Q1 update – GTx, ADC and NASH

Gene therapy – M&A picking up, imminent crucial update from Biomarin

In Q1, the gene therapy space saw one big acquisition (Roche/ Spark (ONCE)) and several smaller deals including Biogen/Nightstar (NITE), Pfizer/Vivet and J&J/MeiraGTx (MGTX). These deals demonstrate the industry’s appetite for gene therapies with an emphasis on liver and ophthalmology as validated domains. CNS (primarily AAV9) and muscle (primarily AAVrh74) are the two other popular domains

What I find interesting in these deals is the fact they weren’t done from a position of strength (as opposed to the Novartis/Avexis deal, for example). Spark was struggling with its HemA program and did not have near term catalysts with other programs. Nightstar was trading around its IPO price with initial XLRP data that were hard to interpret at higher doses. MeiraGTx’s stock also hasn’t performed well and the company was facing an imminent fundraising.

The next 12 months will be crucial for GTx with tens of clinical readout that should justify or disprove the current sentiment. The single most important readout will be  a 3-year follow up for Biomarin’s (BMRN) HemA program (ValRox), expected mid-2019. This program is probably the most prominent gene therapy in development (rivaled only by Sarepta’s (SRPT) DMD program). It is in pivotal trials, it clearly works and market potential is huge (peak sales >$3B).

Biomarin’s 3-year update will potentially have dramatic implications for the entire liver-targeting gene therapy space because it will start to answer the durability question. AAV-based products are hailed as single lifetime treatments but actual durability is an open question. Investors are rightfully nervous about ValRox and other liver-targeted programs because in contrast to other tissues (brain and retina), cell divisions clearly occur in adult livers, potentially leading to transgene dilution.

Results to date with ValRox show a peak in FVIII levels at 6 months followed by a gradual decline up to 2 years (last data point). Will the trend continue or can levels reach a plateau that can be maintained for years?  If the 3-year update demonstrates a significant decline towards the clinically meaningful threshold (12%), this will cast a shadow over ValRox’s value proposition. Stabilization in FVIII levels will reinforce the notion of a long term treatment although actual persistence will have to be demonstrated.  The market would like to see 5 years at minimum but ideally 10+ years of durability.

ValRox - 2 year F8

Biomarin’s update should have limited read-across to CNS and ophthalmology (retinal) programs given the limited cell turnover in these tissues but one area that should be affected is muscle diseases where vector dilution due to cell division is potentially the biggest issue. In diseases like DMD and XLMTM, relevant patients are children or infants who add muscle mass as they grow. So far, initial biomarker data from Sarepta’s DMD and LGMD2 programs are impressive but functional data are limited. Audentes (BOLD) presented encouraging results with longer follow up in XLMTM but more follow is needed to understand durability.

Antibody drug conjugates – DS-8201 gets center stage

As far as investors are concerned, ADCs are still in the penalty box given the limited success seen to date with the class. Out of >100 programs, only a handful of ADCs made it to the finish line, predominantly due to a narrow therapeutic window. As most large biopharma companies like Pfizer and Roche de-prioritized ADCs as a class, next-gen ADCs are being developed by smaller, specialized companies like Zymeworks (ZYME) who are trying to design safer ADCs.

While it is too soon to assess the next wave of ADCs, Q1/2019 had news regarding four late stage ADC programs (2 positives and 2 negatives). Daiichi Sankyo announced a massive deal with Astrazeneca for its HER2 ADC and Astellas/Seattle Genetics’ (SGEN) Nectin4 program reported positive results in a pivotal P2, whereas Immunomedics (IMMU) encountered a major regulatory setback with its Trop2 ADC and Immunogen (IMGN) reported the failure of its P3 FRa study.

The economics of the Daiichi/Astra are definitely unusual ($1.35B upfront and $5.55B in future milestones for a 50/50 profit share ex-Japan). DS-8201’s efficacy appears best-in-class and since the targeting antibody is trastuzumab, the differentiated profile can be attributed only to the linker and payload. In HER2+ breast cancer, this ADC generated a 59.5% response rate and a 20.7 month durability of response in heavily pretreated (8th line!) patients. These figures are almost double what Kadcyla reported in a less heavily-pre-treated population.

DS-8201 also generated positive data in populations for which Kadcyla is not approved for such as HER2+ gastric and lung cancer patients. This extended market potential was likely the reason behind the rich deal terms.

Daiichi’s ADC technology is unique as it utilizes a topo-1 inhibitor (most programs utilize tubulin inhibitors [DM1, MMAE] or DNA binders [PBD, IGN]) and a high DAR (drug/antibody ratio) ratio of 7-8 (vs. 3-4 in most ADC programs). Immunomedics’ ADC technology is also similar in terms of payload and DAR, so this may represent a new ADC class.

While Daiichi’s ADC platform clearly delivers on the efficacy front, safety profile is challenging. Activity comes at a heavy price of side effects including a high rate of nausea/vomiting and lung toxicity (which was fatal in some cases). Going forward, Daiichi hopes to mitigate lung toxicity with active monitoring and dose reductions in ongoing P3 trials.

Daiichi is one of the few pharmas with an active ADC pipeline (figure below). At its R&D days, the company shared data with a second ADC program targeting HER3 with encouraging P1 data to date (42.9% response rate, 8.3 months PFS). Safety profile is too early to assess but lung toxicity was also reported, making this a potentially class effect.

Daiichi - ADC

Seattle Genetics’ positive P2 results in bladder cancer got muted reaction from the market despite of a 44% response rate and a ~7-month durability of response in PD-1 failures. To put this number in perspective, PD-1 inhibitors were approved based on a 20-23% response rate in a similar setting. Safety profile isn’t benign but the overall clinical profile still looks strong.

Immunogen’s data for mirvetuximab in ovarian cancer was clearly negative but it is hard to ignore the signal in the FRa-high subset with a strong overall survival  benefit (HR=0.62, p=0.033). The study was designed with PFS as an endpoint so the company would not be able to use it for approval but in contrast to most retrospective subset analyses, the signal in the FRa-high subset looks real. It implies that FRa-medium patients in the study had a slightly shorter survival with mirvetuximab vs. chemo, which isn’t unusual as mirv was tested as monotherapy. To me, this is one of these rare cases where a second, relatively small (250 patients) study is warranted. Mirvetuximab’s is in multiple ongoing P2 combination trials which may be amended to include only FRa-high patients.

NASH – P3 disappointments, activity continues

NASH is as popular as ever on Wall Street, evidenced by NGM (NGM) Bio’s recent IPO and $1B valuation. I am more cautious on NASH as I view it as a high risk indication: It isn’t commercially validated (no approved drugs yet), disease is asymptomatic in most patients and the bar for safety is very high.

So far, P3 readouts have been disappointing with a mixed data set for Intercept’s (ICPT) Ocaliva and a complete failure for Gilead’s (GILD) Ask1 program. Ocaliva met the primary endpoint of the study and demonstrated a clear anti-fibrotic effect but the benefit was marginal which, coupled with a problematic side effect profile, may prevent wide adoption of the drug. Ocaliva’s data serves as a proof of concept for more selective next-generation non-bile acid FXR inhibitors which should hopefully be safer and more efficacious.

I still plan to keep my NASH exposure limited to Madrigal (MDGL) and Viking (VKTX) with their THRb programs despite the lack of near-term catalysts. What I like most about the two is the mutual validation each drug provides, validating the strong efficacy data. Biggest risk is still long term safety but so far both MGL-3196 and VK2809 appear to be safe (especially in light of the recent 5mg data for VK2809).

Portfolio holdings – Apr 28, 2019

biotech portfolio - 28-4-2019

biotech etfs - 28-4-2019

186 thoughts on “Q1 update – GTx, ADC and NASH

  1. problem with $abeo is no cash so no one will touch it…best if they pulled an axgt and do a reverse split…this bio shit the bed by not doing a raise while they had a chance…I highly doubt this new mgmt can pull of a partnership within the small window

    Ohad any opinion on $rckt or $autl?


  2. Ohad & Folks, the gains on CHMA were short lived. With the market downturn It’s now trading well below its offering level of 5.50 and way below recent high of 8.34. Should have banked some profits but ‘long term’ greed always gets in the way :). Any hopes that ER on Aug8 will do something positive?


  3. Hello Ohad, do you think $ABEO EB program has any value? They try to differentiate themselves by treating chronic large wounds as opposed to $KRYS (so far only wounds <20cm2). Thanks as always.


  4. Hi Ohad,

    Do you still have Still attention to AVEO, you used to be interested. The OS data will come out in August. What do you see the chance of success? Thanks so much!



  5. Ohad
    STML vs INSM
    Two Q2 results which look fairly similar (solid launch with ~40% revenue increase), however the market reaction was quite different
    Can you comment on that.


  6. What did you think of MRKR results in pancreatic? Good institutional ownership.

    Do you have an opinion on GNCA?

    Are you buying more ABEO yet?


  7. Jinyu, it reported earnings and I guess missed revenue estimates.
    Chris, You can get average $ for stock very easy, just add/sub p/l & divide with number of stocks… excel can help


  8. ARQL
    Hard to know but my guess is that investors were hoping for an update on the 531 trial. Expectations were high since ARQL had given updates in the past. But nothing really new on the CC. Seems like we have to wait till ASH for an update…


  9. Hi Ohad,

    Any thoughts on how GLYC’s AML program might fare after the flop of their sickle cell anemia treatment based on similar technology?


  10. Hi Ohad,

    Concerning ESPR: The FDA finally scheduled an AdComm for AMRN. Do you expect the same for ESPR the closer the pdufa-date gets?

    Thanks as always


  11. Ohad, you have a good sense for the market. do you increase your short hedge during 2019?? what are your plans?

    and how do you see latest price actions in chma, stml, abeo, espr? good entry points?

    Best Regards


  12. Hey Ohad,

    As others have pointed out, several gene tx companies are way down in valuation– ABEO, AGTC, RGNX — plus the same is true also for CHMA, ESPR – which you had already singled out as value plays.
    What is your take on these tickers, and especially for CHMA which had a successful ph3 and some of the risk has been removed. Do you think that the current low price (they just raised I believe at $5.50) is an opportunity to add? What about for the other companies?

    Have you followed APTO?
    – they announced at last cc that MYC inhibitor has completed/cleared second dose with no AE and clear signs of inhibition of MYC
    – they also completed fist cycle (I believe 150mg) for BKT drug (patient was given drug twice daily) and no AE or toxicities so far… they are now moving to 300mg dose twice daily.
    – several institutional investors have started a position (now 21% of float)

    Thanks a lot!


  13. Ohad, Once again you nailed it mentioning ‘significant correction’ in Jan. While not broad based the bios have certainly lived up to that call. The current valuations appear to show wall street is moving towards bio revenue as opposed to bio potential. (?) Bought Chma after data and Abeo recently. Couldn’t stay away from that $2+ price. Thank you for your input. Invaluable.


  14. Ohad
    What about AUTL below 10?
    Is the woodford the main reason?
    If so, as VC man can you tell why it matters
    Autl has 220M cash, enough to complete the pivotal trail in CD19/22, for which, as you said, the rationale is strong.
    Just curious – do you follow BTAI. Recent results were great – meet all primary and secondary endpoints. Will start ‘soon’ a pivotal ph 3, which will be fairly quick- just a few months. It does not seams to have AE typical for antidepressant, so may compete well with ACAD.


  15. Alex (ESPR) – I am happy with my current exposure, don’t think P2 could change anything as investors are focused on approval and launch.

    Frank (LGND) – TBH I never considered them as they were more of royalty/EPS story and less of a classic drug development play. Their royalty pipeline is quite impressive but looks out of scope for me at least.

    Paul (CMRX) – At first glance I don’t think the story is compelling there, in general not a big fan of chemo formulations for AML. On the other hand, I completely missed CPXX at the time and their P3 data looked really good.

    Les (ABEO) – I think things could stabilize after an imminent fundraising, I thought the MPS3A update was positive and make perfect sense, will have to wait to the next update and see if trajectory is maintained (which will be hard to explain by natural history of the disease).

    Robert –
    RCKT – Haven’t looked at them in a while, at teh time they were too early and valuation wasn’t attractive enough.
    AUTL – I was surprised by recent correction but it looks justified given the setbacks and CD19 data don’t look like a home run. I am still a big believer in their dual CD19/CD22 approach to avoid antigen escape. Following them closely.

    paul (ABEO) – I would wait until fundraising.

    Chris on August 1, 2019 at 3:05 pm said: Edit
    Hi Ohad,
    It would be really helpful if you could add the price/average you bought the stock:-)
    Thanks for your efforts!

    Chris – Are you referring to a specific stock or is this a general comment?

    Les (CHMA) – I thought data were good and that clinical profile will make Mycapssa a viable commercial product. Will publish a post on them on Sunday.

    Milos (ABEO) – I ascribemore value to their LSD programs, I prefer KRYS’s approach in DEB.

    Jinyu (AVEO) – Sorry, haven’t been following them in a while.

    andre (STML/INSM) – Both drugs are doing better than expected IMO. Of the two, INSM looks tempting despite concerns around quarterly sales growth slowing down. Price is close to pre-P3 data levels.

    Robert (ALLO) – Not following the story closely. They are definitely leading with CLLS the Allo CAR space.

    Richard Baker (MRKR) – Sorry, don’t know them well.

    GNCA – Interesting platform but not a big fan of cancer vaccines. ACT program is more interesting but early.
    ABEO – I would wait until they raise more money.

    Richard Baker (APTO) – Their pipeline is still too early and risky imo.

    Randall (GLYC) – I think AML combo data are impossible to interpret without a control arm.

    Alex (AVRO) – I am much more positive, will post more on Sunday.

    Marc (AMRN) – I hope not, it would be a huge surprise as FDA explicitly communicated to the company that an advisory committee is not needed.

    chma, stml, abeo, espr – I plan to keep all of them. Plan to add CHMA and ABEO in the future.

    Toby (RGNX) – I am still holding as a gene therapy AAV, they need a proprietary program with a clear route to market.

    Cube (AGTC /ABEO /CHMA) – Agree. I think CHMA is the more puzzling case.

    Rüdiger – Yes and yes 😉 Summer was much busier than usual plus taking some time off. Will post a portfolio update on Sunday.

    Dan – I think CHMA’s recent weakness creates a long term opportunity but prefer to wait a bit before adding in order to avoid surprises.

    APTO – If they can inhibit MYC this is a huge breakthrough but I prefer to wait for data given history of the target.

    Conrad (CHMA/ABEO) – I still think a correction makes sense after 10+ years of a bull market. I like both CHMA and ABEO as long term investments but prefer to wait before adding more.

    andre (AUTL) – Definitely one on my watchlist but price reaction is justified given setbacks and clinical data are not a home run (but clinical potential could still be differentiated eventually. I still like the dual targeting approach.

    Sorry, not following BTAI.



  16. Hi-

    Great column as usual.

    Any thoughts on NBRV (antibiotics) or AGEX (aging), both small market caps and interesting …

    Also, RAPT (oncology / inflammatory).




  17. Ohad
    speaking about CPXX, what do you think about ATNX (oral chemotherapy)?
    A sort of CHMA story – successful oral vs IV.
    They completed recently pivotal Ph3 with a response rate higher and less neuropathy incidents compared to IV paclitaxel. No need for immuno-suppression is nice plus. Looks a good maintenance therapy for metastatic breast cancer. Plus several trails in angiosarcoma and solid tumors


  18. Ohad if you could be a little more specific if not too much trouble re: CMRX. ( I might learn something for the future)

    CX-01 added to 7+3 chemo had 89% CR vs 58% for chemo alone and this little co has paid $30m upfront plus 10 m shares, so a huge bet. Maybe I got carried away with Mike Sherman here after ECYT buyout.


  19. Paul
    Need Help……CX-01 is from Cantex …..CMRX is Chimerix.
    CX-01 looks interstellar but it’s Private I think (?).
    Would MGEN be another potential CPXX?


  20. Ohad

    ZYME.Stock has done well in a sub par performing biotech market. You had stated your a big fan of their technology. What do you see as their next catalyst and would you recommend buying more as a long term investment.

    Also, do you expect a change at the FDA, now that Gottlieb is no longer at the helm. Do you think that is a reason for the flat performance of the sector.


  21. What is your take on BPMC? The DCPH’s drug phase 3 results seemed to send BPMC stock much lower. Is this price action justified? The response rate of DCPH’s drug is much lower than Avapritinib (9% vs 22%) in the same setting.


  22. Ohad
    Do you follow TRVI.
    Pivotal Ph3 w/ read out in h1 2020.
    Ph2 data were not stellar but they had nice dose response, plus no SAE.
    Is that enough to consider Ph3 derisked?
    If so, why the cap is about the cash position
    Am I missing something, like high discontinuation rate in the open label expansion, or lack of composition of matter patent, or the use of post-hoc analysis to get stat sig in Ph2, or CARA will eat their lunch, sort of…
    The volume is so low, it reminds me CHMA when you originally purchased your 5k shares.


  23. Ohad, you proved a good sense for the market. how do you see the biotech market in 2019/2020 in general? Where do you see the XBI ?

    Do you plan to increase your short hedges or cash? Or even initiate more long positions?

    Looking forward to read your Update today.



  24. Paul – Thanks. Sorry but I am not closely familiar with these names.

    andre (ATNX) – Don’t know the product well but in general in oncology moving from IV to oral is not as important as other chronic indications.

    Paul (CMRX) – I will have to dig deeper, looked at CMRX’s deck and despite the CR difference I am still cautious here as the trial was small (25 pts per arm) and teh OS curves don’t look that great.

    Frank (MGEN) – I am following them but prefer to wait for more data. Valuation is definitely cheap with a negative EV.

    Dave (ZYME) – For the me the most important readout is for the HER2 ADC program next year. I am not very optimistic about ZW25 but happy to be proven wrong here.

    Not sure how Gottlieb’s departure will affect the FDA at this point.

    Liang (BPMC) – I thought DCPH’s data were very strong, setting a high bar for BPMC. BMPC’s KIT program should also work but it may have to share the market and valuation is too high imo.

    andre (TRVI) – I think you already listed all the reasons 😉
    I would consider the drug derisked from a mechanistic perspective following CARA’s P3 but not sure about their claim about the need to have mu inhibition to improve efficacy.

    Carlo – I still think that in general valuation are too high but hard to predict anything concrete. I don’t plan to add more BIS but will selectively add stocks like today (AVRO, VKTX, MDGL).



  25. Hi Ohad,any opinion on ELOX?
    The preclinical data of ELX-02 seems promising and dirisking, but all the data works well at concentration level of 50~100 µg/mL;
    While the clinical PK data at high dose 2.5mg/kg indicating a plasma Cmax = ~8 µg/mL and T1/2= ~3 h, which is substantial lower…
    Not know whether there is a enrichment effect in lung tissue or HBE .
    Many Thanks


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