- This week's deep dive is on a small GI-focused biopharma concern located just to the north of me here in Miami.
- The company recently suffered a trial setback, but still has some 'shots on goal'.
- Full investment analysis is provided in the paragraphs below.
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Maturity, one discovers, has everything to do with the acceptance of ‘not knowing.”― Mark Z. Danielewski, House of Leaves
Today we look at a small biopharma name that is headquartered just a bit over a stone's throw from my loft in Delray Beach, Florida. The company has some 'shots on goal', but has had a recent trial setback. Our analysis on this Busted IPO follows below.
AzurRx Biopharma (AZRX) came public in late 2016. To this point, shareholders have not been rewarded as the shares currently go for just less than a buck a piece and sport a market capitalization of approximately $70 million. The company only had a dozen employees as of year-end 2020, 10 here in Delray, and two more in France.
The company's pipeline now consists of three gut target gastrointestinal (GI) therapies after the company licensed two early/mid-stage candidates from First Wave Bio (FWB) at the end of 2020.
AzurRx's 'home grown' candidate is MS1819. On March 16th, the company announced that it had completed enrollment for its Phase 2b OPTION 2 trial to investigate MS1819 in cystic fibrosis or CF patients with exocrine pancreatic insufficiency.
There are approximately 30,000 individuals with this condition. A week later, the firm disclosed that it had completed patient enrollment for a Phase 2 trial evaluating MS1819 in combination with the current standard of care, porcine-derived pancreatic enzyme replacement therapy, or PERT, for the treatment of severe exocrine pancreatic insufficiency (EPI) in patients with CF. This is an already significant and growing market.
Unfortunately, the company announced at the end of March that its Phase 2b OPTION 2 study failed to meet its primary endpoint. This would seem to put the entire MS1819 program in some jeopardy (the company does not seem to be that forthcoming on impacts of the setback that I can find) despite the hope that the candidate had significant advantages over the current standard of care.
That leaves the company with its recently licensed candidates from First Wave. The company has a planned Phase 2 trial to investigate niclosamide (FW-1022) as a treatment for COVID-19-related GI infections that should kick off this quarter and be completed sometime in the first quarter of next year. In addition, a Phase 1b/2a clinical trial evaluating formulations of micronized niclosamide (FW-420) for grade 1 colitis and diarrhea in oncology patients receiving treatment with immune checkpoint inhibitors is also set to start this quarter. This study should be done by year-end 2022. Both trials are being managed by the global contract research organization PPD.
Analyst Commentary & Balance Sheet:
The company has received the following analyst commentary so far in 2021. On January 6th, Dawson James downgraded AzurRx to a Neutral rating from a Buy previously. On April 1st, Roth Capital maintained its Buy rating on the stock but lowered its price target to $5 from $7. The next day, Maxim Group initiated AZRX as a new Buy with a $3 price target. Finally, on April 14th, H.C. Wainwright reissued its Buy rating with a $2.50 price target. There has been no insider activity in this stock, neither buying nor selling, since late in 2018.
The company posted a net loss of just over $15 million in FY2019 and just over $32 million in FY2020. The main reason for the increase in costs was primarily attributable to the $13.3 million expense related to the acquisition of the company's niclosamide drug candidates through the First Wave License Agreement entered into on December 31st, 2020. Quarterly cash burn factoring that into account should run approximately $4 million to $5 million in coming quarters depending on the status of the MS1819 program. Early in March, the company raised $10 million by issuing just under 7.9 million shares of common stock and warrants to purchase up to an aggregate of just over 4 million additional shares at $1.2725 a piece via a registered direct offering priced at the market.
After analysis, it is hard to be very enthusiastic about my Delray neighbor. Its primary program is clouded in uncertainty with the recent trial results. It is much too early to be confident in what success niclosamide will have within its two current studies, but the drug has been around since the 50s. The company will also most likely have to do another capital raise before trial results on these efforts. Warrants from the recently completed offering will probably produce a slight overhang for the stock as well. Given that, the only grade we can give on AzurRx at this time is 'incomplete'.
As far as the laws of mathematics refer to reality, they are not certain; and as far as they are certain, they do not refer to reality.”― Albert Einstein
Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum
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