Seelos: Data This Year Is Critical (NASDAQ:SEEL)

I covered Seelos (NASDAQ:SEEL) twice before, and I see from my notes that I also had a detailed communication with company management in order to better understand the company. Despite my initial interest, my plan to take a pilot position in the company did not materialize. This has nothing to do with Seelos specifically, and more to do with the terrible market conditions we saw in the early months of 2022. However, that turned out to be a good thing, because SEEL has mostly traded down in 2022, with a recovery obtaining just in the last couple of months.

Seelos makes therapeutic medicines using psychedelic drugs. It also has gene therapy programs. The company has two assets in human trials, SLS-002 targeting ASIB-MDD or acute suicidal ideation and behavior in major depressive disorder, and SLS-005 targeting Amyotrophic Lateral Sclerosis (ALS), also known as Lou Gehrig’s disease. This last one has a pivotal phase 2/3 trial ongoing since Q1 2022, and also a second pivotal trial in Spinocerebellar Ataxia (SCA) which commenced in Q2. Nearest data drop is, however, from SLS-002, which will have a proof of concept study’s part 2 data in 2H.

An important thing that transpired in July was that the FDA agreed to consider the part 2 study – a large, double-blind, randomized trial – as registrational. That means, the company should be able to submit an NDA in the early months of 2023, and get a PDUFA by the end of 2023. This immediately enhances the value of SEEL.

The part 1 data for SLS-02 was quite strong. From the company presentation:

All doses judged to be safe and well tolerated with no new or unique safety signals

• No serious adverse events (SAEs) and all AEs were transient and clinically manageable

• Expected transient increase in Clinician Administered Dissociative State Scale (CADSS) scores at the higher dose groups (75 mg and 90mg) correlated with Cmax (~40 mins), that resolved with mean values < 4 points at one hour

• All subjects had a CADSS score < 4 points at two hours

• Expected mild and transient increase in blood pressure from 30 to 90 minutes post dose, all mean values remained within normal limits, and resolved without intervention

Across 4 scales used to measure suicidal ideation, SLS-02 showed strong clinical improvements, as follows:

	BASELINE (n=17)	DAY 1 (n=17)	DAY 16 (n=14)
MADRS (0-60 scale, ≤12 is remission)	39.4	14.5	7.4
CGIS-SI/B (1-5 scale, 1=not at all, 5=extremely suicidal)	3.8	1.6	1.1
S-STS (0-52 scale, higher score equated to higher suicidality)	22.4	1.7	0.0
PGIS-SI/B (1-5 scale, 1=not present, 5=extremely severe)	3.5	1.6	1.0
MADRS Item-10 (0-6 scale, ≤3 is defined as a response)	5.2	0.8	0.1

Click to enlarge

There is not much else happening at Seelos regarding its lead candidate. The company got a boost recently after it received a research grant from the Michael J Fox Foundation, but this was for Parkinson’s Disease, and the asset was SLS-04, a gene therapy program. Investors are waiting for the part 2 data from their lead study, which will be read out in a few more months. I am guessing things will start becoming interesting again once we have this data. Let’s not forget that the company stock remains subdued because despite their interesting work, there’s never been major efficacy data from a large-scale trial in the company’s history.

Financials

SEEL has a market cap of $114mn and a cash balance of $41mn. R&D expenses were $18mn, while SG&A was $3mn. That gives them a cash runway of just around a quarter. They have a shelf offering from May of $50mn, and in May, they raised some funds – “The net proceeds to the Company from the offering were approximately $64.5 million, after deducting underwriting discounts and commissions and other offering costs.” This gives them some added leeway in terms of cash runway.

The company recently regained compliance with NASDAQ.

Bottomline

SEEL is a high-risk investment right now, with strong prospects of further dilution on positive data, and an almost certain requirement for funds before approval, if it happens. While they do have some early signs of efficacy from the ASIB program, nothing can be said with certainty before the data readout. As such, we will stay on the sidelines.

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