2023-09-28 06:20:30 ET
Summary
- Citius Pharmaceuticals is a late-stage biotech with a drug to treat lymphoma, but their cash runway is not long enough for FDA approval.
- Their flagship drug, Lymphir, has shown promising results in a study, but it is a different version of a previously approved drug with safety concerns.
- The company also has another late-stage candidate, Mino-Lok, but their financial situation is uncertain and they may need to raise more funds.
Topline Summary
Citius Pharmaceuticals ( CTXR ) is a late-stage developmental biotech looking to make their foray into commercialization with a drug to treat lymphoma. While insiders have put their skin in the game, the fact is that the cash runway is not quite long enough to get them to an FDA decision, let alone to market. This makes for a highly risky play on this microcap entity, and that's before we visit the question of whether their drug fills the unmet need. Let's have a look.
Pipeline Overview
Denileukin diftitox (branded Lymphir)
The current flagship for CTXR is Lymphir, a purified, engineered fusion protein of interleukin-2 and diphtheria toxin that has been studied in patients with cutaneous T-cell lymphoma (CTCL) after failing one or more prior lines of treatment.
CTXR first submitted their BLA for this agent back in 2022 on the back of findings from a single-arm phase 3 trial demonstrating an independent committee-confirmed response rate of 36.2%, with 20% of these responders having a duration of response lasting at least 12 months.
It's worth noting that Lymphir is a different version of a drug that was previously approved for treatment of CD25-positive CTCL back in 1999 but was subsequently issued a black box warning due to toxicity in 2008 and was then pulled from the market in 2014. In the pivotal study conducted by CTXR, no new safety signals were observed, and in the authors' opinions, the noteworthy toxicities associated with the original version of this drug were mainly low grade and manageable.
Back in July, the FDA issued a complete response letter detailing a need for "enhanced product testing and additional controls" before proceeding with review of the application. It does not appear as though this meant that they needed to have more study controls (i.e., a placebo arm in a separate clinical trial), but rather more demonstrated control over manufacturing of the biologic. The specific concerns have not been disclosed to date.
On September 8, CTXR announced that they had received regulatory guidance on the resubmission, which they intend to complete in early 2024. Notably, no additional clinical studies were requested at the time.
Mino-Lok
The other late-stage candidate CTXR is working on is called Mino-Lok, an antibiotic intended to sterilize and help salvage central venous catheters that have become infected. Contaminated catheters in this way lead to hundreds of thousands of systemic infections, which cause disability and death, in addition to the risk of delays to infusion treatment.
Mino-Lok is administered to a catheter that has been locked to prevent venous administration, intending to salvage the infected catheter and minimize impact to patients. A phase 3 study in patients with catheter-related bloodstream infections is reaching its first major data release, according to a press release from the company. However, results have not been disclosed to date on this randomized trial.
Financial Overview
At the end of Q2 2023, CTXR held $33.3 million in cash and equivalents, with total current assets reaching $41.1 million. This was set against a net loss of $8.5 million. They've actually trimmed up their losses from the same time in 2022 (1H 2022 net loss was $25.6 million versus $22.6 million in 1H 2023).
The last equity raise was a public offering back in May of 12.5 million shares for net proceeds of $13.8 million. Another 12.5 million warrants were issued at an exercise price of $1.50 per share. This figure was, of course, factored into the cash and equivalents disclosed for Q2.
At this cash burn rate, CTXR has upwards of 4 quarters of cash on hand as of the end of Q2, taking them well into 2024.
Strengths and Risks
It should be noted outright that addressing the FDA's initial concerns that got their first submission kicked back does not guarantee that Lymphir has cleared the efficacy and safety bar to get an approval. No news is just good news on that front for CTXR. In the meantime, we're not looking at a formal decision until middle or late 2024 at the earliest, depending on how fast the company gets the BLA resubmitted and how much priority the FDA gives the review.
After all that trouble, it's a bit questionable just how big the market for Lymphir is going to be, assuming they get approval. I've found disclosures stating yearly sales as high as $34.3 million (back in 2003, not adjusted for inflation; approximately $54.6 million today), but Ligand Pharmaceuticals and subsequently Eisai have had some issues related to pushing off-label use of Ontak to juice sales , so it's difficult to say how big the market is for CTXR in 2023. The company themselves estimate an addressable market size of $300 to $400 million.
Given the relatively low amount of cash on hand, it's difficult to see how CTXR is going to fund operations until that FDA decision, and then it would take another quarter or two to get the ball rolling on commercialization. So it's a big risk factor for investing today that the company is going to have this reckoning coming, with few indicators as to whether that will be from a position of strength.
An equity raise could come from dilution, though this would be painful for current shareholders, given the ~$100 million market cap. It could come from a partnership, although it's not clear who would be interested in taking this on with such a relatively limited market size. CTXR has shown no indication that they're interested in selling off most of their key asset.
Other catalysts could give them something of a position of strength, since they have so many other late-stage assets. So there could be near-term positive momentum, but the cash issues will need to be addressed.
Bottom-Line Summary
CTXR is about as late stage as late-stage companies come. But there are a lot of questions about success moving forward, starting with the critical questions of when and if the FDA will approve Lymphir. And then there are questions about how much market penetration the company could get in a rare tumor, especially given the fact that they have not developed a sales team to support Lymphir and continue to remain committed to spinning off the asset to its own publicly traded company sometime in the future.
Other catalysts could generate significant volatility, but the overall risk/benefit calculation doesn't quite fit for this one. I'm going to follow with an initial "hold" sentiment to see how this develops. In the meantime, I would caution against getting married to this one.
For further details see:
Citius Pharmaceuticals: Not A Lot Of Cash Left Ahead Of LYMPHIR BLA Resubmission