Isis And Aegerion: Investor Sentiment Ahead Of FDA Panels

Investors have rewarded one of these biotechs with lipid-lowering agents under review, while punishing the other. That’s despite the expectation that both could be approved soon.

An FDA panel will take up a pair of lipid-lowering agents with comparable efficacy and safety in the same indication in mid-October. Aegerion Pharmaceuticals Inc.’s lomitapide will be up first, with an advisory committee review slated for Oct. 17 and a Dec. 29 PDUFA review date. Ionis Pharmaceuticals Inc.’s Kynamro (mipomersen) has an Oct. 18 advisory committee review and a Jan. 29, 2013 PDUFA date. But so far this year, Wall Street has rewarded Isis by driving its shares up about 70%, but punished Aegerionby eroding its shares almost 20%.

Wall Street analyst Eun Yang of Jefferies handicapped each drug with a 70% chance of approval. Similarly, public investors expect both are likely to be approved, given the severity of homozygous familial hypercholesterolemia (HoFH), the indication under review, and the lack of treatment options.

Isis seems to have the upper hand not because buysiders see Kynamro as any more approvable, but because they perceive Kynamro ultimately as a better commercialization bet and as a validation of its antisense technology. The Street is also starting to give Isis some credit for recent and potential partnerships for its pipeline. Lomitapide is Aegerion’s sole candidate.

Isis could launch five novel therapeutics by the end of 2017, Charles Duncan of JMP Securities noted. In his sum-of-the-parts analysis of Isis, Duncan valued its pipeline and platform at $4 per share and Kynamro at $9 per share.

Behzad Aghazadeh of hedge fund venBio says the different valuation trajectories for these biotechs this year can be attributed to the growing investor valuation for Isis’ platform and pipeline. “Isis has a platform that has, or is about to be, finally validated and a number of partnerships and royalty streams that will come its way. Aegerion is a one-trick pony.”

Isis inked two partnerships for early stage, antisense programs with Biogen Inc. this year, one in January and the other in June. Together the deals brought in $41 million upfront with the potential for more than $100 million in early milestones. Both deals included options for Biogen to license compounds after mid-stage trials, triggering additional research milestones that could be paid after the exercise of the option (Also see "Biogen Strikes A Deal With Isis For Antisense Technology" - Pink Sheet, 4 Jan, 2012.).

Kynamro is partnered with Genzyme Corp., now owned by Sanofi, while lomitapide remains unpartnered [See Deal]. Investors are betting on Isis’ ability to commercialize and expand the Kynamro label to a larger indication, severe heterozygous hypercholesterolemia (severe HeFH). The partners are moving ahead toward the next indication for Kynamro. The candidate is in a Phase III trial expected to complete enrollment in early 2013 in patients with severe HeFH as well as either coronary heart disease risk equivalents or LDL levels over 300 mg/dL regardless of coronary heart disease risk equivalents (Also see "Isis Books Kynamro Milestone; Seeks Partners For Other Pipeline Assets" - Pink Sheet, 7 Aug, 2012.). Aegerion has said it may pursue HeFH in the future, with or without a partner.

Handicapping The market

Selena Chaisson of Bailard pointed out that HoFH occurs in one in one million patients, while HeFH is much more common, occurring in about one in every 1,500 patients. She anticipates lomitapide will gain the “lion’s share of the small HoFH market” with a high price, since it’s an oral while Kynamro is a weekly subcutaneous injection. But she expects Kynamro will sell into both the HoFH and the HeFH market.

David Pinniger of hedge fund International Biotechnology Trust takes a contrarian view to the market as an Aegerion investor. “If I was a doctor I would try lomitapide first because it is more potent, oral and is associated with less random side effects, only gastrointestinal which are easy to deal with. If patients experienced tolerability issues or I was worried about highly elevated ALTs I would perhaps take them off and then try mipomersen injection, but it would be by far my least preferred option,” he said.

He expects lomitapide to gain the majority of the market, peaking at as much as $500 million in annual sales. He only expects less than $100 million in Kynamro sales in HoFH. Pinniger likes that Aegerion has full rights to the asset, since it makes it a more compelling potential takeout target for the likes of an orphan disease-focused player like Pfizer Inc., GlaxoSmithKline PLC or even Sanofi.

At Sept. 30, private equity group Advent was the largest Aegerion shareholder with 9.7% of shares. T. Rowe Price (8.2%), Perceptive Advisors (6.6%), J.P. Morgan (4.3%) and Fidelity (4.1%) were all shareholders as of June 30.

Fidelity was also the largest holder of Isis shares with 14.95% as of June 30. Other major shareholders included BB Biotech (7.4%), ClearBridge (6.4%), Vanguard Group (5%) and Columbia Wanger (4.5%).

Another consideration for investors could be financing risk. Aegerion may not have enough cash on hand to weather significant regulatory delays. As of June 30, Aegerion had $100.6 million in cash, with an operating loss of $24.3 million in the first half of 2012. That gives it about two years of cash at the current run rate.

But Isis’ tank is quite full. At June 30, the biotech had $336 million in cash with an operating loss of only $14.8 million for the first half of 2012. The company stands to receive more than $200 million in additional milestones through the end of 2016. On Kynamro, the two companies now split development costs equally but Genzyme is responsible for marketing expenses. Isis stands to receive 30% of profits until Kynamro annual sales reach $2 billion and 50% thereafter [See Deal].

Patent And Safety Issues Loom

Aegerion does have some potential patent issues that have given investors pause. Lomitapide’s U.S. composition of matter patent expires in 2015. The company is counting on a Hatch-Waxman five-year extension to gain exclusivity through 2020. As an orphan drug, it would also receive market exclusivity for seven years from approval in the U.S.

Chaisson suggested the patent expiry, along with an already existing royalty it would owe, has kept the company from securing a partnership and attracting more investor enthusiasm. “Aegerion does not have a partner for lomitapide because the company must pay 10% of net sales to the University of Pennsylvania and the composition of matter patent expires in 2015,” she said. A small cap biotech specialist, Chaisson doesn’t hold shares in either company but is a shareholder in antisense companies.

Neither candidate holds a clear edge on efficacy or safety. At 26 weeks in Phase III data, lomitapide had a mean LDL-C reduction of 40%, while Kynamro had an average reduction of 36% (Also see "Kynamro Liver Safety Data Faces FDA Advisory Committee Gauntlet" - Pink Sheet, 15 Aug, 2012.).

Chaisson summed up the liver safety data: “Lomitapide causes significant increases in liver enzymes in 10% to 15% of patients and 10% to 15% of patients quit therapy due to GI side effects. Kynamro also increases liver enzymes in 10% to15% of patients to a lesser extent than lomitapide (3x upper limit of normal versus 5-10x upper limit of normal). I don’t expect this to be a deal breaker for lomitapide at the panel meetings but it will get a lot of discussion.” In addition, Aegerion had a much smaller number of patients in late-stage trials (Also see "Dearth Of Clinical Data For Aegerion’s Lomitapide May Sidetrack Advisory Committee Review" - Pink Sheet, 14 Aug, 2012.).

As for other potential safety issues, Pinniger sees elevated tumor lesions in the two-year mouse studies for lomitapide as a potential wild card before the committee. But he noted that Pfizer’s blockbuster cholesterol drug Lipitor (atorvastatin) “was also associated with significantly elevated tumor incidence in mice.”

He expects Kynamro may be subject to panel concerns about “a higher incidence of more diverse side effects.” Pinniger also noted “injection site reactions and high drop-out rates for mipomersen in clinical studies are also unhelpful and a sign of a treatment that is not easy to tolerate – a big drawback for a chronic therapy.”

The two products will be reviewed by FDA’s Endocrinologic and Metabolic Drugs Advisory Committee.