Clinuvel Pharmaceuticals is an Australian biopharmaceutical company developing an innovative photoprotective pharmaceutical drug under the generic name afamelanotide. The company is based in Melbourne, with an office in Switzerland and a US office that is relocating from San Francisco to New Jersey.
In this article, I will describe the company, its pharmaceutical drug (afamelonatide), and why I believe this is a very unique opportunity for biotech investors.
The History of Clinuvel and its Drug:
Clinuvel’s drug (afamelanotide) has a long, rich history.
In the late 1980s/ early 1990s, researchers at the University of Arizona Cancer Center developed Melanotan, which is a synthetic version of a melanocyte stimulating hormone.
Melanotan had some early media coverage, including an article in Vogue magazine, a brief report on Tom Brokaw’s NBC Nightly News, and mention in the now defunct Longevity Magazine.
Once I first heard about Melanotan in 1990, I tried to get as much info about it as I could. I was fascinated that there was a drug that could actually give fair skinned people a natural, photoprotective tan. A real tan – not a DHA tan-from-a-bottle fake tan. Melanotan stimulates your melanocytes to produce a real tan.
The Melanotan research fell off the radar for several years and it was difficult getting updates on what the progress of the drug was until around the year 2000. In that year, Wayne Millen, an Australian medical doctor, purchased the rights to Melanotan. Millen formed a Melbourne-based company, Epitan, to try to commercialize the drug.
Epitan began clinical trials on Melanotan back in 2000/2001 in Australia. After several fits and starts, the company advanced Melanotan through Phase II.
In 2005, after feedback from the regulators, it became clear to the Epitan board that the drug would not be approved by the TGA (Australia’s version of the FDA) for cosmetic purposes only (i.e. to get people tan). It was an error in judgment that Epitan’s board of directors did not realize that sooner.
In late 2005, Epitan received significant funding from Florian Homm, and a new CEO was installed with a new corporate / clinical strategy. The new CEO, Dr Philippe Wolgen, renamed the company Clinuvel Pharmaceuticals. The new strategy consisted of trying to get Melanotan approved for serious medical conditions.
Melanotan later received the generic name afamelanotide. The company is expected to come out with a trade name for the drug later this year.
Clinuvel’s Drug – Afamelanotide:
Afamelanotide is a peptide which activates the body’s natural ability to produce eumelanin, the dark pigment of the skin which provides natural photoprotective properties. The drug is administered through a slow release implant (about the size of a grain of rice). After the drug is injected into the skin by a physician, afamelanotide begins to tan the skin within a couple days. The tan lasts for about two months. The injectable implant dissolves over time.
The company is trying to get this one compound approved for five different medical indications, some of which are very rare. They include:
- Erythropoietic Protoporphyria (NYSEARCA:EPP), which is absolute sun/UV intolerance. Those suffering from EPP cannot get sunlight without developing serious skin problems. Photos of those suffering form this disease can be pretty gruesome.
- Polymorphic Light Eruption (PLE), which is severe sun/UV poisoning
- Actinic Keratosis and Squamous Cell Carcinoma (NYSEARCA:SCC) in Organ Transplant Recipients – this is skin cancer in transplant patients
- Solar Urticaria (NYSE:SU), which is acute anaphylactic reaction to sun/UV
- Photodynamic Therapy (NYSE:PDT), which is phototoxicity following cancer treatment
Under current CEO Philippe Wolgen, the company has strategically taken afamelanotide into clinical trials in various centers throughout Europe and Australia for those suffering with these five medical indications.
The trials for EPP (#1 above) are in Phase III in both Europe and Australia. PLE (#2 above) trials are also in Phase III. The other three indications are currently in Phase II in Europe and Australia.
In January 2009, Clinuvel successfully filed its IND with the FDA to begin testing afamelonatide in the United States. The company is set to begin an initial safety trial in the coming months. Note that while the FDA required the company to do an initial safety trial, the drug has already successfully gone through the initial safety trials in both Europe and in Australia. The clinical trials are much more advanced in both Europe and Australia as compared with in the US, where trials have not yet begun.
Epitan (later renamed Clinuvel) listed on the Australian Stock Exchange (NYSE:ASX) in 2000 and media attention in Australia grew. The stock peaked at around $1.00 AU or so in the early part of this decade. In April 2007, about a year after the company had been renamed Clinuvel, the stock peaked at $1.23 on the ASX. This was about a month before the company began Phase III trials. The stock would later fall all the way to $0.18, despite the company not receiving any bad news with regards to trial results.
Clinuvel trades on the Australian Stock Exchange with the ticker CUV. It is also traded in the US as a level 1 ADR (OTC) under the symbol CLVLY (10:1 ratio of CLVLY shares to CUV shares – each share of CLVLY is worth 10 shares of CUV).
http://www.google.com/finance?q=ASX:CUV – CUV on the ASX chart
http://www.google.com/finance?q=OTC%3ACLVLY – CLVLY OTC chart
Clinuvel stock is also available in Europe through the Xetra listing UR9.
The Investing Opportunity:
Clinuvel (CUV) is currently trading at around $0.31 on the ASX – and the ADR, CLVLY is currently traded OTC at around $2.55. The current share price is a far cry from its peak in April 2007. As mentioned, CUV peaked at around $1.23 (closing price) at that time and CLVLY peaked at around $10.40 that month.
Since April 2007, Clinuvel has been significantly derisked, yet the share price is a fraction of what it was at its peak.
In January 2009, Clinuvel announced successful Phase III interim results for the EPP indication of afamelanotide. Phase III is expected to conclude by the end of this year. In early 2010, the company is expected to file the drug with European (EMEA) regulators and Australian regulators (NASDAQ:TGA) for the EPP indication. An approval decision is expected later in 2010. The company hopes to receive revenues from the drug by the end of 2010.
Later this year, the company should begin afamelanotide trials in the U.S. Approvals for the drug in the US, if successful, will lag European / Australian approval by an estimated 18-24 months.
Savvy investors see a unique opportunity with this drug. The cosmetic off-label potential of this drug could be enormous. Afamelanotide could protect millions of users from solar damage while providing them with a cosmetically appealing golden tan. A real tan, mind you, not a fake sunless tan. Most importantly, the drug has the potential to change the life of those who suffer from sun intolerance, given them the ability to go outdoors and live much fuller lives.
Clinuvel has many expected milestones coming up in 2009 / 2010. If the company continues to successfully advance afamelanotide toward commercialization, the current share prices will not be available at such a discounted price for long.
In 2009/2010, the company is expected to partner with a large European or US pharmaceutical company to help commercialize afamelanotide. This could come in the form of licensing / distribution rights of afamelanotide for certain world markets (such as Europe or North America) or some sort of acquisition.
Biotech investors who have an appetite for risk and seek potential large gains might take a close look at Clinuvel Pharmaceuticals.
I will provide future updates on the company’s progress.
Disclaimer: This article contains the author’s own opinions, and none of the information contained therein constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. To the extent any of the information contained in the article may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.
Disclosure: long CUV / CLVLY
For further information on this opportunity:
http://www.clinuvel.com – corporate website