Leonard Davis School of Gerontology. He holds the William and Sylvia Kugel Dean's Chair in Gerontology and serves as the executive director of the Ethel Percy Andrus Gerontology Center. He is on the advisory board for the Milken Institute Center for the Future of Aging. He recently received the Glenn Award for Research in Biological Mechanisms of Aging for his research on aging, neurodegeneration, cancer, and diabetes with an emphasis on the emerging science of mitochondrial-derived peptides, which he discovered.

Dr. Nir Barzilai, M.D., is the Founding Director of the Institute for Aging Research, the Nathan Shock Center of Excellence in the Basic Biology of Aging, and the Paul F. Glenn Center for the Biology of Human Aging Research, all at the Albert Einstein College of Medicine of Yeshiva University. He also directs the Longevity Genes Project, a genetics study of over 600 Ashkenazi Jewish families of centenarians and their children. Dr. Barzilai discovered several "longevity genes" in humans that were validated by others and appear to protect centenarians against major age-related diseases, such as cardiovascular disease, cancer, type 2 diabetes, and dementia.

In 2007, Cohen and Barzilai formed CohBar. The company IPO'd in January 2015 and is headquartered in Menlo Park, California.

Mitochondria

You know that every cell in your body has the double helix of DNA - the genome. What you may not know is that most cells, with the notable exception of red blood cells, also contain mitochondria. Mitochondria generate most of each cell's supply of adenosine triphosphate (ATP), used as a source of chemical energy. Without them, you would die in about 30 seconds. Cyanide poisons by inhibiting the mitochondrial enzyme cytochrome c oxidase, thereby preventing the cells of an organism from creating ATP.

Mitochondria have their own independent DNA, inherited from the mother, which can transcribe a variety of mitochondrial proteins. There can be hundreds to thousands of mitochondria in a single cell. Mitochondrial DNA (miDNA) encodes only 37 genes, including 13 proteins essential for life and energy production in a cell. Point mutations in mitochondrial DNA have been associated with a broad spectrum of diseases, including muscle weakness, cardiomyopathy, optic nerve atrophy, retinal dystrophy, impaired hearing, and type 2 diabetes. Mitochondria control cell survival, tell old and defective cells to die, signal to the rest of the body when they are stressed, and appear to be a primary cause of aging.

Mitochondrial-derived peptides discovered by Dr. Cohen in the early 2000s are a new therapeutic paradigm. They go into the bloodstream to regulate metabolism, protect cell function, or cause cell death - the underlying factors of the diseases of aging. Humanin, the first mitochondrial peptide, is present in the brain, testes, and plasma. Humanin levels are higher in families with exceptional longevity and decline with age. A September 21, 2018, paper in Nature - Scientific Reports from Dr. Cohen's laboratory is titled: "Humanin Prevents Age-Related Cognitive Decline in Mice and is Associated with Improved Cognitive Age in Humans."

An earlier paper in Cell Metabolism, also from Dr. Cohen's lab, is titled: "The Mitochondrial-Derived Peptide MOTS-c Promotes Metabolic Homeostasis and Reduces Obesity and Insulin Resistance." MOTS-c is induced by exercise. This is the target of CohBar's first drug, now in Phase 1 human clinical trials for nonalcoholic steatohepatitis and obesity. It appears to have many other potential uses.

MOTS-c and CohBar Source: CohBar

To develop mitochondrial-based drugs, CohBar first identifies and characterizes peptides with biological activity that are encoded within the mitochondria. Then it evaluates the therapeutic potential across different disease models. It files for intellectual property protection and has over 65 provisional patent applications that cover these peptides and their analogs - both composition of matter and method of use patents. The company's strategy is to "own the space" - to own the mitochondrial genome.

Once it has identified a mitochondrial-derived peptide or MDP, it optimizes its structure for potency and drug-like properties. These optimized peptides, or Analogs, are subjected to proprietary assays and validated disease models to match the greatest therapeutic potential to medical needs and market opportunities.

CohBar then has a mitochondrial-based therapeutic, or MBT, that can enter internal preclinical development to be partnered or advanced to the clinic. Many of the steps in this process are separately patentable.

CohBar Technology: Analogs of MDPs Source: CohBar

CohBar has identified MDPs in type 2 diabetes, fibrosis, cancer, and other age-related diseases. All of these are in the discovery, optimization, and preclinical stages. Its lead drug, CB4211, is a MOTS-c analog in a Phase 1a/1b trial for safety and efficacy in nonalcoholic steatohepatitis (NASH) and obesity. NASH is caused by excess free fatty acid released by lipolysis from abdominal fat that flows directly to the liver. That causes liver fat deposits, inflammation, fibrosis, cirrhosis, and eventually liver cancer. Between 12 million and 20 million US patients create a $20 billion to $40 billion market, and there are no approved therapies.

CB4211 has a novel mechanism of action - it inhibits lipolysis, which reduces fatty acid release, leading to a reduction of liver fat. The preclinical data in mice showed a significant 33% reduction in the Non-Alcoholic Fatty Liver Disease Activity Score after only three weeks, improvement in liver triglycerides and plasma ALT (alanine aminotransferase), and normalization of weight in obese animals. The Phase 1a/1b trial is scheduled to end next February, and we should see results in the summer of 2020.

CohBar has identified a new peptide for type 2 diabetes that improved glucose tolerance in diet-induced obese mice. They presented a poster at the June 2019 American Diabetes Association meeting and are optimizing its potency and drug-like qualities.

A new peptide has shown a significant reduction in tumor cell growth in cultured human tumor cells. Twenty different human tumor cell types have been screened against 20 CohBar peptides, and there is evidence of effects against a broad range of tumor types. CohBar also is exploring another new peptide analog that shows antifibrotic effects in lung cells. It has been effective in a mouse model of pulmonary fibrosis. Fibrosis is a major source of organ failure in an aging population and accounts for up to one-third of all deaths worldwide.

The Investment Case for CWBR

Mitochondria play a central role in energy production, cell signaling, and communication. Mitochondrial dysfunction may play a pivotal role in chronic diseases, providing opportunities for drugs that manage and cure the disease instead of just ameliorating the symptoms. CohBar "owns the space" with over 65 patent filings and six issued patents exclusively licensed from UCLA and the Albert Einstein College of Medicine. The company has evaluated over 100 peptides encoded in the mitochondrial DNA and their analogs for potential development into novel drugs treating a wide range of diseases.

It has an experienced drug discovery, development, and partnership team. CEO Steve Engle has over 30 years of executive experience with public biotech companies. He was the Chairman and CEO of XOMA (XOMA) and La Jolla Pharmaceuticals (LJPC). Chief Scientific Officer Ken Cundy PhD has over 30 years of drug development experience at Gilead (NASDAQ:GILD) and Sterling Winthrop.

We are paying a market capitalization of well under $100 million for a company with broad patent protection of new ways to treat and cure the diseases of aging - and perhaps aging itself. There are different approaches to the difficult task of valuing any development-stage biotech stock (See here, here, and here for three examples). Obviously, if CohBar eventually develops drugs that can slow, stop, or even reverse aging, it will be an enormously successful company.

But the most conservative way to value any biotech is to calculate the ultimate value of their drugs in clinical trials and then use a high discount rate to get a value today. In CohBar's case, taking the midpoint estimate of $30 billion for the NASH market and adding $10 billion for the obesity market gives a $40 billion total available market. There are no treatments for NASH and nothing has caught on for obesity. Once CB4211 is approved, CohBar may be valued as if it can capture half of that market. But it won't be approved for about eight years, so we have to discount an ending valuation back to today using a high discount rate to reflect regulatory uncertainty and future dilution. A high 33% discount rate would give CWBR a discounted present value of $2 billion - more than 20x its current value. That may seem outrageous at first glance, but the risk is in the drug development process, not the valuation. A successful NASH and obesity drug should make CWBR worth multiple of its current value eight years from now.

The Risks of Investing in CWBR

CohBar is pioneering an entirely new therapeutic approach and therefore the risks of failure in human clinical trials, either for safety or, more likely, efficacy reasons are higher than usual. It will take it eight to ten years to bring its first drug to FDA approval. We can expect the FDA to be very cautious with the first mitochondria-based drugs.

The company had $14.4 million in cash and no debt at the end of September, which will carry it into the second half of 2020. CohBar's broad patent portfolio gives it, in the words of Scott McNealy of Sun Microsystems, "insurmountable opportunities" to partner out some development programs in return for milestone payments and eventual royalties. It is actively looking for non-dilutive partnerships with larger companies, but an investor has to assume there will be more financings coming. As I tell my subscribers, the second-worst news is: "Your biotech company just raised money." The first-worst news? "Your biotech company can't raise money."

CohBar is only in a Phase 1a/b safety and efficacy trial. These days, preclinical work has gotten so good that very few drugs fail their Phase 1a human safety trial. However, it is still true that efficacy in preclinical animal studies does not always translate to efficacy in human trials. Some investors may prefer to wait for the Phase 1 efficacy results to buy the stock, even if they have to pay a higher price for a de-risked situation. If mitochondrial medicine works as well as I expect it to, CohBar will offer many profitable entry opportunities over the next several years.

Disclosure: I am/we are long CWBR. 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.

Additional disclosure: CWBR is one of seven $20-for-$1 biotech stocks that are current Buys in New World Investor. To see more go to newworldinvestor.com/welcome-seekingalpha-reader.