It depends on how successful Phase 2a is. For fun, let's imagine the best case scenario.
Fast tracked drugs often go to market after Phase 2 [1]. Years ago when I was apart of a study for a cholesterol drug, one of the nurses told me something similar. When asked about skipping Phase III in the Tinnitus Talk Podcast, Carl LeBel was very careful with his words:
So, the designation of getting fast-track status really allows us to have more interactions with FDA, which is important especially at an early phase. And we've talked publically about, on the basis of the Phase IIa results, if those results were positive, we have every intention to file a request for break-through designation. So what that in general allows one to do is again continue to have more and more interaction with this division of FDA, and there can be a situation where, again depending on what the data looks like, depending on the safety, one can kind of speed the process along even faster. At this time we can't make any comments about whether there would be a concession for not having to go through a certain phase. Right now, our plans are, you know, we're in kind of in the middle phase of development, which is Phase II. We are assuming we're going to have to go through a pivotal phase, which would be Phase III. And that would be the next phase we want to go to, and as I said, we're working as hard and as fast as we possibly can.
I find this statement very interesting, especially the "at this time" part. From the WSJ article I mentioned earlier:
The U.S. Food and Drug Administration approved a record 43 new drugs last year through fast-track programs that skip or shorten major steps other drugs must pass, or 73% of total new drugs. That compares with 10 expedited drugs, or 38% of the total, approved 10 years ago.
So the trend is to expedite. I think Carl can't legally come out and say they hope to go to market after Phase 2a, but if the data is good, I think they're going to try. Also, even if this were to happen, they'd still need to go a Phase 3. It's just that FX-322 would be available while this was happening.
We know Frequency is trying to recruit people like the "4 responders" from Phase I/II, so best case let's say that most of the patients from Phase 2a look like these people, and that additional doses give improvement, the drug reduces tinnitus, and the Extended High-Frequency Audiometry shows significant improvements.
In this case, I could see the drug getting Breakthrough Status and going to market sometime late next year (or however long it takes ramp up production). FREQ's market cap is at 724M right now. Sonova, a large hearing aid company, is worth a little over 14B. Since FX-322 would treat tinnitus as well as hearing loss, the market would be bigger and more people would be excited about it since it's improved hearing rather than something you have to wear. So the question is, would Frequency suddenly become worth more than companies like this if it showed it had a better product? Let's say FREQ's market cap would probably be higher, maybe 25B.
Assuming the stock isn't diluted, that would mean the stock rocketed up 34.5x times in value from $21.71 to a new price of $749 a share.
Now, realistically this is not going to happen. FX-322 doesn't look like it will be able to be a hearing aid replacement, and I can't find any stories on biotechs skyrocketing up 3350% in value. The market isn't going to irrationally price this stock way below what it's worth, and if Frequency thought they would be worth that much they wouldn't have cut the 42M private placement deal they did last month. At best these type of stocks seem to jump around 600% on really good results. So maybe a more realistic best case scenario would be $130 a share following really good Phase 2a results. Plus, comparing Sonova and Frequency is comparing apples to oranges, and is a pretty shallow analysis.
I think the more conservative guesses of between $40-$70 a share following moderately successful Phase 2a results are more in line with reality. And while I hope FX-322 will go to market during Phase III, my judgement may be clouded a little by hope.
Now, if the drug doesn't preform well, the stock is going to tank hard. Auris ($EARS) fell around 50% on non-statistically significant results, and then just continued to go down from there. Otonomy ($OTIC) fell 82% following bad results. I think Frequency will face a fate similar to Otonomy if their results are not good.
[1]
https://www.wsj.com/articles/fast-t...ed-for-emergencies-is-now-routine-11562337924
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