CytoDyn's Answer To COVID-19

Summary

• CytoDyn has notched a nice group of encouraging data from its COVID EIND patients.
• CytoDyn's leronlimab has a tripartite MOA that knocks back COVID-19 more effectively than possible with a less comprehensive approach.
• CytoDyn is working on securing the clinical data it needs to support its answers.
• CytoDyn has potential to produce leronlimab at scale but it needs governmental assistance to do so.
• CEO Pourhassan's recent maneuver sparked rough patches in the eternal tug-of-war between pumpers and shorts; it was something to behold.

This article reviews CytoDyn's (OTCQB:CYDY) 5/1/2020 Next Superstock Live 58 minute promo youtube, [the YouTube] particularly as it relates to CytoDyn's evaluation of leronlimab's MOA. I will also discuss CEO Nader Pourhassan's [NP] recent stock trade which seems to have drawn such outsized attention.

This is not an overview article; those interested in more general discussion should reference my previous articles, "CytoDyn's Lofty Promise" or "CytoDyn's Big Bang". Here the focus is on CytoDyn news during May and its impact on an investment thesis in the stock. CytoDyn's EIND COVID-19 results are highly encouraging.

CytoDyn's COVID-19 EIND results are exciting but episodic.

The slides set out during the first ~8 minutes of the youtube describe the results to date of 39 patients treated with leronlimab under EIND's. The first slide addresses results (2:48/58:05) on 11 patients in New York below:

These 11 patients had significant challenges as described on the slide; they were all in risk of imminent death. Leronlimab was administered as a last ditch effort. NP states that saving the lives of four of these patients was a big deal (3:46/58:05) given their condition.

NP reported more detail on 23 California patients treated with leronlimab as shown on the slide below (4:21/58:05):

The slide is self explanatory. NP did mention that of the 11 improved severely ill patients, eight have been discharged from the hospital. (4:57/58:05).

The final group of five to bring the number treated to 39 are shown on the slide below (5:44/58:05):

The overall results from these patients have emboldened CytoDyn to seek a compassionate use designation for leronlimab per 5/4/20 press release in which CytoDyn requested a compassionate use designation for treatment of COVID-19 patients who are ineligible for participation in its two existing clinical trials. If this request is granted it will significantly expand the pool of patients who would be eligible to receive leronlimab, a potentially lifesaving therapy.

I am hopeful that it will be granted. Leronlimab has an atypically benign safety profile for a therapy of such potential power, over 800 patients treated in clinical trials to date with no SAE's (50:20/58:05). The encouraging ad hoc patient data to date draws support from the articulated MOA discussed below. In today's pandemic environment where patients have few options, low safety risk with high potential benefit supports CytoDyn's application.

A further benefit of leronlimab over many other potential therapies is its relative ease of administration. It requires simple subcutaneous injections which can take place in a patient's home. Compare this to remdesivir which requires a 5 or 10 day course of intravenous infusion. Other COVID-19 therapies are even more involved.

CytoDyn has characterized COVID-19 as a RANTES disease acting against lungs, liver, and kidney with a damaging clotting impact.

Dr. Bruce Patterson, who has directed CytoDyn's foray into COVID-19, has studied the results from the first 11 EIND patients in furtherance of his plans to prepare a journal article describing them. He evaluated patients at days 0, 3 and 7.

In doing so he discovered a protein elevated 100X, far more than the elevation of IL-6 or other cytokine storm components. The elevated protein, RANTES or CCL-5, is blocked by leronlimab from binding to CCR5 on immune cells (9:18/58:05).

Dr. Patterson characterizes RANTES as a magnet, attracting enormous quantities of immune cells into the lungs where they make more cytokines and more RANTES. The end result was a sequestration of immune cells in the lungs causing the damage seen in COVID-19 patients. RANTES is toxic to the kidney and liver and is part of the coagulation cascade that helps explain the clots that are being seen.

He emphasizes that COVID-19 should most accurately be characterized as a RANTES disease rather than simply as an IL-6 disease or some other less comprehensive description. He concludes that leronlimab fulfills three roles:

1. it restores the immune system
2. it calms the cytokine storm
3. it decreases the viral load by improving the immune system

As such, leronlimab fulfills the three roles sought in a COVID-19 therapeutic. He emphasizes (10:58/58:05) that a single drug, leronlimab, accomplishes this. It fulfills both anti-viral and anti-inflammatory roles Dr. Fauci has specified for attacking COVID-19.

Having the answers is meaningless if no one believes they are true.

CytoDyn and a band of determined shareholders are convinced that CytoDyn's leronlimab is the answer to treating dread diseases from COVID-19 to HIV to cancer and beyond. So far leronlimab lacks an FDA approval in any indication.

Recently it made a strong bid to acquire such approval by submitting its BLA in treatment per press release headline below:

This article focuses on leronlimab in treatment of COVID-19. Although CytoDyn is slowly making its case as a COVID-19 therapy to a broader audience, it still has a long way to go to reach the prominence that management and CytoDyn bulls believe are its due.

The NIH's working group evaluating potential COVID-19 therapies uses the following criteria:

Dr. Patterson has moved with lightening speed to advance his theories on leronlimab's MOA with statistically significant patient data for publication in a high profile peer reviewed journal (30:20/58:05-33:20/58:05). (A draft is now circulating on the internet.)

There can be no doubt that CytoDyn has substantially advanced the credibility of its COVID-19 quest. Nonetheless, even as it gets ever closer, the prize proves more elusive. Over the last few weeks comments to "CytoDyn: Timeline To COVID-19 Credibility" have shown dribs and drabs of COVID-19 leronlimab publicity beyond CytoDyn's standard fare of paid promotional YouTubes; they still pale by comparison to publicity showered on Gilead's (GILD) remdesivir.

This is painful for true believers. It is even painful for skeptics such as myself. While I am a Gilead shareholder, I view its remdesivir data to date as providing no more than a modestly incremental treatment benefit (slides 9-17). A shorter hospital stay with unchanged overall health prognosis is not what America wants so we can get back to work.

CytoDyn's leronlimab production issues are challenging given the scale of its ambitions in COVID-19.

CytoDyn has no experience in manufacturing a product for sale in any quantity. Now it envisions a pressing need to access vast quantities of leronlimab for it to work its lifesaving magic with COVID-19. The intrinsic complexities of manufacturing any product at scale, not to mention an advanced experimental monoclonal antibody such as leronlimab are overwhelming.

Accordingly, NP's answer midway through the YouTube to the question "what are your two biggest challenges over the next four months?", (28:35/58:05-33:20/58:05) seems obvious. NP's answer was heartfelt. "Manufacturing, manufacturing and manufacturing".

As he noted, when you believe you have the solution the world is waiting for, you must be prepared to respond to the demand. NP's enthusiasm for his role as custodian to leronlimab is palpable. He appears 100% convinced that leronlimab is the answer to the world's COVID-19 fears. Take away COVID'S awful lethality and the world can get back to work.

Everybody wins but only if there is enough leronlimab to go around. NP plans to fulfill his role in history. He is proceeding full speed ahead, guns ablazing. Shareholders beware, perish the thought that leronlimab prove less essential than anticipated.

Shorts and bulls had a grand donnybrook over a recent CytoDyn SEC disclosure.

Having written several skeptical CytoDyn Seeking Alpha articles, I can testify to the hostility such articles generate. There are several posters who are quick to call out anyone who falls from a full-throated endorsement of this stock. That goes with the territory although it can be annoying when posters assume that CytoDyn skepticism equals an indelible sign of a short position in CytoDyn.

Anyway, it is what it is, as the old saying goes. CytoDyn is an over the counter battleground stock. People get in over their head one way or another and it can be a bit tense. Pretty normal stuff, however, this dynamic created what I regard as a strange situation over the last few days.

Let me start by saying that while I disagree strenuously with some of NP's moves (the Vyera deal Number 1 in that category), I admire him and his wholehearted commitment to CytoDyn. As discussed in CytoDyn's Lofty Promise, after becoming involved with a failed company in 2008, he has built it out of nothing with his perseverance.

As noted above, the challenge which most concerns NP is assuring an adequate supply of leronlimab in the event it gets approved to treat COVID-19. His ace in the hole for meeting this need is his deal with Samsung. This deal has put CytoDyn's leronlimab in a comparable league with Gilead's remdesivir in terms of supply (29:20/58:05).

In all likelihood CytoDyn will need government help to keep its leronlimab supply chain up to snuff assuming it ever rises to the prominence that would attract such support (26:09/58:05). Until then NP is bound and determined to keep Samsung in the game.

Towards that end, as described in tortuous detail in the sanctimoniously titled "ANATOMY OF CYTODYN’S CEO FINANCING – SELFLESS ACT TO SAVE COUNTLESS LIVES", NP ended up selling some 4,821,174 CytoDyn shares at an approximate price of $3.25. He accessed these shares by exercising warrants for shares he had acquired over the years.

As a result of his exercise of these warrants along with other warrants that were exercised at the same time, CytoDyn netted $6 million which it needed to satisfy its obligations then due to Samsung.

Shorts got wind of this; not surprisingly, rather than viewing it as a heroic act to save lives, they framed it as a shameful stock dump by Pourhassan while he was giving daily briefings on YouTube and elsewhere to shore up CytoDyn's share price.

Seeking Alpha picked it up on its news feed as follows:

So which is it? Classic over the counter pump and dump, or selfless act to save countless lives?

On Monday 5/4/20 CytoDyn's stock was leaning towards the pump and dump meme as it dropped from the previous day's close of $3.20 to an interday low of $2.53. On Tuesday (5/5/20) it recovered, opening at $2.83, rising to an interday high of $3.37 and closing at $3.13. Much ado about nothing. Wednesday (5/6/20) it basically held strong wavering between $3.10 and $3.30 despite a new salvo from stat news.

I'm not sure what was going on behind the scenes. I'm not ready to outfit NP with either a halo or a devil's tail. With our US treasury straining under its trillion dollar bail-outs I am thankful that NP was incurring ~$5.7 million in tax liabilities out of the deal according to his Medical news first promo article.

Conclusion

CytoDyn is a strange one. I have a modest stake in the company. I wish it and all its investors well. I am unwilling to accept the full bull thesis that leronlimab is a miraculous pan-therapeutic.

I gave a brief overview of the company and its EIND results, along with Dr. Patterson's RANTES theory to an ER doctor friend. His reply back was telling:

1. looks promising on small scale
2. so often things don't play out to expectation in large randomized clinical trials
3. if it plays out with no adverse effects and modest benefits it could be hugely valuable.

So it is with CytoDyn.

Whatever you do be careful. This one moves on a dime as is often true for bulletin board companies. Act in haste and repent at leisure is the watchword here.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Analyst’s Disclosure: I am/we are long Cydy and GILD. 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 may buy or sell shares in CytoDyn or Gilead over the next 72 hours.