Another Round of Insider Buying at Corbus Pharmaceuticals Holdings Inc (CRBP)

Insider buying is heating up at Corbus Pharmaceuticals Holdings Inc (NASDAQ:CRBP) again. Having bottomed along with the rest of the biotech sector in February, shares have been on a tear as critical phase 2 data readouts get closer, with two big ones scheduled for the end of this year. Corbus in some ways is riskier than some other trial stage biotechs because its pipeline is not diversified. It is a one-drug company as of now with the earliest new drug application (NDA) approval estimated by the company at 2021, more than five years away. What makes it attractive though, despite having a one-drug pipeline, is that it has both fast track and orphan status for two indications, and that the one drug it is developing has the potential to treat a vast array of diseases. There is even some chance that upcoming data readouts could spur a bid for the company by Big Pharma.

Corbus Pharmaceuticals Holdings Inc (NASDAQ:CRBP)’s drug is called Resunab, otherwise known as ajulemic acid. Unlike most new molecular entity drugs that are often entirely engineered and unknown to nature, Resunab is based on a naturally occurring molecule that is widely known for its anti inflammatory properties. It is a cannabinoid mimetic, meaning a slightly tweaked form, and cannabinoids have long been known for exhibiting strong anti inflammatory properties.

The two data readouts scheduled for the end of 2016 are for cystic fibrosis and scleroderma. The former is a genetic disorder, the latter autoimmune, but both exhibit symptoms that are greatly exacerbated by chronic inflammation. In cystic fibrosis, lungs that cannot clear out excess phlegm often get infected, triggering a natural inflammatory response that only increases phlegm and makes the condition even worse. In scleroderma, also known as systemic sclerosis, the immune system attacks the skin, resulting in something like a very severe form of psoriasis. Psoriasis is also autoimmune, but generally is restricted to the epidermis. Systemic sclerosis affects the deeper skin structure.

There are two forms of scleroderma. One is limited and only affects the skin, and the other is diffuse. Diffuse is much worse and often life-threatening, where the immune system targets internal organs as well. Corbus Pharmaceuticals Holdings Inc (NASDAQ:CRBP) is trialing Resunab for the diffuse version of the disease. Here, too, inflammation plays a major role as the immune system basically triggers the inflammatory response throughout every organ affected. Inflammation itself is beneficial when the body is trying to clear an infection, but it’s like a scorched earth policy. Making the body inhospitable to bacteria can help kill the infection, but it also takes a big toll on the body itself. Constant inflammation will eventually cause fibrosis and death, whether it is caused by a genetic disorder like cystic fibrosis or an autoimmune disorder like diffuse scleroderma.

Fibrosis is the scarring that happens after the body tries to heal itself following an inflammatory episode. Just like a deep cut heals into a scar, internal cuts at inflammation sites lead to fibrosis, which eventually makes the organ unusable. Healthy people have short and infrequent episodes of inflammation in response to minor infections that are repaired quickly. Cystic fibrosis and scleroderma sufferers have constant inflammation that is self-destructive.

Since both trials are double blinded and placebo controlled, we do not know yet how the drug is performing, but news in April that the Food and Drug Administration (FDA) has allowed the scleroderma trial to continue in a 12-month open-label extension does serve as preliminary evidence of safety and some efficacy. If Resunab were not safe, FDA would not have granted an open label 12-month extension to the trial. This conforms to data from earlier trials where there were no moderate or severe adverse events in 52 patients taking doses of up to 60mg. 71 patients taking doses from 80 to 240mg had no serious side effects either, with the most common symptom being moderate dizziness at 18% of patients. Had the drug not shown any efficacy for any patient at least in their estimation, even given the double-blind nature of the trial, there would be no demand for the extension in the first place.

A confluence of factors could be behind the recent insider buying by Sean Moran, the company’s Chief Financial Officer, and Dr. Yuval Cohen, the chief executive. Moran now holds over 132,000 shares. First of all, with both cystic fibrosis and scleroderma phase 2 results due in just a matter of months, the end of the year is going to be big for the stock. Second, the open label extension grant will start bringing in much more data following the initial release at the end of the year. Third, the markets targeted are especially lucrative, particularly cystic fibrosis that has some of the most expensive drugs in the world. Scleroderma has no treatment specifically designed for it besides general immunosuppression, and Resunab is actually not immunosuppressive. While it does shut down the inflammation, it does not disturb adaptive immunity, keeping immunity active against infection even as the inflammatory response is blocked.

With the open label extension granted as of April, data should be available by early next year, at which point we should have a much better idea of the drug’s efficacy. Corbus is in a special situation here where any substantial evidence of efficacy for either indication could attract the attention of Big Pharma looking for new blockbusters. Anti inflammatory drugs are actually the best selling class of drugs in the world, led by AbbVie Inc. (NYSE:ABBV) megablockbuster Humira, which also targets the inflammatory response. If Resunab is effective against the symptoms of cystic fibrosis and scleroderma, we could start seeing bids for the company as early as next year. If it works for these two with a good safety profile, the possibilities for expanding its label are immense. These could include Humira’s main target of rheumatoid arthritis among a host of other autoimmune disorders.

Corbus Pharmaceuticals Holdings Inc (NASDAQ:CRBP) has enough cash at $9.7 million to carry it through the next four quarters, so enough to ride it through its next major catalysts due in only two. The risks are big with Corbus because safety is not going to cut it. If efficacy results come the end of the year are not compelling, the company won’t have much value because it only has Resunab. But if they are, the potentialities for Resunab are on a Humira level, and Humira has nothing to do with cystic fibrosis.

Dr. Cohen and CFO Morin are not the only insiders to hold significant positions in their own company. Chief Scientific Officer and company cofounder Dr. Mark Tepper owns over 2.1 million shares. Chief Medical Officer Dr. Barbara White owns nearly 120,000. The largest single shareholder is also a company insider, scientific advisor Dr. Sumner Burstein, one of the world’s leading authorities on cannabinoids whose research was responsible for the discovery of ajulemic acid in the first place. Dr. Burstein has staked 3.6 million shares on the drug’s success. Total insider ownership for Corbus Pharmaceuticals (NASDAQ:CRBP) is now over 25% of shares outstanding.

Disclosure: Rafi Farber is long Corbus Pharmaceuticals