Aug 16, 2022

Algernon Rapidly Advances Clinical Trials For Two Lead Programs

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Since covering Algernon 6 months ago, the biotech sector has rebounded significantly and raised the valuations of many research and development companies. The XBI Biotech ETF is up 18% since the beginning of June to late July. Meanwhile, the next best performing sector is healthcare (+1.22%), followed by technology (+.82%), financials (-4.21%), and energy (-10.23%). Algernon caught the wave and their stock has rebounded 26% since mid-July (as of 8/16/22). In addition to the general bullish sentiment in the sector, Algernon has improved its fundamentals to warrant a substantially higher valuation than it's $4.1M market cap (as of 8/16/22).

Here's why.

Algernon's Strategy

Drug repurposing

Developing new drugs is both extremely costly and time-consuming, with R&D expenses surpassing $1-2B (some estimates as high as $5B) and 12-16 years to bring a single drug to market. The rate of attrition of new drug candidates is extremely high, with a dismal 1.9% advancing fully through the FDA’s rigorous 3-phase clinical trial process. Clearly, there is a need for more intelligent drug discovery and development to keep the biotech engine cranking out new, life-changing therapies for some of medicine’s most intractable diseases. Drug repurposing solves this problem by finding new applications for already approved pharmaceuticals. The goal is to find new diseases that the established drug was not originally indicated for.

Advantages of repurposing:

  • The risk of failure is much lower since the safety of the drug has already been established in human trials.
  • The timeline is expedited since the safety studies (Phase 1) have already been completed. The average time to market is 6.5 years (compared to 12-16 years for new drug discovery)
  • Reduced R&D costs (repurposing development averages $300M, compared to $1-2B for new drug discovery)

De-risked development

Algernon Pharmaceuticals is employing drug repurposing strategies to test drug compounds that have demonstrated clinical efficacy in foreign jurisdictions but have never been approved in the USA or Europe. This is a very intelligent approach to claiming exclusivity in two of the largest international markets for drugs (by revenue) and erecting a barrier to entry for the original drug manufacturers. Essentially, they are piggy-backing off of the upfront (intense) capital outlay by the original developing company, benefiting from the preclinical and first-in-human safety studies that allowed the drugs to hit the markets they were originally approved in.

Arbitrage on a multi-billion-dollar scale.

Their business savvy gets even better. Once an established drug has been screened in animal models for new diseases, the company moves these lead compounds directly into Phase 2 clinical trials for off label use in the country in which they were originally approved, or in Australia where you can test a drug in man that has not been approved for the Australian market. They are able to do this because the safety of the drug has already been established in humans. When presented to the FDA, this positive human clinical data makes a compelling case to advance directly into Phase 2 clinical trials under the FDA's Investigational New Drug (IND) pathway.

Drug Development Programs

Algernon's main drug compound (and most advanced program) is Ifenprodil (NP-120), an N-methyl-D-aspartate (NMDA) receptor antagonist specifically targeting the NMDA-type subunit 2B (GluN2B), which prevents glutamate signaling. Ifenprodil is an orally delivered small molecule, which was originally developed by Sanofi to treat peripheral circulatory disorders. Algernon is repurposing Ifenprodil for idiopathic pulmonary fibrosis (IPF) and chronic cough. They conducted two independent studies showing that Ifenprodil outperformed the world’s leading two treatments for IPF, Nintedanib and Pirfenidone, reducing fibrosis of the lung by 56% with statistical significance. Ifenprodil represents a novel first in class treatment for both IPF and chronic cough.

In a slight deviation from their repurposing strategy, Algernon is also pursuing the use of N,N-Dimethyltryptamine or DMT, a known psychedelic compound, as a treatment for ischemic stroke in the brain. While DMT has not been approved for any condition, it has a long history of use in ancient tradition to treat both mental and physical ailments. Algernon is not alone in exploring DMT as a treatment for various mental and physical disorders. In fact, Small Pharma completed a Phase 1 safety study earlier this year, and there are at least 50 ongoing DMT trials.

Ifenprodil for IPF and chronic cough

IPF is a type of chronic lung disease characterized by a progressive and irreversible decline in lung function and scarring (fibrosis) of the lungs. There is no cure for IPF and there are currently no procedures or medications that can remove the scarring from the lungs. IPF is essentially a death sentence, as patients lose 2-3% of their lung capacity every year that the disease remains untreated.

On July 18, 2022, the company announced positive topline data showing that their Phase 2 proof-of-concept study, evaluating Ifenprodil for the treatment of IPF and chronic cough, met its co-primary endpoint . In the study, 65% of patients had stable or improved forced vital capacity (“FVC”) over the 12-week treatment period with statistical significance when compared to an anticipated placebo effect of 40%. FVC is the amount of air that can be forcibly exhaled from one’s lungs after taking the deepest breath possible.

This good news was followed by great news. On July 28, the company reported additional results from its Phase 2a Study of Ifenprodil, where the drug was shown to be much more effective at reducing cough in patients than initially reported. Additional review showed a significant improvement in mean objective 24-hour (geometric mean* was reduced by 32% and 49.5% at 4 and 12 weeks, respectively) and waking cough counts (geometric mean* was reduced by 30.2% and 37.4% at 4 and 12 weeks, respectively). The data came as the result of a statistical review by the Company’s lead scientific and medical advisor, Dr. Jacky Smith, a global expert on cough.

“This additional analysis confirms my initial positive impression of the study. The NMDA receptor has always been an interesting target for cough, but other agents have been poorly tolerated. To see effects of this magnitude in an IPF population, where other drugs have failed to demonstrate a benefit, is notable, and I look forward to seeing the Company’s full data set next month.”
~ Dr. Jacky Smith, Professor of Respiratory Medicine at the University of Manchester, and an Honorary Consultant at Manchester University NHS Foundation Trust
“Ifenprodil’s potential as a potent cough treatment just increased. We have to remember that cough in IPF patients has been historically even more difficult to treat than stand-alone chronic cough. It is quite possible that Ifenprodil may show an even greater efficacy if tested directly in patients that only have chronic cough in the absence of IPF.”
~ Christopher J. Moreau CEO of Algernon

*Analysis of geometric means is preferred to arithmetic means when raw data is not normally distributed, and is the standard method employed in trials measuring objective cough counts, where data are heavily skewed.

So what's next for Ifenprodil?

Algernon plans to file a pre-IND application with the FDA for a larger, Phase 2b IPF study in which the dosing would switch to a new once-a-day formulation of Ifenprodil from the 3-times daily dosing currently being used. The Phase 2b study will also have multiple arms, multiple doses, would be placebo controlled and would be double blinded and randomized. The trial will include patients with IPF and chronic cough comorbidities.

The company has received positive feedback on the pre-IND application for a Phase 2b study for chronic cough alone, but is considering putting the chronic cough indication on the backburner to concentrate fully on the IPF trial. IPF is a US$4B market while chronic cough is an estimated US$1B market.

DMT (AP-188) for stroke

In July, Algernon provided an update on their Phase 1 study status for DMT as a treatment for stroke. In several pre-clinical studies, DMT has been shown to induce healing in the brain by encouraging both neurogenesis and neuroplasticity, the mechanisms involved in healing the brain after an injury like a stroke. The company has filed for a Clinical Trials of Investigational Medicinal Products (“CTIMP”) application with the United Kingdom Medicines and Healthcare Products Regulatory Agency (“UK MHRA”) and anticipates starting the Phase 1 study in October of this year. The purpose of the Phase 1 study will be to determine the safety, tolerability, and pharmacokinetics of their proprietary DMT salt formulation ("AP-188") when administered as an intravenous bolus followed by prolonged infusion. The first part of the study will use a single-escalating dose design while the second part will test the effects of repeated administrations of the highest safe dose. There will be up to 60 healthy volunteers enrolled across the two parts of the study which will include both psychedelic experienced and psychedelic naïve patients. The design of this Phase 1 study was informed by a number of independent DMT studies as well as Algernon's own preclinical in vitro experiments. In these in vitro models of cortical neuron growth, Algernon's researchers observed a statistically significant 40% increase in response to DMT (AP-188) treatment compared to control. Importantly, this growth was achieved with a sub-hallucinogenic dose (the company will not be delivering a psychedelic dose to stroke patients, which is estimated to be approximately 2mg/kg, because DMT’s capability to induce brain neuroplasticity happens even at microdose levels of DMT).

The only hurdle in the way of this first-in-man study is the cGMP production of AP-188. their synthetic, novel salt form of DMT. In the company's most recent update, they confirmed that they are currently working to complete the intravenous formulation (“IVF”) that will be used in the Phase 1 DMT study. They have retained the Centre for Human Drug Research (“CHDR”) and its affiliated pharmacy to meet the cGMP specifications of the UK MHRA. Since there have been numerous independent Phase 1 studies of DMT confirming its safety as a drug, including the 1990’s work of Algernon medical consultant Dr. Rick Strassman who wrote the book “DMT: The Spirit Molecule”, the company is not expecting to see any safety issues arise from its planned Phase 1 study.

Investment Considerations

Upcoming catalysts

  • Pre-IND meeting for Phase 2b for Ifenprodil as a treatment for IPF and IPF with chronic cough
  • Possible Phase 2b IND for Ifenprodil as a treatment for chronic cough
  • Attain orphan drug designation for Ifenprodil as a treatment for IPF - IPF is classified as an orphan disease indication and as such, any new approved drugs are provided 7-year and 10-year market exclusivity in both the U.S and Europe, respectively.
  • File an application with the U.S. FDA for a Breakthrough Therapy* designation as soon as possible.
  • Present the full dataset from its Phase 2a Study of Ifenprodil for IPF and chronic cough at the 9th American Cough Conference in June, 2023. The American Cough Conference is the world’s leading educational meeting for health care professionals involved in the research and management of patients with cough and is held every two years.
  • Prosecute two new DMT patents containing claims for composition of matter of novel DMT salt forms
  • Phase 1 DMT study for stroke

*Breakthrough Therapy designation is a process designed to expedite the development and review of drugs that are intended to treat a serious condition where preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available therapy on a clinically significant endpoint(s).

Intellectual property

Algernon has been issued a patent from the Canadian Intellectual Property Office (patent No. 3101853), for the treatment of interstitial lung disease with Ifenprodil, entitled “Compositions and Methods for Treating Idiopathic Pulmonary Fibrosis.” This patent covers the composition of Ifenprodil and its application in treating interstitial lung disease, including IPF. The base claims of the patent will be valid through 2038, and Algernon has active patent applications for Ifenprodil for the same compositions and methods in the U.S., Europe, China and Japan.

Algernon is pursuing multiple patents for their novel DMT compound, AP-188. The filed composition of matter claims included the nicotinate and pamoate salt forms of DMT, which are considered completely separate structures from the core molecule, and can confer favorable characteristics to the original compound (e.g. increased efficacy, improved safety, increased stability). Importantly, patent offices recognize the novelty of these variants and award composition of matter claims where applicable. Algernon has demonstrated the improved physiochemical properties of their two novel salt forms (compared to fumarate, the most commonly studied DMT salt form). The company believes that the addition of these non-inert salts may actually independently enhance the treatment of ischemic stroke using DMT. This data will support the composition of matter claims for Algernon's nicotinate and pamoate salt forms of DMT.

They referenced the following studies:


AGN shares reached a deeply oversold low in mid-July and have since begun to rebound. The size of last week's bullish marubozu candlestick indicates that this could be the beginning of a much larger move higher. Given Algernon's current modest valuation, a nascent biotech sector rally, and a powerful set of potential catalysts lined up over the coming months AGN shares could easily experience 50%-100% of additional upside by year end.


Author has purchased Algernon shares on the open market and may choose to buy or sell at any time without notice. Author has been compensated for marketing services by Algernon Pharmaceuticals Inc.


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