Raghuram Selvaraju, Chairman of Relief Therapeutics, comments on the newly gained billion-dollar valuation of the small Swiss biotech company and explains the approval chances for its drug Aviptadil to treat Covid-19.
Few people knew about Relief Therapeutics 📈 a few months ago. With a market capitalisation of around CHF 2 million, the shares belonged to the segment of so-called penny stocks - future uncertain. However, since the small biotech company announced that it might have a drug for the treatment of Covid-19 patients in its pipeline, investor interest has been growing inexorably.
«It is very challenging to treat this disease and rare to identify a therapy that actually can have an impact», says Raghuram «Ram» Selvaraju, Chairman of Relief Therapeutics in this interview with The Market/NZZ. There is now first evidence that Relief's drug is working. «That is driving the attention on our stock now», Selvaraju says.
Since the beginning of the year, the Relief shares have jumped over 60,000%. The company, which was floated on the Swiss stock exchange through a merger with Therametrics (formerly MondoBiotech), has grown to a market capitalization of well over CHF 1 billion. This week alone, the stock price gained over 2,000%: «Our drug could generate hundreds of millions of dollars per year», says Selvaraju.
Ram, at the beginning of the year, the market capitalization of Relief stood at merely CHF 2 mio. In the past week, the value has grown to more than CHF 1bn. This surge was driven by hopes that Relief has a drug candidate – RLF-100 (Aviptadil) – that showed in first clinical trials a rapid recovery from respiratory failure in the most critically ill patients with Covid-19. In addition, independent researchers have reported that Aviptadil blocked replication of the Sars-CoV-2 in human lung cells and monocytes. How does that feel?
I believe the attention we are getting now is a function of the severity and the global nature of the Covid-19 pandemic. And, it is a function of the fact that we have been fortunate enough to move a clinical program ahead very quickly: We have now started to see evidence that the drug is working. Many other people have tried things in Covid-19 and didn't get very far. That reflects, how challenging it is to treat this disease and how rare it is to identify a therapeutic that actually can have an impact. That is driving the attention on our stock now.
Relief is a small Swiss based biotech company and has largely remained under the radar so far. It has no CEO, you as the Chairman have a full-time job being a Healthcare Analyst at the US Investment firm H.C. Wainwright & Co. How is Relief Therapeutics run and how many employees work at the company?
Right now, the board of directors manages the company and oversees the decision making. We have an US development company, NeuroRx, that administers the clinical development program for our drug RLF-100. NeuroRx is handling the day to day operations from a clinical development perspective. Before we started the current program, we have been identifying ways to bring Aviptadil forward for other indications. Back then, we did not have any clue that Covid-19 existed or that it will turn out to be such a global problem – or that our drug would be a potential solution for that problem.
In order to justify the current market value well in excess of CHF 1 bn, Relief must be building up a profit potential of more than CHF 100 mio. per year that is realizable for at least 10 years in a row. Is this realistic?
That is very realistic. The Covid-19 pandemic has officially infected 19 Mio. people worldwide. However, that is a gross underestimate of the actual figure. The official numbers reflect only how much testing is done. The number of people that get sick and face respiratory difficulties is somewhere between one and five percent. That might not sound like an impressive statistic. But given the numbers of tens of millions of people infected, this is a sizable population, particularly if you look at the relative benefit of our drug: If it saves lives, how do you put a price on that?
What are your revenue expectations?
If the drug is approved there are three scenarios: Assume it is approved in an environment in which Covid-19 disappears very quickly. I think we can almost totally rule out that scenario. It looks more like that the problem is actually getting worse. The second scenario is an approval for the drug while the disease persists for several more years, but eventually goes away. In that context, we think it is quite likely that peak annual sales of RLF-100 would be much higher than the CHF 100 Mio. annual figure mentioned in your question. The pricing depends on the competitive landscape and the question if there are effective vaccines available etc. In this base scenario and with effective vaccines available, it will take several years to deploy them. Our drug would have four to six years of potential deployment for those patients who get severely ill – and it could generate hundreds of millions of dollars per year during that timeframe.
And the third scenario?
So far no one has developed an effective vaccine against any coronavirus. We have to face the possibility that we will never get a vaccine that provides a durable protection against Covid-19. We have to recognize that this is the way corona viruses behave or how our immune system works. There is also a possibility that there is no effective vaccine. Social distancing over a long period of time is not practical as it would kill the economy. There would come a time when everyone would reach a level of comfort with some degree of risk tolerance and the disease would burn on.
Who owns the rights on Aviptadil?
Relief owns the patents on Aviptadil that are currently valid in the US and in Europe. In both jurisdictions we have orphan drug status, too.
Together with its partner NeuroRx, Relief is currently conducting several studies in Israel and the US on Aviptadil for the treatment of Covid-19 patients. Are these studies relevant for approval?
Let’s focus on the US: That is a Phase IIb/III trial that is aimed at patients who are severely ill because of the consequences of Covid-19. Assuming we have positive, statistically significant data, we would be in a position to go to the FDA and ask for approval. There is also a potential way to get approval sooner: This is by presenting the FDA clear evidence that the drug is therapeutically meaningful effective in a so-called compassionate access program. Having been granted the permission by the FDA to conduct such a compassionate access program, we are currently in this program. The study we are running has registrational quality. If it would be successful it could be the basis for a FDA approval.
When can sufficient data be collected for a possible approval application in the US?
That depends on the rate of enrolment in the currently ongoing trial. At this time, this is not a problem as there are many patients suffering from Covid-19, particularly in the US. If that persists, it would only take us a few more months to get to the point where we would be able to report top-line results from this trial.
How long would it take to get approval after filing?
If you look at Gilead’s Remdesivir, I believe they got emergency authorization from the FDA within weeks after they furnished data. If we get meaningful data, I would expect that the FDA would act in an expedient and collaborative manner. I do not anticipate that we would need ten to twelve months for approval.
What's the probability of Aviptadil getting approval?
The active pharmaceutical ingredient of Aviptadil has been used for a lot of years in different indications. From a safety standpoint we are quite optimistic. From an efficacy standpoint we need more data. I would say the probability at the moment stands at 60 to 70% that we will get the drug approved.
Who finances the ongoing trials?
Relief is paying for the trials. NeuroRx conducts the study on our behalf and we cover all the invoices.
Do you have an agreement with NeuroRx about who receives how much of the profits from Aviptadil? Or is the drug fully owned by Relief?
Aviptadil is our drug.
You are entitled to all revenues it could create?
That is the current situation.
How much do the trials cost?
There are effectively two trials: For the one we are currently running the total budget will be in the range of CHF 7 to 8 mio. The Inhaled study we just got approval to start will probably cost between CHF 10 and 15 mio.
This is total cash burn of around CHF 20 mio. At the beginning of the year, Relief had only CHF 137’000 cash on its balance sheet. How do you finance the expenses?
We have already spent close to CHF 4 mio. on the trials, and we currently have close to CHF 3 mio. on our balance sheet. We have access to a share subscription facility from which we can draw. With the currently high liquidity in our stock we have sufficient access to capital to fund these studies on our own.
We can place authorized share capital in the market. However, if liquidity is available as it happened at various times before, our major shareholder, the private equity firm GEM, allows us to place shares with them at a pre-designed price mechanism that is based on the weighted average stock price. We are not obligated to draw this source of liquidity but can take it and spend it as and when we need it.
Relief has just exchanged a loan by GEM in the amount of CHF 1,7 mio. with 58 mio. shares for a price of CHF 0.033 each. This transaction closed at the end of July, now this share package is worth in excess of CHF 30 mio. Is there any lock-up period for GEM?
We have agreed to convert those notes to equity as we wanted to eliminate this debt from our balance sheet. I have no knowledge of an intent of GEM to sell any of their shares in Relief. They have been with us since 2015 as a faithful long-term shareholder and have supported us for more than five years.
Relief has 2,2 bn shares outstanding. Additionally, there is authorized share capital of 1,1 bn shares, conditional capital of nearly 1 bn shares for bonds and additional 1,8 bn shares for employee benefit plans. However, there are only a handful of employees at the company.
The share benefit plan is not intended solely for the existing employees. It is to give us the possibility to hire additional people and establish further infrastructure as and when we would need it.
What would be your distribution strategy for Aviptadil in case of approval?
We are pragmatic. Aviptadil is aimed for a very targeted costumer base in hospitals. But in any case, we would depend on existing distribution channels in the respective territories. Having said this, we would also be open to offers from interested parties who are willing to value the drug appropriately – especially once we have positive clinical data that convinces the FDA to grant us approval. We will be working pragmatically to find the optimal way to extract the maximum commercial value from the franchise.