Biodexa Pharmaceuticals — In a period of transition

Biodexa’s FY23 results reflected the company’s efforts towards repositioning itself as a therapeutics business, away from its traditional focus on drug delivery. As it is in the clinical stages of development, revenue continued to be limited to collaboration income, and was reported at £0.38m, down 46% y-o-y from £0.70m in FY22. This was completely attributable to Biodexa’s R&D collaboration with Janssen, under which the company was assigned to work on maximizing drug loading, and optimizing in vitro release duration, of Janssen’s experimental large molecules using Biodexa’s Q-Sphera technology platform. Management has indicated that this agreement has now ceased, and we do not expect the company to recognize any further income on this front.

The effect of the restructuring and cost control initiatives (announced in March 2023) were also reflected in the lower operating expenses. The FY23 R&D expenses were 20% lower than the previous year (£4.07m, vs £5.11m in FY22) as the company pulled back on its expansion initiatives on the internal drug delivery platforms (Q-Sphera, MidaSolve and MidaCore), resulting in a £0.87m reduction in pre-clinical expenses. This was aided further by a £0.39m reduction in R&D specific personnel expenses, due to a lower headcount. This decline was partially offset by a £0.41m increase in expenses relating to the MTX-110 clinical program (the Phase I Magic-G1 study in rGBM and the second Phase I study in DMG). Overall, R&D as a percentage of operating expenses declined to 48% (vs 58% in FY22). Looking ahead, we expect core R&D expenses to increase in FY24 with the planned initiation of the tolimidone Phase II trial, continued development work on advancing MTX-110 to proof-of-concept (including a potential IND filing in DMG) and ongoing pre-clinical efforts (including MTD217).

Administrative expenses were broadly flat at £4.34m (vs £4.54m in FY22) and included £2.06m in personnel expenses (down 19% from £2.52m in FY22, following workforce reduction) and £1.31m in legal and professional fees related to the acquisition of global rights to tolimidone, fund-raising efforts and shelved acquisitions (ie Bioasis). The comparable figure in FY22 was £1.36m, related to the terminated acquisition of Bioasis in December 2022 and a £0.4m provision against payment made and loan commitments to Bioasis. We note that Biodexa had extended a £0.08m loan to Adhera Therapeutics (the previous license holder of tolimidone), which was written-off following the deal completion in December 2023. Overall, the operating loss for the year declined by 10% y-o-y to £8.01m (vs £8.93m in FY22). The net loss was reported at £7.08m (vs £7.66m in FY22).

Operating cash burn for FY23 broadly mirrored the FY22 trend (net outflow of £6.82m vs £7.05m in FY22). The company finished FY23 with a gross cash balance of £5.97m, which was supported by US$15.3m raised across three rounds of funding: US$6m through a private placement (February 2023), US$3.3m through a registered direct offering (May 2023) and a US$6m registered offering in connection with the acquisition of tolimidone (refer to our previous note for more details). Based on the company’s internal forecasts, management expects the available cash balance to provide an operational runway into Q424 (provided clinical activities advance as planned). Management has communicated that this would be sufficient for the company to deliver two sets of pre-clinical data (which we assume to be pre-clinical data for MTD217 and in vivo data for tolimidone) and three sets of clinical data (which we believe will include PFS data from the rGBM study – cohort A, expected in Q224). Management anticipates the need to raise further external funding prior to Q424 to advance its development programs.

2023 was a tumultuous year for Biodexa, with operational constraints exacerbated by capital market tightness and overall biotech sector softness. In March 2023, the company decided to pivot its strategic positioning from being a pure-play drug-delivery company, to one focused on the development of therapeutics for diseases areas with significant unmet need. A key part of this strategy was bolstering the company’s pipeline in an effort to produce incremental upside opportunities and diversify risk. The acquisitions of the pre-clinical asset MTD217 (in March 2023) and tolimidone (in December 2023) formed part of this strategy, and the company will continue to seek further deals opportunistically. Exhibit 1 presents Biodexa’s current R&D pipeline.

Tolimidone is a small molecule selective activator of lyn kinase, a protein that modulates insulin sensitivity and regulates blood glucose in fat cells by potentiating insulin receptor activation and the insulin receptor substrate-phosphatidylinositol-3 (IRS-PI3K) signaling pathway. While this property has been widely tested and demonstrated in both pre-clinical and clinical studies (for type 2 diabetes), market interest has been piqued by the drug’s potential disease-modifying properties (ie promotion of beta cell survival and proliferation in pancreatic islets). Early pre-clinical studies (both in vitro and in vivo) in T1D, conducted by University of Alberta Professor Dr Jean Buteau, had shown that tolimidone intervention not only prevents beta cell degradation, but also induces proliferation in beta cells isolated from human cadavers, signaling possible regenerative properties; we believe this was a key motivator for Biodexa’s acquisition of the drug.

Curative or disease-modifying treatments are widely believed to be the holy grail of therapeutic intervention, although such successes have been few and far between. While there are currently no curative treatment options for T1D, immunotherapies, cell therapies and gene therapies are being developed as potential treatment approaches, aiming to either prevent or reverse the underlying autoimmune process, as well as restore beta cell function. We also highlight that an area receiving increasing attention is that of preventative treatments, aimed at early-stage T1D patients who still have functioning insulin-producing beta cells. The first treatment to be approved in this category was the CD3-directed monoclonal antibody Tzield (teplizumab-mzwv; developed by Provention Bio and acquired by Sanofi for $2.9bn in 2023), and we believe that, contingent on clinical progression, tolimidone could be positioned similarly to Tzield, targeting newly diagnosed T1D patients.

Although previous pre-clinical studies have hinted at the disease-modifying potential of tolimidone, we note that data from an in vitro experiment conducted on behalf of the company by a contract research organization (announced in February 2024) was inconclusive on these claims and did not correlate with previously noted results. While we acknowledge that this was unexpected and somewhat of a setback for the program, Biodexa remains confident and is planning a follow-up in vitro study to re-evaluate the results. Management also plans to go ahead with the initiation of the Phase IIa open-label dose-confirmation study, which will recruit 15 patients with T1D over three months (expected to commence in Q224). The study endpoints will be change in C-peptide levels (a marker for insulin), HbA1c (indicator of blood glucose levels) and number of severe hyperglycaemic events. If the results are positive, this will be followed by a Phase IIb double-blinded, placebo-controlled study in 40–45 patients using similar study objectives. Provided Biodexa stays on track for a Q224 clinical study initiation, we expect the company to be funded to data readouts in Q324.

MTX110 (a solubilized formulation of panobinostat, traditionally used in the treatment of relapsed/refractory multiple myeloma) is Biodexa’s legacy asset, and is being developed using its drug delivery platform MidaSolve. The drug is currently in clinical trials for three aggressive and rare brain cancers: rGBM, DMG and medulloblastoma (all ongoing studies are investigator-sponsored).

The company recently reported positive topline data from a second Phase I clinical trial in DMG, conducted by Columbia University. The study included nine patients across three dose cohorts (30uM, 60uM and 90uM), with the drug administered through an implanted convection enhanced delivery (CED) catheter. The median OS of patients in the study was 16.5 months, compared to 10.0 months in a comparable cohort (historical study; n=316) with standard of care (SoC). These results further consolidate the favorable data from the first Phase I study (data reported in October 2020) conducted by the University of California, San Francisco (UCSF), which reported a median survival of 26 months for the seven patients treated (this trial used a different CED system). We caution that while these results are encouraging, these studies were not powered for efficacy and the results would need to be reproduced in larger clinical trials to establish clear benefits. Nevertheless, this data is encouraging enough for Biodexa to warrant continued development, and the company plans to file the IND with the FDA in Q324 to conduct a Phase II study.

DMG is an extremely rare and very aggressive form of pediatric brain cancer, with around 1,000 cases worldwide per year and a median survival rate of less than 10 months. Due to the location of the tumor, surgery is not possible, and the SoC remains radiotherapy.

The rGBM Phase I study (MAGIC-G1) commenced patient enrollment in November 2022, across two cohorts (A and B) with a minimum of four patients each, with cohort A receiving MTX110 as monotherapy, and cohort B receiving MTX110 in combination with lomustine (a cytotoxic chemotherapy drug approved for patients with rGBM). Recruitment for cohort A was completed in October 2023, and PFS data from this cohort is expected in Q224, marking a major inflection point for the company, in our view. Patient enrolment in cohort B is expected to commence this year. Like DMG, this study also utilizes a CED system to deliver therapeutic doses of the drug directly to the tumor site. We highlight that, unlike in other cancer indications, chemotherapy drugs have not been as successful in brain cancers due to their inability to cross the blood-brain barrier. By using a CED system, Biodexa aims to circumvent this issue, and maximize treatment efficacy.

GBM is the most common and most aggressive form of brain cancer in adults (incidence of 3.21 per 100,000 population), and continues to have a poor prognosis, with a survival rate of three to nine months following recurrence. Current SoC includes surgical resection, followed by radiotherapy and chemotherapy (temozolomide; TMZ). The GBM treatment market was valued at $2.71bn in 2023, and is projected to grow to $5.65bn by 2032 (a compound annual growth rate of 8.5%).

Biodexa is also evaluating MTX-110’s efficacy in medulloblastoma in a pilot Phase I exploratory study led by the University of Texas. Unlike the other two indications, in this study the drug will be directly administered into the fourth ventricle, allowing it to circulate throughout the central spinal fluid (CSF). Unlike other brain cancers, medulloblastoma (which starts in the cerebellum) tends to metastasize to different locations in the brain and spinal cord, spreading through the CSF. This condition is rare, with 435 patients diagnosed each year in the US, although the five-year survival rate is fairly high at around 80%. Children comprise c 70% of all medulloblastoma cases.

MTD217 (MTX110 in combination with an OXPHOS inhibitor) is Biodexa’s pre-clinical program, targeting leptomeningeal disease (LMD), a secondary metastatic cancer where the cancer cells invade the CSF and central nervous system; the condition has a poor prognosis (average survival of three to six months). According to available reports, around 5% of all cancer patients develop LMD, highlighting the sizeable patient population. MTD217 is a water-soluble drug formulation that can be delivered directly to the tumor microenvironment (maximizing efficacy and limiting off-target toxicities) and is being designed to simultaneously target key metabolic pathways: glycolysis/Warburg effect and the oxidative phosphorylation (OXPHOS) pathway, used by cancer cells to generate energy for growth and proliferation. Management plans to generate pre-clinical data (in vitro and in vivo) for the drug in 2024 to support an IND application.