Avalanche Biotech – approaching the moment of truth

In a field characterized by binary “make or break” events, Avalanche Biotechnologies (AAVL) is a poster child. The company derives the majority of its valuation ($819M) from AVA-101, a gene therapy treatment for wet AMD (age-related macular degeneration) currently in phase 2. Top line results are expected within 1-2 months and should have a dramatic impact on the stock as well as the entire ophthalmology industry.

AVA-101 is a gene therapy that is injected directly to the eye and is designed to deliver the gene encoding sFlt-1, a natural inhibitor of VEGF. If successful, AVA-101 could substitute anti-VEGF treatments (Lucentis, Eylea) which are highly effective but have to be locally injected every 1-3 months. Avalanche’s goal is minimizing or even replacing local injections for a period of several years.

Although available data are from a tiny phase 1 (8 patients) and despite the meaningful risk of failure, the stock represents an attractive risk/reward profile.

De-risked program

I view AVA-101 as a de-risked program for several reasons:

MOA validation – VEGF inhibition has proven efficacy in wet AMD based on experience with Lucentis and Eylea which are very effective but have to be administered indefinitely. AVA-101 encodes a different protein but its function is essentially the same. Therefore, if AVA-101 is able to produce sufficient amounts of sFlt-1 in the eye, clinical effect is likely. AVA-101 has the potential to be superior to existing agents because it may lead to a constant level of VEGF inhibitor in the eye vs. the fluctuations that occur with periodic injections.

Sustained release

Source : Avalanche Biotech

Phase I data – AVA-101 demonstrated a clear efficacy signal in a small trial (8 patients), in which patients were randomized to three arms: High dose, low dose and control. Patients were followed up for 1 year and were offered rescue treatment with Lucentis as needed. The high and low dose groups had an improvement in visual acuity of 6.3 and 8.7 letters, respectively, whereas the control group lost 3.5 letters.


Source : Avalanche Biotech

Patients on AVA-101 required a dramatically lower amount of rescue injections compared to patients on the control arm (0.33 vs. 3 injections per year). Importantly, the effect was most notable in patients with a long history of anti-VEGF treatment prior to entering the study. The active arms included four such patients (19-29 prior injections), of whom only one had to be rescued once throughout the study period.

Rescue injections

Source : Avalanche Biotech

The rescue injections represent a more reliable and clinically meaningful endpoint as they are less subjective and variable, and were based on a decision by a blinded evaluator. Acknowledging the very small sample size and the lack of a clear dose dependent response, the study generated a clear efficacy signal.

Read-across from other programs – There is long term experience with gene therapy for other ophthalmic indications, especially Spark Therapetuics’ (ONCE) RPE-65 program currently in phase 3. Early results from Spark and other RPE-65 programs clearly show that gene therapy using similar vectors (adeno-associated virus, or AAV) can be safely administered to the retina and produce a long term clinical effect. Although recent findings indicate the effect may be lost after several years, this experience should be viewed as a proof of concept that gene therapy can lead to long lasting protein expression in the eye.

Avalanche is ideally positioned in a lucrative market…

Anti-VEGF drugs for ophthalmic indications represent a multi-billion dollar opportunity. Combined, the two approved agents (Lucentis and Eylea) are expected to generate $4B in sales in the US alone this year. This figure under-represents the real opportunity as many patients are treated with off-label Avastin and penetration into new indications (DME, CRVO) has just begun. Therefore, the US opportunity is probably more in the $8B-$10B range.

If AVA-101 reaches the market with similar efficacy to available drugs, it is likely to capture a meaningful market share, especially in “frequent users”. This could turn it into the biggest franchise in ophthalmology with $3B-$4B in global sales using conservative assumptions (lower pricing and competing gene therapy products).

What makes AVA-101 even more interesting is the competitive landscape of the VEGF market which is controlled by 3 players (Roche, Regeneron, Novartis) who are fighting for dominance and would be willing to pay a lot for such a disruptive product. Avalanche has a broad collaboration with Regeneron (REGN) on multiple indications, the most advanced of which is XLRS (a rare genetic disease). As part of this collaboration, Regeneron also has a right of first negotiation for AVA-101 upon completion of the ongoing trial. This right gives Regeneron a slight advantage over other potential suitors but it is unlikely to prevent a bidding war to acquire Avalanche.

…but market continues to evolve

Next-generation programs beyond VEGF add another layer of complexity. Many companies are developing anti-PDGF agents that may further slow vision loss when added to anti-VEGF treatment. Ophthotech’s (OPHT) and Novartis’ (NVS) Fovista (anti- PDGF aptamer) is in P3 for AMD based strong efficacy in P2. Fovista has to be given as a different injection on top of the anti-VEGF agent, which increases the number of overall shots. Regeneron is developing an anti-PDGFR antibody it is evaluating in combination with Eylea. Although Regeneron’s anti-PDGFR is years behind Fovista, Regeneron plans to co-formulate it with Eylea and administer the two agents in a single shot. If both AVA-101 and anti-PDGF agents reach the market, patients may still need to receive local injections of anti-PDGF with AVA-101 as background. From a patient convenience standpoint, AVA-101 + anti-PDGF may be similar to Regeneron’s co-formulation of Eylea + anti-PDGFR. Therefore, in the long run Avalanche may have to develop a dual gene therapy targeting both the VEGF and PDGF pathways.

Favorable risk/reward going into P2 readout

I view Avalanche as an attractive stock with a favorable risk/reward ratio based on the preliminary efficacy data, the external validation for retinal gene therapy and VEGF as a proven target. I assign a 50% likelihood of a positive outcome in the Phase II (i.e. a significant reduction in anti-VEGF rescue treatments and a 6-letter improvement in visual acuity). Although this means I believe the trial has an equal likelihood of failing, I expect the stock to have a ~200% move (~$2.5B market cap) with good news vs. -80% in case of a failure.

Portfolio update

We are adding a second position in Avalanche going into “mid-2015”data readout. It is important to note that this is a high risk binary bet so overall exposure should be limited (<5% of portfolio).

Portfolio holdings – May 10, 2015

biotech portfolio - 10-5-2015 - after changes

biotech etfs - 10-5-2015

63 thoughts on “Avalanche Biotech – approaching the moment of truth

  1. Nice article Ohad. AAVL will start a P2b after this trial. Any ideas on why they would not want to do a P3 right away?

    Regarding ARQL, I think there are multiple tivantnib presentations at ASCO. There is a KRAS NSCLC trial that is ongoing. Any reason to think there is potential in that indication?


  2. Rick – Thanks. The current trial is a relatively modest one in 2 Australian centers. I guess they wanted to have a more robust data set as well a validated network of clinical sites before starting pivotal studies. This makes sense in light of the different logistical issues gene therapy programs involve (intra-retinal administration, drug supply to many medical centers, safety follow up etc).

    Re ARQL- My focus is more on the new programs as I don’t have a lot of expectations from tivantinib.


  3. Hello Ohad
    Av-101 produce sFlt-1 that reduces VEGF levels and avoiding new blood vessels that causes vision loss, so it stops deterioration, but how it improves
    Sight? does the blood vessels decompose with time?

  4. Hello Ohad,

    How complicated is the procedure to inject this gene therapy? Is it a surgery?

  5. Fan, yes surgery as injection is subretinal, patient has a vitrectomy. Highly recommend you view/listen to analyst day presentation on corp site, in particular Slizard Kiss presentation covers the surgery details. Also the q&a discussion is a must as many issues are covered.

  6. Hi Ohad

    As I understand Sanofi had a very similar project in their pipeline, namely: “GZ402663” but just recently decided not to continue this one. Are you aware of the differences between the approach of Avalanche and Sanofi? At first sight seems bit worrisome for Avalanche to see Sanofi not developing their project further…


  7. Ohad

    Additionally, just did some research: seems there is some doubt about the vector being used for AVA 101.
    And as I understand an intravitreal injection is less risky and would be much preferred vs. subretinal.
    AVA 101 is subretinal
    But e.g. AVA-201 is intravitreal 201 is supposed to use a next-gen vector (AVA 201 targeting prevention vs. 101 targeting treatment, I am aware of this difference)

    Thanks for your thoughts

  8. Alex (AAVL) – Long term, I don’t think anti-VEGF treatments can improve visual acuity as the goal is preventing deterioration. Short term there are vision gains, perhaps as a result of “clearing” the leakage.

    Fan (AAVL) – From what I understand sub-retinal injection is more complicated than standard intravitreal injections but because it’s a onetime procedure it’s feasible. So yes, it’s surgery but a minor one. Thanks, backstroke.

    Kevin (AAVL) – the main difference is the mode of administration (on top of specific vector design). Genzyme decided to administer its treatment intravitreally, which may be the reason for the underwhelming efficacy (although it’s a much simpler procedure).
    Long term, intravitreal gene therapy may be the way forward but I am still skeptic about the efficiency of this approach and there is no clinical proof of concept.


  9. Hi Ohad
    EXEL seems to catche a momentum, what do you think about joining the wagon?


  10. hey Ohad!
    thanks for this report. I have been long on AAVL since the first correction a few months ago (entry at $32). I have addeed some shares now on the recent lows. It seems everybody is a little nervous/unsure– also considering the recent unloading (planned) by VPs. Is there the possibility of mixed results? or can teh share price only crash or shoot up? are you edging the bet?

    Also, I wonder if you have followed the latest combination results for CLDX’s Varli (anti cd-27) and PDL1 drugs – it seems Varli has a great effect on response rate (compared to PDL1 monotherapy) and long-term effects (development of immunity). Will you take a look at their AACR releases/results and kindly let us know what your take is? I know you though Varli previosu results were underwhelming.
    By the way, CLDX’s share price dropped $10 from the recent high.

  11. Hey Ohad
    Oxford Biomedica has a Lenti virus delivery platform and they are advancing Retinostat, with ph1 results reading very soon (weeks or months away). This represents a competitor to AAVL. They are going after teh same market.

  12. Alex (EXEL) – I am still hesitant to jump the bandwagon…

    Dan (AAVL) – My working assumption is that the P2 data will trigger a dramatic move to either direction. Mixed data should be viewed negatively by the market. Investors’ edginess is understandable given the binary nature of the data set, this is anything but a sure win.

    Re: CLDX – The preclinical data with PD-L1 were encouraging but this has to be corroborated in humans.

    Dan (AAVL) – There are a lot potentially competing projects targeting VEGF with gene therapy but AAVL is by far the most advanced. Will be interesting to see the Oxford Biomedica data as their program is quite different from AVA-101. First, they use lentivirus, in contrast to AAVL and ONCE which use AAV. There’s an ongoing debate as to which approach is better in the eye but I have limited insight on that. Another important difference is their different approach of VEGF inhibition with 2 small natural anti-angiogenic proteins (Endostatin and Angiostatin).



  13. Hi Ohad,

    AAVL – Thanks for the response. I guess another outcome since it is a small trial is that the results are mixed though that could be a negative as well depending on current valuation.

    ARQL – Agreed re Tivantinib. Though it sounds like any positive news on that front may be a huge upside.

    Any thoughts on ONTY and their HER2 inhibitor? Is it a better Neratinib? And they now seem to have quite a pipeline though in very early stages. A management change with a more respected CEO may be what ONTY needs now.

  14. Rick –

    AAVL – Mixed results will be perceived as negative imo.
    ARQL – I don’t think any of the mentioned studies can make a huge impact but hope I am wrong.
    ONTY – it doesn’t have to be better than neratinib, just as effective with lower side effects. So far the combination data with Kadcyla was not striking imo but it’s still early. It is hard to ascribe meaningful value to their earlier stuff.


  15. Hi Ohad,

    Have you had the chance to listen to FMI earnings call?
    Thanks as always,

  16. Chris (FMI) – Surprisingly, they sounded quite reserved about reimbursement efforts plus the launch of Foundation Hem appears to have encountered some technical challenges. The effect of the Roche collaboration will hopefully kick in later this year.


  17. Ohad,

    >10% drop for FMI looks not good for investors who didn’t tender the shares for Roche’s deal. Are you planning to sell due to the missed ER and reimbursement issue?


  18. Ohad

    with abstracts for ASCO due out tomorrow,which stocks that you follow do you think may have positive moves upon the release, or leading up to the conference

  19. Ohad

    do you think the failure of tivantinib is somewhat priced into arql.if not, wouldn’t it seem wise to wait before entering the stock.

  20. Hi Ohad,

    MRNS- Would you consider adding more at this level? When do you expect MRNS to bring iv formulation into clinic? TIA.

  21. Cloud (FMI) – Indeed, the stock is now 20% lower than the tender price. I still don’t intend to sell as one quarter is still not enough to convince me something fundamental has changed.

    Mike (LBIO) – Don’t have a concrete opinion on them. I believe TILs will have a role in melanoma and additional indications are emerging but the market share due to logitics is an open question.

    dave – Obviously a lot of emphasis is put on immuno-oncology and PD-1. In terms of catalysts for specific stocks, IMGN and CLVS will have important readouts but I data in the abstracts is expected to be limited.

    dave (ARQL) – That’s a very good question. My assumption is that tivantinib represents ~40% of valuation (the rest is evenly distributed between cash and early stage pipeline) . HCC data are expected in 2016-2017 (interim/full analysis) and by then multiple catalysts for the FGFR and Akt programs are expected.

    Gene (MRNS) – I don’t plan on increasing my position since MRNS is a very high risk stock. IV ganaxolone is expected to enter the clinc by year end 2015, the company still hasn’t disclosed what indication it intends to pursue.


  22. Re ARQL valuation, the EV is about 60M so that values Tivantinib at about 24M

  23. Hey Ohad
    There is a great article on ny times about virus in the eye- seems to explain why ava-101 might also work
    Here is the title:
    After Nearly Claiming His Life, Ebola Lurked in a Doctor’s Eye

  24. I’m looking forward to your annual ASCO preview (if you’re writing one), but do you have any initial thoughts on the ORR result of 40% for IMGN853 in platinum resistant ovarian cancer? For this trial, n=10 so there’s plenty of room for a pretty different result in a larger trial. Their larger trial n=44 in a variety of folate alpha expressing tumors also showed benefit in their weekly dosing regimen with a once a month break but a bit short of 40% ORR.

  25. Hallo Ohad,
    what do you think about the new abstracts of Morphosys?
    Abstract #8500
    Abstract #3004
    Abstract #590
    Abstract #7508
    Do you see a possible comeback story for Gantenerumab due to the enthusiasam for the positiv BIIB037/aducanumab data (a small and preliminary study!)?

  26. Alex (AERI) – I still haven’t formed a concrete opinion there…

    Rick (ARQL) – I was referring to market cap , not EV.

    Dan (AAVL) -Thanks will take a look.

    Wildbiftek (IMGN) – Not sure I’ll have time for an ASCO preview this year.
    IMGN853 results were a good start but it’s very hard to interpret a 10-patient sample size. Follow up is another issue. Tolerability looks better, though.


  27. Toby, see below.

    Abstract #8500 (MOR208) – Activity in DLBCL is better than expected but patients were relatively less heavily pretreated and competition is still fierce.
    Abstract #3004 (4-1BB) – Intriguing responses in Rituxan refractory patients although re-treatment effect is also possible.
    Abstract #590 (HER3) – Don’t see this regimen going forward, too much toxicity.
    Abstract #7508 (anti-Notch2/3) – Underwhelming PFS and OS. There is still an opportunity to select patients based on target expression.


  28. Hey Ohad
    I just read that the ph2 population for ava-101 has much milder wet amd than phase1, thus gains in visual acuity will be lower for treated population, perhaps just maintenance of baseline, but that number of injections could gondown…. However, In phase 1 those were very few anyway.mjust two patients had one or two…
    What do you think would happen ( market reAction) if this, indeed,mwould be the outcome?

  29. Hi Dan, hi Ohad,

    Read this assessment as well and actually understand that this is seen as the most likely scenario given the quite mild profile of the participants…the analysts still gave a buy recomnendation on the back of this, though personally not sure how the market would judge this. Curious to read your opinion, Ohad.


  30. Hi Ohad

    I think this article underlines the importance of baseline as well (i.e. the better the visual acuity at baseline the lower the VA effect of the treatment): http://www.nature.com/eye/journal/v27/n1/full/eye2012225a.html
    I acknowledge as layman this study is regarding Lucentis, so not sure if it is inappropriate to do this kind of cross-comparisons, though still think one might get some indications which make me a bit skeptical regarding the improvement goal of 6 letters in the P2a study that you mention; btw I struggle to find this 6 letter goal specifically mentioned in the study (https://clinicaltrials.gov/ct2/show/NCT01494805) , where did you come across this goal?

    Additionally my understanding is that the lower amount of rescue injections was most notable in patients with a long history of anti-VEGF treatment prior to entering the study, whereas the average number of prior injections of the patients in the P2a study was 10.

    Overall it seems like the baseline data is not really ideal to deliver an overall positive outcome of the P2a study – my personal guess: VA gain might be below 6 letters, but rescue treatments will be lower indeed.

    Thanks again for your thoughts

  31. Slide from R&D day outlining differences between 1 and 2a patients: https://docs.google.com/file/d/0BwCWn01CFCvHakVxMXNkd2tqdkE/edit

    With a higher baseline, maintaining VA levels with minimal or no rescue injections for a good(65-70%) of patients would IMO be a very positive result. With current SOC too many patients drop out due to hassle of monthly/bimonthly injections and inturn experience VA loss. Showing that you can maintain already high baseline without the future hassle, where’s the downside?

    Its worth noting Avalanche have outlined todate that a future ph2b would be for patients previously treated with SOC, no treatment naive.

    If I had one criticism, or could be I’m missing something, is why treatment naive would not be fully represented. Aiming for a SOC replacement only label?

  32. Thanks, backstroke. Helpful compact slide.
    Jefferies would see the following parameters as a win for AVA-101:
    – larger than 60% reduction of rescue injections
    – retina thickness: reduction larger than 155 micron over baseline
    For VA they expect a “some letter” gain, due to heterogenous population in the study

  33. Kevin, re Jefferies
    On retinal thickness reduction different to ph1, where it was more like 200µm, though started from a higher 549, compare to ph2a at 332.5. Maybe 155µm might be high hurdle with median so much lower on ph2a, a higher % reduction it would be to achieve that.See slide below for ph1 and above for starting baseline for both.

    On VA improvement, 4 naive might help boost to a little gain overall. Also patient R2005, only ph1 on drug who had VA loss was believed due to scarring on fovea and unable to improve VA. Better screening on 2a keeps those out and helps, unknown how that shakes out.

    On rescue injections, unsure how they measure that. Any other narrative to help explain?

  34. Dan (AAVL) – The fact that the P2a enrolled less advanced patients has already been discussed at the company’s R&D day. Very hard to speculate on this but I still believe that if AVA-101 works as it should (i.e sustained release of sFLT1 over a year), visual acuity should improve as most patients are VEGF pre-treated and it’s likely to assume the benefit they experienced was not optimal due to lower frequency of administration than needed. Maintenance of VA without with no/minimal rescue shots is obviously a positive but this will be analyzed against the control arm.

    Kevin (AAVL) – As I wrote above, if AVA-101 is able to obviate the need for rescue shots the clinical benefit is obvious and market reaction should be positive. The 6 letter improvement is just my own guess based on the P1 and other VEGF studies, there is no specification in the protocol about such threshold. The median number of prior VEGF injections is slightly lower than that in the P1 ( 10.5 vs. 11.5 for experienced patients) and time since diagnosis is significantly shorter (16.2 vs. 49.2) but there should be many patients with 2+ years of treatment.
    Personally, I still believe continuous VEGF inhibition should lead to better VA, we’ll find out soon.

    backstroke (AAVL) – I completely agree about VA maintenance without additional shots is a big positive. As anti-VEGF frequency is often not idea due to patient compliance, I expect that gene therapy will be superior. Regarding not going after naive patients, it’s standard with every new treatment (let a lone treatment paradigm) to start with more advanced patients and then climb up the treatment lines.

    Kevin (AAVL) – Personally I would be disappointed with a 60% decrease in anti-VEGF frequency. Not sure about retinal thickness.

    backstroke (AAVL) – I assume they measure the total number of of shots and divide them by number of patients.


  35. Hi Ohad,

    You mentioned in earlier posts that you like XENE and AUPH and you plan to add later this year. Do you think both companies are attractive at these levels?
    Thanks as always,

  36. Hi Ohad
    I was wondering if you had an opinion on CNAT
    In their last conference call, they said that they had a good meeting with the FDA on the use of approvable surrogate end points for NASH at least, namely Child-pugh , meld scores, HVPG gradient. Maybe an easier path towards approval than using histologic endpoints? Although I haven’ seen much data on these endpoints with their drug. In any case, looking to set final protocols for P3 studies by end of year.

  37. Denny – I am tracking both names closely.

    LOXO – I like the story and believe the stage is set for proof of concept in tumors with Trk fusions later this year (first patient already enrolled). Plan to add some in the coming months.

    KPTI – Primary focus is still on corroborating the myeloma signal but I didn’t see any update at ASCO. The ASCO abstracts included interesting signals in ovarian and GBM but it will be challenging to move forward as monotherapy without patient selection. There was also additional activity in DLBCL in the Japanese study.

    Roland – My opinion stays the same: CNAT is a very high risk play with an intriguing rationale and disruptive potential. So far, they have shown good biomarker effect but we don’yt know whether this translates to real clinical benefit. We need to wait for the final protocol as well as updates from liver cirrhosis and portal hypertension to understand whether the endpoints proposed by the company (MELD, CP score, and HVPG) are indeed relevant.

    Alex (FMI) – Hard to tell. It could be a result of the weak Q1 performance.


  38. Hi Ohad,

    Any biotech’s you have you eye on in GI,renal space? I have my eyes on 3. ZSPH, RLYP are two examples in the 1B range and ARDX is an example in the 100 million range. Possibly more upside in the latter which has a deeper pipeline (including hyperkalemia in early stages) but the former two have more immediate catalysts including possible M&A.


  39. Do you know anything about Ocata or can you comment on their platforms? Potential for disruptive technology in Ophthalmology. Seems as if they have 2-4 yrs safety in administration of RPE and some early efficacy. Thanks

  40. Hi Ohad,

    Given huge discount compared to Roche’s $50 offer, do you think maybe it’s a good idea to add more for FMI?


  41. Ohad

    Any opinion on fibrogen.stock has been down 40% since beginning a year and lockup period released alot of stock on mkt recently.are you familiar with there pipeline?and if so your thoughts.

  42. Hi Ohad, any plans to add ONCE with first product in phase 3. Small indication though but other programs for broader indications in pipeline. Thanks, Marc

  43. Ohad
    You wrote before that ZFGN is in your watch list. They corrected about 45% from the peak in March due to about 3 mo delay of the Ph 3 data due to slower than expected enrollment. Also they modified the inclusion criteria to speed up the enrollment. Do you see anything rising red flag here? One analysts lowered the probability for success from 80% to 70% because of the modification, but it could not explain such massive correction.

  44. Rick – I track these names but don’t know the field well enough to have an opinion.

    Dorin (OCAT) – I am very excited about their approach, which appears the most relevant one for dry AMD. They just started P2 so efficacy data will take time to emerge.

    Cloud (FMI) – I would wait before adding more until there is is more visibility on reimbursement and commercial performance as this is a long term story and the takeout option is off the table for now.

    Dave (FGEN) – I know them but don’t have a strong opinion. I like the anti-fibrosis program more than the HIF1 activator.

    Marc (ONCE) – Will wait for a better entry point, initial market opportunity for RPE65 is modest and this is a long term story so I don’t see a reason to get in at current valuations.

    andre (ZFGN) – Still tracking them and believe they have a real drug for obesity. Again, prefer to wait until prices are more reasonable.

    Alex (AVEO) – Not sure. The 2nd line data they have collected retrospectively is good but they are stating the obvious: if they do a full P3 study and succeed the drug will get approval.


  45. Ohad, have you ever looked at Proteon Therapeutics? Any thoughts?

    ZFGN is well off its highs? Do you still find it overvalued?

  46. Ohad,

    As for OCAT you probably are aware of this preliminary study which reports fairly positive results. It is only four patients with seemingly dramatic improvement in three. It is relatively recent with online publish date of April 30, 2015


    The full article is illuminating. No pun intended.

    And for anyone who might be interested here is Charlie Rose’s presentation including Dr. Stephen Schwartz who directed the P1 study for OCAT’s RPE cell transplantation. Schwartz’s input starts at 31:45.


    As you say very intriguing and with the February dustup over financing don’t you think this may be a good entry point, or are you waiting for more corroboration of the concept?

    Thanks again and best regards,


  47. A link enclosed here makes reference to OCATA’s previously published results in the Lancet (Oct. 2014.) The more recent results cited by Pete above are for 4 Asian patients, and they are pretty much a confirmation of the data from 2014. The company went through a name change (formerly Advanced Cell Technology), so there might be some difficulty in tracking their progress.


  48. Hi Ohad,

    Do you have an opinion on Galapagos? They recently had the 3rd largest biotech ipo ever on nasdaq which was very succesfull. 24 week results of filgotinib DARWIN1 and DARWIN2 phase IIb are expected in july/august. 12 week results were excellent. It could be a blockbuster but there is competition in RA. Baricitinib is 2 years ahead, and Abbvie has their own ABT494 although not as an monotherapy. GLPG looks to have an promising pipeline. Really curious about your opinion on the other side of the Atlantic. Im long in GLPG by the way. Nice trackrecord by the way.

  49. Great article and discussion about $AAVL. I am long. A couple of points:
    1) The 3yr follow up data from Ph1 is also expected mid-year. I have some concerns regarding this data given recent discussion about durability of AAV therapies. I think this could negatively impact stock even in Ph2 is ‘positive’.
    2) It is is apparent from above discussion and from analyst reports that the market is a little unclear on what will constitute a Ph2 success. It is quite possible that the small nature of this study and the less severe baseline characteristics of the included patients will make it hard to demonstrate a statstically signficant difference in terms of number of re-injections. However, I am long, because I think the Ph1 data showed that, even in severe patients, the drug could effectively abolish the need for any breakthrough treatment. Therefore, I expect that in the Ph2 there will be very little breakthrough treatment in the treated arm. For me this is much more impi

  50. Great article and discussion about $AAVL. I am long. A couple of points:
    1) The 3yr follow up data from Ph1 is also expected mid-year. I have some concerns regarding this data given recent discussion about durability of AAV therapies. I think this could negatively impact stock even in Ph2 is ‘positive’.
    2) It is is apparent from above discussion and from analyst reports that the market is a little unclear on what will constitute a Ph2 success. It is quite possible that the small nature of this study and the less severe baseline characteristics of the included patients will make it hard to demonstrate a statstically signficant difference in terms of number of re-injections. However, I am long, because I think the Ph1 data showed that, even in severe patients, the drug could effectively abolish the need for any breakthrough treatment. Therefore, I expect that in the Ph2 there will be very little breakthrough treatment in the treated arm. What I am less clear on is what breakthrough rates we can expect in the control arm with baseline VAs of 63. Any thoughts?

  51. Richard – Sorry don’t know PRTO well. I still think ZFGN is expensive, will wait for a better entry point.

    Pete/Hillary (OCAT) – Thanks for providing this info, indeed quite encouraging. Agree that valuation is attractive.

    Bert (GLPG) – I have been following them for a long time, they have are significantly de-risked following initial DARWIN results. I am waiting to see their safety profile, which could be a major differentiator vs. Xeljanz and baricitinib. At their last quarterly call, INCY said they don’t think GLPG is differentiated.

    binary (AAVL) – Thanks. Agree about the recent RPE65 data as an overhang. This is clearly a risk for all AAV-based gene therapies although it’s important to note not all gene therapy treatments are created equal from an efficiency/potency standpoint. In addition, Anti-VEGF may not necessarily behave as other gene therapies as this is a classic decoy approach.
    As far as expectations from the P2a, I at the stricter side of the spectrum, as I believe the number of rescue shots should be dramatically reduced (from 4-5 to ~1) in order to support broad acceptance. Completely agree this is the most important metric.

    Richard (CYCC) – No value there imo.


  52. Hi Ohad,

    Good to see you already follow GLPG for a long time. The CSO of Galapagos said the following about safety: “Its selective inhibition of JAK1 also leads to a differentiated safety profile, as measured by an improvement in hemoglobin and overall lipid profile”.

    It will be interesting and i agree safety profile might be the key to success. Whats your strategy on GLPG, you wait on the 24-week results or even longer to decide if its a buy? Maybe till Abbvie decides is they take the license and pay $200 million or results of Filgotinib in Crohn’s Q1 16?

    Anyway, i will surely keep following your blog, best of luck to you.

  53. Actually, is not phase 2a main endpoint related to safety? I expect that they meet that primary endpoint.

  54. Hi Ohad,
    I am new to your blog but I will enjoy following it. I have a question for you with regard to AAVL. You estimate a positive response of 200% with a successful trial and a drop of 80% with a negative trial. Would you be so kind as to share your understanding about how you come up with these numbers.
    Secondly since your initial writeup on May 10 an article was published on Seeking Alpha by Lowenthal Capital as a result of an interview with the “entire team” of management at AAVL.(http://seekingalpha.com/article/3205796-avalanche-management-addresses-wall-streets-concerns-ahead-of-binary-catalyst) Among the many comments are that this trial is not powered enough to determine the efficacy of the secondary endpoints ( I assume less deterioration in vision and less rescue injections). If you have a chance to read this article I would appreciate any update on your thoughts, if any, about AAVL.
    Thanks for your blog.

  55. Mike (AAVL) – Thanks. Stock reaction to news is very tricky to predict so obviously my prediction is very subjective and is as good as anyone else’s. Basically, the rationale was that if AVA-101 obviates the need of injections it will become a ~$3B drug down the road. Given the clear head start, the competitive pressure in the field and the potential to generate additional treatments with their platform, a~$2.5B valuation makes sense.
    Regarding the SA article, management is understandably cautious in terms of expectations and a good safety profile is the first requirement for a drug like AVA-101. I still believe the trial should generate a clear efficacy signal (reduction in frequency of anti- VEGF administration) if AVA-101 is doing what it is expected to do.


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