CDTX - Cidara Therapeutics: Leveraging Antifungals To Move Into Cancer Therapy

2023-08-10 17:50:45 ET

Summary

• Cidara Therapeutics is a biotech company with an approved antifungal drug, Rezzayo, but its sales are not enough to offset expenses.
• The company's pipeline includes antifungal and antiviral agents, with CD388 being the most advanced drug in development for influenza.
• Cidara is also exploring the use of its drug-Fc conjugates in cancer medicine, targeting CD73, but the project is still in preclinical stages.

Top Line Summary - Cidara

Cidara Therapeutics ( CDTX ) is the rare aspirational biotech that is trying to move into the oncology drug space while already having approved therapies available to help fund research and development. While sales of their main drug Rezzayo continue to grow, it is currently not enough to offset the outlay CDTX faces. Coupling that with a shaky capital structure, along with an unproven cancer pipeline, makes CDTX a highly risky venture at this time.

Pipeline Overview

Antifungal agents

CDTX has one drug current FDA approved and being marketed. Rezafungin (branded Rezzayo) is a once-weekly injection used to treat candidemia or invasive candidiasis. A phase 3 trial is investigating the safety and efficacy of this agent to prevent invasive fungal disease in patients undergoing blood and bone marrow transplants, a complication that can be life threatening .

Although the drug is now approved, CDTX only has rights to Rezzayo in Japan. In the US and Europe, partners like Melinta Therapeutics and Mundipharma hold the rights, to which CDTX is only entitled to relatively small royalties and milestone payments.

Antiviral agents

Source: ESMO 2022 poster presentation

One of the cornerstones of the developmental pipeline is based on a platform that CDTX dubs Cloudbreak, which has led to the development of so-called drug-Fc conjugates (abbreviated DFCs). In principle, these drugs should work in a way that's similar to antibody-drug conjugates, except that the targeting is due to the small molecule coupled to the Fc portion of a human antibody, combining the precision of small molecule inhibitors with the ability to engage the immune system simultaneously. The Fc portion also prevents breakdown of the antiviral drug, hopefully improving pharmacokinetics.

A candidate called CD388 is the most advanced DFC currently in development by CDTX. The goal with this agent to provide protection against influenza A and B with a single dose per flu season. This agent was granted Fast Track designation by the FDA in June 2023.

Moreover, development of CD388 is being supported by a partnership with Janssen; however, internal development on Janssen's side was recently de-prioritized in a large-scale effort to refocus their research. It remains unclear at this time whether that means that the partnership between the 2 companies will be terminated, but it definitely means that the heavy lifting will need to be done by CDTX for the time being.

CD388 is currently being evaluated in a placebo-controlled, phase 2 trial , and interim data announced in March 2023 showed evidence that CD388 could both reduce the viral load and PCR-confirmed influenza infection after exposure to influenza A. Notably, 14 of the 28 patients (50%) in the placebo group had PCR-confirmed influenza, compared with 6 of 28 (21.4%) in the CD388 group.

Oncology

The DFC project is also being carried into cancer medicine development. The main target of interest for the DFC platform is CD73, a cell surface molecule found on tumor cells that helps to suppress the immune system near the tumor. It has been recognized for some time as a promising cancer target ; however, no agents have yet been developed that were shown to exploit this molecule.

The CD73 DFC has not yet moved into human trials, but CDTX intends to file an IND to move into phase 1 study in 2024.

Financial Outlook

Per the latest quarterly filing, CDTX maintains $50.4 million in cash and equivalents, with total assets of approximately $68 million.

Source: CDTX Q2 filing

Meanwhile, collaboration revenues sat at $7.6 million, which is up from $6.2 million in the same time period of 2022. However, operating costs have also gone up, leading to relatively flat net loss of $12.8 million, down from $13.1 million in Q2 2022.

Doing the rough math, this means that CDTX has around 4 quarters of cash left, and that's even after gaining $17 million in proceeds from an underwritten stock offering.

Strengths and Risks

CDTX has an interesting pipeline, with a real shot at an alternative to the flu shot with wide applicability. In addition, if they can effectively target CD73 in cancer, this could have implications for treatment on par with other immune checkpoint blockbusters like the PD-1 and PD-L1 antibodies.

However, the headwinds are strong here. First off, the cash position is simply not enough to get a new product to the goal line from phase 2 studies, even with Fast Track designation. I'd say there is a high risk for dilution, but CDTX sits at a market cap of approximately $85 million at the time of writing. There's just not that much they can tap without some really serious dilution, and that's a huge risk for me as a potential investor today .

On top of that, the lack of clarity on the status of the Janssen partnership throws a strong red flag for the financial status of the DFC project. CDTX is going to have a hard time carrying the burden of research, and if Janssen ultimately decides to drop out altogether, it's tough to see how they can go it alone. That said, the company has a clear track record of putting together partnerships and building out deals for itself, so there remains hope in that department, even if Janssen decides to back out.

Another headwind, from my interest in cancer in particular, is that the target of interest, CD73, is almost totally unproven in therapy. And there have been a lot of notable failures of brand new checkpoint inhibitors that were seeming shoo-ins for inclusion in the treatment arsenal. I cite the notable failure of TIGIT inhibition in small cell lung cancer as one of several notable examples. That's not to say that CD73 is a bad target, but one must be cautious before getting too excited about a new immunotherapy molecule.

Bottom Line Summary

CDTX is something I would consider a very high-risk, very high-reward proposition at this time. For anyone getting in today, the ceiling would be very high, but with the number of challenges the company faces, you should be prepared to take a large hit on your investment.

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