SCYNEXIS Inc (NASDAQ:SCYX) Has Some Pent Up Buy Volume Waiting To Pull The Trigger

SCYNEXIS Inc (NASDAQ:SCYX) picked up some strength on Monday, and while the company has opened the Tuesday session out of the US down a little, it looks as though sentiment is decidedly positive right now. The gains come on the back of expectations for a near term binary event – the releasing of some data from two concurrent trials of its lead candidate – and it seems markets expect this data to come out in favor of continued development.

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The drug in question is called SCY-078, and the trials are the follow on sections of two phase II studies, with targets that we will look at in a little more detail shortly. Back at the beginning of end of July/beginning of August, the company announced that this data would be available by the end of the third quarter of 2016.

Of course, this timeframe has now passed, and so markets expect the data any day now. The trial has already been reported as meeting its objectives, and so the follow on data is expected to mirror this outcome. As mentioned, if it does, there’s plenty of potential upside on offer, above and beyond the current gains, on the advancing of the drug into a pivotal trial in this indication.

The market is large, and for us this validates this bias.

With this in mind, here’s a look at the drug and the indications in question, and a discussion of what we are looking for from the phase II follow ups as reinforcing of an efficacy bias, and in turn, a bullish near term thesis.

So, SCY-078 is targeting tow primary conditions, both caused by a Candida infection – a condition called vulvovaginal candidiasis (VVC) and another called invasive candidiasis. Both are conditions that often get referred to as a yeast infection, and they are very common – nearly 75% of all adult women have had at least one incidence of an infection caused by the underlying yeast, Candida, in their lifetime.

The current SOC treatments are topical (creams) or an antibacterial vaginal suppository. These methods of treatments are safe and effective in most of the mild forms of the condition, but in IC and VVC a stronger treatment is often required to avoid recurrence.

This is where SCY-078 comes in. It’s an oral and an IV treatment, which works by inhibiting what is called beta 1,3 D glucan synthesis in the cell wall of fungi. The inhibition of this process results in fungicidal cell death, and the countering of the infection in question.

In the IC indication, patients received IV dose of an SOC called, echinocandin, and then stepped down onto a once daily dose of oral SCY-078. 86% of those randomized to the drug, at the point of the analysis, looked as though they were set for a positive result. It is this 865 we are watching closely when the upcoming data hits, to see if the drug has maintained its edge over non randomization.

In the VVC trial, the company managed to demonstrate that SCY-078 exhibited clinical evidence of the antifungal activity of oral SCY-078 in an infection caused by Candida, and in turn, met on its efficacy endpoint. Again, we are looking for a maintenance of this efficacy (i.e. no or few recurrences of the infections) in the patients in question.

What sort of upside is on the cards if the Scynexis can put out positive follow up data?

Well, the company didn’t respond too positively to the July release, and we think this is representative of markets waiting for confirmation by way of follow up. In light of this, we think there’s plenty of pent up buy volume waiting to pull the trigger, and that the recent gains illustrate this pressure.

As such, we put a 20-30% minimum upside on positive data, with a target somewhere in the region of $5.60 a share.

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