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PolyMedix ($PYMX) Cowan Research


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Cowan Emerging Company Research
PolyMedix — Outperform (1)
PYMX files 10K; focus remains on antibiotic & heptagonist data expected 1H12

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PolyMedix ($PYMX) Cowan Research

  1. 1. Biotechnology Emerging Company Research PolyMedix — Outperform (1) PYMX files 10K; focus remains on antibiotic &March 14, 2012 heptagonist data expected 1H12Analysts Summary: PolyMedix filed its 2011 10K last night, reporting 4Q11/FY11Simos Simeonidis, Ph.D. numbers. There were no significant updates in the 10K, other than the(646) 562-1386simos.simeonidis financials, and investors attention remains focused on the (antibiotic) and PMX-60056 (heptagonist) Phase II data expected in 1H12.Yatin Suneja Antibiotic data, expected in a few weeks, represent the moment(646) of truth for PYMX. We believe that the full data from PMX-30063s trial in ABSSSI, which will include data from MRSA patients, will be a very significant milestone for PYMX shares, since it will represent the first time that one of the companys compounds will have been tested in 1) a relatively large 2) patient population. If the full Phase II data replicate what we saw in the first ~80 patients, especially if the drug continues to demonstrate 1) very high clinical response rates, averaging 92% among the four groups, and 2) a clean safety profile, we expect the market to start paying much closer attention to PYMX. Given the compounds first-in-class status, coupled with its mechanism of action, that carries the theoretical potential to overcome resistance, we believe that if the full Phase II data corroborate what we saw in the interim look, investors will start viewing PMX-30063 as a compound with significant commercial potential. Data from two PMX-60056 trials expected in 1H12. In addition to PMX-30063, investors will be watching for data from: 1) the 40-patient Phase II trial of PMX-60056 in PCI (Percutaneous Coronary Intervention), and 2) the Phase Ib/II dose-ranging trial of PMX-60056 in the reversal of Lovenox. 4Q11/FY11 numbers reported. PYMX spent $6.7M ($4.9M in R&D, $1.9M in SG&A) in 4Q11 and $21M ($13.8M in R&D, $7.2M in SG&A) in FY11, and ended 2011 with $14.6M in net cash ($21.4M in cash, minus $6.8M in debt).PYMX (03/13) $1.31 Revenue $MMMkt cap $227.4MM FY 2011 2012E 2013EDil shares out 173.6MM Dec Actual Prior Current Prior CurrentAvg daily vol 372.4K Q1 0.8 — 0.5 — —52-wk range $0.5-1.5 Q2 0.3 — 0.4 — —Dividend Nil Q3 0.4 — 0.4 — —Dividend yield Nil Q4 0.9 — 0.5 — —BV/sh $0.03 Year 2.5 — 1.8 — 20.4Net cash/sh $0.08 EV/S — — 116.7x — 10.3xDebt/cap NAROA (LTM) NA5-yr fwd EPS NA EPS $growth (Norm) FY 2011 2012E 2013E Dec Actual Prior Current Prior Current Q1 (0.04) — (0.06) — — Q2 (0.05) (0.06) (0.07) — — Q3 (0.04) — (0.05) — —S&P 500 1396.0 Q4 (0.07) — (0.04) — — Year (0.20) — (0.21) — (0.07) CY — — — — — P/E — — — — —Please see addendum of this report for important disclosures.
  2. 2. PolyMedix Company Description PolyMedix is a biotech company that is developing compounds for the treatment of infectious diseases and acute cardiovascular disorders using its proprietary computational drug design technology. The company’s lead compound, PMX-30063, is a novel defensin-mimetic antibiotic, and is currently in a 200-patient Phase II trial in acute bacterial skin and skin structure infections (ABSSSI). PolyMedix’s second development program, PMX-60056, is a non-peptide small molecule designed to reverse the action of heparin and low molecular weight heparin (LMWH), and is currently in Phase II testing in the reversal of heparin in patients undergoing percutaneous coronary intervention (PCI) and in a Phase I/II dose-ranging study in the reversal of Lovenox. PolyMedix is also developing a number of compounds that are currently in preclinical development and include an oral version of PMX-30063, PMX-10072, an anti-tuberculosis compound, and PMX-30024, an anti-malaria compound. The company was founded in 2002, is headquartered in Radnor, Pennsylvania and currently has 28 employees.PolyMedix Upcoming Milestones M ilestone Timing IND filing for PMX-30063 (oral and t opical) 1H12 Complet e enrollment and report dat a from t he Phase II t rial of PMX-60056 in PCI 1H12 Dat a from Phase Ib/ II dose-ranging t rial of PMX-60056 in t he reversal of Lovenox in healt hy subject s 1H12 Full dat a from t he Phase II t rial of PMX-30063 in ABSSSI 1H12 Init iat e a second Phase II st udy of PMX-30063 2H12 Pot ent ial part nerships for PMX-60056 and PMX-30063 2013 Source: Cowen and Company, PolyMedixPolyMedix R&D Pipeline Therapeutic Class/Product Indication P-C I II III FILING MKT Comments PMX-30063 (Antibiotic IV) ABSSSI • PMX-60056 (Heparin/LMWH antagonist) Anticoagulation reversal • PMX-30063 (Antibiotic: oral, topical) ABSSSI • PMX-50003, PMX-70004 (Polymer biomaterials) Bacterial infections • PMX-10072 (Anti-tuberculosis) Tuberculosis • PMX-30024 (Anti-malaria) Malaria • PMX-10098 (Anti-fungal) Fungal infections • PMX-30016 (Biodefense) Biodefense • PMX-20005 (Angiogenesis inhibitor) Oncology • Total Drugs in Development 7 0 2 0 0 0 Radnor, PA Investor Relations Contact: Lisa Caperelli - 484.598.2406 Source: Cowen and Company, PolyMedix 2 March 14, 2012
  3. 3. PolyMedixInvestment ThesisPolyMedix is a development stage biotechnology company that uses its proprietarycomputational drug design technology to develop non-peptide small molecules forthe treatment of infectious diseases and acute cardiovascular disorders. Thecompany is currently developing two lead clinical programs, both of which wereinternally discovered and developed, and are fully owned.1) PMX-30063 for ABSSSI. PMX-30063 is a novel antibiotic small molecule, designedto overcome the resistance that eventually develops with most antibiotics. PMX-30063 is designed to act as a synthetic version of the naturally occurring defensins,peptides with antimicrobial activities that have been part of the innate immuneresponse throughout evolution. By attempting to emulate the action of thedefensins, and disrupting the structural integrity of bacteria (i.e. via a biophysicalapproach), as opposed to interfering via a biochemical approach, as most classes ofantibiotics do, PMX-30063 has the potential to become an antibiotic against whichresistance is less likely to develop. Given the increasing problem of antibioticresistance, and with the obvious caveat that the compound is currently in its firsttrial in patients, we believe that if PMX-30063 is able to differentiate itself in termsof resistance, and assuming it would be able to get through its clinical trials with areasonable efficacy and safety profile, it has the potential to become a significantagent in the large antibiotic market. PMX-30063 is currently in a 200-patient Phase IItrial in patients with acute bacterial skin and skin structure infections (ABSSSI). InDecember 2011, the company announced positive interim results from the first 80patients enrolled in the study. The data showed that PMX-30063 was safe and well-tolerated, with a combined cure rate of 92%, across the four dosing arm (~20patients in each arm). The study is currently ongoing and PolyMedix expects topresent full data from the study in the first half of 2012.2) PMX-60056 for the reversal of heparin and LMWH. PMX-60056 is a smallmolecule designed to reverse anticoagulation following administration of heparinduring cardiothoracic surgery and low molecular weight heparin (LMWH) in theprevention of deep vein thrombosis (DVT) and pulmonary embolism (PE) settings.PMX-60056 was designed to bind to a specific pentasaccharide sequence that ispresent in both heparin and LMWH, inactivating them and thus reversing theiranticoagulant effects. The only drug currently approved for the reversal of heparinis protamine, an agent which is cheap and fairly effective, but comes with significantsafety concerns. There are currently no approved agents for the reversal of LMWH,despite the fact that bleeding while being treated with LMWH can lead to seriousand, in some cases, life-threatening complications. Thus, we believe that acompound that can safely and effectively reverse the action of both heparin andLMWH could take significant market share in both settings and becomecommercially successful. PMX-60056 is currently in a Phase II trial in patientsundergoing percutaneous coronary intervention (PCI) and a Phase Ib/II dose-rangingtrial in the reversal of Lovenox, with data from both the trials expected in the firsthalf of 2012.Data from Phase I studies and from small numbers of subjects make for ahigh risk investment; so, proceed with eyes wide open. The main and obviousrisk to our call on PYMX is that comes with a significant amount of risk, since we arebasing our thesis on the available, very early stage data. The promising results fromthe company’s two lead compounds come from 1) Phase I trials (even though in PMX-60056’s case, we are able to judge the compound’s efficacy, given its mechanism ofMarch 14, 2012 3
  4. 4. PolyMedix action, and we have seen interim data from PMX-30063’s Phase II trial in ABSSSI), 2) very small numbers of subjects. In addition, PMX-30063 is currently in its first trial in patients, and even though we have seen impressive topline interim data from the first 80 patients enrolled in the Phase II trial in ABSSSI, we are still relatively early in the compound’s development. Finally, even though both lead compounds have relatively benign safety profiles thus far, the hypotension signal seen in the PMX- 60056 trials, and the paresthesias, transient liver enzyme elevations and cardiovascular effects seen in the PMX-30036 Phase I trials, have to be further examined in the Phase II setting before investors become more comfortable with either compound.PolyMedix P&L ($MM) ($MM) 2010A Q1:11A Q2:11A Q3:11A Q4:11A 2011A Q1:12E Q2:12E Q3:12E Q4:12E 2012E 2013E Revenues US PMX-60056 sales 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 EU PMX-60056 royalties 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 US PMX-30063 sales 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 EU PMX-30063 royalties 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Upfront and Milestones- PMX 60056 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 9.0 Upfront and Milestones- PMX 30063 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10.0 Grants and Contract Revenues 2.1 0.8 0.3 0.4 0.9 2.5 0.5 0.4 0.4 0.5 1.8 1.4 Total Revenues 2.1 0.8 0.3 0.4 0.9 2.5 0.5 0.4 0.4 0.5 1.8 20.4 COGS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Gross margin G&A 5.8 1.5 1.9 1.9 1.9 7.2 2.0 2.0 2.1 2.2 8.3 10.0 Sales and Marketing 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Research and Development 11.0 2.6 2.7 3.6 4.9 13.8 5.1 5.3 5.5 5.6 21.5 25.0 Total Operating Expenses 16.7 4.1 4.6 5.5 6.7 21.0 7.1 7.3 7.6 7.8 29.8 35.0 Operating Income/Loss (14.6) (3.3) (4.2) (5.1) (5.8) (18.5) (6.6) (6.9) (7.2) (7.4) (28.1) (14.6) Interest Income and other expenses (0.9) (0.3) (1.0) 1.0 (1.1) (1.4) (0.2) (0.2) (0.2) (0.2) (0.6) 1.4 Pretax income (15.5) (3.6) (5.2) (4.1) (6.9) (19.9) (6.8) (7.1) (7.4) (7.5) (28.7) (13.2) Income tax benefit (expense) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 tax rate Net Income (Loss) (15.5) (3.6) (5.2) (4.1) (6.9) (19.9) (6.8) (7.1) (7.4) (7.5) (28.7) (13.2) EPS Basic $ (0.19) $ (0.04) $ (0.05) $ (0.04) $ (0.07) $ (0.20) $ (0.06) $ (0.07) $ (0.05) $ (0.04) $ (0.21) $ (0.07) Diluted $ (0.19) $ (0.04) $ (0.05) $ (0.04) $ (0.07) $ (0.20) $ (0.06) $ (0.07) $ (0.05) $ (0.04) $ (0.21) $ (0.07) Shares Outstanding Basic 81.0 81.0 103.2 106.0 106.0 99.1 107.1 108.1 150.9 193.6 139.9 201.4 Diluted 137.3 136.7 171.6 174.9 173.6 164.2 175.4 177.1 212.2 214.3 194.8 222.9 Source: Cowen and Company 4 March 14, 2012
  5. 5. PolyMedixPositives1. PMX-30063, is an antibiotic with a novel mechanism of action, with the potential to address the issue of antibiotic resistance.2. PMX-60056 has shown promising efficacy and safety in the reversal of heparin and LMWH in its trials thus far.3. Both lead programs could be promoted in the U.S. by PolyMedix by a relatively small, hospital-based sales force.Negatives1. Both lead compounds have been tested in relatively small number of subjects.2. Impact of hypotension in PMX-60056 trials and of paresthesias and cardiovascular effects in PMX-30063 trials need to be further evaluated in the Phase II setting.3. Both compounds would have to be tested in a large Phase III program before commercialization and may need a partner before entering Phase III testing.March 14, 2012 5
  6. 6. PolyMedix Addendum STOCKS MENTIONED IN IMPORTANT DISCLOSURESTicker Company NamePYMX PolyMedix ANALYST CERTIFICATIONEach author of this research report hereby certifies that (i) the views expressed in the research report accurately reflecthis or her personal views about any and all of the subject securities or issuers, and (ii) no part of his or her compensationwas, is, or will be related, directly or indirectly, to the specific recommendations or views expressed in this report. IMPORTANT DISCLOSURESCowen and Company, LLC and or its affiliates make a market in the stock of PYMX securities.Cowen and Company, LLC and/or its affiliates managed or co-managed a public offering of PYMX within the past twelvemonths.Cowen and Company, LLC and/or its affiliates received in the past 12 months compensation for investment bankingservices from PYMX.PYMX is or was in the past 12 months a client of Cowen and Company, LLC; during the past 12 months, Cowen andCompany, LLC provided IB services.PYMX has been client(s) of Cowen and Company, LLC in the past 12 months.Cowen and Company, LLC compensates research analysts for activities and services intended to benefit the firmsinvestor clients. Individual compensation determinations for research analysts, including the author(s) of this report, arebased on a variety of factors, including the overall profitability of the firm and the total revenue derived from all sources,including revenues from investment banking. Cowen and Company, LLC does not compensate research analysts based onspecific investment banking transactions. DISCLAIMERThis research is for our clients only. Our research is disseminated primarily electronically and, in some cases, in printedform. Research distributed electronically is available simultaneously to all Cowen and Company, LLC clients. Allpublished research, including required disclosures, can be obtained on the Firm’s client website, information on any of the above securities may be obtained from our offices. This report is published solely forinformation purposes, and is not to be construed as an offer to sell or the solicitation of an offer to buy any security inany state where such an offer or solicitation would be illegal. Other than disclosures relating to Cowen and Company,LLC, the information herein is based on sources we believe to be reliable but is not guaranteed by us and does not purportto be a complete statement or summary of the available data. Any opinions expressed herein are statements of ourjudgment on this date and are subject to change without notice.Notice to UK Investors: This publication is produced by Cowen and Company, LLC, which is regulated in the UnitedStates by FINRA and is disseminated in the United Kingdom by Cowen International Limited ("CIL"). In the United Kingdom,‘Cowen and Company’ is a Trading Name of CIL. It is communicated only to persons of a kind described in Articles 19 and49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005. It must not be further transmitted toany other person without the consent of CIL.Copyright, User Agreement and other general information related to this report© 2012 Cowen and Company, LLC. Member NYSE, FINRA and SIPC. All rights reserved. This research report is prepared forthe exclusive use of Cowen clients and may not be reproduced, displayed, modified, distributed, transmitted or disclosed,in whole or in part, or in any form or manner, to others outside your organization without the express prior writtenconsent of Cowen. Cowen research reports are distributed simultaneously to all clients eligible to receive such research6 March 14, 2012
  7. 7. PolyMedixprior to any public dissemination by Cowen of the research report or information or opinion contained therein. Anyunauthorized use or disclosure is prohibited. Receipt and/or review of this research constitutes your agreement not toreproduce, display, modify, distribute, transmit, or disclose to others outside your organization the contents, opinions,conclusion, or information contained in this report (including any investment recommendations, estimates or pricetargets). All Cowen trademarks displayed in this report are owned by Cowen and may not be used without its priorwritten consent.Cowen and Company, LLC. New York (646) 562-1000 Boston (617) 946-3700 San Francisco (415) 646-7200Chicago (312) 577-2240 Cleveland (440) 331-3531 Atlanta (866) 544-7009 Dallas (214) 978-0107 London(affiliate) 44-207-071-7500 Geneva (affiliate) 41-22-707-6900 COWEN AND COMPANY RATING DEFINITIONS (a)Rating DefinitionOutperform (1) Stock expected to outperform the S&P 500Neutral (2) Stock expected to perform in line with the S&P 500Underperform (3) Stock expected to underperform the S&P 500(a) Assumptions: Time horizon is 12 months; S&P 500 is flat over forecast period. COWEN AND COMPANY RATING ALLOCATION (a) Pct of companies under Pct for which Investment Banking servicesRating coverage with this rating have been provided within the past 12 monthsBuy (b) 52.3% 8.4%Hold (c) 44.9% 2.0%Sell (d) 2.7% 0.0%(a) As of 12/31/2011. (b) Corresponds to "Outperform" rated stocks as defined in Cowen and Company, LLCs rating definitions (see above). (c)Corresponds to "Neutral" as defined in Cowen and Company, LLCs ratings definitions (see above). (d) Corresponds to "Underperform" as defined inCowen and Company, LLCs ratings definitions (see above). Note: "Buy," "Hold" and "Sell" are not terms that Cowen and Company, LLC uses in itsratings system and should not be construed as investment options. Rather, these ratings terms are used illustratively to comply with NASD and NYSEregulations. March 14, 2012 7
  8. 8. PolyMedix8 March 14, 2012