Summary
Seelos announced they have a deal with Duke University to in-license a gene therapy program that is designed to take aim at Parkinson's disease.
I provide a brief background on the target gene and its role in Parkinson's disease and other neurodegenerative disorders.
I review my plan for a speculative position in SEEL and my conditions for a buy.Seelos announced they have a deal with Duke University to in-license a gene therapy program that is designed to take aim at Parkinson's disease.
I provide a brief background on the target gene and its role in Parkinson's disease and other neurodegenerative disorders.
I review my plan for a speculative position in SEEL and my conditions for a buy.
Seelos Therapeutics (NASDAQ:SEEL) recently announced they reached a deal with Duke University to in-license a gene therapy program that is attempting to regulate the SNCA gene, which codes for alpha-synuclein expression, which is a major player in Parkinson's disease ("PD") and other neurodegenerative disorders.
Parkinson's disease is a chronic and debilitating neurodegenerative diseases that cause an enormous medical, emotional, and financial burden on patients and the general public. Attributable to multifarious interactions concerning genetic and environmental risk factors, the absolute root cause of PD remains indefinable. Nonetheless, the collective data developing from clinical and investigational research over the previous decades has recognized oxidative stress, mitochondrial dysfunction, neuroinflammation, and dysregulated protein degradation as the principal roots of neurodegeneration that is seen in PD.
Recently, the CRISPR method gene-editing has become the new cutting edge therapy of the biotech industry in many rare diseases. Now, Seelos Therapeutics appears to have discovered a promising CRISPR technology from Duke University that could accelerate the progress of "fixing" neurodegenerative diseases and permit the deeper comprehension of several PD gene relations, Lewy body dementia, and multiple-system atrophy.
I intend to review the details of the Duke deal and go over some of the science that backs this cutting edge therapy. In addition, I will take a look at the charts to see if there are any hints of a possible resurgence in the share price. Finally, I will lay out my requirements to start a position in SEEL.
Why the SNCA Gene?
The SNCA gene encodes the directions for the assembly of a small-sized protein titled alpha-synuclein, which is commonly found in the brain. Alpha-synuclein is found mainly at the ends of neurons in the presynaptic terminals, which is where neurotransmitters are stored in the synaptic vesicles until released. Any disruption of neurotransmitter release will have an impact on ordinary brain functions.
I performed a little research to find out more about alpha-synuclein and found the basic consensus to be it is "not understood." Some studies advocate that it has an imperative role in preserving an ample amount of synaptic vesicles in the presynaptic terminals. In addition, it could help control the discharge of the dopamine, which is a neurotransmitter associated with various movement disorders. Therefore, finding a way to regulate the SNCA gene might be the key to addressing multiple movement disorders.
In PD, the downregulation of SNCA could prevent an over-accumulation of alpha-synuclein in the brain, which will form alpha plaques or Lewy bodies.
SNCA methylation to interon-1 could disrupt mRNA transcription, which will then prevent transcription and creation of the alpha-synuclein. Thus, preventing the accumulation of plaques and hopefully thwarting a neurodegenerative disease. Basically, the methylation would be jamming up the first cogwheel in this process. Why hasn't someone tried this before? Well, I have to suspect a major issue is… how do you eliminate the over-production but without causing under-production of alpha-synuclein?
I am guessing the team at Duke University has figured this out. According to the company's press release,
"SLS-004 is an all-in-one lentiviral vector, for targeted DNA-methylation editing within intron 1. The system is based on CRISPR-dCas9 fused with the catalytic domain of DNA methyltransferase 3A (DNMT3A), an enzyme that is responsible for DNA methylation. The system was delivered to dopaminergic neurons derived from human induced pluripotent stem cells (hiPSCs) from a PD patient. As a result, the expression of SNCA was modified and disease-related cellular-phenotypes characteristics of the neurons were reversed."
It reads as if the technology works in preclinical studies, but now, they have to go in vivo with an animal model to in order to validate the safety and efficacy of the viral vector.
My Take
I am not a neurologist or movement disorder specialist, but if you were to ask me "what will cure Parkinson's?", I would tell you it will come from the gene therapy, gene editing, or RNAi arena. Most of the contemporary therapies attempt to address symptoms or slow the progress, but they don't really stop the out-of-control neurodegenerative cogwheels from turning. SLS-004 appears to be an answer to that issue. Obviously, the program is still pre-clinical and is a long way from being an approved therapy. However, if SLS-004 is safe and effective in PD patients, it would be a monumental moment in neuroscience and in medicine.
On the other hand, PD is a complex disease that will make clinical trials very complicated. As far as I know, we don't have a concrete primary cause of PD, which could make the trial design difficult. What would be the endpoints in these? What would be the specific indication?
Overall, I see this a major step for Seelos, who is now stepping into the gene therapy arena with a promising preclinical program and platform.
Is SEEL a Buy?
I will remain on the sidelines until the company elaborates on their financial position and what their expected OpEx will be in the coming quarters and 2020. The company continues to make notable acquisitions and in-licensing deals which depletes the cash position and will only increase expenses. According to the Q1 10-Q, the company only has $11M in the bank, which cannot be enough to get any of their current pipeline candidates to the finish line.
Don't get me wrong, I am not bearish on Seelos. They recently reverse-merged into a publicly-traded company, so it is going to take a few quarters to establish what the company is and what their objectives are. Once I can see the numbers and timelines in SEC filings, I will be on the lookout for a speculative buy.
Already long SEEL? Investors should be confident about the company's impressive pipeline and that the company is a cheap buy at a $47M market cap compared to other developmental stage gene therapy companies.
Figure 1: SEEL Pipeline (Source SEEL)
However, current investors need to accept the strong possibility of the company executing a secondary offering at some point this year. The company is looking to start their phase III trial for SLS-005 in Q3, which will require a substantial amount of cash. Considering we don't know what the Duke agreement cost, investors should be expecting a fundraising event soon.
Charts
Taking a look at the daily chart (Figure 2), we can see the stock has had a rough go since the reverse merger. However, the trading range has tightened, and the Bollinger bands have constricted around the current share price of ~$2.30. We can see the Duke news caused a brief spike in the share price in the pre-market, but the lack of volume going into the bell caused a strong sell-off. The share price is still moving sideways, which is not great but not terrible.
Figure 2: SEEL Daily (Source Trendspider)
Looking at the chart, we can see a few long-term downtrend lines that were established from the Apricus Bio (APRI) ticker. If the stock can continue trading in this range, it could break the downtrends and allow SEEL to establish a new trend.
Conclusion
The in-licensing of SLS-004 is a significant event for Seelos as it marks the expansion into the gene therapy arena and further establishes the company's commitment to neurological conditions. Nonetheless, I find SEEL to be too immature for a long position due to the short financial track record and neutral charts. I will reconsider a long position if the company is able to secure the funds required to finish their Phase III trial for SLS-005 and provides some guidance on their OpEx for 2020.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
https://seekingalpha.com/article/4272941-seelos-speculative-buy-parkinsons-gene-therapy-candidate
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