PFE - CymaBay Therapeutics: Slow But Steady Progress

2023-05-09 14:45:20 ET

Summary

• Today, we shine the spotlight on CymaBay Therapeutics, Inc., whose stock has had a big rally in 2023.
• The company is advancing its lead asset Seladelpar towards approval and recently signed a licensing deal in Japan, but cash burn remains a concern.
• What's ahead for CymaBay Therapeutics in 2023? An investment analysis follows in the paragraphs below.

Be a worthy worker and work will come ."? Amit Kalantri.

Today, we revisit CymaBay Therapeutics, Inc. ( CBAY ) for the first time since the first quarter of 2021. We concluded that article about this small biopharma in the following way:

The company enjoys strong analyst support and has some catalysts on the horizon. That said, commercialization is years away. With the stock's volatility high, option premiums are lucrative. This is why my "watch item" position in CymaBay continues to be within covered call holdings, which provide significant downside protection while taking advantage of these high option premium prices. "

CymaBay Therapeutics stock has moved up roughly 75% since that last piece thanks largely to the shares rally in 2023. The company also named a new CFO this week and has some key trial data scheduled out in the second half of 2023. Therefore, it seems a good time to peek back in on CymaBay. An analysis follows below.

Company Overview:

CymaBay Therapeutics, Inc. is headquartered just outside of San Francisco in Newark, CA. This clinical-stage biopharmaceutical company is focused on developing therapies for liver and other chronic diseases with high unmet need. The equity currently trades just over $10.00 a share and sports an approximate market capitalization of $1 billion.

The company's primary asset is a compound called Seladelpar. It is targeting several indications, by far the most important of which is primary biliary cholangitis, or PBC. This condition is a chronic disease in which the bile ducts in your liver are slowly destroyed. Seladelpar is a potent, selective, orally active peroxisome proliferator-activated receptor ? (PPAR?) agonist. The candidate has garnered Breakthrough Therapy and Orphan Drug Status from the FDA.

After encouraging results from mid stages studies, the company kicked off a pivotal Phase 3 trial evaluating Seladelpar to treat PBC called "RESPONSE". PBC primarily affects women and is present in one out of roughly 1,000 women over 40 years old in the U.S.

The company also has over 200 patients from their prior clinical studies and from response to taking Seladelpar once daily in an open-label extension study called ASSURE. Data from this study will be a part of the company's efforts to win approval for its marketing application for Seladelpar when that is eventually filed.

This long-term study is around treating people who have been using UDCA (Ursodeoxycholic Acid) but have not achieved the recommended treatment goal or who develop troublesome side effects from UDCA that prevent them from continuing to take this treatment. UDCA has been the long time standard of care for PBC. Much anticipated top-line results from RESPONSE will be out sometime in the third quarter of this year. This registrational study followed one called ENHANCE with produced good results.

As you can see above, the compound is also in earlier stage development for NASH and Primary Sclerosing Cholangitis or PSC. Seladelpar has encouraging stage trial data around NASH in early 2020. Both efforts seem to have been deemphasized in favor of focusing on PBC as they are no clinical trials are mentioned on the company's website, nor did they come in the last earnings conference call.

The company has one other compound in development called MBX-2982, but our focus for this article will center on CymaBay's main asset Seladelpar and its PBC developmental efforts.

Analyst Commentary & Balance Sheet:

The company is universally loved by the analyst community right now. Since early March, 10 analyst firms including BTIG, Oppenheimer, and Piper Sandler have reiterated or assigned Buy/Outperform ratings to the stock. Price targets proffered range from $12 to $19 a share.

Nearly 15% of the outstanding float in these shares are currently held short. An insider sold just over $1.1 million worth of shares in two transactions in mid-April. It was the first significant insider activity in the stock since last June. The company ended FY2022 with approximately $135 million worth of cash and marketable securities on its balance sheet .

In early January of this year, CymBay inked a collaboration and license agreement with Kaken Pharmaceutical Co., Ltd. for the development and commercialization in Japan of seladelpar for the treatment of PBC. There are 30,000 to 35,000 PBC patients in Japan. This agreement included just over $34 million upfront payment as well as other potential milestones and royalties. Two weeks later, the company raised nearly $95 million via a secondary offering. Management stated the upfront payment and secondary offering, combined with FY2022 yearend cash would fund all planned activities into the third quarter of 2024.

Verdict:

The PBC market is significant and growing. As a recent Seeking Alpha article noted, Seladelpar would be superior in several ways to the current standard of treatment even as CymaBay would have to compete with large established concerns such as Pfizer ( PFE ) and Sanofi ( SNY ). Seladelpar will be a second-line treatment for individuals that the standard of care is not working well for, just over 40% of the overall PBC population.

The challenge for CymaBay Therapeutics, Inc. will be twofold. First, they have to successfully navigate the approval process. Based on previous trial results, they should eventually clear that hurdle, although it is hard to put an exact timeline on when commercialization will begin.

Then, CymaBay has to have a successful launch for Seladelpar. Having a marketing partner in Japan is a plus as that will help bring in royalties and milestone payments once approved there. The company is actively looking to fulfill the same role in Europe. A licensing deal in that region would likely be a nice catalyst for the stock.

However, outside of that, the company is likely to need to raise additional capital to support the initial launch of Seladelpar, if/when approved. CymaBay's stock has had a volatile history and the company is still trying to get something to FDA approval, more than 15 years after going public. To be fair, the pandemic did impact trial timelines.

I will continue to keep my small " watch item" holdings within covered call positions in CymaBay Therapeutics, Inc., but I am not adding to this stake. To do that, I would like to see additional trial results, a firmer timeline to commercialization, and/or additional funding efforts completed by CymaBay Therapeutics, Inc.

The employed are punished by having to do what they do not love. The self-employed are punished by the opposite. "? Mokokoma Mokhonoana.

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