CLDN from CS in October
Summary
We are initiating coverage of Celladon Corporation with an Outperform rating and $20 target price. Founded in 2004, Celladon is a biopharmaceutical company based in San Diego, California. Celladon specializes in the research and development of agents targeting sarco/endoplasmic reticulum Ca2+-ATPase (SERCA) enzymes. Celladon's lead pipeline asset is Mydicar, a genetic enzyme replacement therapy for correcting SERCA2a enzyme deficiency, that is being developed as a potential treatment of systolic heart failure. Mydicar received Breakthrough Therapy Designation from the FDA in April 2014. Celladon is currently evaluating Mydicar in systolic heart failure in the CUPID 2 PIIb trial. This trial was fully enrolled as of February 2014. Topline CUPID PIIb data is expected in April 2015.
Mydicar replaces SERCA2a enzyme via gene transfer. Mydicar utilizes a recombinant adeno-associated viral vector 1 (AAV1) serotype to deliver the gene for SERCA2a enzyme. Deficiency of SERCA2a enzyme has been implicated as a central cause of heart failure. Patients with advanced heart failure have unusually low levels of SERCA2a enzyme. SERCA2a enzyme controls the pumping action of the heart by regulating calcium ion levels. During a contraction of the heart, calcium ions are released from the sarcoplasmic reticulum, activating myofilaments resulting in muscle contraction. During a relaxation of the heart, SERCA2a enzyme via the protein phospholamban brings the majority of the calcium ions back into the sarcoplasmic reticulum. Dysregulation of calcium ion levels affects systolic (i.e. contractile) as well as diastolic (i.e. relaxative) function.
There is a significant need for more efficacious therapies to treat heart failure. The current first-line treatment involves a combination of angiotensin-converting-enzyme (ACE) inhibitors and ß-Blockers. Other drugs including aldosterone antagonists, diuretics, and digoxin are used as well. As the disease progresses to the end stage, medical devices including implantable cardioverter-debrillators (ICDs) and left ventricular assist devices (LVADs) are used. Inevitably, a heart transplant will ultimately be required. Mortality is still high: (1) ~50% of patients diagnosed with heart failure will die within 5 years. (2) ~50% of Medicare patients with heart failure die within 3 years following a hospitalization due to this disease. It is estimated that the prevalence of heart failure is ~5.2M in the US and ~12.4M in the EU. The number of patients diagnosed with heart failure is expected to increase, driven by an aging population and rising obesity rates. The direct costs to the healthcare system is also substantial. It is projected that the total medical costs for heart failure in the US is expected to increase 2.5-fold from ~$21B in 2012 to ~$53B in 2030. The majority (~80%) of these costs are attributed to hospitalizations.
Mydicar will be used on top of current pharmacological standard-of-care in heart failure. Mydicar is expected to complement drugs that are currently used to treat systolic heart failure. Mydicar involves a one-time outpatient cardiac catherization, in which a catheter is put into a blood vessel in the arm, upper thigh, or neck and threaded to the heart. The SERCA2a gene is then infused into the coronary arteries and makes contact with cardiac muscle cells. A non-pathologic adeno-associated virus (AAV) delivers the SERCA2a gene to the cell nucleus.
Mydicar has shown promising efficacy in treating systolic heart failure in CUPID 1.
CUPID 1 was a 39-patient PIIa trial evaluating 3 doses of Mydicar (6×1011 , 3×1012, and 1×1013 DNase Resistant Particles (DRP)) and placebo in patients with NYHA Class III/IV systolic heart failure. Mydicar High-Dose (1×1013 DRP) showed a reduction in frequency as well as delay in the onset of recurrent clinical events relative to placebo. Specifically, Mydicar High-Dose showed a statistically significant reduction in recurrent (non-terminal) cardiovascular events relative to placebo through 1 year (88% risk reduction, HR=0.12, p=0.003). These differences were sustained through 3 years (82% risk reduction, HR=0.18, p=0.048). There appears to be a slight trend in survival improvement that favors Mydicar High-Dose. Mydicar High-Dose also stabilized or improved various clinical parameters relative to placebo. There were some imbalances in baseline patient characteristics across
the treatment arms in CUPID 1. In particular, there was a higher percentage of healthier patients in Mydicar arms relative to placebo arms. Post-hoc sensitivity analyses though suggested that the differences in baseline patient characteristics could not completely explain the clinical outcomes observed in CUPID 1.
The key valuation inflection point is the readout of CUPID 2. CUPID 2 is a 250-patient PIIB trial evaluating Mydicar High-Dose (1×1013 DRP) in patients with NYHA Class II/III/IV systolic heart failure. The primary endpoint is time to recurrent hospitalization in the presence a terminal event (all-cause death, heart transplant, LVAD implant). This trial has 83% power to detect at least a 45% reduction in risk (HR=0.55) with a p-value of 0.05. The trial was fully enrolled as of February 2014. Topline CUPID 2 PIIb data is expected in April 2015.
There are few other genetic therapies in clinical development for heart failure. Other clinical-stage genetic therapies include: (1) JVS100 (Juventas) uses a non-viral plasmid encoding stromal cell-derived factor. JVS100 is being evaluated in a PII trial. (2) Ad.HAC6 (Renova) uses an adenovirus serotype 5 encoding human adenyl cyclas type 6. Ad.HAC6 is being examined in a PI/II trial. Preclinical-stage genetic therapies include BB-R12 (Beat Biotherapeutics), Carfostin (NanoCor), and VN-100 (VentiNova).
Mydicar is projected to reach worldwide peak sales of ~$1.5B by 2025. Our sales estimates for Mydicar are based on the following assumptions: (1) Mydicar is approved as a treatment for systolic heart failure in the US and EU. (2) The addressable population in the US and EU is ~350K. (3) Mydicar achieves a penetration of 35% in the US and 25% penetration in the EU after 8 years from initial launch. (4) Celladon sells Mydicar directly in the US and EU. (5) The net price per (one-time) infusion for Mydicar is ~$36K in the US and ~$23K in the EU. (6) The timing of peak sales for Mydicar though will depend on the outcome of CUPID 2 as well as the FDA's and EMA's acceptance of CUPID 2 as a registrational trial. Our modeling assumes that a PIII program will be required and Mydicar will be launched in late 2019 / early 2020. If CUPID 2 hits the primary endpoint and is accepted as a registrational trial by FDA and EMA, then Mydicar could be launched in 2018. Otherwise, assuming the requirement of a PIII trial, Mydicar could reach the market in late 2019 / early 2020. (7) Mydicar is protected from biosimilar competition until 2030.
The rest of the pipeline could drive further upside. Celladon is currently exploring additional indications for Mydicar that are currently not included in our valuation. Celladon is currently enrolling a PI/II trial examining Mydicar in patients with advanced heart failure with LVAD. Celladon plans to start a PIIa trial evaluating Mydicar in arteriovenous fistula maturation failure soon as well. Topline data from this study is expected in 2015. Celladon is also evaluating the potential of Mydicar in diastolic heart failure in preclinical studies. In addition to Mydicar, Celladon has 2 preclinical-stage compounds – SERCA2b small molecule and Stem Cell Factor.
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