Cidara Therapeutics Inc (NASDAQ:CDTX) just announced data from a phase 2 study of one of its lead indications, and the outcome was unfavorable. On the back of the release, and rooted in the unfavorable outcome, the company has taken a close to 40% hit to its market capitalization.
There are a couple of ways to look at this.
The first, of course, is in line with the market response we have seen on the release. That is, that the news is bad for the company, and that it devalues Cidara. The second, is that, yes, the news is not great, but from a long-term valuation perspective, it might not make too much of a difference. In line with this second suggestion, the close to 40% hit in market capitalize action seems something of an overkill.
So, in an attempt to ascertain whether the second of these two suggestions is valid, and in turn, whether the current price represents an opportunity to get into the company at a discount, let’s have a look at what happened, and what we expect going forward.
As mentioned, the drug was one of the company’s lead assets, and it is called CD101. It is currently under investigation across a host of trials, and this one was a phase 2 called RADIANT, investigating the asset in women with moderate-to-severe acute vulvovaginal candidiasis (VVC). For those not familiar with this condition, and by way of a brief overview, it is usually caused by something called C. albicans, but can occasionally be caused by other Candida sp. or yeasts. The typical symptoms of VVC include pruritus, vaginal soreness, dyspareunia, external dysuria, and abnormal vaginal discharge.
The current standard of care treatment for this condition is an oral administration drug called fluconazole, and it was against fluconazole that the company was pitching its 101 asset.
So what did the data say?
Well, the company’s drug demonstrated a similar level of efficacy in terms of treating the fungal infection, but it’s cure rates for the investigative arm were not as high as those reported on the control arm (i.e. the standard of care treatment arm). As a result, the company has discontinued development of this asset – at least in this form. That is important. Why? Because Cidara is also developing an intravenous formulation of the drug, and is currently investigating this intravenous formulation as part of a separate phase 2 study called STRIVE.
This one is not targeting VVC, but is instead targeting a fungal infection known as candidemia. This is an infection of the blood, hence the intravenous administration method of the active ingredient in this phase 2 study, and common scientific principle suggests that we should see some degree of efficacy as and when the trial plays out to completion. This one is comparing the drug to another current standard of care in the space, this time, one called caspofungin, and will see patients offered an optional step down to the above-mentioned fluconazole.
As primary endpoints, the trial will measure mycological eradication and resolution of systemic signs attributable to candidemia at day 14.
So why is all this important?
Because, if the drug proves more effective than standard of care in treating blood-based infections, it’s has a large market to go at – one that will probably outweigh the VVC market it was targeting with an oral administration type.
So what is next? The company is already down 40%, and we don’t expect too much of a selloff as we head into the latter half of this week. As such, it makes sense to call current levels something of a floor. This poses the next question, then, where are we looking to for this floor to serve as a springboard and as a catalyst from which the stock can recover?
The answer is the above discussed phase 2 in IV administration.
The company expects to put out data from the study at some point during the fourth quarter of 2017. If the data comes out as supportive of efficacy, and – more importantly – the efficacy reported is an improvement over the comparable standard of care, then we expect this stock to make a full recovery on the 40% loss recorded this week.
