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A promising biotech not getting a lot of attention is Citius Pharma (CTXR) that targets markets where unmet needs exist and limited doctors prescribing drugs reduces the distribution risk and need to hire a major sales force that trips up most biotechs. The stock is getting some positive movement from news released on Tuesday, but Citius Pharma still trades below levels from earlier this year despite a lot of promising news this year. 

The company trades at a fully diluted market cap of only $55 million after a recent uplisting to the Nasdaq and promising developments with the U.S. Food and Drug Administration (FDA). The small biotech has plenty of reasons to grab investors attention heading into years end.

Phase 3 Trial

For investors, Citius Pharma is a multiple product story providing diversification of risk. The key to the investment story in the stock now is that the small specialty pharma company is already moving into a Phase 3 trial. The stock valuation at only $55 million suggests an early stage biotech with drugs advancing towards early Phase 2 trials and not multiple products already past that stage.

In this case, Citius Pharma started recruiting patients for Phase 3 trails for Mino-Lok a while back. Even better, the FDA recently approved the product for "Fast Track" showing the potential importance of the therapy. As most people probably know, Fast Track provides more interaction with the FDA and priority review for drugs deemed by the regulatory body as ones that treat a serious or life-threatening condition and fill an unmet medical need. Basically, a strong sign that the related company should be taken seriously.

The designation is a positive development, but no guarantee that the FDA will approve the drug. The news on Tuesday from an International study conducted at MD Anderson sister institutions highlights the potential of Mino-Lok. In a Phase 2b study of 44 patients, the product showed 95% effectiveness in the therapy achieving microbiological eradication of the central venous catheters (CVCs) as compared to 83% for the control.

The Mino-Lok therapy is a catheter lock solution that salvages infected CVCs with a large market potential. These CVCs are ports for very sick patients and infections that cause serious medical costs and morbidity with around 500,000 cases per year in the U.S. alone. According to the Association for Professionals in Infection Control and Epidemiology back in 2009, these issues cost the U.S. healthcare system an estimated $2.3 billion annually.

CEO Myron Holubiak had the following to say about the MD Anderson Phase 2b study results:

It is extremely reassuring to note that Mino-Lok is as useful in clinics outside of the US as it is here in the number 1 rated cancer center. We are excited to advance this innovative product to a potentially greater than $1 billion marketplace worldwide.

The company suggests the target market of the U.S. alone reaches $750 million providing plenty of opportunity before even expanding globally.

Second Product

Despite being a very small biotech stock, Citius Pharma offers a multiple product pipeline. The Hydro-Lido is focused on the estimated $500 million U.S. hemorrhoid marketplace providing a secondary therapy to offset the risks of only focusing on Mino-Lok if the therapy was to disappoint on those Phase 3 trials and fail to obtain FDA approval.

The Hydro-Lido offers a prescription strength topical for symptomatic hemorrhoid treatment. Over 5% of the U.S. population suffers from hemorrhoids, but there are no FDA approved prescriptions.

The small biotech completed Phase 2a trails for Hydro-Lido that showed quicker and better relief for hemorrhoids than existing products. The product achieved higher pruritus by Day 2 and a significant reduction in pain and discomfort at the same time. Importantly the components such as hydrocortisone and lidocaine individually prescribed as treatments only achieved a 50% rate for both measures while Hydro-Lido reached at least 85% effectiveness on those measures.

The company plans to begin Phase 2b clinical trials in the near term with results in mid-to-late 2018.

Financials & Risk

Citius Pharma has roughly 12 million shares outstanding after the stock offering back in August. The stock is now worth roughly $55 million based on the fully diluted share count. Insiders own a majority of the stock with Chairman Leonard Mazur controlling 45% of the outstanding shares providing assurance that management is correctly aligned with shareholder interests.

The biotech hasn't reported Q3 results so investors will want to focus on the cash burn when those numbers are released. The company had over $7 million in cash following the August raise and solid prospects supportive of easily raising more funds in the future typical of the way that small biotechs operate. The recent hiring of CEO Myron Holubiak as a former President of Roche Laboratories USA will provide further support to obtain necessary funds from existing and new investors.

Takeaway

The key investor takeaway is that the stock remains relatively unknown with a couple of very promising products. The risks are typical of any small specialty biotech company with limited resources on the balance sheet. The stock is highly reliant on generating positive clinical results and making progress towards approvals for the therapies undergoing clinical trials. Any failure to obtain FDA approval on Mino-Lok will clearly hurt investors in the short term.

As a small biotech, Citius Pharma is only recommended for a diversified portfolio where investors are willing to accept the loss of capital.