OTC:MSCLF
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Business Update
SAT-3247 Enhances Muscle Repair in Canine DMD Model
On August 12, 2024, Satellos Biosciences Inc. (OTC:MSCLF) announced new results from a canine model of Duchenne muscular dystrophy (DMD). The following figure gives an overview of the study, which utilized two eight-month-old dogs with genetically confirmed Duchenne. Canine muscular dystrophy aligns well with the progressive course of patients and is more severe than the mdx mouse model (Kornegay, 2017; McGreevy et al., 2015).
The following slide shows histology of muscle from a healthy comparator animal, a Duchenne canine (DMD comparator), and samples from the same animal both before and after SAT-3247 treatment. The DMD comparator and pre-SAT-3247 samples show dead/dying muscle fibers (stained red) with abnormal muscular architecture while the sample taken following SAT-3247 treatment shows less dead/dying muscle fibers and muscle architecture that is similar to the healthy comparator.
As a way to quantify the improvement in animals treated with SAT-3247, Satellos calculated the regenerative index (RI) based on histological staining as shown in the following image. The index is calculated by identifying the number of new or newly formed muscle fibers divided by the number of dead or dying muscle fibers. Embryonic-like myosin heavy chain (eMHC; blue staining) was used as a marker for new or newly formed muscle fibers as it is expressed in newly forming muscle fibers. Immunoglobulin G (IgG; red staining) was selected as a surrogate marker for dead or dying muscle fibers as it is not possible for IgG to infiltrate a muscle fiber unless it is broken down. The results show an increase in the RI following SAT-3247 treatment. In addition, the table on the right shows a decrease in inflammatory cytokines and in increase in anti-inflammatory cytokines, suggesting an overall decrease in inflammation in the animals.
Lastly, the company performed limb force measurements to quantify any functional change in muscle. The following graphs show the increase in hindlimb flexion force (normalized to body weight) following four months of dosing (each line corresponds to one of the two animals in the study). The company reported that all force measurements were improved by an average of approximately 111% at 2 months and 195% at 4 months.
While there were no control animals in this study, and direct comparisons of results across studies is very difficult to do, we were able to identify studies using the Golden Retriever Muscular Dystrophy (GRMD) model that reported force measurements to help put the above data into context.
Birch et al., 2023: This study tested an AAV-microdystrophin gene therapy in the GRMD model. For body mass corrected tetanic flexion torque increased by 80% for mid/high-dose animals compared to 17% for control/low-dose animals.
Kornegay et al., 2014: This study tested Nemo Binding Domain (NBD) protein in the GRMD model as a means to inhibit NF-κB signaling and promote muscle healing. Results for tetanic flexion force showed no change in NBD treated animals.
Liu et al., 2004: This study examined the effect of prednisone in GRMD dogs age 2 months to 6 months. A dose-dependent decrease in maximal isometric flexion forces was seen in prednisone-treated GRMD dogs.
As seen from the above references, there appears to be a wide range of outcomes for flexion force measurements in studies with GRMD dogs. What we find most encouraging about Satellos’ data, besides the substantial increase in force measurements, is the fact that the animals were older than those typically used in these studies (the animals entered the Satellos study at around 8 months of age), an age at which there is no record of spontaneous improvement that we are aware. We understand skepticism is warranted based on the fact that there were only two animals in the study, however the fact that positive results were seen in a study that was undertaken simply to examine the safety of SAT-3247 in a larger animal model further increases our confidence in in the drug.
SAT-3247 Receives Rare Pediatric Disease Designation
On August 8, 2024, Satellos announced that the U.S. FDA has granted Rare Pediatric Disease Designation for SAT-3247 for the treatment of DMD. SAT-3247 previously received Orphan Drug Designation from the FDA. An important aspect of obtaining Rare Pediatric Disease Designation is that if SAT-3247 is approved, Satellos may be eligible to receive a Priority Review Voucher (PRV), which can be sold to another company. PRVs have been selling over the past couple of years for approximately $100 million each.
Financial Update
On August 12, 2024, Satellos announced financial results for the second quarter of 2024. Net loss for the second quarter of 2024 was CAD$6.0 million, or CAD($0.05), compared to CAD$4.1 million, or CAD($0.04), for the second quarter of 2023. The increase in net loss was primarily due to increased R&D expenses associated with SAT-3247 as well as increased G&A expenses due to increased personnel and professional fees. R&D expenses for the second quarter of 2024 were CAD$4.9 million compared to CAD$1.6 million for the second quarter of 2023. The increase was due to higher salary and management fees, increased preclinical and pre-IND-enabling expenses, and increased CMC expenses. G&A expenses in the second quarter of 2024 were CAD$1.8 million compared to CAD$1.5 million for the second quarter of 2023. The increase was primarily due to higher salary and management fees and increased non-cash stock-based compensation.
As of June 30, 2024, Satellos had approximately CAD$27.7 million in cash, cash equivalents, and short-term investments. As of August 12, 2024, Satellos had approximately 112.8 million shares outstanding and, when factoring in options and warrants, a fully diluted share count of 179.3 million.
Conclusion
While we believe the data presented by Satellos for SAT-3247 has consistently shown the potential for it to make a real difference in the progression of DMD, we aren’t surprised at continued investor skepticism. Up until now, all attempts at a therapeutic intervention for DMD have centered on getting a functional form of the dystrophin protein into muscle cells, with the idea being that it is required for proper muscle function. The approach that Satellos is taking is completely different, and will require a new way of looking at and thinking about treating DMD patients. Satellos is not trying to replace dystrophin but is instead altering the way in which dystrophin-lacking muscle cells regenerate. Muscle fibers without dystrophin are functional but are unable to be repaired properly. SAT-3247 may allow proper repair and regeneration to occur. As a small molecule therapy, it will need to be taken for a patient’s entire life, and conversely can be stopped at any point if need be, unlike gene therapy products. The positive results from the canine study are quite remarkable, and while we understand it was only two animals tested, we believe it is quite unlikely for those results to have been obtained by chance. Based on this data, we are increasing the probability of approval for SAT-3247 in our model, which has increased our valuation to $1.50 and we look forward to the initial healthy volunteer data for SAT-3247 later in 2024.
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