NOVN: B-SIMPLE4: 90% Enrollment

By John Vandermosten, CFA

NASDAQ:NOVN

READ THE LATEST NOVN RESEARCH REPORT

Novan, Inc. (NASDAQ:NOVN) announced on January 19, 2021 that it had achieved 90% enrollment for its pivotal B-SIMPLE4 trial indicating 765 patients have been added. The trial is targeting enrollment of 850 patients across 55 clinical sites. Based on our read and the general trend in clinical trial enrollment, the enrollment pace has improved over the duration of the trial and is expected to be complete by 1Q:21. Enrollment has averaged about 5.5 patients per day since enrollment began and based on our projections, B-SIMPLE4 could be fully enrolled by the first week in February. Based on this timeline, the last patient would complete the 12 weeks of treatment around June, with the final 24-week followup completed in September. After the last patients last visit, Novan would then need to close out the study and complete the clinical study report before NDA submission, expected to occur in 2022.

Novan announced the launch of the B-SIMPLE4 trial on August 31st and enrolled and dosed its first patient a few days later. The B-SIMPLE4 trial is a pivotal, Phase III, multi-center, randomized, double-blind, vehicle controlled, parallel group study that is now being conducted across 55 sites. Enrollment has been well distributed among the sites, with no risk concentration in any one location. Enrollment targets 850 subjects age six months and older presenting molluscum contagiosum (MC). Subjects will be randomized in a 1:1 ratio of active and placebo arms. SB206 will be administered once daily to all MC lesions for a minimum of four weeks and up to 12 weeks until all lesions are cleared. Following 12 weeks of treatment, patients will receive a follow-up visit at week 24.

Topline efficacy results are expected to be made public in 2Q:21. Again, despite setbacks largely due to the pandemic, B-SIMPLE4 is now on schedule.

Exhibit I – B-SIMPLE4 Timeline1

Corporate Headquarters in Durham, North Carolina

Along with the trial enrollment update, Novan identified new corporate headquarters. The company has entered into lease agreement for 15,000 square feet space in Durham, North Carolina, which will serve as headquarters for Novan’s business operations, as well as provide space for R&D and small scale manufacturing. The new area will be significantly smaller than the previous 51,000 square feet. The move to the new headquarters in Durham is expected to begin in April 2021.

Our Thesis

Novan’s lead candidate, SB206 builds on the Nitricil platform which suspends nitric oxide (NO) in a gel that allows for controlled release. Nitricil can be used to deliver a variable dose of NO to the epithelium to address a broad variety of skin lesions including molluscum contagiosum. NO presents a unique mechanism of action and a favorable safety and scarring profile. As a component of Nitricil, the agent has been tested in approximately 3,400 patients in clinical work, with a 24 week safety assessment for the B-SIMPLE trials. Of the 700+ patients in the Phase III trials, there was only one serious treatment emergent adverse event (TEAE) in each of the SB206 and vehicle arms. TEAEs in greater than 5% of subjects were for pain and irritation and were mostly mild or moderate.

There is no standard of care for MC and most healthy individuals clear the virus on their own. In the population where treatment is desired, the lesions can be physically removed or oral and topical therapies can be administered. Some of the more common topical approaches include the use of cantharidin, ZymaDerm and imiquimod; however, none have been approved for treatment for MC and demonstrated consistent effectiveness in trials. These approaches also have side effects, including pain and severe skin reactions, highlighting the need for a tolerable and effective treatment.

We see a fair estimate of an MC population of around six million in the United States and from 2 to 3 million in Japan. We anticipate that the availability of an approved, effective and safe treatment may increase the number of diagnoses and the addressable population could be larger. While a portion of the addressable market will prefer to wait it out, there will be a significant number of patients that will seek treatment given the availability of an approved medicine.

Key reasons to own Novan shares:

‣ Phase III asset to address an unmet need in MC

‣ MC presents a large addressable market with no approved therapies

‣ SB206 statistically significant (p=0.038) on primary endpoint using integrated trial data

‣ Nitricil presents multiple mechanisms for therapeutic effect

◦ Anti-viral

◦ Anti-bacterial

◦ Anti-inflammatory

◦ Anti-fungal

‣ Broad portfolio of dermatology indications in clinical development

◦ Acne Vulgaris

◦ Tinea Pedis

◦ Genital Warts

◦ Others

‣ Favorable drug safety profile with no reported drug-related serious adverse events

‣ Intellectual property protection until 2035 for SB206

‣ North American rights to intellectual property

‣ Partner pursuing commercialization in Japan

◦ Rights to milestones and royalties

Summary

It has been an eventful 2021 for Novan, as it relocates its headquarters and nearly completes enrollment in the B-SIMPLE4 trial. The trial has populated quickly and is on track to provide topline data by 2Q:21. Based on the pace achieved so far, we are confident in management’s target for an NDA filing by 2022 assuming results are supportive.

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1. Source: Novan November 2020 Corporate Overview Slide Deck

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