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After the latest data update at BioCryst’s R&D day which included data from C5 inadequate responders (C5i), we feel that oral twice daily BCX-9930 has the most competitive therapeutic profile among PNH treatments for Paroxysmal Nocturnal Hemoglobinuria (PNH). In case you missed our previous report titled “This is Big” on the paradigm-shifting potential of BCX-9930 in PNH and other complement-mediated diseases here is a recap.
PNH is a rare and potentially life-threatening disease that had no treatment options until the approval of Alexion Pharmaceuticals (Nasdaq: ALXN) Soliris (eculizumab) in 2007. The underlying cause of PNH is mutated bone marrow cells that give rise to red blood cells missing a protective surface protein. Consequently, these PNH red blood cells (RBCs) are recognized as foreign pathogens and targeted by the body’s innate immune system (the complement system). In a nutshell, the defective RBCs are destroyed via one of two processes known as intra and extravascular hemolysis. Before diving into this aspect of PNH it is important to understand the complement cascade (Figure 1, 2) and why Factor D is an ideal target.
Activation of the Alternative pathway of Complement (APC) results in a biological cascade that ends with the formation of a protein complex on the surface of cells identified as non-self tagging them for destruction. In the APC Factor D plays a critical role in the upstream activation of the complement system. Without it, the cascade cannot unfold. Specifically, Factor D cleaves Factor B which goes on to react with C3 convertase. After a number of subsequent chemical reactions, C3b interacts with C5 convertase at the terminal component of the complement system. The cascade concludes with the formation of the membrane attack complex (MAC) on the surface of cells determined to be non-self.
When the MAC binds to PNH RBCs it destroys them via intravascular hemolysis. This is what Soliris inhibits by binding to the terminal C5 component of the APC. In doing so Soliris confers its therapeutic benefit that translates to fewer blood transfusions; some patients are even transfusion free, although most still require them. This is because even though intravascular hemolysis is controlled, patients experience “breakthrough hemolysis”. For a long time, breakthrough hemolysis was not well understood but clinicians now attribute it to extravascular hemolysis caused by C3 loading/opsonization. What does this mean?
If we look at Figure 1 we’ll notice that C3 molecules feed into the amplification loop. These same C3 fragments bind (“opsonize”) to PNH RBCs tagging them for destruction. Next-generation complement inhibitors such as Apellis Pharmaceuticals (Nasdaq: APLS) Pegcetacoplan target C3 proteins enabling greater control over intra and extravascular hemolysis. This is a very important aspect of treating PNH because when RBCs are destroyed so is the hemoglobin inside them carrying oxygen. This symptom of PNH is among the most clinically meaningful since it directly impacts the patient’s quality of life and needs for blood transfusions. Factor D is an ideal target because it is a very specific enzyme and the first step in the amplification process (center of Figure 2) that activates the C3 component of the APC leading to C3 loading/opsonization. With targeting C3 molecules there is indeed a greater risk of infection for patients given that it acts as a surveillance system for pathogens. You see, Factor D acts on its substrate Factor B at the beginning of the APC (Figure 2) thereby converting C3 convertase into smaller C3 fragments that go on to hunt infectious pathogens as well as PNH RBCs. Yet, Factor D is also responsible for the activation of C3 convertase through the amplification loop (shown in Figure 2). Equally important here is that Factor D does not control the Lectin and Classical complement pathways which are crucial for proper immune functions. The same trait cannot be said for C3 inhibition which is implicated in these pathways.
Understanding these characteristics of Factor D helps explain why it attracts so much interest from big pharma. For years Novartis (Nyse: NVS) which has a Factor B inhibitor (LNP023) in Phase 3 for PNH and advanced studies for other complement-mediated diseases tried for years to discover a potent and specific factor D inhibitor. Evidently, it proved too difficult and they pivoted to Factor B. It’s true companies like NVS have 100s of R&D programs in their pipeline, though, not all the assets are valued equally. Reading through the Oct 2020 press release announcing positive interim Phase 2 data for LNP023 (Iptacopan) for the treatment of C3G (rare kidney disease driven by the APC) NVS Chief Medical Officer refers to LNP023 as “…the most advanced asset in our nephrology pipeline”. To the laymen, this may seem like a relatively bland statement but it actually shows, in our view, that NVS and its CMO think very highly of LNP023. Considering that it encompasses 28% (5 out of 18) of NVS’s targeted indications in its nephrology pipeline they feel that proximal inhibition of the APC has broad utility across complement-mediated diseases. This sort of interest is not limited to NVS either.
In the latter half of 2020 AstraZeneca (Nyse: AZN) announced plans to acquire Alexion Pharmaceuticals (Nasdaq: ALXN) for $39B. If you don’t know ALXN has built a vast commercial franchise for its lead asset Soliris (and now Ultomiris) across complement-mediated diseases. For some perspective During 3Q20 Solaris generated $1.6B for the 9-months ending on 9/30/20 ($563M of which was from U.S. sales). Ultomiris which had only been on the market since October had generated $290M ($170M of which was from U.S. sales). Moreover, ALXN has its own factor D inhibitor (ALXN2050) in development for PNH and other kidney diseases. Of note, enrollment is paused for a Phase 2 study for ALXN2050 in PNH as the company awaits additional Phase 1 dose-escalation data. The take-home here is that a selective Factor D inhibitor such as BCX9930 can potentially be developed to treat a host of high-value rare diseases making it literally a pipeline in a molecule.
BCX9930 looks like a best-in-class oral inhibitor of the APC
Based on the clinical data presented below and our understanding of the disease pathology of PNH we feel that BCX-9930 has the most competitive therapeutic profile among its peers (Soliris, Ultomiris, ACH-4471, LNP023, and APL-2). Of particular importance when evaluating the control of intra and extravascular hemolysis is a proper interpretation of key biomarkers and lab metrics including LDH, hemoglobin, reticulocyte counts, bilirubin range, as well as the need for blood transfusions.
With regard to LDH, we argue that it’s distracting investors from taking a holistic view of the data and should not be relied on as a measurement of extravascular hemolysis. As discussed in this 2017 peer-reviewed study it seems that reticulocyte count (newly formed RBCs) is a better gauge of extravascular hemolysis vs. LDH as it aligns better with raised bilirubin, increased C3 loading (i.e. binding by C3 fragments to PNH RBCs), and increased transfusion requirements. Moreover, KOLs at BioCryst’s R&D day expressed that hemoglobin and transfusion requirements are of the utmost importance for patient quality of life.
We don’t just take their word for it and neither did J.P Morgan/Chase Equity Research Analyst Jessica Fye. She put together a call with the firm’s own KOL who said that as long as hemoglobin is rising and stabilizes and the drug diminishes if not eliminates the need for transfusions, he is not too concerned about LDH. The KOL went on to say he was disappointed that LDH ever achieved its status as a biomarker of extravascular hemolysis considering it’s such a non-specific enzyme. Mrs. Fye and her consultant are not the only ones on Wall Street with this line of thinking. Managing Director at Evercore ISI Liisa Bakyo expressed a similar opinion in her notes highlighting many of the same trends in the data that we saw; 8-14 weeks of treatment with BCX9930 resulted in the most significant rises in hemoglobin and the greatest reduction in the need for transfusions compared to other PNH drugs (i.e. Soliris, Ultomiris, ACH-4471, LNP023, and APL-2). She feels as we do that “BCX9930 will win over patients, if not investors”.
Looking at table 2 we see that PNH patients naive to a C5i, BCX9930 had a whopping 3.5 g/dL mean increase in hemoglobin from baseline. The only other PNH drug with a greater increase in Phase 1 was APL-2 with a 4.3 g/dL increase from baseline. However, BCX9930 beats AP-2 in reducing the need for blood transfusions. One-hundred percent of the C5i naive patients were transfusion-free since starting therapy compared to 75% in the APL-2 Phase 1b study. BCX9930 and APL-2 were also comparable with regards to PNH clone size (i.e. the proportion of PNH RBCs vs. normal RBCs).
After factoring in how the other efficacy parameters like bilirubin range and reticulocyte count approach normal levels (Table 2) following 8-31 weeks of treatment with BCX9930 we realized that as the only oral option patients would likely prefer it over alternatives that may have flashier lab metrics. At the end of the day, the decision boils down to what is going to optimally synchronize clinical benefit and quality of life for the patient. As stated, increases in hemoglobin and transfusion avoidance trump LDH, especially when it’s below the 4-6XULN range associated with breakthrough hemolysis. Add on top of all this the convenience of a twice-daily capsule and you have a very competitive product for a disease with high unmet needs left by the standard of care (C5i like Soliris and Ultomiris). It’s worth noting for some perspective that ALXN paid nearly $1B to take out Achillion Pharmaceuticals (Nasdaq: ACHN) thrice daily oral factor D inhibitor with a subpar efficacy and safety profile and dose-limiting toxicities.
Similar trends were observed in the C5i poor responder patient population. LDH was not included for BCX9930 in these patients. This makes sense considering that these patients were already on a C5i therapy which does a great job at bringing LDH down to normal levels (i.e. controlling intravascular hemolysis). Therefore LDH was likely close to 1XULN. It will be interesting to see if that changes or stays the same when the C5i is removed and patients continue on BCX9930 monotherapy as the study protocol allows for. This further bolsters our assertion that LDH is not an accurate indicator of extravascular hemolysis, increased hemoglobin, or associated with fewer blood transfusions. If that were the case then C5i’s like Soliris and even factor D inhibitor ACH-4177 which lower LDH to normal levels would have these benefits.
In our view, this could be the start of a shift in the treatment paradigm similar to what we saw with NASH. For those of you that remember, the goal post used to be set at a liver fat reduction. But, once it became clear that this was an inaccurate predictor of clinical benefit and in fact, it was reducing fibrosis that mattered, the FDA repositioned its expectations to reflect this. As we have seen many of the lauded NASH stocks with once absurdly high valuations largely attributable to the ability of their drugs to lower liver fat, have fallen by the wayside.
Madrigal Pharmaceuticals (Nasdaq: MDGL) went from at its peak a market cap of $4.8B in 2018 to $1.8B today. Intercept Pharmaceuticals (Nasdaq: ICPT) fared even worse declining from a valuation of over $9B in 2014 to just $700M today. The point being is that disease states are continually being teased apart. As new understandings emerge for predicting clinical benefit the FDA adjusts its guidance accordingly. This is what we envision unfolding with the treatment of PNH. It took until Cowen published its report on Orladeyo before the market truly grasped the opportunity for BioCryst to capture up to 50% of the prophylactic market. We suspect a similar trend to happen with BCX9930.
Additionally, BCX9930 qualifies for rare pediatric designation (RPD) and breakthrough therapy designation (BTD). RPD is only granted by the FDA in spaces with less than 200,000 patients. This is significant because an approval with RPD may open the doors for a voucher that can be redeemed for a priority review voucher for another marketing application. In addition to RPD, BCX9930 is eligible for BTD which is designed to “expedite development and review of drugs for serious and life threatening conditions.” Preliminary clinical evidence is needed in order to demonstrate that the drug shows a clinically significant endpoint over the currently available therapy. Early evidence of this potential designation future can be seen by BCX9930 trials being Phase 1 pivotal. Pivotal trials are in attempts to demonstrate efficacy and obtain marketing approval.
In due time analysts and investors should wake up to the fact that BioCryst has discovered and brought to pivotal studies in PNH a potent and selective oral twice daily factor D inhibitor with a superb safety profile. When this happens we want to have all the shares we can. Until then we will continue to add on weakness as management continues to execute on its development and commercial strategy laid out clearly for investors for the past year.
I am we/are long BCRX. This article reflects the author’s (s) opinion and should not be considered financial advice. We reserve the right to buy or sell shares/options of BCRX without notice. Investment theses may change without notice.