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Soligenix, Inc. (OTCBB: SNGX) Dealt a Serious Setback by Data Safety Monitoring Board but Value Still Exists in Biodefense Program

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No question Soligenix, Inc. (OTCBB: SNGX) and its shareholders suffered a significant setback last week when the independent Data Safety Monitoring Board (DSMB) recommended that the company’s confirmatory Phase III trial of orBec, an oral formulation of beclomethasone dipropionate (BDP) in acute gastrointestinal Graft-versus-Host disease (GI GVHD), be stopped after interim results indicated the study would fail to achieve the predetermined primary objective of efficacy. Some investors would consider that news more than just a mere setback as shares fell from 0.27 on September 14, 2011 down to a 52-week low of 0.035 the following day with trading volume topping the 57 million mark. Making matters even worse for SNGX, they have no idea why orBec failed to meet the primary efficacy endpoint after two prior studies with very similar designs demonstrated robust efficacy and clinically relevant results in essentially the same patient population.

Christopher J. Schaber, PhD, President and CEO of SNGX, acknowledged the company had no clear reason for the Phase III trial failure, saying “It is not possible at this exact time to determine what explains this unexpected outcome.” Recognizing that the company’s confusion may not exactly boost investor confidence Schaber followed that statement up by offering “One of a number of possibilities that will be investigated is that these results may be due to changes in the overall treatment practices of the allogeneic stem cell transplantation patient population that may have had an impact on the treatment effect of orBec since the previous Phase 3 study was concluded in 2004.”

Regardless of the reason, SNGX has said that the DSMB’s recommendation has forced them to “evaluate our strategic options, including whether to further pursue the applications of orBec® in the GVHD treatment and prevention space.” This decision comes less than two months after SNGX announced the expansion of their partnership deal with Sigma-Tau, an expansion deal that granted Sigma-Tau the exclusive license to commercialize orBec in the “European Territory.” SNGX received a $5 million upfront payment and a 40% royalty on net sales in Europe as part of the deal along with $11 million in potential milestone payments. The next milestone payment, $2 million, was to be made upon notification by the FDA and European Medicines Agency of the successful completion of the confirmatory Phase III clinical trial of orBec for the treatment of acute gastrointestinal Graft-versus-Host disease, something that is no longer in the cards.

It remains to be seen what effect the DSMB’s recommendation will have on SNGX’s partnership with Sigma-Tau or how it might affect the EMA’s approval decision. The collapse of the trial obviously leaves a lot of money on the table, something that has not won favor among shareholders.

Despite the negative news SNGX is not about to fold. The biopharmaceutical company has a total of $13.5M in cash and grants, is carrying no debt and has no preferred stock, all positive signs. On top of these attributes SNGX’s oral BDP has the potential to be used for other clinical applications in the areas of radiation enteritis, radiation injury, and Crohn’s disease as well as other GI disorders.

For those investors who believe in the long-term value of SNGX much of their belief is rooted in the company’s biodefense program. SNGX still has funding under their $9.4 million NIH grant which will enable them to continue “to pursue development of our heat stabilization technology for subunit vaccines including application to RiVax™, our vaccine against ricin toxin.” In a Phase I clinical trial in normal volunteers RiVax was shown to be well tolerated and immunogenic, a positive sign but given the fact that SNGX carried orBec into a Phase III clinical trial before faltering it may be hard for some shareholders to get too excited.

The reality is SNGX’s biodefense division may be where they find their ultimate success. SNGX has received government support for their research in this area and given the fact that a biological attack remains as one of the most serious threats to our national security that support will likely continue. Upon taking office President Barack Obama identified countering WMD threats as a top national security goal and the White House stated nuclear weapons along with unconventional arms presented the “Gravest danger to the American people and global security.”

Ricin presents one of the most dangerous “unconventional” threats given the scope of damage that it could inflict on the country, making SNGX’s development of formulation and manufacturing processes for vaccines, particularly RiVaxTM, that are stable at elevated temperatures all the more important.

There is a lot that remains up in the air for SNGX and the blow handed down by the DSMB certainly shook investor confidence but with shares floating around the 0.04 – 0.05 range, well below their 50-day moving average of 0.269 and 200-day moving average of 0.211, now might be a perfect time to establish a position within the company. GI GVHD is not the be all and end all of SNGX and with the potential that remains inside their biodefense program the company still has a lot to offer investors.

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