NYSE:CING
READ THE FULL CING RESEARCH REPORT
We are initiating coverage of Cingulate, Inc. (NYSE:CING) with a target price of $70.00 per share. This value is based on our forecasts for the successful development and commercialization of CTx-1301 for Attention Deficit/ Hyperactivity Disorder (ADHD). Cingulate’s candidate uses its licensed precision timed release (PTR) platform to deliver drugs in indications which require a particular release profile over an extended period of up to 24 hours. Its lead indication in ADHD seeks to address a disorder marked by a persistent pattern of inattention, hyperactivity, and/or impulsivity that interferes with sustaining focus and staying organized. Prevalence is estimated to be from 11 to 15% in children and from 4 – 5% in adults. Males are more commonly diagnosed than females.
ADHD is thought to be caused by genetics, brain structure and neurotransmitter imbalances. Environmental and prenatal factors may also contribute to the disorder and babies that were born prematurely or were of low birth weight are more susceptible. Treatment for ADHD includes behavioral therapy, lifestyle changes and medications. Two classes of frequently prescribed medicines include stimulants such as methylphenidate and amphetamines, and non-stimulants such as atomoxetine and guanfacine. There are numerous medications in these classes; however, there remain substantial unmet needs for ADHD patients including slow onset, short duration of action, a side effect profile that can cause sleep disturbances and concerns about diversion that have not yet been addressed.
Cingulate is developing an erosion-based modified-release technology in combination with several already approved therapies in ADHD and anxiety. The technology effects a timed release of the underlying drug to provide immediate, medium term and long-term dispersion of an underlying active pharmaceutical ingredient (API) over a patient’s active day. This is a particularly compelling feature for drugs with a short half-life such as dexmethylphenidate and dextroamphetamine which are the underlying APIs in leading ADHD products.
The company’s lead candidate, CTx-1301, has completed a Phase III blinded and placebo-controlled study to evaluate safety and efficacy of the PTR method in adults with ADHD. The study found an impressive effect size that was much greater than that of other long-acting stimulants. Subjects demonstrated statistically significant improvements in the investigators assessment of the patients’ functioning and a decline in inattentive and hyperactive-impulsive behavior severity. Next steps for Cingulate are to run a fast-fed study, complete stability testing and begin preparing the new drug application (NDA) for approval using the 505(b)(2) pathway for submission in 2025.
Assuming CTx-1301 is approved, Cingulate has several options for commercialization. The company has a non-binding arrangement with Indegene to commercialize the product in the United States but it can partner with another entity if it finds a more attractive arrangement. Companies like Takeda and Johnson & Johnson, with shrinking ADHD franchises, could be natural partners for Cingulate.
Cingulate’s pipeline includes three assets including CTx-1301 (dexmethylphenidate), CTx-1302 (dextroamphetamine) and CTx-2103 (buspirone). The company holds global rights to the underlying OralogiK Erosion Barrier Layer (EBL) technology which is used in these products and licensed from BDD Pharma. While CTx-1302 is ahead of CTx-2103 on the company’s pipeline chart, CTx-2103 may be the next asset advanced by the company given its relatively easier path forward to approval and a large unmet need for anxiety. Beyond the programs identified in the pipeline, there are other opportunities where the EBL design may improve safety and efficacy of novel or already approved drugs in such areas as depression, cardiovascular disorders, Alzheimer’s disease and pain.
The company has licensed its technology from BDD Pharma which has granted Cingulate rights to develop and commercialize multiple underlying APIs that employ the EBL technology. The worldwide rights require milestone payments and royalties after reaching clinical and regulatory goals and upon product sales. Cingulate has also signed an agreement with Indegene to commercialize CTx-1301 on a fee for service basis. The arrangement allows Cingulate to find another commercialization partner with better terms if one emerges.
The market for ADHD is large with almost 93 million scripts written in the US in 2023. While the market for ADHD is mature and methylphenidate has been prescribed since the 1960s, there remain many unmet needs. Sixty percent of patients use a short-acting booster dose in the afternoon. Patients also report delayed onset and the lack of all-day efficacy as shortcomings for these medicines. An EBL, three pulse product can address these weaknesses and provide the benefit required to achieve material penetration into this market. Furthermore, a shortage in amphetamine and methylphenidate product supply over the last two years has increased attention on ADHD treatment, even further underlining the unmet need.
Cingulate executed its initial public offering (IPO) in December 2021 and has since conducted several clinical studies for CTx-1301 including the food effect study and the Phase III safety and efficacy study. In February 2024, the company raised gross proceeds of $7.5 million. The company has access to a stock purchase agreement with Lincoln Park and an At-the-Market (ATM) Offering agreement which provide capacity to raise sufficient funds. Cingulate reduced the exercise price on select warrants in return for exercise which raised net funds of $1.6 million in July. These sources, along with the cash on the balance sheet, should provide sufficient capital to support company operations and the filing of the new drug application (NDA) in 2025.
Key reasons to own Cingulate shares:
➢ Three assets under development
o CTx-1301 for ADHD (dexmethylphenidate HCl)
o CTx-1302 for ADHD (dextroamphetamine sulfate)
o CTx-2103 for anxiety (buspirone)
➢ Late stage development company
o Phase III studies for CTx-1301 complete
➢ CTx-1301 addresses unmet needs
o Multiple dosage strengths
o Provides active day coverage
o Eliminates crash and rebound symptoms
o Improves tolerability
➢ Precision Timed Release Platform
o Eliminate short-acting stimulant boosters
o Reduce patient and payor cost
o Reduce abuse potential
➢ Broader indications for PTR platform
o Insomnia
o Depression
o Bipolar Disorder
o Movement Disorders
➢ Global rights to intellectual property
In our full initiation, we provide background on the drug delivery space, reviewing the importance of half life and a narrow therapeutic window on even drug distribution throughout the day. We identify many of the short-comings of existing technologies for use with ADHD drugs and other compounds that require pulsatile delivery. Our focus narrows with a description and discussion of the technology behind and features of the OralogiK EBL and PTR technology. Next, is a review of Cingulate’s CTx-1301 human studies. We include a description of other assets in the portfolio including CTx-1302, also for ADHD and CTx-2103, which is in development for anxiety.
We then move into the indication section of the initiation report which describes ADHD including a brief history of disease diagnosis. This is followed by a discussion of ADHD prevalence, symptoms, diagnosis and treatment. We look at some of the most commonly prescribed ADHD medications and then review other products that are in development. Peers and competitors are then discussed, highlighting both firms with dominant share and companies developing new candidates not yet approved.
The subsequent section provides a review of Cingulate’s business history, from first inception to its ongoing New Drug Application (NDA) for CTx-1301. We describe the commercialization partnership with Indegene, the Schedule II regulatory environment which further regulates the company’s lead candidates and the ADHD product shortage that has been ongoing since 2022. Key senior management biographies are supplied and risks for life sciences companies in general and for Cingulate specifically are discussed. We wind down our initiation report with valuation work and a discussion of the assumptions supporting our model. The target price is derived from a discounted cash flow (DCF) model which assumes economic value from upfronts, milestones and royalties from CTx-1301 sales in the United States. We conclude with a valuation of $70.00 per share for Cingulate, Inc.
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