Phase Ia progressing successfully; new COVID strain
The ongoing NV-CoV-2 Phase Ia clinical study is a key milestone in the development of NanoViricides (NYSE-A:NNVC)' (NV) novel and innovative anti-virus therapy, NV-CoV-2 uses a sophisticated polymer (NV-387) as the active ingredient to trap and disrupt viruses in the blood. The therapy aims to reduce the viral load to prevent infection of healthy cells and to enable the immune system to clear viruses rapidly.
NV has announced that its recruitment of 36 volunteers (18 active, 18 placebo) is going well with 72% (26/36) having received a single dose. No side effects are reported. Three dose levels are being tested. The design is shown in Exhibit 1.
Of the 26 who completed the single-dose arm before 21 August, 17 have moved to the multiple-dose Phase 1a arm and received all five doses over an eight-day period (the first dose being a double dose). Again, and importantly, no safety issues were reported.
The blood level data to show effective oral administration is not yet available. This is crucially important as the encouraging preclinical work used injected polymer.
The next trial stage is the planned Phase 1b in 36 mild to moderate COVID-19 patients in India; this has not yet started. It could be slow to recruit as patients need to have confirmed COVID-19 and be admitted to the trial setting in a hospital. This also depends on the level of general Covid infection and immunity.
A new SARS-CoV-2 strain, BA.2.86, has emerged (CDC) with over 30 new mutations. The efficacy of the current vaccines and prior infection against BA.2.86 are still unclear. According to management, in theory, NV-CoV-2 should be effective against BA.2.86 and might bind more strongly than to the current main XBB.1.5 strain.
The next stage of NV-CoV-2 development would be a placebo-controlled Phase 2 in a major market like the US. NV also plans to develop a combination therapy (NV-CoV-2-R) with remdesivir (Gilead), an approved COVID-19 anti-viral agent; this has good preclinical model data.
Once the Phase I is complete, NV then intends to advance NV-387 into a respiratory syncytial virus (RSV) Phase 2 study after observing preclinical “strong effectiveness”. RSV is a dangerous lung infection that affects young children and unvaccinated older adults (see our note of 12 July 2023).
At the Q3 point (31 March 2023), NV had US$9.7mln in cash which management views as covering costs till March 2024. This implies a 12-month cash use of about US$10mln. We estimate Y/E cash (30 June) as US$8mln with a rise in costs in FY24 to fund clinical trials. Accordingly, NV will probably require US$17-20mln to fund itself to 31 December 2024 and therefore needs to raise a further US$7.5mln from debt or equity.
We note that Phase II studies for Covid and RSV in the US or Europe would be potentially expensive. We would then expect each indication to need two Phase 3 placebo-controlled studies for FDA regulatory review.
Financials
Year end Jun 30 · 2021 · 2022 · 2023 · 2024
Underlying PBT (USD) · (8.7) · (8.1) · (7.0) · (10.0)
The current Indian Phase 1 trial is structured as in Exhibit 1. An initial cohort of 36 healthy volunteers first participated in one of two single rising dose arms for different formulations: gummy or syrup. This will give essential information about how NV-CoV-2 is absorbed and processed by the body. The volunteers then enter a multiple-dose stage with six doses (the first day uses a double-loading dose). Doses are given on alternate days. This is run in a hospital unit.
Following on from the volunteer study, a further 36 mild to moderate COVID-19 patients will be recruited. These would not normally be hospitalized and do not require extra care — unless they deteriorate — but they will be housed in a hospital unit for the trial. NV plans to measure SARS-CoV-2 levels in the plasma of patients using a form of RT-PCR.
The trial is run by Karveer Meditech, a small Indian Pharmaceutical company under an agreement dated 27 March 2023. Karveer will be reimbursed for the trial costs by NV. On approval, Karveer will sell NV-CoV-2 in India and will pay NV 70% of its sales as a royalty.
Phase I trial design
Exhibit 1 - Phase 1a and 1b design
Source: ProActive from NV sources
NanoViricides (NYSE-A:NNVC) operates as the top, public company for two separate private companies that hold the IP. The President and CEO, Dr Diwan, according to the 2022 10k filing, owns 90% of Theracour Pharma. Theracour carries out work for NV and is reimbursed. As of 31 March, NV owed Theracour US$709k offset by prepayments of US$465k. Dr Diwan also founded Karveer Meditech (see trial details); there is a local general manager.
Corporate structure
Financial projections
Nanoviricides is in effect the public company for two related but separate private research operations: Theracour and AllExcel. Theracour invoices NV and will gain a 15% royalty on sales. Karveer invoices NV for the Phase 1 trial costs and gains a 30% revenue share on future Indian sales; Karveer is stated to sell a variety of generic pharmaceutical products in India.
The financial projections cover the remainder of FY 2023 (to 30 June) and FY24. NV management has stated that 31 March 2023 cash (US$9.7mln) is sufficient to fund the business to March 2024. This implies a burn rate of around US$10mln a year. We have therefore assumed the NV raises sufficient cash in late calendar 2023 to sustain operations till at least December 2024, which is about 16 months from now. This implies a funding need of at least US$7.5mln in either debt or equity. If NV runs two Phase II trials, these costs could be much higher. Running US trials is also more costly than in India.
Table 1 shows the revenue statement (Profit and Loss). Table 2 shows cash flows. Table 3 shows the Balance Sheet. These are unchanged from our last note.
Table 1 - Profit and Loss
Source: Nanoviricides reports, ProActive estimates
Table 2 - Cash flow forecast
Source: Nanoviricides reports, ProActive estimates
Table 3 - Balance Sheet
Source: Nanoviricides reports, ProActive estimates
Value aspects
We are reviewing our valuation projections and will update them following the full phase I data and the FY23 results. The current enterprise value based on our Y/E cash estimate of US$8mln is about US$10mln at a share price of $1.60. Against this, NV will need fresh capital or loans of at least US$7.5mln (Note there are also 1.7mln preference shares but these only convert if there is a change of control.)
The market for a COVID-19 therapy is difficult to assess. In developed, high-priced countries, vaccination is widespread, organized and relatively low-cost. In other countries, a low-cost, easily distributed acute oral therapy would be very useful. Some indication of Phase 2 efficacy is needed to assess the product with more confidence. NV-CoV-2-R is an interesting preclinical combination iteration of this approach. The recent Covid strain, BA.2.86, might affect the infection rate.
In other viruses, RSV seems to be the current preclinical lead for NV-387 with a fast track possible to Phase 2. It would be a late, acute entrant into a market with two established adult prophylactic vaccines from major companies and a possible maternal vaccine indication. Hence, NV-387 acute therapy could have an important role, but the timeline is still unclear. Nonetheless, it provides a quantifiable current market opportunity.
The further shingles opportunity (see our previous note) is on hold.