Adhera Therapeutics Inc (ATRX)

[DewDiligence]

Exenatide LAR: RIP?

[Lehman has downgraded AMLN over concerns about LAR’s PK and painful 23-gauge needle (ouch!)].

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Overall, we believe that expectations for Exenatide LAR may have become too aggressive at the present time and may not be achievable with the drug in its current form. While a once weekly painless injection, with low PK variability, 2% HbA1c reduction and low nausea rate would likely be preferred over the current profile of twice daily Byetta, we have some questions as to whether that profile will actually hold up with more extensive study.

Key concerns include greater PK variability than originally assumed and a needle gauge that we believe may create some commercial barriers particularly when contrasted with emerging competitors.

With regards to pharmacokinetics, while our original expectations for Exenatide LAR PK were for steady state exenatide plasma levels inline with the reported mean peak CMax of 211pg/ml seen with regular Byetta these levels were actually surpassed and continuing to climb at week 6 and reaching a mean level of over 250pg/ml by week 12 with exenatide LAR. Of particular note at week 12 mean plasma concentrations had their greatest variance with a standard deviation of roughly 250pg/ml, which was well above our expectations of a variance no greater than 25pg/ml. Given this wide variance in exenatide blood levels we believe that there could be potential for greater individual side effects over time than that suggested by the original data set and as such now believe that it may be premature to assume a better tolerated drug than regular Byetta BID.

With regards to needle gauge we believe that this could be one of the major determinants of future commercial potential for Exenatide LAR. Overall, we believe that patients would rather take a relatively painless injection once or twice daily than a more painful injection once a week. Currently our understanding from feedback at the American Diabetes Association (ADA) meeting is that the needle gauge for Exenatide LAR is 23 gauge, which is much larger than the 31 gauge for regular Byetta, 29 gauge for Liraglutide and 29 gauge proposed for Ipsen’s extended release BIM-51077. At this needle gauge feedback from clinicians as well as nurse educators has been that self-administration and subcutaneous route of delivery may be difficult for patients and would note a 10% incidence of injection site bruising even with nurse injection.

While this needle gauge is commonly used for intra-muscular (IM) nurse administration of certain annual immunizations we are unaware of a similar size needle bore being employed for regular dosing of a chronic subcutaneous delivered medication.

Thus, while Exenatide LAR may still emerge as having less frequent administration than Liraglutide we do believe that at this needle gauge patients might prefer the once daily 29 gauge needle and lower potential for injection site pain and bruising with drugs like Liraglutide.

Liraglutide Visibility

Liraglutide is a once-daily GLP-1 analogue currently involved in a large 6000 patient phase III program with Novo-Nordisk. While significant attention on once-weekly exenatide LAR has served to neutralize the perceived impact of a once daily incretin mimetic on the Byetta franchise we would suggest that the therapeutic profile may compare favorably to regular Byetta BID and may even be comparable to Byetta LAR. Indeed with a therapeutic profile more in-line with Byetta LAR, dosing frequency in between Byetta BID and Byetta LAR and an injection profile more in-line with the innocuous Byetta BID delivery currently available Liraglutide could emerge as a significant competitor to both forms of Byetta by 2009.

Phase IIb data reported for Liraglutide at the annual American Diabetes Association (ADA) annual meeting suggested that in 165 diabetics previously treated with diet or a single anti-diabetic drug that 14 weeks of treatment with Liraglutide resulted in a 1.74% reduction in HbA1c vs. placebo, a 50% rate of achieving ADA goal levels for HbA1c of 7%, an average 6.6 lb weight loss, and nausea rate of only 10%. We believe that these results are closer to the 2% HbA1c reduction seen with Exenatide LAR than the 1% HbA1c reduction seen with regular Byetta BID and while weight loss is slightly below the 8-9lbs demonstrated thus far with Exenatide LAR we would note that with Liraglutide treated patients having baseline weight of 90kg and with Exenatide LAR treated patients having baseline weight of 110kg the Liraglutide weight loss may be slightly better on a percent of body weight basis.

BIM-51077 Once-Weekly Visibility

While concerns regarding BIM-51077 visibility at the American Diabetes Association (ADA) meeting were not borne out this year we believe that Ipsen actually has generated significant data for its extended release formulation beyond that suggested by the 28-day continuous pump data and beagle dog PK study presented at this years meeting in Washington. Indeed, while Ipsen has been reluctant to discuss details of data that it has provided to partner Roche for purposes of considering a full opt-in to the program we understand from talking with Ipsen management recently that the company has generated phase I/II data for a once daily, once weekly and twice monthly dose schedule of BIM-51077. With recent Roche opt-in ahead of the scheduled November 6th deadline we believe that a phase II multi-dose study could be initiated by YE06/early 2007 and generate proof-of-concept later in 2007.

While it may be early to make comparisons between Exenatide LAR and BIM-51077 we would suggest that with a 29 gauge needle vs. 23 gauge with Exenatide LAR and a clear aqueous solution vs. a more viscous solution with Byetta LAR that BIM-51077 injection itself may ultimately be better tolerated and more convenient to dose than Exenatide LAR.

In addition, if one examines the PK profile of other extended release Ipsen peptide products like Somatuline Autogel we believe that a case can be made for potential once monthly dosing with minimal burst effect and low PK variability, which could prove advantageous in avoiding excess GLP-1 associated nausea due.

Overall Longer Term Fundamentals Strong, But Near Term Risk at Current Valuation Levels

Overall, while we do believe that upside potential will be limited for AMLN shares in the near term and do foresee some potential downside risk on competitive visibility and better appreciation of Exenatide LAR risks we believe that longer term prospects for AMLN are attractive given its leadership position in what could emerge to be an $8B-$10B incretin class. As such, we would suggest that investors accumulate shares more opportunistically around the lower end of what has emerged as a $40-$50/share trading range over the last 3-6 months and as such believe that an Equal weight rating is most appropriate at this time.
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