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RISE of the COVID-19 Therapeutics CytoDyn (OTCMKTS: CYDY) & Humanigen (NASDAQ:HGEN)

RISE of the COVID-19 Therapeutics CytoDyn (OTCMKTS: CYDY) & Humanigen (NASDAQ:HGEN)
Written by
Chris Sandburg
Published on
December 17, 2020
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Enrollment Key Metric in Therapeutic Race

  • Philippines EUA Relevant to CytoDyn, not Humanigen
  • Highly Credentialed Humanigen Team
  • Possibility of NASDAQ Uplisting for CytoDyn Over $4.00
  • Impact of Regulators on Stock Price
  • Possibility of DSMC Intervention Next Week

The top two COVID-19 therapeutics candidates in the approval pipeline seem to be sparring. Yesterday both Humanigen (NASDAQ: HGEN) and CytoDyn Inc (OTCMKTS: CYDY) gave enrollment updates and ignited a firestorm within investor social media forums about the likelihood of an Emergency Use Approval (EUA) in the Philippines. Humanigen started off with their conference call at 12:00PM EST and revealed that they enrolled 423 of the 515 patients needed to complete their trial. At the closing bell CytoDyn announced it had reached full enrollment with 390 patients and planned to readout a month later. During the investor call the CEO of Humanigen, Cameron Durrant, MD said that an EUA would be needed in the USA before filing for one over in the Philippines based on his experience. This view was immediately challenged after the bell by CytoDyn’s CEO Nader Pourhassan who said:

“Since the Philippine FDA has relaxed the criteria of EUA for any safe drug with any efficacy data, we will file our EUA as soon as the presidential order is implemented by the Philippine FDA with all of the information we currently have available, which we believe could occur within the next couple of weeks.”

CytoDyn believes their drug leronlimab meets the safe and possibly effective criteria established by the executive order and a quick fact check of the order reveals that he is indeed correct.CNN covered the news conference, and it's very clear that CytoDyn meets the parameters laid out in the executive order. There are clear benefits of leronlimab laid out in the phase 2 mild to moderate CD-10 study. The benefits have to outweigh the risks of taking it and no treatment is approved for severe to critical covid that works. Many might forget that in the CD-10 trial leronlimab reduced the incidence of SAE’s by 60% over the control group. An important highlight is a key nuance that the CEO of Humanigen overlooked. The filing of an EUA “shall be done by the industry or government concerned.” Humanigen had not made any mention of an agent in the Philippines which means that Humanigen would need an EUA in the USA but CytoDyn was skillful in securing a local sponsor and that perhaps accounts for the disparity between the two CEO’s.

Contrast Between Humanigen and CytoDyn

Operation Warp Speed (OWS) clearly has Humanigen in its sights. On November 6th they announced a Cooperative Research and Development Agreement (CRADA) in collaboration with the Biomedical Advanced Research and Development Authority (BARDA). This led to a NIH sponsored 200 patient ACTIV-5 COVID19 “Big Effect Trial'' with positive case control and interim analysis. This trial is in combination with Gilead Sciences (NASDAQ: GILD) remdesivir. The endpoint in the ACTIV-5 study for hospitalized patients is clinical improvement in the 8-point ordinal scale. OWS is clearly working with Humanigen which is a key endorsement for the company. In yesterday's call the company indicated that manufacturing wasn't going to be an issue because they needed tens of thousands of doses to maybe a hundred thousand doses and had the support of OWS. In November Durrant and Chappell said that Operation Warp Speed had asked for unblinded data from the study, and had received it from the company’s clinical research organization. The company is still blinded to the results and just has interim analysis from the Data Safety Monitoring Committee (DSMC). This was a very positive development for the company, but it hasn't been followed through with a purchase contract which is quite disheartening for investors and patients suffering with the disease as the government favors vaccination over treatments. Should the drug be approved there’s an argument that there won't be enough supply of lenzilumab. CytoDyn seems to be the polar opposite of Humanigen with respect to governmental assistance. They have received absolutely nothing, which actually makes them free agents, and able to sell leronlimab to the first country that grants them an EUA. They have EUA feelers out to the Philippines, the United Kingdom, and the European Union. The company is well positioned because it is approximately 30 days away from the second full approval in COVID-19 behind remdesivir. What has investors on edge is there isn't even a peep or hint of governmental involvement. The government has access to this clinical data so investors are fearing the worst. They believe that the government will act rationally and isn’t responding because the data is poor. What investors are missing about leronlimab is that it has gone through 3 DSMC meetings and got the highest mark which is “continue the study as planned because they are expected to hit their endpoint.” This is a resounding indicator that the drug is making an impact on lowering the mortality rate. This is excellent news given that no other drug is a phase 3 randomized controlled trial has mortality as an endpoint. Almost all drug developers gave up on mortality as an endpoint in favor of time to clinical recovery. Unfortunately for Humanigen, after their DSMC they had to increase their trial size to meet their primary endpoint. That is an anecdotal sign that the drug works, but perhaps not as good as they initially thought. Regardless of what the government thinks of leronlimab the DSMC is an independent body that acts in the best interests of the patients. On November 23rd the clinical trial reached 75% enrollment (293 patients) which opens it up for DSMC review. The primary endpoint was 28 day all cause mortality. Mortality benefit is the gold standard, which means if the drug has a mortality benefit it will be approved. On December 21 the DSMC might peek at the data and see that there is a mortality benefit (primary endpoint) and recommend EUA approval or order that the patients on placebo are immediately given the drug. Regardless of how the DSMC or FDA act, CytoDyn plans on unblinding the study on January 12, 2021 with results “announced shortly thereafter.” CytoDyn has made it well known that 300,000 doses are available this year and in about a week the Philippines could snatch the entire supply of leronlimab leaving the United States without a very viable therapeutic option targeting mortality. Humanigen doesn’t appear to have the same level of conviction in their drug as CytoDyn and seem to be waiting on OWS to bail them out on the manufacturing front. These 300,000 doses are expected to fetch $2.0 billion according to CytoDyn’s CEO Nader Pourhassan. Humanigen has a lot going for it with respect to big pharma experience and credentials. Their management team is almost a who's who of biotech. They have executives from Johnson & Johnson (NYSE: JNJ), Novartis (NYSE: NVS), Roche Holdings (OTCMKTS: RHHBY), GlaxoSmithKline (NYSE: GSK), Sanofi (NASDAQ: SNY), Teva Pharmaceuticals (OTCMKTS: TEVJF), and Iovance (NASDAQ: IOVA). CytoDyn’s board of advisors are from academia and its directors are from small to midcap pharma companies. The credentials just aren’t there but the data does the talking for them and it is speaking volumes in terms of number of indications all tied to multiple mechanisms of action. HGEN uplisted on September 4th, 2020. For the past 6 months CYDY management has talked about waiting to hear from the NASDAQ regarding its uplisting application. It's clear from the message board chatter that CYDY investors have not been able to understand management's discussion of the uplisting. Plain and simple, CYDY is within striking distance of meeting its final listing requirement of $4.00. If the price is there and the volume is there it's reasonable that they will uplist the day after they get the call. The recent price action and volume may be enough to pierce $4.00. The stock appears to be extremely undervalued given they are 30 days out from a major regulatory milestone. A NASDAQ uplisting appears imminent.

Regulatory Frustration Impacting Therapeutic Valuations

The government isn’t always right at picking winners and losers which is why investors should focus on the fundamental data from the trials instead of trying to second guess why politicians aren’t acknowledging therapeutic drugs that work. It's abundantly clear that leronlimab and lenzulimab both work and are likely to get regulatory approval. The question for investors is what is that worth?

Ease of Use - Major Issues

There is a very good chance that CytoDyn is in the winning stretch for the therapeutic race. If CytoDyn should stumble for some reason Humanigen still can't catch up because they cannot overcome the ease of administering a subcutaneous injection versus an intravenous treatment in a hospital for 3 days. Lenzulimab is also constrained to the hospitalized population not yet on ventilators. A recent CNBC report by Meg Tirell uncovered in an interview with Monsef Slaoui that OWS data showed a 5 to 20% utilization of Regeneron’s (NASDAQ: REGN) and Eli Lilly’s (NYSE: LLY) antibody drugs. Slaoui was very disappointed by the usage because they could reduce hospitalizations by 50 - 70% for people that are at risk of severe disease. Tirell said:

“Due to the complications around administering the drugs they just aren't getting used. . . The drugs have to be administered very quickly after you are diagnosed. They need to be administered within the first few days and often people don't feel sick at that point. . . . They are IV drugs and have to be administered in that IV setting."

Leronlimab is a best of breed drug that can be given with a simple subcutaneous injection and operates in the spectrum from moderate to “people at death's door.” Leronlimab is the only severe to critical drug that got a DSMC green light to proceed without any changes. Big pharma drugs are struggling as it is and don’t stand a chance after leronlimab is approved.

Investment Summary

The value of a drug approval is clearly not baked into CtyoDyn’s stock price. The company has a $2.0 billion market cap yet in the next 30 days it could sell $2.0 billion of product if they get an EUA from either the Philippines, the United Kingdom, or the United States. Since CytoDyn finished its trial it is going after a full approval in severe to critical COVID-19. With a mortality benefit, they will be the new standard of care. Humanigen cannot compete with this and will have to play second fiddle to possible therapeutic rationing of leronlimab. Humanigen’s drug lenzulimab is likely to gain approval. Assuming approval by Q1 2021, it is quite undervalued at a $500 million market cap. Approved drugs normally fetch in the billions. Humanigen does have a pipeline, but it's in cancer and Graft versus Host Disease (GvHD). Ironically CYDY has trials in the same indications so it's unclear how this is all going to play out. The most likely scenario is that CYDY turns into a Gilead like big pharma with dozens of indications and Humanigen gets gobbled up by another big pharma to compete against the biggest little pharma called CytoDyn. Investors that fail to heed this call on CYDY won't be missing the train they will be missing the rocketship. The CEO of CytoDyn said don’t blink or you will miss it. Investors without a full position in CYDY just blinked. HGEN could be a great hedge in this therapeutic area, but most investors like to buy the best in breed and that is CytoDyn.


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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