Company: Cortexyme, Inc
Ticker: CRTX
Market Cap: $2.93bn (Aug 10th 2021)
After my April 2021 article about ImmunityBio (IBRX) and their cancer vaccine approach was very popular, I decided to turn this into a three part series. Today's article is part two of my three part series covering currently incurable diseases. Part one covered cancer, part two covers Alzheimer's disease (company: Cortexyme) and part three covers Parkinson's disease (company: Inhibikase Therapeutics).
In June 2021 the questionable approval process of Biogen's (BIIB) Alzheimer's disease treatment Aduhelm led to a lot of controversy. There are multiple companies aiming to develop an Alzheimer's disease treatment but of those companies only one developed a game-changing approach focused on an upstream Alzheimer’s disease target. That company is called Cortexyme. With an important, upcoming catalyst in November 2021, it is the perfect time to deep dive into the company. In this article I will explain why strategic investors like Peter Thiel, Pfizer (PFE) & Takeda (TAK) backed Cortexyme (CRTX) and why it is the single most important biotech investment you can make in 2021.
Structure
Macro view on Alzheimer's disease
Who is Cortexyme?
Cortexyme's innovative approach
Pipeline
Share structure & financials
Risks
Conclusion
Macro view
First described in 1906 by German physician Dr. Alois Alzheimer as "a peciliar disease" showing symptoms of profound memory loss, we today call this indication Alzheimer's disease (AD). As AD is a progressive disease, the dementia symptoms gradually worsen over time. Moving from mild memory loss to losing the ability to carry on a conversation and respond to the environment in later stages.
"Alzheimer's is the sixth-leading cause of death in the United States. On average, a person with Alzheimer's lives 4 to 8 years after diagnosis. The disease afflicts an estimated 5.7 million people in the United States and more than 30 million people worldwide and is expected to grow to 14.0 million people in the United States by 2050. The direct costs of caring for individuals with Alzheimer’s disease and other dementias in the United States were estimated to total $300 billion in 2020 and are projected to increase to $1.1 trillion by 2050." (Alzheimer's Association)
AD is a very gruesome disease for the affected individual, but also for their loved ones and caregivers. AD advances through the brain and leads to severe symptoms like disorientation, mood/behavior swings and unfounded suspicions about family, friends and professional caregivers.
On June 7th 2021 Biogen's Aduhelm was approved to be marketed as a treatment for AD. However, the efficacy of Aduhelm is still unclear and the approval process let to a lot of criticism, as it showed a lot of inconsistencies. Biogen still has to complete a phase 4 confirmatory trial, hoping that efficacy can be proven.
The Aduhelm situation is the latest manifestation of the historical challenges in developing effective therapeutics for AD. It showcases the poor understanding of disease causation and animal models that do not translate to efficacy in humans.
However, one company aims to overcome these challenges and apply their innovative approach to get to the root cause of AD. This company is called Cortexyme.
Who is Cortexyme?
Cortexyme (CRTX) is a clinical stage biopharmaceutical company founded in 2012 by Casey Lynch and Dr. Steve Dominy. The company's focus is to develop therapeutics for degenerative diseases. The team was able to convince prolific investors like Peter Thiel and Pharma giants like Pfizer & Takeda. Still in comparison to other clinical stage biopharmaceutical companies CRTX showed prudent money management raising only $309M in total:
Seed round: $15M Peter Thiel, Breakout Labs (2014)
Raised $15M in Series A financing led by Pfizer Inc. along with new investment from Takeda Pharmaceutical Company Ltd., through its venture arm, and other private investors. Existing investors such as Dolby Family Ventures also participated (January 6, 2016)
Series B: $76M (May 31, 2018) New investors include Sequoia Capital, Vulcan Capital, Verily Life Sciences, EPIQ Capital Group, RSL Investments, Huizenga Capital, and one of the world’s largest long-term mutual funds. All of Cortexyme’s current investors participated, including Pfizer, Takeda Ventures, Lamond Family, Breakout Ventures, and Dolby Family Ventures.
IPO: $78 million (May 8, 2019)
Private placement offering: $125 million (Feb 10, 2020)
The consensus view or even dogma in 20+ years AD research and the thesis the other scientists have followed is based on abnormal structures found in the brains of AD patients called plaques and tangles. They are prime suspects in damaging and killing nerve cells in two ways:
"Plaques are deposits of a protein fragment called beta-amyloid that build up in the spaces between nerve cells.
Tangles are twisted fibers of another protein called tau that build up inside cells." (Alzheimer's Association)
Because of this dogma in research all of the traditional approaches to treat AD that have made it to a clinical stage have focused on removing amyloid / tau. However, there was never emphasis on finding out what the upstream root cause for the amyloid is and how it can be prevented.
CEO & Co-founder Casey Lynch has a scientific background in AD research and majored in Neuroscience. She has always been fascinated with the brain and also had AD cases in her close family. Her focus on AD research in the lab was motivated by wanting to understand what is driving the plaques found in AD patient's brains. She left her Phd program to found a company which was acquired in 2004. Right after that she founded Neuroinsights. In the following years she became increasingly frustrated with the single minded focus on amloyd in AD research. All this led her to co-found Cortexyme, Inc. with Dr. Steve Dominy.
CRTX's "approach is based on the seminal discovery of the presence of Porphyromonas
gingivalis (“P. gingivalis”), and its secreted toxic virulence factor proteases, called gingipains, in the brains of greater than 90% of Alzheimer’s patients." (Cortexyme, Inc.)
Animal models support the P.gingivalis thesis, as the models prove causation of Alzheimer’s and Parkinson’s pathology through P. gingivalis infection. CRTX's orally
administered, brain-penetrating small molecule gingipain protease inhibitor Atuzaginstat (COR388), has successfully treated the effects in preclinical studies.
Below I will discuss CRTX's approach and their growing pipeline. However, I will cover CRTX from the investor perspective and not dive too deep into the science. For those wanting to deep dive into the specifics of CRTX's scientific approach, I recommend this seeking alpha article by Gordon Gecko was a Commie.
Cortexyme's innovative approach
Based on the discovery of gingipains, toxic protease virulence factors from the bacterial pathogen, Porphyromonas gingivalis (Pg), which are found in more than 90% of brains with AD, CRTX developed a novel approach to stop and prevent the destruction of healthy brain cells. CRTX's drug is called Atuzaginstat and is the first and only selective small molecule inhibitor of gingipain activity being investigated in clinical trials for the treatment of neurodegenerative disease. The video below explains CRTX's approach quite well.
(Source: Cortexyme)
As we get older our body is not able to resist keystone bacteria like P.g. Those bacteria attack the cells of the mouth and gum, thus causing periodontal disease. After time they gain access to the bloodstream and through the bloodstream enter the brain. Here P.g. invades brain cells entering neurons before replicating and spreading to neighboring neurons where it survives by creating proteases called gingipains. Gingipains digest neurology-related proteins, eventually collapsing the cells structure and killing the neurons. By hiding inside neurons, Pg. evades immune cells and the natural protection of the body.
"it’s essentially digesting the cell from within. It’s a little like having termites in your brain cells or in your gum tissue" Michael Detke, MD, PhD, chief medical officer,
While gingipains weaken the immune response around P.g. the brains natural defenses build up around the infected cells, causing the build up of plaques and other inflammatory biomarkers associated with AD.
"We know we can’t kill the bacterium. What we did is develop a drug that targets those proteases, which are causing all the damage inside the cell." Michael Detke
Atuzaginstat's COR compounds are designed to enter neurons and block the gingipains that attack neurology-related proteins. This prevents damage to neurons while starving the Pg. bacteria & preventing it from replicating neuro inflammation. In addition, beta levels are reduced. This leads to healthy neural function and halts the progression of AD.
(Source: Cortexyme)
Even though the above thesis sounds completely logical the P.g. thesis was not taken seriously by fellow researchers and scientists for many years, because of the dogma in AD research. Since 2007 the support for the P.g. thesis grew and independent, peer reviewed research confirmed the thesis.
(Source: Cortexyme)
In his 2017 book "The End of Alzheimer's" Dale E. Bredesen outlines P.g. as one of the common causes for AD. Researcher's working on AD treatments were looking at mouse models that were changed and were not able to translate to human pathologies. CRTX chose a novel approach with a new physiological animal model that they believe is representative of human Alzheimer’s disease pathology. CRTX's Chief Mediccal Officer Michael Detke, MD, PhD is excited about the efficacy of Atuzaginstat "I’m excited because there’s so much converging evidence that supports this theory and support that it will be efficacious. Multiple papers published by third party sources have showed that the biggest 2 risk factors for Alzheimer disease are lower level of education and periodontal disease. That’s 1 piece of evidence. We’ve showed in a mouse model that if you take rub porphyromonas gingivalis on regular non-genetically modified mice, they all get the pathology of Alzheimer disease plaques, tangles, inflammatory markers like TNF alpha. That mouse model has been replicated by 5 independent labs. Replication and verification by fellow sciences is an important part of the process."
Apart from the scientific differentiation, there are also many practical and business related benefits to Atuzaginstat. On March 16 2021 in an Oppenheimer webcast with the CRTX team I submitted a question asking about the benefits they see in their approach vs Biogen's Aduhelm. The speaker Chris Lowe - COO & CFO gave a very clear and on point answer.
Benefits Atuzaginstat vs Aduhelm:
Upstream target
practically in terms of the drug -> it is a small oral molecule
Simply a pill vs injection
trying to be caregiver for the population or give shot of any kind is challenging to say the least as AD shows symptomps of "unfounded suspicions about family, friends and professional caregivers;"
Atuzaginstat's clinical evidence is superior to Aduhelm's
Because their approach is a small molecule, they believe they have advantages in terms of the ROI they offer to the system meaning they will likely be more favorable in terms of overall costs to the system, the simplicity they offer on administration of being oral vs other approaches which require higher level of monitoring. Thereby will have a much higher ROI from the payers perspective and government agencies.
Based on the above discussion points, it becomes clear that CRTX has a very differentiated approach to developing a treatment for AD. In addition, they also have a growing pipeline that is very advanced and the Pivotal GAIN trial will even be ready for topline data readout in November 2021.
Pipeline
CRTX has a growing and healthy pipeline of treatments related to neurological diseases. In this article I am focusing on AD & Periodontal disease, as Parkinsons is a topic I want to write an separate article about in the future.
(Source: Cortexyme)
Alzheimer's Disease
Currently a global pivotal Phase 2/3 clinical trial of Atuzaginstat (COR388) is ongoing called the GAIN (GingipAIN Inhibitor for Treatment of Alzheimer’s
Disease) trial. The interim analysis has been successful so far and topline data for the fully enrolled population of 643 subjects is expected mid-November 2021.
Michael Detke, MD, PhD on the trial design: "The phase 3 GAIN trial is designed to be a gold standard test of this drug for disease modification in patients with mild to moderate Alzheimer disease, corresponding to Mini Mental State Exam scores between 24 and 12, inclusive at the outset of the study. We’ll be treating patients for a year, using widely accepted co-primary outcomes of the ADAS-Cog, which measures cognition, and the ADCS-ADL, which measures activities of daily living or ability to function. We’re looking at a lot of biomarkers and traditional secondary outcomes as well, including traditional biomarkers such as amyloid, tau, etc."
(Source: Cortexyme)
Two additional unique features of the GAIN trial in comparison to other AD treatment trials:
Multiple biomarkers related to Pg. infection are evaluated. A very meaningful being Ptau217. This biomarker predicts AD. The question is, if gingipains are related and cause Ptau217? An infection with Pg. increases Ptau217 and Cor388 reverses it nicely.
40% of the patients were getting dental exams done parallel to the trial. This way an outcome of the trial will be finding out, if Atuzginstat can be used to treat gum disease as well.
The speech recognition analytics software “Winterlight” is used before and after many days of treatment. As the team has to make sure that patients cannot cheat the test, each of the images are different. This way they can measure complexity and patients cannot practice it to know the answer. they have to really answer based on new information. Some patients get other pictures in beginning than others.
(Source: Cortexyme)
Current conclusions the team deducted from the trial data so far look very compelling and increases my excitement for the topline data readout.
The team plans to engage with the FDA immediately after the data readout in mid-November. It is suspected that CRTX will present the topline data at CTAD 2021 Boston – USA – November 9-12, 2021. The super bowl of Alzheimer’s Disease Therapeutic Trials with key leaders in Alzheimer Disease research.
Periodontal Disease
In contrast to many clinical stage biotech companies, CRTX's main trial is de-risked because of the fact that a substudy of 233 patients called the REPAIR trial is in Phase 2
and expected to report on efficacy of Atuzaginstat in periodontal disease in Q4 2021.
The reason for this approach is the fact that the key pathogen in the development of periodontal disease has been identified as being P.g.
"Periodontal disease is a common age-related disease affecting nearly 50% of the population over 50 years of age, or 65 million people, in the United States." (Cortexyme)
There is currently no treatment for periodontal disease that halts or even reverses the progression.
Share Structure & Financials
CRTX is a pre-revenue company. In terms of cash on hand the team believes that their "existing cash, cash equivalents and investments will be sufficient to fund our planned operations through 2023."
Share price performance since IPO:
As can be expected from a clinical stage biotech stock, there is a lot of volatility. However, you can see that there is an upward trend and the price broke through the $70 resistance on Aug 9th 2021.
Looking at CRTX share structure, we find high insider ownership of 31.72% which is especially important for Biotech's in clinical phases. It underscores the conviction of the management team and proves their skin in he game. The insider ownership at another popular AD related stock Cassava Sciences is only 5.96% for example.
(Source: Seeking Alpha)
The other part I really like about the share structure is that there are only 29.69M common shares outstanding and of those the free float is only 17.94M.
Add to that the short interest of ~16.8% and it becomes obvious why moves up like on Aug 9th will be seen more often once we get close to the data readout date. Biogen's share price increased 55% on FDA approval news, even though it was only a conditional approval and efficacy of Aduhelm has not been proven to date. CRTX on the other hand will have a full data readout in November and most likely prove efficacy of Atuzaginstat.
Biogen had a market cap of $36.9bn and increased to $57.2bn after the Aduhelm approval. This means the market asserted $20.3 bn in absolute market cap increase to Aduhelm's potential.
From today's level CRTX can at least increase 7 fold to reach a $+20bn market cap short term. Longer term it will most likely increase even more due to the tight share structure, robust data, efficacy, better ROI for payers and being the first mover in a market with a huge TAM of $+200bn.
Even though the company has released compelling data and based their approach on a peer reviewed theory in many medical journals, it is still quite under the radar and rarely mentioned when potential AD treatments are discussed in media.
To give you a relation on how unknown CRTX is, I would like to point you to the number of Twitter followers of Biogen 40,000 vs CRTX 468 (and they are quite active with good content). This exemplifies a great opportunity for astute investors to position themselves, before the herds are made aware of this stock in Nov.
We witnessed on August 9th a single day increase in share price of 50% just from the PR confirming that topline data of GAIN trial will be released mid-November.
Just imagine what happens once the topline data is released in Nov and media starts mentioning CRTX.
Risks
Even though CRTX is one of my high conviction investments, there are of course risks associated with investing in pre-revenue, clinical stage biotech companies.
As depicted in the chart, the volatility can be frightening, if one is not used to it.
The data readout delivering unfavorable results or results that are misinterpreted by the market
(Hostile) takeover: Not so much a risk that would lead to losses, but rather would limit the gains. Recently Sanofi acquired Translate Bio for only $3.2bn. A price that did not fully reflect the company's potential.
Challenges with FDA approval. In CRTX recent 10Q this risk factor is discussed "Clinical holds imposed by the FDA could prevent us from administering Atuzaginstat at higher doses than currently utilized or planned. Preclinical data for Atuzaginstat showed toxicity at very high exposure levels in mice and, as a result, the FDA placed Atuzaginstat on partial clinical hold to enforce an exposure cap on Atuzaginstat dosages in humans at approximately 2.4 times the top dose of 80 mg BID in our Phase 2/3 GAIN trial. Although the FDA has permitted the continuation of clinical trials at the planned doses of Atuzaginstat, if we determine that we need to increase the dosage of Atuzaginstat in humans, the partial hold, or any future clinical holds placed by the FDA may have a negative impact on our ability to carry out our clinical studies, which could delay or prevent the commercialization of Atuzaginstat and may harm our business and financial condition. In addition, the FDA placed a partial clinical hold Atuzaginstat impacting the OLE phase of the GAIN Trial following the review of hepatic adverse events in the Atuzaginstat trial by the FDA. Under the hold, we have stopped enrollment and dosing in the OLE phase of the GAIN Trial."
Dilution: The team mentioned that the cash on hand will last until 2023, but this could change once they have to start manufacturing or RnD takes longer than expected. Issuance of equity securities could be one way to raise capital and that would of course dilute sharesholders. From recent 10Q "Management expects to incur additional losses in the future to fund its operations and conduct product research and development and may need to raise additional capital to fully implement its business plan. The Company may raise additional capital through the issuance of equity securities, debt financings or other sources in order to further implement its business plan"
Conclusion
CRTX is one of my highest conviction long stock holdings currently. The combination of
a team that constantly under promises and over delivers plus the upcoming catalyst in November make this a compelling investment. It is important to note again that the CRTX team is going against the grain with their approach. If they are successful, it would be a major win for AD patients, their loved ones and of course CRTX shareholders. It will change the way we currently think about treating AD forever.
In closing,
High insider ownership gives me confidence that they believe in the success of the trial
Compelling share structure
Short term 7 bagger potential, long term even more
High unmet need - no treatment or cure available for AD
The direct costs of caring for individuals with AD and other dementias in the United States were estimated to total $300 billion in 2020 and are projected to increase to $1.1 trillion by 2050
Topline data readout in mid-November
De-risked because of the opportunity to commercialize the periodontal treatment: Nearly 50% of the population over 50 years of age, or 65 million people, in the United States are affected by periodontal disease
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References
Alzheimer's Association https://www.alz.org/alzheimers-dementia/what-is-alzheimers
LifeSci Partners Presents: Benchtop Bios Podcast: https://open.spotify.com/episode/57SgxoJ5TVUm14gtaeM1el?si=ElVvDSZFT_ehfhD4urK2Fg&utm_source=copy-link&dl_branch=1
March 2021 Oppenheimer Webcast recording: https://wsw.com/webcast/oppenheimer9/crtx/2758613
Neurology Live Interview with Michael Detke https://www.neurologylive.com/view/neurovoices-mike-detke-atuzaginstat-potential-alzheimer-periodontal-disease
Gingipains Identified in Alzheimer's Disease Brains Differentially Fragment ApoE Proteins https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3838996
Disclaimer: This blog post is purely my personal opinion and is not financial advice. Please do your own research, before taking investment decisions. I am long Cortexyme..