• Bio5C

Q1 - ZYME, MRNS, QURE


Some quick updates from Q1 reports:

ZymeWorks, Inc. (ZYME) - 18 Points / $18 Target

The Celgene collaboration expansion last week really sent ZymeWorks stock on a tear. You can read more about the deal in my note → LINK. The short-version is that back in December 2014, Celgene and ZymeWorks agreed to collaborate on the development of eight bispecific candidates using ZymeWorks' Azymetric™ platform. The deal came with $8 million upfront and the potential for up to $164 million per candidate. On April 23rd, the deal was expanded to add two more candidates to the collaboration, which now stands at 10 potential bispecific candidates (at $164 million each), totaling $1.64 billion in potential milestone payments from Celgene to ZymeWorks.

I've stated before, ZymeWorks has excellent Charisma. And it's not just the Celgene deal that makes me say that; it's the other deals with Merck, Lilly, Glaxo, Daiichi Sankyo, and J&J that sum to $5.853 billion in total value that is so exciting about the platform. These "blue-chip" big pharma and biotech names also add excellent Credibility to the story. The company also has a growing internal pipeline that consists of ZW25, a HER2-HER2 bispecific in P1/2 studies, and ZW49, which is ZW25 plus a toxic payload, nearing an IND filing in the Q3. This is what makes ZymeWorks an excellent potential long-term hold.

However, over the short-term I'm a little concerned about the Cash position. The expansion deal with Celgene came with only $4 million upfront. Yes, ZymeWorks has been efficient at signing up collaborators and not diluting shareholders, but at some point they are going to come to the Street and tell everyone that they need more cash to move ZW25 (and ZW49 forward). We will get an update from the single agent cohort expansion data and see new data on the combo of ZW25 with chemo in HER2+ cancers at ASCO (June 1-5). ZymeWorks would like to be in registration studies with ZW25 in 2019. They also want to file an IND and begin Phase 1/2 studies with ZW49 before the end of the year. I think this company is going to need a lot more cash in the near-term.

Accordingly, I smell a financing coming soon. Perhaps management waits until after ASCO, but my gut is telling me something happens before ASCO so that management can meet with partners, potential partners, and investors and tell them the balance sheet is strong. Pieris (PIRS) and Sangamo (SGMO) are two platform biotechs that can't seem to have enough cash on hand. ZymeWork, while far from on fumes, is the outlier. In the meantime, ASCO represents a nice near-term Catalyst, but after that, I don't see much on the near-term horizon.

I've lowered the 5C score to '18' point to account for the pending financing. My price target is $18 per share.

Trade Idea → Anything below $12 looks like a great entry price.

uniQure N.V. (QURE) - 18 Points / $28 Target

uniQure's first quarter update centered mostly around AMT-061 and AMT-130. With respect to AMT-061, the company's next-generation AAV5 vector expressing hFIX with the FIX Padua variant, the company expects to initiate patient enrollment in the dose-confirmation study by the end of the Q2. Target enrollment is 3 patients. Each will receive a one-time administration of AMT-061 at a single dose of 2 x 10¹³ gc/kg. The company will assess Factor IX activity at approximately six to eight weeks following administration of AMT-061 to confirm the dose for the pivotal trial; however, we do not know if they will provide that data to investors. Top-line data from the dose-confirmation study are expected to be available before the end of this year.

The pivotal trial is expected to begin in the Q3. Management is currently selecting sites and obtaining IRB approval. The Phase 3 will include a six-month lead-in phase in order to collect baseline patient data. We should have a better sense of the results of the dose-confirmation study data to be presented late 2018 based on what management says around dosing and expectations for the Phase 3 in the Q3. Keep in mind, preliminary data from AMT-061 so far look outstanding compared to AMT-060. At ASH in December 2017, AMT-061 demonstrated approximately 6.5-fold higher FIX activity compared to those receiving AMT-060 (see data). This is very important because data from AMT-060 looked inferior to Spark's SPK-9001.

With respect to AMT-130, on April 25, at the 70th annual AAN meeting, uniQure presented a broad set of preclinical data establishing the proof-of-concept for AMT-130 in Huntington's disease (HD). Data from three different HD models were featured. You can view the full oral presentation slides; and see my quick summary of the data is below.

The data show a dose-dependent increase in AMT-130 vector DNA and a dose-dependent reduction in huntingtin (HTT) protein following administration of AMT-130 (see A below) in iPS-derived neurons and an 88% reduction in human HTT protein at the highest dose of AMT-130 after 7 months in humanized HD mice (see B below).

Data from LV-HD rats show a 98% reduction in mutant HTT aggregation and a 98% reduction in neural dysfunction (see C below). Separate studies in R6/2 HD mice show an improvement in clasping time and rotarod improvement (see D below), two tests of cognitive function as it relates to motility.

Importantly, and perhaps the most exciting aspect of AMT-130 that leads to the Charisma of the story, R6/2 HD mice treated with AMT-130 showed an improvement in median survival of 29 days (+24%) (see E below).

Transgenic minipigs, one of the largest HD animal models available, were used to study the feasibility, efficacy and tolerability of AMT-130. A dose-dependent distribution of the AAV5 vector was detected throughout the brain and was correlated with microRNA expression, reduction of human mHTT and lowering of messenger RNA. Human mHTT was significantly reduced by a median of 68% in the striatum and a median of 47% in the frontal cortex at 6 months after administration of AMT-130 (see F below).

A GLP-safety and toxicology study in non-human primates is nearing completion. Data from this study will be included in support of an Investigational New Drug (IND) application, which is expected to be submitted to the U.S. FDA in the Q2. Following clearance of this IND, uniQure expects to initiate of a Phase 1/2 clinical trial in Huntington's disease patients.

Beyond AMT-061 and AMT-130, uniQure is continuing to work with Bristol on AMT-126 in congestive heart failure. The candidate is currently in preclinical (minipig) trials, with data expected later 2018.

As of March 31, 2018, Cash was $140.8 million. The burn rate in the Q1 was $21 million. However, yesterday uniQure announced a proposed public offering of 4.6 million shares of common stock. Pricing should be after the bell today or tomorrow morning. Assuming the deal prices around $28/share, gross proceeds are likely $129 million (includes over-allotment). I've preemptively updated the 5C score (+1 to Cash) to account for this increase in cash, which is now 18 points. My price target is $28 per share (essentially the deal price).

Upcoming Catalysts include:

1) Presentation of older Phase 1/2 AMT-060 data at the World Federation of Hemophilia (WFH) 2018 Congress, May 20 -24.

2) Initiate dosing of patients in the dose confirmation study of AMT-061, and initiate patient enrollment in the lead-in phase of the pivotal study of AMT-061.

3) Completion of the GLP-safety and toxicology study of AMT-130 and submission of the IND in Huntington's disease.

4) Data from the AMT-126 heart function study in a diseased minipig model of congestive heart failure.

5) Top-line data from AMT-061 dose confirmation study in approximately three patients late 2018.

6) Expansion of the Company's early-stage research pipeline.

Trade Idea → Buy QURE on any major pull-back on "lame" AMT-060 data at WFH. We already know AMT-060 sucks, the story is AMT-061 and AMT-130.

Marinus Pharmaceuticals (MRNS) - 17 Points / $11 Target

Yes, we are still waiting for the Phase 2 data on top-line data from MAGNOLIA! Management is now saying Q3. This data was supposed to be in the Q1, then pushed into the Q2. Now it's in the Q3. MAGNOLIA is the intravenous version of ganaxolone for severe postpartum depression (PPD). The Phase 2 AMARYLLIS study of oral ganaxolone in moderate-to-severe PPD is now expected in the Q4. This data was expected in the first half of the year. As you can imagine, this is all hurting Marinus' Credibility score. That said, those are two very important Catalysts on the horizon. Management also plans to initiate the Phase 3 MARIGOLD study with oral ganaxolone in children with CDKL5 deficiency disorder (CDD) around the middle of the year. This program has very good Charisma given the recent success and stock-price movements for competitors (like GW Pharma and Zogenix) in targeting children with rare CNS diseases.

- Quick Background Review -

Marinus is developing ganaxolone for the treatment of rare and common neuropsychiatric conditions (see pipeline). Ganaxolone is a synthetic analog of endogenous allopregnanolone. Allopregnanolone, which itself is a metabolite of progesterone, is a potent positive allosteric modulator of GABA action on the GABA-a receptor. Allopregnanolone slows the rate of recovery of the GABA-a receptor from desensitization and possibly increases the rate of entry into fast desensitized states (it essentially restores the proper electrical balance of the brain). Allopregnanolone exerts neurogenetic, neuroprotective, antidepressant, and anxiolytic effects. Reduced levels of allopregnanolone are found to be associated with major depression, anxiety disorders, premenstrual dysphoric disorder, and Alzheimer’s disease (Tsutsui & Haraguchi, 2016). Ganaxolone exhibits all the theoretical efficacy of allopregnanolone with reduced risk of hormonal side effects. That is because Marinus made structural modifications to ganaxolone to prevent reversion back to progesterone, a hormone that could cause unwanted side effects (see below). See a more detailed analysis of Marinus here → LINK.

The obvious comp. for Marinus is Sage Therapeutics (SAGE). Sage is developing SAGE-217, an oral, selective, next generation positive allosteric modulator that has been optimized for selectivity to synaptic and extrasynaptic GABA receptors. It has similar pharmacology properties to Sage's Phase 3 drug for postpartum depression, brexanolone. Brexanolone (SAGE-547) is an improved solubility formulation of allopregnanolone and nearly identical to ganaxolone. I think it is fair to say that Marinus is a "mini-version" of Sage, and with Sage's market capitalization of $6.8 billion - 34x that of Marinus. See my analysis of SAGE-217 here → LINK.

- Ganaxolone Development -

The Phase 2 MAGNOLIA study initiated in June 2017. MAGNOLIA is a Phase 2 double-blind, placebo-controlled, multiple-dose escalation study that will be conducted at approximately 15 sites in the U.S. The study will consist of multiple cohorts of women with a HAM-D17 score ≥26 randomized into each cohort. The primary efficacy endpoint is change from baseline in the HAM-D17 score. Patients randomized into the first part of the study will undergo a 60-hour infusion of either ganaxolone or placebo and will be followed for 30 days. The company expects to complete the IV portion (part one) of the study in the Q3-2018. These data will be used to inform dosing for part two of the study, which is planned to evaluate regimens that include both IV and oral formulations of ganaxolone.

Enrollment is also on-going in the AMARYLLIS Phase 2 study. This is a double-blind, placebo-controlled clinical trial to evaluate the safety, tolerability and efficacy of oral ganaxolone in women with moderate PPD (HAM-D17 score between 20 and 25). Patients enrolled in the study will receive up to two weeks of treatment with ganaxolone capsules and will be followed for 14 days. The primary efficacy endpoint is change from baseline in the HAM-D17 score. Data from this study are expected in the Q4-2018.

Beyond peer-review literature noting the link between allopregnanolone and its implication in depression, Phase 2 data recently reported by Sage Therapeutics (SAGE) with SAGE-217 in the treatment of major depressive disorder (MDD) provides excellent Credibility to the Marinus story. Sage's Phase 2 trial enrolled 89 patients with moderate to severe MDD. In the trial, treatment with SAGE-217 was associated with a statistically significant mean reduction from baseline in the HAM-D total score at Day 15 of 17.6 points compared with a 10.7 point mean reduction associated with placebo (p<0.0001). The majority of patients (64%) who received SAGE-217 achieved remission at Day 15 as determined by a HAM-D total score ≤ 7 (compared with 23% of patients who received placebo, p=0.0005). Other secondary endpoints (e.g., MADRS, CGI-I) were similarly highly significant at Day 15 (p≤0.002). These were truly outstanding results!

Marinus also expects to begin enrolling CDD patients in its MARIGOLD study in mid-2018. CDKL5 disorder is a serious and rare genetic disorder that is caused by a mutation of the cyclin-dependent kinase-like 5 gene located on the X chromosome. It predominantly affects girls (5:1) and is characterized by early-onset, difficult-to-control seizures and severe neurodevelopmental impairment. The MARIGOLD study will be a global, double-blind, placebo-controlled, Phase 3 clinical trial in which patients will undergo a baseline period followed by a treatment period. The study’s primary efficacy endpoint will be percent reduction in seizures. Further study details will be released once the study has been initiated.

Finally, Marinus has initiated its Phase 2 study with ganaxolone IV in patients with refractory status epilepticus (RSE). Ganaxolone IV will be added to standard of care and administered for up to five days. The primary endpoint of the study is the number of subjects who do not require IV anesthetic for status epilepticus treatment within the first 24 hours after study drug initiation. Initial data from this proof-of-concept study are expected fourth quarter of 2018.

- Probably Could Use More Cash -

As of March 31, 2018, the company had Cash of $52.0 million. Burn is averaging $6-8 per quarter. Management thinks the current balance is enough to fund its operations into 2020. This seem suspect given the plans to initiate the Phase 3 MARIGOLD study later this year; although, Marinus does have an ATM facility active with JMP Securities. No use of the ATM was noted in the recent 10-Q filing on May 2, 2018. As of December 31, 2017, $19.8 million remained of the $50 million facility. It is possible that Marinus will look to use the ATM between today and MAGNOLIA data in the Q3 to maintain at least 12+ months burn. However, I would not rule out a financing before MAGNOLIA. The cash position - along with the constant data delays - has no doubt held the "run-up" in this stock back. Nevertheless, at 1/34th the value of SAGE, this might be worth a small position play.

Trade Idea → You can buy MRNS October 2018 $10 Calls for 75¢ (55¢ Bid / 95¢ Ask).

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Bio5C has no position in ZYME, QURE, MRNS, SAGE, ONCE, or BMRN.

Bio5C is long PIRS and SGMO

#ZYME #MRNS #QURE

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