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Spring Bank Pharma (SBPH) - Will Inarigivir Data Get Any Better?

In my initial article on Spring Bank in September 2017, I referred to the Phase 2 data generated to date as "meh" and commented that the stock looked fairly valued at $180 million (around $15/sh). I conducted my analysis based on the initial Phase 2 data from the ACHIEVE study presented at the International HBV Meeting on September 7, 2017. Today, the company announced that new data from ACHIEVE will be presented at AASLD held between October 20th and 24th. I've reviewed the abstract and I conclude that the data are still, "meh".

Background On Inarigivir

Inarigivir (formerly SB9200) is a novel, first-in-class, oral, alkyoxycarbonyloxy linear dinucleotide prodrug that has been optimized by Spring Bank to bind selectively to and up-regulate Retinoic Acid Inducible Gene (RIG-I) and Nucleotide Oligomerization Domain protein 2 (NOD2), each of which is involved in the activation of innate immunity by stimulating production of interferon (IFN)-responsive gene expression.

RIG-I is a cytosolic helicase enzyme that functions as a pattern recognition receptor that acts as a sensor for viruses such as influenza, Sendai virus, flavivirus, and even HIV-1. If RIG-I finds viral RNA, it activates an intracellular process by releasing proteins that stimulate the production of endogenous interferon (INF). INF targets viral RNA and prevents its reproduction. Through a feedback loop, INF also stimulates the production of more RIG-I, which triggers the body's innate immune system to go into hyper-drive and fight the viral infection. The Hepatitis B Virus (HBV) has the ability to suppress this innate response by producing proteins that find and deactivate RIG-I. This is a major reason why HBV can persist and move from acute to chronic infection.

Spring Bank has specifically designed inarigivir with a dual mechanism of action. The drug promotes viral clearance by re-activating and stimulating the previously deactivated RIG-I, which causes an increase in the subsequent production of INF. The drug also inhibits viral replication by binding to the Hepatitis B viral RNA and inhibiting the polymerase enzyme responsible for viral multiplication. Importantly, the drug is designed to work by re-activating previously inactivated RIG-I caused by HBV infection, thus targeting only infected cells and leaving healthy cells largely unaffected.

Phase 2 ACHIEVE Trial

Spring Bank initiated a Phase 2 program in May 2016 called ACHIEVE. The first portion of the ACHIEVE trial was a placebo-controlled, sequential-cohort, double-blind trial to evaluate increasing doses of SB9200 as monotherapy for 12 weeks followed by 300 mg of tenofovir (Viread®) for an additional 12 weeks (Gilead is supplying Viread). The initial cohort of the Phase 2a trial enrolled 20 treatment-naïve chronic HBV patients without cirrhosis across multiple sites in Canada, Hong Kong and Korea.

The initial cohort consisted of 11 HBeAg-positive and 9 HBeAg-negative patients, of which 80% were genotype B/C, the most common Asian genotypes. Results in May 2017 show overall safety profile of SB9200 was favorable, and over the 12-week study, no serious adverse events were observed. The company presented initial data from ACHIEVE at the International HBV Meeting in September 2017. Treatment-emergent adverse events ranged from mild to moderate in severity with no interferon-like side effects and were comparable to patients on placebo. There were no Grade 3 laboratory abnormalities, but alanine aminotransferase (ALT) flares, defined as an increase in ALT above 200 IU/ml, were observed in three patients. Two of these ALT flares were viral flares identified in patients on placebo and the other ALT flare was identified in one patient on SB9200 at week 4, which was associated with a reduction in HBV DNA of 2.26 log10 and a 1.01 log10 reduction in HBsAg consistent with a beneficial immune flare. Study investigators did not observe any increase in bilirubin or evidence of hepatic decompensation. Safety data are summarized in the slide below:

Overall, SB9200 demonstrated a statistically significant reduction in HBV DNA at week 12, with a mean change of -0.58 log10 (range 0 to 1.87 log10) in the SB9200 treatment group vs. +0.37 log10 increase in the placebo group (p=0.014). For the secondary endpoint of quantitative HBsAg reduction, 5 of 16 patients (31%) in the SB9200 treatment group had a greater than 0.5 log10 reduction at any time point (range 0.52 to 1.01 log10), compared to none in the placebo group.

The 7 HBeAg-negative patients in the SB9200 treatment group had the greatest mean reduction in HBV DNA at -0.86 log10, and 3 of these 7 patients also had a greater than 0.5 log10 reduction in HBsAg (note: 1 log10 is a 90% reduction and 2 log10 is a 99% reduction).

I consider this data to be just okay. I don't get excited until I see reductions > 2 log10, but this was admittedly only the 25 mg dose and management does plans to increase the dose to 50, 100, and then 200 mg. That being said, to me it looks like nothing really "exciting" happens until you dose TDF, so the market potential for SB9200 may simply be a primer for Viread® or Gilead's next-generation formulation, Vemlidy®. Gilead is supplying Vemlidy® to Spring Bank for future studies. Spring Bank is also pursuing the development of the co-formulation of SB9200 with Viread and with entecavir (Bristol's Baraclude®) as potential fixed-dose combination product for the treatment of patients with chronic HBV who may benefit from the combined use of all three agents.

The company has already completed enrollment in the second 20-patient cohort in the Phase 2a trial, with a stronger 50 mg dose, and Spring Bank hopes to report top-line results for this group in Q4/17 (note: the DSMB cleared movement into Cohort 3 [100 mg] in October 2017). I'm hoping that results from the 100 mg and 200 mg Cohorts are more impressive than what we've seen so far in the 25 mg Cohort. Like I said, I want to see a reduction > 2 log10 and real separation of SB9200 from TDF alone. Unfortunately, ACHIEVE isn't really set up to compare SB9200 to mono therapy TDF. Nevertheless, Spring Bank hopes to complete the entire Phase 2 segment of the ACHIEVE trial early next year and release full results in the second half of 2018.

Best Guess On Peak Sales

HBV is a huge market. There are 250 million people worldwide and 15 million in the U.S. infected with HBV. There is no cure and because the virus can go dormant for years at a time, developing a cure for HBV has not been as straightforward as some investors may believe given the recent success by major biopharma players (like Gilead or AbbVie) in HCV. The vast majority of the 250+ million individuals infected with HBV will never see treatment with any antiviral agent, let alone a new drug candidate such as inarigivir. The current size of the HBV market is around $3.0 billion (source). Viread® did $1.2 billion in sales for Gilead in 2016. Baraclude® did $1.2 billion in global sales in 2016 for Bristol-Myers.

HBV market competition is increasing and it looks like the future of inarigivir is in combination therapy, so I do not think peak sales for inarigivir are quite in the $1.2 billion level, but if successfully commercialized, peak sales could be between $500 and $750 million. Keep in mind, based on the 25 mg dose peak sales look low, but I'm assuming we will see increases to > 2 log10 reductions for the higher doses. Maybe that's aggressive, but I'm also assigning minimal value to the preclinical STING program with SB11285, and this is conservative (but probably fair considering the company has yet to file an IND on this candidate, which is expected in the Q4). Nevertheless, with a 25% chance at success, $650 million in peak sales 10 years from today, a 4.5x multiple on sales, and a 15% discount rate, inarigivir is worth $180 million.

The current market value of the company is $215 million. The stock took a little jump this week when management announced they will present additional data from ACHIEVE at AASLD, likely from the 50 mg cohort. I'm not bearish on Spring Bank, I'm just not sure we need to have a position in the stock today. Yes, I'm being unfair by not assigning much value to the STING program, but if I acquiesce and say it's worth $25 million and then throw in $40 million in Cash, then perhaps the current price of $16.50 is attractive (my target is $19.50). That being said, I'd probably rather wait to see the data from the 100 mg and 200 mg cohorts before I jump in. Nevertheless, Gilead isn't buying Spring Bank just yet, so be patient with this one.


Bio5C has no position in SBPH or any other stock mentioned above.



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