Dimerix (ASX:DXB)

Investment Memo:

Dimerix (ASX:DXB)

- LIVE

Opened: 01-Feb-2022

Shares Held at Open: 2,825,000

What does DXB do?

DXB is an early stage biotech research company that is developing an anti-inflammatory drug to treat respiratory and kidney diseases, with potential applications to treat COVID.

What is the macro theme?

Due to the pandemic, biotech and life sciences have been at the forefront of global decision making for investors, governments and ordinary consumers.

What was once an industry that was considered slow and niche is now rapidly evolving with innovation and technology.

How big could a Dimerix partnership/licensing deal be? [23-Feb-2023]
Dimerix reveals “material offers received from multiple parties" [22-Mar-2023]

Why did we invest in DXB?

Merchant Group Cornerstone Investment

We are following the lead of biotech experts at the Merchant Group, DXB is the first investment in their new early stage biotech fund and they have an excellent track record in the sector.

Phase III Clinical Trials on Rare Kidney Disease

DXB has commenced Phase III clinical trials on patients with a rare kidney disease called FSGS. This disease has 'orphan drug status', which means that DXB is eligible for accelerated approvals by drug regulators.

Clinical trials are a long process, so being eligible for accelerated approvals will save DXB time and money if the drug is proven to be successful at an interim stage.

The prize for a successful FSGS treatment is large, with DXB estimating the market to be more than $1B.

Covid-19 Side Bets

DXB has 2 near-term Covid-19 Phase III studies. If either of these studies are successful then we expect DXB’s share price to significantly re-rate.

Results from low-cost COVID-19 study announced [13-Dec-2022]

Fully Funded

DXB has recently raised $24M at 20c, fully funding its clinical trials for FSGS through to interim results.

DXB gets $6M R&D Tax Incentive Rebate [25-Oct-2022]
Patient Recruitment and quarterly cash flow update [27-Oct-2022]
DXB secures non-dilutive funding ahead of key catalyst [17-Feb-2023]
DXB raises $8.7M to progress Phase 3 clinical trial [05-Jun-2023]

What do we expect DXB to deliver?

Objective #1: Progress the Phase III Clinical Trial for Rare Kidney Disease (FSGS)

Over the next 12 months we want to see DXB get ethics approval in new jurisdictions and undertake recruitment for Part 1 of its Phase III clinical trial, which will include around 70 patients.

DXB could expand FSGS addressable market by ~5-10%% [13-Jan-2023]
Dimerix clears an important hurdle [09-Feb-2023]
DXB secures non-dilutive funding ahead of key catalyst [17-Feb-2023]
DXB passes second safety hurdle in Phase 3 trial [08-Aug-2023]

Milestones

Phase III Study Design Complete

complete Study Design approved by the FDA

Ethics approvals complete 12/12 countries

complete Site Setup

complete First Patient Recruited

cancelled Patient Recruitment Updates

DXB Quarterly Reveals FSGS Patient Numbers [28-Jul-2022]
DXB’s latest Investor Presentation [16-Sep-2022]
Patient Recruitment and quarterly cash flow update [27-Oct-2022]

complete 72 Patients Recruited

Date set for DXB clinical trial result [24-Jul-2023]

in-progress Patient Recruitment Updates

DXB Quarterly Reveals FSGS Patient Numbers [28-Jul-2022]
DXB’s latest Investor Presentation [16-Sep-2022]
Patient Recruitment and quarterly cash flow update [27-Oct-2022]

72nd Patient Trial Complete

complete Interim Results Announced - [March 2024]

complete [New] Commercialisation Deal (Europe, Australia, UK, Canada, NZ)

not done Commercialisation Deal (US)

not done Commercialisation Deal (China)

Objective #2: Complete Phase III Clinical Trial to treat COVID-19 hospitalisations (CLARITY 2.0)

We want DXB to provide initial data on whether its treatment can improve respiratory function in hospitalised patients with COVID-19 in a clinical setting. With ethics approval granted in India and Australia, DXB will need to recruit patients and undertake analysis to evaluate the efficacy of its drug.

We want to first see an interim safety analysis of the first 80 patients before DXB continues recruitment for the full 600.

Patient recruitment for COVID-19 study completed [18-Aug-2022]
Results from low-cost COVID-19 study announced [13-Dec-2022]

Milestones

complete Results Published

Objective #3: Complete Phase III Clinical Trial to treat pneumonia in patients with COVID-19 (REMAP CAP)

We want DXB to complete its Phase III clinical trial on ICU patients with pneumonia. It is well underway with recruitment and we will be expecting initial results in the first half of 2022. If DXB’s treatment is proven to be effective then we expect the technology to be transferable to other patients with pneumonia not just those caused by COVID-19.

Milestones

complete Results Publsihed

What could go wrong?

Early Stage Biotech Risk

There are some standard risks that are associated with early stage biotechs that are undertaking clinical research:

The drug is ineffective at treating the particular disease (determined by clinical trial results)
The drug is not considered safe for human consumption
The design of the trial is such that the regulatory body does not approve the drug
Patient recruitment is delayed
Ethics approval is delayed

DXB raises $8.7M to progress Phase 3 clinical trial [05-Jun-2023]

Rare Disease Specific Risk

FSGS is a rare disease, this means it could take a long time to find and recruit patients into the clinical trial. To increase the pool of applicants for the clinical trial, DXB will need to recruit from around the globe. Therefore, DXB will need to to secure ethics approval in each new jurisdiction - this takes time and may cause delays.

Commercialisation Risk

Even if DXB’s treatment is successful it will still need to commercialise the drug, which can be difficult if a competitor drug is superior or the landscape of the disease changes (ie. a new strain of COVID-19 emerges that renders the drug ineffective).

What is our investment plan?

In early stage biotech investing, the lead up to initial phase III trial results is where investors can expect to see positive share price action as speculators enter the stock on expectation of a positive result, similar to what we usually see in our exploration stocks prior to long awaited drill results.

Like with all our early stage investments, we invest early and wait patiently for the share price catalyst event, at which point we will look to free carry prior to the result being announced, expecting to sell about 25% of our position on a share price re-rate, holding 75% into the release of results.

Prior to the phase 3 trial results for FSGS we will look to free carry our position if the share price re-rates off the back of either of the COVID treatment results.

Disclosure: The authors of this article and owners of Next Investors, S3 Consortium Pty Ltd, and associated entities, own 2,825,000 DXB shares at the time of writing this memo. S3 Consortium Pty Ltd has been engaged by DXB to share our commentary on the progress of our investment in DXB over time.