Cellceutix announced on May 24, 2016 favorable results from its phase II trial to treat mild to moderate psoriasis. Cellceutix (CTIX)reported that its trial compound, Prurisol, delivered results that not only met the studies primary endpoint, but also demonstrated treatment efficacy that equaled or surpassed results from products that are currently on the market. In fact, Cellceutix was bold enough to boast its phase II trial success in a direct comparison to Anacor' (NASDAQ:ANAC)s phase II results back from it's 2011 study, demonstrating their confidence that Prurisol can be a significant competitor, deserving of some market attention.
Albeit, Anacor stock also did not immediately climb upon publishing its phase II results to treat psoriasis, with their stock trading at roughly six dollars a share during that period. But,the stock did begin to gain traction when analysts began paying more attention to the pipeline and gave subsequent upgrades. Shareholders who believed in the pipeline and for those that frustratingly held shares through periods that felt as though someone hit the "ignore" button, were recently rewarded by being offered $5.2 billion dollars for their shares, or roughly $99.26 a share. The offer came from Pfizer, who is interested in their experimental eczema drug, crisaborole.
I bring up the Anacor comparison for two reasons. First, Cellceutix is reacting in similar fashion to that of Anacor after they had posted successful phase II results, being that ANAC stock moved sideways, at best. Second, Anacor is a great comparison because it shows where Cellceutix can be in just a few short years, assuming that the phase III trials continue to meet or exceed trial endpoints. Whether or not Anacor held any more promise than Cellceutix did or does is debatable. What is not debatable, though, is the fact that Cellceutix management must figure out a way to assist Wall Street analysts in understanding the company, its products and its pipeline.
Not only has Cellceutix management compared the Prurisol results to Anacor's AN2728, they also put the Prurisol results head to head with its potential primary competitor, Otezla. The company was eager to point out some key distinctions within its phase II results. First, the half-life period for Prurisol is approximately 1.3 hours, compared to the between 6 - 9 half-life hours for Otezla. It would be understandable that patients might be easily persuaded to switch to Prurisol if the company can prove equal or superior benefit. The difference is significant in that the sooner that a drug gets out of a patients system, the less likely for the patient to face potential side effects. The half-life difference between the two is significant, to say the least. And, because the end results are comparable, the company is sitting in a potentially enviable position.
From a treatment standpoint, medical professionals do not embrace the idea of residual medication hanging around in the blood stream if it is not performing a necessary function. They prefer a fast acting treatment that does the job and eliminates itself from the body. Not only does the drugs elimination lessen the chance of side effects, it also provides more opportunity and management for patient compliance.
To parse the phase II results a bit, the trial enrolled 115 patients with endpoints measuring efficacy and safety in three separate dosing regiments. Patients had to meet minimum requirements related to the severity of their psoriasis, which was measured on the 4 point IGA scale. A score of 0 is clear and a score of 4 is severe. The study was comparable to the Anacor trial in that each patient had to have a certain percentage of affected body area and had to have at least one psoriatic lesion measuring a minimum score of 3, which is considered moderate.
Like its competitors, the trial had a placebo arm used to identify comparable results within three dosing regimens. After the 84 day treatment period, the efficacy endpoint needed to demonstrate,at a minimum, a 2 point improvement from the patients baseline score. Additionally, the treatment endpoint measured safety and tolerability.
To further sift down the results, there was no considerable difference between the placebo arm and those patients that were dosed in the 50 and 100 milligram studies,respectively. That might sound bad.However, and this is a big distinction, the patients in the 200 milligram arm of the study showed significant differences from the placebo arm. Results indicated that over 43% of the patients met the primary efficacy endpoint compared to only 16.7% in the placebo arm. That result has some statistical relevance and because psoriasis has a tendency to indiscriminately clear on its own, the results are significant. And like Anacor and other comparable trials, even though the study was not designed to demonstrate statistical significance, the results can and will be used to determine the next course of treatment in the phase III trial and design, possibilities that may include increased dosing to determine maximum potential benefit through various dosing regimens.
What stands out for me is that because Prurisol demonstrated significant efficacy results in the 200 milligram arm of the study, it clearly demonstrates that at that dosage level, at the very least, Prurisol performs. Because the data is accompanied with strong safety and tolerability data, those that put too much significance into the results of the lesser dosing arms are missing the point and wasting time. Understanding that the efficacy results are comparable only in the lower dosing arms when compared to the placebo, the proof is then in the pill because it clearly demonstrated efficacy in the highest dosing arm of the trial, the 200 milligram dose.
Drilling deeper into the phase II results, Prurisol showed greater efficacy in treating patients that had a minimum baseline score of 3(moderate) when compared to those patients with a baseline score of 2(mild). What this demonstrates in that Prurisol may have the effectiveness to treat patients that have a higher degree of psoriasis, which is impressive because if Cellceutix is going to compete against the best of breed in Otezla, building a results based arsenal is certainly important. Prurisol, up to this point, has been proven safe, tolerable and demonstrates efficacy on several levels within the treatment and rating scale.
But, make no mistake, even though the Prurisol data is strong, management must be able to advance the trial without sacrificing attention to its other pipeline candidates, Kevetrin and Brilacidin. Prurisol can be programmed to address a $13 billion dollar market, treating many of the 125 million people affected by the condition worldwide. If managed correctly, via partnership or license, the market can be lucrative. And relying on investigator remarks that patients indicated a desire to continue using Prurisol even after the trial phase was concluded is a great indicator of real world efficacy and patient preference.
The trial is being regulated under the FDA's 502(b)(2) pathway. In simplest terms, that designation has been designed by the FDA to provide an expedited pathway for trials that are using medications that may have previously been approved and are not necessarily new to the market. The trial must, however, work to demonstrate meaningful changes and formulation of that drug. So, instead of Cellceutix needing to reprove efficacy in certain parts of a compound, they are permitted to rely on previously published data when they utilize the existing drug or compound. By being granted this track, the company stands to save both time and money as the trial can be expedited based on treatment results.
Utilizing the 502(b) pathway, Prurisol can be closer to market than in a normal phase III trial situation. Because of that, the company should consider options that may soon present themselves based on the strong phase II data. To achieve these options, the management team needs to act. Foremost, the company needs to broadcast the Prurisol results as loudly as possible. With the stock trading at $1.50 a share, the company is vulnerable to being purchased at levels not much higher than this. The market has a short term memory and regardless of the fact that CTIX traded north of three dollars a share less than a year ago, shareholders would have only a small voice in stopping a sale of the company at prices near that level. I witnessed the same at Ocata and it can happen here.
Realistically, trials don't always go according to a company's time line and management must be receptive to strategic alternatives. With Prurisol demonstrating comparable or superior results to current psoriasis treatments, management needs to focus on securing either a partnership or a license agreement for Prurisol to use as leverage against any potential suitor or financier. I understand that the Anacor deal was not only about psoriasis, but they did receive almost $100 dollars per share and had revenue of less than $17 million dollars last quarter. The value can be there if management aggressively plays their results. Lest we forget, Anacor also traded at $6.00 a share through the middle of 2013 before it began its upward trajectory.
Providing a potential partner or licensee with attractive rights to Prurisol is something they should consider, especially when an agreement can be used to leverage and fund the Kevetrin and Brilacidin trials. Giving up a relative little to earn a lot makes economic sense. A significant factor that keeps many small biotech companies suppressed at low share price levels is that short sellers prey on their need to access the capital markets via dilution. Short sellers do not necessarily ignore the progress or success at many small biotech's, they are simply smart enough to understand that companies need money to advance trials. If Cellceutix can eliminate that perception of near term dilution, regardless of what management has presented to shareholders, the stock will have far greater opportunity to grab traction based on its trial results.
Sitting on these Prurisol results should provide comfort to investors and provide a floor at levels not much lower than current prices. But, as investors know, until buyers show up, the stock can be easily pressed lower. Much of the near term headline risk has been eliminated with the Prurisol results and the company is worthy of a strong look by speculative investors who appreciate risk that is hedged with compelling clinical data.
Admittedly, I expected the stock price to appreciate substantially on the Prurisol results, but I also know that the market of this generation follows no ordinary set of rules. Sometimes good news is good and sometimes good news is bad. It's the conundrum of our market. But, at the end of the day, the Prurisol results were strong and the potential of getting the compound to market is real. Management simply needs to demonstrate that they have the expertise and willingness to advance the pipeline.
Management should be applauded for getting Prurisol successfully through the phase II trial. However, it may be time for them to look long term, secure a strategy that ensures a viable future and be willing to attract a seasoned team of FDA trial processionals to complete the next stage of the journey.
Disclosure: I am/we are long CTIX.