Here’s Why Timber Pharmaceuticals May Be Set to Break Higher; Orphan Drug Focus, Two Phase 2b Trials, and Balance Sheet Funding Through Q3 2021

Timber Pharmaceuticals, Inc. (NYSE American: TMBR) is receiving a somewhat uninspiring welcome as a newly-listed NYSE stock. However, we believe that the Company’s share price is oversold and may be poised for a correction as the Company moves towards completing patient enrollment and releasing topline data in its two Phase 2b trials, currently anticipated in Q3 2021.

Since becoming a public company in mid-May, Timber has continued to execute its strategic plan to develop and commercialize treatments for orphan and rare dermatologic diseases. The orphan drug market is the focus for Timber based on the seven years of U.S. market exclusivity provided when the FDA approves orphan drugs. Orphan drug exclusivity prevents FDA from approving other companies’ applications for the same drug for the same use, enabling the Company to maximize value in the marketplace from a set of treatments that target unmet medical needs.

While Timber only started to trade on the NYSE in May, the Company brought with it a product portfolio with near and long-term opportunities. The pipeline features a stable of biopharmaceutical products intended to offer treatments for orphan dermatologic diseases. More specifically, its initial drug candidates are focused on treating non-systemic and rare dermatologic disorders, including congenital ichthyosis (CI), facial angiofibromas (FAs) in tuberous sclerosis complex (TSC), and localized scleroderma.

To date, the Company’s investigational therapies have demonstrated proven mechanisms-of-action backed by decades of clinical experience and well-established chemistry, manufacturing, and controls (CMC) and well-supported safety profiles. And it’s that combination of attributes which is driving the development and ultimately, the commercialization of its targeted dermatologic treatments. Here’s why.

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Progress Made in Q2 2020

Timber has been quick to offer the market good news. During the second quarter of this year, it announced that all 11 sites in the CONTROL trial are open for TMB-001 for CI. Many locations have also opened for TMB-002 for FAs, enabling Timber to continue its enrollment in each of the Phase 2b clinical trials. The Company expects to complete patients’ admission in both the TMB-001 and TMB-002 clinical trials during the first quarter of 2021. 

Beyond advancing its two Phase 2b trials, the Company is also advancing its strategic options for the two assets Timber had acquired in connection with its merger with BioPharmX. In an August update, Timber announced its latest monetization efforts through the notice received from the European Patent Office (EPO) stating its intention to grant a patent for its topical composition of pharmaceutical tetracycline (including minocycline) for dermatological use. Already, patents covering the BPX-01 and BPX-04 assets have previously been granted in the United States and South Africa. Claims related to the patents have been allowed in Australia- serving as a precedent for further allowance.

While owning a robust IP portfolio is critical to success, it’s only part of the necessary tools for success in that cash is still king, and Timber has both. In its recent 10-Q financial filing for the second quarter of 2020, management noted that after accounting for several one-time expenses and costs related to its merger and listing, its cash balance of nearly $14 million at June 30, 2020 is expected to fund its trials and operations through the completion of both current TMB-001 and TMB-002 clinical trials, which are expected to conclude in Q2 2021 with topline data results expected to be released in Q3 2021. 

Assuming that these clinical trials produces positive results, the Company can then proceed with planning Phase 3 trials – a crucial step on the path to commercialization.

Two Clinical Programs are Targeting Substantial Market Opportunities

To reach the next level of success, Timber is advancing two assets through Phase 2b clinical trials and one through a preclinical stage program. The Company’s two late-stage products, TMB-001 in CI and TMB-002 in FAs, target orphan indications with high unmet needs and no FDA approved treatments. To expedite the regulatory process, Timber is utilizing the 505(b)(2) pathway to minimize the data it will be required to generate in order to obtain marketing approval for its product candidates and therefore reduce the development time. 

Upon approval and commercialization, Timber estimates that the U.S. orphan markets for TMB-001 and TMB-002 can reach $250 million for each indication at peak sales. In addition, both product candidates have additional prospective life cycle management opportunities to sustain growth and further maximize add-on marketing potential. A top-line data readout for both Phase 2b trials is expected during the third quarter of 2021.

Although Timber has several irons in the fire, its ambitions are disciplined and straight-forward – create shareholder value by specializing in drug development for orphan dermatological conditions with no current FDA approved treatments. Each product candidate also has potential follow-on indications in significant dermatology markets beyond the initial orphan indications. 

Notably, Timber has established numerous strategic relationships that can help the Company continue development of its product and also transition from a development stage to an FDA-approved product company. Timber collaborates with scientific advisors from UCSF, Yale, and Stanford. Timber also has relationships with AFT Pharmaceuticals, the Foundation for Ichthyosis, and the Tuberous Sclerosis Alliance.

Understanding Orphan Drugs and the 505(b)(2) Pathway

To get products through trials and to market quickly, Timber is leveraging the 505(b)(2) regulatory pathway to expedite potential approvals from the FDA. In addition to the speed offered through that pathway, the focus on orphan drugs, which are drugs that target populations below 200,000 people in the U.S., brings specific financial incentives, including tax advantages and user-fee waivers. Most importantly, an approved orphan drug is given market exclusivity for seven years in the U.S. and 10 years in Europe and Japan. An additional strategic consideration is that the trials tend to be smaller and less costly, with greater FDA flexibility. Many large drug companies, such as mega-caps like Novartis (NYSE: NVS) and Pfizer (NYSE: PFE) have used this 505(b)(2) pathway.  

As investors evaluate Timber’s pipeline potential, it’s essential to understand the specific advantages of the 505(b)(2) regulatory pathway. It mitigates clinical risk and significantly reduces drug development time. These benefits come as the original compound’s safety and efficacy have already been established and can be leveraged to expedite new development. Thus, companies are often given the approval to move directly into Phase 2 clinical studies, as is Timber’s case. 

Moreover, because orphan drugs are often the only or best treatment option for these rare diseases, they generally obtain better pricing and reimbursement status than drugs serving much broader populations with several competing treatment options. That understanding may be the motive behind Timber’s focus on orphan drugs, knowing that its products’ successful commercialization can potentially seize substantial commercial opportunities with little to no competition.

Positioned for Growth in 2020-2021

Moving forward, Timber is already positioned to become a leading player within the rare/orphan dermatology space. The corporate strategy is disciplined, and its focus remains true to the development and anticipated commercialization of its portfolio assets within this segment. Those efforts are also centered on mitigating the cost, risk, and time of drug development while retaining earnings potential through several strategic initiatives. 

First, the Company is identifying compounds with proven mechanisms-of-action across several dermatologic conditions. This mitigates clinical risk for each of the programs and increases life cycle management potential. Second, it pays close attention to ensuring that specific drug’s differentiation creates potential barriers to entry. Third, the Company is only pursuing orphan indications with no approved FDA treatments. Timber is focused on filling unmet needs to deliver truly meaningful therapies to patients.

Although Timber’s stock has faced a tough few months since becoming public, we believe that there is an apparent disconnect between the value in its clinical trials and its current market cap.

Going forward, the Company’s pipeline opportunities, its strong balance sheet, and two ongoing Phase 2b clinical trials may take center stage to drive a surge in shareholder value. 

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