Robust Orladeyo Launch Continues; Blockbuster Trajectory Confirmed
Today 11/3/21 our top holding BioCryst Pharmaceuticals (BCRX) reported financial results for the third quarter and key upcoming milestones. While the market is responding harshly to Orladeyo revenues (actual= $41M, $37M net), management revealed new metrics we find compelling and confirm the broader facets of our investment thesis. Namely, that Orladeyo is headed to become the market leader in the prophylaxis HAE market valued at $2.3B in 2018 and expected to reach $4.2B by 2026 according to Grand View Market Research. The other headline update for Orladeyo was FY21 revenue guidance between $115-120M. This was in line with Wall Street’s consensus for the year and positions Orladeyo as one of the most successful drug launches in history by any standard.
Despite today’s gut-wrenching reaction to earnings, we remain increasingly bullish on the long-term outlook for the company. In our, view this new data surrounding Orladeyo and management getting out for face to face interactions with prescribers starting with the Annual Scientific Meeting of the American College of Allergy, Asthma & Immunology (ACAAI) bodes well for maintaining and even increasing launch momentum into the end of 2021 and into 2022. By officially stating that Orladeyo is headed to the #1 market position management essentially confirmed that Orladeyo will be a blockbuster product (peak sales>$1B).
We know this with an extremely high degree of confidence considering the market for Orladeyo is already worth over $2B and is expected to increase an additional $2B over the next 5-years. Per doctor surveys done by BCRX and sell-side firms like Cowen, Cantor, and JPM as well as BCRX we know that Orladeyo is expected to capture up to 50% of the HAE patients in the U.S and probably more abroad. In countries like the UK, Germany, and Norway where launches are underway injectable therapies are less present and patients primarily are treated acutely. Moreover, the leading injectable HAE treatment in the US Takhzyro has peak sales estimates of over $1B meaning that we can expect an even greater number for Orladeyo.
Other Highlights; REDEEM 1 and 2 Are Designed for Success Looking at POC Data
The other focus of today’s update was the pivotal trials in PNH REDEEM 1 and 2 which are on track to start dosing patients this quarter. Also starting before the EOY are POC studies in three nephritis indications (likely C3G, PMN, and IgAN). Highlights from the long-term follow up on patients from the PNH POC study in C5i naive patients includes maintenance of increases in hemoglobin, no RBC transfusions for patients on 400-500 mg doses, no discontinuations from the study, and in the maintenance of key biomarkers (hemolysis and PNH RBC clone size). In the patients with an inadequate response to C5i similar trends were observed including 2 of the 3 patients that remained on long-term follow-up transitioning to monotherapy while maintaining clinical benefits. A key point to note is that if this data was replicated in REDEEM 1 and 2 the company would exceed the bar for success by a healthy margin. This gives us immense confidence heading into pivotal trials which have an interim readout at 12-weeks. We suspect this update could happen as early as 2022.
Final Remarks; Nothing has Changed Except Share Price (SP); Confidence in Company Maintained
While changes in SP are something we care immensely about as it is what ultimately produces the monetary gains we seek, it should not always be conflated with success. It is more important in our view to be critical of the company’s execution of its strategy to create value for shareholders. At times the company can be doing this yet the share price diverges and heads downwards. As we have seen this is because it is often a lagging indicator. If we take a step back we see that BCRX is executing exceptionally well on the launch of Orladeyo. Wall Street at the outset was skeptical that Orladeyo could compete with “more efficacious” injectable therapies like Takhzyro. Yet, here we are and 60% of patients starting on Orladeyo are switching from injectables with the number 1 switch being from this prevailing market leader and soon to be second-ranked product next to Orladeyo. In its first year on the market, Orladeyo is expected to do ~$120M which will likely go down in the books as one of the most successful drug launches in history. What is even more exciting as BCRX CEO John Stonehouse has emphasized every chance he gets is the opportunity of the fast-follower BCX9930 is 10X bigger. Eventually, there will be a tipping point and until then we continue to be buyers on weakness. Its unsure where SP will land today tomorrow or the next day. However, we can say with high confidence that with the current trajectory BCRX is headed to become a pharma powerhouse that discovers, develops, and commercializes small molecules for rare diseases. The elephant in the room presently is how is BCRX going to finance this next stage of growth. While the company closed out Q3 with $204 million on hand and access to $75 million through its existing credit facility, buyers appear to remain timid. Critics have been quick to point at the company’s R&D allocation. With increasing revenues, $204 million on hand, access to $75 million and CFO, Anthony Doyles remarks (minute marker 53) about equity raise being their least favorable option, we are confident in this teams ability to ink a favorable deal which will allow 9930 to progress and receive the it deserves. Once this is addressed we see clear sky’s to immense value creation for patients AND shareholders.
I am/we LONG BCRX