Biotech

Bhavneesh Sharma

Top 20 Ranking (28.2% Avg Return) --TipRanks

Eidos Therapeutics: overvalued at current price & lagging behind in timeline

Eidos Therapeutics (EIDX) was founded in 2013 and is based in San Francisco, CA. Transthyretin is a normal protein in the blood that transports thyroxine (thyroid hormone) and retinol. Due to some hereditary mutations or environmental factors, it gets misfolded and gets accumulated as abnormal amyloid in the heart or peripheral nerves. Hereditary forms of TTR amyloidosis are inherited in an autosomal dominant pattern (HTTR) and may present with cardiac involvement due to amyloid deposition in the heart (HTTR-cardiomyopathy, CMP) or peripheral nerves causing peripheral neuropathy (HTTR-PN). TTR cardiomyopathy (hereditary or wild type) affects 100,000 to 400,000 people worldwide. Most patients with TTR-CMP are diagnosed after the age of 50 years. Some of these cases may have mutations like V122I which may seen in 4% of African Americans. Wild types of TTR-CMP (non-hereditary) may be seen in the elderly and very under-diagnosed. Cardiac biopsy was the only test to diagnose TTR-CMP in the past but more patients are being identified recently due to the use of non-invasive tests like a combination of scintigraphy and tests for light chain amyloidosis (serum free light chain ratio, serum electrophoresis and urine electrophoresis). Recently, Pfizer's Tafamidis was approved in treating TTR-CMP(wild type and hereditary). TTR-PN usually affects people with age more than 60 years and affect approx. 10K people worldwide. It is more common is some geographical areas like Portugal, Sweden and Japan. 


The company is developing AG10, a small molecule that binds to and stabilizes abnormal transthyretin protein (TTR), thus preventing the formation of amyloid. TTR normally exists s a four part molecule. It can destabilize and dissociate into individual monomers, which misfold and aggregate as amyloid fibrils in organs like the heart or peripheral nerves. AG10 binds to the 4 part TTR molecules, prevents it from dissociating into individual monomers, and thus prevents the formation of abnormal amyloid. The molecule was discovered using funding from Stanford. It is currently in a Phase 3 trial in TTR-cardiomyopathy (both hereditary and wild-type).

 

Phase 2 data for AG10 and comparison with  Pfizer’s Tafimidis, another TTR stabilizer:

 

AG10 has shown >90% TTR stabilization in phase 2 randomized clinical study in TTR-CMP (the study follow-up period was 28 days) in 49 patients. In comparison, Tafimidis has shown 40%-60% TTR stabilization in clinical studies and is already FDA approved in TTR-CMP (mutant and wild type). In the Phase 2 randomized study, it also showed a significant dose dependent increase in serum TTR levels in both wild type and mutant patients (which has been identified as a marker of disease activity and overall survival). Serum TTR levels were normalized at 28 days of treatment. 

 

Upcoming open-label extension study data for AG10 in expected in November this year:

 

An open-label extension study (Data from this open-label study is expected in the second half of this year (my guess is that they will release the open-label, extension study data at the annual conference of the American Heart Association conference in November this year). Phase 2, randomized study data was also released at the AHA conference last year. one year followup) is still ongoing (47 patients) which will also measure endpoints like serum TTR levels, TTR stabilization, serum pro-BNP and survival. Patients treated with Tafimidis were excluded from this study.

 

Ongoing pivotal Phase 3 trial for AG10 in TTR-CMP:

 

The trial is planning to enroll 510 patients. The randomized, placebo-controlled portion, part A of the trial will last 12 months while the extension part B of the trial will last another 18 months (total duration=30 months). Tafamadis use will be allowed in the last 6 months of the part B of the trial. The co-primary endpoints are exercise capacity (measured by the six minute walk test) and mortality/cardiovascular events related hospitalization. The data from the six minute walk test could be enough for regulatory filing and could be available in the first half of 2021. 

A pivotal, phase 3 trial in TTR-neuropathy is also planned to start in the second half of the year (TTR-cardiomyopathy is however, a much larger market than TTR- neuropathy) 



Balance sheet

 

The company had $147M in cash reserves at the end of Q1 this year and the management expects that it is well funded till the end of part A of the phase 3 trials in TTR-CMP. The operating cash use was $10M in Q1 this year. The phase 3 trial in TTRP-CMP (both parts) are expected to cost $60M and the company has already spent half of it. There is no long-term debt. 


Valuation

 

Tafamidis is the closest comparator for AG10 and is priced at $225,000 per year (life time of treatment). Consensus peak sales estimate for Tafamidis is $2.04 billion in 2024 (Evaluate Pharma). In comparison, consensus peak sales estimate for AG10 is just $280M (2024), Evaluate Pharma.

 

Eidos’ management has mentioned concerns over the inability of the elderly to afford even a copay for Tafamidis and may decide to price AG10 lower than Tafamidis to gain market share. 

 

Notes from a KOL call with an academic cardiologist:

 

The call was organized by Slingshot Insights. KOL is a Cardiologist in an academic center in U.S. West coast and runs a cardiac amyloidosis clinic: V221I mutation in the U.S. has predominant cardiac involvement unlike Europe/Japan where it has neurological involvement (people with the mutation have a more severe disease than the wild type. In KOL’s clinic, approx 15-20% cases have V22I mutation). All patients diagnosed with TTR-PN get cardiac screening and referral to rule out CMP. More amyloidosis cases are being diagnosed as effective treatments are available (including ones from Alnylam and Ionis). More cardiac screening for TTR-amyloidosis is needed in patients with unexplained heart failure, e.g. African Americans or elderly patients with bilateral carpal tunnel syndrome. First degree relatives of patients with HTTR are screened for the disease. In TTR-PN patients, he prefers RNA silencing agents like Alnylam’s patisiran since they have shown an improvement in neuropathy while other agents have shown a stabilization of neuropathy (patisiran is FDA approved in HTTR with neuropathy). He is not that bullish on Ionis’s iontersen due to lack of effect on neuropathy improvement and more side effects like thrombocytopenia. Alnylam is also coming up with a s/q form to compete with inotersen. His academic center is in the process of getting early access administration for Tafamidis in TTR-CMP patients. He would like to see a RNA silencer approved in HTTR-CMP as well and likes the fact that patisiran improved some cardiac abnormalities like hypertrophy and longitudinal strain on a posthoc analysis of APOLLO trial (however patisiran is not being tested in wild type patients like AG10 or Tafimidis). He was also involved in the phase 2 trial of AG10. He would also like to see a head to head trial comparing the TTR stabilizing effect of both drugs. He also thinks that it will be difficult for Eidos to compete with a big company like Pfizer. He also thinks that a combination of an RNA silencer and a TTR stabilizer may be clinically useful in some patients. 

 

Key points in the bear thesis:

 

- Eidos’ management’s claim of superiority over Tafamidis is based on different trials (where there may be baseline differences in the patient population), not a head to head comparison trial.

- Tafamis is already FDA approved in both wild type and hereditary TTR cardiomyopathy while Eidos is at least 3 years behind.

- Pfizer is a much larger company than Eidos and has superior marketing and sales force in place.

- Clinicians who are already using Tafamidis may be reluctant to switch to AG10 unless they see a clear head to head comparison between the two drugs.

- My risk-adjusted NPV calculation is $590M for AG10 (using peak consensus sales estimate for AG10). In comparison, Eidos has a market cap of $1.28 billion. It is overvalued by at least 50% at present. 

 

In conclusion, I consider Eidos common stock has overvalued at present. The shares had quite a run and look ripe for a pullback. Long-term, I remain bearish that Eidos will be able to compete effectively with a much larger rival like Pfizer. Eidos will also need to raise significant capital before AG10 reaches the market which is likely to put downward pressure on the stock price.

 

 

 

 

Disclaimer:

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 advisor 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 EIDX but may pick up a short position in the next 72 hours (planned 2% allocation). 

 

Bhavneesh Sharma covers biotech as one of the original contributing analysts at FATRADER. A market expert with a medical degree and MBA, he is ranked among the top 15 financial bloggers and top 100 overall financial experts (including Wall Street analysts) on TipRanks.
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