Vistagen Could Run Up Ahead Of Phase 3 Results In Social Anxiety Disorder

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Vistagen's fasedienol nasal spray is in two phase 3 trials for social anxiety disorder, with results expected in 2025.Positive results from PALISADE-2 were seen previously, and VTGN may need only one ...

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I haven't looked at VTGN since April, when I considered the name a hold, as the company had good cash runway, but results from further work on fasedienol were a while away. This article takes a look at where VTGN is now, and how things have changed, leading me to rate the name a buy. Updates On Fasedienol On April 1, 2024, VTGN announced it had initiated PALISADE-3 a 236-patient, double-blind, placebo-controlled, randomized trial of fasedienol for the acute treatment of anxiety in adults with social anxiety disorder. The trial involves a public speaking challenge to induce anxiety, conducted in a clinical setting, with the primary outcome measure being the Subjective Units of Distress Scale (SUDS). On September 23, 2024, VTGN announced it had initiated PALISADE-4. PALISADE-4 also has an estimated enrollment of 236 patients and the same primary outcome measure, indeed VTGN has referred to it as a replicate study of PALISADE-3. VTGN lead neuroscience programs. Note the PALISADE phase 3 program includes the completed PALISADE-2 study and the underway PALISADE-3 and PALISADE-4 studies. (VTGN Corporate Presentation, October 2024.) VTGN's guidance on the timing of a readout for PALISADE-3 of \"2025,\" which it gave with the quarterly earnings press release in August, isn't very specific. The CEO did, however, provide something a bit more specific on the earnings call.  So currently, our target for PAL-3 is mid-25 and for PAL-4 will be near the end of '25. Shawn Singh, CEO of VTGN, Q2'24 earnings call, August 13, 2024.  In any case, even if some patience is required, VTGN has two shots on goal with those trials, especially since success might only be required in one of those two trials.  Vistagen believes either PALISADE-3 or PALISADE-4, if successful, together with the positive results from PALISADE-2, may establish substantial evidence of the effectiveness of fasedienol in support of a potential fasedienol U.S. New Drug Application (NDA) submission to the FDA for the acute treatment of anxiety in adults with SAD. VTGN comments, earnings press release August 13, 2024.  I do think those two shots on goal have some chance of success given the results seen in PALISADE-2 where there was a significantly greater reduction from baseline on the SUDS in fasedienol patients compared to placebo patients. Results from the primary efficacy endpoint of PALISADE-2. (VTGN Corporate Presentation, October 2024.) Financial Overview VTGN had cash, cash equivalents and marketable securities of $108.4M as of June 30, 2024. R&D expenses for Fiscal Q1'25 (Q2'24) were $7.6M and G&A expenses were $4.6M in the same quarter. VTGN reported a net loss of $10.7M for FQ1'25, with net cash used in operating activities of $10.9M in the quarter. At the current rate, then VTGN would burn through its cash in about 10 quarters, or by the end of 2026. In fact, I believe cash burn could pick up further as the company has now initiated PALISADE-4. Nonetheless, even though PALISADE-4 wasn't underway during FQ1'25, preparations for it were, so the current R&D expenses may be fairly close to what is seen now PALISADE-4 is underway in earnest.  The increase in R&D expenses was primarily due to an increase in clinical and development expenses related to the commencement of the Company's PALISADE-3 Phase 3 trial, and costs related to preparations for the initiation of its PALISADE-4 Phase 3 trial of fasedienol in SAD, an increase in headcount costs, and an increase in consulting and professional fees. VTGN comments, earnings press release August 13, 2024.  In any case, if VTGN is unsure about its cash balance, it can delay development of its other lead assets, itruvone and PH80. The company could, however, look to raise more funds. Notably, the company has an Open Market Sale Agreement with Jefferies LLC, which it has used in the past to raise funds.  During the fiscal year ended March 31, 2024, we sold 4,698,495 Shares under the terms of our Sales Agreement for net cash proceeds of approximately $36.2 million. In February 2024, increased the remaining available aggregate offering price of our common stock under the Sales Agreement to $100 million. Statement from VTGN 10-Q, for the quarter ended June 30, 2024.  There were 27,055,107 shares of VTGN's common stock outstanding as of August 12, 2024. VTGN has a market cap of $81.7M. Conclusion, Rating, And Risk VTGN is now underway on both PALISADE-3 and PALISADE-4, both of which it plans to report topline results on in 2025. Given the results seen in PALISADE-2, and the fact that success in either PALISADE-3 or PALISADE-4 might be enough to support a filing for approval, I believe the company is in a good position with regard to its clinical prospects. Additionally, since we are further down the road now than we were in April, with 2025 just two and a half months away, I wouldn't be surprised to see VTGN stock find a base. Perhaps VTGN could run up during 2025, as we approach a result from PALISADE-3. That being said, as 2024 hasn't been a strong year performance-wise, there could still be some tax loss selling. Overall, however, I'll rate VTGN a buy now, even if a slightly cheaper entry could possibly be had in November or December if tax loss selling occurs. Data by YCharts I stop short of rating the name a strong buy because there is a risk VTGN looks to raise more cash, perhaps if the stock runs up into PALISADE-3 results, and the risk of a trial in psychiatry failing is always present, even with a positive phase 3 result in hand. The risks of any long in VTGN are several folds, a few of which I'll mention here. Firstly, if VTGN announces delays in the PALISADE-3 or -4 trials with earnings for Q3'24 in November, the stock could fall. Secondly, if VTGN announces an offering, as it did in 2023 with a $100M public offering, the stock could sell off. In this case, any offering might not be $100M, but if it represents substantial enough dilution, it could trigger some selling. Lastly, anyone holding VTGN through a clinical readout is exposed to a potentially disappointing result and a large drop in the share price. Indeed, if there are interim analyses that lead to a stoppage of a trial due to futility, the stock could fall heavily, before we even get to the expected date of topline results in 2025.  Editor's Note: This article covers one or more microcap stocks. 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