White Paper on Potential for SHP622 in Friedreich’s Ataxia and Economic Implications for Intellect Neurosciences
Written by: Larry Smith, founder of SmithOnStocks.com, in June 2015 and updated by Intellect Neurosciences in June 2016
Key Points of this Report
x Friedreich’s ataxia (FA) is a devastating orphan disease that has no approved drugs. There is an enormous amount of research underway using different mechanisms of action to control FA; the most advanced group are drugs that decrease oxidative stress (anti-oxidants) and/or increase mitochondrial function. x There are four drug candidates in this group in phase 1 and 2 human trials: Edison’s EPI-743, Shire/ Intellect’s SHP622, Reata’s RTA-408 and Retrotope’s RT001. x There is no clinical data that allows for a comparison of these four drugs. x The incidence of FA in the US is about 6,500 to 11,000 patients; the European incidence rate is about the same as the US and the rest of the worldwide incidence rate is about half of the US rate. x At a typical orphan drug price of $200,000, this incidence rates represents a $1+ Billion addressable market. x Because of the significant unmet medical need, penetration of the US market should be rapid. x These drugs all work by different mechanisms of action. History suggests if they are each effective that each will find a place in the market. This is not a “winner take all” situation. x FA is just one of many mitochondrial diseases in which anti-oxidants could find a role. There are a broad range of other mitochondrial diseases that are estimated to affect five to 25 times as many patients as FA. x Both Edison and Reata have formed very significant collaborations with large pharma to broadly develop their compounds in other diseases beyond FA. x If Shire decides to take SHP622 into clinical development and if it is successful and ultimately approved, the milestones for Intellect would be $120 million that could be received in the next four years if the product is approved in the US and Europe. x Using a discounted cash flow model using assumptions shown in the next section of this report, the net present value of these milestones discounted at rates of 20%, 30% and 40% would be $64 million, $49 million and $38 million respectively for Intellect.
Economic Implications for Intellect
Edison’s EPI-743 works to synchronize energy generation in mitochondria by countering cellular redox stress. In February 2016, EPI completed a Phase 2B Double-Blind, Placebo-Controlled, Clinical Trial of EPI-743 in Friedreich’s Ataxia. Edison has yet to report results from that trial. SHP622 is an anti-oxidant drug that prevents oxidative stress by a combination of hydroxyl radical scavenging activity and metal chelation. In July 2015, Shire completed a Phase 1b trial to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of SHP622 in adults with Friedreich’s Ataxia. SHP622 was generally safe and well tolerated when administered as single and multiple PO doses. There were no severe treatment emergent adverse events (“TEAEs”) or deaths reported in either the single or multiple dose 2 groups, and the majority of TEAEs were of mild severity. However, one subject in the multiple dose group was discontinued due to a possibly related treatment emergent of angina pectoris. Overall, there were no clinically meaningful differences between SHP622 and placebo or between the single and multiple dose groups. The mean terminal elimination half-life ranged between 7.36 and 10.33 hours across all dose groups. Inter-subject variability appeared to be low to moderate. RTA 408 is one of a class of drugs that Reata developed to target the activation of a transcriptional factor Nrf2, a therapeutic target in FA. Increasing Nrf2 could improve mitochondrial function by reducing oxidative stress. Reata has initiated a placebo-controlled, multi-center Phase 2 study of RTA 408 in patients with FA. There are a broad number of other approaches to treating FA, which I go into in this report. I think that these three drugs will be approved first if their future clinical trials are successful. There is no meaningful clinical data at this point to predict if they will be successful or how they will compare to one another. Each of these drugs has a different mechanism of action. Historical experience with other drug classes suggests that each drug will have different effects in different patients and will be used in various combinations, again assuming that each is shown to have meaningful clinical effects. In the same way, the anti-oxidants as a class are likely to be used in combination with other classes of drugs being investigated if they are successful in clinical development. It is extremely unlikely that this will be a winner take all market, but rather one in which drugs find their unique niches. The opportunity in FA is quite meaningful. I estimate that there are roughly 6,500 to 11,000 patients in the US. Prices for drugs treating rare disease with this type of incidence are generally priced extremely high and I would think that the price of SHP622 would be on the order of $200,000 if it provides significant clinical benefit. This suggests that the US market would be about $130 to $220 million. I estimate that the foreign market potential is 16,000 to 30,000 patients representing a potential market of $325 million $550 million. This makes for a worldwide addressable market of $455 to $770 million. The anti-oxidants are potentially effective in a broad number of other diseases in which there is mitochondrial dysfunction that leads to the creation of free radicals. There are a broad range of other mitochondrial diseases that are estimated to affect five to 25 times as many patients as FA. This explains the intense research interest in the area. It is impossible to project what SHP622’s sales potential might be. However, the market opportunity appears sizable. Each $10 million of sales of SHP622 would produce significant royalties, which the market would likely capitalize at about ten times. I have also looked at the value of the milestone payments from Shire. Intellect is due $120 million in milestone payments upon achievement of certain events. The timing for reaching the specified milestones is difficult to project, but let me give it a try. Assuming that net loss carryforward offset taxes, the net present value of the stream of cash payments discounted at 20%, 30% and 40% would be $64 million, $49 million and $38 million respectively for Intellect.
Friedreich’s Ataxia Study Sheds Light on Molecular Development of Disease
JULY 19, 2016
The mechanism leading to cell death in Friedreich’s ataxia has been described in a new study published in the Annals of Clinical and Translational Neurology.
According to the study, “Deep sequencing of mitochondrial genomes reveals increased mutation load in Friedreich’s ataxia,” down-regulation of a gene called frataxin (FXN) increases damage to mitochondrial DNA (mtDNA). This increase in the mutation load of the mitochondrial genome reduces DNA repair capacity. With time, mtDNA mutations accumulate and reduce mitochondrial fitness, leading to cell death and the symptoms of Friedreich’s ataxia (FA).
The team of researchers, led by Dr. Marek Napierala of the University of Alabama in Birmingham, measured the amount of mtDNA damage and mutation load in Friedreich’s ataxia and control fibroblasts grown in the laboratory. They also analyzed the ability of Friedreich’s ataxia and control cells to repair oxidative damage in their mtDNA and the status of the genes involved in DNA repair and metabolism.
They saw that short or long-term down regulation of FXN gene expression results in a significant increase in mtDNA damage, which translates in a significant increase in mutation load in mtDNA. Low FXN gene expression also reduces the ability of the cells to repair mtDNA damage caused by oxidative stress.
The results revealed that Friedreich’s ataxia fibroblasts had a higher level of mtDNA damage compared to unaffected cells, and that control cells (depleted of FXN) acquire mtDNA damage in a manner similar to cells in Friedreich’s ataxia patients.
“We propose that accumulation of mtDNA lesions represents a critical event in the development and progression of [Friedreich’s ataxia],” the authors wrote. “Next-generation sequencing of Friedreich’s ataxia mitochondrial genomes revealed a widespread increase in mutation load in patient fibroblasts. Although mtDNA damage alone can have profound consequences within the cell, low expression of FXN may also affect the nuclear genome.”
“Therefore, it would be of interest to extend these studies into whole-genome analyses of Friedreich’s ataxia samples including terminally differentiated neurons, glia, and cardiac cells,” the authors concluded.
Faulty Mitochondrial Process in Friedreich’s Ataxia Described JUNE 7, 2016
Scientists at University College London have, for the first time, described the full sequence of faulty mitochondrial processes in a Friedreich’s ataxia mouse model.
Findings show that dysfunctional mitochondria directly contribute to cell death through lipid peroxidation in disease-affected neurons – a degradation of cellular lipids that if prevented, stops brain cell death.
According to the National Institutes of Health, Friedreich’s ataxia is a rare inherited disease that causes nervous system damage and movement problems. It usually begins in childhood and leads to impaired muscle coordination (ataxia) that worsens over time.
Despite intense research into the mechanisms causing Friedreich’s ataxia, scientists are still in the dark about whether mitochondrial dysfunction is a side effect of accumulated iron, or if it is part of a primary process driving the disease.
Although earlier studies suggest that frataxin gene mutations lead to faulty mitochondrial respiration, which promotes the production of reactive oxygen species and brings about mitochondrial dysfunction, oxidative stress, and mitochondrial iron accumulation, technical issues limited the study’s reliability.
The team behind the new study, “Mitochondrial energy imbalance and lipid peroxidation cause cell death in Friedreich’s ataxia,“ argued that post-mortem tissue or fibroblast cells are poor models of the disease. Instead, they developed a cell culture model using neurons and glial cells from a validated mouse model of Friedreich’s ataxia that develops progressive disease with age.
Using live cell imaging and biochemical techniques, researchers found that despite similar low levels of frataxin in glial cells and a type of disease-affected neurons called cerebellar granule cells, the mitochondria were defective only in the neurons. In those cells, the lack of frataxin disrupted the mitochondrial membrane potential. The difference in electric charges between the in and outside of a cellular membrane is crucial for a mitochondrion’s ability to produce energy.
The publication in Cell Death and Disease, details how the disturbed potential emerged as a result of decreased complex I activity, accompanied by increased complex II activity. These complexes are part of the energy-producing mitochondrial respiratory chain and need to be in sync for the process to be effective.
When the balance between the two complexes became disturbed, researchers found that mitochondria produced more reactive oxygen species, which depleted the stores of the antioxidant glutathione and led to a 10-fold increase in lipid peroxidation in the cerebellar granule cells.
It became obvious that the lipid peroxidation was a key driver of cell death, since preventing lipids from becoming oxidized also prevented cell death. The strategy could be explored as a new treatment for Friedreich’s ataxia.
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