AXGT expects to report data from three trials in Q4'19.
AXGT's gene therapy for Parkinson's disease has already produced promising data earlier this year.
Upcoming data in Parkinson's disease comes from patients treated with a higher dose.
Axovant Gene Therapies (AXGT) is running three clinical programs on three gene therapy candidates for neurological and developmental disorders. Readouts from all three programs are expected in Q4'19, presenting an opportunity for a trade, which is the focus of this article.
A big Q4'19 upcoming AXGT
AXGT's three clinical programs include a trial of AXO-LENTI-PD, a gene therapy for Parkinson's disease, a trial on AXO-AAV-GM2, a gene therapy for GM2 gangliosidosis and a trial on AXO-AAV-GM1, a gene therapy for GM1 gangliosidosis.
Figure 1: AXGT company pipeline. Source: September corporate presentation.
With earnings earlier this month AXGT confirmed it would report data from the second dose (medium dose, lower dose used previously) cohort of the AXO-LENTI-PD study in Q4'19, initial data from AXO-AAV-GM1 and further data from AXO-AAV-GM2 studies.
AXO-LENTI-PD
AXGT has licensed AXO-LENTI-PD from Oxford Biomedica (OTCPK:OXBDF) and is running it in the SUNRISE-PD study. The potential appeal of a gene therapy for Parkinson's disease, and the fact that additional data with AXO-LENTI-PD data come from up to six patients, make the Q4'19 data from SUNRISE-PD a high impact readout. The potential to compare the second dose cohort to the first lower-dose cohort adds to that potential impact even more.
When a gene therapy trial isn't controlled, as is the case with the current AXO-LENTI-PD trial, one of the best ways to tell if the drug does something is comparing higher doses to lower doses. Previous comparisons have been based on comparisons to data from previous trials, which can only ever be so convincing.
AXGT has thus far reported data from two patients treated with the lowest dose of AXO-LENTI-PD. While the three month data initially looked quite strong, data at six months, while again appearing better than the average results from ProSavin (an earlier version of AXO-LENTI-PD developed by OXBDF), weren't quite as strong.
Figure 2: AXGT compares its data to data from ProSavin and sham data from other trials. Source: AXGT June presentation.
In presenting the AXO-LENTI-PD data, endpoints other than the Part III (motor) OFF scores were discussed, such as Part II (Activities of Daily Living) scores, which were indeed positive. However when a company starts talking in detail about endpoints, other than what is usually the primary efficacy endpoint, the market is often reserved in its response. Indeed UPDRS Part III OFF scores have been the major readout from many Parkinson's disease therapy trials previously.
If AXGT continues to report positive data with regards to these other endpoints more consistently, investors may be more willing to get excited about strong results there too. With this second cohort of patients dosed with a higher dose of AXO-LENTI-PD, I am expecting data to be strong, as increases in dose were effective with ProSavin. Further, I believe the data seen with AXO-LENTI-PD to date at lower doses are already encouraging, although that belief comes from comparison to previous data from other trials.
Figure 3: AXO-Lenti-PD appeared to perform particularly well on Part II of the UPDRS. Source: AXGT June presentation.
I think data on alternative endpoints will only be an additional positive as patient B, who experienced greater improvement on Part III, also experienced greater improvement on Part II.
AXO-AAV-GM1 and AXO-AAV-GM2
Previous data with AXO-AAV-GM2, while an encouraging first step, came from a patient who received an infusion of AXO-AAV-GM2 into the cisterna magna and lumbar region of the spine only, and not the thalamus in the brain. AXO-AAV-GM2 produced an increase in the activity of the enzyme Hexosaminidase A from a baseline of 0.46% to 1.44% at three months, however further increases would provide greater benefit.
AXO-AAV-GM2 was administered into the cisterna magna and lumbar spinal canal only. Due to the patient’s advanced disease, a co-delivered intrathalamic injection of AXO-AAV-GM2 was not administered. Future patients in the program, who are expected to be treated earlier in their disease course, will receive AXO-AAV-GM2 co-delivered into the thalamus bilaterally as well as into the cisterna magna and spinal canal. - March 11, 2019, press release from AXGT.
Certainly we can speculate additional patients treated with AXO-AAV-GM2 may produce additional encouraging data, even if only by virtue of being able to administer the drug to the thalamus as well. In fact, part A of AXGT's study of AXO-AAV-GM2 involves dose ranging with approximately seven patients being treated, and so improvements related to the use of higher doses are also a possibility in the future.
Figure 4: Schematic of ganglioside metabolism highlighting relation between different gangliosidoses. Source: AXGT corporate presentation.
Due to some underlying similarities of GM1 gangliosidosis and GM2 gangliosidoses (Tay-Sachs disease and Sandhoff disease), it is tempting to speculate that AXO-AAV-GM1 results may come with data showing an increase in beta-galactosidase activity. Whether or not that would interest the market would depend on the degree of the increase and any clinical improvement. Certainly if data are released at the same time as AXO-LENTI-PD/AXO-AAV-GM2 data the market's interpretation may be hard to judge.
Financial overview
AXGT reported earnings for the quarter ending June 30, 2019 (FQ1), in August. The company ended FQ1 with $84.2M in cash and cash equivalents but $39.4M in debt, $21.9M of which is current, which puts net cash at $44.8M. When we consider that net loss in FQ1 was $28.1M and net cash used in operating activities was $17.7M it is pretty obvious that AXGT is going to want to round up some additional funds soon. As of August 7, 2019, there were 22,780,672 shares outstanding yielding a market cap of $175.18M (at a price of $7.69).
Table 1: AXGT balance sheet excerpt. Source: Recent AXGT 10-Q.
Conclusions
AXGT has a big Q4'19 coming. There are reasons to be bullish about readouts in the AXO-LENTI-PD study due to dose escalation and AXGT warming the market up to the idea of examining Parkinson's disease gene therapies on multiple endpoints. There are also arguments to be made regarding the likelihood of positive data with AXO-AAV-GM2 and even AXO-AAV-GM1. I believe AXGT represents a potential long in Q4'19, but I see no reason to enter prior to that, so I am currently neutral, but would be bullish in Q4'19.
The risks of any long trade in AXGT are several fold, a few of which I will mention here. Firstly, weak data from any of the company's clinical programs could cause the share price to drop. If the market writes off the pipeline completely, the stock would trade to cash or cash minus debt (about $2/share currently). If AXGT doesn't raise funds prior to those readouts then, and the pipeline is devalued entirely, investors will be looking at large losses. Secondly, concerns over AXGT's cash balance mean that any issues or delays in the company reporting data would put it in a precarious situation. Lastly, if results are delayed, AXGT may be viewed as losing ground to competitors. Some competitors include MeiraGTx Holdings (MGTX), Seelos Therapeutics (SEEL), Voyager Therapeutics (VYGR) and Neurocrine Biosciences (NBIX).
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
https://seekingalpha.com/article/4292003-three-q419-catalysts-axovant
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