Biotech portfolio updates – Esperion, Trevena, Exelixis and ArQule

Esperion – Positive read-through from Repatha

Shares of Esperion (ESPR) doubled within two weeks after Amgen (AMGN) announced positive CVOT (cardiovascular outcomes trial) outcome for Repatha, Amgen’s PCSK9 antibody. Although this news will make the lipid-lowering field more competitive for Esperion, it also validates the LDL hypothesis and removes some regulatory risk around Esperion’s LDL-lowering pill, bempedoic acid (ETC-1002).

Until now, investors assumed Esperion will need to have CVOT data in order to file for approval but now the likelihood of FDA approval based on positive LDL readout in 2019 is much higher. Beyond regulatory uncertainties, investors’ primary concern revolves around whether an oral drug with a 25% LDL reduction has room in a market dominated by generic oral drugs (statins, Zetia) on the one hand, and branded highly effective (50%-60% LDL reduction) PCSK9 antibodies on the other.

Despite the relatively modest LDL effect, I believe there is a significant market for a drug like bempedoic acid. Its profile (25% LDL reduction, oral, no muscle-related side effects) can address a major clinical need in patients who cannot achieve desirable LDL levels (due to dose-limiting side effects or lack of efficacy) with approved oral agents. For many of these patients, a cheap oral agent with a milder LDL effect is more suitable than monthly injections of PCSK9 inhibitors, which will probably be preferred in more severe patients (very high LDL levels, high risk for cardiovascular events etc.).

Market opportunity for 2nd/3rd line oral therapy is illustrated by Merck’s  (MRK) Zetia and Vytorin (Zetia + statin), which generated peak sales of over $4B combined. Bempedoic acid appears more efficacious than Zetia and in contrast to Zetia, has a statin-like effect on CRP levels. In a market with no branded oral agents, Esperion could easily gain market share by formulating bempedoic acid with a statin, Zetia or both to reach 50-70% LDL reductions.

My primary concern with owning Esperion in 2017 is the lack of meaningful positive catalysts for the remainder of the year. With P3 data expected only in mid-2018, meaningful data updates for Esperion can only be negative/neutral: PCSK9 actual CVOT results which may not live up to expectations and new safety signals with bempedoic acid that may force Esperion to terminate the program. An acquisition remains the only meaningful upside catalyst.

Even if Esperion gets bought during 2017, timing and price are hard to predict, but for me this is a good enough reason to own the stock given the scarcity value and sales potential of bempedoic acid ($1B under conservative assumptions). Even a sales multiple of 3 results in a x5 upside over current market cap of $564M.

Trevena – P3 readout next month

The next big catalyst in my portfolio is Trevena’s (TRVN) P3 data next month. The company will report results from two post-surgical pain studies and hopes to demonstrate that its drug (oliceridine) can alleviate post-surgical pain as effectively as opioids but with fewer side effects and complications.

Opioid-related side effects are a major issue in hospitalized patients, especially in certain risk populations. Although life-threatening events are uncommon, opioids have tolerability issues that can be dose-limiting and may lead to increased hospitalization stay and cost. In order to take market share dominated by established generic opioids, Trevena has to address those issues to an extent that will justify oliceridine’s relatively high cost.

I am cautiously optimistic about the P3 readout based on previous data which demonstrated similar efficacy with better tolerability or superior efficacy with similar tolerability depending on oliceridine’s dose. However, it is important to note that the drug’s efficacy/safety profile was not always a homerun across all metrics and doses. Assuming the drug is as efficacious as opioids, investors will focus on its safety profile, especially on opioids’ hallmark side effects (nausea, vomiting, constipation) and the more dangerous respiratory failure, which is potentially life-threatening.

On paper Trevena is targeting a huge market with more than 10 million relevant operations in the US annually but given the complexity and variability (different procedures, different hospitals, different guidelines etc.) and the lack of a benchmark, market penetration is hard to estimate. In the post-surgical pain setting, efficacy is a pre-requisite but it does not guarantee broad use of oliceridine in hospitals, where additional factors (cost, personnel, risk of complications and bureaucracy) are equally important. Therefore, Trevena’s study is unlikely to have a black or white outcome (unless the trial fails completely).

I am still struggling with assessing oliceridine ‘s market opportunity. The closest comparator I could find is Pacira’s (PCRX) Exparel, which is also used to treat (in this case, prevent) post-surgical pain. Exparel is an analgesic which is administered locally to the site of surgery and is currently approved for various types of surgeries. Although Exparel is not a direct competitor to opioids, one of its strongest selling points is the opportunity to reduce systemic opioid use by local pain control. In that sense, Exparel is used to minimize utilization of systemic painkillers like oliceridine.

Exparel generated US sales of $276M in 2016, which may provide a benchmark for the market opportunity in post-surgical pain. It is important to note that Exparel’s penetration is still quite limited, partly due to its less than stellar efficacy. Using it as a benchmark, oliceridine has a realistic market potential of $500-600M assuming a differentiated clinical profile and a modest market share.

Exelixis – Questionable risk/reward for 2017

“What are the arguments of not selling EXEL now?” was a question asked by one of my readers. Following the 100% jump in just over three months, that question is getting tougher and tougher to answer. The recent deal with Takeda for Japan rights implies an acquisition is not on the table, so focus now shifts to Exelixis’ ability to generate sales that could justify a market cap of $6.6B.

Exelixis has three growth drivers:

1 – Renal cancer (RCC) opportunity – Cabometyx is the most effective agent in RCC and could generate $600M in the US alone without any label expansions. Exelixis has a shot at getting 1st line approval based on a P2 study (CABOSUN) which demonstrated superiority over Sutent (current standard of care). Approval in 1st line could push US sales to ~$1B even when assuming PD-1 regimens become the dominant treatment option.

2 – Opportunity beyond RCC – Cabometyx is being evaluated in multiple clinical trials including a P3 in liver cancer (data in 2017) and combination studies with PD-1 inhibitors in GU cancers.

3 – Cotellic (partnered with Roche) – Exelixis has co-promotion rights in the US to the drug, which is expected to be in three pivotal trials this year based on preliminary intriguing efficacy signals.

While these drivers have the potential to drive shares higher in the long run, my sense is that the risk/reward in 2017 is becoming unfavorable. Exelixis is entering 2017 with very high sales expectations in RCC which might make it challenging to generate positive surprises. 1st line approval may come towards the end of 2017 but data need to be analyzed and verified by an independent review before the package is submitted to the FDA, which is another risk.

On the label expansion front, the liver cancer data is the most impactful catalyst but risk is high as it was based on a single arm P2 and the P3 was not stopped for efficacy at an interim analysis despite its large size. The PD-1 combination studies continue to generate intriguing data, especially in bladder cancer but results are hard to interpret and will not translate into revenues anytime soon. Lastly, Cotellic may become an important drug for Exelixis eventually but P3 results are 2-3 years away.

ArQule – Internal pipeline making progress in niche indications  

On Friday, ArQule (ARQL) reported the failure of tivantinib in liver cancer. The stock was down only 18%, as expectations had already been very low. The company now plans to focus its resources on three proprietary programs (ARQ087, ARQ092, ARQ531), which in my opinion don’t get enough recognition from the market, evidenced by a market cap of $85M.

ARQ087 (FGFR inhibitor) and ARQ092 (Akt inhibitor) target well validated pathways which have already been explored with limited success. I like these programs despite the high risk because they employ a creative development strategy and potentially clinically differentiated molecules (based on cross trial comparisons). The initial markets ArQule is pursuing with each compound are small ($50M-$200M each) but the timelines may be quick and the impact on ArQule’s valuation could be significant.

ARQ087 – With ARQ087, ArQule is going after intrahepatic cholangiocarcinoma (iCCA) with FGFR2 mutations, an underserved niche indication representing ~1500 cases in developed countries (>2nd line metastatic patients). According to a recent update, ARQ087 led to a response rate of 24% (6/25) in FGFR2+ iCCA. The majority of patients experienced some tumor shrinkage and 3 of the 6 responders stayed on treatment for 40+ weeks (3 responses still ongoing). PFS appears to be ~6 months, which compares favorably with previous reports in the literature.

Based on regulatory feedback, ArQule plans to start a pivotal single-arm P2 in 2017. Depending on recruitment rate, the trial may report data within 18 months of initiation and serve as a basis for accelerated approval.

ARQ087 is clearly active in FGFR2+ iCCA but efficacy does not appear spectacular, especially compared to other rare fusion mutations (ALK, ROS, Trk). In addition, although response rate and PFS appear better than historical data in iCCA , there is limited knowledge on the natural history of patients with FGFR2 mutations which may confer better prognosis. Still, if the pivotal study corroborates a ~20% confirmed response rate and a response durability of 5-6 months, ARQ087 has a reasonable chance of approval given the unmet need and rarity of the tumor.

ARQ087’s biggest competitive threat is from Incyte’s FGFR inhibitor INCB54828, which is in a 100-patient P2 trial in cholangiocarcinoma including FGFR2+ tumors. The trial started recruiting in October 2016 and may have data (as well as a decision to advance to pivotal trials) during 2017.

ARQ092 – ARQ092 started as an oncology program but is now shifting to rare diseases characterized by activation of the PI3K/Akt pathway. The first of these is Proteus Syndrome, an ultra-rare indication characterized by outgrowth of skin, bone and other tissues (best known as the elephant man syndrome). Proteus Syndrome is caused by an activating mutation in Akt1, making it an ideal indication for an Akt inhibitor.

To date, ArQule treated 5 adult patients in collaboration with the NIH with plans to increase the dose and recruit younger patients in 2017. While efficacy is challenging to assess (ARQ 092 is the first disease modifying treatment for the disease), biopsies demonstrated a 50% reduction in Akt signaling in 4 patients.

ArQule is expanding ARQ092 to additional rare indications characterized by PI3K/Akt over- activation (PROS) and expects to treat patients in 2017. The addressable patient population is hard to assess given the different indications and mutations (not all may be relevant for ARQ 092) but it can range from several hundreds to several thousands in developed countries. Assuming an annual cost of $200k-$300k per patient, the commercial opportunity in Proteus and PROS is $100M-$200M.

Portfolio updates

I am adding a second position in Trevena as I expect a positive P3 readout  which will hopefully be well received by investors. I am also adding another position in ArQule based on the potential of its two lead programs to generate data and market recognition. I am selling Exelixis at a 410% profit ahead of its quarterly earnings next week for the reasons discussed above.

Portfolio holdings – Feb 20th, 2017

Portfolio - Feb 20 2017 - after changes biotech etfs - Feb 20 2017

143 thoughts on “Biotech portfolio updates – Esperion, Trevena, Exelixis and ArQule

  1. Hey Ohad

    putting some life back into this blog! nobody posted for too long!

    I was just looking at the RDHL slides about their IBS-D ph3 compound BEKINDA… and found a number that is very interesting for TRVN, here it is:

    2013 hospital abulatory care visits for use of Morphine: 7.8M.
    Morphine is the top 6 prescribed drug in the USA.
    I am not sure what the cost of morphine is, but certainly it might only be a fraction of the cost of each ambuatory/emergency care visit.

    what if TRVN is able to capture 5% or 10% of the market?

    Thanks, hope you are well and that you will have more time for the blog soon!



  2. EXEL Great results. They are paying off their debt so bottom line will keep improving as will their top line.

    GEMP Same folks who sold ESPR to Pfizer – with portfolio similar to ESPR. Is this spinning off of pipelines PFEs way of getting better valuations?

    IMGN Inching up – Ohad had indicated that he was tempted to buy at $2.xx. Doubled since then. Any comments?


  3. Georges – Thank you!

    Peter – Thank you!

    Dan (TRVN) – I think everybody agrees on morphine-related burden (clinical and economic), the question has more to do with having a differentiated product and while TRVN has some selling points, the profile is not as strong as I hoped for.


    EXEL – Agree, they are having a great launch but this is already baked in (hence the muted stock reaction yesterday)

    IMGN Inching up – They should have incremental updates at ASCO but I don’t expect to be dramatic. With their broad partnered pipeline there can always be a wild card from NVS or LLY. I am still on the sidelines.



  4. Hi Ohad
    good to hear from you again.
    Any thoughts about XLRN and EPZM? Diversified portfolios and strong partner – CELG. If you have to pick one of them, which one has stronger and more promising platform.
    Thanks and take care


  5. Versartis has somavaratan , an extended release of human growth hormone that had promising results so far but has the phase 3 velocity trial results in September 2017. Its a high risk/reward catalyst in a $3 billion market but wonder why they have not partnered yet…large bio/pharma skepticism? Do you have any opinion?


  6. Hey Ohad

    have you listened to the CC of ARQL?
    they are about to start ph1 of their reversible BTK molecule… they are attaching high expectations to it… calling it a potential $1B drug.

    Have you heard of CAPR? they had good, solid results in DMD ph2. Their valuation is lower now than before those results… I think they took some heat on Twitter when Feuerstein called them a small company who is trying to pump their stock with an iffy trial. But DMD is notoriously hard to treat, and according to other sources I follow the ph2 seems legit and the results positive, though not a slam dunk.

    Finally there is an i/o company out of canada with market cap under $100M that seems intriguing. They are about to start p3 and their drug in ph2 double overall survival (in combination with chemo). It seems that many big pharma with checkpoint inhibitors are combining them with chemo, so this might be an interesting play. They have multiple ph2 for various indications and just got fast track designation.
    here is a link:



  7. Hey Ohad

    please delete the first message…. I thought I had lost my post for some reason….
    did not mean to repost ska things


  8. load up DMTX of jump overboard?

    any thoughts on RARE? 3-phase3’s another on tap….plus rare drugs have higher success p3 (73% success p3) especially if they use biomarkers.

    thanx sir, hope your back soon


  9. Alex (ARRY) – I guess that as the launch approaches, people turn to focus on challenging market dynamics in BRAF+ melanoma. It won’t be easy to compete with Roche and NVS…

    andre (XLRN/EPZM) – I would definitely go for XLRN as I like their approach (designed TGF beta traps) over that of EPZM’s (HMT inhibitors) although it is still too expensive IMO and investiors are rightfully nervous about toxicity.

    Sam (VSAR) – Sorry don’t know them well.

    Richard Baker (FLXN) – It’s been a while since I last looked at them.

    robertgoulet –
    DMTX – I plan on keeping a small position (perhaps even add) as newer products may overcome limitations wit the HemB program.
    RARE – I still find the 2.5B market cap very hard to justify. Citi recently published a very insighful report on the true market opportunity in XLH, which may be much smaller than originally conveyed.



  10. $ESPR With 7 months to go in the year, when do u anticipate a partnership or a BO. Do you suspect a partnership will pan out or a BO ? Institutions seem to have loaded up on the shares of the company up to 87% now on NASDAQ. What price do u think it will achieve before Partnership or BO ? Who are the most likely partners or purchasers ?

    $EXEL Any update on Exelixis
    $GERN JNJ looking to file for approval in myelofibrosis. Any thoughts ?


  11. IMGN made a big move, investors seem to expect some good reports at ASCO but reports are around phase 1/2 only.

    ESPR lost a lot of ground today – market jitters?


  12. J Allen DMTX Intriguing at these prices Inherited metabolic disease (IMD) program utilizes AAV-8 Could be a game changer. dmtx-301 initial data later this year. I would not bet against James Wilson this time around with OTC


  13. curiousgeorge –

    ESPR – very hard to predict a transaction and there is no certainty it will occur. A potential catalyst may be MRK’s CETP data later this year. Regarding price tag, if I had to guess I would go for ~1.5B, which implies a 100% upside but my guess is as good as anybody’s…
    EXEL – Launch in the US is going great but stock price has that baked in already. Liver data is coming soon, if positive could have a huge impact but I am not optimistic.
    GERN – Need to check recent data

    Bouschka – I will try to post something pre or post ASCO, the problem is that I don’t a lot to write about this year…

    curiousgeorge (RXDX) – I still think LOXO has a better molecule.
    ARQL – Overall they didn’t have any material updates, starting a pivotal trial in ihcc soon and could have data in Proteus later this year.

    Les –
    IMGN – I don’t there will be a lot of new stuff at ASCO after last week’s conference call. Glad to see responses hold up in larger sample sizes, still not sure if activity as monotherapy is good enough.
    ESPR – No idea…

    J Allen (DMTX) – It’s a high risk bet but given the low valuation I think it’s a risk worth taking.



  14. Hi Ohad
    what do you think of this EXEL evaluation?
    “After appropriate discounting, we estimated the peak net annual earnings of $6M, $90M, and $300M for Cometriq, Cabometyx, and cabozantinib’s 20 other indications, respectively. Taking the sum of the three figures ($396M) multiplied by 33 P/E average (of large cap biopharma), we arrived at $13B enterprise value. This figure is 130% higher than the current market valuation of $5.6B.”




  15. uriousgeorge-
    ESPR – Negative CETP data is good for ESPR because it removes a potential oral competitor.
    GLYC – I find their data hard ot interpret, never understood why they got BTD to begin with….

    andre (ARQL) – I still think results are decent and there is a chance to get accelerated approval with a pivotal P2. AGIO’s data put these data in perspective.

    NLNK – Not sure there is anything wrong with it, as their patient population was tougher. Cantor issued a note where they reverse engineered INCY’s data and showed that results are not that different in 3rd line patients and beyond (very small numbers, different indications etc.)

    curiousgeorge (IMMU) – I think it’s good for SGEN

    Richard Baker (IMDZ) – Sorry, don’t know them well.
    Alittle too late for me to do a pre-ASCO report but I hope I will get back to writing next month.

    Alex (EXEL) – I think it is very generous… I don’t think the stock can go there without a totally new indication like HCC.



  16. Regarding GLYC, based on their presentation from january in R/R AML the CR rate seems to be slightly better than historical trials. The best CR was from Classic 1 which utilized Clofarabine plus cytarabine and was about 35%. At the recommended dose 1271+chemo was ~42. The 30 day mortality is much better for 1271+chemo as is median OS right now. Still may be hard to compare without a randomized trial so like AGIO and CEL, GLYC can use e-selectin as a biomarker.

    In frontline 1271+chemo seems clearly better than historical trials. CPX-351 had about ~38% CR in their P3 trial. 60day mortality is much lower than CPX-351. Celator was of course purchased by JAXX for ~1.5B. But I agree more has to be seen to push marketcap above ~375M where it is at currently.

    GLYC seems to have a differentiated pipeline though. CXCR4 is targetted by big pharma and perhaps PFE can file Rivipansel for SCD early like Novartis


  17. Rick (GLYC) – Thanks. Not familiar with the rest of their pipeline but as far as their AML data goes, I see very little reason for optimism (see MEIP’s single arm data that also looked promising).

    tom (ABEO) – I plan on adding more, so far data are pretty good for an early P1.



  18. Thanks Ohad. Thats a good point. What kind of early data do you think for be approvable in AML? AGIO, CELG have filed in IDH2 R/R AML with a CR of about 19%. Do you think this will be approved and if so biomarkers would be the way to go even if the CR rate is low?


  19. CLDX

    EV is currently about 130m.

    Whats your opinion about the poster presentation at ASCO 2017 from Varlilumab and Opdivo in combination trial and the results to date?

    Are you still on the sidelines?



  20. ARQL

    I like the stock and valuation because of the potential of ARQ 087 in FGFR+.

    Cash is currently about 35m, so ARQL needs to raise funds in the near term. Data was already published, so there will be no catalyst which could push the stock higher in order to conduct a reasonable offering.

    Maybe wait until the offering comes and reenter the stock ? Do you hold?


  21. Exel—- It looks to me that MSS colon cancer Cotellic/Atezo will read out later half of 2017 or first quarter 2018. We don’t have to wait 2-3 years. Enrollment for study completed first quarter 2017 and patient median OS in Regorafenib is expected to be 6 months


  22. Rick (AGIO) – Yes I think AG-221 will get approved despite the somewhat underwhelming efficacy.

    Alex (EXEL) – A lot of drugs are found to have immunologic effects in prelinical models, but translatability to humans is unclear. At the end of the day what matters is clinical endpoints and I don’t see how this changes things. cabo+PD-1 studies are still ongoing.

    seppbroo (CTMX) – Not cheap enough IMO.

    hallama (CLDX) – Yep, still on the sidelines. Data at ASCO were early and not that impressive IMO.

    ISHIA (ARQL) – Always hard to predict timing of events, especially with such a low valuation. I plan to hold going into data in the 2nd half of the year for Akt.

    Chris (EXEL) – The trial started just a year, where did it say enrollment is completed?



  23. NLNK – do you think the punishment for the loss of Roche partenership is justified?
    They still have 4 Ph 2 programs and a lot of chash.

    MRUS – any idea why they were one of the biggest losser after ASCO

    No positions in both, just looking for a resonable entry point,


  24. CLVS – Clovis to settle class action lawsuit for $142M in cash and stock
    Medina vs. Clovis Oncology, Inc., et. al., No. 1:15-cv-02546, that accused the company and certain executives of violating securities laws by making allegedly false and misleading statements regarding its progress and market potential of rociletinib, given a thumbs down by an FDA advisory committee last year.

    Hello Ohad
    Does this affect the shareholders at that time?



  25. Hi,

    So Tivo has been approved by CHMP for RCC in first line. In addition a recent P1 study found that Tivo could be tolerated at full dose in combination with Opdivo (whereas Cabo required a dose reduction); now expanding to P2. AVEO valuation is still below the post-2013 FDA decision, even allowing for a factor 2 dilution of the stock. Your thoughts appreciated on whether the upcoming P3 third-line data (assuming successful) should be enough for first-line authorization in N/A. Also on how big the market niche would be for TIVO if it turns out to be the most effective anti-VEGF drug in combination with PD-1s. It always seemed to me that its potential lay mainly in combination therapy.


  26. andre –
    NLNK – Personally I am not excited with their pipeline. The Roche breakup is a serious blow but sentiment could reverse dramatically if INCY makes it.
    MRUS – Efficacy simply wasn’t strong enough although population was a tough one.

    Alex (CLVS) – Not sure.

    Ruhu (EXEL) – I think it will have an impact on the stock but the liver cancer data could be more dramatic.

    Chris (EXEL) – Thanks, indeed quite interesting!

    Chris (AVEO) – Good for them! The landscape is much complicated today and 1st line RCC will hopefully be transformed with PD-1 and cabo. One interesting angle is tivo’s good combinability as a relatively selective and safe molecule which bodes well for their PD-1 combo study.



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