Tag: Biotech

YMAB: different data for different audiences, disclosure issues, and stock sales – PT $16

Portfolio manager summary

  • Y-mAbs (YMAB) is a biotechnology company focused on cancer treatment – it has one FDA-approved drug on the market, Danyelza (naxitamab), which received FDA approval in November 2020 for the treatment of neuroblastoma
  • Our diligence reveals that YMAB’s top shareholder is also the same physician in charge of the neuroblastoma program at a major YMAB study site and patient treatment center – his over $100MM ownership in the company is the first time we’ve seen a conflict of interest of this magnitude between patient care/research integrity and financial interests
  • We believe YMAB is obfuscating Danyelza’s efficacy – while investor materials have shown objective response rates (ORR) of 68% to 79%, its FDA label shows an ORR of merely 45%; CLVS’s stock plunged 70% in 2015 when it disclosed lower than guided efficacy for an oncology drug
  • If this weren’t enough, we believe YMAB’s characterization of highly positive results in frontline trials is disingenuous and a result of selecting the healthiest patients for study – patients with no detectable evidence of cancer
  • YMAB received a rare FDA Refusal-to-File (RTF) letter for Omburtamab in October– in the three years ending 2018, just 1% of BLAs received an RTF. We believe this is a sign of execution and cultural issues; management has already missed its own expectations/targets for resubmitting Omburtamab’s BLA
  • Investors and/or the SEC might take issue with YMAB’s disclosures about its founder, Thomas Gad; filings disclose the single insolvency of a “personal holding company”, but our review of never before seen Danish corporate filings show at least five entities with no less than 40MM kroner in liabilities that went bankrupt/were dissolved 
  • While YMAB’s stock rallied from the mid-20s to low-50s from 2019 to early 2021, Gad has sold almost half of his direct holdings
  • We believe that the combination of Danyelza’s “real” efficacy and YMAB’s poor disclosure presents significant risk to investors, and that Danyelza will not be as successful as the company and sellside would like you to believe – we assign a $16 price target to the stock, down ~55% from current levels

Overview

YMAB is a biotechnology company focused on the development of antibody-based products for the treatment of cancer.  YMAB’s product portfolio was licensed from Memorial Sloan Kettering Cancer Center (MSKCC), and its only FDA approved product, Danyelza (naxitamab), is for the treatment of relapsed or refractory (R/R) high-risk pediatric neuroblastoma.  Neuroblastoma is a rare, almost exclusively pediatric cancer that develops in the nervous system.  Unfortunately, this disease  is “associated with poor long-term survival” and accounts for 15% of pediatric cancer deaths.

Obviously, treating pediatric cancers is an exceptionally noble mission, and we applaud YMAB and the team at MSKCC for their work.  What is not noble, however, is what appears to be a pattern of unusual and incomplete disclosure about drug efficacy and management history, execution issues, and stock sales.

As an example of the above, we cannot reconcile why YMAB would tell investors that Danyelza’s efficacy exceeds 75%, when its recent FDA approval shows an efficacy of just 45%.  Read on to learn why we assign a $16 price target to YMAB, down ~55% from current levels.

Part I: A disclosed and disturbing conflict of interest

Before going into the substance of our thesis, we’d like to bring up an issue which we believe is a significant public health and governance issue.  

A look at YMAB’s holders list shows that its top holder is Nai-Kong Cheung:

Who is Nai-Kong Cheung? Dr. Nai-Kong Cheung, who owns over ~$100MM in YMAB stock, is the head of the neuroblastoma program at Memorial Sloan Kettering (MSK) which is not only a study site for YMAB’s drugs, but also a treatment center for neuroblastoma patients.

Said another way – Dr. Cheung, through his massive stock ownership (likely well in excess of his MSK compensation), has a clear financial interest in trial outcomes and patient care at MSK.  YMAB licensed its drug portfolio from MSK and granted shares to Cheung for “his involvement in the development of technology licensed from MSK in consideration for his services with respect to such technology development.”

We believe that this, despite any policies and procedures, creates a massive conflict of interest that could favor YMAB over patient care (choosing a YMAB product for reasons outside of clinical superiority, for example) or in clinical trials (like presenting data in a favorable manner).  WE ARE NOT ACCUSING DR. CHEUNG OF ANYTHING UNTOWARD, BUT THE OPTICS HERE ARE TROUBLING.

Bear the latter in mind as we discuss certain data reporting issues in the next section.

This would not be the first time conflicts of interest have touched MSK – in 2018, ProPublica and the New York Times found that “…several top executives and board members [at MSK] had profited from relationships with drug companies, outside research ventures or corporate board memberships.

Source: NYT

These findings led MSK to conduct a review, which found:

Source: ProPublica

We believe that MSK’s previous cultural issues, Cheung’s significant ownership in YMAB, and his leadership position in the very department conducting patient care and research using YMAB drugs creates an alarming set of conditions.

The findings we share below, particularly around the efficacy discrepancies between how YMAB has presented its drug data compared to its FDA label, should be considered in light of the conflict of interest mentioned above.

Part II: Danyelza’s different data for different audiences

After the close on 11/25/20, YMAB announced that YMAB’s Danyelza (naxitamab) received its FDA approval for relapsed/refractory pediatric neuroblastoma.  The resulting FDA label highlighted what we believe to be significant inconsistencies in the efficacy data that YMAB has presented to both the market and the medical community.

Before we move on to laying out this data, let’s first recap some important terminology related to the efficacy of oncology treatments:

  • Objective response rate (ORR): according to the FDA, ORR is “the proportion of patients with tumor size reduction of a predefined amount and for a minimum time period”
  • Complete response (CR): according to the FDA, CR is defined as “as no detectable evidence of tumor”
  • Relapsed/refractory disease (R/R) – setting where the disease does not respond to or gets worse on therapy or after showing a response to prior therapy

These terms, along with progression-free survival (PFS), which is defined as the “time from randomization until objective tumor progression or death”, are critical in allowing physicians and other important stakeholders to compare treatment options.

Now, let’s walk through what we believe are significant inconsistencies in how YMAB presented Danyelza’s data. 

Shot: Data per Company Investor Deck

In YMAB’s December investor deck, YMAB shows that Danyelza, in Study 201, which was the dataset submitted to the FDA for its biologics license application (BLA), has an ORR of 79% and a CR of 71%:

Source: YMAB December Investor Deck

Shot: Data per SIOP Poster

In a poster presented at the International Society of Paediatric Oncology’s October 2020 Virtual Congress (SIOP), YMAB shows a lower ORR of 68% and a CR of 59%:

Source: SIOP 2020 poster screenshot

It is notable that YMAB has changed to presenting the SIOP data in its January 2021 and subsequent investor decks, without explanation:

Chaser: Data per FDA Label

And then there are the efficacy metrics found in the FDA label (approved November 2020) for Danyelza, which we believe is the most credible source and the one most likely to be relied on by physicians, showing a dramatically lower ORR of 45% and CR of 36%.

Source: FDA label

To put this in context, the FDA label ORR and CR are 34 percentage points and 35 percentage points, respectively, LOWER than what YMAB presented in its investor deck – and 23 percentage points for both metrics LOWER than what was presented at SIOP:

Source: Investor deck, SIOP 2020, FDA label

What gives? 

Why would YMAB show investors and the medical community efficacy metrics dramatically higher than those that ultimately blessed by the FDA?  Did YMAB analyze the data differently than the FDA would?  If so, why? 

It is our view that YMAB chose to interpret and present the data in a manner that was favorable to them, and, by extension, to the stock price.  

Physician commentary from a pediatric oncologist at a large neuroblastoma treatment center suggests the investor and SIOP data was limited to a single site:

“Single site versus multi-site. That [higher number] is that two decades of data that they have for patients who were treated at Sloan Kettering as a single institution. This goes back to how much cherry-picking occurred.”

YMAB’s own explanation is unsatisfactory:

“Well, we have 3 sets of data out from that study. We have the investigators’ response evaluation, which shows about 79% overall response. We have the independent tumor response evaluation, where we have 2 independent radiologists and 2 independent pathologists looking at bone marrows and scans from the patients and concluding that 68% of the patients is responding. And the same data set was sent to the FDA, and their decision was that they excluded a number of our responders for various kinds of reasons. And I could have spent the next 3 months discussing whether it was fair and reasonable and added additional information on data. I felt it was more important to get the treatment out to the patient than having that discussion that the FDA wanted to remove a number of our responders out of the first 24 patients.”

Source: Call on 12/16/20

The FDA is clearly using a different evaluation criteria than YMAB, and investors are expected to just believe that YMAB’s interpretations are better than the ultimate arbiter of drug safety and efficacy? This, in our view, is not a good look.

It’s like Clovis Oncology, in a bad way

More tangibly, YMAB is bringing to market a product whose label efficacy is dramatically lower than what YMAB initially communicated.  This is something investors should be concerned about – Clovis Oncology found itself in a similar situation, to the detriment of its shareholders.  After telling investors its rociletinib showed a 59% response rate in lung cancer, it provided a November 2015 update revising the number down 25 points to 34% response rate.  This sent Clovis’s stock down ~70% in one trading day. 

Danyelza’s FDA label efficacy is more than 30 points below what YMAB was telling investors. 

We have doubts about efficacy and success

Along with the company credibility issues that this implies, it means to us that Danyelza will struggle to compete against incumbent United Therapeutics’ Unituxin (dinutuximab) in the R/R setting.  In this paper, published in The Lancet, we learn that Unituxin has a median PFS (defined as how long a person lives without their disease worsening) of 2.1 years for R/R neuroblastoma:

Source: The Lancet

For Danyelza, YMAB uses an analogous metric known as Duration of Response (DoR), which is effectively PFS for patients that have responded to the treatment, a more favorable metric since it excludes patients that failed to respond.  Danyelza’s DoR is just 6.2 months:

Source: Danyelza FDA label

To put this in perspective, competitor Unituxin has a progression free survival, which includes non-responsive patients, of 2.1 years, while Danyelza’s DoR (which EXCLUDES non-responsive patients) is just 6.2 months.

The implication is that Unituxin’s DoR should be greater than 2.1 years, and that Unituxin has an over 4x better PFS or DoR than Danyelza.  

Physicians will ultimately decide how they want to use the drug, but we are bearish on its prospects outside of MSK.  

The same oncologist we quoted earlier said that “no one” outside of MSK has been able to make their own evaluations of Danyelza’s study data.  Further, due to the data issues we highlighted, comparability of Danyelza to other drugs was characterized as “nebulous”:

“No one had an opportunity to to make their own evaluations if you weren’t at Sloan Kettering. Even if you referred a patient there, it was still a little bit nebulous as to how does this data compare.”

If you test healthy patients, you get good results

YMAB has also been promoting Danyelza’s results in the frontline setting, where it would compete with Unituxin’s on-label use.  In YMAB’s materials, they show a 2-year event-free survival rate of 74.3%, comparing favorably to Unituxin’s 63%:

Source: Investor deck

For anyone that reads this, it’s absolutely amazing to see this kind of EFS without the use of the standard of care stem cell transplant.  And we think that’s exactly the reaction we think YMAB wants you to have.  

What they don’t tell you is buried in disclosures presented during SIOP – the patients in this study were in complete remission (i.e., they had no detectable evidence of cancer):

Source: SIOP

The boxed areas say “…improved outcomes of HR-NB patients in complete remission (CR) after induction therapy and autologous bone marrow transplant (ABMT)” and “Eligibility criteria included non-evidence of disease”.

So Danyelza was given to patients with no evidence of cancer after receiving chemo, and the results of that study were good? That should come as no surprise. 

In the case of Unituxin, the eligible patients in the study were not limited to those only in complete remission:

Source: NEJM

To put this simply – YMAB is comparing the results of a drug given to those with no detectable evidence of cancer to the results of a drug given to sicker people. This, in our view, is disingenuous.

We believe this is a problem in study design – by using the healthiest of cancer patients, how could the results NOT come out positively? How can these results be taken credibly?  

Why on earth would a physician choose to prescribe Danyelza? Not only did YMAB’s efficacy come in lower than it presented, but the survival benefits appear to be dramatically lower in R/R when compared to Unituxin. Not to mention the patient selection for Danyelza in frontline seems highly biased.

In our next section, we highlight YMAB’s execution issues for two of its drugs, Omburtamab and Nivatrotamab.

Part III: Execution issues

Omburtumab’s refusal to file as a cause for concern

YMAB first landed on our radar in October and the reason that it attracted our attention was something that rarely happens in the biotech world.  The company received an FDA Refusal-to-File (RTF) letter for the BLA for its pipeline drug Omburtamab.  

An RTF letter is a notice from the FDA that a submitted drug application is incomplete, and that the FDA is refusing to accept the application until the sponsor corrects the identified issues.  

RTFs are relatively rare – between 2010 and 2017, the FDA issued only 73 RTF letters – over that same period, 1,042 new drug applications and BLAs were filed, implying that just 7% of applications were deemed sufficiently incomplete as to warrant an RTF letter.  More specifically, in the three years ending 2018, less than 1% of submitted BLAs (most relevant to Omburtumab) received an RTF.  

The FDA takes the view that issues that are addressed by RTFs are known as “complex significant deficiencies”, note that these are the FDA’s words, not ours and they include:

  • Applications that are materially lacking to the extent they would not permit efficient review
  • Parts of an application that contain inadequate information
  • Reliance on a single trial when prior communication with FDA determined the need for more than one trial
  • Failure to submit assessment of studies related to the potential abuse of a drug
  • Content not submitted electronically where the FDA has specifically requested electronic format

In our view, these seem like basic blocking and tackling for any drug company, and the inability to comply with them is a cause for concern.  In the case of YMAB, detail around the RTF is scant, but sufficient enough, in our view, to call into question the company’s ability to execute.  In its RTF release, YMAB said that the “FDA determined that certain parts of the Chemistry, Manufacturing and Control (“CMC”) module and the Clinical module of the BLA require further detail”.

A subsequent conference call with investors was similarly vague, seeming to chalk up the CMC module issue to YMAB “anticipating that the FDA would have been okay” with what the company provided:

Source: Investor update call on 10/6/2020

On the clinical side, it appears that FDA is asking YMAB for tumor response data independently evaluated according to the RANO criteria, an industry standard set of criteria published in 2010 used to assess response to first line treatment:

Source: Investor update call on 10/6/2020

To us, this reads like YMAB simply chose not to provide independent data evaluated according to a widely accepted framework. 

The more galling part is that FDA “found out” that YMAB had the data needed to do this:

Source: Investor update call on 10/6/2020

Reading further, we learn from YMAB’s CEO that the study data was, in fact, not validated and that the FDA had allowed them to provide the RANO criteria evaluation as a post-marketing commitment:

Source: Investor update call on 10/6/2020

This, in our view, strains credulity. The FDA was going to accept an application where the data are not independently evaluated and then changed its mind? 

As if that weren’t enough, CEO Moeller mentions on this call that they would work to resubmit Omburtamab’s BLA “before the end of 2020”:

Source: Investor update call on 10/6/2020

But in 4Q20 results, that timeline got pushed to the end of the second or third quarter of 2021, suggesting the problems hinted at during the October 6 investor call are perhaps thornier than disclosed:

Source: Press release

We think the fact that YMAB did not provide data evaluated under RANO criteria as an indicator of company credibility and execution.  This is, in our view, entirely consistently with the Danyelza efficacy story we shared above.

In its 2018 Report on the State of Pharmaceutical Quality, in noting how it has processes to refuse poor-quality drug application submissions, FDA discusses drug product application quality, noting that “[a]nother important indicator of the overall State of Quality is the quality of drug product applications sent to the FDA, which may reflect a firm’s quality culture across its operations.” (our emphasis) 

The hat trick – issues with a third product

On December 16, 2020, YMAB released a pipeline update that included commentary on the aforementioned Danyelza and Omburtamab, as well as a third drug candidate, Nivatrotamab.

In the case of Nivatrotamab, we learn that no complete or partial responses were achieved in YMAB’s 10 patient study, but they are still preparing for a Phase 2 study:

Source: Press release

So in addition to Danyelza’s data issues and Omburtamab’s RTF, we have Nivatrotamab’s poor initial results.  This collection of events suggests significant execution and cultural issues, which, when combined with YMAB’s incomplete management disclosure and founder’s stock sales,  makes us very negative on the company. 

Part IV: YMAB’s disclosure issues appear to extend to its founder

Thomas Gad is YMAB’s “Founder, Chairman, President, and Head of Business Development and Strategy and Director.”  

In the proxy, there is a curious mention of a Y-mAbs Therapeutics ApS (“Old YMABS”), a Danish company explained as Gad’s “personal holding company involved in research and development activities in the pharmaceutical industry.”  The proxy goes on to tell us that “the company was placed in liquidation proceedings in 2015. The company is now under compulsory dissolution proceedings.”

Taking this at face value, it seems innocuous. But, as we have seen, YMAB appears to have an issue with full and complete disclosure, and this, unsurprisingly, extends to the company’s disclosures about its founder.

Our examination of Danish corporate records found not just Old YMABS’s bankruptcy, but four other Gad-affiliated companies that were dissolved/went bankrupt, and a sixth company which recently absorbed Old YMABS.

Here is an overview of Gad’s corporate activity:

Sources: Danish Corporate Filings for Thomas Gad, Gad Invest, Singad Holding, Singad Pharma, SG Generics, Old YMABS, G. Estates

What is most impressive to us is that it appears that there are two separate insolvency storylines here.

  • The first is the insolvency of Singad Pharma, whose activities consisted of importing and distributing pharmaceuticals (translated from the Danish corporate filings). As you can see below, of Singad Pharma, Singad Holding, and Gad Invest, Singad Pharma was the only entity with real revenue and profit.  But it wasn’t very profitable – for the period which we were able to obtain filings, its best operating margin was in 2008 at 3.75%, when sales peaked.  Between 2008 and 2011, Pharma’s sales fell 65% but liabilities grew 165%, and the equity value went deeply negative to -27MM kroner.  We believe that the insolvency of Gad Invest and Singad Holding were the result of Singad Pharma’s clear insolvency:

Sources: Danish Corporate Filings for Gad Invest, Singad Holding, Singad Pharma 

  • SG Generics appears to be another story.  Founded sometime in FY2008, around the same time when Gad Invest became a 100% owner of Singad Holding, SG Generic’s business was also the import and distribution of pharmaceutical products (translated from Danish corporate filings).  While we only have three annual filings for SG, it’s quite clear that the business never went anywhere – producing no revenue in the 2008 to 2011 period:

Source: Danish Corporate Filings for SG Generics

In August of 2013, a request for dissolution was sent to the probate court in Elsinore, and in May 2014 a bankruptcy decree was handed down:

Source: Danish Corporate Filings for SG Generics

Curiously, in December 2012, Gad formed another entity, EQ Medicine ApS, which was renamed Y-MABS Therapeutics ApS (what we called Old YMABS).  In Old YMABS’s 2013 filing, we learn that it acquired SG Generics in bankruptcy, and that SG’s condition wouldn’t affect Old YMABS’s business:

Source: Old YMABS’s 2013 filing and Google Translate

But clearly it did affect Old YMABS, because in 2016, a request for dissolution was filed, and a bankruptcy decree was handed down.  The decree was subsequently repealed and Old YMABS was dissolved by merger in June 2020 in yet another Gad entity, G. Estates, formed in 2019:

Source: Old YMABS’s 2013 filing

So in the SG Generics story, we have Gad forming two entities (Old YMABS and G. Estates), which subsequently absorbed two bankrupt entities (SG Generics and Old YMABS). 

The most galling fact here is that YMAB only discloses to its investors the bankruptcy of Old YMABS, which had just 81k kroner of assets and 9k kroner of liabilities at the end of 2014.  Investors are left completely in the dark about the chain of insolvency beginning with Singad Pharma, which had an 41MM kroner in liabilities.  These are undisclosed insolvencies and dissolutions never before seen by investors.

Why was this left out? 

It is our view that this is yet another significant data point in a pattern of poor and shifting disclosure designed to sweep unfavorable events and data under the rug.

Part V: Founder’s stock sales

Since April of 2019, Thomas Gad has amassed a breathtaking amount of stock sales, regularly selling every couple weeks as the stock went from the $20s to the low $50s.  In April 2019, we estimate that Gad directly held 1.19MM YMAB shares – as of March 3, 2021, Gad holds 596k shares, implying that he sold ~50% of his ownership since 2019. Inclusive of sales following option exercises, this amounts to 795k shares!

All the while, investors bid the stock from the mid $20s to the high $40s.

It seems rather concerning that while the sellside salivates over the company and management continue to promote YMAB that Gad himself is dramatically reducing his exposure to the company he founded:

Source: SEC

We estimate that this has resulted in net profits to Gad of approximately $27.3MM: $8.3MM in 2019, $17MM in 2020, and $2MM in 2021 year to date.

Why should investors continue to hold the stock if the founder and Chairman is lightening up his ownership?

Part VI: Conclusion and valuation

The Mariner Instant Replay shows that:

  • From a public health perspective, Dr. Cheung’s ownership of over $100MM YMAB stock is a conflict of interest that could be to the detriment of both patients and investors
  • YMAB’s Danyelza appears to have an efficacy and disclosure issue – while showing investors and physicians efficacy ranging from 68% to 79%, Danyelza’s actual label shows efficacy of just 45%
  • Further, YMAB appears to have tested Danyelza on patients with no observable cancer, making the high efficacy numbers in the front line setting almost meaningless
  • YMAB’s Omburtamab RTF is suggestive of poor execution and data issues
  • YMAB’s Nivatrotamab doesn’t appear to show any efficacy thus far
  • YMAB has failed to disclose that Thomas Gad’s bankruptcy history is not just limited to his “personal holding company”
  • Gad has unloaded stock at a breathtaking pace, having sold ~50% of his ownership since 2019

We believe that YMAB is obfuscating its Danyelza efficacy and its Omburtamab execution.  The sellside expects Danyelza to take almost 40% of the R/R neuroblastoma market in the long run.  We just don’t see it.

It is our view that Danyelza will never reach more than 20% patient penetration, and that, despite sellside estimates to the contrary, Omburtamab will not see revenue until 2024.  

Under these assumptions and 12.5% discount rate in a DCF, we arrive at a price target of $16, down ~55% from the most recent close.

IBIO – don’t buy the vaccine dream

Portfolio manager summary

  • IBIO is a Texas-based company whose stock was up ~500% year to date through 12/7 on investor optimism about its COVID-19 vaccine efforts
  • We believe that IBIO is vaccine vaporware, with a history of having inserted itself into the discourse of several diseases-du-jour over the last decade including H1N1, Ebola, and now COVID
  • IBIO has never actually commercialized any of its vaccine or therapeutics efforts, having eliminated pipeline disclosure in FY17
  • In fact, IBIO settled a shareholder suit alleging that it lied about its Ebola claims, and we believe IBIO’s COVID effort is just a replay of the 2014 Ebola episode
  • Despite this, the Roberts (Kay and Erwin), have reaped compensation in excess of 100% of IBIO’s revenues since 2008
  • We uncovered associations between Robert Kay and CELH’s Carl Desantis, himself a controversial businessman, and a Georgian businessman caught up in post-Soviet intrigue along with Hillary Clinton’s brother
  • Robert Erwin, on the other hand, was CEO and Chairman of LSBC, a plant-based biotech that went bankrupt in 2006
  • Between the company’s track record and management history, we believe this is a clear “fool me once, shame on you; fool me twice, shame on me” situation that investors shouldn’t get caught in. We believe that IBIO’s business is worth no more than the cash on its balance sheet adjusted for the next twelve months of cash burn, or just $0.43 per share, down 71% from the 12/7 close

All hat and no cattle

If you ever hear the saying “all hat and no cattle”, the message is simple: wearing a cowboy hat doesn’t make you a cowboy. All talk, no substance – rarely has a metaphor fit our view of a company the way it fits IBIO.

iBio is a Texas-based company that purports to develop vaccines and other therapies using its plant-based system known as FastPharming. As a fresh example of what investors are dealing with, on December 2nd, it announced a Statement of Work with Belgium-based ATB Therapeutics, which sent IBIO’s stock up ~10%, adding about $30MM to the company’s market cap.

What investors miss here is that ATB Therapeutics did just EUR 55,209 in gross profits in 2019 and had just EUR 2.2MM in assets on its balance sheet:

Source: ATB financials

Investors are overly optimistic about this announcement, especially given the size of the partner – we do not believe this will be a material revenue generator for IBIO moving forward. After researching IBIO, we view this as typical of the company’s modus operandi, and think it is yet another red flag in a series of many.

For context, it is our view that this announcement was solely used to bolster investor optimism about IBIO, which was up ~500% year to date through 12/7 on its purported COVID efforts, which we believe will amount to nothing.

In light of Moderna and Pfizer’s stunning recent announcements that their COVID vaccine candidates prevented over 90% of infections, we thought it would be important to give investors a look into purported COVID player IBIO’s business model, history, and management.

Before kicking off this report, here is a little perspective – a perspective that should give the reader an idea of the level of investment required to be competitive in the COVID vaccine race. Pfizer spent $2B to get its vaccine to this stage, and it had $1.5B in cash on its balance sheet at the end of September. Pfizer has approximately 88,200 employees.

In the last twelve months, Moderna has spent $729MM on R&D and had $1.5B in cash on its balance sheet at the end of September.

IBIO, on other hand, had $77MM in cash at the end of September and 51 employees at the end of June.

We believe IBIO lacks the track record, leadership, or resources to be successful. In our report below, we will outline IBIO’s repeated failure to bring vaccines and other therapeutics to market over its history as a public company. At one point, IBIO even made comments that implied its involvement in Ebola drug development! We also will present our concerns about key personnel and why we believe they cannot be trusted.

Based on all this information we believe IBIO shares to be worth no more than $0.43, its cash value per share (pro forma for today’s offering adjusted for cash burn), or 71% below current levels.

Understanding the bull case

IBIO’s meteoric 2020 performance is largely the result of the company’s purported efforts toward a COVID vaccine developed through its FastPharming System. Investor speculation in vaccine plays this year has been so frothy that at one point in July, IBIO’s stock was up 2483% from the beginning of the year. And while the stock has since come in, it is still up over 400% on the year as investors assign value to its technology and the possibility that IBIO may be able to successfully bring to market a COVID vaccine.This InvestorPlace article argues that while IBIO may be behind its peers in developing a COVID vaccine, its technology has real potential. Comments on Reddit outline a similar view on IBIO and its technology:

Source: Reddit

Source: Reddit

It is our belief that these investors are unfortunately unaware of IBIO’s history of unkept promises and the management history of the company. We outline those topics in this note.

IBIO’s Ebola (EboLIE?) Drug

COVID would not be the first time IBIO gave itself a part in the search for a solution to a concerning disease. In 2014, the world was horrified by a small, but concerning the spread of Ebola from Africa to other locations, including the US.

With no approved drugs on the market at the time, the FDA allowed two experimental drugs to be used in the US. One of these compounds was ZMapp, a cocktail developed by San Diego-based Mapp Pharmaceuticals and manufactured by Kentucky Bioprocessing using “genetically modified tobacco plants”. In August 2014, Mapp ran out of its supply of the drug, and the federal government sought help from other facilities, one of which was the Texas A&M Center for Innovation in Advanced Development and Manufacturing. (source: US District Court of Delaware, case 1:14-cv-01343, document 1).

The Texas A&M facility was affiliated with Caliber Biotherapeutics LLC. Caliber, in 2013, entered into a licensing agreement with IBIO to “use their combined capabilities to develop their own product portfolios, starting with a monoclonal antibody for an oncology indication.” 

A shareholder suit refers to an October 11, 2014 quote from founder and then CEO Robert Kay (who just stepped down from the CEO role in March 2020 but remains co-chairman of the board) from the Washington Post (this, despite IBIO only partnering with Caliber for oncology):

Source: US District Court of Delaware, case 1:14-cv-01343, document 1

Just five days later, IBIO explicitly inserted itself into the Ebola discussion with a press release that implied it had a role in responding to Ebola:

Source: Press release

These communications resulted in an approximately 530% increase in IBIO’s stock price from the beginning of October 2014 to the middle of that month. Shortly thereafter, two Seeking Alpha articles, one on October 20 and the other on October 23, concluded that IBIO never actually explicitly confirmed it was producing an Ebola drug and that the government-funded lab was not exploring any changes to Mapp’s compound. These reports sent the stock down approximately 55% through month-end. Shareholders later sued IBIO, claiming that “iBio repeatedly lied about the role it played in producing an experimental Ebola drug”

This is a classic “Fool me once, shame on you; fool me twice, shame on me” situation. IBIO settled for $1.9MM, and, unsurprisingly, investors never saw IBIO come to market with an Ebola drug. We believe IBIO is pulling the same trick this time around, albeit more discreetly. We have the view that if a company settles a lawsuit that alleges it lied to its shareholders, that should be a large enough red flag to make it a bad investment.

However, for the investors that still think IBIO can pull off a COVID-19 vaccine, we believe the company’s repeated pattern of failing to commercialize its efforts speaks for itself.

IBIO: promises unfulfilled

IBIO’s roots are in a 2004 acquisition of a plant-based technology platform from Fraunhofer USA Center for Molecular Biotechnology (FhCMB), a non-profit translational research institution. IBIO’s model was to use the platform to create and advance its product candidates and license the platform to other parties. Indeed, in the 2008 10-K, we see that IBIO is “prioritizing the following product candidates for our in-house research and development portfolio”:

Source: 2008 10-K

In the 2009 filing, we learn that IBIO and FhCMB, in January 2009, agreed to “defer further preparation for clinical trials of a seasonal flu vaccine candidate and instead to focus on clinical trials of a pandemic flu vaccine candidate”, namely H1N1. (We are struck by IBIO’s ability to insert itself in the discourse for H1N1, Ebola, and now, COVID-19.)

In the same filing, we learn that FhCMB is an important source of funds for IBIO – in 2009, FhCMB received $8.7MM from the Bill & Melinda Gates Foundation to fund clinical trials of “the pandemic flu candidate based on [IBIO’s] platform.” Further, IBIO noted that “[t]he U.S. Department of Defense (“DoD”) has also provided $10.3 million in funding to FhCMB for preclinical and clinical studies for anthrax and plague vaccine projects, and this funding is similarly beneficial to us because we have retained the commercial rights to any technology improvements resulting from those projects”.

Needless to say, it sounds like FhCMB was probably an important source of capital and revenue. The company derived close to ~$1M in sales as a subcontractor to FhCMB. The company also put its focus on H1N1 stating that “Our near-term objective is to complete preclinical evaluation and transition select vaccine candidates into Phase I Human Trials”.

In the 2010 10-K, we learn that in addition to H1N1, IBIO was developing vaccine candidates targeting the H5N1 virus and therapeutics for Human Papilloma Virus (HPV), as well as owning the commercial rights to an oral anthrax vaccine. Once again, the company stated the importance of H1N1 saying “We currently are prioritizing H1N1 influenza vaccine candidates for our in-house research and development portfolio”. All of this was being done at IBIO’s “approximately 500 square feet of office space at our headquarters located in Newark, Delaware, which is leased on a month-to-month basis from FhCMB.”

In the 2011 10-K, we find out that IBIO started Phase I trials for both the H1N1 and H5N1 vaccines in late 2010, and the company had yet again expanded its efforts to develop vaccines for malaria and trypanosomiasis and therapeutic proteins for Fabry disease, hereditary angioedema, and treatment of disorders caused by a deficiency in alpha-1 antitrypsin. This seems like a gargantuan undertaking for a company with just seven employees at the time.

In the 2012 10-K, we learn that IBIO completed its H1N1 and H5N1 Phase 1 trial, and in the 2013 10-K, the company started disclosing all its research programs as seen below.

Source: 2013 10-K

But then, things seem to slow down considerably over the next few years. The chart below shows the status of these clinical programs over the next few years:

Source: 10-Ks

In the 2014 10-K, there is no progress AT ALL on the 2013 pipeline, and we just see the addition of one therapeutic protein known as IBIO-CFB03. In FY15, we see that just three products have moved forward – malaria, hookworm, and anthrax vaccines moved into Phase 1. We also learn that IBIO filed a legal complaint against its partner, Fraunhofer, for material contract breaches. In FY16, we see “feasibility demonstrated” (whatever that means) for several products.

Also in FY16, IBIO launched a new business, IBIO CMO (now IBIO CDMO), a contract manufacturing organization to 1) develop and manufacture third party products, 2) develop and product IBIO’s products for the treatment of fibrotic disease (what happened to the vaccines?!) and 3) commercial technology and transfer services. Was the litigation with Fraunhofer going so poorly that IBIO had to pivot its business?

Sure enough, in the 2017 10-K, the product candidate pipeline is GONE. There is no mention of the progress of the pipeline, and IBIO mentions the following risk:

“Neither we nor our collaborators have completed any other clinical trials for any vaccine or therapeutic protein product candidate produced using iBio technology. As a result, we have not yet demonstrated our ability to successfully complete any Phase 2 or pivotal clinical trials, obtain regulatory approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization.”

To recap – between 2008 and 2016, IBIO claimed to have a pipeline of promising vaccines and therapeutics, including implying a role in addressing Ebola, and quite literally NONE OF IT MATERIALIZED into a marketable product.

Of the $8.4MM in revenues booked between FY08 and FY17, $6.3MM came from providing, through Fraunhofer, technology services to a Brazilian company, with the remainder coming from nutraceutical sales in 2008 and 2009. This revenue stream went to zero in FY18. 

Since then, IBIO has done little else, in our view, generating revenues of just $2MM in FY19 and $1.6MM in FY20.

What IBIO has done, however, is spend almost 7x on G&A as it generated in revenues since 2008 – two of the main recipients of this largesse were the Roberts (Kay and Erwin), who have been in leadership positions at IBIO through the saga we outlined above. We believe the Roberts’ track record is a cause for concern and an indication that the company’s promises lack credibility.

Robert Barons? We believe that IBIO’s leadership is a cause for concern

Over the last 12 years of what we view as a bunch of talk with very little results, the company has had two constants – the Roberts – Robert Kay and Robert Erwin, two individuals whose aggregate cash and stock compensation between FY08 and FY20 comprised 101% of the $12.5MM in revenues that IBIO generated during the same period. We believe that this is grossly excessive given the track record we outlined above.

Robert Kay was IBIO’s CEO from its 2008 spin-off until earlier this year when he stepped into the role of Co-Chairman and member of the board. As CEO, he oversaw the series of failed commercializations we outlined above but made over $7.5MM in the process.

Kay’s background includes some colorful experiences and characters. Before becoming CEO of IBIO in 2008, when it was spun out of Integrated BioPharma (INBP), Robert Kay was on the board of INBP from 2003 until the 2008 spin-off. INBP appeared to be a family affair, with Gerald Kay (Robert’s brother) as CEO at the time (now Chairman). Today, according to Bloomberg, Riva Kay Sheppard and Christina Kay share the Co-CEO seats at INBP. During Robert Kay’s time on INBP’s board until the IBIO spin-off announcement, INBP’s stock fell from a peak of $12.85 to approximately $2.72, a 79% collapse.

But this is not as interesting as who the Kay brothers have surrounded themselves with – Carl Desantis. Carl, who still sits on the INBP board and was partners with the Kay brothers in a vehicle known as Trade Investment Services, LLC (TIS), was also the founder of Rexall Sundown, which was fined $12MM by the FTC about claims it made in the marketing of a dietary supplement, Cellasene. 

In 2000:

Source: Broward New Times

Carl is also the largest shareholder of CELH, which Grizzly Reports covered in an October 2020 research piece. CELH itself makes bold claims, saying it is the “first and only negative calorie drink the world.”

But that’s not all – enter Vasili Partarkalishvili – Vasili and the Kay brothers, along with Carl Desantis (through TIS mentioned above), were owners of a company called Paxis Pharma, which INBP bought in 2003.

Somehow, inexplicably, Hillary Clinton’s brother Tony Rodham is part of this story:

Source: TIME

We should note here that the Gene Prescott mentioned here was Robert Kay’s partner in a real estate business.

Back to Vasili – in the early 90s he opened Liberty Bank, which, in 1994, the US Comptroller of the Currency warned was not authorized to operate in the US. Vasili and his partners got sued by two men claiming that “Liberty, IBN and several other enterprises amounted to a Ponzi scheme in which they lost hundreds of thousands of dollars”:

Source: TIME

Those partners included Robert Kay:

Source: TIME

We believe it is safe to say, given Robert Kay’s background with dubious characters and the Ebola lawsuit which involved management making false claims, that anything he is involved with is deserving of additional scrutiny if not complete avoidance.

Now, onto the other Robert, Robert Erwin. Erwin has been IBIO’s president since 2008, earning over $4.9MM through FY20. Like Robert Kay, Erwin has a track record we wouldn’t want to see in a public company. According to Erwin’s bio on the IBIO website, he “led Large Scale Biology Corporation from its founding in 1988 through 2003, including a successful initial public offering in 2000, and continued as non-executive Chairman until 2006.”

Like IBIO, Large Scale Biology Corporation (LSBC) was attempting to use plants as biological factories. What Erwin’s bio doesn’t tell you is that LSBC “never really managed to get its products off the ground” LSBC filed for Chapter 11 protection in 2006, and its 3Q05 10-Q shows it had an accumulated deficit of over $200MM.

Erwin has also found a way to enrich himself as the minority shareholder of Novici Biotech, which, since 2012, performs various scientific services for IBIO:

“In January 2012, the Company entered into an agreement with Novici Biotech, LLC (“Novici”) in which iBio’s President is a minority stockholder. Novici performs laboratory feasibility analyses of gene expression, protein purification and preparation of research samples. In addition, the Company and Novici collaborate on the development of new technologies and product candidates for exclusive worldwide commercial use by the Company.” (Source: IBIO 10-K)

In FY19 and FY20, IBIO’s expenses related to Novici were $954k and $97k, respectively, accounting for 47% and 6% of IBIO revenue during those periods. Not a bad gig if you can get it.

To recap, IBIO’s founder/former CEO/chairman, whose compensation exceeded 60% of IBIO’s revenues from FY08 to FY20:

  • Served on the board of what appears to be a family-run company while its stock price fell 79%
  • Partnered with Carl Desantis, who is alleged to have made unsubstantiated claims about the businesses HE ran
  • Alleged to have partnered with a Georgian “wheeler-dealer” to launch a bank that was not authorized to operate in the United States

IBIO’s president, whose compensation was approximately 40% of IBIO’s revenue from FY08 to FY20, was CEO and Chairman of a biotech that went bankrupt during his tenure and extracts value from IBIO through his position as a minority shareholder that provides services to IBIO.

Given these backgrounds and IBIO’s track record, we believe there is little value for investors in the stock.

We believe IBIO is likely to disappoint investors

The Mariner instant replay shows that:

  • IBIO’s ATB Therapeutics deal is with a company with just EUR 2MM in assets
  • We believe that IBIO will be unable to compete in the vaccine space given the massive amount of dollars and time required to be successful
  • IBIO’s track record shows that the company has attempted to insert itself in vaccine discussions related to other diseases-du-jour, but none of these efforts amounted to anything but stock price movement. In the fact, the company settled a lawsuit alleging it lied about its Ebola program to shareholders
  • Despite never commercializing a vaccine or therapeutic, Robert Kay and Robert Erwin, IBIO’s founder/former CEO (now Co-Chair of the board) and president, respectively, received compensation exceeding all of IBIO’s revenues from FY08 to FY20
  • We believe both Roberts present significant credibility and execution risk to the business

Our view is that the year to date move in IBIO is unrelated to business fundamentals and that the track record of IBIO’s platform and management suggests the business is in no better condition than it was in before its initial 633% move in February. IBIO has not shown investors any meaningful progress for its COVID-19 program, and we believe this program amounts to little more than vaccine vaporware.

Given this, we view IBIO as a stunning example of “all hat no cattle” and do not believe the business is worth more than the cash on the balance sheet.

After today’s offering, this amounts to 53c per share – which, adjusted for approximately $20MM of estimated cash burn over the next year, results in a price target of $0.43 per share or down approximately 71% from the 12/7 close.

Can’t FIXX this – We believe Homology’s HMI-102 is in trouble

Portfolio manager summary (Idea originally posted May 4, 2020)

  • Homology (FIXX) is a gene therapy company whose technology has been criticized by scientists as “untrue to the scientific community”
  • On April 15th, 2020, a key patient in FIXX’s only Phase 1/2 clinical trial shared test results on Facebook that suggest FIXX’s HMI-102 gene therapy is unlikely to be efficacious
  • In response, FIXX stock fell almost 25%, and instead of providing all investors with an update, management quietly updated the sellside, stressing product safety but not efficacy
  • In light of this result, we believe that the HMI-102 trial will not reach its primary endpoint, and that the stock should trade to cash value, or $5.80 per share
  • Social media is important – early stage drug company Allakos also had trial revelations posted to FB – the exposure of these led the stock to fall over 50%

Executive summary

It’s an understatement to say that Facebook has changed the world – it’s created an ability for people to be transparent about their experiences, lives, and opinions, for better or worse. In the case of Homology, it’s for the latter. Homology, a gene therapy company whose technology has already been scrutinized by scientists as “untrue,” has just one product in clinical trials, HMI-102, for the rare disease phenylketonuria (“PKU”). As Med Genie reported back in January, FIXX’s trial update showed interim phenylalanine (Phe) results that suggested HMI-102 was not efficacious for low and mid-dose patients.

Our note highlights a data point the company would very much like you not to know – the only patient in FIXX’s high dose cohort posted her results on Facebook, and they show that HMI-102 is unlikely to reach trial endpoints even at a high dose. We believe this patient was forced to take her posts down as a result, and management selectively disclosed the issue to the sell side, providing comments about the drug’s safety, and conveniently ignoring the implications to efficacy and the business. Maybe they were hoping to raise capital before officially announcing trial results. Who knows? We believe that the HMI-102 program is dead in the water, and since its progress is the major driver of FIXX’s value, we believe that the stock should trade to cash value, or $5.80, down 56% from the April 27th close.

Background

The best shorts are often one-trick ponies, but rarely do we find one where a single data point completely upends the long investment case. Homology Medicines, FIXX, is one of those rare finds.

Homology is a gene therapy company which has their first and lead product candidate, HMI-102, in a dose-escalation Phase 1/2 trial (pheNIX) for phenylketonuria. FIXX also has 2 IND-enabling programs and some discovery stage programs, but the HMI-102 trial is the company’s main shot at viability.

PKU is a relatively rare disease, with a U.S. incidence of approximately 350 cases per year and a prevalence of just 16,500, per FIXX’s 10-k. PKU is tied to mutations in the gene that control PAH, an enzyme that metabolizes phenylalanine, or Phe. The condition results in a deficiency in the enzymatic activity of PAH, causing an excess in Phe in the bloodstream that can result in intellectual disability. PKU patients are identified soon after birth, and are primarily treated with a Phe-restricted diet. FIXX’s HMI-102 seeks to modify the underlying genetic cause of PKU, effectively curing the disease and allowing patients to eat normally and not experience the cognitive and metabolic issues from higher than normal Phe.

FIXX’s technology, which does not use the CRISPR approach to gene therapy, has already been subject to scrutiny, with David Russell, a researcher at the University of Washington, saying, “What’s surprising is this company raised so much money on something thought to be untrue in the scientific community,” in a piece in MIT Technology Review.

We believe that recent revelations about the efficacy of HMI-102 support this skepticism and show that the drug is not efficacious, kicking out the one leg holding up FIXX’s business, and that FIXX should trade to cash value, or $5.80 per share, down 56% from the April 27th closing price.

The pheNIX trial

The pheNIX trial for HMI-102 launched in June 2019, and its primary efficacy endpoint is two plasma Phe measurements below 360 umol/L (or 6 mg/dL) between 16 and 24 weeks after dosing. Following evaluation of the first two patients in a cohort, “a decision can be made to either escalate to the next dose level, add a third patient or expand the cohort at the selected dose level”.

Now before we review what’s new, it’s helpful to note that a mouse study presented at the 21st Annual Meeting of the American Society of Gene & Cell Therapy titled “Sustained Correction of Phenylketonuria by a Single Dose of AAVHSC Packaging a Human Phenylalanine Hydroxylase Transgene” showed that HMI-102 showed an effect to mouse Phe levels just one week after dosing – in fact, mouse Phe levels remained relatively flat after that first drop.

This would imply that the therapy shows its effect soon after dosing and the longer timelines contemplated in the study endpoints are to indicate that the effect is long lasting. Sure enough, we see a similar dynamic in the pheNIX trial data released by FIXX in December 2019. There were 3 patients examined here – from the 10-k: “(n=2 patients in the low-dose Cohort 1 and n=1 patient in the mid-dose Cohort 2) as of the data cutoff of December 2, 2019. A fourth patient was dosed in Cohort 2 subsequent to the data cutoff date and was therefore not included in the analysis.”

In this release, we see the two patients in the low-dose cohort experienced no improvement in fasting Phe after dosing or even 12 weeks later. The cohort 2 patient, getting a mid-dose, showed an improvement in Phe level immediately after dosing, but their Phe level did not fall below the 360 umol/L threshold defined as the primary endpoint (it stayed around 500) calling into question the efficacy of the treatment, which Med Genie mentions in their piece (from the 10-k):

Damning revelations

On March 5, 2020, a woman we will call Miss A started a Facebook group (since made private or taken down on April 15, 2020) to discuss her experience getting gene therapy for PKU:

On March 9, 2020, Miss A, who lives in Normal, IL tells us she’s going to Chicago, which happens to be one of the pheNIX trial sites:

The next day, Miss A provides us with enough to data to know that she is Patient 5, part of the high dose cohort 3 in FIXX’s HMI-102 trial (cohort 3, mentioned by Miss A, would be the next dose up from the cohort 2, the mid-dose cohort):

Dr. Burton appears to be Dr. Barbara K. Burton, a physician focused on PKU at the Ann & Robert H. Lurie Children’s Hospital of Chicago, a trial site mentioned in the pheNIX trial description on clinicaltrials.gov:

This, taken together with the fact that Biomarin’s own PKU trial was in too early a stage to enroll a Cohort 3 patient in March 2020, it’s probably safe to say that Miss A is taking part in FIXX’s pheNIX trial.

On March 11, Miss A receives her infusion:

Miss A then shares a series of updates on how she is feeling and the progress of her weekly visits post-infusion. Six days post infusion, she says she hasn’t gotten any test results back, but that it may take 2 or 3 weeks to get a Phe level:

27 days post-infusion, Miss A tells a FB commenter that she won’t get Phe levels till six weeks post-infusion:

And then 35 days post-infusion, on April 15, 2020, a bombshell – Miss A gets her Phe levels, and at 25 mg/dL or 1497uMol/L, they are well above the 360 uMol/L endpoint threshold after 5 weeks (and after the drug typically takes effect), suggesting that HMI-102 is not efficacious even for a high dose patient:

Just a few hours after her post, Miss A’s entire group is either taken down or made private, perhaps at the demands of FIXX itself.

Management’s disclosure problem

We believe that management was aware of this post and tried to manage the perception of it by talking to the sell side and to select investors. In fact, Oppenheimer’s equity sales desk was sharing the below email conversation between their analyst Matt Biegler and FIXX’s Theresa McNeely to explain the price action on April 15th:

Who was Theresa planning to speak to? We know that Baird’s Madhu Kumar got a call:

But when we asked Theresa ourselves, she was much less forthcoming:

It appears to us that FIXX chose to inform the sell side and potential larger investors, who appear to be selling the stock (it has dramatically underperformed biotech broadly), but not the average investor. This is a significant red flag that investors should be aware of.

Why all this matters

Because the mouse study and the Cohort 2 data showed an effect to Phe levels one week after dosing rather than a gradual reduction, we can conclude that Miss A’s level, at 1497 uMol/L, is probably not going to get better, unfortunately. Further, her levels several weeks into the trial are still much higher than the threshold level specified in the primary endpoint of 360 uMol/L. This means that the therapy is showing zero efficacy even for a high dose patient. This data point is damning given the size of the trial and importance of the high dose patient in light of the lack of efficacy in the low and mid-dose cohorts.

Now the sell side may parrot management and say that there is no way to know whether Miss A is who she says she is, but the evidence is certainly strong supporting her case. They may say that there was no way for her to know her Phe level, but her posts show that she expected to receive them. They may also say that the drug is safe, and that liver enzyme elevation should be expected in a therapy like HMI-102, but that’s all beside the point. The point is that the Phe level Miss A received 5 weeks after infusion show that HMI-102 is not efficacious.

These results support the skepticism around FIXX’s use of the AAVHSC vector in liver directed gene therapy, which, based on the results thus far, and in particular Miss A’s results, appear to show zero efficacy and thus makes it inferior to Biomarin’s AAV5 vector.

Furthermore, if management thought this information was material enough to talk to the sell side analysts covering the stock, why not put it in an 8-k or even a press release for the benefit of their entire shareholder base? Given the materiality of the information, wouldn’t all shareholders have benefited from the same level of disclosure rather than be kept in the dark? This is behavior consistent with that of MDXG and ALLK, both companies with executives formerly from reputed companies who have seen their stock prices demolished.

For FIXX, we believe that this is a huge problem – the HMI-102 pheNIX trial is the ONLY program in their portfolio that is in the Phase 1/2 stage, and thus the primary path to viability for the company. With this piece of data showing that HMI-102 is not efficacious, we believe that the program is likely worthless and unlikely to proceed to commercialization. While FIXX may try to apply HMI-102 to other indications, we believe that doing so would essentially restart the trial and approval clock without making up for the lost time to market from a failed PKU trial.

Furthermore, social media matters. While FIXX management may be dismissive of people posting on Facebook, these posts have value. In the case of Allakos (ALLK), Seligman Research put together a barn burner of a report which included numerous Facebook posts questioning the efficacy, safety, and trial design of ALLK’s drug candidate. Since that report, ALLK stock is down approximately 51%, and ALLK actually has several later stage trials.

In the case of FIXX, we believe that HMI-102 in PKU is the ONLY path to viability – given the lack of efficacy of HMI-102 at high dose, we believe that the HMI-102 program is dead, and that the stock should trade to its cash value per share, or $5.80 per share, down 56% from the April 27th close price.