Lipocine: TLANDO Might Become A Potential TRT Option In Patients With COVID-19 Infection (NASDAQ:LPCN)


In our follow up article on Lipocine Inc. (LPCN), we will focus on the potential opportunity of its oral testosterone replacement treatment under the brand name TLANDO for patients infected with the COVID-19. Our bullish thesis has been built around the fact that TLANDO might be used as a testosterone replacement treatment in COVID-19 patients, which are dealing with low testosterone baseline levels. If such COVID-19 patients do not receive any kind of testosterone replacement treatments then they face a higher risk of serious complications or even mortality during the clinical course of the disease. There are also other available TRT options on the market, but they require a lengthy titration process and some of them also come with black box warnings. Therefore, if TLANDO receives a green light during the upcoming PDUFA event or if it gets approved for the testosterone-related treatment of the COVID-19 patients in the near future then the company has an enormous commercial opportunity. In that case, we anticipate a double-digit or even a triple-digit increase in the stock price given that the stock has now only a market cap of approximately $78.8 million.

The COVID-19 Impact On Testosterone Levels

“Published mortality data consistent shows that two-thirds of ∼45,000 U.K. COVID-19 (SARS CoV-2) deaths are in men with rates under age 85 years of 50.6 of 100,000 for men in the United Kingdom, vs. 25.5 of 100,000 in women.”

(Source: Androgens: Clinical Research and Therapeutics)

Based on statistical data, the COVID-19 infection rate is way higher in men under the age of 85 compared to women. Health professionals are considering the key differentiator might be in the sexual hormone – testosterone. Several studies have shown that lower baseline testosterone in men might lead to a worse clinical course of the disease.

“Testosterone is associated with the immune system of respiratory organs, and low levels of testosterone might increase the risk of respiratory infections. Low testosterone is also associated with infection-related hospitalization and all-cause mortality in male in ICU patients, so testosterone treatment may also have benefits beyond improving outcomes for COVID-19,” Professor Çayan explains.

(Source: Science Daily)

In general, testosterone has an important function for overall strength-related activities of our body, especially when it comes down to the functionality of respiratory muscles. It is also a well-known fact that testosterone levels reduce with age, therefore the older men population of over 65 years comes at higher risk.

“A study of patients hospitalized due to COVID-19 suggests that the disease might deteriorate men’s testosterone levels. The study found that as men’s testosterone level at baseline decreases, the probability for them to be in the intensive care unit (ICU) significantly increases”

(Source: Science Daily)

Let’s take for example a patient with COVID-19 infection who is 75 years old and has a normal diet and active lifestyle. Given that he has already low baseline testosterone levels because of its age, the COVID-19 infection will further deplete his testosterone levels over the next 2 or 3 weeks of disease progression. Unless, this patient has a very strong genetic testosterone production, which can produce enough testosterone levels despite the COVID-19 infection he might be put on a ventilator for breathing support.

“The gradual decline in total and free testosterone levels has a direct correlation with serious pulmonary complications requiring advanced care (ICU, ventilators, ECMO, etc.)”

(Source: Elsevier Public Health Emergency Collection)

Very low testosterone levels might result in a lack of strength of respiratory muscles. Therefore we might be basically unable to produce a physical activity of breathing which could result in a lack of oxygen in our body. That is also one of the reasons why ventilators are so critical for older patients to be able to survive the worst scenario progression of the COVID-19 infection. As we are familiar with the basic relationship of the COVID-19 infection and the testosterone level, a logical solution might be an injection of testosterone in our body to increase testosterone levels.

“A recent meta-analysis concluded that “low testosterone levels in men with T2DM are associated with increased cardiovascular mortality” and that “testosterone therapy is associated with a reduction in all-cause mortality and cardiovascular events.”

(Source: Androgens – Clinical Research and Therapeutics)

We have already established therapies on the market or so-called testosterone replacement therapies (“TRT”). Currently, there are available TRT in various forms including intranasal, oral, tables, and even injections. Latter might be a painful experience for some patients and some of them might even fear receiving TRT using injections.

(Source: HC Wainwright Conference Presentation)

According to the figure above, the biggest issue with current TRT options on the market is for physicians to find an appropriate dose for patients therefore the use of titration is necessary. Therefore patients might undergo multiple treatments over the course of 3- 6 months, which might be a painful experience and in the end might not even reach any kind of efficacy. In addition, as it is a secondary exposure of testosterone, which has been labeled as a black box warning by the FDA. In addition, some patients might experience an increased level of testosterone due to wrong sampling doses during a titration phase. That could lead to other serious SAE-s including heart attack or stroke and in the worst-case scenario even death. Lipocine is trying to solve those issues by developing oral TRT under the brand name TLANDO.

TLANDO

“TLANDO™ is an oral testosterone replacement therapy product candidate containing Testosterone Undecanoate (TU) that is designed to help restore normal testosterone levels in males for conditions associated with a deficiency or absence of endogenous testosterone.”

(Source: Lipocine Website)

TLANDO is primarily targeting patients diagnosed with hypogonadism, which is a disease that results in the diminished production of the overall testosterone LE in the body. The PDUFA date for TLANDO approval for hypogonadism indication was already set on 28th August 2020 but has been postponed due to unknown reasons. Most likely, the FDA decision was postponed due to the COVID-19 pandemic, as the FDA has been busy these days bringing vaccines to the market or any other related drugs or therapies, which could mitigate the symptoms of elderly patients with COVID-19 infection. Nevertheless, we anticipate that the particular PDUFA decision for TLANDO will come out before the end of 2020, which we view as one of the most important catalysts for this stock.

(Source: HC Wainwright Conference Presentation)

According to the figure above, the oral TRT in the case of TLANDO compared to other TRT alternatives would be way more convenient for both physicians and patients. Patients could receive an effective dose already at the start of therapy. An important advantage of TLANDO is the fact that patients will not be required to undertake any kind of risk during a so-called titration process. Consequently, that would reduce the overall costs of TRT as fewer visits to hospitals and physician examinations would be necessary to find the efficacious dose.

In our view, that creates a potential commercial opportunity for the company as the sales representatives would have an easier task to pitch the TLANDO product to physicians. Further, the mass production and distribution of the drug are way easier when it comes to an oral format compared to injections. In our view, if the FDA prescribes TLANDO as an effective TRT option to prevent the worse than an expected clinical course in elderly patients with COVID-19 infection, then the company faces an enormous commercial opportunity.

(Source: CDC)

Unfortunately, the US has reached slightly less than 100,000 new daily COVID-19 cases over the last couple of days. It is hard to say for us but the COVID-19 pandemic will most likely persist before there is an available vaccine on the market. Therefore the number of daily COVID-19 cases will most likely continue to grow rapidly before there is reached herd immunity. Unfortunately, that creates an even higher addressable market for the LPCN, in the case TLANDO gets approved as a TRT option for patients with COVID-19 infection

In terms of risks, we believe that any kind of COVID-19 related clinical studies should result in higher costs. For instance, LPCN is a micro-cap biotech company that doesn’t have all of the necessary funds to fund extensive clinical studies including thousands of patients in various sites in the U.S., which might be a requirement to bring the COVID-19 related drug or therapy to the market.

(Source: SEC Filing)

As of 06 30 2020, the company reported cash and cash equivalents plus marketable investment securities of approximately $18.2 million. In our view, that might not be sufficient enough to fund the COVID-19 related studies on a standalone basis, therefore the company might be forced to issue new shares or to co-operate with a large pharma name like Pfizer (PFE) or Johnson & Johnson (JNJ).

In addition, Lipocine is about to present the data from its recent studies using TLANDO treatment in hypogonadal men on November 9, 2020 from 7:00 to 9:00 p.m. EST.

“Lipocine will present results from studies suggesting that low testosterone levels may play an important role on the clinical outcomes of COVID-19 in men as well as the safety and efficacy of TLANDO™, an oral testosterone replacement therapy without a dose titration requirement, at the 21st Annual Fall Scientific Meeting of the Sexual Medicine Society of North America (“SMSNA”).”

(Source: Press Release)

We recommend our readers who are closely following this stock to watch this virtual event, as positive results might shape the future stock and business performance of the company.

SA Quant Rating

(Source: Seeking Alpha)

LPCN has an average quant rating of 2.91 out of 5.0, which makes it a ‘neutral’ rating. If we take a look at Quant Rating Breakdown, on the right side of the figure above, momentum and growth are the biggest contributors as they are both rated A or A+. Given that LPCN is an early-stage biotech company, we find value, growth, and profitability metrics a bit irrelevant at this point. Therefore we have decided to focus on the SA Quant momentum metric. We believe that an analysis of the momentum combined with the technical analysis might be the most useful tool to predict the future performance of the early-stage biotech stock. Once the company brings commercial products to the market and starts generating revenue, then we will place more weight on other SA Quant metrics.

(Source: Seeking Alpha)

According to the figure above, the stock price of LPCN has more than doubled over the last 6M and 9M. However, over the last 3M, the stock price has declined by approximately 20%, given that we have been facing lately a technical correction in the major stock market indexes due to the resurgence of the COVID-19 infections in the U.S.

(Source: Seeking Alpha)

This chart indicates that the stock has underperformed both the biggest ETF on the market – the SPDR S&P Biotech ETF (XBI) and the S&P 500 market index (SPX) by a significant margin over the last year.

(Source: Seeking Alpha)

Likewise, LPCN has underperformed both XBI and SPX over the last 5 years, given that shareholders of Lipocine have lost almost 90% during a particular period. Now let’s take a deeper look into technical indicators using RSI and moving averages.

(Source: Seeking Alpha)

According to the figure above, the current SMA (50D) is at 1.42 as of 10/29/2020 or roughly 13.6% higher than the current stock price. It should act as a near term resistance in the case stock price rebounds from the present short-term bearish trend starting back at the end of August 2020. On the other hand, we see the SMA (200D) level as a great entry point for investors who are waiting for a technical correction in the stock price. In our view, one trading strategy might be to wait for a potential major sell-off in the key U.S. stock market indexes due to a second wave of the COVID-19 infections or any kind of political issues surrounding the upcoming presidential elections. That could drive the stock price of LPCN lower towards the SMA (200D) level of 1.01 or roughly 25% lower than the current stock price. Contrarily, some investors who already own the stock might use the SMA (200D) level as a stop-loss point in the case LPCN reports worse-than-expected clinical trial results or a negative TLANDO related decision by the FDA in the near future.

(Source: Seeking Alpha)

LPCN has an RSI (14-day) value of 33.17 as of 10/29/2020, which is close to being undervalued. If we take a look at historical RSI data over the last 2 months, we can see that it has been trading in the range of 30 – 50. Therefore we believe that as the recent market sell-off has driven the stock price of LPCN lower, RSI shows us that this creates a potential buying opportunity. We believe that biotech companies should be immune to the overall performance of the major stock market indexes and especially to all of the developments related to the COVID-19 pandemic. Based on our analysis in this article, we have even placed a bullish thesis surrounding the COVID-19 pandemic, as LPCN has a realistic chance to bring the TLANDO product as a TRT for COVID-19 patients.

Conclusion

To sum it up, in the case of positive data during the upcoming TLANDO related study in hypogonadal men we would be bullish about the future performance of the stock price in the near future. As we have previously mentioned in our article, several health experts have already pointed out in their studies a strong relationship between the low baseline level of testosterone and the worse disease progression in elderly men patients with COVID-19 infection. Therefore a TRT remains a reasonable option to increase the level of testosterone in a high-risk group of elderly men patients. Lipocine has realistic chances to bring the oral TRT to the market to increase the baseline testosterone levels and help a particularly high-risk group to off-set a negative clinical course of the disease. Given that it is a binary option event in a micro-cap biotech company, we do not recommend initiating any positions for our readers who are more risk-averse investors looking for long-term steady returns. However, a TLANDO related trade for patients infected with the COVID-19 might be more suitable for high-risk investors who are looking for high double-digit returns in a short period of time but are not afraid to maybe losing everything if the company goes bankrupt in the near future. In terms of key risks we see them as the following, (1) excessive share dilution, (2) upcoming PDUFA negative decision for TLANDO, (3) TLANDO might not show any positive significant results as a testosterone replacement therapy to reduce severe symptoms of male patients with the COVID-19 infection.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article does not constitute a bid or an invitation to bid for the purchase or sale of the financial instruments in question. Neither is it intended to provide any kind of personal investment advice, therefore, readers should conduct their own due diligence. Investing in financial instruments may always be associated with risk. Please contact your personal financial or investment advisor for any additional questions or materials regarding this article. We shall not be liable for any type of damage or loss arising from the use of the information contained in this article.

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