Well-known and widely followed healthcare institutional investor Perceptive Advisors’ founder Joseph Edelman recently added another $6 million of the common stock of Dova Pharmaceuticals (DOVA), a company I have been following for the past 2 years. Perceptive Advisors now owns 3.57 million shares or 10.3% stake in the company. In this article, I will analyze Dova’s product pipeline and present my investment thesis for this company.
Dova was founded in 2016, and is based in Durham, North Carolina.
The company’s lead product is Doptelet (avatrombopag), an oral, thrombopoietin receptor agonist (TPO-RA), which received FDA approval for treating chronic idiopathic thrombocytopenia (ITP) (low platelet count) in adults who had an inadequate response to previous therapy on June 27 (Perceptive reported buying the stock after the FDA approval in this indication). Doptelet was earlier FDA approved for treating thrombocytopenia in adult patients with chronic liver disease (CLD) who are scheduled to undergo a surgical procedure in May 2018. Last month, the company also received European marketing authorization for Doptelet in treating thrombocytopenia in adult patients with CLD, who are scheduled to undergo a surgical procedure. TPO-RAs acts by stimulating the production of megakaryocytes and ultimately platelets in the bone marrow by binding to and activating the TPO receptor.
In the U.S., Dova has signed a deal to co-promote Doptelet in thrombocytopenia due to CLD to Salix Pharmaceuticals in the interventional radiology, hepatology, gastroenterology, colorectal surgery and proctology segments, which are specialties with high volume of procedures. The division of net revenues from this deal will be 65% to Dova and 35% to Salix. This deal adds further conviction to Doptelet’s potential in this indication where platelet transfusions (whose efficacy lasts for a short time) have been the usual standard of care.
Chronic ITP indication is the crown jewel in Doptelet’s FDA approved indications. Chronic ITP in adults is an autoimmune disease caused by the formation of auto-antibodies against platelets. Primary ITP is caused by autoantibody formation which is not associated with a secondary condition. Secondary ITP is associated with diseases like lupus (SLE), HIV, hepatitis C, chronic lymphocytic leukemia, CLL and more recently, with Zika virus infection. ITP is termed as chronic when it lasts more than 12 months after diagnosis. Severe ITP is the term used when the platelet count is below 20K/microL with bleeding symptoms, and requires platelet transfusion.
The prevalence of chronic ITP was approximately 8 per 100,000 in children and 12 per 100,000 in adults in the U.S. In a case series, 52% of adults with chronic ITP had a platelet count below 20K/microL at some point in their disease course, thus requiring treatment. Bleeding due to thrombocytopenia was seen in two-third of chronic ITP patients, usually in the skin and mucus membranes (purpura and petechiae). Up to 57% patients with chronic ITP may have serious bleeding manifestations like intracranial hemorrhage, gastrointestinal bleeding, severe menstrual bleeding or hematuria.
The first line treatment for chronic ITP is glucocorticoids which are indicated in patients with platelet counts below 20K/microL, even in the absence of bleeding symptoms. Patients with platelet count higher than 20K/microL may also need glucocorticoid therapy if they have bleeding symptoms. Severe bleeding symptoms like gastrointestinal bleeding or intracranial hemorrhage require urgent platelet transfusion, IV immunoglobulin and IV glucocorticoids. Patients who do not respond to these first line agents may need second line treatments like rituximab, oral TPO-RAs (Doptelet), splenectomy or immunsuppressants.
Response rate in chronic ITP to different agents:
- Glucocorticoids= 50% patients respond initially but only 20% patients maintain the response after two years.
- IVIG= 70% patients respond initially, but platelet count decreases to the baseline in 3 weeks after the dose. Also, it is costly, $10K/patient and needs 4-6 h/day of continuous infusion for 2 days.
- Overall, 80% of chronic ITP patients need second line treatments during the course of their disease.
- Rituximab: 30% patients maintain the response at one year.
Role of oral TPO-RAs (Doptelet) in chronic ITP:
1. The role of oral TPO-RAs as a second line agent in chronic ITP is to maintain a platelet count above 100K/microL as a maintenance treatment (after the patient has achieved remission using splenectomy or rituximab) and avoid the risks of repeated platelet transfusions.
2. In some cases with severe thrombocytopenia due to chronic ITP which do not achieve remission with splenectomy or rituximab, oral TPO-RAs may help to achieve remission as well.
3. Oral TPO-RAs may also be useful in these patients to achieve remission if they are not candidates for splenectomy or rituximab.
4. In addition oral TPO-RAs help to raise the platelet count in chronic ITP patients when they are scheduled to undergo a procedure.
Epidemiological studies in chronic ITP have shown that 60% adults refuse splenectomy (as second line treatment) when offered. Though TPO-RAs are usually used to achieve remission if splenectomy or rituximab have been unsuccessful, 16% of hematologists in a survey preferred to use them to achieve remission as a second line agent over other therapies. Usually, it takes 7-10 days to achieve the desired platelet count after starting TPO-RA. Given the oral form of therapy and low toxicity, many hematologists are leaning towards using TPO-RAs earlier in the disease course (even before splenectomy or rituximab).
Doptelet has advantages over competitor oral TPO-RA, Eltrombopag which include:
- No dietary restrictions (eltrombopag should be taken on an empty stomach (one hour before or two hours after a meal).
- No drug interactions (eltrombopag should not be taken within four hours of medications or drugs containing polyvalent cations (eg, antacids, dairy products, mineral supplements).
- No side effects like increase in liver enzymes like eltrombopag. Eltrombopag has a boxed warning about liver toxicity.
- An increased incidence of cataracts has been seen with eltrombopag, unlike Doptelet.
Despite its shortcomings like food/drug interactions and liver toxicity, eltrombopag (Novartis) had $1.17 billion in sales in 2018, thus making it a blockbuster drug. Due to it advantages over eltrombopag, I expect Doptelet to achieve higher peak sales than competition. Slingshot Insights held a phone call with a KOL academic hematologist and he ranked Doptelet as 10 out of 10 on his level of excitement for the drug considering the complicated disease course for chronic ITP and its efficacy in improving platelet counts over a long duration of time. Consensus peak sales estimate for Doptelet clearly reflects this ($1.88 billion in 2024, Evaluate Pharma). In addition, Doptelet is also in a phase 3 trial in chemotherapy induced thrombocytopenia, a common condition (data is expected in the first half of 2020), which will further expand its target market.
My estimate for NPV for Doptelet is $4 billion. On the other hand, Dova’s market cap is just $500M at present (with $92.7M in cash reserves and $20.7M in long-term debt). Dova’s stock is also trading almost 50% below its all time high of $34.68 in 2018 and has shown a strong momentum recently, almost doubling in the past two weeks. Upcoming H1 2020 data readout is expected to continue investor interest in the stock and continue upward momentum.
Rating for Dova’s common stock= Buy
Price target= $35
Time-frame= 2-3 years
Suggested allocation= 2%-3%
Risks in this investment including potential future competition from Shionogi’s Mulpleta on the cost front. Mulpleta is however only approved in adult patients with thrombocytopenia and CLD who are planned to undergo a surgical procedure and is not FDA approved in chronic ITP.
This article represents my own opinion and is not a substitute for professional investment advice. It does not represent a solicitation to buy or sell any security. Investors should do their own research and consult their financial adviser before making any investment. Investing in equities, especially biotech stocks has the risk of significant losses and may not be suitable for all investors. While the sources of information and data in this article have been checked, their accuracy cannot be completely guaranteed.
I/we have no position in DOVA but plan to pick up a long position in the next 72 hours.