NASDAQ:EDSA
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Business Update
Update on EB05 Development in ARDS
Edesa Biotech, Inc. (NASDAQ:EDSA) is developing EB05 (paridiprubart) as a treatment for acute respiratory distress syndrome (ARDS). The drug is currently being evaluated in a Phase 3 clinical trial of approximately 600 patients hospitalized with ARDS caused by SARS-CoV-2 infections who are on invasive mechanical ventilation, both with and without additional organ support such as extracorporeal membrane oxygenation (ECMO). The primary endpoint for the study is the mortality rate at 28 days.
To support this Phase 3 study, in October 2023 Edesa secured a commitment of up to CAD$23 million from the Government of Canada via the Strategic Innovation Fund (SIF) to help cover expenses for the Phase 3 trial. The SIF funding will be applied toward study expenses, including hospital and physician expenditures, along with scale-up manufacturing for commercial drug product if development is successful. It will also allow for an expansion of the number of hospitals in the trial so that the company can fine-tune for places with the highest hospitalization rates. The SIF is an initiative by the Canadian government to expand and grow the life sciences sector and money is allocated from the SIF following a competitive review process.
The company has plans to evaluate EB05 in a broader ARDS population, however the best regulatory pathway forward for the drug is still being determined. Were the company to amend the current protocol to include all ARDS patients it would likely change the powering assumptions for the study and potentially introduce additional risks and variables. In addition, EB05 has the emergency use authorization (EUA) pathway still available to it in ARDS caused by COVID, and the addition of non-COVID patients to the trial may affect the potential to use the EUA pathway. Edesa is interested in getting EB05 approved in the most expeditious manner possible and the company is continuing to evaluate how best to do that while at the same time maintaining the goal of testing the drug in a general ARDS population.
EB05 to be Developed in Pulmonary Fibrosis
Edesa is planning to file an Investigational New Drug (IND) application such that a Phase 2 trial of EB05 can be initiated in pulmonary fibrosis, which is the end stage of a broad range of interstitial lung diseases characterized by the progressive scarring of lung tissue. There are more than 200 known causes of pulmonary fibrosis, with idiopathic pulmonary fibrosis (IPF) being the most common form. IPF affects approximately 250,000 individuals in the U.S. (Pulmonary Fibrosis Foundation) and there are only two FDA approved therapies, pirfenidone and nintedanib. The median survival for IPF is 4.5 years (Kaunisto et al., 2019).
Research over the past decade has focused on the role of damage-associated molecular pattern (DAMP) molecules in the exacerbation and progression of pulmonary fibrosis (Ellson et al., 2014). Toll-like receptors (TLRs) are pattern recognition receptors of DAMPs and play a critical role in how DAMPs exert their effects in cellular microenvironments. TLR4 in particular was shown to have a profibrotic effect in the lung when activated by DAMPs (He et al., 2009). The interaction of TLR4 and DAMPs causes the release of numerous proinflammatory cytokines on macrophages and fibroblasts (Zhang et al., 2008). Thus, targeting the TLR4/DAMP interaction may be beneficial in the treatment of fibrotic lung diseases.
Study Planned for EB06 in Vitiligo
Edesa is planning for a Phase 2 study of its anti-CXCL10 monoclonal antibody for the treatment of moderate-to-severe non-segmental vitiligo patients. Vitiligo is a disease that causes areas of the skin to lose color, with non-segmental vitiligo being characterized by patches appearing on both sides of the body. It is caused when pigment-producing cells (melanocytes) die or stop producing melanin as a result of an autoimmune disease, genetics, or a triggering event (e.g., stress, sunburn, skin trauma).
Past research showed that the chemokine CXCL10 was elevated in both vitiligo patient skin and serum (El-Domyati et al., 2022). In a mouse model of vitiligo, which includes CXCL10 expression in the skin, neutralization of CXCL10 in mice with established, widespread depigmentation induced reversal of disease as shown by repigmentation (Rashighi et al., 2014). In addition, serum CXCL10 levels are significantly increased in vitiligo patients compared to controls, suggesting that CXCL10 may play a role in the pathogenesis of vitiligo in humans (Gharib et al., 2021).
The vitiligo market is projected to reach approximately $500 million by 2028 (EvaluatePharma), and two recent events show the potential for vitiligo treatments in development:
• In October 2022, Villaris Therapeutics was acquired by Incyte (INCY) for $70 million upfront and up to $1.3 billion in potential milestone payments. Villaris was developing auremolimab, an anti-IL-15Rβ monoclonal antibody in preclinical development for the treatment of vitiligo.
• In October 2023, VYNE Therapeutics (VYNE) announced positive results from the Phase 1b trial of VYN201 in patients with non-segmental vitiligo with a mean percentage reduction in F-VASI score for the 1.0% and 2.0% cohort of 30.3% and 39.0%, respectively. In addition, the drug was generally well tolerated with a favorable safety profile. Following the announced results, VYNE raised gross proceeds of $88 million in a private placement financing.
We believe that a successful Phase 2 trial with EB06 in vitiligo patients would result in a significant revaluation of that asset in line with the valuations assigned to early stage vitiligo products as shown above.
Financial Update
On February 9, 2024, Edesa announced financial results for the first quarter of fiscal year 2024 that ended December 31, 2023. There were no revenues reported for the first quarter of fiscal year 2024. R&D expenses in the first quarter of fiscal year 2024 were $0.7 million, compared to $1.4 million for the first quarter of fiscal year 2023. The decrease was primarily due to decreases in external research expenses related to the EB01 trial. G&A expenses totaled $1.1 million for the first quarter of fiscal year 20234 compared to $1.0 million for the first quarter of fiscal year 2023. The increase was primarily due to a increased fees for professional services and noncash share-based compensation.
As of December 31, 2023, Edesa had approximately $4.3 million in cash and cash equivalents, which does not include the CAD$23 million in potential funding from the Canadian government, the $10 million revolving credit agreement, or the approximately $6.4 million of available capacity on the Canaccord ATM. As of February 9, 2024, Edesa had approximately 3.2 million shares outstanding and, when factoring in stock options and warrants, a fully diluted share count of approximately 4.2 million.
Conclusion
Edesa is preparing to file INDs such that clinical trials can be initiated for EB05 in fibrosis and EB06 in vitiligo. The company has a number of options available in order to fund those trials, and this financial flexibility in a time of uncertain market conditions is a big advantage. We also look forward to updates regarding EB01, as the company looks for a partnership to advance that compound into a Phase 3 program. With no changes to our model our valuation remains at $32 per share.
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