Cortexyme (CRTX) Upcoming GAIN Trial could be positive

Coming in at the 17th most shorted stock in the world is Cortexyme ($CRTX) at 24.77% shorted (*Has since decreased to 21% shorted and 30th most shorted stock in the world).

Cortexyme ($CRTX) is a clinical stage biotech looking to treat Alzheimer’s disease in a unique way, with a Phase 3 trial reading out Q4 2021.

Quick Ape Translation: Mouth Bacteria moves into brain → Bacteria produces Enzymes; Enzymes Eat Brain → Alzheimer’s Disease. That is the main idea behind Cortexyme’s lead agent Atuzaginstat (COR388 – Lysine gingipain inhibitor). The hard to treat bacteria (Porphyromonas gingivalis) in your mouth crosses over the gums, goes into the blood brain barrier, and then infects the brain. The bacteria release an enzyme that breaks down proteins/neurons (Gingipains in this case). If you prevent this enzyme from acting on the neurons, then you could halt/slow down Alzheimer’s Disease. An early trial has shown that this causality is not a consequence of Alzheimer’s, but a precursor.

While most of the trials are with neurodegenerative diseases, the early trials looking at biofilm (read it’s less like bacteria and more like an organism that is living in your mouth) showed efficacy. If Atuzaginstat did not work in this setting it would really signal it probably wouldn’t work beyond the Blood Brain Barrier.

They were able to show the bacteria, Porphyromonas gingivalis, had a profound effect on the brain and Alzheimer’s disease, and very importantly showed an increase in Tau load (not this Tao, stop going to clubs and invest your money in a boat, boats are way better than going to a club, I don’t care if you live in South Dakota).

C-suite: Casey Lynch (LinkedIn) is the CEO / Founder / Chairperson of Cortexyme. She passes the eye test. She earned a MS from UCSF which has a long history of Alzheimer’s research, her first job was working for the VA Hippocampal Lab (The Greater LA VA Healthsystem is the largest VA and does some great oncology research btw) poking monkeys with cholinergic agonists (tangentially acetylcholinesterase inhibitors, such as donepezil and galantamine are the most commonly prescribed drugs for Alzheimer’s). She then went on to form other LLCs and serve on various boards of organizations and associations while founding Cortexyme. She seems personable, and strongly believes in the company (still holding a majority of shares 8 years later), mission-driven as you can see from this presentation from a couple years ago. I went on a really deep dive on her life and found out that she had two grandparents with Alzheimer’s disease (I’m not a stalker, but she also snowboards).

She also seems to have had a mildly successful exit previously (Aspira Biosystems was acquired by Nanomune Technologies, Inc in 2004 which I cannot find any additional information on). Sometimes knowing when something is not successful and exiting can be the correct move.

Michael Detke, MD, PhD (Linkedin) has a long history in CNS, mainly at Eli Lilly, and working as a consultant. I also respect as someone in academia, when they stay on as Adjunct Professor, he’s a Hoosier. One red flag is he spent 2013 – 2018 (PT consultant and FT Chief Medical Officer) at a company called Embera Neurotherapeutics that seems like it went nowhere and they were not even doing new drugs but combos of existing FDA approved drugs (5 employees on LinkedIn).

The biggest red flag/worry about Cortexyme is their Regulatory Affairs. As mentioned above, because of what I term “Biogen Effect” there will be increased scrutiny on all future Alzheimer’s Medication FDA submissions. Within a pharmaceutical company the department responsible for making sure studies are designed in order to receive approval, preparing documents for FDA, maintain approval, lead the IND and New Drug Approval, and a ton of other stuff. Essentially these are the company’s face to the FDA/EMA, etc. I cannot understate how vital it is to have Regulatory Affairs have a role in the trials and to have deep relationships with the FDA. The best Regulatory Affairs VPs are those with experience working at the FDA in the same specialty and/or working in Pharma/Biotech in the same specialty in order to build those relationships. Relationships are the lifeblood of approvals and those contacts can make or break a close call.

They recently hired (not involved with formation of the GAIN trial) Drew Sukovich, PhD, RAC (LinkedIn). He seems to have had somewhat low positions in different specialty areas. He has only been in Regulatory Affairs for about 10.5 years –

After he was a director for only 2.5 years, he went to work for a small consulting company (Treximo) which at the time only had about 100 consultants. Often in Pharma people can jump levels and get new titles by going into consulting. I don’t see this as a strength, and having worked with a lot of pharma consultants, they can be extremely hit or miss (mostly miss). He was a “Vice President” at consulting for 15 months. He was then hired by Cortexyme as VP of Regulatory Affairs and Quality.

If I was hiring someone to lead regulatory affairs at a biotech with the hope I could get an approval for Alzheimer’s Disease I would want to pick someone who:

  1. Had the FDA relationships for the specific disease area
  2. Worked at the FDA
  3. Long career in Regulatory Affairs with extensive experience at this level (VP) at a company

For whatever reason they went with someone who is not any of these, maybe he’s a great guy, or a savant, but this hire doesn’t make sense to me from the outside. If the data is a slam dunk, then it won’t really matter. If the data is closer, then a Regulatory Affairs VP can make or break the approval. I cannot understate how important Regulatory Affairs is to a company like this, and honestly open your checkbook and just pay whoever you need to.

Final Thoughts: I really went into this thinking that this stock was going to be a dud this past week. It is incredibly hard to get approval for any drug, much less an Alzheimer’s Drug. This will be even more of an uphill battle after the “Biogen Effect.” This is NOT a slam dunk by any means, but more like a lottery ticket until the GAIN data comes out. The market values an FDA approval of an Alzheimer’s Disease medication with questionable efficacy at $20BN ($BIIB).

What would be the value of a medication that has great efficacy? The current market cap is sub $2BN. I hate to invest my money into something that will go sideways. Cortexyme has said that topline Data from GAIN is coming Q42021. I’d rather have volatility because then I can add or exit my position. This stock is going to be extremely volatile, but some things that make me feel more comfortable investing my money – C-suite is buying/executing and holding in the Millions of dollars. One Director has personally bought $4MM+ shares over the last year (David Lamond). Institutional ownership has slowly increased as well. If I am going to take a gamble, I want to bet alongside the house money.

The study design is really brilliant both in terms of data collected, secondary measures (think Multiple Shots on Goal) and addressed my main concern that all patients treated would have Porphyromonas gingivalis (needed for the drug to work). With 642 patients if the medication is effective, over 48 weeks they should be able to show an effect if it causes an effect. They also did a lot of animal studies since 2013, that have shown benefit (always love to see Basic Science). Essentially it appears they went in a parallel with designing the drug, and trying to tackle Alzheimer’s disease from a completely new standpoint (Tau target vs. traditional Amyloid). I like when a company will not only challenge assumptions, but then do studies to back up their new perspective.

The most impressive part of what has been released from GAIN so far is that 90% of patients wanted to continue the drug (Open Label Extension). This is extremely high, even higher than Oncology studies. It means the medication is tolerable and that patients perceive benefits. The fact that enrollment for the trial was completed early means that the research teams/physicians were excited about this trial and that excitement continued throughout enrollment.

Without knowing the data, but knowing the circumstances and the people behind it, I look at this as a lottery ticket. If I lose it, that sucks but no sweat off my back, but sometimes you need to make bets with asymmetric upside. If I win then I’m buying a vacation home, maybe near Jackson Hole and let Casey borrow it to snowboard.

This article was written by u/DoctorDueDiligence