10 Bagger Club Logo

An Australian Pharmaceutical Innovator - Firebrick Pharma

by PhuketGuy & Phred, June 2022

Firebrick (FRE.ax) has developed Nasodine, a povidone-iodine nasal spray, that kills the viruses that cause colds. Globally there are billions of cases of the cold per year, with enormous economic costs from absenteeism from work, and placing a huge strain on the public health system. Strong global patent protection - US, EU, AU and others. Phase 2 Clinical trials of Nasodine for Covid-19 underway in South Africa. TGA (Therapeutic Goods Administration - Australia) Phase 3 common cold trial due for completion in July ’22. Both FDA (US Food and Drug Administration) and EMA (European Medicines Agency) - trials to commence following TGA approvals.

Company Structure:

  • Shares on Issue: 170 million
  • Increase in FRE shareholders from 400 to over 4,600 since commencing trading on ASX
  • Share price: $0.35
  • Market Cap: $60 million
  • The top 20 hold 70%, and includes founders, doctors and pharmacists. Approximately 40% of shares held by founders and escrowed for 18 months
  • Cash in Bank: $8.8 million

Key personal:

  • Peter Molloy (Executive Chairman): previously at Pfizer as Managing Director of Australia/New Zealand operations, and later International VP for Marketing.
  • Stephen Goodall (Chief Operating Officer): was COO of Viralytics which was acquired by giant US Pharma Merck for $500 million.
  • Professor Phyllis Gardner (Non-Executive Director): based in California, Phyllis is a tenured Professor of Medicine at Stanford University and on the Board of Harvard Medical School.
  • Peter Kash: New York-based biotech investor and major FRE shareholder - Peter has significant prior success with several US biotech companies with six FDA-approved drugs. Looking to make Firebrick his seventh.

Patents and Trials:

  • On 17, February 2022, FRE announced that the patent application covering the use of Nasodine in Covid-19 had been granted in the US The market for the common cold in the US is simply enormous - with over 1.5 billion cases annually. Takeover by a big US Pharma company in the future with a +$1 billion valuation is highly likely. Joe Rogan (audience of 11 million), in his December 2021 podcast with Dr Peter McCullough, discussed the potential for a povidone-iodine treatment for Covid-19.
  • The company is pretty bullish that their new product will meet all the requirements as they have already completed the same Phase 3 trial successfully for another product of a similar nature just under 2 years ago. Hence, the management thinks it's just a matter of going through the required processes and then getting the approval.

The extract from Firebrick’s official announcement below reads:

The randomised controlled Phase 3 trial expects to recruit up to 450 adult subjects with early cold symptoms to achieve a target treatment population of 196 subjects, who are confirmed by PCR, to have a viral cold.“This is the second Phase 3 trial for Nasodine and we are excited to take what we believe will be the final step towards commercialisation of Nasodine in Australia, and to lay the pathway for international approval and distribution,” said Firebrick Executive Chairman, Dr PeterMolloy.

“Nasodine is a first-in-class nasal spray medicine that actually targets the viral cause of the common cold, where colds start – in the nose.” The primary endpoint of the trial will be the impact of Nasodine treatment (3 sprays per nostril, 4 times daily for 5 days) on overall cold severity in the viral-infected population. Overall cold severity will be measured using the Global Severity Score (GSS) from the WURSS-21 cold severity survey. “GSS is the same endpoint we used as a secondary endpoint in our first Phase 3 trial, against which we saw a clear clinical benefit of Nasodine, especially in those who had confirmed viral infection,” said Dr Molloy.

Yet, it is not 10 Bagger Club’s intention to wait until Firebrick’s products are sold off shells and the value is calculated off earnings and cash flow. We suppose Firebrick Pharma will probably get bought out by big pharma - and that is what we are looking forward to.

The story so far has all the big US retail brands including Walmart and CPS Pharmacy, as well as one of the biggest pharmaceutical conglomerates of China, are already contacting Firebrick Pharma and asking for pre-contract for sales following the approvals. Dr Molloy is knocking them all back right now - as he is aware that some big pharma companies are watching this to pounce for a buyout - which is a lot easier than running a company - given that Dr Molloy and the rest of the board have about 130 million of the 170 million shares on issue - that would be a nice windfall for them at $3-5 per share sale value. Nice to see they are aligned with us shareholders and fiscally motivated. And that is the sort of thing big pharma likes to do - as in pay big once and then collect forever using their retail networks.

Now, that may just be yank big-talk… but to us, it makes sense. A common cold cure in a nasal spray has big retail possibilities in the long run (not to mention the Covid-19 cure). So even if Dr Molloy got a buyer at US$500m - there are 170m shares in this company and they have A$8.5m cash - so a new cash raise does not look likely to dilute further. USD500m roughly equals A$700m which means that would be a sale for around A$3.50 per share. At US$1b, it would be a sale at around $8 per share.

We see there are likely two or three big valuation jumps in the share prices in the next six months:

  1. Given that we don't need to wait until they are in production, we expect to see the first big value jump in this stock when the Phase 3 trial is successfully completed.
  2. Then when the Covid-19 Phase 2 trial is also successfully done.
  3. And finally, when the Phase 3 trial in the US has been completed.

Meanwhile, remember Firebrick Pharma intends to also go all over Europe and Asia. There are 2.6 billion cold and flu cases per year just in the US and Europe. How many more are there in populous Asia. In the company's latest announcement it was established that Firebrick Pharma now has patents already granted in 26 countries including the USA, Germany, Switzerland, France, Italy, Sweden, United Kingdom, Australia, New Zealand, Turkey, Malaysia, Philippines, Hong Kong, and South Africa.

This stock has 10 Bagger still written all over it. Hold tight and do your own research.