It has been a hectic 5 months here at Pontifax (10 new investments, some yet to be announced) so unfortunately I didn’t have a lot of time to publish new posts. Going forward, I will try to make posts more concise so I’ll be able to publish stuff also during busy periods.Today, I will focus on what I consider to be the three winners in the portfolio in 2017 so far, not only from a stock performance but also from a strategic development perspective. All three will have important readouts in the coming 6 months.
Esperion – Flawless execution, pivotal readouts in Q2/18
Despite its strong stock performance (+275% YTD), I still feel that Esperion (ESPR) and its management team don’t get the credit they deserve for their flawless execution in 2017. After starting 2017 with poor investor sentiment and great uncertainty about its clinical/regulatory strategy, Esperion is ideally positioned for pivotal readouts next year (Q2 2018). Although risk is still significant I am more excited than ever about Esperion for the following reasons:
Clinical profile continues to hold up– With a database of >700 patients, the effect of bempedoic acid (ETC-1002) on LDL and CRP is seen universally across patient populations (statin intolerant, diabetics, hypertension) and combinations (statins, ESPRezetimibe). Despite inhibiting the same pathway targeted by statins, the drug has a differentiated tolerability profile especially on muscle-related side effects. Long term safety is still a significant risk, as rare safety events require large studies and long follow up to emerge.
Experience with PCSK9 drugs validates Esperion’s market assumptions – CV outcomes data with PCSK9 inhibitors earlier this year continued to validate the LDL hypothesis, and were probably an important part of FDA’s decision to keep LDL reduction as an approvable endpoint. The lower than expected effect size with PCSK9 may grow with more follow up but also suggests that CRP is also an important part of the equation (PCSK9 drugs do not reduce CRP). The lackluster commercial performance of Repatha and Praluent also support Esperion’s long thesis, showing that subQ administration and high pricing are barrierS for patients and payors, respectively. This makes bempedoic acid (especially in combination regimens) an attractive option: oral, well tolerated and relatively cheap.
CRP hypothesis supported by Novartis’ canakinumab – The recent data with canakinumab provided the first prospective proof that inflammation is an important driver of cardiovascular disease. Canakinumab inhibits IL-1 beta, a master inflammatory switch without any major direct metabolic functions. This supports Esperion’s claim about the importance of CRP reduction on top of LDL reduction. Canakinumab had a dose-dependent CRP-lowering effect (see figure below). Bempedoic acid appears to be the only drug in clinical development that inhibits both LDL and CRP (as statins do).
Source: Ridker PM. N Engl J Med. 2017 Sep 21;377(12):1119-1131.
Competitive threat from CETP inhibitors is gone – Merck’s decision not to file for approval for its CETP program (anacetrapib) followed by Amgen’s decision to terminate its CETP program it had acquired in 2015 leave the stage to Esperion’s bempedoic acid as the only late-stage oral lipid-lowering agent in development.
FDA acknowledges statin intolerant patients as a legitimate sub-population – One major achievement Esperion had is the agreement with the FDA on using the definition “statin intolerant” in order to identify patients who cannot or will not take even a low dose of statins. This group is still tricky to define but the acknowledgement of its existence and need of treatment alternatives is very encouraging. It is still unclear if and how statin intolerance will be reflected in bempedoic acid’s future label.
Esperion expects to have P3 data from four parallel P3 studies in Q2/Q3 2018, which will include LDL and CRP readouts. A CVOT (cardiovascular outcome trial) is expected to readout only in 2022.
Abeona – Three gene therapies now in the clinic
Abeona(ABEO) (+215% YTD) also had a strong year, moving from obscurity to a leading gene therapy company. Like Avexis (AVXS), Abeona’s programs utilize AAV9 to replace a missing protein in the CNS. Although Abeona cannot boast a spectacular clinical data set like that of Avexis (see recent NEJM publication), it has preliminary signs of biological activity in the CNS using biomarkers (which Avexis lacks). To me, from an investor perspective, the two data sets complement each other in validating AAV9’s ability to express clinically meaningful amounts of a therapeutic protein in the brain.
Abeona’s lead program (ABO-102) for MPS IIIA (Sanfilippo A) has generated a promising efficacy signal, making it one of the most promising gene therapy programs in development. The company recently started a clinical trial for a related condition (MPS IIIB, Sanfilippo B) for another gene therapy program (ABO-101). A third gene therapy program (EB-101) is expected to enter P3 for a rare dermatology indication (RDEB), unrelated to the company’s CNS pipeline.
During 2017, Abeona provided several updates from the ABO-102 trial (I discussed initial data a year ago here). Overall, updated results continue to look promising and indicate ABO-102 has the potential to alter the natural course of the disease. Findings include:
1) HS reductions in the CSF – Reductions in HS (a toxic metabolite that gets accumulated in MPS IIIA patients) in CSF were significant and dose-dependent. This is the most important biomarker readout as the CSF is thought to mirror metabolite content in the brain.
2) Urine HS reduction – significant but with fluctuations, effect in the low dose group diminished at 180 and 360 days (despite the strong effect in the CSF). The medium dose had limited improvement but the single patient at the high dose had a remarkable 94% reduction.
3) Liver volume reductions – At the low and medium doses, there were significant reductions after 360 and 180 days, respectively. The patient at the high dose cohort (who had the largest baseline liver volume in the trial so far) had a dramatic reduction already after 30 days.
4) Clinical measures – Most importantly, there are hints of clinical stabilization based on the Vineland Adaptive Behavior Scale/test for the low dose cohort. A historical control cohort demonstrated a 14-point decline vs. a 2-point decline for the three treated patients. This observation is also aligned with other brain imaging endpoints that all point at the same direction.
In summary, data are preliminary and limited but all point to the right direction. During 2018, Abeona should have 1-year data for the medium dose cohort and initial biomarker data for the high dose cohort.
Regulatory strategy – Based on recent cases with rare pediatric CNS indications (Avexis’ SMA1 program, Biomarin’s CLN2 program), Abeona may be able to file for approval based on the ongoing study. It is still unclear how many patients and what follow up will be required by the FDA but if data from higher doses corroborate initial findings, the company may have a sufficient data package by Q1 2019 (1 year follow up for 12 patients across three doses). A BTD is likely to come by mid-2018.
Market opportunity and valuation – MPSIII A and B are ultra-rare indications and estimations regarding the relevant number of patients vary from 1500 to 4000, combined. Assuming a targetable population of 2000 and an average cost of $800k per patient, the cumulative commercial opportunity is $1.6B. The RDEB opportunity is probably similar in size (Higher prevalence but lower cost per treatment). At a market cap of $700M, Abeona’s upside potential is still significant but not huge. Further upside could come from the two Batten diseases programs (CLN1 & CLN3), which are expected to enter the clinic by early 2019.
Lack of AAV9 license from Regenxbio (RGNX) is a risk going forward – Regenxbio holds IP around AAV9 and while Abeona indicated the two companies are in discussions, no agreement was announced to date. While this should not stall Abeona’s clinical development, it represents a commercial risk.
Sage – P3 POC achieved but real value lies in follow-on program
Sage Therapeutics (SAGE) reached an all-time high last week after announcing positive P3 data for its lead program brexanolone (SAGE-547) in PPD (post-partum depression). Brexanolone’s data set were from two P3 trials in severe and moderate PPD, respectively. Although benefit was not as dramatic as observed in P2 (placebo arm performed much better in the P3 studies, as usual…), brexanolone’s benefit in severe patients looks clinically meaningful (~ 5 points on the HAM-D scale) and should support approval in early 2019. Efficacy in the moderate PPD trial was not as robust (2.2 points) and did not reach statistical significance after 30 days.
While last week’s data may open up a $300M opportunity for brexanolone, they should be viewed more as a mechanistic validation for SAGE’s approach of using neuroactive steroids and as a positive read-through to SAGE’s oral derivative of brexanolone, SAGE-217. SAGE-217 is a novel oral drug with potentially superior properties over brexanolone, which is a formulation of a naturally occurring substance administered over a 60-hour IV infusion.
SAGE-217 is viewed by investors as Sage’s real value driver based on its improved properties, potentially superior efficacy (based on prolonged exposure with oral administration) and strong patent protection. It is currently in P2 trials in PPD and major depressive disorder (MDD), two indications that represent blockbuster potential for a novel oral agent.
Sage is expected to report P2 data in MDD for SAGE-217 by year-end, which should have a significant impact on the stock. Positive data will open up a multi-billion opportunity in a market that has seen little innovation in decades. Negative data will probably push the stock towards the floor valuation provided by brexanolone in severe PPD (~$1.5B). A P2 study in PPD is also expected to read out shortly afterwards in Q1/18. This trial involves treatment for 14 days with SAGE-217 (in contrast to 2.5 days with brexanolone), which might lead to a more pronounced therapeutic effect.
Staying loyal to the gene therapy basket approach, I am adding Nightstar Therapeutics (NITE) and Krystal Biotech (KRYS). Nightstar is becoming a diversified gene therapy play in ophthalmology with a P3-ready program in choroideremia and a P1 program in XLRP (competes with AGTC/Biogen’s program). Krystal has a preclinical program for DEB that in contrast to Abeona’s program, involves injecting a virus with the relevant gene (COL7A1) directly to the patients’ skin.
Portfolio holdings – Nov 13, 2017