Cidara Therapeutics is developing a novel echinocandin (CD101) that we believe will compete for first-line treatment of systemic fungal infections in a subset of patients. Current standard of care for patients with invasive candidiasis or candidemia involves daily IV treatment of an echinocandin until they can be safely released with oral azole step-down therapy. Given its once-weekly dosing schedule, it offers the possibility of a quicker path to outpatient treatment over the current once-daily inpatient schedule. Additionally, this approach would be the best available option for patients with azole-resistant infections, contraindications, and those who cant tolerate oral medications. While we see a niche opportunity here as a non-inferior echinocandin option, there would be additional upside if CD101 achieves superiority as it would become the obvious first-line choice for a broader patient population. Additionally, we expect a larger market penetration in the prophylactic setting, where once-weekly CD101 IV could be a more potent outpatient alternative to oral azoles in patients undergoing transplant. While we believe CD101 IV alone more than justifies the current valuation, we expect additional value generation from CD201 and other products from Cloudbreak.
Background and context
Cidara Therapeutics (NASDAQ: CDTX) is an anti-infectives company with both antifungal and antibacterial programs. Their lead asset, CD101, is a novel formulation of a known class of antifungals called echinocandins. Echinocandins target the fungal cell wall and are first-line therapies for most types of invasive candidiasis. CD101 is a structural analog of anidulafungin with some charge and structural modifications that increase its half-life (~133 h in humans), and reduces liver toxicity. CD101 is being evaluated in systemic Candida infections and has received Qualified Infectious Disease Product (QIDP), Fast Track, and Orphan Drug designations. Current standard of care echinocandins are limited by their dose-limiting toxicities and their daily IV dosing schedule. Additionally, Candida drug resistance is on the rise and so new chemical entities are needed. CD101 would enable initial inpatient treatment followed by subsequent treatments in the outpatient setting. CD101 was also being evaluated as a topical treatment for vulvovaginal candidiasis (VVC). However, this program was discontinued after Cidara announced CD101 topical failed to achieve clinical cure rates comparable to oral fluconazole. Their second program, CD201 is the first product from their Cloudbreak program and will be evaluated in patients with multi-drug resistant (MDR) gram negative infections.
Cidara currently has a market capitalization around $160M and cash and cash equivalents of $84M. With a burn rate of ~$13M/quarter, their cash position should provide runway through 2018. Recently, Cidara announced a $20M private placement from both new and existing institutional investors at a modestly discounted price. Given that this financing was not critically needed and the fair terms of the deal, we see this as a bullish sign.
Clinical management of invasive candidiasis/candidemia and the unmet need
Invasive candidiasis (IC) is a life-threatening Candida infection with a reported mortality rate of 30-40%. The incidence of IC varies substantially by region but has been found to be as low as 3.65 to as high as 26.2 per 100,000 in the US. The most common species of Candida are C. albicans, C. glabrata, C. parapsilosis, C.tropicalis and C. krusei. Up until recently, C. albicans were the most common cause of infection. In the last few years however, there has been a decline in the incidence (70% to 50%) of C. albicans and an increase in isolation of non-albican species most notably C. glabrata, and C. parapsilosis. This phenomenon is of public health interest as these species tend to have higher rates of resistance.
IC is primarily treated using three classes of antifungal agents: polyenes, azoles, and echinocandins. Polyenes, first introduced in the 1950s, are prescribed less often due to severe toxicity and generally low tolerability. Azoles are the most commonly used agents and are largely effective. They are available in both IV and oral formulations, which is advantageous for clinically stable patients who can then be discharged from the hospital and given outpatient oral step-down therapy. Azoles however, have a number of contraindications, and a growing number of Candida species have shown to be resistant to treatment (notably some C. glabrata and all C. krusei isolates). Furthermore, azoles have cross resistance among their class, meaning that once an azole treatment has failed no other azole class can be administered effectively. Echinocandins are a relatively new class of drug but are now widely recommended for the first-line treatment due to favorable toxicity profiles and broad-spectrum activity against Candida (very few cases of resistance have been noted). One main drawback of echinocandins is that they must be administered daily by IV infusion, potentially extending the hospital stay of patients and limiting their use to the hospital setting.
According to the Infectious Disease Society of America (IDSA) guidelines, best treatment practices will start daily IV echinocandin treatment until a point (usually 5-7 days) when the patient can be safely switched to an oral step-down therapy with an azole. Oral step-down enables the remainder of treatment to occur outside the hospital. Estimates from clinical studies suggest the majority (~60%) of patients are unable to switch to oral step-down therapy before finishing 5 full days of IV echinocandin therapy and therefore must stay in the hospital the full 5 days before release. Furthermore, another study assessed the time to azole switch and found nearly 1/3 of patients were unable to safely switch to oral treatment within the first week. 6.7% of patients in this study required IV treatment for 15-28 days. This represents a major economic burden on the healthcare system and provides a strong financial case for an agent that could be used once weekly in the outpatient setting. Additionally, there is further risk when switching from an echinocandin to an azole where resistance is more common and therefore control of the infection might be lost. Accordingly, IDSA guidelines recommend against an oral step-down when the Candida strain is suspected to be resistant to azoles. This is thought to be the case for 2.5-9% of Candida infections. Some species like C. tropicalis show levels of resistance exceeding 20%. With a once weekly echinocandin option, patients with azole-resistant strains could still be released from the hospital and given outpatient treatment.
CD101 topical failure in VVC is a poor predictor of failure in invasive candidiasis
Despite the failure of CD101 topical in VVC, we believe there is still a high likelihood of success for CD101 IV in systemic Candida infections. While CD101 topical achieved very impressive preclinical data in animal models of VVC, these models have many issues and ultimately translate poorly to the clinic. In contrast, there is robust data supporting the translatability of IV antifungals (including several echinocandins) in IC and candidemia. Up until this study, no echinocandin had been evaluated as a topical treatment and therefore posed additional risk.
CD101 IV: Preclinical data
In preclinical models, CD101 has been tested against 713 fungal clinical isolates where it demonstrated activity comparable to other antifungal compounds. In a separate study of 500 recent Candida isolates, CD101 demonstrated fungicidal activity for 95% of evaluable isolates. While CD101 seems to exhibit only comparable activity in in vitro studies, it shows unique drug distribution in animal models of IC that suggest it can better penetrate tissue lesions (See Fig. 2 below from Zhao, et. al). Importantly, CD101 but not micafungin intra-lesion concentrations exceeded the mutant prevention concentration, representing a key area of CD101 differentiation among the class.
Moreover, as shown below, CD101 treatment resulted in significantly less liver burden and 4X more mice with no liver burden when compared with micafungin at 24 hours post-dose (See Fig. 5 below, from Zhao, et. al). Overall, these preclinical data support CD101 non-inferiority and may even predict superiority.
Results from the Phase 1 SAD and MAD studies assessing CD101 safety and tolerability in healthy subjects were disclosed in late 2015 and early 2016, respectively. A table from their publication of these studies is shown below. In both studies, there were no SAEs, including in a high dose cohort of 400mg for three consecutive weeks (the highest dosing schedule used in the current Phase 2 study). Additionally, there were no apparent liver toxicities, an important distinction from existing compounds in this class. Although these studies were done in subjects that were considerably healthier than those with IC or candidemia, other echinocandins, like caspofungin, showed signs of liver toxicity even in healthy volunteers.
PK/PD results from CD101 IV demonstrated an impressive T1/2 of between 125-146 hours and Cmax levels well above the 90% minimum inhibitory concentration (MIC90) values for the majority of pathogenic isolates tested in vitro.
Overall, these clinical data suggest a tolerability profile at par and potentially better than approved echinocandins. Furthermore, these data also suggest CD101 IV should reach therapeutic concentrations sufficient for fungicidal activity against the majority of pathogenic Candida isolates.
Near-term Binary Events
Phase 2 data of CD101 IV in patients with invasive candidiasis or candidemia (STRIVE trial)
The current Phase 2 study in patients with invasive candidiasis or candidemia includes cohorts that receive an initial 400mg dose followed by subsequent 400mg or 200mg doses weekly and will be compared with IV caspofungin followed by oral fluconazole. The primary endpoints include both TEAEs, mycological eradication at day 14, and resolution of systemic signs of infection. According to a recent update from management, the STRIVE trial plus an additional Phase 3 trial with a non-inferiority endpoint (20% margin) will be sufficient for registration. Based on the PK/PD data, coupled with robust activity observed in preclinical models of Candida infection, we see CD101 IV as having a high probability of success in this trial.
CD101 IV opportunity in prophylaxis
Another update from Cidara management was that they have plans to initiate a Phase 3 trial of prophylactic CD101 IV in immunosuppressed patients undergoing transplant or chemotherapy. Management believes a single Phase 3 trial will be sufficient for registration and plan to start the trial in mid 2018. With this potential label expansion, the CD101 opportunity becomes more attractive as it creates another option for patients who have GI absorption issues and cant tolerate oral fluconazole. Given that echinocandin treatment is more potent and less prone to resistance, its use in this context makes sense, except that once-daily IV administration is impractical. However, a once-weekly treatment would allow physicians the option to choose an echinocandin instead of the cocktail of azoles currently used.
The Cloudbreak discovery program has the potential to offer additional opportunity for upside. It takes an immunomodulatory approach to treating infectious disease and given its novelty, may be less prone to mechanisms of resistance. They have established basic proof of concept in an ex vivo model of A. fumigatus, demonstrating enhanced neutrophil recruitment and growth inhibition. Despite promising early results in this model, we were excited to see them shift focus to CD201, a compound targeting MDR gram negative infections. Facilitating neutrophil recruitment to fungal infections makes sense in the context of a healthy immune system, but it makes much less sense under conditions of neutropenia. However, with MDR infections, facilitating a more aggressive immune response could be very valuable, either as a standalone treatment or as a companion with other anti-infectives. Preclinical data thus far suggest CD201 has both inherent antibacterial and immunostimulatory properties. Importantly, they also found isolates were significantly less prone to spontaneous mutagenesis.
Although still in its early days of development, the program should be fully funded through IND with non-dilutive capital from the CARB-X program.
The global market for systemic antifungal therapeutics is estimated to be in excess of $3B. The azoles flucanazole and voricanazole have reached sales of $1B and $700M, respectively, while the most successful class of echinocandin, caspofungin, has peak sales of $600M. While Cidaras CD101 is unlikely to reach blockbuster sales, there is still a considerable market for a once-weekly IV echinocandin that can be administered in the outpatient setting. According to the 2013 AMR hospital guide, the number of weeks of inpatient antifungal treatment per year in the US is 1.8M (from 1.6M patients). It is estimated that ~40% of those patients are discharged on antifungal therapy, with a total average of 3 weeks on therapy (1 in inpatient and 2 in outpatient). There are 640K eligible patients in outpatient x 2 weeks of treatment = 1.28M total weeks of outpatient treatment. Using a treatment cost of $2,500/week the total inpatient and outpatient opportunities are ~$4.5B and $3.2B, respectively. According to management, there is an estimated 213K weeks of prophylaxis treatment per year in the US, which comes to a total $532M opportunity. In a downside scenario, CD101 IV is non-inferior to standard of care, hits the market in 2Q21, and penetrates 0% of inpatient, 2% of outpatient, and 5% of the prophylaxis markets at peak, totaling sales to $90M ($0M + $64M + $26M). In a base case, CD101 IV is non-inferior, hits the market in 2Q21, and penetrates 0% of inpatient, 5% of outpatient, and 10% of the prophylaxis markets at peak, totaling sales to $213M ($0M + $160M + $53M). In an upside scenario, CD101 IV is superior to standard of care, hits the market in 2Q21, and penetrates 5% of inpatient, 10% of outpatient, and 20% of the prophylaxis markets at peak, totaling sales to $651M ($225M + $320M + $106M). Considering the rates of azole resistance and oral intolerance in these patient populations and the convenience and cost savings of once-weekly treatment in the outpatient and prophylaxis settings, these scenarios suggest there is an attractive opportunity here that alone more than justifies the current valuation.
The main commercial competitors to CD101 IV are the approved antifungals which include polyenes, azoles, and other echinocandins. As these compounds become generic (some as soon as 2018), there will be additional pricing pressure for newly approved products. Regardless, CD101 can have attractive competitive positioning for a number of reasons that may still justify favorable pricing:
1.) As a once a week therapy, there is potential for improved compliance when compared to daily IV doses or oral azoles in the outpatient setting
2.) Doctors can continue echinocandin regimens following discharge rather than switching to a different antifungal class like azoles
3.) Issues with azole treatment due to resistant Candida strains or contraindications
One competitor, SCY-078, being developed by Scynexis (NASDAQ: SCYX) is currently in Phase 2 clinical trials. SCY-078 is an orally available echinocandin that could be administered following discharge from the hospital. This potential treatment is in direct competition with CD101. However, there are reasons to believe both drugs could have separate niches in the space given the limits of oral therapies in patients with GI issues (intra-abdominal candidiasis for example) and compliance concerns with sicker, higher risk patients.
Additional competitors include F2G, a UK biotech in the discovery stage, Amplyx, a Series C funded San Diego company starting Phase 2 development in 2018, and Matinas Biopharma (NYSE: MTNB), a company developing an orally available Amphotericin B as a prophylactic in acute lymphoblastic leukemia.
Risks CD101 may prove inferior to daily IV echinocandins followed by oral azole step-down.While we see this as unlikely, CD101 topical did fail to achieve non-inferiority when compared to oral fluconazole. CD101 may prove more toxic in patients with IC or candidemia.Even though CD101 appeared tolerable in healthy volunteers, it remains to be seen how it is tolerated in this sicker patient population. Physicians may be less likely to use a once-weekly IV echinocandin over daily IV treatment. Some ICU doctors we spoke to suggested they liked the dosing flexibility offered from once-daily dosing. These doctors also saw less value in the potential for early discharge to outpatient care as the majority of their patients are very sick. Summary
Overall, given the rise of azole-resistance, and the percentage of patients who cant tolerate oral medication, we see a niche opportunity for CD101 IV in IC, Candidemia and in transplant prophylaxis. With an attractive enterprise value, a reasonable balance sheet, and additional value drivers from their Cloudbreak program, we believe Cidara offers a favorable risk/reward scenario.
Disclosure: I am/we are long CDTX.
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