Biotech Ideas

[gfp927z]

Gemini Therapeutics (GMTX) - >>> The Geographic Atrophy issue. $APLS, $ISEE, $CBIO, $GMTX.


Matt's Biotech Newsletter

Feb 15

https://geminitherapeutics.com/pipeline/

https://investorshub.advfn.com/boards/replies.aspx?msg=161811558


Welcome back to Matt’s Biotech Newsletter, Issue #4. I’m trying a new concept for this issue. I’m going to cover just one disease state and all the related companies I follow.

Geographic Atrophy (“GA”) seemed like a logical first choice as I’m really interested in this condition, have four relevant public companies to write about, and my favorite company in the space will be reporting pivotal data in roughly six months.

———

A quick primer, written as accurate as I am capable of, for my own mental clarity:

(Feel free to skip this if you have a good handle on macular degeneration.)

Advanced age-related macular degeneration has two forms: Dry AMD (Geographic Atrophy) and Wet AMD.

Advanced Dry AMD (Geographic Atrophy) is a chronic, progressive, and irreversible loss of the retina. Three layers of the retina undergo atrophy: the choriocapillaris, retinal pigment epithelium, and photoreceptors. (These three layers are adjacent to each other.) There are conflicting theories on what causes Geographic Atrophy, as you will see by the different approaches companies take. Visual acuity charts do *not* do a good job measuring the true impact of GA due to “foveal sparing” — a tiny spot in the center of the macula staying healthier until very late in the disease. The ability to read an eye chart is somewhat maintained but “real world” vision for activities like driving and walking is lost.

42% of patients’ eyes with geographic atrophy are legally blind (20/200 or worse with best correction), according to Genentech.

Wet AMD is different and caused by new blood vessel growth “neovascularization” in the choriocapillaris and is treatable with Anti-VEGF therapy. It is often proceeded by Dry AMD. The “wetness” is caused by leakage from the new, less stable blood vessels. Treating Wet AMD is important to reduce permanent damage and restore vision. Visual acuity charts do a good job measuring vision improvement in Wet AMD. The leading drug Eylea from Regeneron is annualizing at $5.2 billion in US sales alone and another $2.4b in Rest-of-World sales. Eylea competes with Lucentis and repackaged off-label Avastin as well. A large number of U.S. patients receive an off-label Avastin product to treat Wet AMD due to cost: 50% according to Outlook Therapeutics and 70% according to a 2018 survey of U.S. retinal specialists. Eylea sells incredibly well despite only 36% U.S. market share.

———

Unmet Need and Commercial Potential:

“These patients are the most motivated patients of all of the patients that I see with retinal disease.” —Dr. Pearse Keane at Apellis’ Geographic Atrophy Investor Day.

Geographic Atrophy has roughly 1 million patients in the US, greater than 5 million worldwide. (Wet AMD has similar prevalence.) Geographic Atrophy has no available treatments.

It’s my opinion that a treatment for Geographic Atrophy, if successful, would easily become a blockbuster drug. 1 million patients in the U.S. alone, irreversibly losing their vision, with no option to stop or slow it. The first drug approved can have the whole market. If multiple get approved, there is plenty to split. Prevalence similar to Wet AMD, where Eylea does almost $8 billion in worldwide sales with extensive competition. This disease state has been a graveyard of drug development but what has been difficult before doesn’t have to be difficult forever. Let’s start with my favorite company here.

———

Apellis Pharmaceuticals $APLS, $3.72b Market Cap.

Apellis, in my mind, has single-handedly rejuvenated interest in the Geographic Atrophy space. (At a recent investor presentation, Catalyst Biosciences CEO Nassim Usman’s remarks seemed to agree.) Their 2017 Phase 2 “FILLY” trial data for their Complement C3 controller APL-2 (now pegcetacoplan) provided new hope for GA treatment after the Phase 3 failure of Roche’s Lampalizumab, a Complement Factor D inhibitor. Apellis has two Phase 3 trials fully enrolled and reading out in Q3 2021.

Apellis’ theory is that Geographic Atrophy is caused by complement system activation via C3 protein and its convertases. They believe the C3 problem in GA is two-fold:

One, C3 deposits are found in high amounts in the retina of patients with AMD. As patients get older, the C3 is not “cleaned up” as well as it should be (by being inactivated, internalized and processed through lysosomal activity) so it stays on the cell surface. Monocytic cells such as macrophages or macroglia sense this and phagocytose the cell. In the retina, this causes loss of vision.

Two, C3 is split into C3a, which recruits immune cells to the site of activation, and C3b, which cleaves C5 into C5a (which also recruits immune cells) and C5b. C5b is important because it helps form the Membrane Attack Complex “MAC”. The MAC disrupts the cell membrane (“poking a hole” essentially) weakening or killing retinal cells.

Controlling C3 with Pegcetacoplan tamps down all three pathways of the complement system and their downstream proteins. Lampalizumab was a binder of Factor D in the complement system. Factor D is only found in one pathway of the complement system, the alternative pathway. Factor D has no effect on the classical pathway or the lectin pathway. Apellis’ target goes “upstream” of Factor D and blocks more pathways and proteins as well as directly addresses C3 fragments and deposition.

My confidence in Pegcetacoplan’s Phase 2 trial data was further buoyed by their recent GA-focused Investor Day. First, I wanted to include a slide below from their general corporate slide deck for two reasons. One, it shows the absolute success of the Phase 2 endpoint, Change from Baseline in Square Root GA Lesion Size, for both dosing regimens: monthly and every other month “EOM”. Two, it shows the sham injection arm performed exactly in line with Lampalizumab’s Phase 3 trials.

The second slide below is from the recent GA Investor Day presentation and I included it because it shows data I had previously not seen. Investors knew the Phase 3 endpoint is slightly different from the Phase 2 endpoint. The Phase 2 looked at the Square Root GA Lesion Size while the Phase 3 will look at Absolute Lesion Size. This change was made at the FDA request but I think the important takeaway is this: CEO Cedric Francois had said before at investor conferences that the change in endpoint makes no difference to the Phase 2 results and the data below shows this is true.

I believe the Pegcetacoplan Phase 3 “DERBY” and “OAKS” trials will repeat the results of the Phase 2 “FILLY” data. (Nice names!) In fact, I would put my personal confidence level around 70%, which is high for a pivotal readout. Here are my reasons:

Same patient population (inclusion/exclusion criteria) for DERBY and OAKS as for FILLY.

Dose-dependent response in Apellis’ Phase 2, with both arms showing separation and monthly arm performing the best. Lampalizumab’s EOM Phase 2 arm did not show any separation from sham at Month 12, a warning sign in retrospect.

Sham injection growth in Apellis Phase 2 performed in line with sham injection growth in the Lampalizumab Phase 3.

Square root vs. absolute growth results both came out the same.

Apellis ran some analyses (not shown above) using the patients own non-treated eye as a control and that showed separation in the treatment arms as well.

The FILLY data had around 80 patients in each arm, twice as large as the Lampalizumab Phase 2 arms. Less chance of a false positive in Phase 2.

DERBY and OAKS are large studies (600 patients each, randomized 1:1:1) and can withstand some missing measurements and dropouts due to COVID.

(For the record, the company has said missing data due to COVID is so far very manageable but since the pandemic never ends I think it’s something worth considering, especially with endpoint measurements approaching.)

One last point on efficacy and commercial potential: The study will continue dosing out until two years. This is exciting because the greatest effects were seen between Month 6 and Month 12. If the gap between Sham and Pegcetacoplan widens further from Month 12 to Month 24 it will give Apellis stronger evidence to show retinal specialists. That data would probably come right around a PDUFA date if the Phase 3 is successful.

But what about safety?

The biggest safety issue arising from the FILLY data was new onset exudations. Basically, treating Dry AMD and causing Wet AMD. At 18 months, the rate was 20.9% (18/86) for the monthly arm, 8.9% (7/79) for the every other month arm, and 1/81 (1.2%) for the sham arm.

Some things to ponder: Almost all patients finished the study and assessment in FILLY. The safety profile did not cause notable dropouts. The safety profile did not prevent the FDA from approving the exact same patient population for the Phase 3. Wet AMD exudations are not ideal but these exudations were treatable with anti-VEGFs and only caused minor vision loss. None of the exudations were “Classical CNV”, a more serious form of new onset exudation.

Also consider the Phase 2 was only single-blinded so the physicians knew which patients were getting sham. Were they predisposed to diagnose new onset exudations in the treatment arms and not the sham arms? Possibly. The Phase 3 studies will be quadruple blinded.

I think Apellis has a few winning “outs” safety-wise, some combination of:

The rates of new onset exudation in the treatment arms go down with the quadruple blinding.

Rates for the treatment arms stay the same but rates for the sham arm go up, making the comparison look not as bad. (Only 1 new onset exudation out of 81 sham patients seems low and might be a quirk.)

The every other month arm hits the endpoint and is the right combination of efficacy (close enough to the monthly arm), patient convenience (less visits) and safety (8.9% or lower is very manageable).

The demand for the first GA treatment ever is so great that patients and physicians on the whole simply don’t care about the exudation rate as long as it treatable with Anti-VEGFs and unlikely to be Classical CNV.

I am biased but if I had GA I would roll the dice with 80% chance of no issue vs. 20% chance I need to get dual injections, so long as I could afford both treatments and had confidence it was the best path to preserve my vision.

Market reaction likely won’t be kind if the Phase 3 exudation rates in the treatment arms go higher than the Phase 2 data while the sham stays at 1-2%. I don’t think it’s likely but can’t rule it out. I also am still not convinced it would matter for approval or launch but short term reactions are what they are. Certain expectations are built in.

Apellis also has a Pan-AMD inhibitor in the very early stage pipeline.


As for the retinal injections themselves, there were two cases of infectious endophthalmitis out of 1,500 injections. Those rates do not concern me.

For another perspective on safety, I turned to the KOL calls at Slingshot Insights. If you aren’t familiar with Slingshot Insights, they are a paid research site (with extremely reasonable “Starter” tier!) that conducts exclusive calls with Key Opinion Leaders on biotech companies and data their members request. Joe McCann at Slingshot Insights was gracious enough to allow me to use quotes from their KOL calls in this issue. Thank you Joe! Highest recommendation for Slingshot.

KOL names will be anonymized.

Selected quotes on safety:

Doctor 1:

“Both of them [Apellis and Iveric Bio’s candidate Zimura] increase the risk of choroidal neovascularization developing, which is wet AMD. The risk can be as high as about 10% of the patients over the year that the phase 2 study was done, as compared to about 1-2% of the patients who didn't get the drug or the other control eyes. That may result from the protection effect, actually, because if the retina is atrophic or dead in a region of the macula, it's not going to be producing VEGF, which is the molecule that recruits the new blood vessels.”

“As long as the patient is coming in for injection anyway of the complement inhibitor, it's not a big deal to also inject an anti-VEGF antibody.”

Doctor 2:

“So as you know, the monthly arm [of APL-2], there was about a 21% conversion to wet AMD, and I think every other month it was less than 10%. I think 8.9%. And then in the sham, I think it was one percent. So that 21% is quite high, but given the fact that there is no FDA approved drug at the current time, patients who have foveal threatening GA being one of the first drugs to show clinical trial data that it can inhibit or stop the progression of the lesion size, I think every clinician would have to make their own informed decision with the patient and weigh the pros and cons. But yes, that is a high percentage, but given that option, I still would be open to using it on patients with them having the proper understanding that there is a one out of five chance that even though they're getting the monthly injection, that this could then cause the transformation into the exudative phase. Some of my colleagues are totally against it, but I still try to keep an open mind about its beneficial use, even though there's that one out of five chance.”

To wrap things up on Apellis, let’s throw in some quotes on commercial potential.

Doctor 1:

[on bimonthly dosing] “Okay. Yeah. I'd say probably about 70% [of patients] would go for it, would be appropriate, the 30% not wanting it for the reasons I mentioned before.”

[“Do you think GA or let's say APL-2 if it's approved, do you think that will have the same pricing power versus what we have seen in the wet AMD space?”] “I would think so.”

Doctor 2:

[on how many patients would be interested in a product with monthly dosing] Also a good question. The vast majority, I would say over 80% of my geographic atrophy patients, both fovea involving and non-fovea involving always ask, "Is there any treatment? Is there any treatment? Is there anything that can help preserve my vision?" … I would say out of that 80%, at least 50% would be open to the idea of monthly injections.

Thank you again to Slingshot for allowing me to use the above quotes!

Conclusion: I am obviously pretty bullish on the Apellis GA program. I think it’s sound scientific theory, the most evidence of efficacy we have ever seen in a Phase 2, tolerable safety, and it’s fully enrolled. I truly hope I am right for GA patients and for you the reader. But you have to make your own decision here and be skeptical. We all should remember this is a very tough area of drug development.

———

Iveric Bio $ISEE, $530m Market Cap.

Speaking of skeptical, I am skeptical about Iveric Bio. They have a C5 inhibitor with one “successful” trial that they say can be used for regulatory submission. Let’s examine that trial first. Here are the two slides that compare to the first Apellis slide above.


I have a lot of issues here. First, the sham grew *way* faster than in both the Lampalizumab trials and FILLY trial. If the sham came in at 0.34 to 0.35, how would these results look? I’m guessing not significant. Also why did the 2mg dose outperform the 4mg dose in slowing growth? That makes no sense.

Other problems I see ahead for Iveric: GATHER1 is being called a pivotal trial for future NDA submission but it is a smaller proof-of-concept trial designed like Apellis’ Phase 2. It seems odd the FDA would make Apellis run two fresh, large Phase 3 trials for approval but would accept the GATHER1 design as a Phase 3 especially with the wonky dose response and sham groups. Also, 26% of patients in GATHER1 missed the 12 month measurement!


To top it all off, Iveric Bio probably won’t be done recruiting GATHER2 until the 2nd half of 2021 and then it’s another 12+ months until data (and Apellis *might* get priority review if successful) so it’s safe to say Iveric is 18 to 24 months behind Apellis in the best case scenario.

Conclusion: I see no reason to hold Iveric Bio right now personally.

If Apellis fails, then Iveric will likely fail as C5 is downstream of C3. (They believe the presence of C3 can actually be *protective* against GA but I don’t think that theory holds water.)

If Apellis succeeds, it still has little read through to Iveric’s C5 inhibitor which addresses the MAC but does not directly address C3. I don’t want to bet on a horse that will be 18+ months behind with possibly inferior data.

That’s just my opinion, though. A lot of prestige biotech funds are in this name. Honestly, it’s hard for me to figure out why but I’ll stay open for new information that may change my mind.

———

Catalyst Biosciences $CBIO, $206m Market Cap.

If you want a stock that may see a large increase, possibly even larger than Apellis itself, on a positive pegcetacoplan result that company would be Catalyst Biosciences. Catalyst has a long acting anti-C3 protease, CB 2782-PEG, which is licensed to Biogen. While it is likely 4 to 5 years behind the Apellis product, good news for pegcetacoplan is very likely good news for Catalyst. Catalyst’s product being long-acting could be a nice selling point in the future if it could be effective with 4 injections per year, instead of 6 or 12. Otherwise, it could slot in as a “me too” drug and try to compete with Biogen’s marketing muscle.


The economics of the partnership are noteworthy for a $175 million company. $340 million in milestones plus a blended royalty rate that I estimate at around 10%. In a future scenario where CB 2782-PEG is approved in all geographies and a blockbuster, Catalyst is easily a 10x+ stock based on this one program alone. It’s probably the most pure play on the “C3 causes GA” thesis. With Apellis, their valuation reflects their pegcetacoplan systemic programs (for PNH, ALS, etc.) and GA. Catalyst is dirt cheap, practically left for dead, and they won’t have to spend anything to get GA across the finish line. I actually like their MarzAA program too (attempting to make a better version of NovoSeven for bleeding disorders) but that can be a discussion for another issue.

Conclusion: Catalyst is a resource-constrained company so I understand why they chose to license to Biogen, even if the terms should have been better. Biogen’s name doesn’t have the prestige it once did but they have plenty of cash and need new revenue. Partnerships are always a risk so shareholders will have to hope that Biogen moves things forward quickly and correctly but mostly that Apellis succeeds in Q3.

———

Gemini Therapeutics $GMTX, $568m Market Cap.

I’m really conflicted on Gemini Therapeutics, the company acquired by FS Development Corporation (a special purpose acquisition company “SPAC” from Foresite Capital) and trading under $GMTX now. It’s a company I definitely *want* to like because a lot of smart biotech accounts on Twitter are bullish and it’s a creative approach to treating GA. Gemini is targeting a genetically defined subset of the GA patient population, variants with low Complement Factor H “CFH”, for their proof of concept studies. CFH helps regulate the alternative pathway of the complement system.

Gemini is developing a recombinant Complement Factor H protein, GEM103, to replace these deficits and restore balance to the complement system. They have also have gene therapy approaches in pre-clinical work. My main hang-up is the slide below in their corporate slide deck.


Looking at those different dose levels and responses, it’s hard for me to take away any clear lessons from the drug and its effect. Their slide deck doesn’t do a good job explaining the “Ba” biomarker (part of the alternative Complement pathway) nor give C3a levels which they say on a previous slide are also a predictive biomarker. Raising CFH levels in the eye of patients with genetic deficiencies more likely than not lowers alternative pathway activity but is that enough? Also, why did the lower doses work better than the higher doses?

Conclusion: While Gemini’s approach sounds great in theory, I’m likely going to watch and wait for conclusive sham-controlled data, like the Phase 2 results we should get late this year, before I buy a full-sized position. Even if that means I have to pay more and am late to the game.

———

Disclosures:

I am long $APLS, $CBIO. No position but may initiate $GMTX. No position in $ISEE.

I reserve the right to sell some or all of my positions, or initiate new positions, after publishing if I receive new information that changes my view or if my financial situation changes.

I am not a financial advisor. This is not financial advice. My goal is not to influence you to purchase securities. This is a free newsletter and I receive no compensation. I have no business relationships with these companies. I just like discussing them. These are my opinions and they could be wrong.

Thanks!

———

<<<