Seeking Alpha • Sep 30
Adamis Pharmaceuticals: Managing A Position In A Company Diagnosed With Chronic Failure
Summary
Adamis Pharmaceuticals recently provided an update on Tempol’s Phase II/III COVID-19 trial, which revealed the interim did not demonstrate statistical significance of its primary endpoint.
The DSMB has recommended the company halt the trial. The company believes vaccination and the Omicron variant might have influenced the outcomes.
Adamis has a long track record of fumbles and failures. I am finally ready to put ADMP on my “Wall of Shame” and ultimately mothball the position.
If you have followed my coverage of Adamis Pharmaceuticals (ADMP), you would know that I have a classic "Love/Hate Relationship" with the company and its ticker. On one hand, the company has a portfolio of approved products that are in huge markets. In addition, ADMP has offered countless trading opportunities over the years that have allowed me to generate substantial profit. On the other hand, Adamis has fumbled almost every prospect and has obliterated shareholder value over the years. Recently, Adamis has added TEMPOL to its list of failures after the company announced that it failed to hit its primary endpoint in its Phase II/III trial for COVID-19. This was a major blow to the "Turnaround Bull Thesis" and crushed the share price to all-time lows. Now, I am left deciding whether to actively manage the position in hopes ZIMHI is able to deliver, or just set some sell orders and mothball the ticker.
I intend to recap the company's previous blunders and how they impacted the company's long-term outlook. In addition, I will review the TEMPOL update and will provide my views. Finally, I will determine if there is any hope for ADMP and will discuss how I will manage the position going forward.
A History of Failure
I have been a longstanding investor in Adamis Pharmaceuticals, and during this time I have watched the company establish a track record of failure. When I first got involved with the ticker the company had inhaler product candidates (APC-1000, APC-4000), which were based on the DPI technology from 3M (MMM) that the company acquired the rights back in 2013. The last update that I could remember was in a company press release in 2019, which announced that they had initiated their phase III efficacy studies for APC-100O and APC-4000 and had moved on to the tape portion of the drug/device combination. Sadly, that was really the last word on those programs and they were slowly phased out of the pipeline. It is safe to say that those programs were a disappointment.
Adamis had another pipeline flop with their sublingual tadalafil product (APC-8000). The FDA sent Adamis a Refusal to File "RTF" letter regarding their NDA for APC-8000. The FDA determined the NDA was not satisfactory and would necessitate supplementary data to consider approval. Consequently, the company simply gave up on the project to conserve cash.
Another disappointment came from their US Compounding subsidiary, which Adamis acquired back in 2016. At that time, the expectation was that US Compounding would be pulling in "$50 million per year with 24 months after closing." However, the subsidiary battled to clear a profit regardless of the company's best efforts. What is more, the company also had some legal issues regarding US Compounding, so they decided to offload the subsidiary for around $10M-20M. At that time, it was nice to hear that $10M-20M would make it into the bank, but ultimately the company most likely lost money on the project over the years.
The company's once flagship product, Symjepi, was expected to be a leading competitor against EpiPen and other epinephrine injectors. However, Symjepi took multiple attempts to get through the FDA; the company had a legal dispute with Belcher Pharmaceuticals over the epinephrine formulation; it took over a year to find a commercial partner, and another year for a full-scale commercial launch by Novartis' (NVS) Sandoz division. However, Sandoz was not willing to commit to a traditional marketing campaign or hire a salesforce to focus on allergist offices. As a result, Symjepi sales were far lower than expected, so both companies decided to break the partnership.
Adamis was eventually able to find another partner, US WorldMeds, who is taking on the commercial efforts for Symjepi and Zimhi. Unfortunately, Symjepi's relaunch is not going as planned with Adamis having to perform a recall due to a manufacturing defect in the needles. What is more, Symjepi's window of opportunity is starting to close as competition is on the horizon. Aquestive Therapeutics (AQST) just announced that their oral film epinephrine candidate, AQST-109, was able to produce a median Tmax of 12 minutes, which was faster than EpiPen's Tmax of 22.5 minutes. Even if Symjepi is able to relaunch with some support from US WorldMeds, it is only a matter of time before next-gen epinephrine products claim the market. I believe it is safe to say Symjepi has been a huge disappointment.
Tempol Failure
Recently, Adamis announced that the "third planned interim analysis of the Phase II/III clinical trial examining the effects of Tempol in high-risk subjects with early COVID-19 infection did not achieve its primary endpoint, as measured by comparing the rate of sustained clinical resolution of symptoms of COVID-19 at day 14 of Tempol versus placebo. The independent Data Safety Monitoring Board "DSMB" recommended that the study be halted early due to lack of efficacy." The company has halted the trial and is going to "evaluate the unblinded data from the trial to determine the next developmental steps for Tempol."
Obviously, this is a major blow to the turnaround thesis and was a major disappointment considering some of the preclinical work showing Tempol's potential to be a game changer. However, the company did point out that Tempol's preclinical work was based on severe illness and not early COVID-19 infection. What is more, the company believes the COVID-19 environment has changed dramatically in terms of vaccinations, variants, and hospitalization rates, which could have had an impact on the results. Adamis believes there could still be some use for Tempol in severe illness or immunocompromised COVID-19 patients.
My Views on Tempol's Failure and Future
Admittedly, I was extremely disappointed about Tempol's failure considering its preclinical performance. Indeed, the trial was to examine the effects of Tempol in high-risk subjects with early COVID-19 infection, whereas the preclinical work pointed to severe COVID, which would probably require hospitalization. So perhaps it was just the wrong trial structure to show if Tempol can work in COVID? One must admit that the pandemic is not what it used to be… more people are vaccinated and/or have natural immunity from already having COVID. In addition, the predominant Omicron variant is not as virulent as the native strain or the delta variant. As far as I know… a person in Tempol's trial could be vaccinated and/or already been infected with COVID. So, a less deadly variant and bolstered immune system against COVID probably would have benefited the placebo group. So, it is possible Tempol was not able to show any benefit because the patients were probably unlikely to be hospitalized regardless of Tempol.
So is Tempol another failure for Adamis? Well… yes, in terms of the company finding a way to expedite the trial initiation and set up several trial designs for multiple patient populations and disease states. Indeed, Adamis is a small-cap pharmaceutical company that doesn't have the influence or money to pull that off, so we can't blame them for picking one and running with it. One could argue that the company should have gone with the severe COVID population from the start, however, I would argue targeting non-hospitalized patients was a larger market that could benefit from oral therapy. Indeed, I would like to see the company go after the hospital setting, but I am not sure the company can afford to run the trial without extensive dilution. Even if the company was to get funding and run another trial, I doubt the future COVID-19 market will be worth the dilution. As a result, I have to brand Tempol's COVID-19 adventure as another failure at this point in time. Nevertheless, I am still hopeful the company can gather enough data to get Tempol approved for a broad label that deals with ARDS or an anti-inflammatory indication.
Adamis Pharmaceuticals Pipeline (Adamis Pharmaceuticals)
No Hope?
Admittedly, my recap of failures might be incredibly discouraging to current and future ADMP investors. However, I will point out that there is some hope for Adamis and its shareholders. First of all, Tempol has potential, so there is some value left in the asset. I believe we could see Tempol used in other COVID-19 indications. In addition, Tempol should be operative in other respiratory illnesses.
In addition, Adamis has Symjepi and Zimhi left in the portfolio that could deliver significant revenue in the coming years. Zimhi is the company's high-dose naloxone rescue device for opioid overdoses, which is supposed to be the company's second chance after Symjepi's dud of a launch. However, Zimhi also had a rough road to approval with fights off reference drug issues and a CRL. US WorldMeds should have better luck with Zimhi considering they have a complementary product in their portfolio and the U.S. government is allocating $1.5B to fight the opioid epidemic and increase access to naloxone. But, US WorldMeds is going to have to make some deals rather than hope organizations decide to stumble upon their Zimhi direct ordering website. There is a huge opportunity for Zimhi to be a major player in the opioid epidemic and potentially turn this ship around... but there is a possibility that Zimhi will go the way of Symjepi.