RESEARCH REPORT UPDATE BPMX: A SPECIALTY PHARMA CO
Post# of 223
Posted On: 10/08/2015 1:39:08 AM
RESEARCH REPORT UPDATE BPMX: A SPECIALTY PHARMA COMPANY WITH A FOCUS ON WOMEN’S HEALTH AND DERMATOLOGY
10/07/2015 By Grant Zeng, CFA
Overview
BioPharmX Corporation (NYSE:BPMX) is a specialty pharmaceutical company focused on utilizing its proprietary drug delivery technologies to develop and commercialize novel prescription and over-the-counter (OTC) products that address large markets in women’s health and dermatology.
BPMX aims to develop products that target two health or age-related conditions:
Which are not presently being addressed or treated at all or
Which are currently treated with drug therapies or drug delivery approaches that are suboptimal.
In order to achieve the above objectives, The Company utilizes a unique strategy designed to bring new products to market by identifying optimal delivery mechanisms and/or alternative applications for FDA-approved active pharmaceutical ingredients (APIs). A big advantage of the company’s strategy is that it can reduce the time, costs and risks typically associated with new product development by repurposing drugs with demonstrated safety profiles, taking advantage of the regulatory approval pathway under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act available for repurposed/reformulated drugs.
BPMX’s management team has experience in formulation development, intellectual property generation, clinical trial execution, regulatory strategy definition and commercialization of products through licensing as well as direct to consumer. The company’s business model is to outsource its manufacturing and at times commercialization activities in order to maintain its focus on technology sourcing, acquisitions, and strategic partner development to create new products to address unmet needs in well-defined global markets.
Currently, BPMX’s product portfolio targets significant market opportunities and includes one commercial OTC product VI2OLET (dietary supplement molecular iodine tablet) and two clinical stage product candidates: (1) BPX01, a topical antibiotic for the treatment of acne and (2) BPX03, a molecular iodine (I2) tablet for the treatment of breast discomfort associated with fibrocystic breast condition (FBC) and cyclic mastalgia.
VI2OLET, A Commercial Product, May Generate Meaningful Revenue in 2016
As the company’s first commercial product, VI2OLET is a once-a-day OTC dietary supplement molecular iodine tablet (3.0 mg daily iodine supplement) that promotes overall breast health and is for the alleviation of benign breast pain associated with fibrocystic breast condition (FBC).
The Company commercially launched VI2OLET at the end of 2014 and is rolling out the product in drug store and retail chains throughout the US. VI 2 OLET is currently available for sale in approximately 2,960 CVS retail pharmacy chains and 650 Vitamin Shoppe stores throughout the United States, as well as online through drugstore.com and walgreens.com.
The commercial launch of VI 2 OLET iodine is supported by an extensive consumer marketing program targeting women between the ages of 30 and 44. With a combination of brand and shopper marketing, both nationally and locally, the company is generating awareness, engagement, education, consideration and purchase interest.
So far, revenue from the product sales is minimal, but we believe the product will generate meaningful revenue for the company in calendar 2016 resulting from the company’s focused and integrated marketing strategy.
VI 2 OLET iodine is the only OTC molecular iodine dietary supplement that addresses cyclic breast discomfort and is clinically demonstrated to alleviate the symptoms associated with fibrocystic breast changes including tenderness, swelling and aches. The company’s patented molecular iodine (I2) formula is delivered to breast tissue and reduces the breast cell build-up that results in breast discomfort. Women who suffer from menstrual-related breast discomfort are recommended to take one tablet per day on an empty stomach for at least 60 days to realize initial symptom relief. They may take a second tablet every evening if they have more severe symptoms. Additionally, with consistent daily use, VI 2 OLET iodine has been shown to help maintain healthy breast tissue.
FBC, an Unmet Medical Need
Fibrocystic breast condition (FBC) is the generally accepted term to describe breast discomfort caused by the influx of hormones during the menstrual cycle. Previously referred to as “fibrocystic breast disease,” the terminology was changed due to the fact that the breast changes are benign (harmless). Healthcare professionals now prefer to refer to the condition as “fibrocystic breasts,” “fibrocystic breast changes” or “fibrocystic breast condition.”
Fibrocystic breasts are composed of tissue that feels lumpy or rope-like in texture. Doctors call this nodular or glandular breast tissue. It's not uncommon to have fibrocystic breasts. More than half of women experience fibrocystic breast condition at some point in their lives. Although FBC is normal, it can cause breast pain, tenderness and lumpiness. Breast symptoms tend to be most bothersome just before menstruation.
FBC occurs most often in women in their 20s to 50s. Rarely do postmenopausal women experience FBC, unless they're on hormone therapy. FBC affects millions of women. In the US alone, about 37.5 million women suffer from the symptoms of FBC each month – a cycle of breast tenderness, aches, swelling, heaviness and, for many, even acute pain caused by high levels of estrogen and prolactin. While it’s best known for its role in the production of milk, prolactin also causes breast cells to build up month after month with each menstrual cycle. This buildup results in swollen breast tissue, which can develop into lumps and masses that put pressure on surrounding nerves, leading to breast discomfort that can last anywhere from several days to a few weeks each month.
If the symptoms are mild, no treatment is needed for FBC. However, severe pain or large, painful cysts associated with fibrocystic breasts may warrant treatment. Fine-needle aspiration and surgical excision are used to relieve the symptoms, but both methods are invasive, therefore are rarely used. OTC pain killer is used to relieve FBC related breast pain, but does not solve the root problem.
Previously, healthcare professionals have not been able to prescribe their patients an effective remedy to address breast discomfort without side effects. For example, oral contraceptives are sometimes prescribed for lowering the levels of cycle-related hormones linked to FBC, but long term use of oral contraceptives have serious side effects such as severe headache, chest pain and shortness of breath.
However, now scientists have confirmed that molecular iodine is clinically demonstrated to be effective in alleviating the most common symptoms of fibrocystic breast condition, including tenderness, aches, heaviness and swelling.
Iodine’s primary role in the body is in the creation of the thyroid hormones, T3 and T4. The thyroid absorbs iodine to make and release these hormones into the blood. In addition to supporting proper thyroid function, iodine has other important effects, including maintenance of healthy breasts. Iodine-deficient breast tissue is an underlying cause of fibrocystic breast condition. Multiple studies show that iodine supplementation reduces indications of this condition.
There are two primary forms of iodine for human consumption: iodide (I-) and molecular iodine (I2). The thyroid more readily absorbs I- over I2, which can lead to a change in delicate hormone levels in the thyroid. Iodine from I2 is absorbed into the thyroid at a lower rate than iodine from iodide and at a higher rate into breast tissue making molecular iodine the preferred form for breast health. Therefore, molecular iodine is superior over iodides when treating fibrocystic breast condition.
Clinical studies have shown that a daily regimen of molecular iodine can provide relief from cyclic breast discomfort. Molecular iodine has been used in clinical trials of 1476 women. A recent study showed that up to 74% of women experienced improvement in their breast discomfort. Following table summarizes the results from a recent study involved 2,242 women who were given one of three treatment protocols. This study clinically examined different forms of iodine for treatment of FBC and demonstrated safety differences between molecular iodine and iodide.
BPX03, a Phase III Ready Candidate, further Strengths the Company’s FBC Franchise
In addition to OTC molecular iodine VI2OLET, BPMX is also developing a prescription molecular iodine tablet, BPX03, for the treatment of benign breast pain associated with FBC and cyclic mastalgia. BPX03 is intended for global distribution, where prescription products may be required due to regulatory requirements.
BPMX licensed both VI2OLET and BXP03 from Iogen in March 2013. Under the terms of the agreement, BPMX received an exclusive worldwide perpetual irrevocable license to Iogen's patented technology relating to an oral iodine tablet. In exchange, BioPharmX agreed to pay to Iogen a non-refundable license issue fee of $150,000, and 30% of net profit associated with direct commercialization of an OTC iodine tablet product or 30% of net royalties received from any sub-licensee. For other products developed and commercialized using licensed technology and associated intellectual property covered by this agreement, including a prescription iodine tablet, BPMX agreed to pay to Iogen a royalty of 3% of net sales for the first 12 months of commercialization and 2% of net sales thereafter.
BPX03, like OTC VI2OLET, is a new non-hormone treatment for FBC and mastalgia. BPX03 promotes antiproliferative and apoptotic activity in breast tissue. Prior sponsor has completed a Phase I and a Phase II study which demonstrated that BPX03 was safe and well tolerated. BPX03 also demonstrated statistically significant improvement of FBC symptoms at 3-6 mg does in the completed Phase II trial.
BPMX is preparing to conduct a pivotal Phase III safety and efficacy clinical study, which is intended to support the FDA and foreign regulatory requirements. The company also plans to initiate an institutional review board (IRB) pilot study in late 2015 for the preparation of the planned pivotal Phase III study. The pilot study will enroll 120 subjects for a 9-month treatment. Based on data from the pilot study, BPMX intends to commence the Phase III study in 4Q16.
We estimate data from the Phase III trial should be available in mid-2017. A NDA will be submitted in late 2017, and a final nod from the FDA will be obtained in 2H18. BioPharmX will seek approval only in those countries where the company will seek to market the prescription product.
We believe the company’s FBC franchise will be greatly strengthened by the addition of prescription molecular iodine. With both OTC and prescription iodine, BioPharmX is poised to be the market leader in the unmet FBC market.
Peak sales from the company’s VI2OLET and BXP03 could reach $250 million globally.
BPX01, a Topical Minocycline, for Acne
BioPharmX is also developing BPX01, a non-lipophilic, topical antibiotic for the treatment of acne. BPX01 utilizes a transepidermal delivery mechanism for minocycline and other APIs that has the potential to kill p. acnes bacteria without the systemic side effects of orally-administered antibiotics.
Background on Minocycline
Minocycline is a broad-spectrum tetracycline antibiotic, and has a broader spectrum than the other members of the group. It is a bacteriostatic antibiotic, classified as a long-acting type. As a result of its long half-life it generally has serum levels 2–4 times that of the simple water-soluble tetracyclines.
Minocycline is the most lipid-soluble of the tetracycline-class antibiotics, giving it the greatest penetration into the prostate and brain, but also the greatest amount of central nervous system (CNS)-related side effects, such as vertigo. A common side effect is diarrhea. Uncommon side effects (with prolonged therapy) include skin discoloration and autoimmune disorders that are not seen with other drugs in the class.
Minocycline and doxycycline are the two most frequently used oral antibiotics for the treatment of acne vulgaris. Both of these closely related antibiotics have similar levels of efficacy, although doxycycline has a slightly lower risk of adverse side effects.
The most common side effects of minocycline include upset stomach, diarrhea, dizziness, unsteadiness, drowsiness, mouth sores, headache and vomiting. Occasionally minocycline therapy may result in autoimmune disorders such as drug related lupus and auto-immune hepatitis. Minocycline can cause vestibular disturbances with dizziness, ataxia, vertigo and tinnitus. These effects are again thought to be related to minocycline's greater penetration into the central nervous system. Vestibular side effects are much more common in women than in men, occurring in 50% to 70% of women receiving minocycline. As a result of the frequency of this bothersome side effect, minocycline is rarely used in female patients.
BPX01’s Advantages over Oral Minocycline
All the side effects discussed above limit the use of oral minocycline for the treatment of acne. As a result, BioPharmX formulated BPX01 as a topical cream using a proprietary drug delivery technology. BPX01 is a new anhydrous, non-oil based topical antibiotic targeting acne bacteria.
BPX01 is designed to have several advantages compared to both orally-administered and other topically-administered retinoid- and antibiotic-based solutions. Advantages of BPX01 include:
topical delivery of minocycline,
controlled dosages targeted directly to affected area,
increased delivery of API at low dosages,
non-lipophilic design allowing for faster absorption by the skin,
potential lower risk of systemic side effects common to orally administered antibiotics,
Gel-like form rubs on like a sanitizer.
In addition, BPX01 has been shown in pre-clinical studies to possess anti-inflammatory properties, which reduce swelling and slow hyper-cornification.
In March 2015, BioPharmX completed its planned pre-IND (Investigational New Drug) meeting with the US FDA which was focused on the company's proposed strategy for advancing BPX01and plans for conducting safety and toxicology studies, along with human clinical trials. Following the conclusion of the meeting, the company believes that it has sufficient guidance from the FDA for advancing toward an IND application for phase II clinical trials.
BPMX is currently conducting an animal toxicity study, after which the company will submit an IND to the FDA to initiate its first Phase IIa clinical trial of BPX01. The company is also preparing to conduct a bridging safety study using oral minocycline as the comparator and a Phase II dose-finding clinical study for BPX01.
BPMX intends to pursue regulatory approval of BPX01 under Section 505(b)(2) of the FDC Act. The 505(b)(2) regulatory pathway may reduce the drug development risks and costs by using prior findings of safety and/or efficacy for an approved product. In BPX01 case, part of the safety and efficacy data from the oral formulation of minocycline may be used for the filing of a NDA for BPX01.
If everything goes well, we estimate BPX01 will be approved by the FDA in calendar 2019. Peak sales of BPX01 should be around $450 million.
BPX01 Target the Big Acne Market
Background of Acne
Acne vulgaris (or simply acne) is a long-term skin condition characterized by areas of blackheads, whiteheads, pimples, greasy skin, and possibly scarring. The resulting appearance may lead to anxiety, reduced self-esteem, and in extreme cases, depression.
Acne is the most common skin condition in the United States and around the world. According to American Academy of Dermatology, about 40 to 50 million Americans have acne at any one time. Worldwide, about 650 million people are affected by acne. Further, not just teens have acne. A growing number of women have acne in their 30s, 40s, 50s, and beyond. Adult acne can be particularly frustrating.
What exactly causes acne is still unknown, but research has shown that genetics is estimated to be the cause of 80% of cases. Acne mostly affects skin with a greater number of oil glands including the face, upper part of the chest, and back. During puberty in both sexes, acne is often brought on by an increase in androgens such as testosterone. Excessive growth of the bacteria Propionibacterium acnes, which is normally present on the skin, is often involved.
Propionibacterium acnes (P. acnes) is the anaerobic bacterium species that is widely suspected to contribute to the development of acne, but its exact role in this process is not entirely clear. There are specific sub-strains of P. acnes associated with normal skin and others with moderate or severe inflammatory acne. It is unclear whether these undesirable strains evolve on-site or are acquired, or possibly both depending on the person. These strains either have the capability of changing, perpetuating, or adapting to, the abnormal cycle of inflammation, oil production, and inadequate sloughing of acne pores.
Treatment Options for Acne
Many different treatments exist for acne including benzoyl peroxide, antibiotics, retinoids, antiseborrheic medications, anti-androgen medications, hormonal treatments, salicylic acid, alpha hydroxy acid, azelaic acid, nicotinamide, and keratolytic soaps. They are believed to work in at least four different ways, including the following:
normalizing skin cell shedding and sebum production into the pore to prevent blockage,
killing P. acnes,
anti-inflammatory effects, and
hormonal manipulation.
Antibiotics, including topical and oral antibiotics, are frequently used to treat acne by killing P. Acnes. While topical antibiotics are frequently used for mild to moderate severe acne, oral antibiotics are indicated for moderate to severe cases of inflammatory acne due to their antimicrobial activity against P. acnes in conjunction with anti-inflammatory properties. They are believed to work both by decreasing the number of bacterial and as an anti-inflammatory.
The Acne Market
The US market for acne prescription medication was about $3.3 billion in 2014 with 53% for topical treatment and 47% for oral treatment.
Commonly used oral medications are oral antibiotics which include doxycycline and minocycline with total sales of $1.5 billion in 2014. Valeant and Galderma are the two companies with the most market share.
Commonly used topical medications for acne include adapalene, benzoyl peroxide, clindamycin, dapsone, azelaic acid, and tretinoin. Sales from topical medications were $1.7 million in 2014. Key players in the topical market include Galderma, Bayer and Valeant.
BPX01 targets the topical antibiotic market for acne. We believe, once approved, BPX01 should be able to capture a fair share of the total topical market with peak sales around $450 million.
BPX02, A Biologic for Dermatology
BioPharmX has a collaboration and supply agreement with NuTech, a private biologics company specializing in the spinal and orthopedics market. This agreement describes the collaboration between Nutech and BioPharmX to develop products in the field of dermatology. Products and intellectual property developed under this agreement are exclusively owned by BioPharmX and licensed to NuTech for use in indications outside of dermatology. In exchange for an exclusive license to NuTech's intellectual property in the field of dermatology, BioPharmX will pay to NuTech a royalty of 3% of net sales on product sold in the field of dermatology. In exchange for granting NuTech an exclusive license to BioPharmX IP and IP developed in collaboration with NuTech in indications outside of dermatology, BioPharmX shall receive from NuTech a royalty of 3% of net sales on products sold by them.
BPX02, which is developed in collaboration with NuTech, is a biologic for the dermatology indications. This candidate is still in R&D stage, but we believe it will further strengthen the company’s dermatology franchise. We will keep investors posted when we have any update on this product development.
Up-listing to NYSE MKT Raises Company Visibility Significantly
BioPharmX shares were up-listed in NYSE MKT in July 2015, which, we believe, greatly raises the company’s visibility.
Previously, the company’s shares were traded OTC. We all know that there is a limited market for a company’s common stocks, if they are quoted on the over-the-counter market (OTC). Trading in stocks quoted on the OTC market is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with the Company’s operations or business prospects.
Moreover, the OTC market is not a stock exchange, and trading of securities there is often more sporadic than the trading of securities listed on a quotation system like NASDAQ or a stock exchange like NYSE. There is no assurance that a sufficient market will develop or remain stable in the stock, in which case it could be difficult for stockholders to resell their stocks. Liquidity is also an issue for institutional investors.
We believe the uplisting significantly increases the Company’s visibility and will attract institutional investors, therefore increase the liquidity of the Company’s shares.
Balance Sheet Boosted by Recent Financing
As of July 31, 2015, BioPharmX had cash and cash equivalents of $7.4 million, compared to $1.3 million on January 31, 2015. The working capital was $3.9 million as of July 31, 2015.
In June, 2015, the company completed a public offering of 3,636,364 shares of its common stock at a price to the public of $2.75 per share, which generated net proceeds of $7.8 million. The company also issued an unsecured convertible note with a principal amount of $0.5 million, which was automatically converted into common stock upon the uplisting to the NYSE MKT.
In addition, Korea Investment Partners (KIP) Overseas Expansion Platform Fund, an existing stockholder of the company, has agreed to purchase 1,081,081 shares of common stock from BioPharmX in a private placement in connection with the successful uplisting of the company's common stock to the NYSE MKT.
This private placement was anticipated to close within 15 business days of the uplisting of the company's common stock to the NYSE MKT on June 25, 2015. But as of September 14, 2015, the KIP private placement had not closed and the Company has notified KIP that KIP’s obligation to pay the $2.0 million purchase price to the Company has become due and payable under the subscription agreement.
BPMX Shares are Undervalued
We are initiating coverage of BioPharmX (BPMX) with a Buy rating. Our 12-month price target is $3.00 per share.
BPMX is a specialty pharmaceutical company with a focus on women’s health and dermatology. We believe that the industry dynamics in the areas of women's health and dermatology represent significant opportunities for innovative new products to emerge as attractive solutions for unmet needs in multi-billion dollar therapeutic categories. In particular, we believe that both the women's health and dermatology markets are large specialty markets with significant global patient demand.
On the front of women’s health, BPMX is marketing an OTC molecular VI2OLET for the treatment of fibrocystic breast condition (FBC). Although sales of VI2OLET have been minimal so far since it was launched at the end of 2014, we believe sales could pick up steam in the calendar 2016 due to the company’s focused and integrated marketing strategy.
In addition to the marketed OTC product VI2OLET, BioPharmX is also developing BPX03, the company’s prescription molecular iodine, for FBC. BPX03 will enter pivotal Phase III trial in 4Q16, which we expect will be approved in 2018. If approved, BPX03 will complement the company’s currently marketed OTC molecular Iodine VI2OLET. With both OTC and prescription Iodine, BPMX is poised to become the market leader in FBC market.
The multi-billion dollar acne market is the next target for BioPharmX. The company’s BPX01, a topical formulation of minocycline, will enter Phase II study in 1Q16. If everything goes well, we expect BPX01 to be approved in 2019. The company’s dermatology franchise will be further boosted by the successful development of BXP02, a biologic under R&D stage for the dermatology indications.
With three products on the market in 2019, BioPharmX will become a key player in the two targeted markets of women’s health and dermatology.
We are also happy with the company’s development strategy. BPMX utilizes a unique strategy designed to bring new products to market by identifying optimal delivery mechanisms and/or alternative applications for FDA-approved active pharmaceutical ingredients (APIs). A big advantage of the company’s strategy is that it can reduce the time, costs and risks typically associated with new product development by repurposing drugs with demonstrated safety profiles, taking advantage of the regulatory approval pathway under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act available for repurposed/reformulated drugs.
With all that said, when it comes to the company’s valuation, we believe the company’s shares are undervalued at current market price. Currently the company’s shares are trading at about $1.2 per share, which values the company at $25 million in market capitalization based on 21 million outstanding shares. This is certainly a deep discount.
As we discussed above, by 2019, BioPharmX will have three commercially available products targeting the two big markets: women’s health and acne. Based on our financial model, BPMX will become profitable in fiscal 2020 with an earnings per share (EPS) of $0.26 based on total revenue of $50 million. Considering the company’s growth potential, we think a P/E multiple of 25 should be used to value the company. Therefore, we come up with our price target of $3.00 per share based on the 25x P/E ratio, discounted at 20% for four years. Our price target of $3.00 per share values the company at $63 million in market cap, which is still conservative in our view.
But keep in mind the risks.
Our model assumes product approval of BPX03 and BPX01 in 2018 and 2019 respectively. Investors should know that any drug development is a high risk business that will navigate through both clinical and regulatory hurdles, which has proven to be high. Although the company’s development strategy reduces risks associated with drug development, a failure of clinical trial or/and regulatory approval can’t be completely ruled out. This will make the company’s shares to decline dramatically.
Another concern we have is the company’s cash balance. Although the company raised about $7.8 million in June 2015, which boosted its balance sheet, we believe the company may need to raise new funds soon to advance its pipeline, specifically its Phase II candidate BPX01 and Phase III candidate BPX03. We estimate the company may need to tap the capital market as soon as in the mid-2016. We remind investors that any equity financing will dilute existing shareholder base, and cause share price to decline.
But overall, we think BPMX is a name with relatively favorable risk/reward profile for investors with a long term investment horizon.
10/07/2015 By Grant Zeng, CFA
Overview
BioPharmX Corporation (NYSE:BPMX) is a specialty pharmaceutical company focused on utilizing its proprietary drug delivery technologies to develop and commercialize novel prescription and over-the-counter (OTC) products that address large markets in women’s health and dermatology.
BPMX aims to develop products that target two health or age-related conditions:
Which are not presently being addressed or treated at all or
Which are currently treated with drug therapies or drug delivery approaches that are suboptimal.
In order to achieve the above objectives, The Company utilizes a unique strategy designed to bring new products to market by identifying optimal delivery mechanisms and/or alternative applications for FDA-approved active pharmaceutical ingredients (APIs). A big advantage of the company’s strategy is that it can reduce the time, costs and risks typically associated with new product development by repurposing drugs with demonstrated safety profiles, taking advantage of the regulatory approval pathway under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act available for repurposed/reformulated drugs.
BPMX’s management team has experience in formulation development, intellectual property generation, clinical trial execution, regulatory strategy definition and commercialization of products through licensing as well as direct to consumer. The company’s business model is to outsource its manufacturing and at times commercialization activities in order to maintain its focus on technology sourcing, acquisitions, and strategic partner development to create new products to address unmet needs in well-defined global markets.
Currently, BPMX’s product portfolio targets significant market opportunities and includes one commercial OTC product VI2OLET (dietary supplement molecular iodine tablet) and two clinical stage product candidates: (1) BPX01, a topical antibiotic for the treatment of acne and (2) BPX03, a molecular iodine (I2) tablet for the treatment of breast discomfort associated with fibrocystic breast condition (FBC) and cyclic mastalgia.
VI2OLET, A Commercial Product, May Generate Meaningful Revenue in 2016
As the company’s first commercial product, VI2OLET is a once-a-day OTC dietary supplement molecular iodine tablet (3.0 mg daily iodine supplement) that promotes overall breast health and is for the alleviation of benign breast pain associated with fibrocystic breast condition (FBC).
The Company commercially launched VI2OLET at the end of 2014 and is rolling out the product in drug store and retail chains throughout the US. VI 2 OLET is currently available for sale in approximately 2,960 CVS retail pharmacy chains and 650 Vitamin Shoppe stores throughout the United States, as well as online through drugstore.com and walgreens.com.
The commercial launch of VI 2 OLET iodine is supported by an extensive consumer marketing program targeting women between the ages of 30 and 44. With a combination of brand and shopper marketing, both nationally and locally, the company is generating awareness, engagement, education, consideration and purchase interest.
So far, revenue from the product sales is minimal, but we believe the product will generate meaningful revenue for the company in calendar 2016 resulting from the company’s focused and integrated marketing strategy.
VI 2 OLET iodine is the only OTC molecular iodine dietary supplement that addresses cyclic breast discomfort and is clinically demonstrated to alleviate the symptoms associated with fibrocystic breast changes including tenderness, swelling and aches. The company’s patented molecular iodine (I2) formula is delivered to breast tissue and reduces the breast cell build-up that results in breast discomfort. Women who suffer from menstrual-related breast discomfort are recommended to take one tablet per day on an empty stomach for at least 60 days to realize initial symptom relief. They may take a second tablet every evening if they have more severe symptoms. Additionally, with consistent daily use, VI 2 OLET iodine has been shown to help maintain healthy breast tissue.
FBC, an Unmet Medical Need
Fibrocystic breast condition (FBC) is the generally accepted term to describe breast discomfort caused by the influx of hormones during the menstrual cycle. Previously referred to as “fibrocystic breast disease,” the terminology was changed due to the fact that the breast changes are benign (harmless). Healthcare professionals now prefer to refer to the condition as “fibrocystic breasts,” “fibrocystic breast changes” or “fibrocystic breast condition.”
Fibrocystic breasts are composed of tissue that feels lumpy or rope-like in texture. Doctors call this nodular or glandular breast tissue. It's not uncommon to have fibrocystic breasts. More than half of women experience fibrocystic breast condition at some point in their lives. Although FBC is normal, it can cause breast pain, tenderness and lumpiness. Breast symptoms tend to be most bothersome just before menstruation.
FBC occurs most often in women in their 20s to 50s. Rarely do postmenopausal women experience FBC, unless they're on hormone therapy. FBC affects millions of women. In the US alone, about 37.5 million women suffer from the symptoms of FBC each month – a cycle of breast tenderness, aches, swelling, heaviness and, for many, even acute pain caused by high levels of estrogen and prolactin. While it’s best known for its role in the production of milk, prolactin also causes breast cells to build up month after month with each menstrual cycle. This buildup results in swollen breast tissue, which can develop into lumps and masses that put pressure on surrounding nerves, leading to breast discomfort that can last anywhere from several days to a few weeks each month.
If the symptoms are mild, no treatment is needed for FBC. However, severe pain or large, painful cysts associated with fibrocystic breasts may warrant treatment. Fine-needle aspiration and surgical excision are used to relieve the symptoms, but both methods are invasive, therefore are rarely used. OTC pain killer is used to relieve FBC related breast pain, but does not solve the root problem.
Previously, healthcare professionals have not been able to prescribe their patients an effective remedy to address breast discomfort without side effects. For example, oral contraceptives are sometimes prescribed for lowering the levels of cycle-related hormones linked to FBC, but long term use of oral contraceptives have serious side effects such as severe headache, chest pain and shortness of breath.
However, now scientists have confirmed that molecular iodine is clinically demonstrated to be effective in alleviating the most common symptoms of fibrocystic breast condition, including tenderness, aches, heaviness and swelling.
Iodine’s primary role in the body is in the creation of the thyroid hormones, T3 and T4. The thyroid absorbs iodine to make and release these hormones into the blood. In addition to supporting proper thyroid function, iodine has other important effects, including maintenance of healthy breasts. Iodine-deficient breast tissue is an underlying cause of fibrocystic breast condition. Multiple studies show that iodine supplementation reduces indications of this condition.
There are two primary forms of iodine for human consumption: iodide (I-) and molecular iodine (I2). The thyroid more readily absorbs I- over I2, which can lead to a change in delicate hormone levels in the thyroid. Iodine from I2 is absorbed into the thyroid at a lower rate than iodine from iodide and at a higher rate into breast tissue making molecular iodine the preferred form for breast health. Therefore, molecular iodine is superior over iodides when treating fibrocystic breast condition.
Clinical studies have shown that a daily regimen of molecular iodine can provide relief from cyclic breast discomfort. Molecular iodine has been used in clinical trials of 1476 women. A recent study showed that up to 74% of women experienced improvement in their breast discomfort. Following table summarizes the results from a recent study involved 2,242 women who were given one of three treatment protocols. This study clinically examined different forms of iodine for treatment of FBC and demonstrated safety differences between molecular iodine and iodide.
BPX03, a Phase III Ready Candidate, further Strengths the Company’s FBC Franchise
In addition to OTC molecular iodine VI2OLET, BPMX is also developing a prescription molecular iodine tablet, BPX03, for the treatment of benign breast pain associated with FBC and cyclic mastalgia. BPX03 is intended for global distribution, where prescription products may be required due to regulatory requirements.
BPMX licensed both VI2OLET and BXP03 from Iogen in March 2013. Under the terms of the agreement, BPMX received an exclusive worldwide perpetual irrevocable license to Iogen's patented technology relating to an oral iodine tablet. In exchange, BioPharmX agreed to pay to Iogen a non-refundable license issue fee of $150,000, and 30% of net profit associated with direct commercialization of an OTC iodine tablet product or 30% of net royalties received from any sub-licensee. For other products developed and commercialized using licensed technology and associated intellectual property covered by this agreement, including a prescription iodine tablet, BPMX agreed to pay to Iogen a royalty of 3% of net sales for the first 12 months of commercialization and 2% of net sales thereafter.
BPX03, like OTC VI2OLET, is a new non-hormone treatment for FBC and mastalgia. BPX03 promotes antiproliferative and apoptotic activity in breast tissue. Prior sponsor has completed a Phase I and a Phase II study which demonstrated that BPX03 was safe and well tolerated. BPX03 also demonstrated statistically significant improvement of FBC symptoms at 3-6 mg does in the completed Phase II trial.
BPMX is preparing to conduct a pivotal Phase III safety and efficacy clinical study, which is intended to support the FDA and foreign regulatory requirements. The company also plans to initiate an institutional review board (IRB) pilot study in late 2015 for the preparation of the planned pivotal Phase III study. The pilot study will enroll 120 subjects for a 9-month treatment. Based on data from the pilot study, BPMX intends to commence the Phase III study in 4Q16.
We estimate data from the Phase III trial should be available in mid-2017. A NDA will be submitted in late 2017, and a final nod from the FDA will be obtained in 2H18. BioPharmX will seek approval only in those countries where the company will seek to market the prescription product.
We believe the company’s FBC franchise will be greatly strengthened by the addition of prescription molecular iodine. With both OTC and prescription iodine, BioPharmX is poised to be the market leader in the unmet FBC market.
Peak sales from the company’s VI2OLET and BXP03 could reach $250 million globally.
BPX01, a Topical Minocycline, for Acne
BioPharmX is also developing BPX01, a non-lipophilic, topical antibiotic for the treatment of acne. BPX01 utilizes a transepidermal delivery mechanism for minocycline and other APIs that has the potential to kill p. acnes bacteria without the systemic side effects of orally-administered antibiotics.
Background on Minocycline
Minocycline is a broad-spectrum tetracycline antibiotic, and has a broader spectrum than the other members of the group. It is a bacteriostatic antibiotic, classified as a long-acting type. As a result of its long half-life it generally has serum levels 2–4 times that of the simple water-soluble tetracyclines.
Minocycline is the most lipid-soluble of the tetracycline-class antibiotics, giving it the greatest penetration into the prostate and brain, but also the greatest amount of central nervous system (CNS)-related side effects, such as vertigo. A common side effect is diarrhea. Uncommon side effects (with prolonged therapy) include skin discoloration and autoimmune disorders that are not seen with other drugs in the class.
Minocycline and doxycycline are the two most frequently used oral antibiotics for the treatment of acne vulgaris. Both of these closely related antibiotics have similar levels of efficacy, although doxycycline has a slightly lower risk of adverse side effects.
The most common side effects of minocycline include upset stomach, diarrhea, dizziness, unsteadiness, drowsiness, mouth sores, headache and vomiting. Occasionally minocycline therapy may result in autoimmune disorders such as drug related lupus and auto-immune hepatitis. Minocycline can cause vestibular disturbances with dizziness, ataxia, vertigo and tinnitus. These effects are again thought to be related to minocycline's greater penetration into the central nervous system. Vestibular side effects are much more common in women than in men, occurring in 50% to 70% of women receiving minocycline. As a result of the frequency of this bothersome side effect, minocycline is rarely used in female patients.
BPX01’s Advantages over Oral Minocycline
All the side effects discussed above limit the use of oral minocycline for the treatment of acne. As a result, BioPharmX formulated BPX01 as a topical cream using a proprietary drug delivery technology. BPX01 is a new anhydrous, non-oil based topical antibiotic targeting acne bacteria.
BPX01 is designed to have several advantages compared to both orally-administered and other topically-administered retinoid- and antibiotic-based solutions. Advantages of BPX01 include:
topical delivery of minocycline,
controlled dosages targeted directly to affected area,
increased delivery of API at low dosages,
non-lipophilic design allowing for faster absorption by the skin,
potential lower risk of systemic side effects common to orally administered antibiotics,
Gel-like form rubs on like a sanitizer.
In addition, BPX01 has been shown in pre-clinical studies to possess anti-inflammatory properties, which reduce swelling and slow hyper-cornification.
In March 2015, BioPharmX completed its planned pre-IND (Investigational New Drug) meeting with the US FDA which was focused on the company's proposed strategy for advancing BPX01and plans for conducting safety and toxicology studies, along with human clinical trials. Following the conclusion of the meeting, the company believes that it has sufficient guidance from the FDA for advancing toward an IND application for phase II clinical trials.
BPMX is currently conducting an animal toxicity study, after which the company will submit an IND to the FDA to initiate its first Phase IIa clinical trial of BPX01. The company is also preparing to conduct a bridging safety study using oral minocycline as the comparator and a Phase II dose-finding clinical study for BPX01.
BPMX intends to pursue regulatory approval of BPX01 under Section 505(b)(2) of the FDC Act. The 505(b)(2) regulatory pathway may reduce the drug development risks and costs by using prior findings of safety and/or efficacy for an approved product. In BPX01 case, part of the safety and efficacy data from the oral formulation of minocycline may be used for the filing of a NDA for BPX01.
If everything goes well, we estimate BPX01 will be approved by the FDA in calendar 2019. Peak sales of BPX01 should be around $450 million.
BPX01 Target the Big Acne Market
Background of Acne
Acne vulgaris (or simply acne) is a long-term skin condition characterized by areas of blackheads, whiteheads, pimples, greasy skin, and possibly scarring. The resulting appearance may lead to anxiety, reduced self-esteem, and in extreme cases, depression.
Acne is the most common skin condition in the United States and around the world. According to American Academy of Dermatology, about 40 to 50 million Americans have acne at any one time. Worldwide, about 650 million people are affected by acne. Further, not just teens have acne. A growing number of women have acne in their 30s, 40s, 50s, and beyond. Adult acne can be particularly frustrating.
What exactly causes acne is still unknown, but research has shown that genetics is estimated to be the cause of 80% of cases. Acne mostly affects skin with a greater number of oil glands including the face, upper part of the chest, and back. During puberty in both sexes, acne is often brought on by an increase in androgens such as testosterone. Excessive growth of the bacteria Propionibacterium acnes, which is normally present on the skin, is often involved.
Propionibacterium acnes (P. acnes) is the anaerobic bacterium species that is widely suspected to contribute to the development of acne, but its exact role in this process is not entirely clear. There are specific sub-strains of P. acnes associated with normal skin and others with moderate or severe inflammatory acne. It is unclear whether these undesirable strains evolve on-site or are acquired, or possibly both depending on the person. These strains either have the capability of changing, perpetuating, or adapting to, the abnormal cycle of inflammation, oil production, and inadequate sloughing of acne pores.
Treatment Options for Acne
Many different treatments exist for acne including benzoyl peroxide, antibiotics, retinoids, antiseborrheic medications, anti-androgen medications, hormonal treatments, salicylic acid, alpha hydroxy acid, azelaic acid, nicotinamide, and keratolytic soaps. They are believed to work in at least four different ways, including the following:
normalizing skin cell shedding and sebum production into the pore to prevent blockage,
killing P. acnes,
anti-inflammatory effects, and
hormonal manipulation.
Antibiotics, including topical and oral antibiotics, are frequently used to treat acne by killing P. Acnes. While topical antibiotics are frequently used for mild to moderate severe acne, oral antibiotics are indicated for moderate to severe cases of inflammatory acne due to their antimicrobial activity against P. acnes in conjunction with anti-inflammatory properties. They are believed to work both by decreasing the number of bacterial and as an anti-inflammatory.
The Acne Market
The US market for acne prescription medication was about $3.3 billion in 2014 with 53% for topical treatment and 47% for oral treatment.
Commonly used oral medications are oral antibiotics which include doxycycline and minocycline with total sales of $1.5 billion in 2014. Valeant and Galderma are the two companies with the most market share.
Commonly used topical medications for acne include adapalene, benzoyl peroxide, clindamycin, dapsone, azelaic acid, and tretinoin. Sales from topical medications were $1.7 million in 2014. Key players in the topical market include Galderma, Bayer and Valeant.
BPX01 targets the topical antibiotic market for acne. We believe, once approved, BPX01 should be able to capture a fair share of the total topical market with peak sales around $450 million.
BPX02, A Biologic for Dermatology
BioPharmX has a collaboration and supply agreement with NuTech, a private biologics company specializing in the spinal and orthopedics market. This agreement describes the collaboration between Nutech and BioPharmX to develop products in the field of dermatology. Products and intellectual property developed under this agreement are exclusively owned by BioPharmX and licensed to NuTech for use in indications outside of dermatology. In exchange for an exclusive license to NuTech's intellectual property in the field of dermatology, BioPharmX will pay to NuTech a royalty of 3% of net sales on product sold in the field of dermatology. In exchange for granting NuTech an exclusive license to BioPharmX IP and IP developed in collaboration with NuTech in indications outside of dermatology, BioPharmX shall receive from NuTech a royalty of 3% of net sales on products sold by them.
BPX02, which is developed in collaboration with NuTech, is a biologic for the dermatology indications. This candidate is still in R&D stage, but we believe it will further strengthen the company’s dermatology franchise. We will keep investors posted when we have any update on this product development.
Up-listing to NYSE MKT Raises Company Visibility Significantly
BioPharmX shares were up-listed in NYSE MKT in July 2015, which, we believe, greatly raises the company’s visibility.
Previously, the company’s shares were traded OTC. We all know that there is a limited market for a company’s common stocks, if they are quoted on the over-the-counter market (OTC). Trading in stocks quoted on the OTC market is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with the Company’s operations or business prospects.
Moreover, the OTC market is not a stock exchange, and trading of securities there is often more sporadic than the trading of securities listed on a quotation system like NASDAQ or a stock exchange like NYSE. There is no assurance that a sufficient market will develop or remain stable in the stock, in which case it could be difficult for stockholders to resell their stocks. Liquidity is also an issue for institutional investors.
We believe the uplisting significantly increases the Company’s visibility and will attract institutional investors, therefore increase the liquidity of the Company’s shares.
Balance Sheet Boosted by Recent Financing
As of July 31, 2015, BioPharmX had cash and cash equivalents of $7.4 million, compared to $1.3 million on January 31, 2015. The working capital was $3.9 million as of July 31, 2015.
In June, 2015, the company completed a public offering of 3,636,364 shares of its common stock at a price to the public of $2.75 per share, which generated net proceeds of $7.8 million. The company also issued an unsecured convertible note with a principal amount of $0.5 million, which was automatically converted into common stock upon the uplisting to the NYSE MKT.
In addition, Korea Investment Partners (KIP) Overseas Expansion Platform Fund, an existing stockholder of the company, has agreed to purchase 1,081,081 shares of common stock from BioPharmX in a private placement in connection with the successful uplisting of the company's common stock to the NYSE MKT.
This private placement was anticipated to close within 15 business days of the uplisting of the company's common stock to the NYSE MKT on June 25, 2015. But as of September 14, 2015, the KIP private placement had not closed and the Company has notified KIP that KIP’s obligation to pay the $2.0 million purchase price to the Company has become due and payable under the subscription agreement.
BPMX Shares are Undervalued
We are initiating coverage of BioPharmX (BPMX) with a Buy rating. Our 12-month price target is $3.00 per share.
BPMX is a specialty pharmaceutical company with a focus on women’s health and dermatology. We believe that the industry dynamics in the areas of women's health and dermatology represent significant opportunities for innovative new products to emerge as attractive solutions for unmet needs in multi-billion dollar therapeutic categories. In particular, we believe that both the women's health and dermatology markets are large specialty markets with significant global patient demand.
On the front of women’s health, BPMX is marketing an OTC molecular VI2OLET for the treatment of fibrocystic breast condition (FBC). Although sales of VI2OLET have been minimal so far since it was launched at the end of 2014, we believe sales could pick up steam in the calendar 2016 due to the company’s focused and integrated marketing strategy.
In addition to the marketed OTC product VI2OLET, BioPharmX is also developing BPX03, the company’s prescription molecular iodine, for FBC. BPX03 will enter pivotal Phase III trial in 4Q16, which we expect will be approved in 2018. If approved, BPX03 will complement the company’s currently marketed OTC molecular Iodine VI2OLET. With both OTC and prescription Iodine, BPMX is poised to become the market leader in FBC market.
The multi-billion dollar acne market is the next target for BioPharmX. The company’s BPX01, a topical formulation of minocycline, will enter Phase II study in 1Q16. If everything goes well, we expect BPX01 to be approved in 2019. The company’s dermatology franchise will be further boosted by the successful development of BXP02, a biologic under R&D stage for the dermatology indications.
With three products on the market in 2019, BioPharmX will become a key player in the two targeted markets of women’s health and dermatology.
We are also happy with the company’s development strategy. BPMX utilizes a unique strategy designed to bring new products to market by identifying optimal delivery mechanisms and/or alternative applications for FDA-approved active pharmaceutical ingredients (APIs). A big advantage of the company’s strategy is that it can reduce the time, costs and risks typically associated with new product development by repurposing drugs with demonstrated safety profiles, taking advantage of the regulatory approval pathway under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act available for repurposed/reformulated drugs.
With all that said, when it comes to the company’s valuation, we believe the company’s shares are undervalued at current market price. Currently the company’s shares are trading at about $1.2 per share, which values the company at $25 million in market capitalization based on 21 million outstanding shares. This is certainly a deep discount.
As we discussed above, by 2019, BioPharmX will have three commercially available products targeting the two big markets: women’s health and acne. Based on our financial model, BPMX will become profitable in fiscal 2020 with an earnings per share (EPS) of $0.26 based on total revenue of $50 million. Considering the company’s growth potential, we think a P/E multiple of 25 should be used to value the company. Therefore, we come up with our price target of $3.00 per share based on the 25x P/E ratio, discounted at 20% for four years. Our price target of $3.00 per share values the company at $63 million in market cap, which is still conservative in our view.
But keep in mind the risks.
Our model assumes product approval of BPX03 and BPX01 in 2018 and 2019 respectively. Investors should know that any drug development is a high risk business that will navigate through both clinical and regulatory hurdles, which has proven to be high. Although the company’s development strategy reduces risks associated with drug development, a failure of clinical trial or/and regulatory approval can’t be completely ruled out. This will make the company’s shares to decline dramatically.
Another concern we have is the company’s cash balance. Although the company raised about $7.8 million in June 2015, which boosted its balance sheet, we believe the company may need to raise new funds soon to advance its pipeline, specifically its Phase II candidate BPX01 and Phase III candidate BPX03. We estimate the company may need to tap the capital market as soon as in the mid-2016. We remind investors that any equity financing will dilute existing shareholder base, and cause share price to decline.
But overall, we think BPMX is a name with relatively favorable risk/reward profile for investors with a long term investment horizon.
(0)
(0)BioPharmX Corporation (BPMX) Stock Research Links
Scroll down for more posts ▼