2 affordable biotech IPOs – Ambit and Esperion

2013 will be remembered as one of the strongest years for biotech IPOs, with over 30 successful offerings year to date. A lot has been written on the biotech IPO boom and what will be the long term consequences. My personal view is ambiguous. On the one hand, most if not all of the companies that went public are “IPO worthy”: They are innovative, address medical unmet needs and are run by capable management teams. On the other, I find it extremely hard to justify the valuations of many of the companies. What is even more frustrating is the fact that the ones with the most exciting technologies and belong to my coverage universe are also the most ridiculously priced. Agios (AGIO), Oncomed (OMED), Blue Bird (BLUE) and Epizyme (EPZM) are all good examples for great companies whose stocks are way too expensive.

2 exceptions are Ambit (AMBI) and Esperion (ESPR). Both companies have clinical proof of concept for their lead programs with important upcoming catalysts and importantly, each has a “sane” market cap of ~$250M.

Ambit

Ambit’s lead program is quizartinib, a FLT3 inhibitor for acute myeloid leukemia (AML). In 2009, the drug was licensed to Astellas, which recently terminated the collaboration and returned rights for quizartinib to Ambit. This naturally leads to some skepticism but the clinical data (especially those recently generated)  imply quizartinib is a true breakthrough drug and has a real shot at becoming the standard of care in FLT3-mutated AML (The drug also has some activity in non-mutated AML).

AML – Desperate need for new treatments – AML is one of the toughest cancer types to treat with very limited treatment options and no newly approved drugs. Bone marrow transplant is the only truly effective treatment available, creating a huge need for treatments that can either be used to facilitate transplantation or augment post-transplant remission.

Clinical activity – Quizartinib has an unusually large body of clinical data, with a phase II data set for over 300 patients across several dose levels (Will be ~400 at ASH this December). Although the trials were not randomized, short-term anti-tumor activity was striking.  In an initial phase II that evaluated higher doses in 2nd/3rd line AML patients, 75% of patients showed some regression including 6% with CR/CRp (Percentage of cancer cells in bone marrow is <5%) and 44% with CRi (CR with incomplete neutrophil recovery).

Quizrtinib is clearly a very active drug but it also suffers from the following issues:

Issue #1: Short duration of response – Quizartinib’s magnitude of response rate resembles that of high profile hematology drugs such as Pharmacyclics’ (PCYC) ibrutinib or Gilead’s (GILD) idelalisib in CLL/NHL, but unfortunately durability of response was limited (less than 3 months). This is a hallmark feature of AML, where responses are relatively easy to achieve but are typically short-lived. It is important to note that even short term responses are clinically meaningful because they may allow patients to receive a transplant.

Issue #2: Is CRi a clinically relevant endpoint? Most of the CRs with quizartinib were achieved without full hematologic recovery (CRi). In contrast to CR/CRp, which is clearly associated with long term benefit, the correlation of CRi and long term outcome is not well established. From a regulatory standpoint, CR/CRp is an acceptable surrogate endpoint for accelerated approval whereas CRi is not (to date).

Issue #3: Cardiotoxicity – Quizartinib’s most significant side effect is QTc prolongation. Grade 3 QTc prolongation occurred in 17% of patients and appears dose dependent. Although there were no related deaths in the trial, QTc prolongation is a major overhang even in oncology.

Ongoing phase IIb – Under a new management team, Ambit is conducting another phase II using lower doses (30/60 mg). This 76-patient study is aimed at demonstrating similar activity in 3rd line AML while minimizing cardiotoxocity. If successful, Ambit plans to use results in order to file for accelerated approval in 3rd line AML.

Preliminary results from the phase IIb (34 patients) continue to show good efficacy with lower QTc incidence although there appears to be a slight decrease compared to the previous trial (see figure below). An important metric in these patients is the number of patients who are bridged to transplant. From that standpoint, the 60mg dose looks similar to the higher doses but the numbers are still small.

Quizartinib - p2 efficacy

At its recent earnings release, Ambit disclosed that top-line results of the entire trial are “consistent” with prior phase II data, which included a 46% CRc (CR+CRi) rate with 35% of patients bridged to a transplant. Actual data are expected in December (ASH 2013) but this implies quizartinib is very active and safe at lower doses.

Reasonable chances for accelerated approvalAmbit intends to start a phase III trial early next year to pursue full approval of quizartinib utilizing overall survival as the primary endpoint. It will also try to obtain accelerated approval based on the phase II results, using CRi and potentially bridging to transplant as surrogate endpoints. The company will meet with the FDA in November in order to assess the agency’s receptiveness to this route.

Ambit already tried to get accelerated approval for quizartinib in 2011 but the feedback from the FDA was not supportive. This time, it will have a larger data set, longer follow up and an improved safety profile.

The main issue will be convincing the FDA that CRi is a clinically meaningful endpoint that is associated with long term outcomes. In order to do so, Ambit plans to submit historical data from large medical centers that demonstrate the correlation. It will also claim that putting patients in CRi (as opposed to CR/CRp) is enough to make them transplant-eligible, the ultimate goal for every AML patient who can tolerate it and has a donor.

Another issue will be having sufficient number of patients at the relevant dose. Ambit already indicated it views 60mg as the optimal dose but it will have only 38 patients who have been treated with 60mg. It might be able to use the 30mg cohort (additional 38 patients) assuming activity is good enough.

Marqibo as a precedent – Marqibo was approved for another type of leukemia (ALL) based on a 65-patient trial that generated a CR rate of 4.6% and a CRi rate of 10.8% with a limited duration of response. Although quizartinib was tested in another indication, its CR + CRi rate looks superior (38-39%), implying the drug passes the bar for efficacy. Similarly to quizartinib, most responders to Marqibo achieved CRi, which bodes well for acceptance of CRi as a surrogate endpoint.

SummaryEven when assigning low probability of accelerated approval, Ambit’s market cap ($242M) looks attractive. The main reason is the high likelihood of eventual approval in additional treatment lines. The combination of quizartinib’s strong efficacy and the lack of effective AML treatments makes it only a matter of time before the appropriate setting is found.

In case quizartinib does not receive accelerated approval, Ambit will have to show a survival benefit in randomized studies. The planned phase III trial in relapsed/refractory AML is one potential setting but eventually, quizartinib may be used in every FLT3-mutated AML patient either as first line induction treatment as a bridge to transplant (probably in combination with chemotherapy) or as maintenance after transplant.          

Esperion

Esperion is developing ETC-1002, a cholesterol lowering drug currently in phase IIb. The drug has an unusual dual mechanism of action: It inhibits one enzyme (ACL, an enzyme involved in cholesterol synthesis) and activates another enzyme (AMPK, has broad metabolic functions beyond cholesterol synthesis).

Clinical activity – ETC-1002 demonstrated clear activity in 3 placebo controlled trials, where the drug led to a 25%-39% (placebo adjusted) decrease in LDL-C. The most important trial (Study 006) was conducted in statin-intolerant patients, which represents the drug’s near-term market opportunity. Patients in the trial had to be intolerant to 2 statins (most common side effects are muscle pain or weakness). LDL-C decreased by 29% (placebo adjusted), which compares favorably to Zetia, the most common drug in this setting (leads to 15%-20% LDL-C reduction).

Safety profile: so far so good – Safety profile overall looks clean although there were 2 signals that warrant further follow-up: A decrease in hemoglobin and increase in uric acid. Although neither signal was severe, it remains to be seen how manageable they are over time and whether they increase with longer treatment of ETC-1002. In addition, there are no safety data involving prolonged treatment duration as all trials to date included treatment of up to 12 weeks.

Market positioning – Statins are and will likely remain the cornerstone of cholesterol lowering therapy. A drug like ETC-1002 can be integrated either as a standalone for statin-failures (patients who are intolerant or unable to reach desirable LDL levels with statins) or as add-on to statins. To date, ETC-1002’s efficacy has been shown only as monotherapy (Phase II combination data expected this week). Even if the drug has activity in combination with statins, targeting statin-failures is the shorter and safer route to market. The market opportunity for this setting is exemplified by Zetia’s $1B revenue in this segment, which represents 10%-20% of patients.

Competition – Competition will likely come from 2 directions: Zetia and PCSK9 antibodies. Zetia is the established player in statin-failures; it is an oral drug with a good safety profile and reasonable efficacy (15-20% LDL-C reduction). PCSK9 antibodies are investigational agents that demonstrated dramatic reductions of ~60% but they are given as an injection (IV or subcutaneous).

Esperion’s ETC-1002 falls somewhere in between with a 30% reduction in LDL-C. Its main advantage is being oral, which fits better with the current treatment paradigm. This may enable Esperion to slot ETC-1002 before PCSK9 antibodies as patients will arguably prefer to avoid once or twice monthly shots. It can also allow Esperion to develop formulations that combine ETC-1002 with statins or Zetia in a single pill.

Another potentially distinguishing factor is ETC-1002’s broad metabolic effect (associated with AMPK activation). Clinical trials show an effect on several metabolic factors (CRP, insulin, blood pressure). This effect is not seen with other drugs and could translate to better long term outcomes.

Upcoming catalysts – The most near term catalyst is results from a phase II trial evaluating ETC-1002 in combination with a statin (Lipitor). The company scheduled a conference call for next Tuesday to discuss the results. This trial will help define ETC-1002’s potential as add-on therapy and anything less than a 25% reduction should be viewed as disappointing. A large phase IIb in statin intolerant patients started recently with results expected in H2 2014.

Summary – Readers of this blog will probably notice I typically don’t cover cardiovascular companies, but in this case it was hard to ignore the scarcity value of a new oral drug with proven efficacy and 2 important catalysts in the coming 12 months. The drug’s long term safety profile is still unclear, but Esperion’s market cap is attractive from a risk/reward standpoint.

Portfolio updates

We are initiating positions in Ambit and Esperion. We are also selling 200 shares of Incyte (INCY) and 200 shares of Seattle Genetics (SGEN) in order to keep both positions below 10% of the portfolio’s total worth.

  Portfolio holdings – September 1st,  2013Biotech portfolio - Sep 1st 2013- after changes

Biotech ETFs - Sep 1st 2013

54 thoughts on “2 affordable biotech IPOs – Ambit and Esperion

  1. Ohad
    How the AMBI results compare to resent ASTX top line results of SGI-110? ASTX reported 16% CR (8/50) and 53% CR in treatment naive AML patients (9/17).

    Do you have an opinion about Immunomedics (IMMU)?
    Their recent results with anti-CD22 in FL look strong – response rate (88%), CR (42.4%), 60% in remission after 3 years!
    thanks –andre–

  2. It’s hard to compare across trials, especially in AML but AMBI’s data look better imo given they had quite an advanced patient population. In addition with sgi110 there is always the question of superiority over Dacogen.

    IMMU – I am more interested in their ADC programs which generated activity signals in p1.

    Ohad

  3. Any thoughts on Compugen?
    What would you consider reasonable entry prices for EPZM and BLUE?
    Thanks,
    Steve

  4. Any thoughts on amrn and vascepa as add on to statin therapy? Anchor label expansion in dec 2013. Tia!

  5. Steve- I prefer not to discuss Israeli companies. Both stocks need to go down by 50% in order to become attractive imo.

    Stan- Sorry I am not following them closely.

    Ohad

  6. Ohad, regarding SGI-110, why do you say there is “always the question of superiority over Dacogen”? What leads you to have potential concerns ‘110 may not be superior?

  7. hi Ohad,

    do you have any opinion on Evotec? Here one of the lastest presentations:
    http ://evotec.sissy.bgcc.at/uploads/media_library/10/2013-06_Evotec_Jefferies2013_e.pdf
    They have pretty much going on – seems well diversified, and hardly any cash-burn.

    Regarding MorphoSys, what is your general opinion on antibodies for GPCRs? They seem to work pretty actively in this field.

    Thanks!
    Christian

  8. Christian- I don’t know them very well although I am familiar with some of the programs.
    Regarding GPCR antibodies – it has been a very challenging field but if anyone can crack it , it’s Morphosys with their expertise and discovery platforms.

    Ohad

  9. Ohad
    ESPR said that the LDL was reduced by 22%. Is it significant? You said that you were looking for at least 25%
    thanks — andre–

  10. Indeed, results are a little bit disappointing. Still, the activity is there and could warrant pursuing co-formulation of ETC-1002 with Lipitor. Long term safety profile still an open question.

    Ohad

  11. Chris – This is negative because it might impact efficacy. Interesting to see a drug that was well tolerated in so many patients at 360mg for NSCLC but in HCC they couldn’t even give 240mg.

    Ohad

  12. Thanks Ohad.
    I would like to take this opportunity to wish you and your family a happy and healthy new year.
    Best, Chris

  13. Ohad, thanks for a very informative article! It is so good to get your insights about these recent IPOs that are relatively affordable and offer reasonable risk/reward opportunities. I especially appreciated you delving into the chronic disease/cardiovascular area. All of the biotechs I currently invest in are focused on oncology, but given the high prevalence of cardiovascular and other chronic diseases, it seems like a good idea to be open to exploring companies that are working in these areas, as well. Thank you for taking the time to share your good research and analysis, and for giving us some new ideas to think about!
    Thanks,
    Debra

  14. Hi
    Ohad

    ESPR phase 2 results show 22% incremental lowering of LDL in 8 weeks, with zeita already providing 15-20% lowering LDL.

    Do you know how many weeks time zeita takes to achieve this 15-20% lowering of LDL ?

    I want to learn more about this drug, before i jump in.

  15. Debra – I also feel the need to diversify beyond oncology/hematology. The CV market is huge indeed, the flip side is the huge trials with outcome endpoints companies need to do in many indications.

    Ruhulla – If you look at Zetia’s label you’ll find a p3 in which one of the arms was similar to ESPR’s trial (combination with Lipitor 10 mg). Zetia’s effect was 12% which looks inferior to ETC-1002 but this is cross trial comparison.

    Ohad

  16. Ohad, agree tivantinib news today is disappointing. It does cast more doubt on likelihood of P3 HCC trial succeeding. One thing I would note is that EXEL has reduced the cabo dose quite a bit from where they initially envisioned and are still seeing efficacy so hopefully still hope for ARQL. But, still agree this news today was disappointing. I am still planning on holding on to my ARQL shares though because still trades close to cash, have cash to 2016, and still have wholly-owned AKT and FGFR inhibitors in ongoing P1 trials (data in 1H14). Plus, still more data to come on tivantinib at ESMO.

  17. Hi Ohad, what do you think about Merrimack Pharmaceuticals, do you think it’s attractive at this level?

  18. mcbio – This is a recurring theme with kinase inhibitors, companies dose escalate to levels that are reasonable for p1 but for larger patient populations too many safety events emerge. AMBI uses less than half of their MTD, Exelixis is now testing 60mg vs. 140mg.

    Alex – I don’t think it’s attractive since I see little value in their programs. The p3 program in pancreatic cancer is doomed to fail imo and all the Her3 programs have disappointed to date.

    Ohad

  19. Take from one of AMBI blogs out there:
    Late yesterday (9/4/13), I received a letter from Alan Burnett, one of the investigators involved in the quizartinib trials.

    He writes:
    “Many companies convince themselves that they have the ultimate drug to cure a cancer.This is manifest by them taking the view that a non-randomised trial is so good that they will get approval without randomisation or OS as the endpoint. Ambit tried this and the FDA told them to go forth and multiply. They are now back to square one in that respect. Many of us feel that these small molecules will be best used firstline in combination with chemo. I think that they are coming round to that as a registration strategy…. Meanwhile there are other hopefuls on the block, however I still think that quizartinib has its nose in front.”

    This is my takeaway:
    –Ambit is likely to move toward quizartinib as a combination therapy (especially as firstline treatment), where it is very likely to be a huge success. The oncologic literature gives credence to the theory that FLT3 inhibitors + standard chemotherapy will improve outcomes.
    –Results from Ambit’s end of phase 2 meeting (EOP2) will give investors clarity on how Ambit plans to bring quizartinib to market
    –For those who can tolerate high risk, potentially very high reward, Ambit would be an excellent buy.
    –I estimate the likelihood of success at about 60%. This would place the market valuation around $384 million ($22/share)

  20. Steve – I am following them but still don’t have a concrete opinion. Their approach is very exciting scientifically speaking but there are a lot of open questions. One can view past failures in CF and DMD as red flags or as a validation that this time they are using the right trial design.

    DJ – When a drug is so potent in such a terrible disease (although response is not durable), there is a very high likelihood it will get incorporated in the treatment algorithm. To me it’s a question of time.

    Ohad

  21. Don’t see a lot of value in their pipeline after the refocus. The unconventional routes are intriguing (topical formulation for lupus and ophthalmology) but I can’t tell whether there is a real opportunity or just a spin.

    Ohad

  22. Hi Ohad – what do you think about another upcoming IPO, $BIND? Does their nanoparticle platform look promising? What would you consider a fair market cap for it?

  23. I am hearing mixed reviews on their technology. Their p1 results weren’t too exciting imo, they had responses but most patients were taxane naive or sensitive from what I recall so one could argue standard Taxotere could do the job as well.

    Nevertheless, I am glad it will be a public company. Looking forward to Acceleron’s and FivePrime’s IPOs this week as well.

    Ohad

  24. Ohad, any thoughts on the large insider selling transaction from ARRY Director Liam Ratcliffe? Yikes

  25. Robert, looks like Ratcliffe sold about 580,000 shares in the past few days. While that’s indeed a large amount, note that he still owns almost 2.8M shares of ARRY.

  26. Thanks for views on Ambit. Some further, positive data follows.

    New (August 30, 2013 ) open access letter in Nature explains progress in finding a solution when AML is resistant to quizartinib. Authors indicate success with SAR302503, which is Sanofi’s Jakarta. http://www.nature.com/bcj/journal/v3/n8/full/bcj201340a.html

    The above makes me wonder if FDA approval becomes more likely when it appears the researchers have largely found the relevant mutations in AML and so oncologists can more rationally treat the disease with A or B, with reasonable prospects for OS, and perhaps finding a good combination along the way.

    Also, a free, open access Nature article from June 2013 regarding recent leukemia drugs approved and in testing. Some kind words for Ambit’s quarzinib/AC220. http://www.nature.com/nature/journal/v498/n7455_supp/full/498S8a.html

  27. Hi Ohad,

    I like acceleron as well in the upcoming ipo’s. Would you share any thoughts on your interest in five prime? Thank you

  28. Robert – I am not too worried about it. Of course, I would like to see only inside buying but that’s life. The fact he’s a director implies there is nothing catastrophic he is aware of.

    Kirk – Thanks for sharing the papers, very interesting stuff (especially the 1st one). This is good news for patients (and Sanofi of course) although a more comprehensive data set is needed in order to validate their claims (head to head vs. quizartinib in resistant clones and to see the effect of a selective JAK2 to prove the effect is Flt3 mediated).

    mike – I am still waiting for them to become more transparent after the IPO to learn more. I know their FGF-decoy program, which looks very good on paper but encountered setbacks in the clinic. They have something between a pan-FGFR small molecule inhibitor and an antibody for the soluble ligand, could have a unique profile. I am a big believer in FGFR as a family of targets.

    Ohad

  29. Hey Ohad
    as always, thanks for the research on these two companies. AMBI looks good, except the share price went over $15 already.
    It seems that we are in a golden moment of biotech IPOs. Every company with a decent technology or a candidate in phase 1 or 2 is going public… they are seeing the great success of the other companies, and the valuations are porbably getting very generous all around.
    Talking about recent IPOs; what do you make of STML price target at $60, just recently, and a projected sales for their first drug of $500M+ (I think it was Jeffries & Co)?
    There is good news just out on BIOD for their ultra-fast injectable insuline. The CC for results will be at 8am this morning. You were talking about diversifying and not just focusing on oncology companies, BIOD would be a diabetes play. I wonder if you have any opinions on the company and it’s valuation, which right now is still around $100M.
    Thanks a lot for you suggestions and research!
    Dan

  30. Mike – If you like FGFR, what are your thoughts on ARQL trading around cash and with a wholly-owned FGFR inhibitor in ongoing Phase 1 trials, among other assets?

    Dan – On BIOD, how is BIOD-123 going to compete with a generic Humalog in the near future if the drug is just non-inferior to Humalog on glycemic control. Wouldn’t the drug need to be superior?

  31. Yeah, agreed. hopefully they will demonstrate that in p3. the phase 2 was aimed only at non-inferiority and of too short duration and too small a sample to demonstrate stat-relevant advantages.

  32. Dan – STML is something I totally missed. The 3 case studies in BPDCN looks very compelling but they are just starting a pivotal p2 with potential approval only in 2015.

    Re: BIOD, It’s been a while since I looked at them, will look into it. In general, ultra rapid insulins have clear potential benefits but getting meal time insulin approved isn’t trivial at all. Not sure what kind of data is required for approval but the most relevant factor imo is reduction in hypoglycemic events. Agree about market cap being tempting, though.

    Ohad

  33. Ohad,

    What do you think of SNTA’s announcement today? Exciting new possibilities or more of the same?

    Thanks,

    Dan S.

  34. Hi Ohad, do you agree with this?:

    ———
    Verastem announced the initiation of its registration-directed ph.II trial COMMAND for its lead FAK inhibitor defactinib (VS-6063) in mesothelioma.

    Given supporting preclinical evidence as well as the strategically adaptive study design enriching for merlin-loss patients at interim, we believe defactinib has a reasonable chance for success in this setting.
    ———

    Thanks,
    Hubert

  35. Hey Ohad and everyone
    what do you think of GERN – it reached a new high today. What are your opinions considering their only drug is going head to head with INCY and the JAK inhibitors? They claim the difference (advantage) is that Imetelstat is disease modifying. I have been a holder of the shares for over a year and I am very happy with the recent rise, after teh shares tumbled to just above $1. The market cap is at 240M, and surely of this is disease modifying it should be worth more than what GILD payed for YMI (I believe that was around $450M). Or is this just wishful thinking on my part?
    thanks for your input!

  36. Dan S. – Very interesting scientifically speaking but still very early and I want to see actual data.

    Hubert – I am still cautious on this program and using merlin levels as a predictive biomarker, from what I understand there is still no biological rationale there.

    Dan – They are supposed to present data in MF at ASH (investigator sponsored trial), if they really show disease modification and/or reduction of allele burden in MF then they can be complimentary to Jak inhibitors.

    Ohad

  37. Hey Ohad,

    what do you think about Celldex at current level – the performance of the stock this year ist very impressive. Do you think that it’s still a buy-option or time to wait for lower prices?

    Thanks for your opinion!

  38. Hey Ohad!
    yeah… but by the time they present, if the results are positive, the stock will go higher, don’t you think? Also, the GERN CEO, Scarlett, is the one who sold to ONXX Kryepolis… But I know. Anyone coudl say, and what if the results are negative?
    :)

  39. Hi Ohad,
    How would you think about Sapacitabine, compared with Ambit’s Quizartinib?
    It looks that cycc’s Sapacitabine is promising for AML and is half way in phase III. Cycc has about 60 m market cap with 30 m cash in hand. Thx.

  40. Dan

    re: GERN

    Scarlett just telegraphed at Stifel that the results that Tefferi will present at ASH will be positive. I know someone in the trial that is doing amazingly well; anecdotal, I know. But Tefferi keeps expanding the cohorts. Something good is going on. My personal hematologist–I have leukemia–doesn’t like Jakafi; too many side effects to manage. He has a patient in the trial at Mayo. He is rooting for imetelstat.

  41. Ohad, do you think $pcyc and $stml are still reasonable here? I am thinking about adding to my position.

    Also, looking to enter $acad and $ontx, thoughts?

  42. Martin- As you can see in the post I published today, we sold half of the CLDX position. I like the programs but valuation is pretty generous.

    Dan – I would still rather wait and see te data, even if the stock reacts to the news there will be plenty of upside.

    JB – What’s exciting with AMBI’s quizrtinib is the strong efficacy, the new MOA, the molecularly defined subgroup and the mild safety profile. On all these fronts, quizartinib is superior to sapacitabine.

    Robert – I have no idea…

    Bridgette – Both PCYC and STML are too expensive imo but that’s what I would have said 3 and 6 months ago and look what happened since :)

    Ohad

  43. Ohad.

    What other company data for AML is strong in ASH abstracts? I like $AMBI and you changed my ming on $GERN.

  44. Bridgette – Unfortunately there is very little progress in AML, in contrast to most other blood cancers. Besides AMBI, which is by far the most active AML drug IMO (and as you know there are issues there as well), perhaps the new hypomethylating agents from CELG and ASTX can be beneficial.

    Ohad

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