After a brutal 2021, the junior biotech sector is beginning to show some signs of a bottom taking hold. We have identified a micro-cap biotech company with a US$10 million market valuation that is on the brink of some huge advancements in its drug pipeline and revenue generating potential. An uplisting to the Nasdaq this quarter could also help this company gain a much wider following among US investors. We have recently taken a long position in this company's shares and in this article, we elucidate our bullish rationale.
The Biotech sector has fallen ~50% in the last year and there are mounting signals that an important low is in place.
Algernon Pharmaceuticals (“Algernon”) (CSE: AGN) (FRANKFURT: AGW) (OTCQB: AGNPf) is a clinical-stage drug repurposing company that investigates safe, already approved drugs, including naturally occurring compounds, for new disease applications. The company’s research and development strategy relies on the efficient, expedited advancement of known chemical entities into new human trials. Algernon is also developing dosing regiments, novel drug formulations and seeking new regulatory approvals in global markets. The company specifically investigates drug compounds that have shown clinical success in some geographies but have never been approved in the U.S. or Europe, to avoid off-label prescription writing.
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. Drug development efficiency has been decreasing on a logarithmic scale since the 1950’s (a phenomenon known as Eroom’s Law, a derivative of the famous Moore’s Law) . The exponential decrease in efficiency is alarming, and soon pharmaceutical companies will find themselves in an economic bind: the total cost to successfully commercialize a single drug asset, when accounting for all the R&D expenses applied to failed development projects, will loom so large over potential profits that the NPVs will be prohibitively low. In other words, it just won’t make business sense to develop new drugs. 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 is the process of finding new applications for already approved pharmaceuticals. The goal is to find new diseases that the established drug was not originally indicated for.
The advantages of drug repurposing are clear:
Drug repurposing allows a company to build significant value in their repositioned drug assets at a very early point in their research programs.
Drug repurposing has historically been practiced as an afterthought of the traditional development process. A newly approved drug may have “off-target” effects that result in side effects, indicating that the molecule may interact with other pathways of disease pathogenesis. The table below delineates some of the most impressive repurposing pivots to date .
Missing from the table is dimethly fumarate (DMF), a drug originally developed in post-WW2 Germany for psoriasis, applied as a topical cream. In 1994, the Swiss pharma Fumapharm was licensed an oral therapy formulation for sale in Germany alone (brand name Fumaderm). Seizing on the opportunity to market this blockbuster more widely in Europe, the biotech Almirall developed novel oral formulation (brand name Skilarnce) which approved by the European Medicines Agency for use in Europe (2017) as a treatment for moderate-to-severe plaque psoriasis. Further research on dimethyl fumarate conducted by Fumapharm revealed the molecule’s primary mechanism of action as an immunomodulator. In collaboration with Biogen, the two companies engineered another oral formulation of DMF to treat multiple sclerosis (MS). In 2013, the FDA approved the multi-purpose drug (brand name Tecfidera) for adults relapsing from MS.
The process of discovering new therapeutic applications for an approved drug requires knowledge of both the molecular aspects and clinical outcomes of the drug. Researchers have developed several computational methods and experimental approaches to predict the disease-modifying behavior of potential repurposed drug candidates. Computational methods employ a data-driven approach to identify the “signature” of a drug and compare it to that of other drugs or diseases to identify correlations (or inverse correlations). These similarities point the clinician towards possible novel applications of the drug. For example, a gene expression signature may be acquired from the tissue of cancer patients and compared to the corresponding differential gene expression in patients taking the drug of interest. If the drug downregulates expression of the genes detected in the cancerous tissue samples, then that inverse correlation could indicate that the drug may target the molecular pathways that give rise to the cancer in the first place (“drug-disease” comparison). Drug-disease theory relies on the concept of signature reversion principle, which states that if a drug can downregulate the genes that are differentially upregulated in a disease, then that drug may be able to reverse the disease itself (the disease “phenotype”). Similarly, if the gene expression profiles between two different drugs (approved for different disease indications) show correlations, then it is possible that the drugs may have activity against each other’s primary indications (“drug-drug” comparison). Drug-drug comparisons uncover shared mechanisms of actions and potential off-target effects. Other drug signatures can be captured to further define a drug, such as the chemical structure or adverse events profile, and used to infer therapeutic potential against other disease indications by making comparisons between the corresponding signatures of previously approved drugs and the diseases that they are established to treat .
Researchers also employ experimental approaches to discover potential drug repurposing candidates. Phenotype screening involves the identification of compounds that show disease-modifying effects in in vitro models of disease. For example, researchers at the Medical Biotechnology VTT Technical Research Centre of Finland developed a cell-based assay to screen a library of over 4,000 drug compounds for their effects on cancer cell proliferation . In this case, proliferation (cell division and expansion) is the phenotype of interest, and a drug-induced decrease in proliferation indicates that the drug may be a good candidate to explore further. The high-throughput nature of phenotype screening makes it an attractive strategy for short-listing enormous libraries of putative compounds.
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.
The company’s repurposing program is the brainchild of Dr. Mark Williams. Dr. Williams was a co–founder of the Algernon Pharmaceuticals drug repurposing program and was actively engaged as the Company’s Chief Scientific Officer until March 1, 2021, and now sits on the Board of Directors. He has specific expertise and skill sets in taking companies from the discovery process to Phase 2 trials including cGMP manufacturing and toxicology.
Dr. Williams employed a phenotype screening approach to identify 12 compounds that have never been approved in the US or Europe, and by further investigation into their molecular targets and known mechanisms of action, postulated that they may be able to treat different diseases. After conducting multiple animal trials using widely accepted animal models and proper controls, 5 drugs emerged as lead candidates for Algernon’s program.
Algernon’s unique approach to drug repurposing will expedite de-risked drug approvals for some of medicine’s most intractable diseases.
Algernon’s drug development pipeline addresses three disease areas: stroke, idiopathic pulmonary fibrosis (IPF) / chronic cough, and pancreatic cancer (PC) and small cell lung cancer (SCLC). Their most advanced drug candidate is NP-120 (ifenprodil) as a treatment for IPF and IPF-associated chronic cough, with a Phase 2 study underway and results expected in Q2 2022. Three Phase 1 studies are planned in 2022 for AP-188 (“N,N-Dimethyltryptamine or DMT”) a known psychedelic compound, as a treatment for stroke, and ifenprodil as a treatment for pancreatic cancer (PC) and small cell lung cancer (SCLC). The company anticipates initiating a Phase 2 study for DMT as a treatment for acute stroke in Q4 2022. Read MedicalGold's primer on DMT and other medical psychedelics as novel treatments for mental illness.
Idiopathic pulmonary fibrosis 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. The idiopathic pulmonary fibrosis (IPF) market will rise substantially from just over $900 million in 2015 to $3.2 billion by 2025, representing an impressive compound annual growth rate (CAGR) of 13.6%. According to research and consulting firm GlobalData’s latest report, such growth, which will occur across the seven major markets (7MM) of the USA, France, Germany, Italy, Spain, the UK, and Japan, will primarily be driven by the increased use of expensive therapies, the anticipated launches of two novel therapies, FibroGen’s FG-3019 and Promedior’s PRM-151, and a rise in diagnosed prevalent cases of the disease.
A chronic (persistent) cough is a cough lasting eight weeks or longer in adults, or four weeks in children. Chronic cough can interrupt sleep, cause exhaustion and in severe cases can cause serious vomiting, light-headedness, and rib fractures. A dry, non-productive cough is a very common symptom of IPF. At least 70% - 85% of patients with IPF have a dry cough, which can often get worse on exertion. According to IndustryARC™ the cough remedies market size is estimated to be $1.40B, in 2018, growing at a CAGR of 6.64% during 2019-2024. Pleasant taste and easy intake of oral syrups are among the key factors driving the global cough remedies market. Some traditional cough remedies include drinking honey, bromelain and bacterial microbes. Further, some new generation cough remedies include corticosteroids, bronchodilators and antibiotics.
Ifenprodil was first approved in France (1971) as a vasodilator and has been used in France to treat peripheral arterial obstructive disease. It is also approved in Japan and South Korea for the treatment of vertigo. The compound’s mechanism of action is against the NMDA receptor, acting as an antagonist. Ifenprodil is an N-methyl-D-aspartate (NMDA) receptor antagonist specifically targeting the NMDA-type subunit 2B (GluN2B). Ifenprodil prevents glutamate signaling. The NMDA receptor is found on many tissues including lung cells, T-cells, and neutrophils and certain types of cancer cells.
Algernon is currently conducting a 20-patient open-label study in IPF patients with chronic cough across seven clinical sites in Australia and New Zealand. The Phase 2 study is being conducted over a 12-week treatment window with 20mg ifenprodil administered 3x per day. Efficacy endpoints include metrics of cough and lung function (including a molecular biomarker of fibrosis – ProC3), and data is expected to be available in Q2 2022. The Company just announced that it has closed enrollment in the trial.
Algernon has already demonstrated that NP-120 reduced fibrosis in a well-established animal model of IPF. This in vivio study concluded that NP-120 treatment resulted in a 56% reduction in fibrosis versus an untreated control arm, beating the efficacies of two globally approved treatments, Nintedanib (51% reduction) and Pirfenidone (44% reduction), handedly .
“We have now completed two studies from an independent laboratory, confirming that NP-120 is an effective anti-fibrotic agent for IPF. We believe NP-120 could represent a novel approach to treat IPF and we look forward to advancing our lead into a Phase II clinical trial as quickly as possible to establish human efficacy. We also intend to pursue discussions with the firms responsible for the development of NP-120 and NP-121, and to seek an orphan designation with regulatory authorities.”
Pancreatic cancer is a debilitating disease with a five-year survival rate of just 8%, the lowest of the 22 common cancers. Lung cancer is not much better, with only 19% of patients making it to the five-year mark. Algernon has embarked on a mission to repurpose NP-120 (ifenprodil) as a treatment for both of these cancers.
In Q2 2021, Algernon announced the commencement of its pancreatic cancer clinical research program with ifenprodil. In a research paper authored by Dr. William North of Dartmouth College, ifenprodil demonstrated a significant anti-tumor effect in a pancreatic cancer animal model. The drug significantly and rapidly reduced the average solid tumor size by approximately 50% within three days, and this reduction was maintained for the duration of treatment in a murine model of pancreatic cancer. The average tumor size in the untreated group doubled during the same period .
Shortly after the company began their pancreatic cancer research in collaboration with Dr. William North, Algernon appointed Dr. North to lead their small cell lung cancer (SCLC) program. Dr. North is a cancer research pioneer with over 120 publications in the field. One of his publications, entitled “Small-Cell Lung Cancer Growth Inhibition: Synergism Between NMDA Receptor Blockade and Chemotherapy”, found that ifenprodil in combination with chemotherapeutic agent topotecan, produced clear additive effects that completely blocked tumor growth .
Perhaps the most exciting research that Algernon is pursuing is the use of DMT to treat stroke-related brain injury. There are over 15M strokes world-wide each year, and the global stroke treatment market is expected to reach $15B by 2027. Current treatment options are limited to Tissue Plasminogen Activator (TPA) or blood thinners. The insufficiency of these therapies is evident when you look at the proportion of stroke survivors that are left with serious disability and require intensive physical rehabilitation.
Currently, medication treatments for ischemic stroke are primarily limited to TPA or blood thinners. However, these treatments are stroke type specific and cannot be given until the patient has received a brain scan to determine if the stroke is ischemic (blockage) or hemorrhagic (bleed). Patients being treated with TPA must receive the drug within 3 - 4 hours of the injury. As a result, only 5 - 10% of stroke patients receive TPA.
The second major treatment option for ischemic stroke is thrombectomy which is the mechanical interventional procedure by which a blood clot or thrombus is removed under image guidance using endovascular devices. In order for this procedure to be effective, the blocked blood vessel needs to be large enough a large vessel occlusion (LVO) which is only approx. 20% of ischemic strokes. As a result, the vast majority of ischemic stroke patients have no other option except to be stabilized (oxygen, blood pressure and heart rate, hydration, blood glucose) with a watch and wait approach.
Recent research has uncovered DMT as a potential treatment for stroke-associated brain injury due to its ability to induce neuron growth (neurogenesis) and rewiring (neuroplasticity). In a study conducted at the University of California, Olsen showed in vitro that DMT has neuroplastic and neurogenesis effects in cortical neuron assay . In another study, Nardia et al showed DMT was effective in an animal stroke study reducing infarct volume and almost completely restoring motor function . Finally in a study from the University of Hungary, DMT reduced the activity of some of the mechanisms and effects that are involved in the damaging biological cascade that occur after a stroke .
Algernon in its own preclinical study showed DMT increased the growth of cortical neurons by 40% with statistical significance in one arm of the study, when compared to control. Algernon also reports that the increased growth was achieved with a sub hallucinogenic dose.
After a breakneck ~200% rally to begin the year, Algernon shares have pulled back to an important area of support near $7.00-$7.50:
C$7.50 per share equates to a roughly US$10 million market cap for Algernon. This valuation is low enough that AGN shares offer a lot of torque to success in any of the above clinical trials. In particular, the phase 2 trial for Algernon’s AP-188 (DMT) as a treatment for stroke-associated brain injury is likely to receive a great deal of attention later in the year - success in this phase 2 trial would warrant a 9-figure market valuation.
 New tricks for old drugs: Faced with skyrocketing costs for developing new drugs, researchers are looking at ways to repurpose older ones - and even some that failed in initial trials [Link]
 Pushpakom, S., Iorio, F., Eyers, P. et al. Drug repurposing: progress, challenges and recommendations. Nat Rev Drug Discov 18, 41–58 (2019). https://doi.org/10.1038/nrd.2018.168 [Link]
 Iljin K, Ketola K, Vainio P, Halonen P, Kohonen P, Fey V, Grafström RC, Perälä M, Kallioniemi O. High-throughput cell-based screening of 4910 known drugs and drug-like small molecules identifies disulfiram as an inhibitor of prostate cancer cell growth. Clin Cancer Res. 2009 Oct 1;15(19):6070-8. doi: 10.1158/1078-0432.CCR-09-1035. Epub 2009 Sep 29. PMID: 19789329. [Link]
 Algernon Pharmaceuticals’ NP-120 Reduced Fibrosis in an Idiopathic Pulmonary Fibrosis Study by 56% Outperforming USFDA Approved Treatments Nintedanib and Pirfenidone [Link]
 North WG, Liu F, Lin LZ, Tian R, Akerman B. NMDA receptors are important regulators of pancreatic cancer and are potential targets for treatment. Clin Pharmacol. 2017 Jul 17;9:79-86. doi: 10.2147/CPAA.S140057. PMID: 28761381; PMCID: PMC5522667. [Link]
 North WG, Liu F, Dragnev KH, Demidenko E. Small-cell lung cancer growth inhibition: synergism between NMDA receptor blockade and chemotherapy. Clin Pharmacol. 2019;11:15-23 https://doi.org/10.2147/CPAA.S183885 [Link]
 Ly C, Greb AC, Cameron LP, Wong JM, Barragan EV, Wilson PC, Burbach KF, Soltanzadeh Zarandi S, Sood A, Paddy MR, Duim WC, Dennis MY, McAllister AK, Ori-McKenney KM, Gray JA, Olson DE. Psychedelics Promote Structural and Functional Neural Plasticity. Cell Rep. 2018 Jun 12;23(11):3170-3182. doi: 10.1016/j.celrep.2018.05.022. PMID: 29898390; PMCID: PMC6082376. [Link]
 Lindsay P. Cameron, Charlie J. Benson, Brian C. DeFelice, Oliver Fiehn, and David E. Olson. Chronic, Intermittent Microdoses of the Psychedelic N,N-Dimethyltryptamine (DMT) Produce Positive Effects on Mood and Anxiety in Rodents. ACS Chemical Neuroscience 2019 10 (7), 3261-3270. DOI: 10.1021/acschemneuro.8b00692 [Link]
 Sándor Nardai, Marcell László, Attila Szabó, Alán Alpár, János Hanics, Péter Zahola, Béla Merkely, Ede Frecska, Zoltán Nagy. N,N-dimethyltryptamine reduces infarct size and improves functional recovery following transient focal brain ischemia in rats. Experimental Neurology, Volume 327, 2020, 113245. ISSN 0014-4886,.https://doi.org/10.1016/j.expneurol.2020.113245. [Link]
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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