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Understanding the Value Proposition in Timber Pharmaceuticals May Expose the Upside Potential from Two Phase II Trials in the Rare Dermatologic Disease Space

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Understanding the Value Proposition in Timber Pharmaceuticals May Expose the Upside Potential from Two Phase II Trials in the Rare Dermatologic Disease Space

July 07
07:22 2020

Timber Pharmaceuticals (NYSE American: TMBR) is creating shareholder value by specializing in drug development for orphan dermatological conditions with no current FDA approved treatments. Timber currently has three treatments in progress for orphan dermatologic diseases: a Phase 2b congenital ichthyosis (CI) program, a Phase 2b program for facial angiofibromas in tuberous sclerosis complex (TSC), and a preclinical localized scleroderma program. 

Each of these programs has the potential to expand into a treatment study for additional and broad dermatology indications beyond the initial orphan indications. Strategic allies poised to help Timber transition from a development stage to an FDA-approved product company include advisors from UCSF, Yale, and Stanford, plus relationships with AFT Pharmaceuticals, the Foundation for Ichthyosis, and the Tuberous Sclerosis Alliance. 

The company has also raised $25 million in equity at the time of its listing to fund the company through its clinical development milestones. In the meantime, investors are trying to determine the Timber value proposition. The answer may be right in front of them.

A Focus On Orphan Drug Indications Using the 505(b)(2) Regulatory Pathway

Beyond its focus on orphan drug indications, Timber Pharmaceuticals is leveraging the 505(b)(2) regulatory pathway to expedite potential approvals. Orphan drugs are therapies that target populations below 200,000 people in the U.S. For drug developers, certain financial incentives are provided for orphan drugs, including tax advantages and user-fee waivers. Most importantly, an approved orphan drug is given market exclusivity for seven years in the U.S. and ten years in Europe and Japan. From a clinical development standpoint, the trials tend to be smaller and less costly, with greater flexibility from the FDA. 

Timber is taking advantage of those benefits in addition to the 505(b)(2) regulatory pathway, a primary means to mitigate clinical risk and time in drug development. An inherent benefit of this course is that the safety and efficacy of the original compound have already been established and can be leveraged to expedite new development. Thus, companies are often given the approval to move directly into Phase 2 clinical studies, as is the case with Timber. Mega-caps like Novartis (NYSE: NVS) and Pfizer (NYSE: PFE) have used this same pathway

These orphan drugs often become the only treatment option for these rare diseases. Once approved they generally obtain better pricing and reimbursement status than drugs serving much broader populations with several competing treatment options. By focusing on orphan drugs, Timber expects to be able to target its markets with a more focused and efficient strategy that can seize substantial commercial opportunities.

The company is already developing three clinical programs, two of which are in Phase 2b clinical status.

Advancing Multiple Clinical Programs In 2020

While new to the public markets, Timber Pharmaceuticals is already positioning itself to become a leading player within the rare/orphan dermatology space. The corporate strategy focuses on the development and eventual commercialization of its portfolio assets within the orphan drug segment. At the same time, activities are centered on mitigating the cost, risk, and time of drug development while retaining earnings potential. Timber is accomplishing this goal through several strategic initiatives.

First, it is identifying compounds with broad and proven mechanisms of action across many dermatologic conditions. This mitigates clinical risk for each of the programs and ensures life cycle management potential. Second, it pays close attention to making sure that significant differentiation of a specific drug creates a barrier to entry. This allows Timber to maintain high earnings potential while mitigating CMC risk, which is one of the most common issues a drug will fail to get approved. Thirdly, the company is only pursuing orphan indications with no approved FDA treatments. This focus on unmet needs allows the Company to deliver truly meaningful treatments to patients, which mitigates concerns relative to pricing and reimbursement.

Currently, Timber has two assets in Phase 2b clinical trials and one preclinical stage program. The company’s two late-stage products, TMB-001 in Congenital Ichthyosis and TMB-002 in Facial Angiofibromas, fit perfectly within the above-described strategy. Each one targets an orphan indication with high unmet need and no FDA approved treatments. They both also utilize the 505(b)(2) pathway by taking advantage of an established mechanism of action and well-characterized CMC and safety profiles. Finally, according to management estimates, the U.S. orphan markets for TMB-001 and TMB-002 are expected to reach $250 million for each indication at peak sales.

In addition, both have other life cycle management opportunities to sustain growth and further maximize add-on marketing potential. Timber noted in its previous shareholder update that both trials are currently recruiting, and a top-line data readout is expected around the third quarter of 2021. Most recently, the TMB-001 CONTROL study initiated all of its 11 sites in both the U.S. and Australia and has patients actively enrolling. Its target enrollment is 45 patients who are nine years or older. TMB-002’s Phase 2B clinical trial is now open and enrolling patients in 70 percent of sites. Its target enrollment is 120 patients in 16 sites across the world. Timber has worked with clinical trial investigators and researchers to ensure the health and safety of patients due to COVID-19.

A Fortified Balance Sheet Can Push Trials Forward

One of Timber’s differentiating factors is that the company came to the market with approximately $25 million in new cash raised from institutional investors, and this financial strength positions Timber to quickly advance its trials.

According to the company, most of its cash will go toward funding the TMB-001 and TMB-002 clinical trials. Notably, it is expected that the current cash and cash equivalent balances should be sufficient to take Timber through top-line data readout for both Phase 2b trials, expected next year. A portion of the funding will also advance the development of its earliest, preclinical asset, TMB-003. Timber plans to continue developing this asset toward an IND.

The company’s management bring strong and diverse talent in the rare and orphan dermatology space that have the expertise to drive its clinical programs forward The company is led by CEO John Koconis, a proven leader with over 25 years’ experience leading successful teams in global pharmaceutical markets and having launched multiple market leading dermatology products.

Although investors are just learning about this newly listed company, few can argue that the company is not entering an exciting stage and period of growth from its assets. The balance sheet is strong, but Timber also has numerous potential clinical development milestones coming up over the next months. Additionally, the merger with BiopharmX brought with it the listing to the NYSE American, along with two additional assets to the Timber portfolio: BiopharmX’s Phase 3-ready minocycline gels in acne and rosacea. Strategic options for these assets include everything from a strategic partnership to a divestment, and Timber management is currently evaluating the best path forward. Notably, the balance sheet and access to public capital may also allow Timber to stay active on the business development front by providing the financial means to add interesting and complementary new compounds to its already impressive pipeline.

Creating Shareholder Value in 2020 and 2021

From a capital structure perspective, Timber has 11.9 million shares outstanding. At the time of the merger with BioPharmX, , insiders held approximately 53% of the outstanding common shares and institutional investors held roughly 35% of the current float, or 88% together. A small and tight float like this can often create sharp changes in value. 

On the positive side of that equation, Timber can benefit from its capital structure and balance sheet by positioning itself to become one of the leading companies in the rare orphan dermatology space. It has multiple shots on goal, is supported by a robust portfolio of products that address critical unmet needs, and may be best-positioned to bring to market the first FDA-approved drug for their respective indications.

This may be a “getting to know you” period for Timber investors, who are only now learning about the value potential in the company’s assets. And, while current valuations may not fairly represent an appropriate market-cap for a company with two Phase 2b programs underway, it does expose opportunity. Timber Pharmaceuticals may be ripe for growth and is certainly worthy of consideration at these levels. 

 

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