VYNT: Predicting Drug Discovery

By John Vandermosten, CFA

NASDAQ:VYNT

READ THE FULL VYNT RESEARCH REPORT

We are initiating coverage of Vyant Bio, Inc. (NASDAQ:VYNT) assigning a valuation of $2.00 per share. Vyant is a drug discovery and development technology company that is focusing on neurodevelopmental and neurodegenerative brain disorders. The company’s strategy for developing new therapies combines the application of human-derived organoid models of brain disease, scaled biology and machine learning. The process identifies new drug targets and candidates by screening for efficacy in human induced pluripotent stem cell (iPSC) derived disease models, identifying candidates by their ability to rescue diseased phenotypes to the normal phenotype in the desired neurological disease. This model improves the likelihood of identifying successful candidates by selecting the appropriate genetically-defined patient population and establishing efficacy in an in vitro human disease model avoiding reliance on animal models which lack important features necessary to predict human drug response.

Vyant is distinguished from other drug discovery organizations by its Brain Organoid Screening Platform, which we will refer to as the BOSP. BOSP combines the human organoid platform with software analytics and machine learning to identify drug candidates. The process employs standardized, high-throughput screening of candidates to establish human efficacy in an in vitro human disease model prior to expensive clinical studies, reducing the risk of unforeseen toxicity or side effects. The approach is expected to accelerate preclinical drug discovery and development in brain diseases, which can reduce the risk of clinical failure and lower the cost of identifying new agents.

The BOSP platform avoids reliance on imperfect animal models which in many cases do not accurately reflect human pharmacodynamics. BOSP can guide the construction of smaller trials that select only the best drug candidates among thousands that will work in human patients and generate a higher likelihood of success. This can be either a repurposed drug in a new indication or a new chemical entity (NCE).

The process for evaluating a candidate begins with reprogrammed iPSCs which are differentiated into 3-D brain organoids. Functional measures of synaptic network activity in patient-derived brain organoids are then compared to healthy, non-diseased organoids with respect to their electrophysiological signature using high throughput screening and the Fluorometric Imaging Plate Reader, otherwise known as FLIPR. Patient-derived mutant brain organoids are treated with prospective drug candidates, then observed for a change in functional phenotype. Candidates that rescue the diseased phenotype to a healthy, non-diseased state are scored and ranked, providing several promising candidates for further study in other validated assays and ultimately the clinic.

Vyant offers a pipeline of four candidates in three indications. The most advanced is VYNT-0126 in Rett Syndrome (RTT), a rare disease that is caused by a genetic mutation affecting brain development in girls. If funding is received, we anticipate that Australian clinical trials will begin in 2023 followed by US enrollment for a RTT pediatric study. A second therapeutic candidate, in partnership with Atomwise, is also targeting RTT. This candidate, employing the “ORAI-“ prefix, has not yet been disclosed and is expected to be the subject of an investigational new drug (IND) application depending on availability of capital. The second indication in the pipeline is cyclin-dependent kinase-like 5 (CDKL5) deficiency disorder (CDD), a rare developmental epileptic brain disease caused by mutations in the CDKL5 gene. Additional details will be provided on this candidate after Vyant has strengthened its intellectual property protections. In collaboration with OrganoTherapeutics, Vyant has developed an in vitro human Parkinson’s disease (PD) drug discovery platform that captures patient pathology and enables high-throughput screening to drive the discovery of disease modifying therapies for PD, the second most common neurodegenerative disorder after Alzheimer’s disease.

Vyant plans to begin clinical work on VYNT-0126 for Rett Syndrome in early 2023, launching a Phase II proof of concept study in adult RETT patients in Australia. The trial is expected to enroll up to 48 subjects using a double-blind placebo-control design. A pediatric trial is being considered later in 2023 which would require IND clearance by the FDA and would be conducted in the United States. Vyant may also consider enrolling adult patients in the US if patient recruitment is slow in Australia. Eventually, all development assets will be passed on to a partner that can complete pivotal trials and submit to the FDA using the 505(b)(2) pathway; however, the primary goal for VYNT-0126 is to validate the platform.

Vyant’s candidates are a particularly relevant first swing in RTT given the hurdles that gene therapy and X chromosome reactivation face in this indication. While gene therapy or X reactivation may seem to be a natural solution to a genetic disease, in the case of RTT, these approaches can be problematic. Success relies on the precise balance of the proportion of MECP2 protein generated, otherwise another condition known as MECP2 duplication syndrome can occur also causing severe disability.2

The drug development industry faces many hurdles in the modern era including declining returns, increasing costs, fewer blockbuster indications and long timelines to generate data needed to obtain regulatory approval. According to a 2016 report, the principal reasons that drugs fail is due to lack of efficacy (57%) or safety (17%).3 For clinical trials that can cost up to and in excess of a billion dollars to run, tools that help improve efficiency, anticipate in-human toxicity issues and increase the likelihood of success are extremely valuable. Vyant’s BOSP platform is one of the tools that can help usher in a more streamlined and better vetted candidate identification process.

Vyant held $9.4 million in cash as of September 30, 2022 and expects to receive additional financial support from the Australian government to fund its Phase II trial. Net cash of $4.4 million from the vivoPharm asset sale in 4Q:22 will also contribute to cash balances. Other rare disease foundation and grant funding may be available. We anticipate that existing cash is sufficient to support operations until the end of calendar year 2023.

Key reasons to own Vyant Bio shares:

➢ Candidates vetted using brain organoids prior to costly and time-consuming clinical trials

o Donepezil and undisclosed new chemical entities in Rett’s Syndrome

o Undisclosed repurposing and NCE candidates in CDKL5 Deficiency Disorder

➢ Reduces reliance on animal models to identify safe and efficacious candidates

➢ Provides platform technology offering broader applications if validated

o Parkinson’s disease

o Alzheimer’s disease

➢ Brain Organoid Screening Platform

➢ Complementary partners

o Atomwise - AI/ML screening in RTT

o Cyclica - AI/ML screening in CDD

Vyant has identified its lead candidate, donepezil, which is an approved product for Alzheimer’s disease. As safety and toxicity profiles are already understood by the FDA, the product will enjoy a streamlined pathway through the regulatory process assuming it can show efficacy in pivotal trials. The identity of Vyant’s other assets have not yet been disclosed; however, they are new chemical entities (NCE) and will therefore enjoy additional intellectual property protections compared to donepezil. One of the goals of advancing the lead programs in rare disease is to validate the BOSP platform so that diseases with larger populations can be addressed.

In our initiation report we provide a description of the competitive environment in drug discovery, which has been accelerating its use of AI and ML. This is followed by an in-depth description of the primary indications in RTT and CDD. Further sections summarize the details of the recently identified lead candidate, donepezil, and the pathway expected in the pursuit of approval. Intellectual property and patents are addressed as are the risks faced by biotech companies. The research report summarizes the main peers and competitors in the RTT, CDD and brain organoid space and introduces the executives managing the company. Our closing sections provide a summary of key milestones over the recent past and Vyant’s valuation. Assumptions behind our discounted cash flow (DCF) model are provided that value the undisclosed NCEs for RTT and CDD and generates a target price. Based on this work we generate a valuation of $2.00 per share.

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1. Source: Vyant 3Q:22 Corporate Presentation, January 2023.

2. Clarke, A.J., Sheikh, A.P.A. A perspective on “cure” for Rett syndrome. Orphanet Journal of Rare Disease. April 2018.

3. Hwang, TJ, et al. Failure of investigational drugs in late-stage clinical development and publication of trial results. JAMA Internal Med, 176 (12) (2016), pp. 1826-1833