Kitov Pharmaceuticals: An Update
Must Read|Oct. 30, 2017 9:28 AM ET|1 comment| About: Kitov Pharmaceuticals Holdings Ltd. (KTOV)
Amit Ghate
Summary
KTOV has had a number of positive developments since I last covered the stock.
In particular its NDA for its lead drug, KIT-302, has been accepted by the FDA with a PDUFA date of May 31, 2018.
It has also conducted another positive phase 3 study that should help sell the drug if it's approved.
Despite some negatives, I have maintained my full position in the stock.
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A number of people have asked me, both in the comments and via private messages, to write a follow-up to my previous articles on Kitov Pharmaceuticals (KTOV). I had been hesitant to do so because there are still unresolved ISA accusations leveled at the company which I have no way to vet or handicap. Moreover, some of the company’s actions, e.g. the numerous financings and relatively high executive pay, have been less than shareholder friendly.
That said, and noting the interest in coverage, I do want to review a number of key developments that have occurred since my last article and explain why I’m still long my full position despite the real negatives noted above. Let’s begin with three positives related to KTOV’s leading drug — the combined celcoxib/amlodipine formulation known as KIT-302 — which is intended to treat the pain of osteoarthritis AND the often associated side effect of hypertension. (For anyone new to KTOV, I suggest you review my five earlier articles on the company and its potential valuation; to do so simply click my author profile and then filter articles by ticker KTOV.)
Submittal of KIT-302’s NDA
On July 31, 2017 KTOV submitted it new drug application to the FDA and on Oct 2 it was formally accepted as complete by the FDA with a target review date of May 31, 2018.
This was very welcome news as it completes KTOV’s work on the drug (at least until the FDA comes back with its opinion which then might entail additional studies or other work). It should be noted that the mid 2018 review date constitutes approximately 9 months of delay relative to the company’s initial estimates and to my assumptions in previous articles. This however isn’t that big a deal in the bigger picture.
It will be very interesting to see what the FDA rules and whether or not it agrees that not only did KIT-302 meet its primary endpoint of achieving at least 50% of the blood pressure reduction that amlodipine reaches on its own, but that the combo drug actually reduces some blood pressure measures more than does amlodipine administered on its own. See the error bars in the chart below taken from KTOV’s most recent investor presentation.
South Korean Agreement
On March 8, 2017, KTOV announced a licensing agreement with Kuhnil Pharmaceutical Co. Ltd. for KIT-302 in South Korea. According to this English page, Kuhnil is a small pharmaceutical company ($1M to $2M in revenues) but still among the top 5% of Korean pharmaceutical companies. As indicated in the press release the terms of the agreement include:
Upon receipt of marketing authorization in South Korea, Kuhnil will have the exclusive right and license to manufacture, distribute and sell KIT-302 in South Korea. Kuhnil will be responsible for seeking regulatory approval for KIT-302 in South Korea.
Under the terms of the agreement, Kitov is entitled to receive milestone payments upon achievement of certain predefined regulatory milestones, as well as double digit royalties on net sales. The initial term of the definitive agreement with Kuhnil is for ten years from the date of first commercial sale and shall automatically renew for an additional one-year term. Commercial launch in South Korea is estimated to take place in 2019.
These are respectable terms, and bode well for the company in negotiating other licensing deals, particularly once (or rather IF) FDA approval is attained.
Positive Results from Kidney Study
During the initial Phase 3 KIT-302 study, KTOV noticed that, based on creatinine levels, kidney function may also be improved by taking KIT-302 vs. taking the anti-hypertensive amlodipine on its own. These findings are summarized in the slide below sourced from the same presentation linked to above:
To verify this, the company sponsored a second phase 3 clinical trial. The top line results of this study were announced on October 26, 2017.
First, the study once again showed that “KIT-302 lowered systolic blood pressure a comparable amount to the widely used antihypertension drug, amlodipine besylate, thus meeting the trial's primary efficacy endpoint of achieving at least 50% of the amlodipine reduction (p=0.019).” This P value isn’t as low as the original study’s but that may be because it only included 104 patients vs. the 152 in the original study. Also, there was no word on whether this study duplicated the finding that KIT-302 resulted in a greater reduction in blood pressure than did amlodipine on its own. Hopefully the company will release such data promptly. (For reference the clinical trials link will eventually have the data; here’s a link for the first trial and another for this second trial.)
As to renal function, the second study confirmed, at great statistical significance, that KIT-302 does reduce creatinine relative to baseline. It also showed, but without statistical significance, “that KIT-302 enhanced the creatinine reduction by an average of 102% over that achieved with amlodipine besylate alone, although there was a slight increase in the rate of edema in the KIT-302 treatment arm.”
These creatinine results should further bolster the company’s eventual ability to differentiate — and thereby sell — its combination drug. For example GoodRx lists NSAIDS as the number one worst medication for your kidneys. (This large metastudy finds that “The results of the meta-analysis showed that current exposure to NSAIDs was associated with an approximately 1.5-fold increase in the odds of developing AKI in the general population and in people with CKD.” But the details are too technical for me to interpret.)
Now let’s consider a company development wider than KIT-302:
Acquisition of 92% Stake in TyrNovo
In a series of two transactions, KTOV bought a 92% interest in TyrNovo for sums valuing the purchased company at approximately $7M. TyrNovo has an interesting pre-clinical drug known as NT219 which is thought to inhibit two feedback pathways that lead to drug resistance. By combining NT219 with other drugs, the other drugs’ mechanisms of action are kept effective whereas without NT219 they run into drug resistance. The two slides below highlight the potential of the drug, but since it’s pre-clinical I’m not attributing any value to it yet, though it’s certainly something to keep tabs on going forward.
Company Share Structure
The last part of the update is to review the fully diluted market cap. The following table summarizes my best understanding of that number.
At today’s closing price of $2.18, the stock is trading at a fully diluted market cap of $44M.
Conclusion
Kitov has gotten its lead product through the NDA process and is awaiting an FDA decision at the end of May 2018, and it has already struck a small licensing deal in South Korea. The company has also performed an additional phase 3 renal study whose positive results should make the eventual sale of KIT-302 even easier than it would have been previously. If the company can clear the Israeli Security Authority’s allegations against it (and I have no way of handicapping this outcome), then I would reiterate my strong buy and eventual price target of $22.5. In the meantime, I personally have accepted the risk of holding the stock at a fully diluted market cap of only $44M and have even slightly increased my long position.
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Disclosure: I am/we are long KTOV.
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.
