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Business Update
IND-Enabling Studies Underway for QN-302
In June 2022, Qualigen Therapeutics, Inc. (NASDAQ:QLGN) announced it has commenced Investigational New Drug (IND)-enabling studies for its lead therapeutic program, QN-302, which include initial safety and pharmacology studies. Exploratory toxicology studies are expected to commence in the third quarter of 2022, followed by initiation of GLP toxicology studies in the fourth quarter of 2022. We anticipate an IND being filed for QN-302 in the first half of 2023.
In addition to starting IND-enabling studies, the company also announced it has established an in vivo maximum tolerated dose of QN-302, which coincides with a therapeutic window for target indications as demonstrated in earlier efficacy studies.
QN-302 is a genomic quadruplex (G4)-selective transcription inhibitor that the company licensed from the laboratory of Professor Stephen Neidle at University College London (UCL). Stretches of nucleic acids with repetitive guanine (G)-rich sequences can form higher order quadruplex arrangements (G4s). G4s can occur in genomic DNA and are widely distributed in a non-random manner in the human genome (Huppert et al., 2005). These complexes are over-represented in numerous cancer-related genes (Siddiqui-Jain et al., 2002). In addition, G4s contribute to the genomic instability of cancer cells and may be involved in the regulation of transcription and replication (Wang et al., 2019; Varshney et al., 2020). Their enhancement in cancer cells is exemplified by one study showing approximately 10,000 G4 structures in an immortalized cell line in contrast to a noncancer cell line that exhibited only approximately 1,500 G4 structures (Hänsel-Hertsch et al., 2016).
G4s can be exploited by cancer therapeutics that stabilize the structures and inhibit various cellular processes. These types of compounds are particularly attractive when targeting "undruggable" proteins such as MYC, which is upregulated in approximately 70% of all cancers and controls the expression of a wide variety of genes associated with proliferation, differentiation, apoptosis, and oncogenesis (Dang, 2012).
QN-302 is a tetra-substituted naphthalene diimide (ND) derivative that exhibits low nM anti-proliferative activity against a panel of human cancer cell lines (Ahmed et al., 2020). In addition, it was shown to down-regulate a large number of genes including those in the TNF, NK-kappa B, and Wnt signaling pathways. Lastly, protein levels of MAPK11 (which is overexpressed in multiple human cancers) were reduced to undetectable levels following 2x-weekly dosing of QN-302 for 4 weeks in a PDAC xenograft model.
To support the development of QN-302, Qualigen has assembled a Scientific Advisory Board (SAB) to help guide the company through the development and regulatory path as it develops the drug for pancreatic cancer and potentially other indications. The SAB held its first meeting in August 2022.
Update on QN-247
On August 1, 2022, Qualigen announced that following an in vivo efficacy analysis of QN-247 in solid tumors, a robust efficacy signal with no safety issues was seen in a triple negative breast cancer (TNBC) model. The company is planning an in vivo data readout for the third quarter of 2022 following testing in multiple indications. The company believes that the favorable safety profile and encouraging efficacy seen in TNBC warrant future investigation and investment.
QN-247 (formerly ALAN or AS1411-GNP) is an aptamer-based anticancer formulation composed of QN-165 conjugated to gold nanoparticles (GNPs). Previous preclinical studies showed that QN-247 was stable in aqueous and serum-containing solutions, had superior cellular uptake, and increased antiproliferative effects compared to unconjugated QN-165.
In March 2021, Qualigen entered into a Material Evaluation and Option Agreement with the University College London (UCL) to evaluate the use of QN-247 with G4 binders developed by Professor Stephen Neidle and colleagues at UCL. Previously published research showed a G4 binder exhibited potent activity in human gemcitabine-resistant pancreatic cancer cells (Ahmed et al., 2020). The use of a G4 binder along with QN-247 may potentiate its activity against pancreatic cancer and represents another significant potential indication for QN-247.
Acquires Majority Stake in NanoSynex
In May 2022, Qualigen entered into a definitive agreement to acquire a majority stake in NanoSynex Ltd., and Israeli-based diagnostics company developing the Antimicrobial Susceptibility Testing (AST) platform. The goal of AST is to provide clinical laboratories with a rapid, accurate, and personalized test for bacterial infections such that the correct antibiotic treatment can be identified quickly to treat a patient's particular infection. The company closed on the transaction in June 2022.
Antibiotic resistance is one of the top ten global public health problems (World Health Organization). The rise of antibiotic resistant organisms is tied to the misuse and overuse of antibiotics through selection of organisms that harbor mechanisms for self-preservation. A 2019 study estimated that approximately 1.2 million deaths worldwide that year were due to antibiotic resistant organisms, with another approximately 5.0 million deaths worldwide associated with antibiotic resistance (Antimicrobial Resistance Collaborators, 2022). Unfortunately, at the current trajectory, the problem of antibiotic resistant bacteria is only going to get worse. The CDC estimates that at least 2.8 million individuals in the U.S. contract a bacterial infection that is resistant to one or more antibiotics each year (CDC).
For patients with life-threatening bacterial infections, urgent treatment is of the utmost importance, as it is estimated that for every hour that effective antibiotic treatment is delayed, survival rates drop approximately 7% for patients with septic shock (Science Daily). To counteract this, many doctors will prescribe a broad-spectrum antibiotic before knowing the identity of the causative organism. This both facilitates the rise of antibiotic resistant organisms while at the same time negatively affecting the body's microbiota, or "good bacteria". Thus, a technology that can rapidly identify the responsible pathogen and determine its level of resistance to different antibiotics would be an important advancement.
NanoSynex's technology was reported on in 2017 (Avesar et al., 2017). Using a very small amount of sample, the company was able to rapidly identify antibiotic susceptibilities for 12 bacteria-antibiotic combinations in one day. In addition, the team was able to perform a similar analysis with five clinical urine samples that resulted in same-day results, versus the current methodology that requires up to two days to positively identify the correct pathogen.
Qualigen will provide up to $10.4 million in milestone-based funding over the next three years for the development and ultimate commercialization of the NanoSynex technology per a Funding Agreement between the two companies. This additional funding will be treated as senior debt, repayable to Qualigen in five years or sooner upon the occurrence of certain events, which may include an IPO or sale of NanoSynex. On July 5, 2022, Qualigen provided $1.5 million to NanoSynex pursuant to the Funding Agreement.
We view the investment in NanoSynex as a nice strategic fit for Qualigen as it looks to leverage its expertise in diagnostic development to expand into an important and rapidly growing sector of the diagnostic market.
Update on FastPack System
The company's FastPack diagnostic system is a proprietary platform that provides rapid and accurate immunoassay testing results. It consists of the FastPack Analyzer and FastPack test pouches that includes a single-use, disposable foil packet containing the FastPack reagent chemistry. The company currently markets nine assays, including tests for prostate cancer, thyroid function, metabolic disorders, and research applications. FastPack products have been placed in well over 1,000 physician offices worldwide. Since launching in 2001, cumulative sales of FastPack products has exceeded $120 million.
In April 2022, Qualigen announced the resumption as of April 1, 2022 of worldwide distribution and commercial control of FastPack from the previous marketing partner Sekisui Diagnostics. The company will now realize 100% of the revenue from FastPack sales. It is preparing for increased demand now that most COVID-19 restrictions have been lifted and patients are increasingly going to see their healthcare providers, which may lead to increased revenues.
While Qualigen will continue to sell FastPack products, the main focus of the company will be on developing therapeutic candidates that address high unmet medical needs in cancer and infectious diseases.
Financial Update
On August 15, 2022, Qualigen Therapeutics, Inc. announced financial results for the second quarter of 2022. The company reported $1.4 million in revenues for the second quarter of 2022, compared to $1.1 million for the three months ending June 30, 2021. All revenues were generated from product sales of diagnostics. The revenues reported in the current quarter represent a 28% year-over-year increase from the second quarter of 2021.
R&D expenses were $1.5 million for the second quarter of 2022 compared to $4.5 million for the three months ending June 30, 2021. The decrease was primarily due to decreased preclinical costs associated with the potential application of QN-165 for the treatment of COVID-19. G&A expenses were $2.7 million for the second quarter of 2022 compared to $3.0 million for the second quarter of 2021. The decrease was primarily due to a reduction in professional fees.
As of June 30, 2022, Qualigen had approximately $9.7 million in cash and cash equivalents. We estimate the company has sufficient capital to fund operations into mid-2023. As of August 15, 2022, Qualigen had approximately 38.8 million shares outstanding and, when factoring in stock options and warrants, a fully diluted share count of approximately 57.7 million.
Conclusion
The first quarter of sales for FastPack® following Qualigen assuming full responsibility for sales and marketing was a success, with year-over-year sales up 28% and we expect the ramp in sales to continue in the coming quarters. The therapeutics pipeline is advancing on schedule and we anticipate an IND being filed for QN-302 in the first half of 2023. We have increased the discount rate in our model to account for the currently unfavorable market conditions for raising capital along with the estimated dilution for the company's next capital raise. This has resulted in a decrease in our valuation to $3.00.
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