It's been a little over a decade since Corbus Pharmaceuticals (NASDAQ: CRBP) picked up rights to a synthetic cannabinoid analog called lenabasum. Corbus scooped up those rights on the cheap thanks to the experimental drug's previous failure to work as a pain reliever in a mid-stage study.
Corbus has lenabasum in a late-stage pivotal trial as an anti-inflammation drug for patients with severe autoimmune conditions. Success could lead to billions in annual sales, but Corbus Pharmaceuticals has been trading at a market cap of just $477 million.
Is this little biotech a bargain opportunity at recent prices, or a value trap to be avoided? Here's what you need to know about both sides of the argument.
Reasons to buy
The ongoing Resolve-1 trial will enroll around 354 patients with systemic sclerosis, a severe and thankfully rare autoimmune disease. Around 200,000 people in the U.S., EU, and Japan are affected by systemic sclerosis, and positive mid-stage data suggests lenabasum resolves inflammation and reduces the formation of scar tissue or fibrosis.
In 2016, Corbus reported data from a phase 2 study of 27 patients, spread evenly across three dosage arms, and a 15-member placebo group. After 16 weeks of treatment, all three dosage groups combined achieved an average score of 33% on the American College of Rheumatology's combined response index for systemic sclerosis (CRISS), compared to just 1% among the placebo group.
Systemic sclerosis is the most advanced among four indications in which the drug is being evaluated, and the rest aren't far behind. Corbus is running a 150-patient phase 3 dermatomyositis trial to see if it can repeat results seen in a 22-patient phase 2 trial.
Dermatomyositis leads to a severe rash and a lot of painful muscle inflammation. Lenabasum reduced disease activity by 9.3 points on the CDASI scale, which indicates disease severity, compared to a 3.7-point reduction for the placebo group.
Last December, Corbus began a 415-patient phase 2 study with cystic fibrosis (CF) patients. Lenabasum doesn't get at the root of the problem, but it appears to reduce symptoms of inflammation and fibrosis that accelerate CF patients' loss of lung function.
Finally, there's a chance that lenabasum can become a new treatment option for people with systemic lupus erythematosus, another severe autoimmune disorder that affects an estimated 550,000 people in the U.S., EU, and Japan.
Reasons to remain cautious
It's hard to feel confident about lenabasum's odds of success given the size of the patient groups tested in phase 2 studies. It would be different if the results had been a total slam dunk, but they weren't.
During the placebo-controlled portion of lenabasum's phase 2 study with systemic sclerosis patients, CRISS scores were a lot higher in the active group, but the difference just squeaked across the threshold for statistical significance. With a 15-member placebo group, there's a chance that different background therapies were responsible for the observed effect.
Corbus began the pivotal Resolve-1 study in late 2017 using change from baseline to patients' modified Rodnan Skin Score (mRSS), which is a component of CRISS, as its primary endpoint. The difference in mRSS improvements between groups at 16 weeks wasn't strong enough to be considered significant.
In April, Corbus called the Food and Drug Administration (FDA) for a meeting to talk about Resolve-1's primary endpoint. The company wants to change the main goal to CRISS and claims the agency is on board with the decision.
We probably won't find out why the agency agreed to move the goalposts this close to the end of the trial instead of insisting on using CRISS from trial's outset. Investors should know that FDA communications are considered private, and the agency can't complain when companies mischaracterize its message.
A turnkey preclinical-stage pipeline
Last September, Corbus expanded its pipeline from one new drug candidate to 601 by handing Jenrin Discovery just $250,000 up front. If any of the preclinical-stage compounds go all the way, Corbus could end up paying some milestone payments and a mid-single-digit royalty on any future sales.
The lead asset purchased was CRB-4001, a synthetic cannabinoid that targets CB-1 receptors found in the liver, lung, heart, and kidney. The company intends to begin clinical trials with CRB-4001 before the end of the year. Best of all, the National Institutes of Health (NIH) will coordinate a potential proof-of-concept study.
Play it safe
Since the approval and launch of Epidiolex, a cannabidiol (CBD) tincture extracted from actual cannabis, the path for a synthetic cannabinoid shouldn't be too rocky. Unfortunately, none of Corbus' mid-stage trials were unequivocal success stories.
You might miss a big run-up if lenabasum succeeds in its first phase 3 trial, but it won't cost you anything to pass up a questionable opportunity. It's probably best to remain on the sidelines until results from the Resolve-1 trial are ready.
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