Galidesivir has made Island Pharmaceuticals the ultimate ‘America First’ play for ASX investors!

Think of ‘America First’ ASX stocks and Island Pharmaceuticals (ASX:ILA) typically hasn’t come to mind, but its acquisition of Galidesivir should put it firmly in the list. You cannot question the data that the company is in possession of, but some investors may think a company with plans to undertake an ‘animal study’ is years away from commercialisation. To the contrary, the company is closer than you think.

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What is Galidesivir?

Galidesivir is an antiviral molecule that has a broad spectrum of activity in over 20 RNA viruses, including high-priority threats such as Ebola, Marburg, MERS, Zika, yellow fever and SARS-CoV-2.

It works as a nucleoside analogue that mimics adenosine triphosphate (ATP) and inhibits viral RNA synthesis, allowing broad activity against many RNA viruses. Nucleoside analogues are basically ‘monkey wrenches’ that interfere with viral replication because they are incorporated into viral RNA by RNA-dependent RNA polymerase but, lacking 3′-hydroxyl group, cause RNA synthesis to halt because the phosphodiester bond that would link to the next nucleoside can’t be formed.

Examples of other nucleoside analogues successful on ‘the front line’ have included Remdesivir (used to treat COVID-19 during the pandemic), Vidarabine for Herpes in 1976 and Zidovudine for HIV in 1987.

Why is Galidesivir a big deal?

Because it has spectacular results against certain diseases with up to 90% mortality rates and no effective treatments, of which Marburg is just one. Moreover, such diseases have potential to be used for bioterrorism too. Don’t take our word for it. The US government has invested US$70m into Galidesivir towards its ongoing development to target Marburg, as well as Ebola, amongst other indications.

Island Pharmaceuticals plans to undertake a single animal study in Marburg using Galidesivir and complete it by Christmas 2025, pending FDA feedback.

The ultimate plan is for Island’s business partner to be the US government. Washington may add Galidesivir to its Strategic National Stockpile and have it delivered as required. The Stockpile reserves medical supplies and pharmaceuticals to respond to public health emergencies. Its assets include $500m worth of Ebola treatments.

So a $100-200m takeup for Marburg wouldn’t be unreasonable. Moreover, Island could also conduct trials in Galidesivir for other indications like Ebola and measles and add it to the stockpile and this could potentially happen with just one animal study.

Island is much closer than you may think

Upon hearing the phrase ‘animal study’, investors could be forgiven for thinking this asset is several years away from commercialisation and long odds to make it, thinking this is just the first step in a long journey of multiple clinical trials and likely hundreds of millions of dollars.

To the contrary, much of the hard work and investment has been done . If the animal study results are successful, there’s potential for ILA to submit a New Drug Application (NDA) under the FDA’s Animal Rule and results could come before Christmas 2025.

The FDA’s Animal Rule facilitates the approval of drugs in indications where human trials are unethical or not feasible (and this is the case here), provided safety is shown in humans and the disease is well modelled in animals. And it is, clinical data has shown Marberg can have a 100% fatality rate within just over 10 days from infection, but Galidesivir can lead to a survival rate of greater than 90%, 30 days from infection. Moreover, it has a clear impact on viral load.

Island believes all it may have to do to secure an NDA is to replicate that same study and show similar results. If they are anything like the results above (i.e. showing 100% mortality after 12 days without intervention but 100% survival with intervention) it is difficult not to see this happening.

An NDA may provide Island with access to a Priority Review Voucher (PRV), which would be additional to any PRV given for ISLA-101. As we’ve noted in previous reports on Island, PRVs can sell for >US$150m if recent precedent transactions are any guide. Indeed, the most recent sale of a PRV was US$160m.

Firmly America First

One concern healthcare investors may have had is Donald Trump’s Health Secretary Robert Kennedy being a vaccine sceptic, but this could work in ILA’s favour – in that Galidesivir could address measles. Despite measles having been under control for decades, it is re-emerging due to herd immunity being lost by virtue of vaccination rates falling below 95%.

This is not necessarily because of anti-vaccination beliefs being more prominent but also that many younger generations are not anymore as childhood routine given the incidence had fallen. Measles is one of the most virulent of all viruses on earth – you can have no symptoms for 7-14 days and infect 12-18 people in that time.

For comparison’s sake, the omicron COVID variant was estimated to be 4.2 people when it first emerged in South Africa in late 2021 . The Stockpile is an America First play first and foremost, so Elon Musk’s short-lived DOGE did not touch it.

What about ISLA-101?

Some investors may wonder if Island is abandoning the ISLA-101 program. It is not, but the future direction is yet to be determined. The company is working through its clinical data. It is clear the data is positive, but there were more definitive results in the preventative arm rather than the treatment arm.

It would seem a larger Phase 3 trial would be the next step, and perhaps it would only look at ISLA-101 as a preventative treatment for Dengue. It is plausible that it may take some months to make this happen – to secure FDA consent and funding/partnerships necessary for the trial. But there cannot be any denying that the overall Phase 2 results were a step forward.

Enormous upside for investors

Our friends at Pitt Street Research value the company at 167.5m or $0.618 per share in our base case and $211.6m or $0.778 per share in our bull case using a SOTP valuation. Of this $0.335 derives from ISLA-101 and $0.247 from Galidesivir, with the balance coming from the company’s debt/cash position. Investors interested in finding out more should check out the report.

Island Pharmaceuticals is a research client of Pitt Street Research. Pitt Street directors own shares.