Todos Medical Acquires Lucrative NLC Assets For Pennies On The Dollar

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Little in biotech is working or controlling the pandemic for that matter, but the Biden Administration's Test-to-Treat initiative announced at the State of the Union, places Todos Medical TOMDF in the pole position to capitalize on any iteration of pandemic going forward. TOMDF could even leapfrog big pharma giant Pfizer PFE which indicated its 3CL protease inhibitor Paxlovid was facing production constraints and is only expected to deliver 3.25 million doses in September.

CEO of TOMDF Gerald Commissiong indicated in a Benzinga interview that there is “equivalent clinical activity between our compound and Pfizer’s“ and with respect to sales “it starts with a B not an M.”

The company says that it is almost totally derisked and assured a profitable path forward in testing or with the huge upside associated with a drug approval. The current market cap is $27 million and its trading pennies to the dollar.  

NLC Acquisition of IP Completed

On March 11, 2022, Todos Medical announced the acquisition of 3CL protease assets and IP from NLC Pharma. This acquisition solidifies Todos’ ownership of the 3CL related intellectual property, Tollovir, Tollovid, and TolloTest.

The 60% majority control allows them to move forward and submit EUA applications in Israel and Greece while simultaneously pursuing the regulatory options in the United States. Should the pandemic fizzle, TOMDF is uniquely positioned to handle the boom in surveillance testing that is likely to thrive against a political backdrop of the midterm elections.The incumbent party can ill afford another wave that shuts down the economy.

If history serves as a guide the next COVID-19 wave is just around the corner and the waning immune protection along with the shortage of Paxlovid could facilitate the need for an EUA approval of Tollovir which showed considerable safety and handily beat remdesivir by taking dying off the table. 

Biotech Selloff

The market has been brutal for the entire biotech sector for the last 12 months with the biotech sector index (XBI) peaking at almost $174 then dropping for the entire year to the low $80’s. Todos shares have actually slightly outperformed the index in this timeframe despite the weakness in small biotechs.

TOMDF versus XBI, February 21st, 2021-present

Todos was significantly outperforming the index a few months ago as investors anticipated the completion of the NLC acquisition and the Tollovir phase 2 clinical results, which were recently released and quite frankly knocked it out of the park (especially given the small sample size), reducing COVID-19 related deaths by 100% and also reducing hospital stays by an entire week compared to standard of care, which included antiviral Veklury (remdesivir), sold by Gilead Sciences GILD. However, the acquisition was expected to be completed by mid December, the stock began to slide despite the excellent clinical results, fed by convertible note sellers and investors refraining from buying since they were wondering what was happening with the NLC acquisition.

Living with the Virus Strategy

Additionally, many in Wall Street are thinking that Omicron was COVID’s last stand and that future variants will have little impact on the population. Even the White House has tossed around the idea of “living with the virus.”

There are reports of new variants popping up that may be more or less deadly than Omicron or Delta, but more transmissible. Many people are tired of reports of new variants (just like we have with the annual flu), but this doesn’t mean that the problem will just go away. Vaccines are proving to be less and less useful as new variants emerge, and the need for antivirals that can be effective year after year regardless of the variant is increasing. COVID-19 is becoming endemic like the flu and people need to be tested and treated as opposed to vaccinated and locked down.Even in New York City, the school mask mandates and indoor vaccine mandates have recently been lifted.

These recent events make it clear that the pandemic is not going away, even if talking heads suspend vaccine mandates or masking requirements. Each of the major variants has evolved separately and we know that Alpha and Delta were both worse than the wild-type, original virus. The next variant could also be worse. The idea of a vaccine to stop the disease is long gone; the only reasonable path forward for the world is testing and readily available antiviral treatment. As such, top COVID-19 antivirals are forecasted to sell billions this year and in the coming years. 

Comparable Therapeutic Valuation Metrics

The leading drug is, Paxlovid, Pfizer’s  PFE COVID-19 antiviral which is a 3CL protease inhibitor, is expected to generate $22 billion in sales in 2022, topping the global annual sales record set by AbbVie’s Humira. Molnupiravir, Merck’s MRK COVID-19 antiviral, is not as efficacious and there are questions about its safety. But Merck still sees sales reaching $5-6 billion in 2022 sales after posting almost $1 billion in sales in Q421. These drugs are both used in the outpatient setting before patients need to go to the hospital.

The most widely recognized drug in the hospitalized setting is Gilead’s GILD remdesivir, which has a similar mechanism of action to Merck’s drug, as opposed to Paxlovid. The 3CL protease inhibitors have shown to be the most promising antivirals for COVID-19, with Todos’ Tollovir reducing COVID deaths by 100% in the hospitalized setting and Pfizer’s Paxlovid reducing deaths by 100% in the outpatient setting (and reducing hospitalizations by ~90%).

Drugs with other mechanisms have simply fallen behind in efficacy. Remdesivir only reduced the relative risk of death in the hospitalized setting by 25%, and in the outpatient setting, molnupiravir reduced hospitalizations by just 30%. Gilead’s remdesivir (Veklury) did $5.6 billion in sales last year. It is clear that the highly effective solutions are forecasted for over $20 billion in annual sales while those less powerful solutions like remdesivir and molnupiravir can manage about $6 billion in annual sales. 

Todos’ Tollovir could be the highly effective solution in the hospitalized setting that physicians are looking for. This is possible because, even though Tollovir is a botanical extract, Todos was able to isolate key compounds in the extract and this allows them to formulate a new chemical entity and manufacture at scale.

The Deal Details

Per the company’s recent press release, 3CL Pharma, the entity that owns the 3CL intellectual property, will be 60% owned by Todos and 40% owned by NLC Pharma. To further strengthen the relationship, Todos is investing $2.2 million in the company and NLC will own just over 63 million TOMDF shares. NLC may go public via IPO, SPAC, or reverse merger, or it could be fully acquired by Todos. The companies have committed to completing further funding for 3CL Pharma.

Valuing the Deal

A rough estimate of a drug’s value can be done using a peak sales multiple. Typically in late stages of development with promising candidates, to obtain valuations, peak sales multiples can be at least 2-4x. It is not out of the realm of possibilities for Todos’ Tollovir to beat Gilead’s remdesivir in peak sales since the drug, by currently available data, is much more effective.

Therefore, it's reasonable to think Todos might generate at least $6 billion in sales of Tollovir. A 3x multiple on this peak sales number will yield $18 billion in valuation; $10.8 billion of value to Todos. The company is currently trading at a ~$25 million market capitalization. Even when investors factor in risk and required clinical development, there is a large disconnect between $10.8 billion and $25 million. This is important because Paxlovid is in scarce supply and other antivirals will be needed, even molnupiravir.

Tollovid sales, the cousin nutraceutical of Tollovir, is a revenue driver for 3CL Pharma subsidiary as well as Todos. Todos recently sponsored a Superbowl Celebrity Flag Football event that was broadcasted to over 30 million households.

This event marks the beginning of a robust marketing campaign that can amplify Tollovir sales and potentially put the company in a place where they don’t need to raise capital. Additionally, Tollovid and TolloTest bring additional value to the company.

Conclusion

The acquisition of 3CL protease assets and the formation of the 3CL Pharma subsidiary marks the beginning of a new era in Todos’ journey. It is now possible to assign more concrete value to TOMDF shares and sights have been set on valuations comparable to the current antiviral leaders, Paxlovid, Veklury, and molnupiravir, which each brings in billions in revenue — The existing $27 million market cap was shaped by an aggressive seller that squashed price discovery.

The news could be an absolute game-changer for Todos Medical which could lead to an uplisting to the NASDAQ in the coming months. The current valuation of under $30 million (market cap) is not in alignment with the hundreds of million or arguably billions of value that were just created by the formation of this company. The CEO said he sees the value “starting with a B not an M.”

Image sourced from Unsplash

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