We have searched far and wide for why Innovate Biopharmaceuticals (INNT) is flying high.

The news is absolutely scarce other than a recent a reverse recapitalization with Monster Digital (Nasdaq: MSDI). At the end of Q3 2017, the company had $174K in cash and operations consumed an average of ~$1M during the first three quarters of 2017 so it has an acute need for capital.

However, its leading drug candidate, Larazotide INN-202 has promise.

Larazotide Acetate or INN-202 is Innovate’s leading drug candidate for celiac disease (CeD) entering phase 3 clinical trials. INN-202 is a tight junction regulator, which helps restore “leaky” or open junctions to a normal state.

In CeD patients, ingestion of gluten causes disruption or opening of the tight junctions. The open junctions cause an inflammatory cascade within the intestinal epithelium that eventually destroys the intestinal villi, decreasing the surface area for absorption of nutrients, thus leading to a variety of diseases.

When ingested prior to a meal, larazotide may help keep the tight junctions closed, thus reducing the intestinal inflammatory process in response to gluten.

Intestinal permeability is thought to be involved in a variety of GI and autoimmune diseases and using a safe, non-absorbed drug like larazotide with more than 800 patient exposure, can allow for rapid proof-of-concept clinical trials.

Celiac disease remains an unmet need with no drugs approved. Patients diagnosed with celiac disease only have the gluten-free diet to manage their symptoms. There are more than 3 million celiac patients in the US and a similar number in Europe with another 15 million in the rest of the world.Larazotide would be the first drug ever approved for celiac disease.

Larazotide is the only late-stage drug entering phase 3 trials with a path forward agreed upon with the FDA. After several clinical trials involving more than 800 patients and a phase 2b trial with 342 patients, larazotide has been shown to be safe and effective in a “real world setting” for celiac patients. Phase 3 trials are expected to begin in 2018.