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On May 16, 2017, Matinas BioPharma Holdings, Inc. (NYSEMKT: MTNB) reported financial results for the first quarter ending March 31, 2017. The company also provided an update on anti-infective drug candidates, MAT2203 and MAT2501. Matinas is in solid financial position with excellent access to capital. More importantly, data from two clinical studies with MAT2203, an orally administered, encochleated formulation of amphotericin B, are expected in June 2017. MAT2501, the company's orally administered, encochleated formulation of amikacin is expected to move into a multiple ascending dose PK/tolerability study in the near future.

Below is a review of the recent financial results and a highlight of MAT2203 and MAT2501 ahead of the next wave of clinical milestones.

Financial Results

Net loss for the first quarter ending ended March 31, 2017, totaled approximately $21.2 million, or $0.25 per basic and diluted share. Net loss included a non-cash inducement charge for the exercise of warrants in January 2017. As a reminder, the company successfully completed a warrant tender in late 2016 and early 2017, netting proceeds of $12.7 million in cash. Adjust net loss totaled $4.5 million, driven by $2.4 million in R&D and $2.1 million in G&A expense. Actual cash burn during the quarter totaled only $3.0 million.

Thanks to the successful warrant tender, Matinas exited March 2017 with $15.8 million in cash and equivalents. I find this sufficient to fund operations for the next 12 months. In late April 2017, the company entered into At-the-Market (ATM) financing with Cantor Fitzgerald whereby Matinas can raise proceeds up to $30 million at prevailing market rates. I see the ATM as an astute move by management given the significant catalysts on the near-term horizon. Matinas became eligible to these type of controlled equity offerings when they began trading on the NYSEMKT in February 2017.

MAT2203 Update

MAT2203 is an orally-administered, lipid-crystal nanoparticle formulation of amphotericin B (AmB). AmB has activity against a broad spectrum of invasive fungi, and thus it is the standard of care for many systemic fungal infections. The drug is fungicidal, which means it kills the invading fungal infection, as oppose to azoles like fluconazole or voriconazole that are fungistatic (only halt the spread of the infection). Unfortunately, the high toxicity of AmB, which shows up at around 1 mg/kg, is roughly equal to the therapeutic dose, thus creating a very small therapeutic window for the drug.

Gilead's liposomal formulation, AmBisome® (LAmB) has improved tolerability up to the 10 mg/kg range. However, early work done with MAT2203 (CAmB) shows that oral delivery of the resulted in no overt adverse events at doses up to 90 mg/kg in animal studies; and in mouse models of Candidiasis, MAT2203 was shown to be superior to both AmBiosome and Fungizone® (1, 2). Separate models show MAT2203 to be superior to other formulations of AmB in models of Aspergillus (3). It seems that Matinas has figured out a way to greatly improve the therapeutic window for an incredibly powerful drug.

- Data Read Outs In June - 

Matinas is current investigating MAT2203 in two clinical programs. The first is an open-label Phase 2a study being conducted by the NIH/NIAID in Bethesda, MD. This is a dose-titration study for the treatment of mucocutaneous candidiasis in immunocompromised patients who are refractory or intolerant to standard non-intravenous therapies. These are patients with advanced cancer, organ transplant, or viral infection that no longer respond to oral azole treatment. The first patient enrolled in October 2016. 

In March 2017, Matinas announced that NIAID initiated a 6-month open-label expansion of the Phase 2a study designed to keep patients that respond to MAT2203 on the drug. I see that as a very good sign because investigators at the NIH would not seek authorization from the FDA to keep gravely ill patients on a drug that they did not think was working. The NIH is set to report interim results from the study on June 3, 2017, at ASM Microbe 2017 conference in New Orleans. 

I think this will be a positive event for the company. The typical response rate for patients refractory to oral azole antifungal therapies is only approximately 5%. The statistics for this trial have been designed in such a way that if 20% of the patients experience a clinical response, the primary endpoint will be achieved. Target enrollment is up to 16 patients; therefore, 20% response rate equates to only 3-4 patients. I'm hoping we see signs of this kind of response at ASM Microbe. 

The second clinical study is a Phase 2, randomized, multicenter, evaluator-blinded study of oral MAT2203 compared to oral fluconazole (Diflucan®) in adult female patients with a diagnosis of moderate to severe vulvovaginal candidiasis (VVC), more commonly known as "yeast infection". Target enrollment is 75 women enrolled into three treatment cohorts of 25 patients each (200 mg MAT2203, 400 mg MAT2203, and 150 mg oral fluconazole). The Phase 2 VVC study is designed to assess the efficacy, safety, and tolerability of MAT2203 in this otherwise healthy population, an excellent juxtaposition to the going Phase 2a NIH study in immunocompromised patients. Top-line results are expected in June 2017.

A third Phase 2 study is expected to begin shortly. In this study, Matinas will analyze the multiple dose safety, tolerability, and PK study in patients with mucocutaneous candidiasis undergoing treatment for hematologic malignancies such as leukemia. This study will include patients being treated with the chemotherapy regimen that typically induces neutropenia, causing suppression of the immune system and subsequently puts patients at risk for developing an invasive fungal infection (IFI). This trial is expected to commence in June 2017.

- A Big Market Opportunity -

In 2013, Pfizer reported $775 million in sales of voriconazole (Vfend®), while Merck (MRK) reported $309 million in sales of posaconazole (Noxafil®). The former market leading product, Pfizer's Diflucan® (fluconazole), now available as a generic, reported peak sales of $1.17 billion in 2003. In 2013, Merck reported $660 million in sales of caspofungin (Cancidas®) while Astellas reported $307 million in sales of micafungin (Mycamine®). These are less effective drugs with usage far greater than generic amphotericin B due to the fact that they are much less toxic.

I believe an orally-available amphotericin B could have tremendous uptake. As noted above, Pfizer's Diflucan® (fluconazole) posted peak sales of nearly $1.2 billion, and the drug is far less powerful than AmB. Matinas is astutely studying MAT2203 head-to-head vs. Diflucan in the planned Phase 2 VVC study noted above. If successful, this sets up MAT2203 as a potential for a paradigm shift in how invasive fungal infections (IFI) are treated in this country. Of course, this is all highly contingent upon clinical trial results.

The IFI prophylaxis market is an enormous potential opportunity for Matinas. Mostly all medications today are limited to active infections and dosing typically only lasts for 1-3 weeks. Despite high mortality rates, a typical course of treatment may still run in excess of $50,000. The IFI prophylaxis market is 7X the size in terms of the number of patients. Treatment is also expected to run concurrent with chemotherapy and last as long as 6-14 weeks. We are talking about a potential 20-50X increase in market size. This takes a multi-hundred million dollar opportunity, like AmBiSome's $500 million in peak sales in 2014, and turns it into a multi-billion dollar opportunity.

MAT2501 Update

On March 27, 2017, Matinas Biopharma (MTNB) reported positive topline results from a Phase 1 single ascending dose study of MAT2501 in healthy volunteers. MAT2501 is the company's oral lipid-crystal formulation of amikacin. Amikacin is a powerful antibiotic with limited bacterial resistance. Unfortunately, the injectable formulation of the drug has poor tolerability and high incidence of series adverse events, including severe nephrotoxicity and ototoxicity. The U.S. FDA recommends strict monitoring of amikacin blood levels to avoid these risks.

Up next for MAT2501 is a multiple ascending dose PK/tolerability study of MAT2501 in healthy volunteers. Similar to the single ascending dose study, the goal here is to show that repeat dosing of MAT2501 does not spike peak amikacin blood levels to above safety limits (35 μg/ml). Results from the single dose Phase 1 study showed peak levels did not exceed 0.1 μg/ml, leaving tremendous room for Matinas to explore higher doses of MAT2501. The Phase 1b study should commence shortly.

MAT2501 has been granted QIDP status and orphan drug designation by the U.S. FDA. The company also intends to explore the development of MAT2501 for the treatment of a variety of multi-drug resistant, bacterial infections, including Enterobacteria, Acinetobacter, Pseudomonas, Staphylococcus aureus, and other gram-negative infections.

Conclusion

I am incredibly intrigued by and optimistic on MAT2203. The product has clear differentiating characteristics to existing formulations of AmB, an estimated $750 million market in the U.S. The leading formulation of AmB is Gilead's AmBisome®, a liposomal injection formulation that generated $350 million in sales in the U.S. in 2014. Global sales peaked at $500 million in 2014. MAT2203 looks to have superior safety and tolerability, targeted delivery, and oral administration. Importantly, AmB itself has broad-spectrum activity and limited drug-drug interactions, which all-in makes me think MAT2203 is a potential blockbuster (sales in excess of $1 billion) if approved. I model peak sales of MAT2203 at $1.25 billion, about the same size as Diflucan® (fluconazole) at Pfizer prior to the patent expiration.

MAT2501 is equally as interesting, albeit a bit earlier stage. Nevertheless, a safe and effective broad spectrum antibiotic that can target different types of chronic and acute bacterial infections, including nontuberculous mycobacterium (NTM) infections and various multidrug-resistant Gram negative infections would also be a potential blockbuster drug. Independent work out of Australia found that amikacin is highly effective in treating NTM, but that the risks of toxicities must be heavily weighed for each patient. Independent work out of India suggests that amikacin may be the most effective antibiotic to fight rapidly growing mycobacteria and treat patients with NTM. I model peak sales of MAT2501 at $750 million, about the mid-range between Abbott's Biaxin® (clarithromycin) and Pfizer's Zithromax® (azithromycin) at peak.

Below is a breakdown of my NPV analysis using only a 30% probability of approval for MAT2203 and a 20% probability of approval for MAT2501, along with a 15% cash flow discount rate and 5X multiple on peak sales. I expect that my probability rates for approval of MAT2203 will increase subsequent to the release of (positive) Phase 2 data next month.

Despite all these aggressive measures, I still find the shares to be 115% under-valued.