Pulmatrix Inc (NASDAQ:PULM) Is Dramatically Undervalued

In August 2016, Pulmatrix Inc (NASDAQ:PULM) announced that the FDA had granted Orphan Drug designation to one of the company's development assets, a drug called PUR1900. Pulmatrix's market capitalization failed to respond to the news, and the company basically collapsed into the final quarter of 2016. The decline came as part of a continuation on the overarching momentum for the year, with Pulmatrix declining from $3.5 a share in April to $0.5 at year end.This week, the company has announced that the FDA has further granted what is called Qualified Infectious Disease Product (QIDP) Designation to the drug. This time around, we have seen some market capitalization impact, with Pulmatrix popping to trade around the $1.64 mark as things stand. We think this is just the beginning, however. This company looks to have been beaten down without any real justification over the last year or so, and at current rates, looks to be trading at a sharp discount to its fundamental value.As a brief overview, the company has two primary products in development, both of which are rooted in a proprietary inhalation technology called iSPERSE. The first (and most advanced) of these products, PUR0200, targeting COPD, is currently under development in collaboration with biotech giant MYLAN (TLV:MYL). Under a special regulatory path in Europe, Pulmatrix can get rapid approval for the product by simply showing that PUR0200 is bioequivalent to an existing blockbuster product, or in other words, demonstrating that it can deliver the same amounts of drug to the lungs resulting in similar patient exposure. A trial aiming to achieve just that is set to kickoff during the second quarter of this year, setting up the possibility of an approval in a blockbuster indication during 2018. That's billion-dollar drug number one.Billion-dollar drug number two is the above-mentioned PUR1900, and it is currently under investigation for the treatment of an infection that comes around as a result of cystic fibrosis. Orphan designation is given to drugs targeting rare diseases, and has a number of associated benefits including extended market exclusivity and certain tax breaks associated with development and commercialization. The QIDP designation, and specifically, in this instance, a subset of QIDP called Fast Track designation, should allow for expedited approval (as well as a degree of extended marketing exclusivity post-approval) for the asset in question. This one is again based on the iSPERSE system, and the infection it is targeting is called Aspergillus. Current standard of care therapy for these infections is antibacterials delivered orally. However, the dose required is extremely high, because the infection resides in the lungs, and the active ingredient needs to pass through the blood stream in order to reach the infection. High-dose translates to higher than desired toxicity, and this – in turn – results in some unwanted side effects. The inhalable product that Pulmatrix has developed delivers the active ingredient direct to the lungs, and in doing so, should allow for a far lower active dose delivery, while maintaining efficacy as far as treating the infection is concerned. This one is early stage right now, but will move into the clinic this year, and – again – should serve up numerous catalysts as it navigates the development pathway.Cash on hand at last count (September 30) was a little over $7 million, so near-term dilution isn't a concern.The bottom line on this one is that there is no discernible reason for the company to have lost such a large portion of its value over the last 12 months, and with a big pharma partnership, a promising proprietary technology, a late stage asset and plenty of cash on hand, as well as numerous potential catalysts set to hit press over the coming quarters, Pulmatrix could be a rewarding exposure throughout 2017.We will be updating our subscribers as soon as we know more. For the latest updates on PULM, sign up below!Disclosure: We have no position in PULM and have not been compensated for this article.