BioCryst Approvals Close The Window On Short Sellers

Berotralstat Recent Development

BioCryst (NASDAQ:BCRX) develops novel, oral and small molecules that inhibit enzymes that play a key role in biological pathways of rare diseases. With the Japan PAFSC Review clearance and UK early access for Berotralstat for the treatment of Hereditary Angioedema (HAE), BioCryst is in a position to finally cash in on 20-plus years of R&D. Berotralstat (commercially called Orladeyo) is an oral, once-daily, small molecule kallikrein inhibitor positioned to capture a significant share of a $1.5 billion market. This market is expected to grow to $5.8 billion by 2025. This market is currently dominated by Takeda (NYSE:TAK) and CSL Behring LLC which offer preventive and rescue therapies. These therapies require intravenous or subcutaneous administration which is highly invasive and time consuming. The HAE market is clambering for an oral solution, and Orladeyo is here to fill that void. The current solutions cost approximately $600k per year, and BioCryst is hinting it will charge $500k per year for its daily oral pill. The US PDUFA for Orladeyo is scheduled for December 3rd. After the recent Japanese and UK events, it would be hard to believe Orladeyo will not be available in the US soon. BioCryst has already hired a highly experienced 16-person salesforce to sell Orladeyo and is expecting revenues to be generated as early as the fourth quarter.

Current State of Play

BioCryst is a classic example where a stock's valuation can radically diverge from the progress of a company. BioCryst is transforming from an R&D company, with an incredible pipeline, to launching some blockbuster solutions into the rapidly growing rare disease market. In this market, the yearly cost to treat some of these diseases can be $500,000 or more. BioCryst has 173 million shares outstanding with a declared short position of 38 million shares. The current institutional holdings are 90%, according to the Bloomberg terminal. With at least five major catalysts in the next eight weeks, we could be looking at quite a short squeeze.

Recent events

While BioCryst the stock has been struggling in the market, BioCryst the company has accomplished several significant milestones. There must be a reason why the firm's CFO recently spent half his yearly salary buying 50k shares of BCRX on the open market at $4.08 per share.According to the recent investor presentation:

• September 3rd - US Government buys 7 million dollars of Rapivab for strategic stockpile.
• September 8th - University of Florida researchers confirm Galidesivir showing promise as possible Covid-19 antiviral solution
• September 30th - Oral Factor D (BCX9930) shows excellent clinical benefits for the treatment of PNH.
• August 3rd FDA grants fast track status for oral Factor D inhibitor (BCX9930).
• August 31st NIAID adds 47 million for Galidesivir antiviral development for animal trials and to ramp up production.
• October 28th BioCryst Presents Abstracts at Annual Scientific Meeting of American College of Allergy, Asthma & Immunology.
• October 30th MHRA Grants HAE Patients Early access to Berotralstat in United Kingdom.

Other Factors

Galidesivir

• The Covid-19 monkey trial data is due in Q4. Phase I Brazilian trial for Covid-19 is due Q4.
• BCX9930 Oral Factor D for Covid-19.
• The 200/400 Cohort 2 data for PNH is due in Q4.

CX9250

The Fibrodysplasia Ossificans Progressiva (FOP) Phase 1 data is due Q4.

Rapivab

There is the possibility for future government stockpiling for seasonal influenza.

The Pipeline

Berotralstat

Berotralstat (Orladeyo) is a revolutionary treatment for Hereditary Angioedema (HAE).

BioCryst's lead compound, Orladeyo, is designed to be an oral once-daily capsule that prevents HAE attacks. This drug targets a disease that currently is treated by injectables costing approximately $500-600k a year. BioCryst estimates Orladeyo will cost $500,000 per year. HAE is currently a $1.5 billion market and is expected to grow to $5.8 billion by 2025.

Galidesivir

This nucleotide RNA polymerase inhibitor disrupts the viral replication process and has the potential to treat multiple viral threats. NIAID is currently testing Galidesivir for treating Covid-19 and Yellow Fever. Galidesivir was safe and generally well-tolerated in a Phase 1 clinical human trial. Galidesivir demonstrated survival benefits in animal studies against a variety of serious pathogens, including Ebola, Marburg, Yellow Fever and Zika viruses. Galidesivir demonstrated broad spectrum activity in vitro against more than 20 ribonucleic acid (RNA) viruses of nine different families, including coronaviruses, filoviruses, toga viruses, bunya viruses, arenaviruses, and flaviviruses.

In 2013, NIAID contracted BioCryst to develop Galidesivir against a broad spectrum of viruses. Then, in 2015, the Biomedical Advanced Research and Development Authority (BARDA) issued BioCryst a contract to develop Galidesivir against possible bio attacks. Galidesivir qualifies for approval under the Animal Rule. The Recent $44 million contract is geared towards producing a possible oral antiviral for Covid-19. Galidesivir is finishing animal trials for Covid-19 while simultaneously finishing up Phase 1 dosing trial in Brazil. Both these trials should have results released in Q4.

BCX9930 - Oral D Factor

BioCryst management refers to Oral D Factor as a pipeline in a molecule. The recently completed Phase 1 study treating PNH produced encouraging data for this indication. The Phase 1 data while early clearly shows BCX9930 a serious player in the Factor D market. This market is valued at $10 billion-plus. BCX9930 has Orphan Drug Disease status and has been designated fast track status as well. BioCryst will be meeting with the regulators in the fourth quarter discussing advanced development programs for multiple indications. The company plans multiple advanced development clinical trials, for multiple indications, in the first quarter of 2021. Factor D markets include:

• PNH paroxysmal nocturnal hemoglobinuria
• Atypical hemolytic uremic syndrome
• Glomerulonephritis PNM primary membranous nephropathy
• Vasculitis antineutrophil cytoplasmic antibody-associated vasculitis
• Lupus nephritis

BCX9250 - Oral ALK-2 inhibitor

BioCryst with BCX9250 is pursuing activin receptor-like kinase-2 (ALK2) inhibition in the race to stop fibrodysplasia ossificans progressiva. BCX9250 has Phase 1 data due in the fourth quarter.

Rapivab (peramivir injection)

Rapivab is approved for the treatment for the flu. BioCryst recently sold the US government $7 million worth of stockpiles. Rapivab is approved in many countries.

Valuation

BCRX has 173 million shares outstanding and has a current price of $3.84. This means BioCryst has a current market value of $665 million. It is extremely hard to value an evolving drug pipeline, but I can point out some metrics important to figuring out the value of this pipeline.

Galidesivir

Galidesivir is an antiviral that is currently being funded and studied by BARDA. The purpose of this effort is for BARDA to find a broad-spectrum anti-viral to stockpile against possible bio attacks. It is currently evaluating Galidesivir for treating Covid-19 and Yellow Fever. Look at how many billions in market cap Gilead Sciences (NASDAQ:GILD) gained with the Remdesivir approvals. Last quarter sales of Remdesivir were reported at 775 million. Roche Holding AG (OTCQX:RHHBY) just paid $350 million for US rights to AT-527, a potential Covid-19 antiviral from Atea Pharmaceuticals. Galidesivir could easily be worth $2-6 billion with the right approval.

Berotralstat

Berotralstat has Japanese approval and was designated UK early access. US approval should follow in the next two months. Being the only oral treatment for PNH, Berotralstat could easily gain 30-50 percent market share of a current $1.5 billion market. This market is anticipated to grow to $5.8 billion by 2025. Berotralstat could have sales of $300 million to $1 billion and easily garner a multiple of 4-6 times sales. This would be $1.2 billion on the low side to $6 billion on the high side.

BCX9930 Oral Factor D

BCX9930 is potentially the most valuable asset in BioCryst's pipeline. BCX9930 has Orphan Drug and fast track approval for PNH.

Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) and Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN) have announced that they have entered into a definitive agreement for Alexion to acquire Achillion, a clinical-stage biopharmaceutical company focused on the development of oral small molecule Factor D inhibitors to treat people with complement alternative pathway-mediated rare diseases, such as paroxysmal nocturnal hemoglobinuria (PNH) and C3 glomerulopathy (C3G). ALXN acquired ACHN for $930 million.

It can be creditably argued BioCryst's phase 1 data is better than the data from Alexion's phase 2 studies.

Developing a successful Oral D Factor drug will create revenue in eight or nine very valuable markets. Here is a copy of BioCryst's BCX9930 presentation.

If ALXN in early Oral Factor D drug development was acquired for $930 million, BioCryst's better results must be worth at least $1.5 billion right now.

Without even looking at any other drugs in the pipeline, it is hard to even comprehend the current $665 million market value.

The Conclusion

It's one thing to short 22% of the float in a biotech stock hemorrhaging money, but is kamikaze insane to be caught in this position in BCRX. BioCryst is within a quarter of potentially producing hundreds of millions in yearly revenues. Institutions have quietly acquired over 90 percent of all the shares outstating in BCRX, leaving an actual float, outside of institutional holdings, of 17 million shares at the most. Say institutions believe the stock is worth 30 or 40 dollars a share, where do the shorts find 38 million shares to cover this position. On top of the Berotralstat approval, BioCryst is being funded by and working with NIAID and BARDA to produce a possible Covid-19 anti-viral. Galidesivir is currently in animal trials and dosing trials as I write this report. Any positive news on the trials could launch this stock. The world is desperate to find an effective solution to treat this pandemic. The time to cover the short position has ended and a period of rapid appreciation could soon follow.

Disclosure: I am/we are long BCRX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.