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2019-10-18 19:24:17

Scratch any cynic and you will find a disappointed idealist. ― George Carlin

Today we look at a small developmental firm whose stock plunged after a failed trial result in mid-summer. However, the stock has slowly started to claw back some of those losses in recent weeks. Can the comeback continue? We try to answer that question in the paragraphs below.

Company Overview

GlycoMimetics, Inc. (GLYC) is a Rockville, Maryland based clinical stage biopharmaceutical company focused on the development of glycomimetic therapies for patients with unmet needs. Glycomimetics are small molecules that mimic the structure of carbohydrates involved in many biological functions. In addition to providing fuel for the body, carbohydrates are believed to play a role in inflammation, cancer, and infection. The company just suffered a significant setback when a compound it had licensed to Pfizer (PFE) failed a Phase 3 trial. GlycoMimetics was formed in 2003 and went public in 2014, raising net proceeds of $57.2 million at $8.00 per share. The stock, which had been trading north of $10 all year through mid-July, cratered on news of the setback in early-August and now trades just over $4.50 a share, commanding a market cap of ~$200 million.

Proprietary Platform

Most human proteins are modified by carbohydrates, which in turn affect how these proteins function. The company is focusing on a certain subset of proteins known as selectins, which serve as adhesion molecules and bind to carbohydrates that are involved in inflammation, driving a wide range of maladies, including cancer, cardiovascular disease, and hematologic disorders. GlycoMimetics has leveraged its expertise in carbohydrates to create selectin antagonists that may impede disease-related functions of certain carbohydrates.

Source: Company Presentation

Rivipansel

The company's lead candidate from this platform had been rivipansel, which is a selectin antagonist that binds to all three members of the selectin family (E-, P- and L-selectin). It was being investigated in a Phase 3 trial conducted by Pfizer for vaso-occlusive crisis, a debilitating condition that periodically afflicts patients with sickle cell disease. While successfully conducting four early and mid-stage studies on 163 patients, GlycoMimetics entered into a potentially lucrative licensing agreement with Pfizer back in 2011. In addition to its upfront payment of $22.5 million, GlycoMimetics was eligible to receive developmental, regulatory, and sales milestone payments totaling $320 million plus royalties in the low double digits to low teens. The company had earned $35 million of developmental milestones and appeared on its way to collecting much more when it was announced on August 2, 2019 that rivipansel had failed to achieve its primary and secondary endpoints in the Phase 3 trial.

Pipeline

Uproleselan. That setback cratered GlycoMimetics' stock and thrusted its wholly-owned candidate, uproleselan, to the forefront. It is a specific E-selectin inhibitor that is being investigated in combination with chemotherapy in the treatment of patients with acute myeloid leukemia (AML). It has been granted breakthrough therapy designation by the FDA and has received orphan drug status from the FDA and EMA for the treatment of AML.

AML, like most leukemias, is treated with chemotherapy and its attendant side effects, including bone marrow toxicity resulting in neutropenia - an abnormally low number of a specific type of white blood cell that is vital in the protection of the body against infection - and mucositis. E-selectin binds cancer cells within vascular niches of the bone marrow, preventing the cells from entering circulation, where they would be more susceptible to chemotherapy. In preclinical studies, uproleselan was able to draw AML cancer cells out of the bone marrow. More importantly, tumor burden was significantly reduced when uproleselan was administered in combination with chemotherapy versus chemotherapy alone. Also, less severe neutropenia and mucositis and lower bone marrow toxicity were observed in animals treated with uproleselan and chemo as compared to animals treated with chemo monotherapy.

In a Phase 1/2 trial that was completed in 2018, uproleselan with chemotherapy demonstrated complete responses with or without complete blood count recovery (CR/Cri) in 41% of patients in the refractory/relapsed cohort. Median overall survival {OS} was 8.8 months versus ~5.3 months on chemo alone (as per historical norms). Also, 69% of evaluable patients (11/16) achieved measurable residual disease negativity. In the newly diagnosed cohort, the CR/CRi rate was 72% while median OS was 12.6 months. Event free survival was 9.2 months as compared to 2-6.5 months on chemo alone (as per historical norms on a lower risk population than the one treated with uproleselan).

Based on these results, GlycoMimetics entered uproleselan into a Phase 3 trial in November 2018 to evaluate it in the treatment of relapsed/refractory AML patients. A second Phase 3 AML study assessing newly diagnosed AML patients enrolled its first subject in 2Q19. The company also expects to further investigate uproleselan in a third late-stage trial treating AML patients unfit for chemotherapy. Between these three trials, more than 850 patients will be treated and evaluated. Preliminary data on the relapsed/refractory trial is anticipated by YE20.

If successful, uproleselan would enter a market where nearly 20,000 new cases of AML are diagnosed annually in the U.S. and ~350,000 worldwide. Although the median age of diagnosis is 68 years, with an overall five-year relative survival rate of 27.4%, there is considerable need for improved therapies. With that said, the competition in the AML space is rapidly growing as eight drugs have been approved by the FDA in the past two years. Also, there are currently five other compounds in the clinic that target the bone marrow microenvironment.

GMI-1359. GlycoMimetics is also developing GMI-1359, a compound that targets both E-selectin and a chemokine receptor (CXCR4) that is also known to aid in the retention of cancer cells in the bone marrow. Certain cancers have a propensity for metastasizing to the bone, such as breast and prostate cancers. As such, after completing a Phase 1 trial in healthy subjects, GlycoMimetics plans to initiate a small (less than a dozen patients) Phase 1b trial to evaluate its proof of mechanism and safety in metastatic breast cancer patients before YE19.

Balance Sheet & Analyst Commentary

Since going public in 2014, GlycoMimetics has tapped the capital markets on three additional occasions, raising net proceeds in excess of $250 million (when funds from its ATM facility are factored in). As a result, the company is in excellent fiscal shape with $184.2 million of cash as of the end of the second quarter and a runway well into 2021. GlycoMimetics has no long-term debt.

Before the rivipansel news hit in August, Street analysts were nearly unanimous in their praise of GlycoMimetics with five buy ratings, one outperform rating, and a median twelve-month price target of $23 per share. After the failed trial, Jefferies, SunTrust, and Piper Jaffray downgraded the stock to hold and the median price target dropped to $6 a share.

A beneficial owner and a director of GlycoMimetics disagree with the analysts abandoning ship. They purchased over 1.6 million shares and 10,000 shares (respectively) at ~$3.18 a share after the failed trial.

Verdict

With its stock having lost approximately 60% of its value since mid-July, the company is now trading near its cash on hand. Of particular note was the analysts' resetting of their price targets by approximately 75% when the rivipansel news hit. Rivipansel was essentially the low hanging fruit as it was widely expected to receive approval, which would have situated GlycoMimetics to receive an additional $285 million in milestone payments and low double digit royalty payments.

However, at the end of the day, it was not a wholly-owned asset and did not have as much net revenue potential as uproleselan. In fact, H.C. Wainwright only valued the rivipansel franchise at $4.63 a share and moved its price target from $23 to $18 per share. Admittedly, that price target is now an outlier, but it highlights uproleselan as the real potential money maker at GlycoMimetics. Assessing the sales potential of a Phase 3 candidate can be a humbling exercise, but if uproleselan is approved for a broad population of AML patients, it will certainly be a half billion dollar therapy, if not blockbuster.

It's easy to say that GlycoMimetics stock will be dead money for a while as no real catalyst is likely until the preliminary readout of the relapsed/refractory trial near YE20. However, the revaluation of the stock appears to be way overdone, currently assessing its pipeline at less than negative $10 million. With its solid cash position, this name sets up well for some buy-write orders or a small 'watch item' position. I prefer the former for those comfortable and set up for simple option strategies.

An idealist is one who, on noticing that a rose smells better than a cabbage, concludes that it makes a better soup. ― H.L. Mencken

Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum

Before the bell every Monday morning we provide an in-depth analysis on an undervalued small/midcap stock and outline a simple option strategy to make a tidy profit even if the underlying stock does little over the coming months.  If you are not signed up yet for this free service, just click HERE to download our latest report. This action will also ensure you receive all future free reports as published as well. 

Disclosure: I am/we are long GLYC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Long GLYC via buy-write orders


seekingalpha.com @thebiotechforum
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