Biotech

Bhavneesh Sharma

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

Notes On Esperion Therapeutics: Buy/Sell Or Hold?

Esperion Therapeutics (ESPR), based on Ann Arbor, MI, is in the business of lipid management. Its key compound Bempedoic acid (BPA) lowers LDL cholesterol (LDL-C) by a different mechanism than statins (inhibition of ACL enzyme in liver, adenosine triphosphate cirate lyase).  It passed four phase 3 trials and its regulatory application was accepted by FDA (PDUFA in February 2020). In addition, a phase 2 trial of BPA and ezetimibe, which is an approved drug that lowers LDL by reducing intestinal absorption, as a fixed dose combination (FDC) for type 2 diabetics with elevated LDL cholesterol is expected later this year.

Bullish case:

Four Phase 3 trials for BPA have been completed (2 as monotherapy, 2 as FDC), which have shown efficacy in LDL-C reduction in patients with elevated LDL-C, not meeting LDL goal (though LDL reduction with BPA alone is modest, see the summary of 4 Phase 3 trials in the attachments below). Safety issues were raised in one phase 3 trial due to an imbalance of deaths, but data from all 4 trials has shown safety. The FDA has accepted an NDA for BPA both as monotherapy and FDC combo. No Adcom date has been announced so far, which is bullish (though we are still in the Adcom window and it can be announced at any time). The FDA accepting NDA with no Adcom seems to have put safety concerns away for the time being. BPA is oral and thus has an advantage over injectable PCSK9 antibodies from Amgen and Regeneron, which, though they showed higher LDL reduction of 50% and even cardiovascular outcomes and CVOT benefit, have struggled in sales due injectable form (s/q) and high copay for patients ($200-$300/month).

BPA (especially FDC) could fill the gap between oral statins and injectable PCSK9 inhibitors, giving stain intolerant patients (approx. 20% of all statin eligible) a new oral treatment option, with similar efficacy and anti-inflammatory effects as statins when in FDC form. Hypercholesterolemia is a large market and successful drugs can have billions of USD in annual sales. $18 million people in the US could be targets for the company’s BPA/FDC which at a conservative $2K/year pricing could be billions in peak annual revenue opportunity. The effect of BPA on CRP reduction is very encouraging since inflammation is believed to play a role in cardiovascular disease. The stock has upcoming catalysts within a year, including phase 2 data for FDC pill in type 2 diabetics with increased LDL in 2H this year, followed by PDUFA for BPA and FDC in February next year.

Insiders have been buying the stock, including the CEO, who has bought a total of $1.08 million of the stock this year (including $420K in June, July). BB Biotech, a prominent Swiss-based healthcare investment firm, is the biggest institutional holder of the stock (YTD their NAV is up 16%), with $140M invested in Esperion, one of their top holdings.  They have been buying the stock recently, including $2.5M in March and $7M in Dec-Jan.  Their other top holdings include IONS, CELG, NBIX, VRTX, and ALXN. Other institutional investors with a stake include Partner Fund management ($63M), Point 72 ($8.4M), Millennium management ($9.6M).

KOLs are aware of BPA and FDC as future treatment options and feel that it could fill the gap between statins and s/q PCSK9 inhibitors. They have expressed excitement about inflammation lowering action of BPA alone and has FDC. The company’s market research with physicians and payers is favorable. They already have an extensive commercial launch in place targeting physicians, patients and payers (details in their recent analyst/investor day webcast), suggesting that they are confident about the approval. Two recent deals are bullish including out-licensing to Daiichi Sankyo Europe for European rights and a revenue sharing agreement with Oberland Capital that provided non-dilutive financing for commercialization efforts. The management is experienced, and sales/commercial teams have good track record. The CEO has a good entrepreneurial track record. Chief Commercial Officer also has a successful entrepreneurial track record. Head of regulatory was at Amgen and has experience in Repatha’s FDA approval. Head of marketing was at Novartis.

Ezetimibe achieved $2 billion peak sales despite showing modest LDL lowering comparable to BPA monotherapy (though in the hands of Merck). Evaluate Pharma’s Consensus sell-side analyst sales forecast for BPA monotherapy is $723M (2024) and $528M for FDC (2024), total $1.2 billion in peak sales (2024) which using rNPV method could imply 40-50% upside for the stock from current price level. The deal with Oberland also implies $1 billion in peak sales for the company’s drugs per my calculations. Using only FDC only TAM of 600K patients/year at peak (see below), it translates to $1.8 billion peak sales. Cash reserves are adequate after recent Oberland deal and another $150M expected from Daiichi after FDA approval in Q1, and no capital raise is planned for at least the next 12 months. 

Bearish case:

My biggest concerns are: Will BPA and FDC be able to gain sales momentum after approval in the absence of cardiovascular outcomes data (which won’t read out till 2022 and still has no guarantee of succeeding)? Phase 3 CLEAR WISDOM data presented at ACC conference this year showed a trend in MACE 5 in favor of BPA (2% difference vs. placebo). The longer-term cardiovascular outcomes is being studied in CLEAR OUTCOMES trial, which though finished enrollment in Q3, will not release results till 2022 (due to 3-4 years of needed follow-up to monitor events).

Using Amarin’s (AMRN) Vascepa precedence, Vascepa struggled to gain sales in treating elevated triglycerides though it was approved in 2013. After showing significant reduction in cardiovascular events in REDUCE-IT study, Amarin’s stock (which had been languishing for many years) jumped 3x. Although Vascepa is not yet approved in cardiovascular risk reduction in hypertriglyceridemia and increased CV risk (sNDA in September), the data and its inclusion in ADA guidelines was enough for Vascepa sales to gain momentum and prescribers to start writing the drug. Esperion’s P3 CLEAR WISDOM data was reviewed at ACC conference this year and the reviewer (cardiologist from Brigham) concluded that cardiovascular outcomes data is needed before he can start prescribing the drug.

With modest LDL lowering efficacy, I doubt BPA as a monotherapy will be attractive enough for prescribers. FDC pill, however, had excellent LDL lowering and CRP lowering effect and is the way prescribers are likely to go if they have to choose an alternative to statins or use on top of low dose statins in statin intolerant patients. The company’s latest estimate for peak number of US patients on their therapy is 1.8M in conservative case (see analyst day presentation for calculations), lower than the blue sky 18M number mentioned earlier (and only 600K patients at the peak on FDC pill which is most likely to be prescribed).

Another big future risk to the bull case is from oral PCSK9 inhibitors under development. Dogma Therapeutics, founded by scientists from the Broad Institute at Harvard/MIT showed impressive reduction in LDL-C using their oral PCSK9 formulation which is being advanced to clinical trials. If it matches the 50% reduction in LDL-C showed by injectable PCSK9 inhibitors, it could not only present a threat to BPA/FDC but even to statins (if priced competitively). The treatment landscape of treating hypercholesterolemia continues to evolve with RNA silencing agent targeting PCSK9, inclisiran (MDCO, ALNY) phase 3 read-outs expected this year. Inclisiran could be a competitor to currently approved PCSK9 inhibitors if approved since it could be given every 3 monthly or 6 monthly rather than 2-weekly or monthly. It could also present competition to BPA/FDC pill if patients prefer to self-administer a s/q shot every 6 months for 50% LDL reduction rather than taking an oral pill daily (with risk of non-compliance) for 15-30% LDL reduction.

A KOL interviewed by Slingshot Insights mentioned that he would only consider using BPA/FDC in patients not on statins (due to intolerance, side effects) but in those on low dose statins, he would prefer using injectable PCSK9 inhibitors to quickly achieve LDL goal. This may be applicable to most tertiary care center prescribers that the company is planning to initially targeting using its 300-strong sales force. This KOL also thinks 15% LDL reduction by BPA monotherapy could translate to 9% reduction in CVOT which may not be significant (and may not show significant separation from placebo). There have been previous examples of anti-cholesterol drugs which showed LDL reduction, only to fail in CV outcomes trial and were withdrawn from the market. Ethan Weiss, a cardiologist at UCSF called BPA as an expensive ezetimibe and mentioned that he wants CVOT outcomes data. This view could be shared by many cardiologists in the real world (the physicians interviewed by the company in their market research could have a bullish bias since they get compensated for participating in these market surveys).

Although the management/ investors are almost certain or FDA approval in February, will FDA give an unexpected CRL (the space is crowded), and ask the company to come back with cardiovascular outcomes data? While the safety concerns like mortality imbalance have been sidelines for now (after looking at all four phase 3 trials), higher number of patients on BPA in CLEAR WISDOM phase 2 trial (key pivotal trials, presented at the ACC this year) were hospitalized with unstable angina. In view of these safety controversies, I find it surprising that FDA has not decided to schedule an Adcom (which could still be scheduled since there is ample time till PDUFA). The stock could take a hit if FDA decided to schedule an Adcom if investors take it as a sign of FDA raising questions on safety and cardiovascular outcomes data.

Sell-side analysts are bullish on the stock (with median PT almost 2x) and consensus is $1.2 billion in peak BPA+FDC sales (2024), but sell-side analysts could be biased. Even after approval, the management mentioned that many commercial payers may not even consider adding it to formulary till 6 months after launch. Although the cash reserves are adequate per the management, an unexpected capital raise before PDUFA (precedence of Amarin, on the excuse of needing capital to ramp up sales force) could cause the stock to fall further (the stock has been on the decline since peaking in 2018 after the mortality imbalance issues were raised and has not recovered).

 If Repatha and Praluent prices are lowered further, it could pose competition to BPA/FDC (patients and physicians may choose higher LDL lowering over convenience of oral administration). Insider buying is one of the biggest reasons investors are looking at the stock but it could be misleading. Institutions are not always 100% right in their investments. I remember BB Biotech’s heavy buying of Radius Health stock (RDUS) 2 years back (the stock has continued to go down after FDA approval since then).

My conclusion:

I am not bullish on commercial prospects of BPA monotherapy though FDC combo pill may be a significant success, especially if a CVOT outcomes study is done in the future (current CVOT outcomes study is for BPA monotherapy alone which I expect to show a <10% risk reduction or not meeting significance). I am also excited about the prospect of oral PCSK9 inhibitor being developed by Dogma which could disrupt the LDL management landscape. For now, I consider that Esperion stock has more room to fall and will put it on my watchlist for future developments. CEO buying is more bullish indicator than institutional buying and I will watch out more such bullish signals from CEO. Once the Adcom window has passed later this year, short-term traders could attempt to play a runup in the stock before PDUFA (which could be risky to hold the stock through the event). After approval, I will watch closely for sales numbers quarterly (my expectation is a slow sales uptake till CVOT data is out in 2022 and if the trial successful). The research on Esperion was a good opportunity to review the LDL-C treatment landscape and discover Dogma. I am already aware of inclisiran, and also looking forward to its phase 3 read-out later this year (bullish on the data and long Alnylam, may enter MDCO on a pullback).

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 am/we are long ALNY, AMRN. no position in ESPR.

More details of phase 3 trials data for Esperion are attached below.

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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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