Starpharma Viraleze: COVID-19 Nasal Spray Development (OTCMKTS:SPHRF)
Viraleze: Starpharma’s antiviral (especially against SARS-CoV-2 and RSV) nasal spray
Starpharma’s (OTCQX:SPHRY) annual meeting held today provided an update of various company programs, which indicated numerous developments in 2021 that are likely to impact positively on the share price. There was new information about the company’s COVID-19 product, Viraleze, which is positioned to have utility beyond just COVID-19 (e.g. for RSV (Respiratory Syncytial Virus) and influenza). Starpharma is racing to release Viraleze as a preventative/early protection product that will have an interesting place in the COVID-19 space to complement vaccines and later stage drugs. A decline in share price over the past month due to a capital raise provides an entry opportunity for new investors or investors looking to increase their holdings.
Viraleze: Protection against COVID-19, influenza and RSV (Respiratory Syncytial Virus)
CEO Jackie Fairley provided new information about Starpharma’s COVID-19 programs, which indicated that this company hasn’t been moping during the recent COVID-19 lockdowns in Melbourne (Australia).
The nasal spray, named Viraleze (active ingredient SPL7013 which is viricidal), has the potential to prevent infection with and transmission of SARS-CoV-2 virus (which causes COVID-19). SPL7013 is well tolerated in many clinical studies in 44 countries. SPL7013 is non-toxic to humans and not irritating. It is stable at room temperature, so storage and transport is easy. And it is available for rapid scale-up. SPL7013 is also being considered to be produced for ophthalmological applications, but this has been delayed in favour of the nasal spray product.
Viraleze development is planned to be spearheaded through Europe, where COVID-19 outbreaks are making it a tough winter. A risk minimisation product is very well regarded in Europe. The Boston Consulting Group is involved with positioning and building a marketing plan that involves digital marketing, online sales and B2B for rapid market penetration. Market research by Boston Consulting in Europe shows a very positive response. The product is being seen as an addition to masks, gloves, and vaccine. There is a very positive intention to buy the product in Europe (which Starpharma expects will be followed by Asia, Australia, and New Zealand and other parts of the world). Viraleze will be noticed in the US in due course. Focus on Europe makes sense at this time as the US needs to resolve the current messy transition period between the outgoing Trump administration and the incoming Biden administration.
Front-line healthcare workers and staff in high risk environments (airlines, aged care, abattoirs, mining) are obvious early adopters, but there is also interest in individual use by the public. Viraleze will be available as an over-the-counter (non-prescription) medication. Starpharma plans to get the product to market directly, with strong indications of interest in purchasing a product especially by younger people. A powerful advantage of Viraleze is the fact that it is stable at room temperature and could be readily carried for personal use in a handbag or briefcase.
Boston Consulting Group research indicates that here is strong interest in the nasal product for use before potential exposure to a risky situation (e.g. public transport, elevator) and also in what CEO Jackie Fairley called a “morning after” kind of application, where someone who has been exposed to a risky situation could take a dose afterwards, because Viraleze is protective both before and after exposure.
Viraleze reformulation is complete, pilot manufacture is completed and ready for rapid scale-up, with components and inventories, labelling etc. in train. Branding is done.
Regulatory issues: Documentation for regulation is 80% complete. The claims for regulatory approval are around Viraleze inactivation of the SARS-CoV-2 virus. No large efficacy study is needed because the claims are only in relation to SPL7013 anti-viral activity. Only a healthy volunteer safety study is required. EMA (European Medicines Agency) doesn’t require trials because the claim for this product is viral inactivation, not disease prevention.
A key comment about vaccines is that they don’t prevent infection. Instead they prevent the disease. So, it is possible that people who have been vaccinated may be infectious. Therefore, there is still a need for a preventative. Even if there are effective vaccines, this is unlikely to adversely impact Viraleze sales. There will be a particular focus on healthy individuals and emphasis on the broad spectrum of antiviral activity of Viraleze (e.g. including influenza).
Starpharma envisages the likelihood of Government stockpiling as Viraleze is a generic antiviral preventative.
Remdesivir is one of the very few treatment options for COVID-19. It needs to be delivered in a hospital setting via an IV infusion, which, because of its insolubility, involves a large volume and slow delivery requiring 0.5-2 hours. Treatment involves daily administration for 5-10 days. Because of its insolubility, remdesivir is delivered with an excipient (cyclodextrin), which is not recommended for patients with kidney impairment, which is not unknown with COVID-19 patients.
More detail concerning the advantages of Starpharma’s DEP-remdesivir was provided by CEO Jackie Fairley in her report today. DEP remdesivir does not require the use of cyclodextrin, and because of the solubility of the DEP-coupled remdesivir, the delivery volume is 2-3ml, and it can be applied subcutaneously. This means that delivering outside of a hospital setting is possible, and the delivery time is short. Moreover, the DEP remdesivir is longer acting than remdesivir. Starpharma is in discussion with Gilead (NASDAQ:GILD), although CEO Jackie Fairley gave no details of the discussions.
AGM, other parts of the business
The AGM presentation was 40 slides of detailed information about all of the company’s products. Here is not the place to cover these in detail, but investors might be interested to see some pretty impressive results especially in the DEP-conjugate programs.
VivaGel BV (Bacterial Vaginosis)
Some say a picture is worth 1000 words, so here is a picture of the current status of the marketing of the VivaGel BV products in 160 countries around the world. The US is the laggard with delays in FDA approval, which apparently are due in part to the relevant part of the FDA overwhelmed by COVID-19. Marketing rights have already been assigned to ITF Pharma in the US.
VivaGel BV marketing – Source: Starpharma
This is a huge platform technology for the company. DEP-remdesivir mentioned above is a small example. The DEP technology is strongly IP protected and can be used to give old drugs new IP protection. In general, DEP coupling increases solubility, improves performance, and reduces side effects.
Starpharma has a number of unnamed partnership programs involving DEP-antibody drug conjugates, DEP-drug combinations with immuno-oncology agents and DEP-radiopharmaceuticals (both diagnostics and therapeutics).
As well as outside partnerships, Starpharma has 3 internal programs in Phase 2 clinical trials that may be completed mid-2021 and be available for partnering.
It seems that the partnership with AstraZeneca (NYSE:AZN) with AZD0466 is a high priority product for AZN. Starpharma CEO Jackie Fairley expects to see the large Phase 1 trial expanded. The initial data seems compelling, with the drug expected to be “best in class”. It seems likely that AZN will seek rapid approval for AZD0466.
Recent share price moves
Starpharma has recently suffered a share price setback which is a familiar story for small Aussie biotech companies who raise money at a discount. For biotech companies that are not profitable, it can be argued that it is always good to raise money when you can. I’m not convinced that Starpharma needed to raise cash at this time, but raising $A48.9 million in late September through a combination of institutional placement and share purchase plan no doubt allows it to dramatically accelerate its COVID-19 nasal spray development and also its DEP in house Phase 2 trials. It now has approx. $A70 million, and last year, it burned $A14.7 million, so on last year’s burn, it has 4.7 years of cash. At a time when it has products beginning to make money and also the prospect of marketing deals next year, it could be argued that the capital raising was a gift to a group of new and existing institutional investors.
The share price on the ASX at the time the raising was announced was $A1.605, and the raising was at $A1.50. The share price has fallen since to $A1.27 on the ASX. Today, the price has rose to $A1.40. Long suffering shareholders just had to grin and bear it. For anyone contemplating a possible investment in the company, now is a good time as the recent fall in share price had no basis that I can discern.
There is a lot to like about Starpharma’s portfolio of programs which are largely derisked from a technical perspective. What probably concerns investors is the lack of clarity when it comes to the value of all of their programs and when the company will become profitable.
Part of this no doubt comes from being shy about making promises it can’t keep, knowing that the path to profitability can be tortuous. Impatient investors would probably be happy to see more evidence that the company is actively looking for exit strategies, but management gives every sign that it plans to make this company one of a small group of substantial biotech businesses based in Australia. I suspect that it is inevitable that a big pharma group will eventually find Starpharma’s DEP technology to be too generic and attractive to pass up, and AstraZeneca’s AZD0466 could be the drug that convinces AstraZeneca of this, because it might be seen to be cheaper to acquire the company (or at least the DEP technology) rather than pay licensing fees. What is missing here is a second big pharma recognising the DEP technology opportunity, to provide some competitive tension.
While the broad terms of the AstraZeneca (NASDAQ:AZN) programs (there are several) are disclosed, in terms of the products owned by Starpharma, how, when and how much money they will make is unclear. This is most notable for the bacterial vaginosis product suite that is licensed broadly throughout the world to 3 groups (Aspen, in Australia and New Zealand; ITF Pharma in the US (but still waiting for FDA approval) and Mundipharma for much of the rest of the world, although negotiations are ongoing in India, Canada, and Israel). The bacterial vaginosis market is not small (one report says $US4.5 billion by 2026), and Starpharma products are becoming market leaders even soon after their release. Investors would be happier if they had some sense of what the bacterial vaginosis product range will mean for them. The same applies to the new COVID-19 nasal spray. There is good information concerning the technical details, but no guidance at all is given about potential value of the product to Starpharma.
Starpharma had revenues of $A7.1 million in FY2020 (June 19/June 20), and it reported a loss of $A14.7 million. After the capital raising, Starpharma has approx. $A70 million cash, so the company is in a sound financial position.
Today’s AGM provided a lot of information about a series of product developments. The company’s programs are in good shape. Perhaps, the major frustration for investors (and a reason why the share price is stuck) is clarity about earnings and when the company will become profitable. Next year looks strong with likely licensing of two or three internal DEP-conjugate oncology products, release of the COVID-19 Viraleze product, and further progress on sales of VivaGel BV globally.
Probably more important for the Starpharma stock price will be licensing agreements for its internal DEP-oncology candidates (or developments concerning AstraZeneca’s AZD0466) rather than initial VivaGel BV sales. The way that Viraleze seems to be developing, this could be a more explosive ramp-up of sales than has been experienced for the bacterial vaginosis products, although these products seem to be being well received.
With a decline in share price since October ($11.46 late September to $9.50 recently) as a result of a capital raising, this might be a time to think about investment if you have a gap in your investment portfolio for an early stage biotech company. It is rare to see such a full pipeline in a biotech company with a market capitalisation under $400 million.
I am not a financial advisor, but I have a background in biotech both from a technical and also investor perspective. If my commentary helps you and your financial advisor to think about investment in Starpharma please consider following me. Note that I am a long term investor in Starpharma.
Disclosure: I am/we are long SPHRY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
You Might Also Like
Episode #280: Matthew O’Connor, AdQuick, “People Use The Term Disrupt All The Time…And I Like To Think We Can Kind Of Help Erupt The Industry”
Episode #280: Matthew O’Connor, AdQuick, “People Use The Term Disrupt All The Time…And I Like To Think We Can Kind...
Dr. Anthony Fauci on Sunday that Johnson & Johnson and AstraZeneca could send studies of their COVID-19 vaccines to the...