**This article was originally published for ROTY subscribers on December 19th, but has been updated where necessary. Despite the 31% gain, I continue to believe this story is in early innings with compelling pathway to value creation throughout this year and next.
Shares of BioCryst Pharmaceuticals (BCRX) have risen by 260% since my March 2020 ROTY article noted that upside drivers included oral HAE program looking to displace approved injectable treatments, Factor D inhibitor BCX9930 in the lucrative complement-mediated disease space and possible Covid kicker (galidesivir). Year to date, shares are up 8%, which is quite respectable considering the XBI is down 19% over the same timeframe.
Recently, I listened to multiple presentations by management and their admirable execution both commercially as well as in the clinic compelled me to make room for this holding in our Core Biotech portfolio.
Figure 1: BCRX weekly chart (Source: Finviz)
When looking at charts, clarity often comes from taking a look at distinct time frames in order to determine important technical levels and get a feel for what’s going on. In the weekly chart above, we can see shares nearly triple from lows over the past year. The stock has risen above major moving averages after management boosted sales guidance for Orladeyo in January and also pulled off a smart royalty deal to buffer up the balance sheet (with $50 million equity investment at $13 per share). Given that any current dips are more likely due to a weak biotech sector than the story here, I’m inclined to believe that current levels appear to offer investors with a medium to long term timeframe an appealing entry point to accumulate ahead of continued accelerating sales growth for Orladeyo and progress for 9930 in multiple exploratory studies.
In my prior article, here are a couple keys to the bullish thesis we touched on:
- $500 million peak sales opportunity for Orladeyo in HAE (hereditary angioedema), considering US HAE population of 10,000 patients of which 7,500 are already diagnosed and treated. Surveys showed significant willingness from patients to try an oral therapy (despite being satisfied on Cinryze, Haegarda, Takhyzro) and physicians to switch from injectable. To be fair, I was a bit on the skeptical side given tolerability profile (transient GI events for one) and efficacy (at the time not on par with approved injectables). Thus, I allowed for the possibility of a more conservative peak sales estimate ($200 million).
- Lucrative nature of the complement-mediated disease space, with BioCryst poised to profit with their oral Factor D inhibitor BCX9930. I highlighted prior M&A deals (UCB buying out Ra Pharmaceuticals for $2.1 billion, Alexion acquiring Achillion for $930 million). I noted that while the paroxysmal nocturnal hemoglobinuria (PNH) indication was heavily crowded, proof of concept (POC) data would open the gate to treating other complement diseases of the alternative pathway (pipeline-in-a-product). Logical follow-on indications were highlighted, including dense deposit disease, C3 glomerulonephritis and primary membranous nephropathy, acquired hemolytic uremic syndrome, etc). Importantly, management was very happy with drug profile observed in SAD and MAD portions of phase 1 study (able to dose through rash AE in majority of cases).
Figure 2: Pipeline (Source: corporate presentation)
Let’s move onto presentation notes, which convinced me to revisit and ultimately accumulate a position in the Core Biotech portfolio.
Short-Hand Notes on Q3 Conference Call
-The company sported a $200 million cash position + $350 millin cash from royalty deal, equating to $550 million cash on hand (contrasts nicely to $50 million quarterly burn).
-Green flag was identified in that Royalty Pharma also made a $50 million equity investment at $13 share price (significantly above where the stock was trading).
-The purpose of the financing was to help them aggressively move Factor D asset forward. They intend to complete REDEEM-1 and REDEEM-2 PNH studies pivotal PNH studies (endpoint wk 12 & 24), omplete renal POC basket study in three nephritis indications and advance each to pivotal trials. They will also begin POC studies in other complement mediated diseases.
-In the Q3 conference call, management was quite proud that the Orladeyo launch has exceeded expectations, especially in the middle of a pandemic. $115 million to $120 million full year sales for 2021 was expected. The bottom line was that HAE patients want a once daily oral medicine. The strongest evidence was that patients were switching from injectable to oral even when disease is controlled and they were satisfied with prior treatment. Why? In one word, convenience. Management confidence is growing, they believe they can exceed global peak sales target of $500M.
Figure 3: HAE landscape (Source: Pharvaris corporate presentation)
-The big takeaway is also the readthrough to their discovery platform, developing potent orally bio available compounds against difficult biologic targets. They will repeat Orladeyo’s success with Factor D inhibitor BCX9930 (applications in many complement mediated diseases) and then other drugs to follow.
-In Q3, Orladeyo prescriber base grew by another 25%, and now includes nearly half of top 500 HAE treaters. August survey of 60 US physicians, they see use of Orladeyo doubling to become their most prescribed prophylactic treatment over next 12 months. Long term data backs up the drug’s benefit, with new 96 week APeX-2 results showing sustained 80% reduction in attacks (this new data is getting closer to on par with injectables).
On Piper Sandler
-6 members of senior management team were on the call, and I appreciated the transparency. Orladeyo is creating revenue to allow them to reinvest in the pipeline. Factor D could address ten to a dozen rare disease indications, as they bring an oral drug to rare disease patients suffering from complement mediated diseases.
-Success is repeatable, they can keep doing what they did with Orladeyo in HAE, bring an oral drug into markets dominated by injectable treatments.
-2021 guidance revenue floor was $100 million. They are off to fantastic start in launch, at the stage of filling the funnel with new patients. Management is excited about the first 3 quarters where the same number of patients treated are brand new to the drug. They see going forward that they are just scratching surface in terms of opportunity. Of 500 doctors who treat 50% of HAE patients in the market (tier 1), half have prescribed Orladeyo. Intent to prescribe is also high in 2022. Patient activation has not happened fully yet, in other words those coming in and asking for Orladeyo from their doctors. Great progress from payer perspective, hearing from physicians that the access process has gone better than they expected. Growth is being driven by long term efficacy data and positive experience for patients on drug (linear growth stage at this point). To give an idea on management execution, consensus was $30 million for first year of sales and they did $37 million in Q3 alone. In more recent market research, doctors said patients are having a great experience with Orladeyo. In 12 months they see Orladeyo as being their most prescribed drug (caveat that physicians can be overly optimistic). Trends so far show they are seeing switching (half or more patients switching from injectable prophylactic drugs, half switching from acute drugs). Consistent trends are being seen pre and during launch.
-80% of patients who started Orladeyo were still on drug at Q3, management sees that settling at 70% after one year. Orladeyo is controlling their attacks and with low burden of freedom. Worldwide peak revenue guidance originally was $500 million, now management thinks could be reset higher. That $500 million number is 2.5 years old, management says it is substantially higher and they are still thinking of how ex US contributes to that number. They will update that number around the beginning of 2022 (this was the key ¨tell¨ regarding January’s guidance hike).
-Long term data for Orladeyo is powerful, and puts a nail into a key aspect of the bear thesis. The drug works very well, getting high retention because patients are doing well and are getting controlled on Orladeyo. Patients are seeing sustained reduction in attacks. Also, patients switching from injectables are having that same low rate of attack. Across long term follow up and APeX trial they are seeing durability of response, whether or not on prior prophylaxis.
-The leading reason patients drop off Orladeyo is GI adverse events. However, from the beginning they set the expectation with patients that these events tend to be mild and go away early in therapy (doing that helps them through the process). Long term efficacy and low rate of attacks that is sustained gives prescribers more confidence. Stress is a big trigger of HAE attacks, and the flip side of that is confidence and they want patients to feel confident in the drug they are taking. Patient to patient interaction is just getting going as well (word of mouth), and they are working on getting people face to face now as opposed to Zoom (could be another inflection point to increase growth, caveat for impact of Omicron Covid variant). A powerful point is that Orladeyo has not known a non-Covid world. Still, they were wildly successful with the launch, when face to face kicks in, ¨watch out¨ (doctor interactions, sales reps, etc). Patients and doctors are not losing touch with each other in US (telemedicine). Even if Covid wanes, they don’t expect a huge rush to go back to doctors’ office.
-Getting patients to switch from their drugs to Orladeyo is painful for competitors. Skeptics/competition point to old pivotal data that says Orladeyo doesn’t work nearly as well, but the new 96 week data suggests Orladeyo works similar to injectables. They dig at adverse events like GI events, but injectables have injection site pain. It’s about skill in competing not size (salesforce is not huge). ¨We like our data and we like our product, we have what we need¨, a statement that reflects high confidence.
Figure 4: 96 week data highlights efficacy of Orladeyo as it improves over time, goes a long way to silencing critics (Source: corporate presentation)
-9930 oral Factor D inhibitor is in 2 pivotal studies in PNH, one active control and one placebo controlled. They are seeing great traction in terms of interest from investigators at sites all over. They expect those patients to be randomized this year. In renal nephritis basket study, it’s much smaller and open label, requires biopsies before and after. Enthusiasm is there and sites are getting set up. It’s hard to know how long to fully recruit the trial, as complement is really active (competitive) as an industry and the target is well known. The stock reflects very little value for this program- over next couple years they will be getting data from POC in three nephritis indications which would then lead into pivotal studies for all 3 indications if they are successful. Two pivotals in PNH, readouts at some point in those then they move on to regulatory filings. All of this on the heels of launching Orladeyo. ¨Value creation from here as far as I can see is huge¨, another nice nugget from management.
-Per the specific wording of the Royalty Pharm deal terms, 9930 could be a $1.5 billion to $3 billion+ peak sales drug (3% royalty on sales up to $1.5 billion, 2% sales $1.5 billion to $3 billion, no royalty over $3 billion). For Orladeyo, no royalty is due on sales over $550 million.
-For BCX9930, management states that proximal complement inhibition is an exciting field across all competitors, where they can quickly move from phase 1 POC data straight into pivotal trials! Again,they have an opportunity to accelerate into pivotal from phase 1, which does not come by accident (medical need, drug profile, etc). We shouldn’t underestimate the challenge of recruiting subjects, especially in rare disease.
-Data has been generated as monotherapy (not being on C5 inhibitor), also in in combination (patients not doing well on C5 inhibitor alone) and together the picture looks very good. We can easily see clinically meaningful and rapid changes in hemoglobin. Massive effect has been observed in both patient populations compared to historical experience supported by transfusions (patients are practically transfusion free). They have a very strong expectation of success because the target is fully validated.
-This has been a story where management has constantly not been given benefit of the doubt. It took a successful launch in HAE to get some respect for the data generated prior. Management is patient because they can be, company is now in a strong financial position. It’s all about execution. They believe the tipping point will come where people realize that Orladeyo is a way bigger product than they thought it was. The tipping point occurs where Wall Street realizes that the company is self sustainable, that they won’t need to go to the market for financing. Management is having fun because future is exciting and inspiring team is in place.
-Recent conviction sized insider buys were a nice green flag as well. CFO Anthony Doyle acquired 35,258 shares at $12.48 per share for a total of ~$402,580. Vincent Milano, a member of the board of directors, bought 7.5K shares at $12.19 per share for a total of $91,425.
-I see Kalvista (KALV) and Pharvaris (PHVS) as competition in HAE, both likely have better drugs than Orladeyo. However, Kalvista is enrolling a phase 2 study with the phase 3 (on demand) trial to start Q1 2022, so they are well behind BioCryst. Likewise, Pharvaris candidate has a superior drug profile, but is only in phase 2 with data in 2022, then they have to run pivotal studies. Essentially, Orladeyo in HAE is a cash generator until competition overtakes them in a few years, while 9930 (Factor D) is the golden goose.
-C5 inhibitors (think Alexion’s Soliris) have been a major improvement for treating these PNH patients. However, some of them continue to remain anemic, a proportion of them are quite symptomatic and also need significant blood transfusions at regular intervals. From a patient perspective this is a long term treatment and two weekly injections for a period of years and decades together has significant impact on their quality of life. Per BioCryst management and physicians, it’s better for them to have choices.
-9930 was initially studied in both naive patient population and inadequate response population. 16 patients were enrolled. These were very ill naive patients with baseline hemoglobin 8.3, bone marrow failure and high transfusion dependence. Duration of treatment was 22 weeks on doses that matter. In the C5 naive group, follow up confirms findings. Anemia was relieved, hemoglobin going up +3.5 g/dL, remarkable increase in red cell clone size 40 percentage point increase, large clinically meaningful reduction in all the hemolysis biomarkers (bilirubin, AST, LDH, reticulocyte count). The key remaining challenge is the need for continued transfusions. This was a dramatic result, NO transfusions needed, dropped to zero, 100% of patients transfusion free in 400 or 500mg BID group.
Figure 5: Improvement in key parameters in C5-inhibitor naive patients (Source: corporate presentation)
-The only transfusion in this group was very early on after two weeks of dosing patient B in first cohort. This patient year prior to study had 13 units of red cells transfused. As they dose escalated, gained control of hemolysis, hemoglobin doubled over 50 weeks. AST and LDH stabilized, reticulocyte count settled as anemia corrected. Investigators reported rapid symptomatic relief (imagine the difference hemoglobin of 12 to 14 and avoidance of transfusion makes to the patient’s well being, compared to hemoglobin of 6 to 7 and repeated transfusions). Improvement of 8 points in fatigue score, great results and again we can imagine patient’s improved quality of life.
-Patient H case study is helpful. They started at 200 mg twice a day and he showed prompt response in every measure. 400mg from day 15 to week 20, clone size got to 100%. Stability in various biomarkers took some time to be evident. No transfusions were necessary on study. Hemoglobin rising from under 10 to 15. Fatigue score improving by 9 points from baseline. Again, these are great results.
-Outcome for C5 inhibitor inadequate response patients was very similar. 6 patients were very ill, 3 had bone marrow failure, 3 had prior blood clots, 5 transfusion dependent, baseline hemoglobin of 8.9. 4 were being treated with Soliris, average dose of 1200mg every 2 weeks which is higher than approved drug label. Baseline laboratory profile shows high bilirubin, high reticulocyte counts, etc. Adding 9930 treatment led to controlled intravascular and extravascular hemolysis. Shorter follow up here, but the story is similar. 5 of 6 patients’ levels fell dramatically, hemoglobin has risen quickly. Just like in naive, dramatic outcome is observed in transfusion rate (went to ZERO in 5 of 6 patients, halved in last one). Patient N demonstrates effects of adding 9930 on top of 1200mg Soliris every 2 weeks (after 12 weeks of 9930, seeing continued rise in hemoglobin, rise in PNH red cell clone size, fall in reticulocyte count, etc). It can take longer than this for the whole picture to stabilize, but patients are doing very well.
Figure 6: C5-inhibitor inadequate response patients experienced significant increase in hemoglobin as a result of control of hemolysis/corresponding reductions in other relevant measures (Source: corporate presentation)
-They haven’t seen any safety signals so far (no dose interruptions or discontinuations). Rash side effect goes away without intervention. Transient headache was observed in C5 naive group (expected, confirmation of on target effect). They ¨couldn’t be more pleased with results¨, anemia relieved, transfusions avoided and extravascular hemolysis was brought under control. Consistent effect is being observed in naive and patients on C5 inhibitor, which gives them confidence.
-Standard of care is currently burdensome on patients and their lifestyles are being tied to infusion schedule of every few weeks or months (competition). They manage their lives around infusion schedule and transfusion schedule. Having options to enable leading an active lifestyle is great. 9930 gives them the ability to make it so that transfusions are no longer necessary (outcome is ¨more than great¨). It’s true that transfusions make you feel better, but they have other effects (iron overload, some medications with severe side effects). A treatment that would allow patients to have acceptable hemoglobin and reduce or eliminate the need for transfusions, would be priceless.
-I found it helpful how the doctor thinks of PNH in eras. Pre-ecluzimab era the goal was to prevent end organ damage, thrombosis and complications associated with it (life threatening, leading to mortality and morbidity). C5 inhibitors took care of that, as they prevent thrombosis but quality of life still is not sufficiently great (patients are still transfusion dependent and anemic). Patients have remained on C5 inhibitors, continue to remain symptomatic, anemic, negative impact on quality of life. Proximal complement inhibitors play a significant role here. It doesn’t make sense for patients on IV drug to give them another IV or subQ drug- tell patients there is an oral compound and they are keen to participate in these studies. More pleasing is to see these patients have significant hemoglobin improvement (ie doubling as in the case study). Oral therapy availability is vital to improve their quality of life, lead lifestyles where they’re not attached to the hospital too long.
-They ranked outcomes in order of importance to KOL (key opinion leader). Landscape is certainly shifting. LDH is a marker of intravascular hemolysis, is important to monitor and see what it’s doing. However, patients don’t see LDH, they see their quality of life (still feeling tired, still need transfusions, etc). ¨I’m not reading numbers, I’m treating you¨ was a powerful phrase from a physician. In the larger scale, transfusions of hemoglobin (decreasing them) is extremely important for patient well being and quality of life.
-Regarding Factor D inhibitors, it is well known in nephrology circles that certain diseases like lupus activate the complement pathway. KOL says over the last decade they’ve discovered complement is involved in a whole variety of glomerular diseases. Diseases in which complement is causative (C3 glomerulopathies, direct damage to filtering of kidney and lend to end stage kidney disease). AHUS also involves disregulation of alternative complement pathway. Diseases like systemic lupus consume complement, where they know that complement in disease like this can be helpful. The alternative pathway causes end organ damage, especially in kidney. Factor D is very elevated, alternative pathway is the pathway that’s doing the damage during lupus. Complement pathway is pro inflammatory, ANCA vasculitis for example. IgA nephropathy alternative pathway is activated, its action in kidney comes into common pathway (Factor D, C3 and beyond) being targeted now in other rare glomerular diseases. Proteomic analysis in diabetic kidney disease led to one surprising finding that C3 and other distal complement components may be responsible for progression of kidney injury toward end stage disease. A big thought is that a complement inhibitor administered in a disease that’s not rare could slow progression to end stage disease or possibly prevent it. Blocking in Factor D and beyond is a target they want to pursue in several kidney diseases. An oral Factor D inhibitor really could benefit patients in treating and managing these diseases per KOL.
-The patient has the freedom to go out and do what he wants to, hemoglobin at acceptable level to allow him to do that. The patient doesn’t need transfusions, doesn’t have to worry about iron overload. They won’t have to manage travel schedules for when needs infusions in clinic. These numbers from patient point of view are very encouraging, gives quality of life back to them that we’ve lost for so many years. Again, they are treating the patient, not the numbers.
-HAE gave them a lot of good learnings from market research, uncovering patient desire and need for an oral therapy. For PNH, management structured interviews with 25 doctors and 20+ patients on Soliris or Ultomiris. Only 3 of 23 patients were still getting transfusions regularly (majority were considered fairly well controlled). They reference two specific patients, one transfusion dependent and one not. Both gave their C5 high marks for satisfaction. Patient A can work part time, can travel, have a life that he’s okay with, ¨not what it was but until something else comes along it’s what I’ve got¨ (wants to go and do stuff after each transfusion). Patient B has stable hemoglobin and is manageable overall. Patients are coping, but they want greater convenience and efficacy. They are grateful for current therapies and relatively satisfied, but looking for more. Many patients are still managing overall disease and symptoms. Physicians indicate that if asked by the patient they would prescribe 9930 (similar to what was seen in HAE). 91% of patients are interested in switching, so this is not correlated to satisfaction on current treatment.
-KOL is encouraged by naive study data, stable hemoglobin improvement. 3 of his 4 patients are on higher ecluzimab dose, so he likes the possibility of gradually and slowly withdrawing these patients off that drug. A single drug is better for patients and economically it makes sense.
-Does data support monotherapy for 9930? KOL says it does, but caveat for low N (number of patients treated). They have confidence due to data for 9930 as an add-on therapy. Patients have stability in hemoglobin. It is reassuring that patients have not had thrombosis with significant disease activity. Data looks promising, but the caveat is for slightly higher LDH than expected (aspect of bear thesis). If patients had to choose between normal LDH and transfusion independency with good hemoglobin, they would take the latter. From patient perspective, they find hemoglobin and transfusion independence most important. All the other numbers to most patients don’t mean anything. They want to know that they don’t need transfusions, hemoglobin is at acceptable if not near normal level to allow them to have great quality of life. Why did LDH only go to 2x upper limit of normal? It may mean nothing per management. Where did target level of LDH come from in first place (obscure in literature)? Most hematologists care more about hemoglobin. There is no data post complement inhibitor era correlating LDH with clinical response from patient. Even if 2x upper limit of normal of LDH, it’s definitely not the range where breakthrough hemolysis takes place. In summary, LDH was an interesting prognostic marker in the era before C5 inhibitors, but LDH never been validated as prognostically useful after complement inhibitors have been applied. Some studies have LDH as a key endpoint in the trial, how would we do in that situation? In naive patients it’s real easy to measure and an accepted surrogate marker for clinical benefit.
-In PNH and certain other diseases, treatment landscape is crystal clear regarding challenges to improve upon C5 inhibitors on market. If 9930 is safe and effective, it can make a whole lot of difference to a lot of patients in terms of transfusion avoidance and normal hemoglobin. Other alternative pathway inhibitors or complement inhibitors are in development (crowded), but it’s a huge market, massive, layers of indications and the bottom line is that BioCryst is happy to compete in this space. It’s still too early, they have a ways to go before we can know how the competitive landscape plays out. KOL states that for nephritis patients they really do like to have most of their patients on an oral medications if they can. Especially groups of C3G and lupus patients, who are generally younger people going to school, working , etc. Coming in for infusions continuously impacts their lifestyle. For older patients it may make less of a difference, but most people don’t want to come in for an infusion on weekly or biweekly basis. If they can get anywhere close to current data in larger studies, it would be a fantastic result.
-Key analyst question was which renal complement diseases they plan to study next year. Management noted they would discuss specifics in the near term, but they (kidney indications) are all attractive. Anti inflammatory effects could decrease or eliminate need for glucocorticoids in lupus population (patients say it’s the worst part of lupus therapy due to acute side effects and LT health effects over the years as they accumulate). One disease group to look at in monotherapy would be C3G glomerulopathies, where no therapy is available now. It’s a very exciting concept and they could run this against standard of care (which is just supportive care). 2 to 3 studies in this population already and they were able to recruit sufficient patients despite it being ultra rare condition. Company will also consider lupus and lupus nephritis.
-Another legitimate question was how much they worry about PNH patients missing a dose of oral drug? Compliance in the trial was excellent, people had no trouble taking twice daily medicine in the study. If you’re a CMML patient, they won’t know what their response is at first (have to trust in the medicine). For PNH patients on the other hand, they will know if they miss a dose and get hemolysis. Then they take the next dose. Patients know what is happening with their disease, so they are unlikely to miss a dose. Somewhere down the line likely there will be an app on your smartphone to tell you to take your pill, but either way that is not an issue. The team clarified that they are already working on that.
For the third quarter of 2021, the company reported cash and equivalents of $203 million as contrasted to net loss of $58.8 million (which led to the selloff given burn rate). Keep in mind that the company soon after added $350 million in cash via the Royalty Pharma financing. Of note, SG&A expenses more than doubled to $35 million. Orladeyo revenue came in at $37 million for the quarter, with number of new physicians prescribing the drug growing by another 25 percent.
Importantly, after this article was originally published, management issued new sales guidance for Orladeyo with net revenue set to more than double in 2022 to ¨no less than $250 million¨. Additionally, language continues to show increased confidence as they expect Orladeyo to become the market leader in HAE prophylaxis therapy with peak sales of $1 billion.
As for oral Factor D inhibitor BCX9930, the company is now enrolling patients in two global pivotal studies in PNH (lead indication). Plans are also in the works to complete the renal proof of concept basket trial and advantage to pivotal studies in C3G, IgAN and PMN within the next couple years (as well as commence proof of concept studies in other complement-mediated diseases).
As for institutional investors of note, Baker Brothers owns a good sized chunk of the company (around 7% stake).
Digging deeper into competition in the HAE space, KalVista’s slides (a prior ROTY pick as well I might add) show branded HAE market revenues growing to $4 billion by 2026 (backs up BioCryst management’s comments that Orladeyo could be a bigger drug than market is giving them credit for regarding $500 million peak sales figure, which subsequently was raised to $1 billion). Focusing specifically on the KOMPLETE phase 2 trial in prophylaxis setting, while I agreed in Chat that initial data looks superior, this phase 2 study is just getting underway presently after setback suffered as FDA put the trial on a hold. They will need to enroll 48 patients, do an 8 week run-in period then assign patients randomly to one of three doses given twice daily for 12 weeks. From there, they will need to run a phase 3 study as well (then review period with regulatory agencies, approval, build out salesforce for launch if they aren’t bought out, etc). Per KalVista’s presentation at Stifel, they actually consider Orladeyo as a good example of the success an oral drug can achieve in HAE (management admits that efficacy is near that of injectables, with GI side effects being the key limiting factor). KalVista’s KVD824 actually gets a better level of inhibition of plasma kallekrein as lanadelumab/Takhdzyro (prior clinical hold does raise questions, a bit of an overhang until we see more clinical results).
Likewise for VenBio-backed Pharvaris and their novel oral bradykinin-B2-receptor antagonists, phase 2 study in prophylactic setting is just getting underway as well with data in 2022. Again in this instance, the lead drug looks superior including side effect profile so far (similar adverse event profile to placebo group), but Orldaeyo still has a significant lead time on the market to take advantage of (take share from injectables, generate cash for investment into Factor D). In management’s presentation at Oppenheimer, they note that the bradykinin-B2 receptor pathway is validated given that injectable icatibant/Firazyr has been on market 10 years. Much like KalVista, they are pursuing both on-demand and prophylactic settings. Company numbers also confirm the substantial opportunity here, with HAE market growing 13% compound annual growth rate through 2027 (sales to exceed $4.3B). Interestingly enough, it seems like HAE is a beachhead indication for them as other diseases will follow. Also, I didn’t realize how far behind they are in prophylaxis (running phase 1 trial, then bridging study with 416 and only then the pivotal study, quite the long pathway to market).
For both of the above competitors, I can only imagine how difficult it is to enroll studies when there is already an approved oral drug that offers great long term efficacy (their value pitch being that they offer incrementally better efficacy and improved safety, no GI side effects).
Regarding lead indication of PNH for 9930, keep in mind that I regard this as merely the beachhead indication for the drug (am more interested in POC results for indications to follow, which we’ll be better able to judge as the data trickles out). That said, current landscape shows that Alexion’s Ultomiris (quicker infusion, every 8 weeks with subcutaneous formulation in the works as well) posted $701 million in sales for the first half of 2021 (48% increase over prior year). Apellis’ (APLS) Empaveli was priced similar to Ultomiris with broad label and opportunity in patients who respond poorly to Soliris/Ultomiris. Per Apellis’ presentation at Evercore, while current C5 inhibitors are life saving, patients switch to Empaveli to improve quality of life (can expect some seasonality). Management groups PNH patients into 3 baskets (see below).
Figure 7: PNH patient segments (Source: Apellis presentation)
Those with very high unmet need, those who are anemic but don’t necessarily depend on transfusions, and finally those with normal hemoglobin levels but only get there at expense of very high turnover of red blood cells. They see it as patients transitioning from buckets 3 to 2 to 1, with the speed at which it occurs being very important. ASH data revealed they are getting very good feedback from bucket 1 patients, a reminder that it’s important to control both intra and extravascular hemolysis. Remember these patients who are ¨better off¨ are still jaundiced and chronically tired (still room for improvement). SubQ infusion 2x weekly seems a bit more convenient than IV, kind of like a middle ground between current standard of care and the oral drugs in the clinic. Digging deeper into ASH data, we can see that improvement in FACIT-fatigue scores was numerically greater than standard of care but failed to achieve statistical significance. Transfusion avoidance secondary endpoint, however, was clearly superior to standard of care with high statistical significance.
Novartis’ Factor B inhibitor LNP023 should not be underestimated either with the weight of big pharma resources behind it, currently sporting Breakthrough Therapy designation for both PNH and C3G indications. Initial glance at the data would suggest that BCX9930 is faster acting than LNP023, but again we need to see data play out in mid to late stage studies.
To conclude, I hope that readers are able to see multiple aspects of the story here that are appealing to me and why I chose to prioritize BioCryst in the Core Biotech portfolio (focus on accelerating clinical momentum 3 to 5 year timeframe). Orladeyo should be a nice cash cow for them over the next few years before competition from KalVista and Pharvaris comes on the market (assuming positive pivotal readouts). Together with cash proceeds from recent royalty deal, the company is on solid footing to continue beating Wall Street’s expectations and take share from approved injectables. This success is repeatable with BCX9930 in complement mediated diseases and related indications, some of which have no approved treatment at the moment. Importantly, peak sales potential is far higher for this second candidate and again success is repeatable with other markets (FOP being their next target).
This name in a way reminds me of an original Core Biotech call from back in the day when I was first getting my start on Seeking Alpha, Horizon Pharma (HZNP). The stock is 440% since then, as similarly management execution made the difference (pivoting to focus on rare disease portfolio).
Such names require patience, but I’ve found that when there are clear signs of management taking the right steps at the right time, guiding low and then exceeding expectations, key milestones being met in a timely manner, it goes a long way to providing us the confidence necessary to hang tight.
For readers who are interested in the story and have done their due diligence, BioCryst is a Buy and I suggest accumulating one’s desired portfolio weighting at the current share price before the next quarterly update.
I expect clinical momentum to accelerate as 9930 makes progress in pivotal PNH studies, proof of concept studies in nephritis indications and then new trials in other complement-mediated diseases.
Possible Price Target- While our focus on this one is longer term, I do believe share price of $25 is doable within the next year or two as Orladeyo launch continues to exceeed expectations and 9930 moves forward in the clinic. Longer term (ie per Core Biotech approach), if 9930 makes significant inroads into other complement mediated diseases, the potential is there for BCRX to move into large cap territory (in a similar manner to HZNP.
As for risk rating (1=low, 5= high), I’ll assign this one a 3 given substantial derisking/downside cushion via Orladeyo launch metrics, 9930 data to date and bolstered balance sheet.
Risks include continued cash burn leading to additional dilution, setbacks in the clinic, disappointing data for 9930 in pivotal PNH studies as well as early stage POC trials and importantly heavy competition in certain indications they are pursuing (HAE, PNH, other complement mediated diseases). Regulatory risk is always a concern as well, including the FDA’s stance on aformentioned LDH endpoint in PNH and determining how relevant it truly is in the big picture of patient quality of life.
For our purposes in Core Biotech (3 to 5 year timeframe), I hold a 12% portfolio weighting (due in part to share price appreciation) with plan to stay patient over coming years as management continues to execute in the clinic and commercially. There’s been too many examples of high quality, prior Core Bio names that I failed to stay patient with (ARRY with buyout, NVCR since mid teens, SGEN since $50) even as I began to assimilate and understand this principle of accelerating clinical momentum that we’ve been putting into practice these past couple years. I do not plan to make the same mistake here.
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