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DFFN: Planning for Additional Studies of TSC…

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By David Bautz, PhD

NASDAQ:DFFN

READ THE FULL DFFN RESEARCH REPORT

Business Update

Update on COVID-19 Trial

Diffusion Pharmaceuticals (NASDAQ:DFFN) is currently conducting the 100-303 COVID trial of trans sodium crocetinate (TSC) in hospitalized COVID-19 patients in Romania (NCT04573322). This is primarily a safety and tolerability study of TSC when it is administered four times a day for up to 15 days. The trial is designed to have four dosing cohorts of six patients. Previous clinical trials of TSC have shown the compound to be safe and well tolerated when administered once daily, thus the protocol for the 100-303 study calls for an independent safety monitoring committee to review the safety data following the completion of each dosing cohort. In addition to determining safety and tolerability, secondary endpoints will examine clinical endpoints such as oxygen saturation, change in WHO ordinal severity scale, and mortality, although given the limited number of patients (n=24) we don’t anticipate statistically significant differences being detected. Rather, we would view a promising signal (e.g., safe and tolerable at escalating and more frequent dosing than studied previously) to be a positive outcome that could lead to testing TSC in additional clinical indications.

ARDS and TSC

The current coronavirus epidemic is resulting in severe disease for a small percentage of patients, many of which end up on a ventilator as a result of acute respiratory distress syndrome (ARDS), which is a condition where the small blood vessels of the lung leak fluid that fills up the alveoli, thus preventing proper oxygen exchange (Stevens et al., 2018). This can lead to a hypoxic environment in the patient signified by a low blood oxygen level and subsequent lack of oxygen in vital organs, thus a treatment that can increase oxygen diffusion should help these symptoms.

There are many causes of ARDS, including infections (e.g., pneumonia), severe burns, pancreatitis, inhalation of smoke or chemicals, or other serious illnesses. An excessive inflammatory response appears to be involved in the pathogenesis of ARDS (Li et al., 2019). Current treatment options involve supportive care while the lungs heal, which can involve oxygen therapy non-invasively or invasively (ventilator). There are no pharmacological treatments specifically for ARDS and approximately 40% of hospitalized patients die from it (Siegel et al., 2020).

In a model of acute lung injury that mimics ARDS, TSC was shown to increase arterial PO2 soon after administration without affecting the lungs (Gainer et al., 2005). This is in addition to multiple other examples of TSC increasing oxygen diffusion in animal models, including in hemorrhagic shock (Giassi et al., 2002) and in a 10% oxygen environment (Singer et al., 2000). Thus, we believe there is ample support for testing TSC in the treatment of ARDS.

Additional Studies of TSC in Hypoxia

The company is currently in the early planning stages for additional clinical studies to evaluate the pharmacodynamics of TSC. These are likely to be short-term studies that could examine oxygenation models in either healthy volunteers or patients with any number of different conditions. The ultimate outcome of these studies is to quantitatively determine a dose response relationship for TSC and tissue oxygenation, which should provide clarity on future clinical indications. The final details of these studies should be available early in 2021 and the planned clinical trials are likely to initiate in the first half of 2021.

Financial Update

On November 12, 2020, Diffusion announced financial results for the third quarter of 2020. As expected, the company did not report any revenues. R&D expenses were $3.1 million for the third quarter of 2020 compared to $1.7 million during the third quarter of 2019. The increase was due to expenses related to the initiation of the 100-303 trial. G&A expenses were $2.1 million for the third quarter of 2020 compared to $1.3 million for the third quarter of 2019. The increase was primarily due to increased professional expenses and salaries.

As of September 30, 2020, Diffusion had approximately $21.9 million in cash and cash equivalents. We estimate the company has sufficient capital to fund operations into the fourth quarter of 2022.

As of November 11, 2020, Diffusion had approximately 64 million shares outstanding and, when factoring in stock options and warrants, a fully diluted share count of approximately 75.2 million shares.

Conclusion

We are glad to see that management has a clear plan in place about how best to move TSC forward into additional clinical indications and we look forward to an update on these plans in early 2021. In addition, we will be eager to see topline data from the 100-303 trial in COVID-19 patients, particularly safety and tolerability at higher and more frequent dosing, and if there are any positive signs such as increased oxygenation that could lead to potential trial expansion. Lastly, Diffusion is very well capitalized and will be able to fund the planned studies with cash on hand, thus we don’t foresee a financing being necessary in the near future. With no changes to our model our valuation remains at $2.00.

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