Fantasy: NASDAQ debut... PGX Pharmaceuticals:A new name for the proposed merged company and the details of the transaction are to be released around the end of the month according to the news release. That there is a potential 3-4 for 1 share roll-back may mean the fantasy is still to be rolled out in the future with events but if it all hit the market by the end of the month as the new company makes its debut what could it look like?
Ideally it would be the debut of a new company on NASDAQ - a big splash. The release of the details would drive home to the market why arguably the most important biotech executive in Canada in the last 20 years(Ronnie Miller) is "thrilled", why Gilles is 'excited', and why AEZS's Chair is 'compelled'. They have been supported by fairness opinions from Raymond James and Bloom Burton so they are well supported. Furthermore, Gilles is in the catbird seat on the inside of both companies.
Ideally a path to H.C. Wainwright's ~US$15 target price(C$100 million market cap) for AEZS becomes clear. As a merger of equals this would put a $C200 million market cap target on the new company. Given the previous transactions by Novo Nordisk and Strongbridge for AEZS's diagnostic, the unique characteristics of AEZS's test for a critical need, and the target price for AEZS by H.C.Wainwright a C$100 million market cap target price for AEZS seems quite possible. For CZO it could mean C$60 million for the base business and $C40 million for the pipeline for example. In October Gilles expected that after an adjustment year in 2023 CZO's base business should get back to historical trends. In the merger news release AEZS's Chair says CZO has "well established" and "growing" operations:
“Ceapro has well-established and growing commercial operations..." CZO had a market cap of ~C$60 million just last year. New dry powder formulations of CZO's two active ingredients(beta glucan, avenanthramide) are also expected to be launched with Symrise opening new markets. CZO's main client is expected to return.
Ideally a clear path to a long-term sustainable business is provided. The current biotech market doesn't like high burn-rates without a compelling path to near-term sustainability. "The combination is attractive for shareholders of both companies, as it is expected to create a long-term sustainable business..." news release Fantasy New Data:
1) Avenanthramide:
CZO has never released preclinical data supporting its avenanthramide pill while saying the non-steroidal anti-inflammatory market is worth $50 billion per year and claiming: "...our avenanthramide program and could be the most significant transformational step we have taken to date in executing on our strategy to expand Ceapro’s business model towards becoming a biopharmaceutical company with the potential to provide an innovative product into very large markets. On the technical side, we are very pleased with the final formulation of avenanthramide powder, which has been produced in house using our unique chromatographic purifying technology and additionally with the final tablet developed with Corealis Pharma Inc, a Laval-based specialty pharmaceutical company." news release In the fantasy situation CZO releases preclinical data for the first time concerning its formulations. This data would clearly differentiate CZO's pill compared to what has been done previously; including with dose-response data. Is it slow-release?Biomarkers believed validated in humans would be shown. The FDA recently approved its first treatment for inflammation and heart disease. Given avenanthramide is believed safe efficacy may be the biggest risk. “Given the favorable effects of avenanthramide and the increased knowledge on inflammation-based diseases, especially in the cardiovascular area, we believe this study will offer insights in this first-in-class product for a potential new approach for patients,” commented Dr. Jean-Claude Tardif CZO news release “We are honored that our data were selected for presentation at this prestigious scientific congress. Importantly, the results obtained from this initial study demonstrated a positive trend and will enable us to gain line of sight into the next phase of development for this program. With these results in hand, we believe we are now well positioned to conduct additional studies of avenanthramides with the goal of achieving proof of concept and supporting our proprietary product’s ability to have a significant impact on inflammation-based diseases,” commented Gilles Gagnon, President and CEO of Ceapro." CZO news release CZO has also previously stated that it has been using avenanthramide with newer generation PGX carriers with promising results. Is there more information concerning where this is going. PGX-YBG is also an anti-inflammatory of potential significance.
2) PGX Update:
Has the 5X PGX facility been completed as expected by the end of the year with commissioning expected imminently? In November Natex said it believed it had 50% of the needed equipment and infrastructure in place for the 10X PGX scale-up. Where does it stand now 2 1/2 months later and is it still on schedule for commissioning of the 100L facility in Q4, 2024. 100L allows CZO to produce at a small commercial-scale for the first time and reach the decision point for mass industrialization of PGX. The 5X and 10X scale-up was also expected to allow CZO to work with potential partners on formulation, etc.
3) PGX Immune Booster Plant:
CZO has done with with human cell-lines suggesting a potential 5X increase in binding efficiency with dectin-1 for its PGX-YBG leading to potential improved immune stimulation. A smaller dose may be required to achieve the same immune profile. PGX could also set the standard for purity. "Protocol designed for a head-to-head study in animals for testing immune properties of PGX-YBG against a commercial formulation." Nov. 2023 news release
Does CZO have data from this head-to-head animal study strengthening PGX-YBG as the potential gold standard immune booster. Previously Gilles said a $40 million immune booster plant had a $100 million net present value with a 20% discount rate targeting 3% market share. With a successful animal study, PGX scale-up to date, and AEZS's tax loss carryforwards what is the expected net present value now? Will CZO target greater than 3% market share - will it target gold standard market share? Upfront money from a diagnostic deal could be used to finance a PGX immune booster plant. Strongbridge's upfront money alone for AEZS's diagnostic test was ~C$40 million adjusted for inflation and now the test may soon be approved for its most important market(children).
4) PGX Partnership:
Given the $100 million net present value for a PGX immune booster plant what could the net present value of a CoQ10 partnership be? The CoQ10 market may be 4X the size of the yeast beta glucan market. Is a partnership expected upon successful de-risking of PGX to the 100L level this year?
5) AEZS Clinical Trial 'Go Decision':
AEZS has been building a portfolio of preclinical programs towards 'go/no go' decisions for human trials. It is most excited about its AIM Biologicals program. Is AEZS now before a clnical trial 'go' decision. (July 13, 2024 news release) Next Steps:
- "Ongoing compilation of a comprehensive pre-clinical data package for scientific advice meetings with regulatory authorities, expected to take place in the near future."
6) Fibrosis:
Dr. Martin Kolb has said PGX-YBG could profoundly change the fibrosis treatment landscape if preclinical results are replicated in humans. In October Gilles said a short toxicology study was required(6 months) but that CZO was moving ahead with planning a clinical trial suggesting the toxicology is stimply believed to be a formality. Is the toxicology study underway and expected to be completed shortly. What does the potential Phase I clinical trial look like and who is expected to be conducting it? Dr. Martin Kolb and Dr. Kjetil Ask helped advance Avalyn Pharma's inhaled fibrosis drug in clinical trials and Avalyn raised ~C$80 million going into its Phase I and more recently raised ~C$230 million and attracted a key contributor to the development and launch of nintedanib which is one of the two main drugs used currently to treat fibrosis.
7) Wound Healing:
CZO's science has already cleared the gold standard model others use preclinically. Gilles called the data a 'home run'. Dr. Li likened the potential applications to "intel Inside'.
"Following positive results from animal studies conducted by the Angiogenesis Foundation, announced next steps with new studies focusing on speed of healing and molecular profiling of tissue regeneration induced by oat-derived bioactive products. Studies are ongoing."
The science is expected to be ready for partnering upon completion of the studies and the science could also support new claims for CZO's active ingredients(beta glucan, avenanthramide) as CZO prepares to launch new powder formulations with Symrise.
-------
"Carolyn Egbert, Chair of Aeterna: “Ceapro has well-established and growing commercial operations, with potential value-creating pipeline opportunities in large and growing cosmetic and consumer health markets. We believe that the new company will have the capital resources to support this ongoing growth, in addition to continuing to maximize the value of Aeterna’s existing assets, including Macimorelin.”
"Gilles Gagnon, Chief Executive Officer of Ceapro, added: “The transaction provides us with the additional capital and internal capabilities to fully support near-term revenue generating cosmeceutical and nutraceutical product development programs, while achieving Ceapro’s previously stated objective of expanding further into the pharmaceutical space, which we will be able to do via the exciting projects Aeterna has been developing, even as we seek to extract additional value from Ceapro’s core technologies. This is an exciting day for stakeholders of both companies who share a bright future together.”"
“We are thrilled with this exciting transaction to merge with Aeterna and combine two complementary companies and teams, in support of our plan to drive significant growth,” said Ronnie Miller, Chairman of Ceapro. “After careful consideration, we believe this transaction is the best way forward for Ceapro and our valued shareholders.”