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Moleculin Biotech, Inc. (NASDAQ:MBRX): Unlocking the Potential of Annamycin in Acute Myeloid Leukemia
Published on September 24, 2024 | Ticker: MBRX

Moleculin Biotech, Inc. (NASDAQ:MBRX) is a clinical-stage pharmaceutical company with a growing pipeline, including Phase 2 clinical programs for hard-to-treat cancers and viruses. The company has three core technologies, each of which have had one or more drugs successfully complete a Phase 1 clinical trial, based substantially on discoveries made at and licensed from the University of Texas MD Anderson Cancer Center (MD Anderson) in Houston, Texas.

Business Overview

Annamycin: A Game-Changing Anthracycline for AML

Annamycin, Moleculin's lead molecule, is a "next generation" anthracycline designed to be different than currently approved anthracyclines, which are limited in utility because of cardiotoxicity risks and their susceptibility to multidrug resistance mechanisms. Annamycin was designed to avoid multidrug resistance and to be non-cardiotoxic and has shown no cardiotoxicity in subjects treated in clinical trials to date. Furthermore, the company has demonstrated safe dosing beyond the dose limitations imposed by regulatory authorities upon currently prescribed anthracyclines due to their inherent cardiotoxicity.

As of March 2024, Annamycin demonstrated efficacy in two of its Phase 1B/2 trials in subjects with Acute Myeloid Leukemia (AML) and Advanced Soft Tissue Sarcoma (STS). In the AML trial (MB-106), the company reported a Complete Remission (CR) rate of 50% and a Complete Remission Composite (CRc) rate of 60% in second-line patients. These results are unprecedented, significantly exceeding the performance of any currently approved AML therapy in the second-line setting.

Importantly, Annamycin's safety profile is also game-changing. The company has engaged an independent expert from the Cleveland Clinic to assess cardiotoxicity associated with Annamycin administration. After reviewing data from 84 subjects across five trials, the expert has not identified any signal of cardiotoxicity, even in subjects who have received greater than the lifetime cumulative anthracycline dose associated with increased risk of cardiomyopathy.

Intellectual Property and Regulatory Milestones

Moleculin's novel Annamycin candidate benefits from a promising advancement in lipid-enabled drug delivery developed in collaboration with and exclusively licensed from MD Anderson. The company has recently been awarded two key U.S. patents providing composition of matter and formulation protection for Annamycin, with a base patent term extending until June 2040, subject to extension to account for time required to fulfill regulatory requirements for FDA approval.

Furthermore, the European Medicines Agency (EMA) has granted Orphan Drug Designation (ODD) to Annamycin for the treatment of AML, complementing the Orphan Drug Designation the company already holds in the U.S. This provides Annamycin with potential regulatory benefits and up to 10 years of market exclusivity in the European Union if approved.

Upcoming Milestones and Valuation Potential

Moleculin is currently preparing for an End of Phase II meeting with the FDA, which is expected to occur in the first half of 2024. The company plans to request an open-label, single-arm pivotal trial of approximately 100-150 patients in the second-line AML setting, where Annamycin has demonstrated its most impressive results. Given the unprecedented efficacy and safety profile of Annamycin, the company believes this trial design should be sufficient to support a New Drug Application (NDA) filing.

If the FDA is supportive of this plan, Moleculin expects to initiate the pivotal trial in the first half of 2025. The company is also continuing to enroll first-line AML patients in the ongoing MB-106 trial, as it plans to eventually conduct a confirmatory Phase 3 trial in the first-line setting.

The potential value of Annamycin is highlighted by the recent valuations of other AML assets. For example, Jazz Pharmaceuticals paid $1.5 billion in 2016 for Vyxeos, a drug with a relatively limited share of the AML market. AbbVie's venetoclax, which is generating $2 billion in annual revenue, is estimated to be worth over $10 billion as a standalone asset. Furthermore, Servier, a French mid-pharma company, paid nearly $2 billion for two niche-focused AML drugs, Idhifa and Tibsovo, which are estimated to potentially produce complete remission in only about 6% of the overall AML population.

In comparison, Moleculin's Annamycin has demonstrated a 60% CRc rate in second-line AML patients, significantly outperforming the currently approved therapies. Yet, the company's current market capitalization is only around $13 million, based on approximately 2.5 million shares outstanding. This stark valuation disconnect suggests that Moleculin's stock is significantly undervalued and poised for substantial upside potential as the company advances Annamycin through the regulatory process.

Financials

For the full year 2023, Moleculin reported an annual net loss of $29.8 million, with no revenue generated. The company's annual operating cash flow was -$24.1 million, and its annual free cash flow was -$24.2 million.

In the first quarter of 2024, the company's research and development expenses decreased to $4.3 million from $5.7 million in the same period of the prior year, mainly due to lower clinical trial activity levels. General and administrative expenses also decreased to $2.4 million from $2.6 million in the comparable quarter. The company recorded a net loss of $5.0 million in Q1 2024, compared to a net loss of $7.9 million in Q1 2023.

As of March 31, 2024, Moleculin had $16.8 million in cash and cash equivalents, which the company believes will be sufficient to fund its planned operations, including its current Phase 1B/2 clinical programs and preparations for future clinical trials, into the fourth quarter of 2024. However, this funding timeline does not align with the company's plan to initiate the pivotal trial in the first half of 2025, indicating a potential need for additional financing.

Risks and Challenges

While Moleculin's Annamycin has demonstrated promising results, the company faces several risks and challenges common to clinical-stage pharmaceutical companies. These include the successful completion of ongoing and future clinical trials, obtaining regulatory approvals, securing additional funding, and potential competition from other AML therapies.

Additionally, in March 2022, Moleculin received a subpoena from the SEC requesting information and documents related to the development of and statements regarding the company's drug candidate for the treatment of COVID-19. The company is cooperating with the SEC's investigation, but the outcome and potential impact on the company are currently unknown.

Conclusion

Moleculin Biotech's Annamycin has the potential to be a game-changing therapy for the treatment of AML, particularly in the second-line setting where there is a clear unmet medical need. The drug's unprecedented efficacy and safety profile, combined with the company's strong intellectual property position and upcoming regulatory milestones, make Moleculin a compelling investment opportunity in the AML space. As the company advances Annamycin through the regulatory process, investors should closely monitor the progress and potential value unlocking events that could drive significant upside in the stock.

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