A perfect storm of sector positives has most biotech investors smiling for the first time since April. Sentiment is almost uniformly positive and that is something to be both happy for and concerned about. A flurry of Fall medical meetings has revived interest in new drugs for various illness – acute, chronic and rare – and the beginning of December has two major conferences taking place now that have big news to pay attention to. Further helping the

At BioInvest, we have analyzed biotechnology stocks for over 30 years and never before witnessed a month with so many explosive value creating events quite like November 2019. The biotech stocks listed above experienced exceptional gains based on many unexpected positive announcements. The gains listed in the parentheses are measured from the day before the favorable news until we went to press. Not included above are stocks that may or not have had news specific to their company but whose respective gains were either directly or indirectly aided by good data, FDA actions and/or takeovers and also saw their stocks skyrocket higher (e.g., ARWR, ESPR, DRNA, IONS, CLVS, MDGL, SGMO, RLMD, KOD, etc.). Many also participated in the myriad of medical and investor meetings that have occurred daily of late and still continued this week, like CTAD, ASH and the ISI HealthCONx Conference (see DATA below). As mentioned above, mid-cap SAGE blew up in an unanticipated failure of SAGE-217.  To put the magnitude of the miss in perspective, SAGE’s market cap dropped from $7.8 billion to $3.1 billion that day (12/5), a painful reminder of the inherent risk in biotech stocks and drug development. That event also helped put a pause in the biotech rally.

Technicals — What To Do After A Hockey Stick Move? The above list of sector catalysts, by no means exhaustive, has led to a massive rally in the IBB and XBI

This Christmas holiday season has come early for biotech. The XBI has posted a positive weekly return for 9 of the last 11 weeks (with two flat weeks in the process but no negative ones). The 50-day (82) and 200-day (84) moving averages are way below as the XBI closed near 93, just a point below the high for 2019 that reached ~95 on Wednesday (94 was the level reached back in early April). For the past two weeks, the index was officially in overbought levels – it closed with an RSI of 71 at press time, but hit 83 on November 29. For several months, we believed that a breakout above the 200-day MA might lead to an explosive rally and with the abundance of good news that’s just what we got. The above plethora of good news – notably the surprise purchase of MTSL Recommendation MDCO by Novartis at an impressive premium only to be followed by the BOLD takeover by Astellas – led to a hockey stick move in the averages and even more impressive gains in individual names, before pausing on the SAGE disappointment.

The WEEKLY index, like the DAILY XBI, is way above support and looks a bit overextended (see XBI Weekly below). However, we also believe this is a strong representation of solid biotech fundamental health and investor optimism. With the daily RSI >70, some short-term pullback is inevitable. The daily MACD is strong but appears to have peaked near-term (+ 3.24). Like the daily index, it is also at the high for the year, and a short-term pullback is likely and would be considered healthy. The weekly MACD continues to look favorable but is also flattening a bit. The seasonal moves in stocks have tended to come earlier than usual this year – e.g., the summer rally happened in June and tax loss season occurred in September instead of October – one could presume that year-end mark-ups and window dressing are happening now and some profit-taking, therefore, may occur before year end. The smart money might be taking some off the table as we write. Most likely, however, is that fund managers, who had a difficult 2018, will try to milk 2019 for all its worth with the government in a stalemate and an impeachment looming for next year. High water marks and hurdle rates need to be recovered and then exceeded so the carried interest folks can buy whatever they want (except backbone). Speaking of fund managers’ greed, here’s a quick scene from one of our favorite movies, Bill Murray’s brilliant performance in Wes Anderson’s “Rushmore” (https://www.youtube.com/watch?v=m5RbdReBMLE).

M&A — A Little Closer Look At MDCO/NVS & BOLD/Astellas

In the previous Issue of MTSL, we said “M&A activity has been a bit quiet but as the year closes we believe M&A departments and bankers are working diligently to close some deals.” With the two big deals announced since then, we can take a lucky bow. Both deals were done at large premiums and at impressive valuations, but the two could not be more different in their respective strategic objectives. First, MDCO clearly was up for sale as it lacked the infrastructure to bring inclisiran to market in any meaningful way. The total ORION clinical package for LDL reduction was complete by the AHA meeting, and based upon the design of the CVOT trials compared with AMGN’s and REGN/SNY’s studies, we (and others) believe the odds of a greater reduction in CV risk including death are high. Partnering/takeover discussions were likely underway since at least the first successful Phase III was released, but once the additional trials were presented first hand to thousands of cardiologists, in our view, NVS’ bid was locked and loaded. Inclisiran’s value proposition was clear to us from the start, and Novartis and its cardiovascular franchise is a great fit (in addition to AMGN, REGN, SNY, PFE, etc.). In this case, the drug will likely gain FDA approval for LDL reduction by the end of next year, and label expansion over the next 2-3 years. We believe Inclisiran will be a blockbuster success and possibly a household name by then. Many MDCO bears did not believe a takeover was going to occur that quick, let alone at the ~$10 billion valuation. However, recent M&A transactions in biotech over the past 2-5 years suggested that Inclisiran was worth more than the market was discounting. The acquisition is a pure fundamental fit of a single blockbuster drug nearing commercialization. Most deals like this are focused on a single, lead compound although MDCO was unique in the sense that management bet the ranch and deservedly won. The MDCO/NVS deal gives us further confidence in the novel cardiovascular compounds and potential valuations of MTSL Recommendations ESPR and MDGL.

The Audentes (BOLD) acquisition by Japan’s Astellas is a platform deal that is focused primarily on AAV gene therapy. Gene therapy is one of the revolutionary technologies that is beginning to show real technological, clinical and even commercial success. The number of illnesses that may be corrected with gene therapy is formidable to say the least, and BOLD has a number of projects underway but only one in clinical trials, AT132, an AAV8 vector containing a functional copy of the MTM1 gene, for the treatment of XLMTM. Like many Orphan diseases, X-linked Myotubular Myopathy (XLMTM) is a rare, serious, life-threatening, neuromuscular disease that is characterized by extreme muscle weakness, respiratory failure and early death. Like many initial GTs, XLMTM is caused by mutations in a single gene, in this case the MTM1 gene that lead to a lack or dysfunction of myotubularin, a protein that is needed for normal development, maturation, and function of skeletal muscle cells. The disease affects approximately 1 in 40,000 to 50,000 newborn males. BOLD is expected to file for FDA approval of AT132 next year. As the table below shows, the rest of BOLD’s pipeline is in the pre-IND stage with a focus on DMD. Hence, we believe the deal represents Astella’s desire to gain access to novel future gene therapies and is paying $3 billion today to do so.

ACADÂ reported details from its positive Phase III HARMONY trial in time to relapse of dementia-related psychosis (DRP) patients at the Clinical trials on Alzheimer’s Disease meeting (CTAD) and hosted a KOL panel.

Undeniable Efficacy

Pimavanserin nailed the primary endpoint with a significant 2.8x reduction in risk of relapse of psychosis versus placebo (HR=0.353; one-sided p=0.0023), stopping at the pre-planned interim analysis; and (2) met the key secondary endpoint with significant 2.2x reduction in risk of discontinuation for any reason (HR=0.452; one-sided p=0.0024).  Based upon this, one can easily see why the HARMONY trial was stopped early.

Widening Therapeutic Window

On the KOL panel, the experts were impressed with the combined compelling therapeutic benefit with a significantly improved tolerability profile and no worsening of cognitive or motor symptoms.  This was viewed as not just clinically meaningful, but also likely to reshape the treatment paradigm for DRP where there are no approved therapies.  In our view, the data easily supports an sNDA filing in H2:20, following FDA discussions in H1:20.

INCY recently announced that the FDA has accepted for Priority Review the Company’s NDA for pemigatinib, a selective fibroblast growth factor receptor (FGFR) inhibitor, as a treatment for patients with previously treated, locally advanced or metastatic cholangiocarcinoma with FGFR2 fusions or rearrangements. Importantly, Priority Review shortens the review period to 8 months compared to 12 months for Standard Review. The PDUFA target action date is May 30, 2020.

The NDA submission is based on data from the FIGHT-202 study evaluating pemigatinib as a treatment for patients with previously treated, locally advanced or metastatic cholangiocarcinoma. Study results, recently presented at ESMO demonstrated that in patients harboring FGFR2 fusions or rearrangements (Cohort A), pemigatinib monotherapy resulted in an overall response rate (ORR) of 36%  (primary endpoint), and median duration of response (DOR) of 7.5 months (secondary endpoint) with a median follow-up of 15 months.

Pemigatinib is a potent, selective, oral inhibitor of FGFR isoforms 1, 2 and 3 which, in preclinical studies, has demonstrated selective pharmacologic activity against cancer cells with FGFR alterations.  The drug development candidate is currently in multiple Phase II/III trials in various FGFR tumor types.  Because FGFR is a growth factor which plays a key role in both tumor cell proliferation and survival, in our view, there is clearly potential for pemugatinib to become a cancer drug for multiple indications.

From the beginning of the ORION clinical trials program in 2016 until the recent successful three Phase III studies, we have been under the belief that Inclisiran would be much bigger than people think. Today’s announcement tells us that Novartis, too, believe as such – as the consensus suggests that Inclisiran will need to generate at least $2.2 billion annually for the deal to be NPV neutral. In our view, the takeover will prove to be an astute acquisition at a very attractive price. The roughly $10 billion price tag is a reminder of the high value placed on innovation in biotechnology that is being recognized by global Blue Chip biopharmaceutical companies.

With a streamlined corporation structured solely on Inclisiran – we tip our hats to former CEO and MDCO founder Clive Meanwell for not only bringing the compound into the MDCO fold, but also designing the ORION clinical plan to perfection. Nothing in life is truly perfect, and the road from the test tube to treating patients and then to the market is filled with stops and starts. The Medicines Company has had its share of those over the years, but it certainly has come to a happy ending. Our previous price target on the day before the ORION-10 and -11 trial presentation was $85 and we raised it to $100 the day the stock jumped on takeover rumors. With both Boards of Directors having approved the merger, it strongly appears to be a done deal at $85 and hence, we do not expect any other bidders to emerge.  Nonetheless, we and our MTSL subscribers are rather happy with the outcome. (https://www.novartis.com/news/media-releases/novartis-acquire-medicines-company-usd-97-bn-adding-inclisiran-potentially-transformational-investigational-cholesterol-lowering-therapy-address-leading-global)

The oral presentations of the ORION-9 and -10 studies further confirm the revolutionary compound that is Inclisiran. On top of its durable LDL reductions and impeccable safety, the ease of use and high compliance rate, in our view, suggest blockbuster status is likely. With Phase III program successfully complete, we remain steadfast in expecting a much larger market for Inclisiran than the current stock price is forecasting. Raising BUY and TARGET PRICE.

ORION-10 results demonstrated LDL-C lowering of 58% at 17 months, comparable to PCSK9 antibodies with only 2 doses/year

In ORION-10, patients given Inclisiran resulted in placebo-adjusted LDL-C lowering of 58% (p<0.0001) at day 510 and time-averaged LDL-C reductions of 56% (p <0.0001) from days 90 through 540 compared to placebo. The reduction in LDL in ORION-10 was greater than the 54% seen in the first Phase III trial ORION-11. More important, treatment emergent adverse events (TEAS) were balanced across both arms exception for injection site reactions which were mostly mild and transient (inclisiran 2.6% vs placebo 0.9%). Mid-way through the trial, drug delivery was moved from a vial and syringe to a pre-filled syringe with a smaller needle gauge. Injection site pain/reactions dropped from 2.1% to 1.0%. Although not powered for statistics, in a pre-specified exploratory CV endpoint of a basket of unadjudicated terms relating to CV death, cardiac arrest, non-fatal MI and/or stroke, patients treated with inclisiran showed a marked decrease compared to placebo (7.4% for I vs 10.2% for P) similar to what was observed in ORION-11 (inclisiran 7.8% vs placebo 10.3%). A very small number of patients on Inclisiran experienced a CV death (n= Inclisiran 7 (0.9%) vs placebo 5 (0.6%), the numbers are insignificant and opposite although similar in ORION-11. While it is too early to determine the ultimate impact of inclisiran on CV outcomes the science and KOLs predict a significant reduction in MACE (e.g., conservatively 30% implied by Dr. Kastelein on the conference call).

ORION-10 & ORION-11 Pooled data showed remarkable risk ratio of 0.74 – or 26% reduction in CV risk – at 18 months

Because the trial designs and patient populations were very similar, in a presentation at AHA on Sunday night and again on today’s call, Dr. John Kastelein reported results from an ORION-10 & -11 pooled data analysis. In this combined dataset, inclisiran reduced LDL-C by 56% (p<0.00001) at day 510 (placebo-adjusted). Among the 1591 patients given inclisiran, 91% met a LDL-C threshold of <70 mg/dL and 87% demonstrated ≥50% LDL-C lowering – reaching AHA-recommended guideline goals. In the exploratory cardiovascular endpoint, inclisiran showed a risk ratio of 0.74 (95% CV: 0.59-0.93) representing a 26% risk reduction. Using the pooled data, MDCO projects a computed 5-year MACE relative risk reduction (RRR) of .70 for the currently enrolling, large ORION-4 CVOT study. As these estimates are based on LDL-C reductions observed in trials with likely adherence issues, Dr. Kastelein noted that while a 30% reduction in MACE is anticipated, he believes this number could be even higher due to the built-in adherence of inclisiran’s physician administered, twice yearly dosing regimen.

Legendary blues rockers Little Feat song, “Time Loves a Hero,” says it all for MYOV today as their Phase III prostate cancer data from HERO trial (https://www.clinicaltrials.gov/ct2/show/NCT03085095?term=Myovant+HERO&draw=2&rank=1) was excellent. Patient MYOV investors were rewarded this morning as the Phase 3 HERO study of once-daily, oral relugolix (120 mg) met its primary efficacy endpoint and all six key secondary endpoints in men with advanced prostate cancer. These results support an NDA submission to FDA upcoming in Q2:20 and future regulatory submissions in Europe and Japan. Importantly, MYOV has retained all rights for the world’s two largest markets, the US and EU. Companies with proprietary assets that have de-risked Phase III data are significant M&A targets, and MYOV has joined other MTSL recommendations like MDCO and ESPR as a clear takeover candidate.

In the primary endpoint responder analysis, 96.7% (95% CI: 94.9%, 97.9%) of men receiving once-daily, oral relugolix achieved sustained testosterone suppression to castrate levels. A responder was defined as achieving and maintaining testosterone suppression to less than or equal to 50 ng/dL from Week 5 through Week 48. For the study to be successful, the lower bound of the 95% confidence interval of the response rate had to be at least 90%.

Five key secondary endpoints demonstrated superiority to leuprolide acetate, including rapid suppression of testosterone at Day 4 and Day 15, profound suppression of testosterone at Day 15, rapid suppression of prostate-specific antigen (PSA) at Day 15, and suppression of follicle-stimulating hormone (FSH) at Week 24 (all p-values < 0.0001). In addition, relugolix demonstrated non-inferiority to leuprolide acetate on sustained testosterone suppression through 48 weeks (96.7% vs. 88.8%, respectively) with a between-group difference of 7.9% (95% CI: 4.1%,11.8%), the primary endpoint required for regulatory submissions outside of the U.S. In addition, the pharmacodynamic results showed no testosterone flare after initiation of relugolix and mean testosterone levels returned to normal levels within 90 days after treatment discontinuation.

The overall incidence of adverse events in the relugolix and leuprolide acetate groups was comparable (92.9% vs. 93.5%, respectively). In the relugolix group, 3.5% of men discontinued the study early due to adverse events compared with 2.6% of men in the leuprolide acetate group. The most frequently reported adverse events, reported in at least 10% of men in the relugolix group, were hot flashes, fatigue, constipation, diarrhea, and arthralgia. Unadjudicated major adverse cardiovascular events were reported in 2.9% of men in the relugolix group versus 6.2% of men in the leuprolide acetate group. These events included non-fatal myocardial infarction, non-fatal stroke, and all-cause mortality. In this regard, relugolix is demonstrating a safety advantage which becomes more important as advanced PC patients are now living longer lives with the advent of new therapies, many of which are oral like Reguolix.

Sangamo will have a very busy December, with two clinical data updates coming at the American Society for Hematology (ASH, https://www.hematology.org/Annual-Meeting/). We remain steadfast that SGMO will emerge as the leader in gene therapy for hemophilia A with SB-525. Then the Company will follow that success with gene therapy for Fabry’s disease, treating its first patient before year end. Moreover, an update for SGMO’s ST-400 gene therapy for beta-thalassemia will lead the Company into investors’ beta-thal discussions. Lastly, SGMO will hold an Investor Day in NYC on December 17.

SB-525 – Hemophilia A Gene Therapy (with Pfizer)
Present follow-up patient data at ASH 2019
December 7 – “Updated Follow-Up of the Alta Study, a Phase 1/2, Open Label, Adaptive, Dose-Ranging Study to Assess the Safety and Tolerability of SB-525 Gene Therapy in Adult Patients with Severe Hemophilia “
Regulatory discussions underway for Phase III

ST-400 Beta-Thalassemia – Additional preliminary data at ASH 2019
December 9 – “Preliminary Results of a Phase 1/2 Clinical Study of Zinc Finger Nuclease- Mediated Editing of BCL11A in Autologous Hematopoietic Stem Cells for Transfusion-Dependent Beta Thalassemia”
Complete patient enrollment by year-end 2019

ZIOP presented new interim analyses from two ongoing sub-studies in its Controlled IL-12 platform, or Ad-RTS-hIL-12 plus veledimex (Ad+V), both as monotherapy and in combination with a PD-1 inhibitor, for the treatment of recurrent or progressive glioblastoma multiforme (rGBM) in adults, at the 2019 Society for Neuro-Oncology (SNO) Annual Meeting (https://www.soc-neuro-onc.org/SNO/2019Annual/2019AnnualHome.aspx).

“Survival of Subjects with Recurrent Glioblastoma Receiving Intra-tumoral Administration of IL-12 Managed with Low-dose Dexamethasone”

Interim Update Reported – key points highlighted in bold

• Decrease in tumor from baseline (time of Ad+V administration) resulting in a patient’s lesion being too small to measure, assessed as a partial response (per iRANO), with follow up ongoing
• Subjects were comparable to the Main study except a higher percentage in the Expansion substudy had multifocal disease vs. unifocal disease and fewer recurrences
  • Based on study design there was a higher percentage of subjects in the Expansion substudy as compared with Main study (75% vs 40%) who received lowdose concurrent steroids
  • Local, regulated IL-12 production using Ad+V in subjects with rGBM rapidly and safely activates the immune system • Peak serum IL-12 at Day 3 with downstream production of endogenous IFN-g peaking at Day 7 in Expansion substudy (and Main study)
• MRI findings of pseudoprogression were consistent with immune-mediated anti-tumor effects
• 20mg V subjects (Main + Expansion, n=20) with unifocal disease at entry, receiving low-dose steroids (defined as <20 mg cumulative dosing of dexamethasone) continued to show a trend towards longer median overall survival (mOS, 16.2 months)
• Adverse reactions (ARs) were consistent with prior studies of Ad+V, predictable, doserelated, and promptly reversible upon discontinuation of veledimex
• No drug-related deaths were reported

“PD-1 Inhibition can be Combined with IL-12 in Subjects with Recurrent Glioblastoma”

Interim Update Reported

• Decrease by 64% in a patient’s tumor from baseline (time of Ad+V administration) resulting in a partial response (per iRANO) with follow up ongoing
• Enrollment is complete per 3+3 (Ad+V and nivolumab) dose-escalation, as well as an additional 12 patients enrolled to the third cohort (highest dose)