NASDAQ:DWTX
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Business Update
Virios Combines with Wex Pharmaceuticals to Form Dogwood Therapeutics
On October 7, 2024, Virios Therapeutics, Inc. (NASDAQ:VIRI) announced a business combination with privately-held Wex Pharmaceuticals, Inc. to form Dogwood Therapeutics, Inc. (NASDAQ:DWTX). The combined company will be focused on the clinical development of three assets: Halneuron®, which is currently in a Phase 2b clinical trial for the treatment of chemotherapy-induced neuropathic pain (CINP); IMC-1, a Phase 3-ready asset for the treatment of fibromyalgia; and IMC-2, which is currently in a Phase 2 trial for the treatment of Long COVID.
On October 9, 2024, the company’s name changed from “Virios Therapeutics, Inc.” to “Dogwood Therapeutics, Inc.”, a 1:25 reverse split occurred, and the stock began trading on the Nasdaq under the ticker DWTX. Dogwood will be led by Chief Executive Officer Greg Duncan; Chief Medical Officer Mike Gendreau; Senior Vice President Operations Ralph Grosswald; Chief Financial Officer Angela Walsh; and Vice President Manufacturing Meng Zhou.
Halneuron®
The lead asset for Dogwood is Halneuron (tetrodotoxin, TTX), a sodium channel blocker currently in a Phase 2b clinical trial for the treatment of CINP. TTX was originally discovered in the pufferfish and subsequent research has identified the toxin in 13 phyla (in both Eukarya and Bacteria) that includes both marine and terrestrial eukaryotes (Lago et al., 2015). As a natural poison, TTX is extremely effective and is the most potent non-peptide neurotoxin known. It blocks the influx of sodium through voltage-gated sodium channels (NaVs), thereby preventing the initiation and propagation of action potentials in almost all neurons and muscle cells (Stevens et al., 2011).
Mammals possess nine voltage-gated sodium channels, NaV1.1-NaV1.9. TTX binds to NaV1.1, NaV1.2, NaV1.3, NaV1.4, NaV1.6, and NaV1.7 (Nieto et al., 2012). NaV1.7 is expressed in all types of dorsal root ganglion (DRG) neurons, sympathetic neurons, Schwann cells, and neuroendocrine cells (Catterall et al., 2005). It is responsible for the perception of pain, which is supported by multiple lines of evidence. Individuals with loss-of-function mutations in the SCN9A gene (which encodes the alpha-subunit of NaV1.7) experience a complete inability to sense pain (Cox et al., 2006) while those with a gain-of-function mutation in SCN9A experience erythromelalgia (Dib-Hajj et al., 2005). In animal models, NaV1.7 nociceptor-specific knockout mice showed increased mechanical and thermal pain thresholds (Nassar et al., 2004). These results led researchers to hypothesize that TTX could be a potential therapeutic to control pain.
Halneuron Clinical Trials
The latest clinical trials investigating Halneuron include a Phase 2 cancer related pain (CRP) study and a Phase 2 CINP trial.
Phase 2 CRP Trial
This was a randomized, double blind, parallel design, multicenter trial that enrolled 165 patients with moderate to severe inadequately controlled CRP. All patients were on standard of care pain management. Halneuron or placebo was administered twice a day for four days and all patients recorded their pain response from days 5-8 (early post-injection period) and from days 9-15 (late post-injection period). The results showed a statistically significant improvement in pain outcomes for Halneuron, with 51% of Halneuron patients experiencing a ≥30% reduction in pain compared to only 35% in the placebo group, as shown in the following image.
For Global Impression of Pain Change, 55% of Halneuron patients reported an improvement in pain compared to 24% of placebo patients. Conversely, 70% of placebo patients reported no change or worse pain compared to only 37% of patients. In addition to a positive pain response, the duration of pain relief was much higher for Halneuron patients, as shown in the following figure. The average pain response for Halneuron responders was 57.7 days compared to 10.5 days for placebo responders. Lastly, over one-quarter of Halneuron responders (27%) had pain relief that lasted for 30 days or longer after one cycle of treatment.
Phase 2 CINP Trial
This was a randomized, double blind, dose-finding, placebo controlled, multicenter study in patients with CINP. Various doses of Halneuron were tested over four days of treatment followed by measurement over four weeks. The study included a total of 125 patients across five dosing cohorts (four active and one placebo). The results showed that a dose of 30 µg twice per day for four days demonstrated the highest level of pain reduction compared to placebo, with the responder analysis results given below.
Halneuron is currently being evaluated in a Phase 2b clinical trial for CINP. We anticipate an update from the company on the trial in the first half of 2025 an interim data readout in the second half of 2025.
Background on CINP
CINP is the result of injury to the somatosensory nervous system following chemotherapy treatment (Colvin, 2019). For agents such as paclitaxel and oxaliplatin, the rate of CINP is up to 81% and 98%, respectively (Hershman et al., 2010; Gebremedhn et al., 2018). CINP begins as an acute pain syndrome that coincides with drug administration, however it can progress to a chronic condition following multiple rounds of therapy.
The only drug endorsed to treat CINP by the American Society of Clinical Oncology (ASCO) is duloxetine, which showed a significant reduction in pain in a Phase 3 clinical trial (Lavoie Smith et al., 2013). However, the drug is not FDA approved for the treatment of CINP. In addition, in a preclinical oxaliplatin-induced neuropathic pain model, Halneuron was superior to duloxetine based on the paw withdrawal threshold (PWT), a measure of pain tolerance.
Financial Update
As part of the business combination, Dogwood raised $19.5 million in a committed debt financing in two tranches: $16.5 million was funded at closing and an additional $3 million will be funded in the first quarter of 2025. This is expected to increase the company’s cash runway through the end of 2025, which includes the expected interim results from the Halneuron Phase 2b CINP trial in the second half of 2025.
Following the business combination with Wex Pharmaceuticals, we have incorporated Halneuron into our DCF model. We model for a Phase 3 trial of Halneuron in CINP to initiate in 2026, an NDA filing in 2029, approval in 2030, and first sales in 2031. At this point, we estimate that a commercialization partnership will be entered into prior to commercial launch and that Dogwood will receive a 13% royalty on net sales. In the U.S., we estimate for peak sales seven years following launch of approximately $1.2 billion. In the E.U., we estimate for commercial sales to begin in 2032 and peak sales seven years following launch of approximately $500 million. Using a 12% discount rate and a 50% probability of approval leads to an NPV for Halneuron of $171 million. When combined with the NPV’s for IMC-1 and IMC-2 along with the estimated current cash level leads to an NPV for Dogwood of $272 million.
As part of the business combination, Dogwood effected a reverse stock split of 25-for-1. In addition, Sealbond, the sole shareholder of Wex Pharmaceuticals and an indirect wholly-owned subsidiary of CK Life Sciences Int’l Inc., received 211,383 shares of common stock and 2,108.3854 shares of convertible preferred stock with a conversion ratio of preferred to common of 1:10,000. The convertible preferred stock will not be converted to common shares without shareholder approval in compliance with the rules of the Nasdaq Stock Market. In addition, Virios shareholders will receive a nontransferable contingent value right (CVR) to receive certain proceeds received by Dogwood, if any, related to future upfront, development, or regulatory milestone payments resulting from corporate partnership transactions of IMC-1 and IMC-2.
We estimate the company’s fully diluted share count is approximately 23.6 million shares. Dividing the calculated NPV by the estimated fully diluted share count leads to a valuation of $11.50.
Conclusion
We view the combination of Virios and Wex as a logical step for each company as Dogwood Therapeutics now has an additional, complementary development asset in Halneuron to go alongside IMC-1 and IMC-2. In the near-term, we anticipate results from the ongoing Phase 2 study of IMC-2 in Long Covid in the fourth quarter of 2024. These results will dictate how the company proceeds in its development, whether to pursue a development partnership or advance it further on its own. For Halneuron, we anticipate interim results from the Phase 2b study in CINP in the second half of 2025. Lastly, for IMC-1 we expect Dogwood will continue to pursue a partnership for its advancement in fibromyalgia.
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