EMMA: Easing Suffering from Sickle Cell Disease

By Brad Sorensen, CFA

OTC:EMMA

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Emmaus Life Sciences EMMA is a commercial-stage biopharmaceutical company pursuing innovative treatments and therapies for a variety of conditions, primarily to this point for rare and orphan diseases, but recently expanding research to include conditions and diseases affecting larger populations. The therapy that has come to market for Emmaus is named Endari and, for now, treats sickle cell disease, which has no cure and has a detrimental impact on numerous people both in the US, where Endari is currently approved for use, and around the world, where the opportunity for expansion exists.

Sickle Cell Disease

Sickle cell disease is a genetic mutation that causes an individual's blood cell to distort into a C, or sickle, shape. This mutation reduces the blood cells' ability to transport oxygen throughout the body. Another problem arising from sickle cell disease is that the sickled blood cells tend to break down rapidly and becoming very "sticky", resulting in patients with sickle cell disease having a propensity to have blood cells that clump together. This clumping causes the blood cells to become stuck and cause damage within blood vessels.

As a result of this clumping and damage to the blood vessels, sufferers of sickle cell can have reduced blood flow to distal organs, which leads to physical symptoms such as incapacitating pain, tissue and organ damage and even early death. Other symptoms of sickle cell disease can include painful swelling of the feet and hands, fatigue from anemia due to the reduced blood cell count, and a potential yellowing of the skin or whites of the eyes.

Sickle cell disease impacts approximately 100,000 people in the US and an estimated 20-25 million people worldwide, a disease for which there is no cure and few effective treatments. And it appears to impact the black community in an outsize fashion with the CDC reporting that about 1 in 13 black babies born are born with the sickle cell trait. This results in 1 out of every 365 black babies being born with sickle cell disease, while only 1 in every 16,300 Hispanic-American births are born with sickle cell.

Endari

As mentioned, there are no official cures for sickle cell disease, although there have been reported cases, by the CDC, of stem cell transplants being used to "cure" sickle cell. This potential cure is an exciting new potential option but will likely not be appropriate for many sickle cell victims. The risks that come along with stem cell transplants, according to the CDC, including life-threatening illness or death and it can be quite difficult to find a matching donor. For most sickle cell sufferers, being able to manage and control symptoms would likely be a much preferable, and more readily available, option. And that's what Endari, the therapy for treatment of sickle cell disease created by Emmaus, can provide.

Endari has been proven to reduce complications of sickle cell disease in adults and children 5 years and older and gained the orphan drug designation from the FDA, which is reserved for those drugs and therapies targeted at conditions affecting fewer than 200,000 Americans. This designation provides the company that receives it with the possibility of receiving tax credits for qualified clinical trials, an exemption from user fees, and, most importantly for Emmaus at this point, 7 years of market exclusivity after approval of the drug or therapy. The effectiveness of Endari in the fight against sickle cell disease is demonstrated by the results from recent clinical studies, which included 230 patients with sickle cell anemia or sickle thalassemia. Importantly, prior to the study, all 230 patients had at least two painful crises within 12 months of entering the trial. Among the encouraging results:

- Endari was shown to lower the frequency of sickle cell crises by 45%--annualized.

- Endari was shown to lower the frequency of hospitalizations by 33%.

- Cumulative days spent in the hospital by those on Endari were reduced by 41%.

- The time to the first sickle cell crisis in patients was delayed by 30 days.

- There was a reduced occurrence of acute chest syndrome (ACS). ACS is an acute complication of sickle cell disease and a major cause of morbidity and mortality. Once acquired, immediate intervention is required—regardless of age.

- Analysis by the company indicates that patients requiring blood transfusions and receiving Endari required about 43% fewer units of red blood cells.

We believe that the prospects of expanding the sales of Endari are good and are pleased with the plans Emmaus management has in place to expand those sales. Expanding sales of Endari is crucial, we believe, to keep the company moving forward, reduce the risks of having to overextend itself in the credit markets or diluting current shareholders by returning heavily to the equity market, and fuel further discoveries and expanding the company's pipeline. The decision to bring the sales force in house in January of 2020 was a good one in our opinion. Even though it increased the company's marketing expenses, we believe having a knowledgeable sales force with "skin in the game" will enhance the prospects of expanding the reach of Endari. We acknowledge that sales of Endari grew by less than 2% in 2020 over 2019, not exactly the robust results we would expect to see from a more aggressive marketing campaign, but we excuse the lackluster performance due to the COVID-19 pandemic that curtailed almost all functions of society, including travel, in-person meetings, and non-critical doctor appointments. We expect to see better results once the 2021 number roll in and even more robust growth in 2022.

In short, we are pleased with the prospects of Endari and therefore Emmaus appear bright to us and we are pleased with the actions that management is taking to expand the domestic use of Endari, move into international markets, and explore other potential uses for the therapy and believe EMMA is worth a look at the current levels for investors with a higher risk tolerance.

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