Cash-strapped Novan takes a hard knock as molluscum drug fizzles in late-stage trials
Tiny Novan is not just low on funds, its investors are also scraping the barrel for some confidence.
The Morrisville, North Carolina-based drug developer’s stock $NOVN plunged into penny stock territory after the company revealed two late-stage studies testing its drug, SB206, failed in patients with molluscum contagiosum, a contagious skin infection that affects about 2 million in the United States.
The topical antiviral gel is being tested against a vehicle in two trials — with each enrolling 340 subjects aged 6 months and older. The main goal for either study is the proportion of patients with complete clearance of all treatable molluscum lesions at week 12. Largely affecting children, molluscum contagiosum is characterized by up to 100 legions — these are small, raised, and usually white, pink, or flesh-colored with a dimple or pit in the center, and can become itchy, sore, red, and/or swollen.
The drug did not meet the primary endpoint in either trial — B-SIMPLE1 or B-SIMPLE2.
But some statistical wizardry has convinced Novan otherwise.
Novan plans to use B-SIMPLE2 as one of its confirmatory trials for a marketing application, pending discussions with the FDA. It also expects to conduct another late-stage study (slated to kickoff in April 2020) to support the existing dataset, the company said, adding that its timeline for an NDA submission remains the second quarter of next year.
The company’s stock was obliterated on Friday morning. Shares cratered nearly 73% to 85 cents.
The company’s pipeline, which includes a range of other dermatology targets, is engineered to harness the therapeutic potential of nitric oxide, a naturally occurring compound. When a threat is detected by the body, white blood cells in the immune system engulf invading pathogens by releasing a burst of nitric oxide to destroy the perpetrator.
Financially, Novan is in trouble. As of September 30, 2019, the company had around $22.5 million in cash — funds that should keep the lights on into the first quarter. But in order to keep developing SB206 and sustain the company, management is in search for a lifeline — exploring financial and strategic options.
The Novan announcement has solidified the position of rival Verrica $VRCA, whose topical agent of cantharidin is up for FDA approval for patients with molluscum contagiosum by July 13.
“(C)onsidering the restricted cash on hand and the lack of convincing competitive data, we consider the singular threat to Verrica’s VP-102 now essentially eliminated,” Cowen’s Ken Cacciatore wrote in a note. “These results are further confirmation that VP-102’s long term opportunity should be assured.”
Last month, Novan said its CEO and pharma veteran Kelly Martin — former chief of Malin Corp and Elan — is stepping away in February. COO Paula Brown Stafford will take over the reins.