Cidara Therapeutics: The underestimated potential of CD388

Summary

• CD388 is a universal long-lasting influenza drug against all seasonal and pandemic influenza viruses in a phase 2b clinical trial. CD388 is not a vaccine but would provide 6 months of protection.
• Cidara Therapeutics claims that CD388 has the potential to capture a meaningful portion of the $9 billion seasonal influenza vaccine market, but this estimate does not account for pandemic risk mitigation.
• The vast implications of an effective influenza pandemic prevention and preparedness solution are not publicly recognized and would distinguish CD388 from other drugs.
• CD388 could be used and stockpiled in large quantities to solve influenza, the number one pandemic threat. Influenza could be reduced to a numbers game.
• Solving influenza could generate up to $30 billion in annual revenue, almost forty times the fully diluted market capitalization of Cidara Therapeutics.

Thesis

The valuation of Cidara Therapeutics relies heavily on the potential revenue of the lead drug candidate CD388 against seasonal and pandemic influenza. But the current revenue potential estimate is based only on the established seasonal influenza vaccine market. The current estimate does not account for the disruptive potential of an effective influenza pandemic prevention and preparedness solution. The unprecedented ability to effectively mitigate the influenza pandemic risk would result in a revenue potential ten times higher than the current estimate. This vast discrepancy indicates that Cidara Therapeutics is significantly undervalued.

Company Overview

Cidara Therapeutics is a biotechnology company with no source of revenue and 44 employees as of 2024-11-02. The lead drug candidate CD388 against influenza is in the phase 2b NAVIGATE clinical trial with 5.000 participants. Oncology drug candidates based on the same platform are in the preclinical stage and CBO421 received IND clearance.

2024 was a transformational year with the divesture of rezafungin, the reacquisition of all CD388 rights from former partner Johnson & Johnson, and a workforce reduction in addition to $240 million and $105 million private placement financing.

CD388 is the only drug candidate in clinical trials. The phase 2b top-line data is expected in Q3 2025 and phase 3 top-line data in Q3 2027 according to the corporate presentation.

Financials

According to the 2024-11-07 Q3 2024 Quarterly Report the company had no debt as of 2024-09-30 and owned cash and cash equivalents of $127.4 million to “support its planned operations through the middle of the fourth quarter of 2025”. The 2024-11-26 private placement financing of $105 million might enable the "Phase 2b/3 trial under consideration" and "subject to securing additional funding" during the 2025 northern hemisphere influenza season according to the 2024-09-09 corporate presentation. Relevant annual expenses related to continuing operations are in the $50 million to $70 million range, not including savings from interest income up to $10 million, and from a 37% workforce reduction of estimated $5 million. Due to the divesture of rezafungin there is no source of revenue left.

As a result of the private placement financing few institutional investors now own most of the common shares. RA Capital as the largest shareholder is limited to 1,092,796 common shares or 9.99% of outstanding shares (up to 19.99%), but owns preferred stock and pre-funded warrants that could be converted to additional 7,583,706 common shares, 27% of all fully diluted common shares in total. As of 2024-11-07 there were 24,885,307 fully diluted common shares, including 16,800,000 fully diluted common shares issued for $14.29 on 2024-04-24. Additional 7,041,309 fully diluted common shares were issued for $14.91 on 2024-11-26. The fully diluted market capitalization is approximately $800 million ((24,885,307 + 7,041,309) * $25.25 = $806,147,054) as of 2024-12-30.

Up to 3,225,586 common shares will be issued under the 2024 Equity Incentive Plan and up to 225,000 common shares under the Inducement Incentive Plan. This includes 726,461 shares subject to preexisting stock awards as of 2024-08-13 and 2024-10-02 stock options for 1,143,575 common shares exercisable at $10.75 and vesting over 3 years.

"The Company will not be able to sell shares of its common stock under the Sales Agreement until April 16, 2025, due to the loss of its Form S-3 eligibility for primary and secondary offerings. As of September 30, 2024, the remaining capacity under the Sales Agreement is $37.1 million."

Cidara Therapeutics is obligated to pay Johnson & Johnson up to $150 million in development and regulatory milestone payments and up to $455 million in commercialization milestone payments.

The seasonality of influenza and the significant capital requirements of future clinical trials and milestone payments characterize this company better than a constant $50 million annual "burn rate" and a "runway" of about 4 years. Possible sources of capital include public offerings after 2025-04-16, additional private placement financing, debt, and public funding due to the significant public health interest.

CD388

CD388 is a long-lasting drug against all influenza viruses, A and B, seasonal and pandemic. CD388 comprises several zanamivir antiviral moieties conjugated to a proprietary antibody fragment, engineered for an extended half-life of 7 weeks. A single dose could provide universal protection for about 6 months, long enough for an entire influenza season, almost like a vaccine. CD388 transforms zanamivir, a great neuraminidase inhibitor with poor drug properties, into a great long-lasting drug. CD388 would provide protection regardless of the seasonal strain. No guesswork would be required as with vaccines, CD388 would be the same every influenza season. The potential for resistance mutations is very low because it would be “very challenging for the pathogen to evolve resistance against a transition state inhibitor”. Without reliance on the immune response everyone could be protected, including high risk groups like the immunocompromised. CD388 would provide truly universal protection against a highly diverse and rapidly evolving virus.

The probability of successfully completing phase 2 and proceeding with phase 3 is 58% based on 3549 infectious disease and vaccine candidates. The already completed phase 2a challenge study resulted in 58% efficacy, 6 infections compared to 14 in the placebo group, higher than the average effectiveness of seasonal influenza vaccines of about 40%, with a 150 mg dose. The phase 2b NAVIGATE study arms include a placebo and 150/300/450 mg doses. The probability of successfully completing phase 3 and proceeding with the approval process is 79% based on 1687 infectious disease and vaccine candidates. The phase 3 clinical trial would be conducted with "subjects at high risk of complications due to influenza". The effectiveness of seasonal influenza vaccines is generally lower in this heterogeneous group, for example 31% in people aged ≥65 years, 21% in cancer patients and 5% in immunocompromised patients.

Competing Drug Candidates

The potential of CD388 relies on a unique combination of properties. CD388 is universal, long-lasting, and scalable.

The polyclonal antibody SAB-176 in phase 2 by SAB Biotherapeutics consists of antibodies produced by cows with a human immune system that get vaccinated with influenza antigenes. This natural immune response is broad, but not universal: H1 antibodies would poorly protect against H5 viruses. Only CD388 combines seasonal and pandemic influenza prevention. The scalability of this universal bovine platform is limited unless many diseases are targeted or cows are deployed in food production. SAB Biotherapeutics is focused on diabetes type 1.

The antibody-drug conjugate EV25 in phase 1 by Eradivir relies on zanamivir and the immune effector function of antibodies. EV25 is not engineered for extended half-life. EV25 relies on "concurrently administered antibodies or pre-existing immunity". EV25 might become an effective and scalable therapeutic but is not a preventative.

Another promising therapeutic is Tivoxavir Marboxil by Traws Pharma. The phase 1 study results indicate a protective effect for several weeks so far.

Various monoclonal antibodies like VIR-2482 have failed in clinical trials. The multi-domain antibody MD3606 remains in the pre-clinical stage, especially since Johnson & Johnson has deprioritized infectious disease research.

Current Potential Revenue Estimate

The potential revenue is presented as “meaningful portion of the approximately $9 billion global influenza market”, with a "multi-billion dollar potential" that I interpret as approximately $3 billion.

Cidara Therapeutics as a research and development company has by design no significant marketing or market research capacities. Marketing has been outsourced to a science communication PR agency.

The current potential revenue estimate is simply based on the seasonal influenza vaccine market.

New Potential Revenue Estimate

Pandemic prevention and pandemic preparedness do not appear to be attractive markets in terms of current market volume. But this is a deeply flawed perspective. No effective pandemic prevention and preparedness solution is currently available. This is an unmet need.

"It’s simply not possible, because the virus continually evolves, to have a constant stockpile—a large stockpile—of vaccines." - Robert Johnson, Director of the Medical Countermeasures Program at the Administration for Strategic Preparedness and Response (ASPR)

The Covid-19 pandemic has significantly increased the pandemic awareness. In 2020 a new genotype of H5N1 avian influenza emerged and is now infecting a broad host range of about 500 avian species and 50 mammalian species worldwide. The pandemic risk is elevated due to this unprecedented H5N1 panzootic.

The current estimate based on the seasonal influenza vaccine market doesn’t reflect public health policies. China for example has a low seasonal influenza vaccination rate of 3% but has deployed 300 billion doses of poultry vaccine against avian influenza as pandemic prevention.

The current potential revenue estimate doesn't account for a rotating stockpile. Large stockpiles of CD388 could mitigate the number one pandemic threat while the doses could prevent seasonal influenza at the end of their shelf life. This would reduce the influenza risk to a numbers game.

"An international survey, to be published next weekend, will reveal that 57% of senior disease experts now think that a strain of flu virus will be the cause of the next global outbreak of deadly infectious illness."

Skip to 1:03:40 of this 2024-06-30 podcast episode with Cidara Therapeutics CEO Jeffrey Stein: Contingency plans for surge production in case of an influenza pandemic and Emergency Use Authorization were already being made. The shelf life of CD388 appears to be at least 2 years at 4°C and there were already discussions about stockpiling with "appropriate government agencies such as BARDA".

Shelf life determination would account for the significant public health interest, the safety profile, and the acceptable decrease in effectiveness. Zanamivir has a shelf life of 10 years. Approved antibody-drug conjugates against cancer have an average shelf life of 35 months at 2-8°C, while stockpiling is not a priority, the effectiveness needs to remain very high, and the safety profile of toxic chemotherapy drugs is unfavorable.

While there are significant risks and uncertainties, it is a realistic possibility that CD388 would enable effective pandemic prevention and preparedness.

The following simple estimate doesn’t account for differentiated pricing indicated by “Premium prices for prophylaxis in high-risk populations” at 20:00 of the 2024-11-11 presentation. But the cost of goods is already below $20 at 23:08: “the cost of goods (…) at current scale is under $20 a dose for the 150 mg dose (…) scaling opportunity to improve cost of goods”.

In a best-case scenario influenza could be solved. With a rotating stockpile of 4 billion doses, a shelf life of 4 years and annual sales of 1 billion doses for $30. The potential annual revenue is $30 billion, ten times more than currently suggested. Almost forty times more than the current fully diluted market capitalization of Cidara Therapeutics.

Supporting Information

The estimated costs (USA, Europe, China) of seasonal influenza due to medical expenses and productivity losses are similar to the costs of solving influenza.

The revenue of the currently best selling drug is $25 billion. CD388 must be exceptional to justify a similar revenue potential.

The International Monetary Fund estimates that the economic costs of the Covid-19 pandemic were about $13.8 trillion, 460 times the annual costs of solving influenza. More than $10 billion are invested in global public health every year, for example through PEPFAR, Gavi, the Pandemic Fund, the Global Fund and the WHO. The estimated annual expenses of $30 billion to solve influenza would be less than 0.5% of global healthcare spending, less than 1% of US healthcare spending and less than 1% of healthcare spending of the rest of the world.

CD388 could significantly benefit high risk groups like 6.6% of US adults due to immunosuppression and 9.3% of the global population aged ≥65 years due to immunosenescence.

The influenza vaccine market is shaped by policies. In the USA the influenza vaccine coverage is about 50% and vaccinations are universally recommended. Worldwide the influenza vaccine coverage is about 10% and in China only 3%. In Europe the impact of diverse recommendations and policies is visible with vaccine coverage rates ranging from above 50% to near zero. Individual decisions are heavily influenced by recommendations, ease of access, and especially free state-subsidized doses, despite low prices. The potential uptake could even be 2 billion doses, at a price of $15 per dose.

Influenza policies aren’t just about individual health outcomes.

The European recommendations by occupation show that laboratory workers top the list followed by poultry workers. This is to prevent reassortment, to prevent a pandemic. With H5N1 in livestock and poultry, influenza prevention would also be about securing the food production. Just below on the list is the military. This is about combat readiness as well.

Public health is just one of several possible policy goals associated with influenza, depending on the country:

Poland plans to allocate 4.7% of the GDP to defense spending. Influenza prevention to preserve combat readiness and healthcare resources would cost about 1% of the defense spending.

Countries like Norway, Singapore and Switzerland thrive due to their stability. Reducing the impact of a future pandemic would attract even more foreign investments.

South Korea is facing a demographic crisis. The elderly population is susceptible to influenza due to immunosenescence and influenza increases the risk of pregnancy losses. Increased influenza prevention would free up healthcare resources and slow down the population decline. An H5N1 pandemic might target younger populations, intensifying the demographic crisis.

China has a long history with avian influenza and might have the most to gain from CD388. The Chinese avian influenza policy relies on mass vaccination. China has successfully deployed hundreds of billions of poultry vaccine doses against H5N1 and H7N9. China may have prevented an H7N9 pandemic. The Covid-19 pandemic originated from China and 94% of the Chinese mainland population received at least one Covid-19 vaccine dose, almost 3.5 billion vaccine doses as of 2023-03-13. China has shown that high vaccination rates can be achieved in poultry and people.

For many countries there are crucial benefits beyond public health like demographic benefits, investor confidence, food security and industries, supply chain stability, or defensive advantages.

And this would be about geopolitics. About China claiming global public health leadership and avoiding a second pandemic, about saving face. About a unifying project for Europe. About legitimacy and responsibility and a competitive advantage in case of a preventable pandemic with avoidable consequences.

Risks to Thesis

The proposed revenue potential is a simple best-case scenario reliant on preliminary shelf life data as well as procurement and regulatory policies. The extent of political will in crucial jurisdictions to proactively invest in effective pandemic prevention and preparedness is uncertain. While resistant virus variants are most likely not viable, they remain a fundamental risk. The immediate risks remain clinical trial failure of CD388 with potentially devastating consequences and significant financial risks posed by the absence of revenue. Third party patents and patent applications are an inherent but not fundamental legal risk.

Conclusion

The perception of influenza and public health policies would change entirely if a state actor would announce the intention to solve influenza and stockpile CD388.

At 18:20 and 24:20 of the 2024-11-11 presentation we learn that an interim analysis is recommended by the Cidara Scientific Advisory Board for March 2025 to gather data for an Emergency Use Authorization of CD388.

The phase 2b top-line data in Q3 2025 or even the proposed March 2025 interim analysis might justify procurement decisions for pandemic prevention and preparedness as well as public funding. State actors don’t rely on FDA approval and stockpiling was discussed with "appropriate government agencies" six months ago. There is a possibility of earlier revenue in addition to ten times more potential revenue in the long run.

Based on the preliminarily shelf life data CD388 wouldn't just be about individual health outcomes but also public health. And CD388 would enable policies with significance beyond public health. That distinguishes CD388 from other drugs, that justifies much more potential revenue than currently estimated.

Disclaimer

This analysis of Cidara Therapeutics is my personal opinion, was made without any involvement of Cidara Therapeutics, is based on publicly available information, and should not be construed as, and does not constitute legal, medical or financial advise. I have a beneficial long position in the shares of Cidara Therapeutics (CDTX).

More

An earlier but much more extensive version of this analysis can be found here:

https://archive.org/details/solving-influenza