BCDA - BioCardia: An Update And A Near-Term Catalyst (Rating Downgrade)

2023-05-30 08:50:56 ET

Summary

• BioCardia has made significant progress in the development of its therapeutic candidates BCDA-01 and BCDA-02, which target ischemic heart failure and chronic myocardial ischemia, respectively.
• The company has received Breakthrough Device Designation from the FDA and a reimbursement code from the Centers for Medicare and Medicaid Services, as well as published promising initial 2-year data.
• The biggest potential catalyst for BioCardia would be the FDA's acceptance of an adaptive statistical approach to the phase 3 trial of BCDA-01, which could come as early as July.

I first wrote about BioCardia ( BCDA ) in June of 2021, explaining why I'd taken a speculative-sized position in the stock. Since then the share price is down (as it is with the majority of small cap biotechs), yet as I outline below the company has made significant progress in the interim.

All of the background presented in my initial article is still very relevant, so I encourage readers new to the company to begin by reading that article. I also encourage them to review the latest investor presentation from which I draw below.

BioCardia

BCDA has four therapeutic candidates and a patented drug delivery system (for delivering cells directly into the heart) in its current development pipeline.

The two most advanced, and therefore most important to BCDA's valuation, are the identical products BCDA-01 and BCDA-02 which differ only in the disease they are targeting (ischemic heart failure and chronic myocardial ischemia respectively). In fact this point has become important because the company hopes to be able to combine some of the development data from both in establishing the treatment's safety profile (see discussion below).

The basic approach underlying BCDA-01 and BCDA-02 is to collect and cultivate the patient's own (i.e. an autologous process) bone marrow cells for injection into the damaged heart. BCDA has honed the process such that the whole process only requires the patient stay in the hospital for one day. See slide below.

The mechanism of action (MOA) of the treatment appears to be multifold, including reducing inflammation and oxidative stress as well as prolonging cell lifetimes and blood cell formation. Every study using this approach (including at companies other than BCDA) have shown positive results (though often not powered for statistical significance).

Since my original article, BCDA has achieved substantial progress in the development of BCDA-01. In particular, it has received Breakthrough Device Designation from the FDA (which according to the FDA offers the company several benefits including multiple ways to interact with the FDA and thereby speed up submission processes, as well as receiving prioritized product reviews). It also received a reimbursement code from the Centers for Medicare and Medicaid services allowing patients (both treated and control subjects) to be reimbursed up to $20,000. Finally, the company recently published initial 2 year data.

The company summarized the 2 year data in an important press release dated October 3, 2022 (with my emphasis):

“The two-year outcomes for patients with heart failure receiving the investigational CardiAMP Cell Therapy in the roll-in cohort showed clinical improvement with 100% survival over two years . These outcomes surpassed our expectations in terms of patient benefit across prespecified primary and secondary endpoints ,” said Peter Altman, Ph.D., BioCardia’s President and Chief Executive Officer. “While this smaller cohort is not a head-to-head comparison, current state of the art therapies for these patients which have been successful in slowing disease, are assessed by us to have 79.9% survival after two years 1.”

In this clinical trial cohort, patient demographics at study start demonstrated characteristics typical of the target population of NYHA class II and III ischemic heart failure patients with reduced ejection fraction. No serious adverse events were observed related to any of the procedures performed . Two-year survival was 100%, and all patients completed 24 months of follow-up. The changes in guideline-directed medical therapy experienced by these patients was presented as minimal during the 2-year study period. Improvement in median functional capacity as measured by six-minute walk distance was observed by six months (28.5 m, P=0.01 ); with six-minute walk distance maintained through 24 months (31.0 m, p >0.05). In the study, 70% of patients reported improved or stable quality of life over 24 months in the standardized self-assessment questionnaire used. At 24 months, 50% of patients were improved by at least one NYHA class (n=4 at class I), 20% had unchanged NYHA class, and 30% deteriorated by one class, from class II to III. Median left ventricular ejection fraction (LVEF) as measured by the echocardiography core laboratory at Yale School of Medicine was improved at month 24 over baseline, six months, and over 12-month follow-up. Echocardiography evaluated by the core lab also showed recruitment of previously akinetic (reduced movement) left ventricular wall segments at month 24 compared to baseline, consistent with the improvements in six-minute walk distance, quality of life, and LVEF through two years follow-up. These outcomes support the potential efficacy of this autologous cell therapy currently under investigation in an ongoing multicenter controlled trial.

Not only are these very exciting results, but they've had an additional positive effect in that publishing them seems to have accelerated trial enrollment. Here's what the company said in this regard on the most recent earnings call (with my emphasis):

Clinical investigators at 20 active partner sites across the United States and Canada have enrolled 120 patients today with 10 additional controlled patients having crossed over to receive therapy. We feel there is clearly increased momentum here, potentially driven by the clinical data presented at the American College of Cardiology in March , showing a 100% survival and patient benefits across many endpoints at two years, including a 35% increase in the heart left ventricular ejection fraction.

Possibility of Early Trial Stoppage

The Phase 3 trial for BCDA-01 is initially designed to enroll 250 ischemic heart failure patients randomized 3:2 in favor of treatment vs. placebo. Its design (discussed in the investor presentation) was such that "If the true effect size is only 50% of that observed in the Phase II trial, it is still 90% powered for the primary endpoint."

However, given that the trial is significantly over powered with respect to early results, there's a chance that the results from fewer patients could still be statistically significant. So the company has been discussing modifying the trial to include early stoppage in the case of clear cut statistical success (or failure for that matter). And here it turns out that the fact that BCDA-02 is the same treatment (aimed at a different diagnosis) may become important. T he FDA had been reluctant to allow early stoppage due to its fear that there would be insufficient safety data necessary for approval. This matter is still ongoing, but I'm optimistic that it will be allowed now that the FDA understands that the development data generated from BCDA-01 and some of that from BCDA-02 can be pooled to generate a safety profile.

Here's what the company said in this regard on the most recent earnings call (with my emphasis):

As many know, we have been working on implementing an adaptive statistical analysis plan to the trial with distinguished consultants, including former FDA leaders and a respected statistical consulting group. In our last March 29 call, we were headed into a meeting scheduled to discuss the FDA’s comments on March 31. That meeting went well. The discussion of the adaptive statistical analysis plan as provided was well received by the agency’s statisticians. The FDA’s primary concern was whether we would have enough safety data to support approval in an indication as large as ischemic heart failure with reduced ejection fraction if the trial was stopped early for efficacy.

The agency’s primary concern with safety was with respect to the safety of the delivery of the cells. We shared with the FDA that we feel we do have sufficient data already with 353 interventions with our delivery system in the clinical indication of ischemic heart failure, reduced ejection fraction to date, and 129 patients treated so far with the cells being advanced in the CardiAMP trial. The FDA was unaware of this more expensive data set and we agreed to detail it for them. We also worked with them on creative ideas to further enhance the safety experience ahead.

Catalysts

The biggest potential catalyst for BCDA would be acceptance by the FDA of an adaptive statistical approach to the phase 3 trial of BCDA-01. That could come as early as July, but I would expect a few more back-and-forths between the company and the agency before this happens (if at all).

Cash Burn & Cash on Hand

The biggest reason that I haven't yet added to my position, is that despite the company having a very low cash burn rate, it is also very low on cash.

Here's the historic cash flow from operations, which shows about $2.5M cash burn per quarter:

And here's the latest balance sheet, showing only $4.8M in available cash, i.e. less than enough to fund two full quarters:

Market Cap

With the stock currently trading at $1.86 per share, the company sports a very low market cap and enterprise value as shown below:

In other words, the market isn't ascribing much value to BCDA's entire product pipeline (and hence buyers might be getting a bargain at today's prices).

Risks

The risks with BCDA are manifold:

• There is a risk that one or several of the clinical trials fail outright or fail to achieve statistical significance.
• The company is in danger of running out of money and may have to do some very unfavorable financings in the future.
• The FDA could decline to allow an adaptive statistical approach to the Phase 3 trial, which could extend the trial by two years or more.
• As yet unknown safety issues could emerge.

My Conclusion and Trading Position/Plan

Given the risks, I haven't added to my speculative-sized position, but were I new to the stock I would be a buyer (again of a small position) because of the excellent results the company has produced so far, its meagre cash burn, and the huge markets it's targeting. Moreover, if the FDA allows an adaptive statistical approach to the Phase 3 BCDA-01 trial, I will most likely establish a full position in the stock. I hope to update my views when there is more clarity on this latter topic.

For further details see: