This Undervalued Biotech is Hurdling Into 2022 with an Aggressive Plan for Three Phase 2 Clinical Trials

2021 was a brutal year for the medical psychedelics sector, with many stocks tumbling 50% or more from their highs early in the year...

… and therein lies an enormous opportunity.

A 30,000-foot look at the psychedelic market is enough to unnerve any investor, but when you dig into the “why” it becomes evident that  these suppressed valuations are caused by confusion about the sector and drug development industry at large. Better education on the science of psychedelic-inspired medicine, and main-stream adoption of these once fringe substances, will reinvigorate investor confidence in the sector.

TRYP will benefit from increased investor confidence in the sector due to broader market trends, such as:

• Regulatory catalysts, such as Canada’s proposed legislation for end-of-life treatments
• With sector-specific education will come interest from Big Pharma and strategic capital. We have already seen market traction with the launch of the first ETF dedicated to psychedelic companies (Horizons Psychedelic Stock Index ETF, PSYK) in January 2021.
• Improved understanding of the drug development process, which is lengthy and fraught with challenges

And company-specific advantages, such as:

• TRYP’s unique regulatory strategy for three different disease indications that deviate from the mental-health focus of their competitors
• TRYP’s focus is on addressing the inadequacies of their competitor’s psilocybin-based formulations and delivery methods
• TRYP’s all-star management team
• TRYP's robust intellectual property prosecution strategy covering composition of novel psilocybin formulations, methods of use (disease treatment), and process development
• TRYP’s data-driven approach to quantifying brain activity (fMRI, EEG) during the psychedelic-induced trip, and measuring the disease-modifying effects of their drug candidates

The TRYP Advantage

Path toward value creation

TRYP is developing novel psilocybin formulations and methods of delivery to address the biggest problem in the psychedelic industry: a consistent psychedelic experience between patients that can be monitored and controlled by tightly regulating blood levels of psychedelic drugs. There are two main strategies that can be employed to tackle this issue: Develop a novel psilocybin formulation that route of administration that delivers a steady supply of drug to the bloodstream in a way that can be monitored and adjusted during administration. TRYP is addressing both factors by developing a novel psilocybin-based drug that will be delivered by a novel (non-oral) route of administration (more details will be released after the patent filing in Q1 2022). Additionally, the company is re-defining the state-of-the-science by measuring brain activity during “normal” and the psychedelic-induced experience, which will allow them to measure the disease-modifying effects of their drug candidates on a quantitative level. This is a novel, data-driven approach that will enable the company to collect irrefutable, quantitative evidence that their drugs work (as opposed to subjective read outs of the patient experience).

Preliminary pre-clinical data supports the safety and efficacy of their lead drug candidates, TRYP-8802 and TRYP-8803, which has enabled the company to submit Investigational New Drug applications to pursue Phase 2 studies for three overlooked disease indications (binge eating disorder, fibromyalgia, and phantom limb syndrome) without conducting a Phase 1 safety study. This is an aggressive approach that is de-risked by both the company’s prior preclinical work and the FDA’s understanding of the safety of psilocybin-based compounds.

Company highlights

• An exceptionally thorough regulatory strategy, prosecuting patents that include the composition of their novel psilocybin formulations, routes of administration/methods of delivery, and methods of use (intellectual property firm is Morrison Foerster, a group with technical mastery in the space)
• An aggressive research and development strategy - simultaneously pursuing three disease indications (binge eating disorder, phantom limb syndrome, and fibromyalgia) for their lead drug candidate, TRYP-8803
• Generating a preponderance of pre-clinical evidence supporting the safety and efficacy of their lead drug candidate, TRYP-8803.
• Beta testing the efficacy of 8803 with a mimetic, 8802, while GMP 8803 is being manufactured
• Clinical trials will collect fMRI and EEG data to characterize, on a quantitative level, the psychedelic experience as it pertains to changes in brain function. This data will serve as a foundation to quantify the disease-modifying effects of their drug candidate.
• Deep sector and capital markets expertise - CEO has over 25 years' experience as a CEO of publicly traded biopharma companies, CSO has over 35 years' experience in clinical development and regulatory affairs, and CFO has over 20 years' experience in venture capital and technology transfer (licensing)
• Partnerships with University of Florida and the University of Michigan for their upcoming clinical trials in binge eating disorder and fibromyalgia, respectively

Opportunity

For those just dipping their feet into biotech investing, it can be intimidating to determine what fundamental developments will have a positive impact on the company’s valuation. New biotech investors have learned that there are a set of tell-tale signals that their target company is on the right track to hitting valuation-inflection milestones. These include, but are not limited to, an executive team and Board with Big Pharma experience, capital markets experts, and a track record of accomplishing what they promised during the last media news blitz (and subsequent financing round). Fortunately, drug development follows an extremely formulaic path with well-delineated milestones, allowing even new investors to quickly scan news releases to gain an understanding of where their target company lies in the drug development/regulatory lifecycle. This well-charted course also benefits biotech companies, allowing them to plan their financings around key catalysts with a reasonable degree of certainty.

The Perfect Market Setup

TRYP finds itself in a prime situation for shareholder value creation due to...

• Expiring warrants and year end tax loss selling that created a perfect storm of selling pressure
• A share price that is down 80% from its early 2021 highs and a market cap that does not give TRYP any credit for their three imminent Phase 2a trials

Many near-term catalysts

• The successful GMP production of their lead drug candidate, TRYP-8803, in Q1 2022
• Announcement of a partnership to develop TRYP-8803 for phantom limb syndrome, and interim data generated in Q1 2022
• Aggressive patent prosecution – The company anticipates converting two provisional composition of matter patents to PCT. They will also file a methods of use and method of delivery patent in early 2022 for binge eating disorder and fibromyalgia (protecting both the formulation and route of administration)
• Application for FDA orphan designation and fast track status
• And the big one: the initiation of three Phase 2 trials in 2022 for binge eating disorder, phantom limb syndrome, and fibromyalgia. The first patients in the binge eating disorder and fibromyalgia trials will be dosed in the 1st and 2nd quarters, and interim data will be generated soon

Led by an all-star team

Recommendation

After a brutal year for the medical psychedelics space, 2022 offers the promise of a positive shift in sentiment as numerous human clinical trials across multiple indications progress and deliver results.

TRYP is uniquely positioned with three Phase 2a trials set to be carried out in 2022. The current C$18 million market cap does not adequately value TRYP’s potential to capture a significant portion of an underserved patient population in neglected diseases such as fibromyalgia or binge eating disorder.

The best investment opportunities often occur when company fundamentals align with stock chart technicals. TRYP’s chart recently exhibited multiple bullish momentum divergences as the share price made a new all-time low ($.21 per share) on dwindling trading volume - major chart bottoms are often characterized by prices making marginal new lows on relatively light trading volume. This is typically a sign that the stock is all “sold-out” and any appreciable uptick in buying interest can often send the share price soaring higher.

TRYP.CA (Daily)

With support near $.20 (30% below Friday’s close) and a 12-month price target of $1.20 (based on successful completion of three Phase 2a trials in 2022 and the beginning of at least one Phase 2b by the first half of 2023) the risk vs. reward proposition available today in TRYP shares is compelling.

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Disclosure

Author owns shares of Tryp Therapeutics at the time of publishing and may choose to buy or sell at any time without notice.