First Wave BioPharma (NASDAQ: FWBI) is a company whose valuation disconnect is getting too big to ignore. In fact, several milestones reached are likely to turn into catalysts that could send its valuation substantially higher within the next two quarters. Thus, investment consideration is more than timely; it's warranted, and here's why.
Foremost, FWBI announced that it had reached full enrollment in Part 2 of its ongoing Phase 2 trial evaluating niclosamide to treat Covid-related GI infection. This announcement came with a marked increase in First Wave's stock price, drawing the attention of savvy investors and the medical community at large. And despite broader weakening in the small-cap sector, especially in biotech, the fundamentals of what's happening at FWBI remain well intact. As a matter of fact, the surge in value after its enrollment update could be more than a precursor of better things to come; it may also mark the beginning of a streak of updates to send prices appreciably higher.
One of those announcements could be an update regarding FWBI's pursuit of a EUA (Emergency Use Authorization) for a COVID GI-tract treatment, which would fill an unmet medical need with no shortage of patients. Topline results, expected in the first half of 2022, could be the driver to expedite that filing. Hence, lower prices based on sector weakness present a compelling investment opportunity and a timely one as well.
Keep in mind, historically speaking, it took Pfizer and Merck less than 60 days after filing to receive EUAs for their orally dosed COVID antivirals. So, it is indeed reasonable to look forward to a quick consideration from First Wave's Phase 2 oral niclosamide trial. Remember, too, FWBI is targeting a condition that others aren't with a specific focus on treating COVID-related symptoms in the GI tract, which are shown to linger for weeks, even months after the virus is cleared from the respiratory system.
The better news- FWBI data shows its candidate works and is safe. To date, FWBI has scored excellent safety data, showed compelling results in its own trial, and is leveraging the fact that niclosamide has been used in mainstream medicine for more than 50 years. Thus, while past performance isn't a guarantee of future success, it's worth noting that FWBI is advancing a better version of the drug that could materially change how specific effects of the COVID virus get treated.
New Applications for Niclosamide
And not only is First Wave fully enrolled in its Phase 2 trials of niclosamide, but extensive background data and research on niclosamide could help provide a pathway to fast-track the treatment through regulatory approvals resulting in the possibility of a 2022 rollout. Remember, too, while First Wave is working with a drug that is well known to medical researchers, the company is still looking to navigate its use in a new and potentially life-saving way. This combines the best of both worlds – a drug with an extensive track record for regulatory bodies to evaluate and an untapped market opportunity to bring relief to potentially millions of patients.
The better news is that interim data suggest that FWBI is on the right path to make that happen by developing a micronized formulation of niclosamide that allows solubility to be increased so that the local GI concentration exceeds that needed to kill SARS-CoV-2. Notably, its proposed treatment could also overcome dosing hurdles, as its oral delivery method may be appreciably more accepted than hypodermic vaccine delivery.
And keep in mind, too, from a competitive perspective, FWBI's drug is different from Pfizer and Merck's oral antivirals by targeting GI-tract infection with another method of action to kill the residual virus in patients. As a result, the competitive landscape after an approved FWBI candidate can be thin. Better still, its revenue-generating firepower can be substantial and undiluted by other treatments in the market.
Still, FWBI's micronized niclosamide doesn't need to be a stand-alone therapeutic. There are significant possibilities for First Wave's niclosamide treatment to attract the attention of medical researchers looking to assemble combination therapies using the drug alongside others to provide maximum therapeutic value. That's not to infer that FWBI's candidate can't haul the load. It only suggests that other opportunities are in play to create revenues.
And don't think other pharma are not paying attention. FWBI's Phase 2 trial was fast-tracked by the FDA based on data supporting likely approval. Of course, since niclosamide has been used to treat patients for decades with an impressive safety profile, tapping into FWBI's novel use of the drug can also benefit them. After all, it's not a secret that pharma companies have pretty much turned to acquisition over pre-clinical processes to mitigate risk and save money.
Thus, with niclosamide relatively easy to produce in large quantities, pharma's path of least resistance to tapping into new indications for the drug could be through a partnership. That could bode well for FWBI in the near term. Keep in mind, too, prices paid for Phase 3 companies are substantially higher than those paid for Phase 2, so getting a deal done ahead of data expected in the next quarter could be in the cards.
A Billion-Dollar Market with Minimal Competition
Here's more good news. Niclosamide's five decades of treatment success could provide an approval tailwind for FWBI's niclosamide candidate. That adds to the list of positive data points published by FWBI, which make a formidable case for eventual and potentially near-term approvals when combined.
And from a potential new revenues perspective, FWBI could see exponential increases, noting that the COVID antiviral market is estimated to be a $20 billion opportunity from respiratory treatments alone. That's what Pfizer and Merck are targeting. But, the other prize from targeting GI infection can also be a billion-dollar market opportunity. And in that instance, FWBI is ideally positioned to capture the lion's share of that opportunity and face significantly less competition when doing so.
Don't underestimate the market, either. Data already shows that about 18% of patients have COVID-related GI infection symptoms, and up to 43% have viral RNA in their stools, which could position an approved FWBI drug to score enormous commercial success. Moreover, if the company continues to post confirmatory trial data, they can be more than well-positioned to capture the niche market of GI COVID treatments; they could own the market.
In fact, First Wave could benefit from near-nonexistent direct competition for its new treatment due to large pharmaceutical companies staying focused on oral antivirals for respiratory indications. In turn, the market can be wide open for FWBI to capitalize on its opportunity and deliver a go-to treatment for GI-related infection. Additionally, FWBI's niclosamide formulation is absorbed directly in the GI tract, so the treatment could have additional advantages over potential competition. Indeed, that too bodes well for potential partnerships and makes the prudent path for drug development companies to join with FWBI instead of competing.
And other than what FWBI has published, no known data suggests that the Pfizer or Merck oral anti-viral drug can effectively treat GI infection. Thus, even the suggestion that physicians prescribing them off-label, especially in the face of a potential upcoming EUA for First Wave's niclosamide treatment, would be unlikely.
Of course, it's always a difficult task to speculate on FDA decision-making processes. But, these are extraordinary times, and the pandemic has pushed the medical community to accelerate the development and commercialization of new, potentially life-saving drugs. Thus, as noted, FWBI could enter the review process with a strong tailwind blowing toward approval, and because the drug is known to be safe, at least a EUA based on Phase 2 data indicating that the drug is effective in treating its intended indications.
A Track Record of Efficacy
Also, know that FWBI isn't presenting just a single shot on goal. While the company is evaluating niclosamide use to treat long-haul COVID GI infection symptoms resulting from the virus staying in the GI reservoir or against inflammatory responses to the initial infection, they are simultaneously advancing a robust clinical trial pipeline that could deliver 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 may very well add a multiple to FWBI's valuation in the coming quarters. Thus, while its niclosamide treatment is the priority today, its broader pipeline brings inherent opportunities as well and should not be overlooked for their value-creating abilities. In short, it's best to value FWBI as a company with multiple shots on revenue-generating goals. Better yet, with its trials relatively quick to enroll and complete, those revenues could come faster than many expect. As noted, partnerships are in play as well.
So, as a global community continues to commit themselves to bringing safe and effective treatments to market to battle COVID and its variants, a perfect storm of investment opportunity is building that exposes the intrinsic value of FWBI using a sum of its parts calculation. The excellent news, it's much higher than the current $21 million market cap shows, and weak markets make the valuation gap almost too wide to ignore. Hence, don't.
Providing Alternatives to Controversial Treatments
Instead, consider the fact that demand for FWBI's treatment could be off the charts by being the only approved drug to target and treat COVID-related GI infection. Then, note that FWBI has established production channels for niclosamide to meet that enormous demand. Combining their readiness with the currently compassionate atmosphere toward drug approvals, the bottom line is that First Wave is ideally positioned to have a breakout year in 2022.
Remember, too, that's an intended result from only its niclosamide indication. First Wave is also developing groundbreaking treatment candidates for patients with IBD and ICI-AC. These two indications also present billion-dollar marketing opportunities on top of the potentially massive revenue-generating opportunities resulting from an approved oral COVID-19 GI treatment.
Thus, with multiple clinical trials advancing, topline data expected next quarter, and an extensive portfolio of long-lasting patents protecting niclosamide use for COVID-19 GI infections, ICI-AC, and the IBDs, expect FWBI to grow into a valuation more appropriate to a late-stage Phase 2 drug company. And unlike those wait-and-see biotechs whose results seem to drag quarter after quarter, investors get the opportunity to take advantage of apparent undervalued prices ahead of imminent data.
Hence, investors would be wise not to overlook the valuation disconnect and seize an opportunity to invest in FWBI shares at levels simply too big to ignore.
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