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Moleculin Biotech Inc (MBRX): Proceed With Caution

Moleculin Biotech Inc (NASDAQ:MBRX), an oncology-focused pharmaceutical firm that just joined public markets in June, is making some waves in the biotech world. Having initially traded above issue to raise $9.2 million and reach post-IPO highs just shy of $9, the company has since settled into the $6-7 range. It’s targeting the development of an interesting asset in the oncology space, but it’s also running a pretty aggressive $20,000 promotional campaign according to HotStocked. These sorts of promotional campaigns can sometimes be legitimate advertising for a company looking for real investors and that’s OK, but they can also be red flags due to conflicts of interest that ensue.

Confirming this is a disclaimer that came from this newsletter, sent out by Small Cap Leader. Moleculin paid this company $20,000 to push its stock on its email subscribers. There are two more – Awesome Stocks here and Stock Trade Wire – for which compensation is not disclosed.

What matters, though, is what’s under the hood. With this in mind, let’s have a look at what Moleculin has to offer investors in an attempt to determine whether or not its fundamentals support its current market cap of circa $75 million.

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 First up, a look at the drug. It’s called Annamycin, and it’s a version of an already approved and very widely used chemotherapy drug type called anthracycline, of which the drug doxorubicin, brand name Doxil by Johnson & Johnson (NYSE:JNJ), is the best known and best selling. Anthracyclines are used to treat most types of cancer, and through inhibiting DNA synthesis among other means they stop cancerous cells from replicating. The problem with anthracyclines, however, is they have an extremely high cardiotoxicity. This limits their efficacy, as dosing is limited to how much a patient (and in particular, a patient’s heart) can withstand. Annamycin is a liposomal version of anthracycline, meaning it is enveloped in a pocket like a cell membrane, which reduces toxicity by preventing direct exposure. This reduces the cardiotoxicity of the drug, which increases the potential dosing, and in turn, should translate to an improved efficacy.

On top of reduced cardiotoxicity, the liposomal element of Annamycin also “hides” it from the multidrug resistance-associated protein (MRP). This protein sits at the outer layer of cancerous cells. When a patient undergoes chemotherapy, the chemo will kill some cells, but leave others that are resistant to the treatment as a result of them expressing this MDR protein, in a survival of the fittest cancer cells mechanism. This means the resistant cells are left to replicate, so when the same treatment is used again, MDR protein pumps recognize the chemo compound and literally pump it out of the cell, negating its efficacy. Multiple studies have shown that these MDR pumps are not able to recognize Annamycin, which eliminates the potential for resistance at least from that factor.

Moleculin is going after a second line acute myeloid leukemia (AML) indication. In patients with AML, the goal is to reduce the number of cancerous cells to the lowest level possible, and then to do a bone marrow transplant. In as many as 80% of treated patients, however, it’s not possible to reduce to the 95% degree required before a bone marrow transplant, and this is in part due to the dose limiting toxicity of anthracyclines drugs. Moleculin is hoping that it can improve the rate of patients that become eligible for a bone marrow transplant with its high dose, low toxicity version of anthracycline.

The hypothesis is sound, and the science is supported by data, but there are some issues.

The first is that the drug isn’t yet technically eligible for investigational development. Moleculin bought the rights to the drug last year from a private entity called AnnaMed. AnnaMed had discontinued the development of the drug, and so the IND on which this development rested expired. So, to start any clinical trials going forward, the company has to get a fresh IND, a complex bureaucratic process.

Before this, it has to audit the results that AnnaMed derived from its preclinical and clinical trials of the drug, and verify they are correct. Now, there shouldn’t be any issue there, but it’s a cost and time factor. IND submissions cost around $600K, and since the company is applying for a special protocol assessment which will allow it to use a phase IIb as a pivotal trial) it could be months before it’s even allowed to start its own development of Annamycin.

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