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Jul 12, 2022
[5 min Read]
Veru Inc. (NASDAQ: VERU) is a biopharmaceutical company focused on developing novel medicines for COVID-19 and other viral and ARDS-related diseases and for the management of breast and prostate cancers. The main short term play here is their drug sabizabulin. Originally developed for the treatment of cancer, Veru found that because of the drugs' anti-viral and anti-inflammatory properties it could also be used as an advanced ARDS treatment for COVID-19. As of Friday, July 9th the market cap of Veru was 1.06B and an EPS of -0.18.
Degenerate Diligence Below
" Sabizabulin is an orally bioavailable bis-indole that binds to the “colchicine binding site” of alpha and beta-tubulin and inhibits tubulin polymerization at low nanomolar concentrations. Sabizabulin disrupts the microtubules, the central mechanism that contributes to both their antiviral and anti-inflammatory activities. Drugs like sabizabulin that target microtubules have broad antiviral activity by disrupting the intracellular transport of viruses such as SARS CoV-2, along microtubules. Microtubule trafficking is critical for viruses to cause infection. Furthermore, microtubule depolymerization agents that target alpha and beta-tubulin subunits of microtubules also have strong anti-inflammatory effects including the potential to treat the cytokine release syndrome (cytokine storm) induced by the SARS-CoV-2 viral infection that seems to be associated with high COVID-19 mortality rates. Sabizabulin provides a two-pronged approach to the treatment of COVID-19 viral infection and the debilitating and sometimes lethal respiratory effects of the virus. First, as an antiviral, it would have direct effects on S protein-microtubule trafficking with the potential to reduce the production of infectious virions, particularly affecting viral replication and assembly and virus particle egress. Secondly, as an anti-inflammatory agent, it may reduce virally induced severe inflammation in the respiratory system and reduce the incidence of cytokine storm and septic shock.
In April 2022, we reported positive Phase 3 clinical study results where Sabizabulin treatment demonstrated a 55.2% relative reduction of mortality in hospitalized moderate to severe COVID-19 patients (≥ WHO 4-supplemental oxygen) at high risk for ARDS and death. We conducted a double-blind, randomized, placebo-controlled Phase 3 COVID-19 clinical trial was conducted in approximately 210 hospitalized COVID-19 patients with moderate to severe COVID (≥ WHO 4-supplemental oxygen) at high risk for ARDS and death. The primary endpoint was the proportion of deaths by Day 60. Based on a planned interim analysis of the first 150 patients randomized, the Independent Data Monitoring Committee unanimously halted the study for overwhelming efficacy and safety. Treatment with sabizabulin 9mg once daily, an oral, first-in-class, new chemical entity, cytoskeleton disruptor that has dual anti-inflammatory and antiviral properties, resulted in a clinically meaningful and statistically significant 55.2% relative reduction in deaths. After a pre-EUA meeting with FDA, the Company submitted a request for FDA emergency use authorization on June 7, 2022. FDA granted Fast Track designation to the Company's COVID-19 program in January 2022.
In February 2021, we reported positive Phase 2 clinical study results where sabizabulin treatment demonstrated a significant relative reduction of mortality in hospitalized patients with moderate to severe COVID-19 symptoms who were at high risk for developing ARDS."
To put it simply, Sabizabulin can save your grandma and grandpa's lives if they develop ARDS.
Earlier this week, the (now) peer-reviewed study was posted in the prestigious New England Journal of Medicine's "Evidence," where no major issues were found. The peer-review process went so far as to say, "[ERROR-The] data demonstrate[ERROR-s] that sabizabulin treatment significantly reduced mortality with an acceptable side-effect and safety profile in hospitalized patients with moderate to severe Covid-19 at high risk for ARDS."
FDA fast-track designation limits the time for a EUA decision to 60 days, making August 5th the last business day for the FDA to announce their decision.
The current analog to Veru's treatment is Molnupiravir and Pfizer's Paxlovid. The main difference between the three is that Paxlovid and Molnupiravir are similar to Tamiflu in that they are preventative therapeutics (despite obnoxious side effects) rather than the life-saving, side-effect-free drug Veru is offering. The United States Government first gave Pfizer a $5.3 billion contract for the first 10 million courses of Paxlovid. The contract alone is already 5X the current market cap of Veru.
According to their most recent investor presentation on June 8th, Veru is predicting a manufacturing capability to treat ~55,000 patients in July, ~100,000 in August, and then upwards of ~250,000 patients from September going forward.
Assuming a treatment price of $3500/patient, this would place Veru's revenues at upwards of $875 million per month, or $10.5 billion per year. At a conservative P/E the market cap of Veru would likely reach upwards of 10-15 billion. Earlier this week Jefferies raised their price target to $55, with an upside of $98 upon EUA approval. H.C. Wainwright notes that "no current FDA-approved or authorized COVID-19 therapeutics in the hospital setting can achieve over 50% relative reduction in deaths. Hence, sabizabulin can potentially become the new standard of care for hospitalized moderate-severe COVID-19 patients if its EUA application is granted."
Least importantly, Fintel currently shows Veru's short interest is 41.43% of the float and a 62.73% OEX short volume ratio. This is unsurprising due to the high rate of failure for biotech approvals.
To wrap things up, my opinion is that Veru's Sabizabulin will likely be granted EUA within the next two weeks. An important thing to keep in mind is the toxicology report and treatment profile of Sabizabulin. The treatment profile for previous studies for breast and prostate cancers was that patients were given upwards of 63mg/dose of Sabizabulin for upwards of two years DAILY and no negative side effects were found. In contrast, the treatment profile for Covid was a standard 9mg/dose per patient, per day under treatment. Obviously, no side effects were found at the lower dosage.
Recent Short Reports
The recent short report, written by Culper research is pure FUD, a true case of short-and-distort. Culper argues that the placebo group was sicker than the non-placebo group. Basically, the report's key point is that the placebo group had an unusually high mortality rate compared to other COVID therapeutic studies, along with the fact that there was a patient in the placebo group that had 42% oxygen saturation at the time of admittance and thus throws off standard deviation in the study. These claims, while true, do not hold any substantiative value. All you need to know is that the mean value oxygen levels of both placebo and non-placebo treatment groups were 91.9% and 92.7% respectively. This means that the Culper short report is misleading. Both treatment groups were equally sick.
This DD is merely my opinion and should not be taken as investment advice.
My current position is 275 call options spread over various strikes between $20-35 expiring anywhere from July 15-August 19 totaling over $13,375.