Corbus Pharmaceuticals Holdings Inc (NASDAQ:CRBP), a Market Exclusive favorite, has been on a 23% tear since Tuesday, August 16. Small $170 million biotechs like this one with no products on the market do not usually make moves like this without a major positive trial readout. Corbus has two big Phase II readouts scheduled for December for its drug Resunab in cystic fibrosis and scleroderma (systemic sclerosis), just over three months from now, but nothing groundbreaking has been reported since Tuesday, at least nothing publicly. So why the big move this week?
It looks like retail traders are following some fairly large insider and institutional moves revealed earlier this week with the SEC, driving the price substantially higher. Stocks like Corbus tend to have low liquidity, so when even a small group of insider-trackers catch word of a major move and decide to follow it, stock gains can and often do happen quickly. They can also dissipate quickly, as has happened before with Corbus, but as we get closer to those two key top line data readouts this December, the chances of shares dropping back down to their previous levels continue to shrink.
It appears that the closer we get to these readouts – and Corbus has yet another with the same drug in 1Q2017 for dermatomyositis – the more insiders and institutional investors step up their purchases. All three trials are double-blinded so there is no way any of these players have direct knowledge of the goings on in the trials, save for an open label extension in the Phase II scleroderma trial granted in April. No results have been reported for that extension yet, but that doesn’t stop investors from speculating one who knows what, if anyone.
Since Q1 this year, insider and institutional ownership in Corbus has exploded higher. From the span of March 31st to June 30th, the number of shares held by institutions filing 13F’s alone has doubled from 5.13 million to 10.24 million. The most notable recent purchase is one of 2,000,000 shares by Chen Bihua of Cormorant Asset Management LLC, constituting a 5.3% ownership of the company. Cormorant is now 3rd in terms of total ownership, behind only Perceptive Advisors LLC with an 8.5% stake, and Knoll Capital Management LP with 6.8%.
More insider buying has also taken place by top executives in the company. CEO Yuval Cohen increased his holdings by 20,000 shares on the 17th. CFO Sean Moran has upped his stake by nearly 150,000 shares on the same day, along with Chief Medical Officer Barbara White, who bought 38,000 shares at $3.15 each.
While the trials are double blinded, that doesn’t mean that anecdotally there isn’t anything that insiders know that we don’t. There is one portion of the scleroderma trial that Corbus was able to get open label approval for from the FDA in April, a good sign that not only does Resunab have a good safety profile, but that patients in the trial want to continue taking it, anecdotally providing evidence of efficacy.
Be that as it may, there is plenty of reason to expect a good top line readout come December for both cystic fibrosis and scleroderma besides the open label extension already granted for the latter. Resunab has already shown a very moderate side effect profile even at high doses, with mild dizziness featured at the top, a common effect of cannabinoids on naïve users. Second, cannabinoids are already known to exhibit strong anti-inflammatory characteristics by inserting themselves into a chain of cellular reactions and stopping the inflammatory response in its tracks. Resunab’s active ingredient, ajulemic acid, is estimated to be 100x more powerful than naturally-occurring cannabinoids in shutting down inflammation.
While none of the diseases that Resunab is being trialed for are caused by inflammation, inflammation is perhaps the biggest factor in worsening the symptoms of these diseases. By shutting the process down, Resunab does not cure the illnesses, but aims to make them much more manageable with less morbidities.
At this point, Corbus is getting much too close to two critical readouts for current gains to quickly evaporate. While it is certainly possible that shares fall back down somewhat on profit taking in the coming days, we don’t see shares going back down below $3 at this point, unless December data proves disappointing in terms of efficacy in cystic fibrosis and scleroderma. Cystic fibrosis results are a little harder to estimate, but the scleroderma indication looks good considering the open label extension already granted.
If only the scleroderma indication is positive come December, Corbus could easily double from these levels by the end of the year to trade above $7. If both are positive, an overnight tripling is possible to trade over $10. With $22 million in cash on recent direct offering, Corbus has more than enough capital to make it past Phase II, and will likely recapitalize at the beginning of next year to push forward with a Phase III pivotal trial.
If both Phase II’s fail to show efficacy, Corbus could move back to penny stock territory, though this is unlikely. For now, all rides on December readouts. Both Corbus insiders and institutional health care investors seem to be betting on good news by the end of the year.
Disclosure: The author was long CRBP at time of writing.