Soligenix: Two Phase-3 Clinical Trials – Results By June 2020 – Soligenix, Inc. (NASDAQ:SNGX)

Soligenix is a small biotech company that will announce results from two separate PH 3 clinical trials: FLASH study SGX301 in patients with cutaneous T cell lymphoma (CTCL) will be announced in 2 months, and top-line results of DOM-INNATE study of SGX942 for the treatment of oral mucositis in patients with concomitant chemoradiotherapy for Head and Neck cancer are expected 4 months after that.

Cutaneous T cell lymphoma (CTCL) is a rare type of lymphoma and there is no FDA approved therapy for the early stage of the disease. It is estimated that around 20 000 patients in USA are affected by this disease and similar numbers are in the EU.

Since CTCL is a rare disease, it is highly probable that investor who do not have background in medicine do not fully understand the potential that SGX301 has to improve the quality of life and substantially prolong it for the patients who use it. It is essential to keep CTCL patients in the early stage of the disease as long as possible, because that is where SGX301 has the advantage, since SGX301 is not carcinogenic and that means that SGX301 can be applied many times to the same patient. This is very important since it means that CTCL could be transformed to a chronic condition in many patients.

If Soligenix announces positive final results for the FLASH study, SGX301 will become the front line therapy for CTCL.

The global market size SGX301 serves is estimated to be more than $200 million per year.

DOM-INNATE study results are expected in Q2. Oral mucositis is a crippling disease that affects Head and Neck cancer patients during chemoradiotherapy. The fact is that it is a painful condition that often stops patients from taking food or water (per os). It is the most common reason for chemoradiotherapy breaks or delays, which is a problem since it gives time for the tumor to repopulate its cells, which results in diminishing efficiency of anticancer therapy.

Once more, there is no FDA approved therapy for oral mucositis and so SGX942 would become the standard of care if the results come positive.

The market size that SGX942 serves in U.S. and EU is estimated to more than $250 million per year.

It is worth noting that Soligenix has arranged interim analysis for both trials and that Data Monitoring Committee recommended that both trials should continue.

For people who are not familiar with Data Monitoring Committee and its role in interim analysis here is a quick summary.

Data Monitoring Committee (DMC) is a group of independent experts -clinicians, statistician, and ethicists whose job is to monitor patients’ safety and treatment efficiency.

Interim analysis is an analysis that is performed during the clinical trial. After reviewing the results from an interim analysis DMC has the power to recommend continuation or cessation of the study based on safety concerns or futility.

Since the DMC has recommended that both FLASH as well as DOM-INNATE studies should continue, it’s highly probable that they’ve seen a better treatment efficiency in treatment groups than in control groups in both trials.

I find it surprising that a company that is expecting readouts from 2 PH3 clinical trials in near future has a market capitalization of only $55 million, and that fact deserves a clarification.

There is an obvious explanation why SNGX market capitalization is just $55 million despite huge potential of its pipeline. In order to finance 2 PH3 clinical trials, which are extremely expensive, SNGX had to issue new shares many times, and there is nothing that investors hate more than share dilution.

The drug development process takes from 10 up to 15 years. The ride was long and bumpy, but management succeeded in completing the FLASH study and top- line results are imminent. Completion of the DOM-INNATE study is expected in the next 2 months and top-line results will be announced 4 months after that. Soligenix had 6mil$ and no debt on its balance sheet as of January 2020 and since last year its cash burn was approximately 2.5 mil$ quarterly. It has enough cash on its balance sheet until both trials are finished and results are announced. Soligenix also has an At The Market (ATM) instrument in place with B Riley FBR,inc to supplement cash.

The most important fact, which was stated in the last companies update letter issued on January 14th, is that the management currently is not contemplating a larger capital raise, until at the earliest after the final top-line results are disclosed. It means that even if SNGX management decided to raise the capital it would be at a much higher stock price than it is today, if FLASH study results come in positive.

Based on other biotech companies that marketed their drugs we anticipate that commercializing costs for SGX301 will be 20-40 mil$ in first year and for SGX942, 50-80 mil$ in first year.

Actually, there is high probability that SNGX will not need a substantial capital raise. According to an interview with Cristopher J Schaber, PhD. President and Chief Executive Officer of Soligenix, the main goal is to commercialize SGX301 in USA. Soligenix has no intention to market SGX301 in EU, and if the results are positive it will be quite easy to find partners to out-licence SGX301 in EU. Proceeds from that deal could be enough to cover the cost of commercialization of SGX301 in USA. A similar approach could be expected for SGX942, and even if additional funds are needed the capital will be raised at a much higher stock price then it is today.

Based on PH2 results and positive interim analyses our opinion is that the probability for FLASH study positive results is 75% and for DOM-INNATE study is 70%. That means that the probability that results from both studies are positive is 52.5% and the risk that both studies fail is 7.5%.

If result from just one study come in positive, it will lift SNGX market capitalization substantially and enable Soligenix to raise capital easier and at much higher stock price than it is today.

It seems to us that other investors who do their own research will come to the similar conclusions but micro capitalization of Soligenix keeps it under the radar for big investors and that will change in no time if the results from the FLASH study come out positive.

And that is our takeaway – there are multiple avenues for Soligenix to market GX301 and SGX942, and if at least one study result comes in positive Soligenix market capitalization has just one way to go and it is up.

Soligenix has a few more valuable assets, with great potential in its pipeline, and the most promising is a ricin toxin vaccine – RiVax -that Soligenix is developing with financial support from the Nacional Institute of Allergy and Infectious Diseases (NIAID). Ricin, a highly potent toxin, is very easily produced. It is classified as a level B biothreat by the Centers for Disease Control and Prevention.

There are no FDA approved prophylactic or post-exposure therapies for ricin toxin exposure and a ricin toxin vaccine could be used to vaccinate military personnel and exposed civilians in an event of a biological attack.

Risks

The only risk at such a low market capitalization, by our opinion, is that the results from both trials, FLASH study and DOM-INNATE study, come in negative and at the same time Soligenix fails to develop RiVax. The risk for such an outcome is very low, less than 10% by our opinion, given PH2 results of SGX301 and SGX942 and that both studies have already been de-risked, to some extent, with interim analyses results and DMC recommendation that both trials should continue.

Soligenix has enough cash on its balance sheet to wait for top line results from both trials. Our point is that a financial risk is very low. After the announcement of positive results Soligenix will have multiple possibilities to commercialize SGX301 and SGX942 – out-licence one or both drugs in EU, or capital raise but at much a higher stock price, and a takeover bid from a large biotech or pharmaceuticals company should not be rolled out.

Conclusion

Soligenix is a small biotech company with great potential, and a very low market capitalization. Our opinion is that the market misjudged the potential of Soligenix, and that due to its micro capitalization Soligenix is under the radar for big investors. The company is expecting readouts from 2 PH3 clinical trials – FLASH study in 2 months and DOM-INNATE in 6 months.

The results are significantly de-risked with interim analyses results.

If result from one study come in positive it will lift SNGX market capitalization substantially but if results from both studies are positive it will transform Soligenix from a small company into a large and stable biotech company with 2 FDA approved, standard of care drugs.

Market potential for SGX301 and SGX942 is estimated to more than 450 mil$ globally per year.

Disclosure: I am/we are long SNGX. 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.

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