Investing

Commodore Capital Buys in for the Long Haul With 20% Vistagen Stake on Promising Phase 3 Data

Ben Ward

Published: August 11, 2023 7:25 am

Last Updated: August 11, 2023 12:09 pm

In a week that has seen Vistagen Therapeutics’ (US:VTGN) stock triple in value, investors and company watchers have been intensely focused on the company.

The fervor was in response to the positive Phase 3 results from its PALISADE-2 study of fasedienol (H94B) in treating social anxiety disorder (SAD). The promising data set the stage for the disclosure by institutional investor Commodore Capital of a 1.58 million share purchase, giving the firm a near-20% stake in the biopharma firm.

The trade by Commodore Capital was initially spotted on Fintel’s insider trading tracker in the evening as the form 13-D filing was made with the SEC. The investor also holds sizable stakes in Xenon Pharmaceuticals (US:XENE) and Viridian Therapeutics (US:VRDN)

Vistagen is developing an innovative pipeline of central nervous system (CNS) medications that it claims have the potential to establish new standards of care in the treatment of a variety of serious anxiety, depression and other CNS disorders.

Pandemic Affect

PALISADE-2’s promising outcome reaffirmed the company’s hypothesis that the COVID-19 pandemic negatively influenced the preceding PALISADE-1 study. The earlier trial, conducted amidst the pandemic’s peak in 2020 and 2021, seemingly struggled due to heightened states of mental health issues in its patient pool, especially anxiety and depression. Comparatively, PALISADE-2 was largely conducted in late 2021 and 2022 as the pandemic waned.

Significantly, PALISADE-2 mirrored the design, protocol, and statistical plan of the PALISADE-1 trial. This standardization assures the validity of the positive results which include:

• Meeting primary, secondary, and exploratory endpoints.
• A confirmed effectiveness of fasedienol in acute SAD settings using the Subjective Unit Distress Scale (SUDS).
• Patients reporting reduced anxiety levels.
• Successful transition from using SUDS in PALISADE-2 to the Liebowitz Social Anxiety Scale (LSAS) in upcoming trials, following positive FDA interactions.

The trial results were comprehensive. Patients treated with fasedienol exhibited a notable decrease in SUDS scores, significant improvements in clinician and patient assessments, and the drug remained well-tolerated with no serious adverse effects.

A Deeper Look into the PALISADE Journey

In late 2020, Vistagen embarked on the PALISADE program. PALISADE-1’s patient pool may have been more affected by the pandemic’s psychological toll. But with the release of its results in July 2022, it was clear that PALISADE-1 missed its SUDS targets. This led to the decision to focus on the open-label extension (OLE), exploring the LSAS endpoint, which later showcased positive results in March 2023.

PALISADE-2, concluding with a reduced number of patients, revealed significant results on the SUDS primary endpoint and secondary and exploratory endpoints, paving the way for the drug’s future in real-world settings, especially in capturing SAD triggers.

Commodore Capital’s Confidence

Research on Fintel’s insider analysis page for VTGN highlighted Commodore Capital’s purchase of 775,756 shares at an average price of $23.15 per share.

Based on the average trade price by the hedge fund, the New York based firm is currently down 68% on the trade. While the hedge fund was not investing in the company for a quick capital return, the doubling of its stake should highlight their conviction in Vistagen’s ability to get the product to market to generate sales in the future.

Q1 Update

Vistagen released a further update yesterday, providing results of its first quarter of FY24. VTGN told investors that its research and development expenses had decreased by $11.1 million over the year to $4.2 million as the company completed its Phase 3 study.

General and administrative expenses also fell from $4.8 million in the preceding year to $3.0 million, in part as a result of termination of pre-commercialization activities in August of 2022.

As a result, net losses narrowed from $19.8 million in 2022 down to $6.9 million, significantly reducing cash burn.

The company ended the quarter with $9.6 million in cash on the balance sheet and told investors that it expects to receive a further $15.2 million from a share sale by Jefferies.

A chart from Fintel’s financial metrics and ratios page for VTGN shows the cash flows from operations, investing and financing for the company over the last three years.

This article originally appeared on Fintel