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CytoDyn (OTCMKTS: CYDY): A Biotech Under Seige or Preparing for a Counter Attack?

CytoDyn (OTCMKTS: CYDY): A Biotech Under Seige or Preparing for a Counter Attack?
Written by
Chris Sandburg
Published on
January 12, 2022
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It’s abundantly clear that there is a large short interest in CytoDyn Inc. (OTCMKTS: CYDY). The bear biotech analyst Adam Feuerstein recently panned the company on twitter for being “rejected” by the FDA for their Breakthrough Therapy Designation (BTD) in metastatic Triple Negative Breast Cancer (mTNBC). It was disingenuous to call this a rejection given the excellent guidance from the FDA discussed later in this article. The tweet appeared to be coordinated with an incoherent Buyers Strike article from a guest writer. The shorts have painted a picture that the company is running out of money, has regulators after them, and all the recent initiatives are failing. The most recent Proactive video by the company spelled out their plan and guided toward a conference call outlining their initiatives for 2022. After the market close on January 11th the company announced a webcast on January 13th at 4:00 p.m. EST. This webcast appears to be the ideal medium from which to launch a counterattack to the anonymous hit piece, so shareholders should be informed on what the issues are.

TNBC Breakthrough Therapy - On Track and Still Worth Billions

Pourhassan, the CEO of CytoDyn, explained that it was 3-4 months since the mTNBC analysis was done. When they presented the data to the shareholders and the FDA it showed overall survival was 12+ months versus Trovoldey’s 11.8 months. At this point in time, CytoDyn’s patient population hadn’t hit the median overall survival number, but the company knew it was at least 12 months. This was slightly better, but there wasn’t enough of a spread for FDA justification which is why they are going to redo the analysis for this point in time during January and then either update the data set or submit it. The FDA basically gave guidance to come back if they had better data, which is what they are planning. This was not a complete rejection of the BTD because Pourhassan indicated he wasn’t sure if the FDA would consider the additional patient information as an update or a full resubmission and therefore considered a new application that was subject to a 60-day clock. According to Feuerstein, this was in fact a rejection of the BTD, and that in turn spurred the sell-off. The truth is neither Feuerstein nor the Company knows at this point in time if it was a technical rejection, and investors will just have to wait until the FDA responds before pointing fingers. The fact is that mTNBC BTD is still in play and worth billions with the pronouncement of a BTD in the coming months. The recent Buyers Strike article on TNBC was done in conjunction with Adam Fuerestein’s tweet. In review, it was one of the biggest hack jobs done on CYDY in recent history. Investors reading the “guest post” will find themselves lost in a sea of incoherent talking points that cannot source even one fact. The Buyers Strike article mainly focused on mTNBC, but the guest writer seemed to have a very poor understanding of the topic. For instance, what is downright humorous is that the author doesn’t seem to understand why CytoDyn measures circulating tumor cells (CTCs) in their cancer trials as leronlimab is known to reduce epithelial-to-mesenchymal transition (EMT) and metastasis through blocking CCR5, among other mechanisms of immunomodulation and anti-angiogenesis. Therefore, the CTC count is a measure of one aspect of leronlimab efficacy—blocking metastasis. But the coordinated short sellers are not interested in the details; they are interested in creating a narrative that they warned investors long ago and that they are still correct. This strategy preys on the less informed and less confident investors and is a form of fear-mongering.

TNBC Pathway is Clear

It should be clear that the BTD for mTNBC is alive and well, but delayed because they followed procedures. Although not eloquently addressed in the Proactive video, the gist of what happened is that CytoDyn was required to file the BTD according to the trial comparator which was chemotherapy at the time when they started. During their trial, that changed as Troveldy became the new standard of care, but the FDA rules required their BTD application to be focused on the chemotherapy. Now that they filed their BTD, the FDA guidance was to come back with data compared to Trovoldy and show efficacy compared to the new standard.Therefore, CytoDyn will add additional months to their analysis using the patients who are still on therapy, and then they will resubmit that data in comparison with Trodelvy. Guidance was that they needed to show superiority rather than efficacy in-line with Trodelvy so now the likelihood of BTD is greater than ever because it is likely that they will show superiority. Before it simply hadn’t been long enough to get the true median overall survival (mOS) statistic since half of the patients hadn’t passed away yet and the median had not been reached. If the patients are still alive, the median would now be sitting at about 15+ months based on the time at which CytoDyn performed the first 1-year data analysis and hadn’t yet reached the median overall survival.Of additional note, because there was no talk about safety, this is just about demonstrating efficacy against the correct standard of care, which is an antibody-drug conjugate that is safer than chemo but still includes chemo (the “drug” part of antibody-drug conjugate). As such, Trodelvy still has significant side effects and it is expected that leronlimab will outperform with regards to safety and tolerability based on a large number of treated patients in HIV, COVID, and other studies.

Strong NASH Data Completely Ignored

CytoDyn is also making progress in nonalcoholic steatohepatitis for a potential BTD, but the fear-mongering is intended to make investors doubt that also. Investors are missing the forest for the trees with the potential BTDs. What is most important is that the company is generating preliminary research suggesting leronlimab has considerable efficacy in NASH and cancer, which are common comorbidities for people with HIV. In CytoDyn’s recent press release they announced that leronlimab shows activity against 4-Class Drug-Resistant HIV-1, heavily treated patients, CEO Nader Pourhassan explained this important concept of potentially addressing multiple comorbidities with one drug:

“Nader Pourhassan, Ph.D., CytoDyn’s President and Chief Executive Officer, commented, ‘I would like to thank Dr. Stefano Rusconi, who had reached out to us to do this study. We are grateful to him and his colleagues for producing what we believe to be further evidence that leronlimab can play a vital role in the treatment of HIV. We believe leronlimab has many advantages, including protecting healthy cells from viral entry, prevention of HIV transmission, convenience, lower toxicity, and the ability to treat patients across the full spectrum of disease from treatment-naive to 4-class resistant HIV. Many HIV patients could also be in danger of developing NASH and, with our recent 350 mg open label NASH trial having achieved its primary (PDFF) and secondary (cT1) endpoints, we believe that all HIV patients may benefit from a CCR5 product as part of their medication. We also believe leronlimab’s potential role in cancer treatment could help HIV patients with a long history of HIV (especially heavily treatment experienced HIV), which increases their risk of developing cancer.’”

Additional Short-Seller Issues

Other topics brought up by short-sellers are the HIV BLA, the Samsung deal, the SEC and DOJ investigations, and the money situation. The cancer and NASH BTDs and clinical progress have already been addressed as the Buyers Strike article did a very poor job of making a bear case as to the research CytoDyn has done as well as the drug’s efficacy. But the shorts do have relevant points regarding the other points.The HIV BLA seems to have been mismanaged by Amarex, CytoDyn’s former CRO. With the hiring of Chris Recknor and other professionals that have experience with data and submitting regulatory filings, the HIV BLA should finally be on track to be submitted properly. This is a “show me” item at this point. Since the BLA has been delayed for a considerable amount of time, only the submission or more importantly the FDA approval of lerononlimab can remove investor doubt on this item. However, once removed it could cause the share price to move up at full throttle.One key issue that is almost purely fear-mongering is the SEC and DOJ investigations into the company. Make no mistake—these investigations are real. But the short seller spin is deceiving. What investors need to read is highlighted below: The SEC informed the company that it should not misconstrue the investigations as proof that the company has done anything wrong or that the SEC has any negative opinion of anything associated with the company and the investigation. All that is known is that the regulatory agencies are gathering information on these topics to make sure all is kosher. And anything that isn’t could result in a simple correction.CytoDyn Q2 2021 10-QDoes this seem like CytoDyn is a target? The SEC informed the company that they should not read into this investigation as if they’ve done anything wrong.The strategy with respect to Samsung Biologics is a big overhang that hasn’t been resolved. That is the only major elephant in the room. The DOJ and SEC investigations have been going on forever and it's difficult to ascertain what they are looking at anyway. All investors have to go on here is management's past history. Will they dilute at these levels just to continue their manufacturing relationship and raise money at what they would consider highly dilutive levels so close to a value inflection point? According to a Proactive video they have stated $8.0 million is was on their balance sheet at the end of the quarter. Will they choose to stretch that out until a value inflection point or will they dilute? If investors believe the shorts, dilution is imminent to pay Samsung.What the shorts haven’t mentioned is COVID-19 as cases are skyrocketing in Brazil and the Philippines, thrusting leronlimab back into the spotlight as it appears COVID-19 hospitalizations are here to stay.


With the stock well below $1.00, investors are missing the obvious—Brazil’s infections are skyrocketing and so are the Philippines’ infections. This will lead to major positive catalysts for the company and put clinical trial results in shooting distance for approvals in multiple jurisdictions within 6 months. That means current price expectations are not factored in.According to worldometer there are 311,717 active COVID-19 cases in Brazil which means that will translate into 15,600 hospitalizations assuming a 5% hospitalization rate that translates into almost 16,000 hospitalizations coming. According to Statista, there are 6820 hospitals in Brazil which means there are at least 2 hospitalizations per hospital. According to the last clinical trial update, there were 23 hospitals recruiting which means there are at least 50 fresh hospitalizations that could translate into clinical trial participants. Pourhassan indicated that 15 to 20 could get to the point of an interim readout in Brazil.The other exciting development released on the Proactive video was that meta-analysis was available in the United States and possibly in Brazil. Meta-analysis allows the combination of 2 or more phase 3 trials to be combined into one for approval purposes. The CD10 trial had 62 critical patients and adding 15 - 20 more would likely result in statistical significance of their primary endpoint of 28-day mortality enabling a EUA in the United States. If ANVISA, the Brazilian FDA counterpart, approves meta-analysis then that event would make a EUA possible in Brazil.

“The FDA has allowed us to do meta analysis, double blinded controlled trials can be combined. Might just need another 15 or 20 people. Talked to Brazilians on Friday to get an update. This is a huge update because the number of cases in Brazil has really gone up. We could be very very close to an interim analysis of data.” - Nader Pourhassan - CEO of CytoDyn

The possibility of 2 EUA’s and possibly a third due to the resurgence of COVID in the Philippines. The Philippines has a positivity rate of 46% which is threatening to overwhelm their healthcare system if they take no action. The spike in infections all over the world could push many governments sitting on the fence into action.Investors have been wondering whether critical COVID-19 treatment with leronlimab would be a steady market or whether it would disappear over time as the pandemic faded away. Recent skyrocketing Omicron breakthrough infections are making it clear that COVID-19 is here to stay and that some patients will progress towards severe disease regardless of the vaccines. With renewed need for critical COVID-19 therapies, CytoDyn’s leronlimab can once again sit in the spotlight.

Financing - The Elephant in The Room

It's safe to say that investors really don’t know what the cash position of the company really is at this moment in time. This is what the short narrative is and preying on the fears of inventors that additional dilution is imminent. It is clear that a large payment is due to Samsung and that the company is only confirming the $8 million on its last quarterly disclosure. How is the company going to bridge the gap and keep Samsung happy while continuing to have enough money to run operations? The financing plan is supposed to be presented on the next webcast that happens to be tomorrow. Here is what he said on the last Proactive Investors video.

“At this time, we are so close to so many amazing milestones that we can utilize those 200 million shares and raise the funds we need to go forward. But people have to keep in mind also that a partnership for NASH it looks very very solid and we can’t wait to have a call with everybody which will be with 10 days or so hopefully that lays out all the steps of what we are doing with each one of these indications” - Nader Pourhassan

On January 11th, Pourhassan announced a conference call for January 13th which is considerably accelerated versus his initial guidance on the 7th. It is possible the company was able to ink a partnership deal in NASH given Tobira with its CCR2/5 inhibitor, CVC, (used in NASH) was bought by Allergan (now AbbVie (NYSE: ABBV)) for $1.7 billion. CVC is a small molecule and was also tested in HIV because it binds CCR5, but it was significantly overshadowed by the much more efficacious leronlimab.Investors that fear the worst are not looking at Pourhassan’s track record of avoiding dilution wherever possible. They may have forgotten the stock option exercise to bring in money but the shorts surely haven’t. What seems outside all comprehension is that he might be able to convince Samsung to extend things or take a smaller number or just postpone the production. Due to the evolution of the virus, CytoDyn might not need as many doses as originally thought and could charge more per dose working with the supply that they have on hand and in production.

Investor Summary

The shorts hit the company really hard and it's clear that CytoDyn and Pourhassan are going to hit back harder on the upcoming webcast. When Pourhassan talked about sending the topline NASH report to over 1000 bigger pharmaceuticals in the world he clearly wasn’t joking. He believes “This data to us will be able to go forward with a phase 3 and Breakthrough Designation.” The possibilities of a BTD in mTNBC and NASH are very high in the coming months now that FDA guidance is out. It's clear the stock will move higher as infections increase in Brazil as investors grasp that the delays in recruitment might finally be behind them. It's not a new concept that the rate of trial recruitment has plagued stock price performance. Once the trial was fully enrolled the company has been consistent on being able to crunch the data and release it quickly. The stock is very oversold and poised to rally and had a climactic selloff thanks to the short manufactured misinformation campaign. Long-term investors appeared to be gobbling up shares at the $385 million valuation yesterday. The risk-reward is compelling given all the catalysts in just Q1. That is what is on the table with tomorrow’s conference call. So investors looking for alpha might want to consider CYDY before the conference call.


Disclosure: Insider Financial and its owners do not have a position in the stocks posted and have posted this article for free without editorial input. This article was written by a guest contributor and solely reflects his opinions.

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