Last Monday, Cellectar Biosciences (Nasdaq: CLRB) reported topline data from their pivotal study with their radiopharmaceutical CLR 131 in the rare cancer indication, Waldenstrom’s macroglobulinemia (WM). The data were expected to be positive, but the reported 61% major response rate (MRR) and 8% complete response (CR) rate, in our opinion, greatly exceeded expectations. Beyond the data, the other big unknown was how the stock would trade with 14mm warrants, struck at $3.185, potentially being exercised over a 10-day window following the topline results. In our October piece on Cellectar and the tranche financing phenomena, we discussed how stocks can become range-bound as the finance investors deal with their warrants in these tight exercise windows. Based on the first 5 days of trading following the data release, it is safe to say that the warrants have weighed on Cellectar’s performance and will likely continue to throughout the 10-day exercise window.
Looking beyond the warrant window, Cellectar should have additional catalysts throughout the year to keep investors engaged and interested. Data from the WM pivotal study continue to mature, so investors can expect additional data releases from the company in the coming months. Interestingly, Cellectar’s CEO stated at last week’s Biotech Showcase presentation that he believes the MRR% will go “significantly higher” and that the CR rate “…has the upside to double” as the data mature. These statements are encouraging and foreshadow that the already impressive topline results should only improve in future disclosures.
Cellectar has also guided that it plans to submit its NDA to FDA in 2H24. This is a push on the previously guided timeline for a submission in 2Q24, which, if granted priority review, would have given the company a PDUFA date in late 2024. Although the new NDA guidance for 2H24 is only a slight slip in timelines, the PDUFA falling outside of 2024 is unfortunate, as many fund managers like to see their microcap biotech bets play out in the calendar year.
We also remind investors that one additional warrant remains outstanding from their previous tranched financing. The last warrant, struck at $4.7775, is exercisable for 10 days following the company receiving FDA approval for CLR 131, and would bring in approximately $34mm. It pains us to suggest this, especially after such strong pivotal data, but could Cellectar’s upside be capped because of this final tranche? Then again, even if the stock did eventually become range-bound around the $4.7775 warrant exercise price, that still represents a healthy move from the mid-$3s where the stock currently sits, and there’s arguably above-average M&A optionality given the recent flurry of radiopharmaceutical deals.
A New(ish) Name to Consider
Longboard Pharmaceuticals (Nasdaq: LBPH) started the year off with a bang when they reported encouraging Phase 2 seizure reduction data with their selective 5HT2c agonist, bexicaserin, for the treatment of epilepsy disorders, known as Developmental and Epileptic Encephalopathies or DEEs. Investors will recall that Zogenix (Nasdaq: ZGNX) successfully repositioned and developed fenfluramine (one-half of the controversial diet pill fen-phen), a non-selective 5HT2c agonist, for the treatment of two of the most common DEEs, Dravet Syndrome (DS) and Lennox-Gastaut Syndrome (LGS). Approved by FDA in 2020 for DS and in 2022 for LGS, fenfluramine (commercially called Fintepla) has a boxed warning about cardiotoxicity caused by off-target effects (hitting 5HT2b). Zogenix was acquired by UCB in 2022 for $1.9b. Longboard believes bexicaserin, through its high selectivity for 5HT2c, will have as good, if not better, anti-seizure efficacy than Fintepla without the off-target cardiotox. The company’s Phase 2 data seemed to support their thesis, and investors rewarded them by chasing their stock substantially higher and putting $240mm into their treasury.
That preamble on 5HT2c agonists provides the context for a new(ish) name we will briefly dive into that also has a selective 5HT2c agonist in development, Bright Minds Biosciences (Nasdaq: DRUG). We say new(ish) because back when we were doing podcasts, we did an interview with Bright Minds VP of Discovery, where we discussed their pipeline of 5HT2 products. There have been lots of changes at Bright Minds since that 2021 podcast; most notably, the company pivoted from having its 5HT2a program as its lead to emphasizing 5HT2c, they completed a Phase 1 study with their 5HT2c product, they listed on Nasdaq, then did a share consolidation to avoid being de-listed from Nasdaq, and the VP we interviewed is no longer with the company. Like most microcap biotechs, Bright Minds had a bumpy last few years, but when we saw the recent investor excitement around Longboard and their 5HT2c product, we thought it was a speculative name worth revisiting.
Bright Minds’ lead asset is BMB-101, a selective 5HT2c agonist. The company completed a Phase 1 study with BMB-101 in Australia in 2023, demonstrating the drug had a good safety profile and was active in the central nervous system through EEG testing. We expect the company to file an IND with FDA shortly and begin a Phase 2 DEE study in the U.S. with BMB-101 this year. However, unlike Longboard, which ran a rather sizeable 50-patient Phase 2 study, Bright Minds’ balance sheet will limit the scale of their Phase 2 plans. As of September 30th, the company had approximately $5mm in cash. Bright Minds’ CEO, Ian McDonald, impressively invested $900K in a small private placement in December last year. Regardless, the balance sheet dictates that the company will likely run a smaller proof-of-concept study. This could play in favor of investors, though, as a smaller study should yield data sooner, perhaps even before year-end.
Bright Minds is a VERY speculative name. It is VERY small, 4.5mm shares outstanding (2023 consolidation), giving it a $9mm market cap, and VERY illiquid. Yet, the mechanism of 5HT2c agonism they are targeting is well validated. Their drug, BMB-101, appears to be a safe and active Phase 2-ready asset. Zogenix and now Longboard have demonstrated investor interest in the 5HT2c class and DEEs as an indication. Once Bright Minds has a cleared IND and clarifies its Phase 2 plans, could they capture investors’ attention? We can only speculate…..