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Citius Pharmaceuticals: Balanced Risk-Reward Bet, Near-Term Catalysts

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A very adjacent up changeable of 2 dice rolling connected a greenish felt array apical successful very crisp focus, showing 4, 5 and 6 connected nan faces. The inheritance is simply a very soft focused wall of chips, past a ceramic wall.

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Maybe nan quality betwixt first matrimony and 2nd matrimony is that nan 2nd clip astatine slightest you cognize you are gambling." - Elizabeth Gilbert

Today we return a deeper look astatine a mini headdress biopharma concern. This appears to beryllium a complex, but compelling 'sums of nan parts' story. An study follows below.

Company Overview:

Citius Pharmaceuticals, Inc. (NASDAQ:CTXR) is simply a Cranford, New Jersey based late-stage supplier interest focused connected nan improvement of therapies that are typically reformulations of antecedently approved narcotics and (in immoderate instances) leverage nan FDA's 505[B](2) pathway to quicker approval. The institution has 2 later-stage programs, 1 undergoing Phase 2 assessment, and 2 successful nan preclinic. Citius was founded successful 2007 and went nationalist successful 2014 erstwhile it reverse-merged into grounded specialty licence sheet shaper Trail One pinch its first waste and acquisition conducted astatine $15 a share, erstwhile giving effect to a 1-for-15 reverse banal divided successful 2017. Its first existent nationalist offering occurred successful 2017, erstwhile it raised nett proceeds of $6.1 cardinal astatine $3.09 a share. The banal trades conscionable complete a subordinate a share, equating to an approximate marketplace headdress of $170 million.

Clinical Pipeline

I/ONTAK. The company's lead plus is I/ONTAK (E7777), an intravenously administered interleukin-2 diphtheria toxin fusion macromolecule for nan curen of patients pinch persistent aliases recurrent cutaneous T-cell lymphoma [CTCL], which it in-licensed from Dr. Reddy's Laboratories (RDY) successful September 2021. CTCLs are a subset (~4%) of non-Hodgkin lymphomas, wherever T-cell abnormalities compel them to onslaught nan skin, resulting successful rashes, scaly patches, and/or tegument tumors. The astir communal shape is mycosis fungoides, which occurs successful ~60% of CTCLs. There are 30,000 to 40,000 patients surviving pinch CTCL successful nan U.S., of which ~10,000 are of nan relapsed/refractory variety, requiring systemic treatment.

I/ONTAK is simply a purified and much bioactive type of Ontak (denileukin diftitox), which was approved by nan FDA successful 1999 and marketed successful nan U.S. by Ligand (LGND) until 2006 and subsequently by Eisai (OTCPK:ESALF) until 2014, erstwhile manufacturing issues - specifically bacterial look and purification challenges - forced its 'voluntary' removal from nan market. In 2016, Dr. Reddy's acquired nan worldwide authorities (ex-Far East Asia) to a caller formulation of denileukin diftitox (known arsenic E7777) from Eisai, who had commenced a Phase 3 study successful nan U.S. Eisai received support successful Japan for E7777 for nan curen of CTCL and peripheral T compartment lymphoma (PTCL) successful March 2021. Shortly aft Citius acquired nan authorities from Dr. Reddy's, nan past diligent enrolled successful nan aforementioned Phase 3 proceedings (December 2021) that was still being conducted by Eisai. In April 2022, results from nan proceedings revealed that E7777's efficacy was accordant pinch nan anterior formulation pinch nary caller adverse events observed. A BLA was revenge pinch nan FDA successful September 2022 and received a PDUFA day of July 28, 2023.

For nan commercialized authorities to I/ONTAK, Citius paid Dr. Reddy's $40 cardinal upfront and is perchance connected nan hook for regulatory ($40 million), improvement ($70 million), and commercialized ($300 million) milestones, arsenic good arsenic debased double-digit royalties.

If approved, nan institution estimates nan home marketplace opportunity astatine $300 cardinal to $400 million, wherever it will compete pinch 3 different therapies: Kyowa Kirin's (OTCPK:KYKOF) monoclonal antibody Poteligeo (mogamulizumab); Seagen's (SGEN) antibody-drug conjugate Adcetris (brentuximab vedotin); and Merck's (MRK) oral chemotherapy Zolinza (vorinostat). All of these therapies are constricted owed to toxicity and adverse events, arsenic good arsenic constricted long of consequence owed to guidance complete time. Along those lines, Bristol Myers Squibb's (BMY) chemo supplier Istodax (romidepsin) was pulled from nan marketplace successful 2021. As such, Citius' therapy has an opportunity to sorb important marketplace share.

Furthermore, nan institution is exploring description into nan PTCL denotation - apt requiring only a single-arm pivotal proceedings - while investigator-led studies are assessing I/ONTAK arsenic portion of operation therapies successful different oncology indications.

Subject to marketplace conditions, I/ONTAK will beryllium spun retired arsenic a abstracted entity successful what nan institution is calling a strategical move to "optimize organizational resources and finance superior to support nan successful execution of each improvement program." This transaction is retired of necessity to money nan milestone payment[S] to Reddy's and a income unit buildout if I/ONTAK is approved.

Mino-Lok. Citius' 2nd astir precocious programme is Mino-Lok, which is simply a solution of antibiotic minocycline, dense sulfate disodium ethylenediaminetetraacetic acerb (a.k.a. EDTA), and ethyl intoxicant that is designed to dainty and salvage infected cardinal venous catheters (CVCs) successful patients pinch catheter related bloodstream infections (CRBSIs). Mino-Lok is introduced to nan lumen of nan catheter (without flowing into nan vein - i.e. 'locked'), wherever it eradicates germs and different unwanted clotting factors for 2 hours and is subsequently aspirated. This process is usually conducted 7 times complete a two-week play pinch a commencement of 5 consecutive days, providing an replacement to catheter removal and replacement, which tin interrupt treatment, arsenic good arsenic origin beingness and psychological trauma to nan diligent astatine a costs of ~$10,000 per procedure, pinch infection curen typically northbound of $50,000. The only different replacement is simply a infirmary location brew of antibiotics. Approximately 500,000 CRBSI aliases cardinal line-associated bloodstream infections (CLABSIs) hap annually successful nan U.S.

After demonstrating 100% effectiveness salvaging CVCs pinch a 0% complication complaint (versus 18% for nan region and switch power arm) successful a Phase 2b proceedings that wrapped up successful 2014, Citius initiated a Phase 3 proceedings successful 2016 that enrolled its first diligent successful 2018. The study has been bogged down successful proceedings creation changes, sluggish pandemic-related enrollment, and very slow catheter nonaccomplishment arena rates. When nan Data Monitoring Committee recommended that nan proceedings proceed 'as is' for a 3rd clip successful mid-2021 (and not halt it for utility), shares of CTXR plummeted 34% successful nan pursuing trading convention and are presently disconnected immoderate 75% from their five-year highest ($4.56) group astir that aforesaid time.

The superior endpoint of nan Phase 3 study is comparison of 'time to catheter failure' betwixt Mino-Lok and nan power limb (antibiotics). It will beryllium considered afloat enrolled astatine 92 catheter failures, which is expected to hap successful 2023 pinch 72 nonaccomplishment events having transpired arsenic of December 21, 2022. An anticipated median clip of 21 days successful nan power group would necessitate 38 days for nan Mino-Lok cohort to execute statistical significance. When nan proceedings is completed and assuming superior endpoint achievement, it will person a Priority Review from nan FDA. As of its 4th fourth press release earlier this month, guidance stated:

Our Mino-Lok Phase 3 proceedings is actively enrolling patients successful nan U.S. and India. We judge nan caller uptick successful recruitment astatine objective sites will assistance successful completing nan proceedings this year."

If green-lit, it will beryllium nan first and only antibiotic fastener solution pinch a world CRBSI/CLABSI marketplace estimated successful excess of $1.8 billion.

Halo-Lido. The company's 3rd objective plus is Halo-Lido, a topical formulation of corticosteroid halobetasol and lidocaine designed to supply anti-inflammatory and anesthetic alleviation from hemorrhoids. It is presently undergoing information successful a 300-patient Phase 2b proceedings pinch information expected to readout successful 2H23. It has nan imaginable to beryllium nan first and only medicine hemorrhoid therapy, nan home opportunity for which - pinch astir one-third of nan 10 cardinal positive sufferers seeking expert curen - is estimated astatine much than $2 billion. If nan information readout is positive, look for Halo-Lido to beryllium out-licensed to money Mino-Lok and its different programs.

Other Assets

These different programs see Citius' in-license of Mino-Wrap (CITI-101) from MD Anderson Cancer Center. It is simply a liquefying gel-based wrap designed to supply inflammatory insubstantial protection and forestall infection successful insubstantial expanders and bosom implants station mastectomy. Furthermore, nan institution has initiated preclinical activities for its induced mesenchymal stem cells therapy for acute respiratory distress syndrome. This plus is 75% owned and housed nether its NoveCite subsidiary.

Balance Sheet & Analyst Commentary:

The contemplation of spinning retired I/ONTAK and out-licensing Halo-Lido person to do pinch nan company's debased rate position. As of twelvemonth extremity 2022, Citius held rate and equivalents of $36.9 million, providing it an operational runway done February 2024. The institution could besides leverage affirmative news regarding an out-licensing woody for Halo-Lido, I/ONTAK's approval, aliases affirmative Mino-Lok information into a little dilutive superior raise. It should beryllium noted that Citius has 38.3 cardinal warrants outstanding, nan mostly of which person onslaught prices betwixt $1 and $2 and expire betwixt 2024 and 2026.

Only 3 Street analysts person made commentary connected nan institution successful nan past Year. All three, Maxim Group ($4 value target), Darwin James ($10 value target) and H.C. Wainwright ($6 value target) person Buy/Outperform ratings connected nan stock.

Verdict:

There are 3 imaginable important catalysts successful 2023, nan nonstop timing of which are uncertain. The spinout of I/ONTAK could hap earlier aliases astir concurrent to its (assumed) FDA support connected July 28, 2023. An out-licensing woody for Halo-Lido could travel earlier aliases aft Phase 2b proceedings results are released successful 2H23. The seemingly endless Phase 3 Mino-Lok proceedings should mercifully travel to an extremity sometime successful 2023 - affirmative results from which could nonstop shares substantially higher.

Worse-case script is simply a thumbs down from nan FDA connected I/ONTAK, nary out-licensing woody for Halo-Lido followed by tepid Phase 2b results, and nary statistical value achieved (or further delays) successful nan pivotal Mino-Lok trial. Although worse-case is possible, it is astir adjacent to best-case script of I/ONTAK support and spinout, a Halo-Lido out-licensing deal, and affirmative and timely results from Mino-Lok. Worse case, nan investor will suffer astir aliases each of their investment; champion case, fixed nan marketplace opportunities for Citius' therapies, an investor could spot a 3 to 5 bagger successful nan span of 12 months moreover pinch dilution from nan warrants.

While excessively risky and analyzable for inclusion for a ample stake, an asymmetrical risk-reward profile, CTXR merits a mini 'watch item' acquisition for consequence tolerant investors.

The gambling known arsenic business looks pinch austere disfavor upon nan business known arsenic gambling." - Ambrose Bierce

Live Chat connected The Biotech Forum has been dominated by chat of lucrative buy-write aliases covered telephone opportunities connected selected biotech stocks complete nan past respective months. To spot what I and nan different play biotech investors are targeting arsenic trading ideas real-time, conscionable subordinate our organization at The Biotech Forum by clicking HERE.

Editor: Naga



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