Anthony SEJOURNE/iStock via Getty Images
Anthony SEJOURNE/iStock via Getty Images
Alopexx (NASDAQ:ALPX ) shares will begin trading on the Nasdaq on October 12th after the company's Initial Public Offering - which is expected to raise ~$15m via the issuance of 3m shares at $5 per share - completes.
The company is developing two core assets - a vaccine, AV0328, and a monoclonal antibody, F598. According to Alopexx' IPO prospectus, both are designed to target bacterial, fungal, and parasitic infections that express the antigenic target poly N-acetyl glucosamine ("PNAG").
Newly IPO'd stocks tend to experience high levels of volatility immediately after listing. In my experience, an initial spike is typically followed by a period of steady decline. Under the prevailing biotech bear market conditions, the declines have been severe and it is not unheard of to see newly traded stock prices decline more than 75% as the market, realising that these companies are years away from commercialising their drug products, and may never do at all, loses interest.
Can Alopexx buck this trend? In this post I will provide an overview of the company and what it is trying to do with its two lead assets, speculate about its prospects of success, and discuss the market opportunity. Unfortunately, although the company's IPO prospectus provides a substantial amount of information on the company I wouldn't want to provide a bull or bear case at this time.
Alopexx' goals are ambitious, but as the company notes in its prospectus, the Big Pharmas Pfizer (PFE), Merck (MRK), GSK (GSK) and Sanofi (SNY) control as much as 75% of the global non-COVID vaccine market and Alopexx' best chance of driving value and share price growth likely lies in its ability to partner with or be acquired by one of them. Without this kind of support, the company may simply lack the funds to compete.
The company's relationship with the US Food and Drug Agency ("FDA"), which ultimately rules on whether a drug is safe and effective enough to be made available for commercial use - will also play a crucial role in the success or otherwise of Alopexx' business.
Let's first consider the company history and its product portfolio.
Alopexx is a bona fide microcap - at the time of its IPO, there are just four staff. CEO is Dr. Daniel Vlock, an experienced drug development specialist whose professional background is mainly within oncology and specifically monoclonal antibodies. Dr. Vlock developed F598 together with Alopexx co-founder and Chief Scientific Officer Gerald Pier PhD, a researcher whose laboratory developed the synthetic PNAG-conjugate vaccine AV0328. Thomas T Thomas - a 30-year veteran - is Chief Financial Officer, and Christine de los Reyes - also a 30-year veteran within business development, is Chief Commercialisation Officer.
Previously, F598 and vaccine AV0328 were licensed to Alopexx Pharmaceuticals, LLC and Alopexx Vaccine LLC, with Vlock acting as CEO for both companies, and funding for both companies was provided by a "high net worth US family office. In 2017, the family office opted to exit from these investments.
That explains the decision to IPO, with funding presumably drying up, and the companies were restructured accordingly into a single entity. Alopexx also has three strategic advisors - William Chin PhD., Bertarelli Professor of Translational Medical Science and Professor of Medicine Emeritus at Harvard Medical School, Colette Cywes Bentley PhD., an assistant Professor at Brigham and Women's Hospital, Harvard Medical School, and David Skurnik, MD, PhD, Professor of Medicine at University of Paris and Lecturer in Medicine at Harvard Medical School.
The PNAG polysaccharide is the target of both the vaccine and the monoclonal antibody developed by Alopexx. According to the company, PNAG:
Has been found to be a component of the microbial surfaces of a large and expanding number of bacterial, fungal and parasitic pathogens.
PNAG is thought to play a key role in the virulence of bacteria such as S Aureus - a leading cause of infectious diseases in humans. According to Alopexx:
Bacterial strains such as S. aureus that are genetically manipulated so they cannot produce PNAG have been found to have a significantly reduced ability to cause infections in mice. Laboratory studies have shown that loss of PNAG production decreases a given microbe's virulence.
Alopexx says it has completed a Phase 1 in-human trial of AV0328 in which the vaccine was well tolerated with no adverse events observed. After discussions with the FDA Alopexx believes it can develop the vaccine as a "complement to currently approved Streptococcus pneumoniae vaccines (Prevnar, Pneumovax and Vaxneuvance)", and that it may be able to secure an accelerated approval from the FDA.
Most drugs must complete Phase 1, 2 and 3 studies - the first to confirm safety and efficacy, second to establish optimal dose and evaluate early signs of efficacy, and third to collect data sufficient for a formal approval.
An Accelerated approval can be awarded by the FDA to a drug based on its meeting a "surrogate" endpoint - i.e. a biomarker closely associated with clinical benefits - in a Phase 2 study, if the patient population's need is significant, with the company required to carry out post marketing studies, on the understanding that if that data does not support findings in the Phase 2 study, the drug will be withdrawn from the market.
Alopexx goes as far as to suggest that Prevnar, Pneumovax and Vaxnevance cover "at best 23 of the 100 known Streptococcus pneumoniae serotypes", and that AV0328 may be able to provide protection against the remaining 80+ serotypes.
Alopexx' IPO prospectus states in relation to F598:
We seek to establish F598 as the standard of care for preventing and ameliorating gram-negative and gram-positive bacterial infections along with fungal infections by organisms that express PNAG in patients admitted to intensive care units (ICU).
Utilization of these therapeutics also has potential applicability beyond infectious diseases, including treatment of neurological conditions and cognitive decline due to inflammation.
The main advantage of using a monoclonal antibody ("MaB") is that it is capable of providing protective immunity much faster than a vaccine, Alopexx says, meaning it can be used to treat patients with a near-term or immediate risk of developing an infection, i.e. within a hospital. A MaB can be used to "complement and augment" the effectiveness of a vaccine and "reduce the development of antibiotic resistant organisms", Alopexx suggests.
Alopexx' plan is to establish F598 in the intensive care unit setting as a possible standard of care, and management says it will collaborate with the Assistance Publique-Hôpitaux de Paris ("AP-HP") - a hospital that sees 5.8 million patient visits annually - to perform a 1,600 patient Phase 2 ICU study.
Alopexx is nothing if not ambitious. For its vaccine, the biotech's target is for AV0328 to be used as a complement to existing Streptococcus pneumoniae vaccines i.e. Prevnar and Pneumovax, in adults and children currently receiving these vaccines.
Prevnar - marketed and sold by Pfizer - is a >$5bn per annum selling vaccine whilst Merck's (MRK) Pneumovax earned ~$900m of revenues last year. Alopexx is eyeing a $60 price point for its vaccine, which compares favourably to the $173 and $249 Pfizer charges the public and private sectors for Prevanr, according to Alopexx' research. Alopexx' vaccine can be produced at a cost of $0.50 per dose, its founders believe, and based on a peak market share of ~60%, their peak sales target is ~$2bn per annum.
Throw in Sexually Transmitted Diseases ("STDs") and the meningococcus pediatric segment, and Alopexx ramps up the overall peak sales target to a sizeable $3bn per annum.
If that seems a somewhat mountainous peak sales target for a company that raised only $15m in its IPO, then consider that Alopexx also believes it can generate peak sales of ~$3bn per annum from its MaB, F598, across ICU, STDs, and N.mening.
Above and beyond that, Alopexx has "noted the role of bacteria in the pathogenesis of Alzheimer's Disease and Type 1 Diabetes mellitus" and also noted that:
Vaccination against PNAG in murine models has resulted in reduction in the development of diabetes and in other studies prevents behavioral and cognitive decline in preclinical mouse models of Alzheimer's disease. Those results support the possible utility of our vaccine in those settings as well.
Some of the best business models are simple and easy to understand, and studying Alopexx' IPO prospectus you could be forgiven for thinking it is only a matter of time before F598 becomes a standard of care in the ICU and that all future Prevnar vaccines will come with a side order of AV0328.
This is biotech, however - a world in which simple business plans don't exist and company valuations defy all logic, and the risk of products failing to ever make it to market is almost impossibly high.
Those that do - especially those developed by <$100m market cap biotechs - make millionaires of their management teams and even some of their early investors.
You can never discount the possibility that the Alopexx lottery ticket is the winning one, and mitigating the risks are examples of diligent scientific research from distinguished academics, the completion of some early in-human trials, the collaboration with a major hospital in Paris, involvement of Harvard Medical School and Brigham and Women's Hospital, unmet need in target markets, and clearly established market opportunity.
Even with such mitigation Alopexx has a long road ahead of it and there are some non-mitigate risks to consider. The decision to IPO may imply that private investment was too hard to come by, and yet the private biotech sector is awash with venture capital firms running startup incubators and business accelerators. Why did the private family opt to exit their investment? What will Merck, Sanofi, Pfizer et al make of a tiny biotech claiming its products are an improvement on their established brands?
These questions may be answered in the coming months and years, and investors can certainly expect some volatility in Alopexx stock in the coming months and years - positive trial results will likely send Alopexx stock skyrocketing, as would a Big Pharma partner investing in the company.
On the other hand, Alopexx faces a fight for survival almost from the outset, with extremely limited resources - apparently, net losses in 2021 were nearly $1m, and cash position prior to the IPO was <$250k.
The sensible option here is to monitor progress from afar for at least 18 - 24 months. The speculative one is to bet on post IPO volatility either to the upside or downside. We won't know which is the better bet until Alopexx has spent some more time in the clinic and the ICU.
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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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.