Pulmatrix Inc (NASDAQ:PULM) reported earlier this month that it has picked up an additional patent related to its lead development program – PUR0200 in chronic obstructive pulmonary disease (COPD). It adds to a list of a number of already granted patents associated with the company’s lead technology, and specifically, its application to COPD, and the company ran up on the back of the announcement to the tune of close to 25%. It has subsequently retraced these gains, however, and currently trades for around $2.78 a share – down nearly 50% on its 2017 highs.
Towards the end of this week, we have seen a degree of strength, and there’s a chance we are heading into a period of upside momentum and a closing of the gap between current price and aforementioned highs. The key thing to recognize here is the technology that underpins Pulmatrix’s development programs could be a game changer if managed correctly along the development pathway in its various target indications. As such, it’s difficult to see this one staying priced as it is currently.
Here is what we are looking at.
As just mentioned, it’s all about the technology here. When patients take inhalable medicines, the formulation inside the inhaler is critical to the efficacy of the drug. As is the case currently, however, this formulation is incredibly inefficient. A large portion of the active compound doesn’t reach the lungs; instead getting stuck at the back of the throat. Not only does this translate to a reduced efficacy, it also brings about the potential for accumulation driven toxicity issues and side effects.
Pulmatrix has developed what it calls the iSPERSE technology in an attempt to overcome this problem. Basically, the technology wraps the active compound in a layer that is covered in bumps and irregularities (management likes to describe it as a sort of raisin shape). With this irregular surface, the individual active molecules don’t get stuck together and don’t clump up in the back of the throat. Their path to the lungs is streamlined, therefore, and delivery is far more efficient than it is for current standard of care methods. Not only does this allow for a reduced toxicity profile, it also allows an inhaler type medication to be used with a lower dosage (as more of the active compound is reaching where it needs to be).
The lead application of this technology is the above-mentioned PUR0200. In its latest patent approval, the company has picked up protection for the application of this iSPERSE technology to an active compound called tiotropium bromide. Tiotropium bromide is the active ingredient in Spiriva, an inhaled drug that serves as first line in the COPD population and generated annual global sales of circa €3 billion for Boehringer Ingelheim Corporation last year.
In other words, Pulmatrix has taken a €3 billion drug and used its proprietary technology to make it safer and more efficient than its current iteration.
So where are the catalysts coming from? So where are the catalysts coming from?
There’s a phase II bioequivalence study set to kick off in Europe near term (initially planned for the second quarter, but now looking like second half) and the company has stated that intends to seek a pre-IND meeting with the FDA to inform the US clinical development path for the drug in the second half of 2017.
This gives us two major catalysts to watch near term – PK initiation in Europe and the outcome of the pre-IND, followed by submission and protocol confirmation on a pathway to approval in the US.
There’s also the potential for partnership driven action. The company has made no secret about its search for a partner in both the COPD indication and a secondary indication of cystic fibrosis, and any development in that arena would no doubt inject some upside momentum into its share price.
As is generally the case at this end of the biotechnology sector, cash remains a concern and is a risk factor. With the potential market on offer and the likelihood of a partner coming on board ahead of late stage clinical development, however, we think this risk is outweighed by the reward side of the picture.
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Disclosure: We have no position in PULM and have not been compensated for this article.