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PULM: Influx Of Grant And Partnership Deal- Signs Of Growing Confidence In Pulmatrix

By Anita Dushyanth, PhD


We met with Pulmatrix’s (NASDAQ:PULM) management (CFO  Bill Duke) at the Rodman & Renshaw conference held at New York city on September 11th and 12th 2017.  Mr. Duke spoke at length about advancing their two lead product candidates PUR1900 and PUR1800 through clinical studies.

PUR1900, the lead inhaled anti-fungal product candidate PUR1900 for the treatment of allergic bronchopulmonary aspergillosis (ABPA) in patients with cystic fibrosis and asthma, has been awarded Orphan Drug and Qualified Infectious Disease Product (QIDP) designations from the FDA for the treatment of fungal infections in patients with cystic fibrosis.  These two designations together provide up to 12 years of market exclusivity for PUR1900 if approved for cystic fibrosis patients.  QIDP also gives PUR1900 fast-track status under FDA's review guidelines.  

On September 5th Pulmatrix announced that the company received non-dilutive funding, an award from Cystic Fibrosis Foundation Therapeutics (CFFT).  The funding enables Pulmatrix to complete the toxicology studies.  This will help accelerate preparation towards commencing the Phase 1/1b clinical trial in 2018.  Overall, federal and state agencies have supported the firm and development of their technology with more than $10 million in non-dilutive funding through competitive grants and awards.  This represents tremendous validation of Pulmatrix’s technology and products from the perspective of strategic partnerships.  We think approval of their application in this year’s program is very positive for PULM given that it is a reflection of CFFT's goal of supporting companies with high-potential innovations. 

PUR1900 has been the subject of an Investigational New Drug application (IND).  Phase 1/1b is a critical milestone establishing PUR1900 safety, tolerability and PK profile versus ABPA-Asthma oral antifungal standard of care (Sporanox).  The clinical plan for Phase 1/1b PUR1900 is a three-part study comprised of single ascending dose (SAD), multiple ascending dose (MAD) as well as single dose comparing inhaled versus oral dose of the drug.  The studies will be conducted in parallel.  The SAD study will recruit six healthy volunteers who will be administered escalating doses of PUR1900 (dose: 5mg, 10mg and 25mg) to assess the safety and tolerability of PUR1900 along with 96h PK profile.  The MAD trail will also recruit six healthy volunteers to study the PK profile, safety and tolerability over a 14 day dosing period (10mg and 20mg).  Part 3 of the Phase 1/1b trial is a cross-over study designed to determine the PK, safety and tolerability of 20mg of PUR1900 (inhaled route) as compared to 200mg of Sporanox (oral route) in twelve asthma patients. This study is planned to gain a better understanding of the single and repeat dose pharmacology of itraconazole when delivered to the lung.  Pulmatrix anticipates data read-out in mid-2018 and plans to use the Phase 1/1b data to support initiation of a Phase 2 program in patients with ABPA initiating in 2H 2018.  

As a reminder, the global ABPA-asthma market is a multi-billion dollar opportunity with the U.S. representing close to two-thirds (~60%) of this industry.  Management expects the Phase I studies supporting the PUR1900 program in both CF and severe asthma patients to create partnership opportunities for both indications.

Pulmatrix recently partnered with Vectura group (LSE: VEC), an industry-leading device and formulation business for inhaled airways products, to develop PUR0200 (VR410) in the U.S. market.  PUR0200 is a combination of tiotropium bromide, the active component in Spiriva, with iSPERSE™ drug delivery platform. 

This is the second partnering deal for Vectura from the new generics program following VR2081 with Sandoz.  Vectura has eight inhaled, four non-inhaled and ten oral products marketed by partners with growing global royalty streams.  The group has a diverse portfolio of drugs in clinical development, including a number of novel and generic programs which are partnered with several global pharmaceutical and biotechnology companies including Hikma, Novartis, Sandoz, Baxter, GSK, Bayer, Almirall, Janssen, Dynavax and Tianjin KingYork along with two wholly owned nebulised development programs.

Firms that would like to commercialize their product in the respiratory space continue to view Vectura as a partner of choice given their success in bringing inhaled respiratory products to market.  For tiny Pulmatrix, success of drug development hinges on select drug candidates compared to its bigger counterparts with more diverse product portfolios.  Vectura has positioned itself uniquely as one of the leading respiratory airways device and formulation specialist with a proven track record of a broad portfolio of products generating substantial revenues, combining its DPI device technology to deliver drugs.  Vectura plans to leverage its proprietary DPI technology, which is validated both from a regulatory and commercial perspective, for use in the development of Pulmatrix’s PUR0200.  

Vectura’s respiratory products include Anoro Ellipta (Global), Relvar Ellipta/Breo Ellipta (Global), Incruse Ellipta (Global),  Ultibro Breezhaler ((EU and Rest of World (RoW)), Seebri Breezhaler (EU and RoW) and AirFluSal Forspiro (EU and RoW).  One of the products in Vectura’s pipeline is VR315, a generic version of GlaxoSmithKline's Advair Diskus®, inhaled combination therapy (fluticasone/salmeterol) for asthma/COPD delivered using Vectura’s proprietary DPI and formulation technology.  In the beginning of May 2017 the U.S. FDA issued a complete response letter (CRL), categorized as ‘major’, in relation to an ANDA application form for VR315.  This is a slight setback for Hikma and Vectura and both the firms alluded that there is a low likelihood of approval in 2017.  The CRL with the ‘major’ tag could mean multiple things such as several minor changes or a major change in the formulation itself.  Making an Advair generic is known to be a challenge as the product poses complexities related to its formulation, dosing and manufacturing.  We could also argue that the FDA has concerns over LABA therapies and therefore the approval process ended up being challenging.  

Despite this setback we remain confident in Vectura’s abilities given their strong track record for generic development programs and success in bringing so many products in the respiratory space, including generics, to market.  As per the agreement, Pulmatrix will provide the data for PUR0200 and assist with the transfer of development and manufacturing activities to Vectura.  Vectura will pay a technology access fee of $1 million to Pulmatrix upon achieving pre-agreed pharmaceutical development criteria.  The plan is to commence development immediately and then license VR410 and future VR410 assets to partners who would fund the remaining development and undertake commercialization activities.  Vectura has agreed to pay Pulmatrix a mid-teen percentage share of any future revenues that it receives from partners relating to the development and sale of VR410 and VR410-related products, including any future combinations.

The stock was trading at $0.70 at the end of 2016 and surged to $4.68 when the firm announced that PUR1900 had received the QIDP status from the FDA.  Since then, the stock price has struggled to achieve this level.  Meanwhile the shares trade well below where we calculate fair value with a couple of potential key inflection points still remaining over the next year: the data readout from Phase 1 trial involving PUR1900 and from Phase 2 trial involving PUR1800.    

We think that overall, the outlook is positive for Pulmatrix.  We are encouraged by management’s efforts to raise non-dilutive financing and sign partnership deals with well-established entities. The firm now has two lead candidates that are relatively mature and in mid-stage clinical development. With roughly $10 million on the balance sheet (as of June 30, 2017) the firm is focused on executing the clinical development of PUR1900 and PUR1800, which if positive, could be transformative for Pulmatrix.

We are keeping a close watch on PULM-related events in the coming months as the company executes on its clinical development strategy.  Pulmatrix has thus far focused on research and development but has now shifted gears and out-licensed its proprietary product PUR0200.  Such deals may present new opportunities for the product as well as for the company and help expand visibility.  We have updated our financial model to include royalty payments from Vectura related to PUR0200 if and when it makes its entry into the U.S. market.  We think a significant portion of OpEx related to PUR0200 will not factor in since the licensing deal represents a low-risk transaction.  Our financial model, assumptions and consequently valuation are subject to change depending on relevant news.


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