EDSA: Important Inflection Points Likely in 2022…

By David Bautz, PhD

NASDAQ:EDSA

READ THE FULL EDSA RESEARCH REPORT

Business Update

Data Readouts for EB05 and EB01 Clinical Trials Expected in 2022

Edesa Biotech, Inc. EDSA is currently conducting two clinical trials for its lead assets EB05, for the treatment of acute respiratory distress syndrome (ARDS) in critically ill COVID-19 patients, and EB01, for the treatment of allergic contact dermatitis. In 2021, the company provided positive interim updates for both trials and we anticipate topline data from both trials in 2022.

EB05

EB05 is currently being investigated in a Phase 2/3 clinical trial in patients hospitalized with COVID-19 with or at risk of developing acute lung injury (ALI) and ARDS. The trial is a randomized, multicenter, double blind, placebo-controlled study taking place across > 40 hospitals (NCT04401475). More than 600 subjects have been enrolled as of December 27, 2021.

In September 2021, Edesa announced positive results from the Phase 2 portion of the trial that included approximately 360 patients, age 24-93, from clinical trial sites in the U.S., Canada, and Columbia. The independent Data and Safety Monitoring Board (DSMB) identified an important treatment effect regarding 28-day mortality in which treatment with EB05 in addition to standard of care (SOC) resulted in a 68.5% reduction in the risk of dying when compared to placebo and requested that the study be preemptively unblinded. The Phase 2 portion of the study was originally designed to guide the patient stratification and statistical powering for the Phase 3 trial, however the DSMB noted that "a clinically important efficacy signal" was detected along with the fact that the study "met its objective". In addition, the DSMB recommended that the study continue into a Phase 3 confirmatory trial.

In October 2021, Edesa announced additional results from the Phase 2 portion of the ongoing Phase 2/3 clinical trial of EB05:

• The DSMB noted a mortality benefit in 136 hospitalized COVID-19 patients receiving supplemental oxygen (28-day mortality rate of 8.2% [5/61] in the EB05 + SOC arm vs. 12.0% [9/75] in the placebo + SOC arm; HR=1.52). Among this group there was a strong signal for patients with severe acute respiratory distress syndrome (ARDS) at baseline (defined as PaO2/FiO2 < 100 mm Hg). The DSMB concluded that patients with severe ARDS receiving supplemental oxygen at baseline had "a clinically important efficacy signal" with a 28-day mortality rate of 16.7% (2/12) in the EB05 + SOC arm vs. 42.9% (6/14) in the placebo + SOC arm. This corresponds to a 66.0% reduction in the risk of death at Day 28 for subjects treated with EB05 + SOC compared to placebo + SOC (HR=2.94, 95% CI: 0.59 – 14.60; P=0.19) when using the Cox Proportional Hazard Model.

• Efficacy signals were also noted in the 190 patients with mild to moderate ARDS at baseline (28-day mortality rate of 7.8% [7/90] in the EB05 + SOC arm vs. 11.0% [11/100] in the placebo + SOC arm; HR=1.46). Among this group, patients with mild to moderate ARDS receiving oxygen beyond supplemental oxygen had a 28-day mortality rate of 10.8% (4/37) in the EB05 + SOC arm vs. 20.5% (8/39) in the placebo + SOC arm. This corresponded to a 50.7% reduction in the risk of dying when comparing the EB05 + SOC arm to placebo + SOC (HR=2.03, 95% CI: 0.61-6.74, P=0.25). In this cohort there was also an increase of 6.1 days alive and free of invasive mechanical ventilation at 28 days when comparing the EB05 + SOC arm to placebo + SOC.

Edesa is currently in discussions with the regulatory authorities in the U.S., Canada, and Columbia regarding the final parameters for the Phase 3 portion of the study (e.g., population size, demographics, etc.). In the meantime, the trial is continuing to enroll patients, with an emphasis on the most critically ill. The company hopes to be able to include previously enrolled critically ill patients in the final Phase 3 cohort, which should expedite the trial timeline. We anticipate an update from the company regarding timelines, number of patients, and other aspects of the trial in the coming weeks.

EB01

In June 2021, Edesa announced positive interim results for EB01 in the Phase 2b clinical trial in patients with allergic contact dermatitis (ACD) (NCT03680131). The initial study cohort consisted of 46 subjects randomized 1:1 to receive treatment with either EB01 2.0% cream or placebo and 36 (n=18 EB01; n=18 placebo) completed the study follow-up and were used in the interim analysis.

The study's Data Safety Monitoring Board (DSMB) performed a blinded analysis of the data and reported an approximately 1.7-fold difference between treatment groups for the primary efficacy endpoint, the mean percent change from baseline on the Contact Dermatitis Severity Index (CDSI). CDSI uses physician's visual assessment of dryness, scaling, redness, pruritis, and fissures, with each scored from 0 (none) to 3 (severe).

In addition, the DSMB reported an approximately 1.8-fold difference between the treatment groups in the Investigator's Static Global Assessment (ISGA), a key secondary efficacy endpoint. The ISGA uses a five-point rating scale: 0 – clear, 1 – almost clear, 2 – mild, 3 – moderate, 4 – severe disease. Success on the ISGA is defined as a two-point reduction from baseline and a final ISGA score of 0 or 1. The ISGA is commonly used for FDA-regulated registration trials in dermatitis.

For both the CDSI and ISGA, double-digit absolute differences were seen between the treatment groups and no serious treatment-related adverse events were reported for either treatment group.

The company recently announced more than 75% of the patients planned for the primary cohort of the trial have been enrolled. While difficult to project the pace of enrollment given the ongoing pandemic, the company may be in a position to announce topline results in 2022.

Financial Update

On December 28, 2021, Edesa announced financial results for fiscal year 2021 that ended September 30, 2021. There were no revenues reported for fiscal year 2021 compared to revenues of $0.33 million, which was derived from the sale of product inventory obtained in the reverse merger in June 2019. There were no cost of sales and services in fiscal year 2021 compared to $0.02 million for fiscal year 2020, due to the sales of product inventory obtained in the reverse merger acquisition. R&D expenses in fiscal year 2021 were $18.0 million, compared to $3.3 million for fiscal year 2020. The increase was primarily due to increased expenses associated with the clinical trials of EB01 and EB05, drug product expenses, and noncash share-based compensation. G&A expenses totaled $5.7 million for fiscal year 2021 compared to $3.4 million for fiscal year 2020. The increase was primarily due to increased salary and personnel expenses, noncash share-based compensation, and higher legal and professional services.

As of September 30, 2021, Edesa had approximately $7.8 million in cash and cash equivalents. Subsequent to the end of the fiscal year, Edesa raised approximately $1.3 million from the issuance of shares under the at-the-market (ATM) program. We estimate that the company has sufficient capital to fund operations through mid-2022, and the company is continuing to evaluate various strategic funding options, including non-dilutive sources for the development of COVID-19 therapeutics. As of December 27, 2021, Edesa had approximately 13.5 million shares outstanding and when factoring in stock options and warrants a fully diluted share count of approximately 16.0 million.

Conclusion

We look forward to additional updates from Edesa regarding the advancement of EB05 and EB01, particularly the anticipated timelines for each of the trials and when topline data is anticipated. As we await word on the ongoing trials we have made no changes to our model and our valuation remains at $20 per share.

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