The patient development of new treatments tends to attract rather impatient investors to Hemogenyx Pharmaceuticals
“…At this low price patient investors attuned to the specific characteristics of the biotech sector might want to keep an eye on Hemogenyx as it moves towards securing licences for its potentially groundbreaking treatments…”
Biotech can be tricky for investors to work out. Not just because of the difficulties for non-specialists in understanding exactly what a company is researching and assessing its likely impact, but also because of the painstaking path medical innovations must navigate before they can be marketed. Brilliant new breakthroughs can seem forever on the horizon, just out of reach.
The patient development of new treatments tends to attract rather impatient investors. Excitement about the possible applications of the decoding of the human genome during the early years of the millennium, for example, generated an investment boom that was soon followed by a bust, as the collective realisation dawned that commercialising biotechnology takes time. There was another surge of interest in the sector last year as the pandemic took hold, investors flocking to companies perceived as being in the running to develop Covid treatments and vaccines. Through 2020 US biotech raised $9.7bn across 57 initial public offerings, well above the previous record of $5.1bn raised in 2018, with the S&P Biotechnology Select Industry index soaring 54pc.
Biotech share prices have retreated from those highs but the fundamental outlook for the sector remains highly promising, as ambitious small caps continue to join industry leaders in developing ingenious new treatments for ageing populations in the world’s most prosperous markets. The values of companies like Vertex Pharmaceuticals (US:VRTX), developing treatments for the underlying causes of cystic fibrosis, or PTC Therapeutics (US:PTCT), working on an oral drug for spinal muscular atrophy, may wax and wane, but the essentially transformative nature of their work continues to shine through.
Pioneering gentler bone marrow treatments
Hemogenyx Pharmaceuticals (LSE:HEMO), whose CEO and co-founder Dr Vladislav Sandler was interviewed by TMS earlier this month, fits the template of a biotech small cap whose principal focus has over the past year rather been obscured by speculation about its capacity to offer some form of Covid breakthrough.
A biopharmaceutical company with facilities in New York developing new medicines and treatments to treat blood and autoimmune disease, Hemogenyx is working to open the proven curative power of bone marrow transplantation to a much wider range of patients. Bone marrow transplantation (BMT) has been effective for more than half a century for treating blood cancers, such as acute myeloid leukaemia (AML) and lymphoma, and more recently severe autoimmune diseases like multiple sclerosis, aplastic anemia, and systemic lupus erythematosus. BMT is often the only option available to those with such serious conditions: prior treatments fail in about 70pc of all AML cases for example.
But though a miracle of modern medicine, BMT is only prescribed as a last resort. Preparing the patient for the procedure requires a tough conditioning process. Maximally tolerated doses of chemotherapeutic agents, often combined with radiation, are administered, which can have severe side effects, including radiation damage to the heart or lungs, thyroid problems, fertility problems, bone damage, and development of other cancers years later. Up to 4pc of patients die during the conditioning stage. And many who might be helped by the treatment are too weak to go through the preparatory phase.
Clinicians face ever more difficult choices in putting patients forward for treatment as autoimmune conditions such as lupus, type 1 diabetes and multiple sclerosis become more common: there are about three times as many cases today as there were only a few decades ago. Blood cancers affect more than 1.1 million people annually in the United States alone, with more than 150,000 new cases are expected to be diagnosed this year.
Hemogenyx is pioneering techniques that would facilitate a much gentler conditioning process, which would open the life saving potential of BMT to patients currently too weak to receive it. The company’s research flows from breakthroughs made by Dr Sandler, a widely published stem cell scientist who also holds a research professorship at the State University of New York.
To make BMT safer, Dr. Sandler began developing a novel type of bi-specific antibody (CDX) that redirect immune cells of a patient to hunt and destroy leukemic and blood stem cells, preparing a patient for BMT. This CDX antibody would eliminate the need for chemotherapy or radiation and their toxic side effects. As Dr Sandler put it in an earlier interview: ‘People won’t lose their hair, their bowels won’t be destroyed, and young women won’t have to freeze their eggs over fertility concerns … the difference, potentially, is absolutely transformative.’
In addition to elaborating CDX antibodies Hemogenyx is developing what it calls ‘HEMO-CAR-T’ immune therapy, a treatment in which a patient’s own ’T cells’, a type of immune cell, are modified to recognise and kill cancer cells. In brief, a sample of T cells is taken from the patient, configured in a laboratory to act with maximal efficiency for each patient’s specific condition, cloned to a critical mass, then re-introduced into the patient’s body.
In the course of developing its treatments the company evolved a technology that it hopes to market as an additional revenue stream: a ‘humanised mouse-based model’; essentially mice carrying the essential elements of a human immune system – functioning human genes, cells, tissues, and organs. The mice allow sophisticated modelling of blood cancers and severe autoimmune diseases for pre-clinical testing of novel drugs and treatments. Hemogenyx is marketing the model for paid collaborations with biopharmaceutical companies and research institutions.
The company used the mice to begin the Covid-19 research that caught the market’s attention last year. Researchers transplanted cells sampled from convalescent Covid patients who developed antibodies against the virus into the mice, seeking to recreate and identify the Covid antibodies. Hemogenyx intends to clone the antibodies it identifies and develop them into a drug.
The company’s share price rocketed last year in response to news of its Covid research, soaring 260pc in the space of a week – from around 2p to nearly 10p – last April, and touching nearly 15p in August. Hemogenyx says the same techniques it is using to isolate Covid antibodies can be deployed at speed to discover human neutralising antibodies against a host of viral pathogens, including Covid mutations and what infectious disease experts in the bioprotection and biodefence sectors call ‘Disease X’, as-yet unknown viruses that may represent a similar or greater threat than the coronavirus.
Progress towards commercialisation
The company’s current focus is to develop its CDX antibodies and HEMO-CAR-T therapies to the point of clinical trial, after which they can be brought to market, and to continue to research Covid-19 treatments.
Last November it secured continued support for its research, agreeing a convertible loan note financing facility with Mint Capital Limited, a Bahamas-based investment management company, allowing access to up to £60 million. In February the company reported it had drawn down £12m worth of funds, £6m of which will be used to pursue clinical proof of concept for the HEMO-CAR-T therapy.
Hemogenyx announced another significant development in January, the successful completion of its CDX antibody, developed in partnership with GlobalCo, a leading global pharmaceutical company. A clone of the antibody is ready for investigational new drug (IND) application-enabling studies, a significant step toward clinical trials. The company’s agreement with GlobalCo gave each partner options to license the IP rights to commercialise the antibody on an exclusive worldwide basis. Earlier this month GlobalCo said that it will not exercise its option to license the antibody, leaving Hemogenyx to confirm it will go ahead and develop the IP itself. The company’s next step is to complete the Investigative New Drug (IND)-enabling pre-clinical studies that are needed in order to file an IND application requesting authorisation from US regulators, and initiate clinical trials to administer the antibody. Earlier this year Hemogenyx also advanced its HEMO-CAR-T project, entering into a Master Translational Research Services Agreement with the University of Pennsylvania to press ahead with clinical trials.
Hemogenyx’s fundamental value
The company’s entanglement in investor speculations over Covid treatments last year rather obscured its essential narrative: its progress towards treatments that aspire to open up the literal lifeline of bone marrow transplants to those suffering from blood diseases. And as our interview noted, questions have been raised regarding Mint Capital’s patience: to date, Mint has converted loan notes of £2,500,000 into shares, leaving convertible loan notes to a value of £9,500,000 outstanding. A conversion notice for a further £900,000 in principal value of loan notes was received from Mint on 23 April 202. The company’s final results for the year ended 31 December, published just last week, stated a loss of £2,095,023, as against a loss of £1,453,144 for the previous year.
Buffeted by these uncertainties, Hemogenyx’s share price has fallen this month from just under 8p to around 2.5p, taking the company back towards its pre-Covid value. At this low price patient investors attuned to the specific characteristics of the biotech sector might want to keep an eye on Hemogenyx as it moves towards securing licences for its potentially groundbreaking treatments.
