Similar to how a blue-chip company might have an increase in stock price before an earnings call, small-cap developmental biotechs often increase in price before important clinical data releases, Advisory Committee Meetings (ADCOM), and U.S. Food and Drug Administration (FDA) drug approvals. However, some of these developmental biotechs can actually decrease in price based on poor company financial position (subsequently leading to cash raises), management ability, and other factors.
Synthetic Biologics (SYN) expects to present top-line data from its Trimesta/Copaxone combo Phase II multi-center clinical trial involving 164 women for the treatment of relapsing-remitting multiple sclerosis (MS) in women.
The data will be presented April 29th and April 30th at the American Academy of Neurology’s (AAN) 66th Annual Meeting in Philadelphia.
Although there is no cure for Multiple Sclerosis, several companies are working on developing treatments. Synthetic Biologics is testing Trimesta (oral estriol) in conjunction with Copaxone for its effects on Multiple Sclerosis. Estriol is a hormone released during pregnancy and has been documented to help women with autoimmune diseases, including Multiple Sclerosis. In small doses, some researchers believe that Trimesta can be used as a treatment for Multiple Sclerosis. Although Trimesta has been used in Europe and Asia for over 40 years, it is not currently approved for use in the United States. In a small trial done at the University of California at Los Angeles when only using Trimesta alone, researchers found the following:
“As compared with pretreatment baseline, relapsing remitting patients treated with oral estriol (8mg/day) demonstrated significant decreases in delayed type hypersensitivity responses to tetanus, interferon-γ levels in peripheral blood mononuclear cells, and gadolinium enhancing lesion numbers and volumes on monthly cerebral magnetic resonance images. When estriol treatment was stopped, enhancing lesions increased to pretreatment levels. When estriol treatment was reinstituted, enhancing lesions again were significantly decreased.”
Investigators at multi-centers in The United States are administering either Trimesta (8 milligrams orally per day) in combination with Copaxone (20 milligrams per day), or a placebo plus Copaxone to patients enrolled in the trial.
The primary outcome measure for the study is the rate of relapse between the placebo and treated groups at two years, which is the generally accepted FDA-approvable endpoint in MS.
The design of the Phase II trial here is as good, if not better than most Phase III trials, so successful data could mean the company can by-pass a phase III trial, and directly move to file an New Drug Application (NDA) with the FDA.
We found an interesting write up that seems make a connection between women who use oral contraceptives (birth control pills) for an extended period of time and the possible onset of MS symptoms, and even a higher risk for those who stop taking the pills. This is interesting because birth control pills use estradiol and estrone, along with progesterone, yet contain very little estriol — all of these are different forms of the hormone estrogen. Estriol has been said to give relief to women from MS symptoms while pregnant.
We think this bodes well for Synthetic’s Phase II trial mentioned above to produce positive results as estriol accounts for 60 to 80% of circulating estrogen, which is what these women might lack after discontinuing their use of birth control. MS is a rare disease, and birth control pills have not been shown to be conclusively connected to the onset of MS, but studies show it could be.
We feel that good data here would provide the company with the needed leverage tto advance its early pipelined SYN-004, an oral beta-lactamase enzyme tablet to treat C. difficile overgrowth infections that patients typically pick up in hospitals. SYN-004 is potentially more valuable in the long term than the Trimesta/Copaxone combination drug, as President Obama is proposing to double spending on these types of drugs in the future
Annual worldwide sales of current MS therapies are estimated at $14.1 billion, so overall, for a company with a market cap around $150M, we feel this catalyst is a very important one for the company and its investors.
Synthetic Biologics holds the exclusive worldwide license to U.S. Patent 8,372,826 and 6,936,599 and pending patents for multiple sclerosis and other autoimmune diseases covering the uses of its drug candidate, Trimesta. Patent 8,372,826 covers the use of Trimesta in combination with Copaxone.
Teva’s (TEVA) Copaxone goes off patent this year. If Synthetic shows good data here, there is a decent chance that Teva could find Synthetics patent useful for a way of extending its Copaxone patent. Therefore, Teva may be interested in partnering with Synthetic for its combination drug, which would equate to Synthetic receiving additional funding to further its early pipeline which has good potential.
Synthetics is set to make an investor presentation on Tuesday, March 11th, 2014. We feel many investors, especially philanthropist investors will be interested in investing in Synthetics. Therefore, we believe Synthetic’s stock price should appreciate significantly over the next week or so.
Synthetics is also developing a beta-lactamase enzyme (SYN-004) to target the prevention of Clostridium difficile (C. difficile or C. diff) infections.
The company aims to show that when co-administered with certain intravenous beta-lactam antibiotics, SYN-004 can degrade the antibiotic that is excreted in the gastrointestinal (GI) tract. Additionally, The company believes that SYN-004 will be able to degrade a broader spectrum of beta-lactam antibiotics, including both penicillins and cephalosporins.
In 2012, 15 million Americans were administered beta-lactam antibiotics. and bodes well for companies developing a drug like SYN-004, as President Obama is proposing to double spending on these types of drugs in the future.
Synthetics, with a market cap of around $150M, is the only company we can find that is developing a C. difficile drug with a market cap under $500M.
It’s worth noting that Randall Kirk’s Third Security LLC owns 12,300,768 shares of Synthetic, which represents about 43% of the company. It’s also interesting to note that Michael Dell’s affiliate investment adviser firm MSDC Management, LP, owns 2,675,000 shares in Synthetics. Kirk is currently best known for his firm’s large and so-far, hugely successful investment in Halozyme (HALO).
Those who suffer from MS might finally be able to find the needed relief from Synthetics patented drug combo, provided the data is good in late April, and we believe it will be.
