Exploiting a valuation disconnect can be rewarding for investors. And First Wave BioPharma (NASDAQ: FWBI) presents one that's too big to ignore. In fact, FWBI's current share price is a textbook example of how investors can sometimes miss the obvious and overlook opportunities that could deliver significant investment returns. And, with several recently reached milestones expected to lead to even more notable accomplishments, the share price could be coiling to fuel a potentially massive rally based on what's potentially in the near-term news queue. For those already following FWBI, there's a lot in play.
Foremost, an update on part 2 of its Phase 2 trial evaluating niclosamide to treat Covid-related GI infection could be a near-term catalyst. The company announced completing enrollment back in January, meaning that this relatively short duration trial is all systems go. Of course, as is often the case when FWBI speaks, investors responded well to the news by sending shares higher by double-digit percentages.
But, it's not only investors embracing the trial and its impact on FWBI; the medical community is also watching. That's because FWBI intends to treat a potentially massive niche market related to more longer-term COVID complications. And, despite FWBI being caught in a marketwide downdraft for biotech stocks, don't be fooled by the price. FWBI's promise of using long-time drug niclosamide to treat an unmet medical need can be a game-changer for patients, investors, and the company.
Data Supports A Jump In Value
In fact, data from the second part of its study could quickly open doors to partnerships, government grants, and licensing deals that could help fund an ambitious clinical program. Thus, the selloff in FWBI stock appears well overdone. In fact, as markets normalize and reward late-stage small-cap biotechs for work already done, expect FWBI to be at the top of the list for investor interest.
And with topline results expected in the first half of 2022, a successful data set could become the deciding factor of securing Emergency Use Authorization (EUA). If the data from the trial is positive, FWBI plans to request a FDA EUA meeting for its COVID GI-tract oral anti-viral treatment. If EUA is granted, the company would be able to fulfill an unmet medical need faced by millions of patients worldwide. As a result, and even with only the potential to treat patients in the U.S. with a EUA, current prices expose an attractive entry point.
Remember that the review process does not take long, with Pfizer and Merck receiving EUAs for their orally dosed COVID antivirals in less than 60 days from filing. Therefore, positive results from First Wave's Phase 2 oral niclosamide trial could help the company earn this EUA sooner than many may expect. Also, keep in mind that FWBI's niclosamide trial targets a specific indication that has not been addressed adequately by the drug development sector: treating COVID-related symptoms in the GI tract. These symptoms have been shown to persist in patients even months after initial infection, creating a dire need to better understand and treat the effects of post-COVID ailments.
The good news for patients and investors alike is that interim data has shown FWBI's candidate is both effective and well-tolerated. FWBI has accumulated excellent safety data throughout its trials and is also capitalizing on the fact that niclosamide has a 50-year history of use in other mainstream medical applications. Although past effectiveness in different applications isn't a guarantee of future success, it's important to understand that FWBI's candidate shows significant potential in bringing a much-needed treatment for specific effects resulting from a COVID infection. Hence, the near-term value driver is at work as well.
Discovering Additional Uses for Niclosamide
Here's more excellent news. Not only is First Wave now fully enrolled in its niclosamide Phase 2 trials, but considerable background data and research on the drug might pave the road for a faster regulatory approval process, meaning that a 2022 launch is potentially within reach. That would bring potential relief to millions of patients and, more importantly, add another arrow to the treatment quiver for a virus that has shown enormous ability to mutate. In other words, while the virus may be slowing its infection rate, medical experts suggest the virus could linger for years to come.
Bad news for patients, but it also carves a space for FWBI to monetize its successful candidate. Moreover, many consider the FWBI trial to be favorably leveraged, with the combination of using a drug with historical merit coupled with compelling data and an urgent need as a plus for expedited approval pathways.
Here's the best part. Interim data has demonstrated that FWBI's niclosamide candidate could be effective, especially with its micronized formulation of niclosamide allowing solubility to be increased so that the local GI concentration exceeds that needed to kill SARS-CoV-2. Even better, its proposed treatment may circumvent dosing issues because it uses an oral delivery route rather than a hypodermic vaccine delivery.
Also important to note is that FWBI's drug candidate differs from Pfizer and Merck's oral antivirals in that it targets GI-tract infection utilizing a distinct mechanism of action to kill the residual virus in patients. This is a significant competitive advantage that FWBI would hold onto following their candidate's approval, as offering an unmatched treatment will allow for undivided revenues as competitors work to catch up.
Best of all, FWBI's micronized niclosamide has the potential to be used as part of a combination therapy. Indeed, First Wave's candidate may already be catching the attention of medical researchers looking to combine FWBI's positive data alongside other treatments to provide next-level relief to patients. That isn't to say that FWBI isn't capable of standing on its own; it simply implies that there are additional revenue-generating options to be found.
Also, keep in mind that along with likely pharma partnership interest, regulators may see potential, too, with the FDA fast-tracking FWBI's Phase 2 trial. So, a double dose of good news can come sooner than later. Moreover, with niclosamide demonstrating an outstanding safety profile in other applications for nearly 50 years, looking further into FWBI's unique use of the drug could present a compelling opportunity for other pharma's to combine treatment forces to make an even better treatment candidate. After all, it's no secret that pharma corporations have shifted mainly to acquisition strategies over preclinical processes to reduce risk and expenditures.
And because niclosamide is known to be easy to produce in large quantities, pharma's best approach to capitalizing upon this new drug application could be through a partnership. Moreover, with FWBI is demonstrating a clear case for its effectiveness, pharma interest can be an unexpected and potential near-term catalyst for the company. Keep in mind, too, that Phase 3 companies earn valuations significantly higher than Phase 2 companies, so completing a transaction ahead of the next quarter's data could be a smart move for all involved.
Vast Market, Little Competition
There's even more to the value proposition. With niclosamide demonstrating its effectiveness for over half a century, FWBI's modified candidate has a more substantial chance of approval than other, lesser-known formulations. This prior research adds to the long series of positive data points released by FWBI, which together provide a strong argument for near-term approval.
The rewards can be substantial as well. The COVID antiviral market is estimated at $20 billion, meaning that their candidate's approval could open the doors to exponential revenue increases for FWBI. Remember, Pfizer and Merck may be targeting a portion of the oral therapeutics market, but FWBI's specific focus on treating GI infection could be a billion-dollar opportunity on its own. And not only is it a considerable opportunity, but no known biotech is as close as FWBI to bringing a credible and effective treatment to the market.
And an effective drug is needed. According to current data, about 18% of patients have COVID-related GI infection symptoms, and up to 43% have viral RNA in their stools, putting an approved FWBI drug in a good position for substantial commercial success. In fact, should the company's clinical trials continue to demonstrate the candidate's effectiveness, they may be more than just well-positioned; they could essentially own the GI COVID treatment sector.
FWBI Is Paying Attention To The Niche Opportunity
That's an opportunity created by most major pharmaceutical companies keeping their focus on oral antivirals for respiratory infections. First Wave, instead, is developing a promising treatment with near-nonexistent competition for its indication. This creates a clear shot on revenue-generating goal for FWBI to take advantage of this unmet medical need and deliver a much-needed treatment to patients struggling with GI-related post-COVID symptoms.
Even better, any potential competition may not be able to match the capabilities demonstrated by FWBI's niclosamide formulation, which has the advantage of being absorbed directly in the GI tract. This speaks well for potential partnerships in the future, creating a situation where it makes sense for drug development companies to collaborate with FWBI rather than compete.
Another key factor driving the potential for partnerships is data. Other than what FWBI has published, no other released data suggests the Pfizer or Merck oral anti-viral drugs could be used to effectively treat GI infection. Therefore, even the possibility of physicians prescribing them off-label is improbable, especially in light of a possible EUA for First Wave's niclosamide formulation.
Speculating about FDA decision-making procedures is, of course, a challenging undertaking. However, the pandemic has brought about a new sense of urgency in the medical community in expediting the research and approval of potentially life-saving drugs. And not only is FWBI working with a drug candidate with a long track record of effectiveness and safety, but it is also targeting a sector that is desperate for new drugs to help treat the emerging long-term effects of COVID-19. Therefore, additional confirmatory data from FWBI's Phase 2 trials could put a EUA approval in the crosshairs. More importantly, lives can be saved.
Niclosamide Brings Multiple Shots on Goal
As noted, FWBI isn't a one-trick biotech. They have multiple shots on revenue-generating goals. Actually, investors need to understand from the start that FWBI isn't focused on this opportunity alone. Although the company continues researching niclosamide's efficacy in treating long-haul COVID GI infection symptoms resulting from the virus staying in the GI reservoir or against inflammatory responses to the initial infection, they're also building a broad clinical trial pipeline that could result in even more catalysts by the end of the year.
First Wave's Phase 2 results for its anti-inflammatory trial in ulcerative proctitis-ulcerative colitis and IBD could also substantially and positively impact its share price as soon as this year. Therefore, although First Wave's niclosamide treatment is its current priority, its broader development pipeline contains other value-creating interests that deserve equal attention. Best of all, because its trials are relatively quick to enroll in and complete, any series of announcements could send valuations soaring. And, as mentioned earlier, shorter trials mean that partnerships could be announced sooner rather than later.
Bringing Relief Where Others Cannot
The bottom line is that FWBI's treatment candidate may soon become the only approved drug to treat COVID-related GI infection, meaning First Wave could enjoy an undivided share of the market as others struggle to catch up. FWBI is also prepared to meet that potential demand, having established a reliable network of production channels for its niclosamide candidate. Hence, with production capabilities in place and the current willingness of regulatory bodies to expedite the approval of breakthrough treatments, First Wave is in a great position to earn unprecedented gains in 2022.
Best of all, although this potential could be realized from their niclosamide candidate alone, First Wave is also developing novel treatment candidates for patients with IBD and ICI-AC. Therefore, on top of the substantial revenue-generating prospects coming from an approved oral COVID-19 GI treatment, First Wave benefits from multiple shots on a billion-dollar goal. In the land of biotech, that's a valuable asset.
Thus, with several clinical trials advancing through the pipeline, topline data to be released next quarter, and a broad portfolio of long-lasting patents protecting niclosamide use for COVID-19 GI infections, ICI-AC, and the IBDs, it may not take long for FWBI's share price to reach a valuation more reflective of the late-stage Phase 2 drug company it is. And with that likelihood being put into play, taking advantage of the current valuation disconnect may be more than timely; it can be too good to ignore.
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