DFFN: Encouraging Data for TSC in COVID-19 Patients…

By David Bautz, PhD

NASDAQ:DFFN

READ THE FULL DFFN RESEARCH REPORT

Business Update

Encouraging Trends in COVID-19 Trial

On May 10, 2021, Diffusion Pharmaceuticals, Inc. DFFN announced the final results from the Phase 1b clinical trial of trans sodium crocetinate (TSC) in hospitalized COVID-19 patients. The company had previously announced topline results showing that there were no dose-limiting toxicities or serious adverse events for any dose (0.25 mg/kg, 0.5 mg/kg, 1.0 mg/kg, or 1.5 mg/kg) with dosing every six hours for a minimum of five days and up to 15 days.

The trial included a number of secondary and exploratory endpoints, including time to improvement in WHO ordinal scale by day 7 and through day 29, time on oxygen supplementation, and length of hospital stay. The study was not powered for statistical significance or to evaluate efficacy, however the patients in the 1.5 mg/kg cohort had improved outcomes compared to patients in the lower dose cohorts. Importantly, no patients required dialysis or developed acute kidney injury. In addition, there were no reports of pulmonary embolism or deep vein thrombosis. There was one death in the study, a patient who received the lowest dose of TSC, however the safety monitoring committee (SMC) determined the death was not drug related. The SMC recommended testing higher doses of TSC along with a continuous intravenous infusion before conducting registration studies.

Oxygenation Trials

With encouraging data in hand from the COVID-19 trial, Diffusion will now turn its attention to three previously planned clinical trials to gain insight into the ability of TSC to affect tissue oxygenation.

• Transcutaneous Oxygen Monitoring (TCOM) Study: TCOM measures local oxygen tension in tissue below the skin and provides an objective measure of oxygen release and diffusion into tissues from vasculature (tcpO2). This study is designed to evaluate the exposure-reponse relationship between TSC and oxygenation through direct measurement of oxygen movement in tissues. It is a randomized, double blind, placebo controlled, pharmacokinetic and pharmacodynamic study in which thirty healthy volunteers will receive 100% O2 before and after dosing with one of five doses of TSC or placebo. The objectives of the trial are to identify the time to increase in tcpO2 following a TSC dose along with magnitude and duration of the effect. Results from this study will inform dose selection for future TSC trials.

• TSC Induced Hypoxia Trial: This will be a double blind, randomized, placebo controlled trial to evaluate the effects of TSC on maximal oxygen consumption (VO2) and partial pressure of blood oxygen (PaO2) in normal healthy volunteers exposed to simulated altitude conditions that induce hypoxia. The primary endpoints will examine the change from baseline in VO2 and PaO2 after receiving a single intravenous dose of TSC following incremental levels of physical exertion in hypoxic and hypobaric conditions (i.e., simulated altitude). The study will be statistically powered to evaluate the difference in effect of TSC versus placebo on oxygen availability and consumption.

• Diffusing Capacity of the Lungs (DLCO) Study: DLCO is a pulmonary function test that measures gas diffusion (carbon monoxide, CO, as a surrogate for oxygen) from the lungs to the bloodstream and is a standard tool for examining pulmonary disease etiology. This trial will be a double-blind, randomized, placebo-controlled study which will evaluate the effects of TSC on DLCO in patients with previously diagnosed interstitial lung disease who have a baseline DLCO test result that is abnormal. The study will be statistically powered to evaluate the difference in effect of TSC versus placebo on improvement in DLCO.

The TCOM study has completed enrollment and dosing and we anticipate data by the end of the second quarter of 2021. The induced hypoxia and DLCO studies should initiate and be completed in the second half of 2021. For each study, we anticipate topline results approximately one to two months following completion of the study.

Financial Update

On May 10, 2021, Diffusion announced financial results for the first quarter of 2021. As expected, the company did not report any revenues in the first quarter of 2021. R&D expenses for the three months ending March 31, 2021 were $2.9 million, compared to $1.5 million for the three months ending March 31, 2020. The increase was primarily due to costs associated with the COVID-19 and TCOM trials. G&A expenses were $1.7 million in the first quarter of 2021, compared to $1.4 million in the first quarter of 2020. The increase was primarily due to increased professional fees, salaries, and non-cash stock-based compensation.

The company exited the first quarter of 2021 with approximately $46.6 million in cash and cash equivalents. This was due in part to a public offering in February 2021 in which Diffusion raised net proceeds of approximately $31.2 million. As of May 7, 2021, Diffusion had approximately 101.9 million shares outstanding and, when factoring in stock options and warrants, a fully diluted share count of approximately 111.6 million.

Conclusion

The positive trends seen in the secondary and exploratory endpoints of the COVID-19 trial are very encouraging and we hope to see similar positive results in the upcoming tissue oxygenation trials. Diffusion is sufficiently financed to conduct the planned trials and we believe by the end of 2021 the company will have enough data in hand to decide which indication(s) to pursue. With no changes to our model our valuation remains at $2.00.

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