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

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

  1. Hi Ohad,

    It’s interesting if you look AMT-060 long term follow up is showing stable to increasing FIX activity in contrast to ValRox. Despite the difference of Hemophilia A vs B I would think that liver cell division would cause transgene dilution in both but QURE 2018 ASH presentation showed 2.5 year follow up with stable expression in low dose cohort and the high dose cohort actually had increased expression going from 7.1% at year 1 to 8.3% at year 2 and 8.9% mean in N=5 at last follow up. At their R&D day QURE showed some mouse data suggesting FVIII expression in the liver induces hepatocyte stress/apoptosis leading to loss of expression over time, do you think it may just be that ValRox and SPK-8011 are inherently flawed approaches?

  2. Jason (QURE) – Durability and what happens into gene therapy with time is still a black box with a lot of potential variables including transgene itself. Very hard to answer these questions now, QURE also uses AAV5 so profile should be similar but who knows…


  3. Hello Ohad,

    Thanks for your update!
    Any opinions on THERF? thetratechnologies – they just completed a ph2 gir their approved drug EGRIFTA (indication: reduction of excessive abdominal fat and adipose tissue) in HIV patients with NAFLD that shows a 37% liver fat reduction compared to placebo – results look good to me and the drug is already marketed for abdominal fat reduction. I would be very interested in you opinion. They claim secondary endpoints also show effects on liver fibrosis. The company is listed on Toronto stock market – market cap $500M. They also have a second drug approved in North America.



  4. Ohad,

    Your portfolio has a lot of gains in it, and in your previous post you were still expecting a biotech (and general) downturn. The BIS holding is a relatively small counterweight to the other positions. Did you give any consideration to selling more positions and raising cash? Or are you more positive on 2019 than back in January?


  5. Andrew (LPTX) – Sorry, not following them.

    Richard Baker –
    MRKR – Not a big fan of their approach.
    MRUS – The technology clearly works but still no “killer app”, prefer to wait for clinical poc.

    Dan (THERF) – Sorry, don’t know them.

    Biotek (DTIL) – I am still reading their initiation reports, didn’t know their allo-CAR program was so advanced, definitely worth monitoring but data will take time to emerge.

    Mark (BIS) – I am still pessimistic about the market overall after a decade long run and lofty valuations. Balancing this with picking companies in which I believe in is tricky. I am considering adding more BIS or just stay with a large cash reserve that just got bigger following the ONCE and NITE acquisition.


  6. Hi Ohad
    ONCE – ” The company faces shareholder lawsuits that call the deal price too low—a “bargain,” one suit claims—and question Spark’s accounting methods and deal disclosures.”

    same with NITE

    Claims have been filed, do you think it can affect the sales? Can the transactions be canceled or can the price rise? What do you think?

    regarding Mark’s question
    what about selling say half of each positions to raise more cash?

  7. Hammer time…any thoughts on $eigr?

    Or Bicycle therapeutics $bcyc which just IPO’d?

  8. Hey Ohad,

    with the press releases today, AXSM seems to indicate they are effectively in pivotal trials for MDD and may have results before the end of the year. Have you had a chance to look at their data/pipeline. Stock appreciated greatly but market cap is still around $630M which is a steep discount over SAGE ($8B). Moreover the company has a broad pipeline in CNS targeting various indications including, among others, TRD, migraine, smoking cessation, narcolepsy, which are all very large indications/markets.



  9. Thanks to Dan or whoever else it was that highlighted AXSM in the 6-8 $ range. Trial results have been great and nice price action followed.

    Dan – Ohad has commented on the stock saying he liked it and it could do ok in the market but wondering how long that would last considering it’s product is a combination of meds which others could formulate as well. Wonder if they could get patents on this.

  10. Hi Ohad,

    Greetings! Sorry for bringing up ARVN again–
    In their April corporate presentation, ARVN stated that Ph. 1 was initiated 1Q19 for their androgen receptor degrader for prostate cancer as well as presented favorable pre-clinical data for their estrogen receptor PROTAC degrader for breast cancer (achieving tumor shrinkage in combo with palbociclib in all 10 mice subjects). ARVN has partnerships with Genentech (2017) and Pfizer (2018). Do you think now is the time to become enthusiastic about PROTAC? Do you think that PROTAC opportunity may be bigger than that of CRISPR? Do you have a favorite in the PROTAC field? Thanks.

    Link to corporate presentation: http://ir.arvinas.com/static-files/a81094d3-1daf-4859-b87c-314b9f878652

  11. Hi

    Do you see any catalysts for NERV to do any better this year ?
    The stock is performing bad as well, any reasons why you hold this ?


  12. HI Ohad I saw your tweet on Nash players. thoughts on NGM ‘s valuation with FGF19 and other candidates in their pipeline?

  13. Hi Ohad — What do you think about Invitae (NVTA) in genetic sequencing and any interest in engineered bacteriophage companies?

  14. Alex (ONCE/NITE) – I don’t think it matters, not aware of cases where these lawsuits were able to torpedo a deal.

    Robert goulet
    EIGR – Sorry, not concrete opinion there.
    BCYC – They are still private from what I see. Interesting targets, ADC-like approach but I prefer to wait to see how these molecules behave in humans.

    Dan (AXSM) – Agree about indications but personally I prefer more innovative products. Stock has made a very nice move, though…

    Jeff B (TBIO/MRNA) – I like mRNA as a field but at its current stage it belongs more on the private side until clinical proof of concept is achieved. MRNA’s market cap is impossible to justify, TBIO is cheaper but high risk especially after the regulatory setback.

    Anna (ARVN) – I am still an avid follower of the PROTAC space, acknowledging these compounds are “ugly” from a med chem perspective but hope it will somehow workout. No favorite player for now, prefer to be of the sidelines until someone shows clinical data.

    Robert goulet –
    ATRA – Not following them closely.
    RGNX – I still plan to hold as a GTx ETF. AMD data look slightly more convincing but still early and hard to interpret.

    Ruhu (NERV) – Yes, I plan on holding into P3 data later this year. Valuation makes risk/reward attractive imo.

    Jaime Allen (NGM) – I have mixed feelingsa here as data look encouraging and provocative but sample size is small and frequent administration is a major issue for a disease like NASH. I don’t think valuation is justified.

    Steve (ALNY) – I have been following them for a couple of years and getting more and more comfortable. TTR launch looking good (not too concerned about Tafamidis) and GalNac programs seem to work. Safety profile is still an open question and valuation isn’t cheap even after recent months.

    Reggie (NVTA) – Sorry, don’t know them well.


  15. NERV – bad news..,and the manner the Company
    presented the date.. what your take?

  16. once – “I don’t think it matters, not aware of cases where these lawsuits were able to torpedo a deal.”
    so far it manage to postpone the deal –
    “Roche has once again extended its tender offer for the outstanding shares of Philadelphia gene therapy company Spark Therapeutics in order to give federal regulators more time to review the proposed deal.
    The new deadline for Spark (NASDAQ: ONCE) shareholders to accept the Swiss Pharmaceutical company’s $114.50 per share tender offer is June 3. The previous deadline, which was extended earlier this month, was May 2.” ..

  17. KRYS

    Ohad, Why is the Chart so strong? Any reasons? Unusual for a biotech without significant news these days…

  18. Hi Ohad,

    Ref. your comment on AXSM – it’s meds not being innovative. Here is what their CEO said on recent ER conf call. “ As a reminder, AXS-05 is Axsome’s novel, oral, investigational NMDA receptor antagonist with multimodal activity. AXS-05 was internally developed at Axsome and was covered by more than 30 issued U.S. patents, with coverage extending to 2030.” Pretty strong statement about the value of their drug. What do you think?

    AXSM has been ripping up recently. Thanks again to Dan or whoever it was that posted AXSM on this blog. It was at $8 then, now $22. Picked up a few shares for some decent gains. At $600M market cap this has room to grow if everything goes right.

  19. Ohad…any thoughts on RYTM and setmelanotide for genetic obesity disorders of the MC4R pathway? Topline pivotal phase 3 readouts for POMC and LEPR deficiency due in 3Q19 and phase 3 readouts for BBS and Alstrom in 2020.

  20. Hey Had,

    What do you think of the quizartinib negative vote in ADCOM? Surprised me.

  21. Dan, after positive P3 results i was very confident about approval but after the briefing docs came out i was already expecting a negative Adcom. We can be happy that AMBI got bought. Not sure if this will influence the frontline P3.

  22. Hey Ohad,
    Any opinions on AUPH VOS for dry eye? seems like a proven MOA and well-defined clinical pathway – and yet it does not seem like investors are giving any value to this program. RESTASIS is also about to go off patent and Novartis is about to spin out its ophthalmology division… so VOS seems like a valuable asset – also patent has a long life for AUPH.


  23. IMGN

    New pivotal study necessary. Much Money will be burned, market hates the Stock Right now. You Said before that Youre thinking about opening a position. Stock is cheap. Whats your strategy here ohad?

  24. Hello Had,

    Regarding the question of innovation/innovative products: isn’t efficacy more important – considering AXSM especially – MDD with few approved options for patients and the efficacy they showed in ph2 seems on par or better than SAGE (sure hard to compare different trials / but again AXSM was against active drug, not placebo). Moreover, if their product was not innovative, why didn’t anybody else think of combining the two drugs they are using for AXS-05? I suppose it wasn’t that obvious, and they were able to patent the formulation / use of the drug for indications, etc. In my opinion what they are doing is actually more than a company like CHMA, which is only changing delivery method of an existing drug (making the drug more convenient (better quality of life and compliance) but it is ultimately also a less effective.) Just sharing these thoughts… I think the question of innovation is an interesting one.

    Thanks for you perspective!


  25. in addition…. drug combinations are a big trend in many diseases (oncology, NASH, heart, mental health). ESPR is doing the same with their combo pill.

  26. After reading a glowing article on Nektar Therapeutics (NKTR) a couple of days ago- I opened a position, immediately covered it… but it immediately resumed its decline.
    How do you feel about the science behind its lead drug NKTR-214 (bempeg)? I see that it does have other drugs, ie for autoimmune disease and pain- both awaiting decisions this month and this year, but the real prize would be for NKTR-214.
    As usual, your insight is much appreciated.

  27. Ohad
    Inclisiran data (MDCO/ALNY) look quite impressive – twice annual dosing with >50% LDLc reduction (n=382), no material safety issue.

    In January you wrote that “at $9B Alnylam is not a steal yet”
    OK, what about $7B today? Does it look more reasonably priced?
    First ever 2 approved siRNA drugs, plus 5 late stage drugs and $1.2B cash.

  28. FYI…$bcyc goes public next week…keep it on watch brother…these small molecule scafold platform’s always seem to attract attention.

  29. Dan,

    Ref. AXSM – was reading their annual report and they cite an innovative technology component that helps making the combination more effective. So it seems more than just a simple formulation.

  30. Hi Ohad, any comments on EXEL’s moves to collaborate with companies like Iconic?

  31. Hey Ohad,

    You mentioned in the past that you were interested in the MGEN’s therapeutic programs in fibrosis. They are now disclosing a second fibrosis targeting program (mircoRNA-29)– this one pre-clinical and targeting Pulmonary Fibrosis, and the data looks encouraging. Valuation of the company is still below $100M, and the second half of the year should be interesting, with data from their ph1 and ph2 programs.
    Are you still considering investing in the company? what do you need to see to become an investor? Thanks, as always, for your insight!

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