For institutional holders, the biggest gains in terms of percentage per holding are made in the smaller companies. For obvious reasons, a hedge fund cannot exclusively rely on small-cap gains and usually save the bulk of their capital for more traditional investments. It is impossible to sink many millions of dollars in a company with a market cap in the tens of millions. Nevertheless, following the small-cap positions of the big players and their respective insiders can help increase the success rate of small-cap picks.
Over the last quarter, we’ve seen a large amount of activity in both insider and institutional buying related to a small-cap biotech called Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP). While these stocks are notoriously risky, by following the lead of both insiders and institutions, it’s possible to mitigate this risk. With Corbus, the increase in insider and institutional holdings is coming at a time when the company is just beginning to dose patients in three separate phase II efficacy trials for its flagship candidate, Resunab.
Corbus is focusing almost entirely on Resunab. The drug is currently undergoing three phase II trials in three separate indications – cystic fibrosis, systemic sclerosis and dermatomyositis. We’ll look at the trials individually shortly, but before that, let’s look at the drug and its mechanism of action.
Resunab is what’s called an endocannabinoid-mimetic drug, which essentially means it is a synthesized drug that targets the endocannabinoid system. This system consists of receptors in our brains and nervous systems that control and regulate inflammation and immune response, among other things. When the immune system responds to a pathogen, one of the most common responses is inflammation. Inflammation is usually beneficial short term as it concentrates immune cells to a particular area, but in certain diseases, it is detrimental and overexpressed, leading to debilitating symptoms such as the fibrosis in cystic fibrosis sufferers.
With Resunab, Corbus is attempting to switch off the inflammation process. It does so by activating the CB2 receptor, which is one of the cannabinoid receptors that make up the endocannabinoid system. The CB2 receptor is found on the surface of nearly every immune cell.
Without letting the confusing abbreviations deter us from understanding the drug, activating the CB2 receptor activates signaling molecules called eicosanoids. Two of them, PGE2 and LTB4, are responsible for inflammation. Another two, PGJ2 and LXA4, are responsible for tissue healing. We know that activating the CB2 receptor increases the production of the tissue-healing molecules and decreases the production of inflammatory eicosanoids. That means less inflammation and more tissue healing.
While all CB2 agonist molecules elicit this response, Corbus’s trump card is that Resunab is up to 100x more potent than the naturally occurring cannabinoids meant to pull off the same job. That means Resunab could be especially effective in stopping the inflammatory cycle in patients where inflammation only hurts the underlying disease rather than helping it.
As for the specific trials, Corbus kicked off a phase II in cystic fibrosis in October this year announcing the first dosing on October 15. The trial is operating at 20 sites split across the US and Europe totaling 70 patients with a primary endpoint of safety and tolerability. It’s a relatively short trial, which is common in these early, dose escalation trials, and top-line results are expected by December 2016, exactly one year from now. Corbus is sponsoring this trial so we can expect cash burn rate to rise next year.