Canadian development stage biotech Cynapsus Therapeutics Inc (NASDAQ:CYNA) just reported a $20 million full year 2015 loss, and a fourth quarter loss of $6.2 million, but its market capitalization has remained relatively flat. Why? Because alongside the announcement, it also reported that it expects topline data from a phase III pivotal trial of its lead candidate APL-130277 – a late stage Parkinson’s disease candidate that made headlines when The Michael J Fox Foundation funded its early stage development a few years back – to be reported during the second or third quarter of this year. The foundation funded the early trials, though full development costs shifted to Cynapsus for the phase III in question, and markets have relied heavily on the potential for an APL-130277 approval as basis for the company’s current valuation.
If data comes out positive, we could see some sharp upside in Cynapsus’ market capitalization. If not, we’d expect the opposite to be true. With this said, let’s have a look at the drug in question, and try to ascertain what we need to see from the upcoming data release to initiate the former, rather than the latter. Here goes.
To understand the drug in question, it’s first important to understand a certain element of Parkinson’s not often discussed in the biotech investment space – the ON-OFF phases of the disease. The current SOC is a drug called levodopa. It’s helps increase dopamine levels in patients (Parkinson’s is associated with a reduction in dopamine, which leads to the loss of motor function). The response to levodopa, however, is not consistent. When a patient is responding well, say, a fixed period after administration, this is called an ON phase. However, when there is not enough levodopa in the system, say, first thing in the morning, after a nighttime dose, this is called an OFF phase. There are a few things that cause OFF phases – late onset efficacy, the aforementioned lack of active compound and even random onset OFF phases.
OFF phases are generally regarded as one of the most debilitating elements of Parkinson’s disease – especially the random onset ones. This is where Cynapsus comes in. The company has developed a sublingual film that acts as a so-called rescue therapy – that is, it is designed to quickly return a patient to the ON phase while the time to activation of their SOC medication lapses.
The data from the foundation supported trials (which were also funded by Intel Corporation (NASDAQ:INTC) showed promising results, with a phase II completed in December 2014 demonstrating a vastly reduced time-to-ON, which was the primary endpoint of the trial. Safety and efficacy proved no issue, so we are looking for a replication of the efficacy side of things in the upcoming phase III topline.
The endpoint is slightly different in this one. It’s the mean change from pre-dose in what’s called the MDS-UPDRS Part III Motor Examination – essentially the company is using an industry standard motor function test to calculate the scale of improvement in motor function from OFF to post-dosage, at 30 minutes. Secondary is the percentage of patients that register as ON at 30 minutes, post dosing.
What are we looking for in the data? Well, the higher the percentage of patients that register as ON post dosing, the better the drug can be considered to have performed from the secondary outcome perspective. Looking at primary, the patient will be assigned a mobility score from baseline, measured in points. The higher the points, the higher the percentage mobility improvement, and the better the drug’s performance.
And that’s how things stand. We don’t know exactly when the data is set to be reported, but we know – as mentioned – that it’s due between April and September. The trial is scheduled for primary completion in April, and with no total completion date stated, chances are Cynapsus expects to collect and report its data pretty quickly. With this in mind, we’re looking at a weighted potential closer to the earlier date than the latter.
As we’ve said, the vast majority of the company’s current valuation rests on the success of 130277. With this in mind, an allocation ahead of release is risky, but offers plenty of upside potential. A post release allocation is more conservative, but there will be less upside available ahead of an NDA based on positive topline.