COCP: Cocrystal Pharma reports 2nd quarter 2023 financial results and provides updates on drug pipeline.
NASDAQ:COCP
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2nd Quarter 2023 Financial & Operating Results
No revenues were reported in the 2nd quarter of 2023 as the Cocrystal Pharma’s (NASDAQ:COCP) drug candidates are still in development stage and milestone payments from Merck have not been received. Research and development expenses for the quarter increased to $2.8 million compared to $2.4 million in the 2nd quarter of 2022. The increase was primarily due to preparations for a Phase 2a clinical trial with CC-42344 for pandemic and seasonal influenza A, and preparations for advancing CDI-988’s COVID-19 and norovirus programs toward a Phase 1 clinical trial.
General and administrative expenses for the quarter were $1.5 million compared to $1.4 million for the 2nd quarter of 2022. The increase was primarily due to professional fees and general corporate cost increases.
The net loss in the 2nd quarter of 2023 was ($4.2) million, or ($0.41) per share, compared with a net loss for the 2nd quarter of 2022 of ($24.4) million, or ($3.00) per share. The 2nd quarter of 2022 included a legal settlement of $1.6 million, which was returned to the company in the 3rd quarter of 2023 following a successful appeal of the trial court’s summary judgment ruling. In the second quarter of 2022, the company also recorded a large non-cash goodwill impairment of $19.1 million.
Cocrystal reported unrestricted cash as of June 30, 2023 of $32.4 million, compared with $37.1 million as of the end of 2022. Net cash used in operating activities for the first six months of 2023 was $8.7 million. The Company had working capital of $34.1 million and no outstanding debt. During the 2nd quarter of 2023, the company raised $4.0 million in a private placement offering that was priced “at-the-market” under Nasdaq Listing Rules. Outstanding shares as of August 14, 2023, were 10,173,790.
On April 24, 2023, the company announced the appointment of Fred Hassan as a new Board member. Mr. Hassan’s distinguished 40-year career includes serving in senior executive and director positions at global pharmaceutical companies and leading investment firms. He currently is Chairman of the investment firm Caret Group and a Director of Warburg Pincus LLC, a global private equity firm.
Program Updates
Cocrystal is developing antiviral therapeutics that inhibit the essential viral replication function of ribonucleic acid (RNA) viruses that cause acute and chronic diseases. The drug discovery process focuses on the highly conserved regions of the viral enzymes and inhibitor-enzyme interactions at the atomic level. It differs from traditional, empirical medicinal chemistry approaches that often require iterative high-throughput compound screening and lengthy hit-to-lead processes. By designing and selecting drug candidates that interrupt the viral replication process and have specific binding characteristics, the company seeks to develop drugs that are effective against both the virus and possible mutants of the virus, and also have reduced off-target interactions that may cause adverse side effects.
Influenza Programs
Influenza is a severe respiratory illness caused by either the influenza A or B virus that results in disease outbreaks mainly during the winter months. The global seasonal influenza market was valued at $6.5 billion in 2021 and is projected to reach up to $28.0 billion by 2029, according to Data Bridge Market Research.
Pandemic and Seasonal Influenza A
Cocrystals novel oral PB2 inhibitor, CC-42344, has shown excellent antiviral activity against influenza A strains including pandemic and seasonal strains, as well as strains resistant to popular drugs Tamiflu® and Xofluza®.
In March 2022 the company initiated enrollment in a randomized, double-controlled, dose-escalating Phase 1 clinical trial to evaluate the safety, tolerability and pharmacokinetics (PK) of orally administered CC-42344 in healthy adults.
In April 2022 the company announced preliminary Phase 1 clinical trial data demonstrating a favorable safety and PK profile in the first two cohorts in the single-ascending dose portion of the study.
In July 2022 the company reported PK results from the single-ascending dose of the study supporting once-daily dosing.
In December 2022 the company reported favorable safety and tolerability results from the Phase 1 trial with CC-42344 for influenza A.
Cocrystal has entered into an agreement with a UK-based clinical research organization to conduct a Phase 2a human challenge study evaluating safety, and viral and clinical measures of orally administered CC-42344 in influenza A-infected subjects. Under the human challenge model, healthy adults will be infected with the influenza A virus under carefully controlled conditions which is believed to accelerate the trial enrollment.
The company submitted an application to the United Kingdom Medicines and Healthcare Products Regulatory Agency to conduct the Phase 2a human challenge study and, pending clearance, is expected to initiate the study in the second half of 2023.
In addition, preclinical development is underway with an inhaled formulation of CC-42344 as a treatment and prophylaxis for influenza A. Phase 1 clinical trial for this is expected to commence in the 1st half of 2024.
Pandemic and Seasonal Influenza A/B Program
In January 2019 the company entered into an Exclusive License and Research Collaboration Agreement with Merck to discover and develop certain proprietary influenza antiviral agents that are effective against both influenza A and B strains. This agreement includes milestone payments of up to $156 million plus royalties on sales of products discovered under the agreement.
In January 2021 the company announced they had completed all their research obligations under the agreement which makes Merck solely responsible for further preclinical and clinical development of these compounds.
In early 2023 Merck notified the company of its intent to continue development of the proprietary compounds discovered under this agreement and that they have filed multiple U.S. and international patent applications associated with these compounds on behalf of both companies. Merck continues to be responsible for managing the patents. It’s possible that milestone payments may occur in late 2023.
COVID-19 and Other Coronavirus Programs
By targeting viral replication enzymes and protease, Cocrystal believes it is possible to develop an effective treatment for all coronavirus diseases including COVID-19, Severe Acute Respiratory Syndrome (SARS) and Middle East Respiratory Syndrome (MERS). The company’s main SARS-CoV-2 protease inhibitors showed potent in vitro pan-viral activity against common human coronaviruses, rhinoviruses and respiratory enteroviruses that cause the common cold, as well as against noroviruses that can cause symptoms of acute gastroenteritis.
Oral Protease Inhibitor CDI-988
The company selected CDI-988 as our lead candidate for development as a potential oral treatment for SARS-CoV-2. Designed and developed using a proprietary structure-based drug discovery platform technology, CDI-988 targets a highly conserved region in the active site of SARS-CoV-2 3CL (main) protease required for viral RNA replication.
CDI-988 exhibited superior in vitro potency against SARS-CoV-2 with activity maintained against variants of concern, and demonstrated a safety profile and PK properties that are supportive of daily dosing.
The company submitted an application to the Australian regulatory agency for a planned randomized, double-blind, placebo-controlled Phase 1 clinical trial. Pending regulatory clearance, a study is expected to be initiated in the first half of 2023. The company believes the FDA’s guidance for further development antiviral candidate CDI-45205 (described below) also provides a clearer pathway for this planned study, as well as directives for designing a subsequent Phase 2 clinical trial.
Intranasal/Pulmonary Protease Inhibitor CDI-45205
An IND-enabling study is ongoing with CDI-45205, a novel SARS-CoV-2 3CL (main) protease inhibitor being developed as a potential treatment for SARS-CoV-2 and its variants.
Guidance was received from the FDA regarding further preclinical and clinical development of CDI-45205 that provides a clearer pathway for future development.
CDI-45205 and several analogs showed potent in vitro activity against the main SARS-CoV-2 variants to date, surpassing the activity observed with the original Wuhan strain.
CDI-45205 demonstrated good bioavailability in mouse and rat PK studies via intraperitoneal injection, and no cytotoxicity against a variety of human cell lines. CDI-45205 also demonstrated a strong synergistic effect with the FDA-approved COVID-19 medicine remdesivir.
An IND-enabling study with CDI-45205 is ongoing.
CDI-45205 was among the broad-spectrum viral protease inhibitors obtained from Kansas State University Research Foundation (KSURF) under an exclusive license agreement announced in April 2020. The company believes the protease inhibitors obtained from KSURF have the ability to inhibit the inactive SARS-CoV-2 polymerase replication enzymes into an active form.
Replication Inhibitors
Cocrystal is using their proprietary structure-based drug discovery platform technology to discover replication inhibitors for orally administered therapeutic and prophylactic treatments for SARS-CoV-2. Replication inhibitors hold potential to work with protease inhibitors in a combination therapy regimen.
Norovirus Program
The company is developing proprietary broad-spectrum, non-nucleoside polymerases for the treatment of human norovirus infections using a proprietary structure-based drug design technology platform. The company also holds exclusive rights to norovirus protease inhibitors for use in humans under the KSURF license. The company is targeting the selection of an oral preclinical lead in the first half of 2023.
In August 2023, the company announced the selection of the novel broad-spectrum 3CL protease inhibitor CDI-988 as the lead potential oral treatment for norovirus. CDI-988 is approved for evaluation in a first-in-human trial in healthy volunteers in Australia, and that trial is expected to serve as the Phase 1 trial for both the norovirus and coronavirus programs.
Norovirus is a global public health problem that’s responsible for nearly 90% of epidemic, non-bacterial outbreaks of gastroenteritis around the world.
Hepatitis C Program
Cocrystal is seeking a partner to advance the development of CC-31244 following the successful completion of a Phase 2a clinical trial. This compound has shown favorable safety and preliminary efficacy in a triple-regimen Phase 2a clinical trial in combination with Epclusa (sofosbuvir/velpatasvir) for the ultra-short duration treatment of individuals infected with the hepatitis C virus (HCV).
HCV is a viral infection of the liver that causes both acute and chronic infection. In June 2022 the World Health Organization estimated that 58 million people worldwide have chronic HCV infection.
Cocrystal co-CEO Sam Lee stated, “This is an eventful time for Cocrystal with notable advancements in developing our pipeline of highly promising antivirals. With our novel oral PB2 inhibitor CC-42344 for the treatment of pandemic and seasonal influenza A, we are building on the favorable data from our Phase 1 trial with the submission of an application for UK MHRA (Medicine and Healthcare Products Regulatory Agency) approval to begin a Phase 2a human challenge trial later this year.”
Mr. Lee further commented, “In our COVID-19 program, we received approval from the Australian regulatory agency in late May to begin a first-in-human trial with our novel, broad-spectrum oral protease inhibitor CDI-988. Earlier this month we announced the selection of CDI-988 as our lead oral norovirus candidate. This Phase I study is designed to access the safety, tolerability, and pharmacokinetics of CDI-988 for both our COVID-19 and our norovirus programs. We expect to report top-line data of CDI-988 Phase 1 study in 2024.”
Valuation & Estimate Changes
The company’s current cash position of $32.4 million should be sufficient to fund their operations through the 2nd quarter of 2024, depending on R&D spending levels and possible milestone payments from Merck. We slightly adjust our loss per share for 2023 to ($2.08) and we are forecasting no revenues in 2023 from the Merck milestone payments.
We are maintaining our price target of $7.00 per share based on higher prevailing interest rates affecting our discounted cash flow calculation as well as uncertainty related to the timing of receiving Merck milestone payments.
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