Esperion (ESPR) is a small company developing a cholesterol drug with the aim to succeed Lipitor or at least to complement it. It is facing up to pharma giants like Sanofi, Amgen and Pfizer. But the company has one asset that nobody else does: its executive chairman is the one and only Roger Newton, an icon of the cholesterol business.
In September Esperion announced positive top-line results from a Phase 2a study of its drug, ETC-1002 when added to statin therapy in patients with elevated levels of low density LDL-C or "bad cholesterol".
Later in 2013 Esperion is planning a larger Phase 2b trial targeting the statins intolerant population with results expected in 2014.
Roger Newton
The legendary Newton led the research team at Warner-Lambert in the mid-1990s that championed Lipitor, the blockbuster cholesterol-fighter. In 2000 Pfizer (PFE) bought Warner-Lambert for $115 billion to get hold of the drug.
By that time Newton had already left and with several members of the Lipitor team co-founded Esperion Therapeutics, a tiny biotech in Ann Arbor, Mich., to develop another set of promising drugs: proteins that mimicked or improved upon high-density lipoprotein (HDL) the good cholesterol that is thought to prevent heart attacks by pulling plaque out of the arteries and reducing inflammation.
In November 2003, a small trial of one Esperion has brought amazing results. The medicine, a big, sloppy protein that had to be infused with an intravenous line, was a supercharged version of the HDL protein. It had been discovered in people in a small Italian village who had an astoundingly low risk of heart disease. In that small trial, it appeared to clear out artery plaque.
The trial was so hugely successful that Pfizer bought Esperion in the same year for $1.3 billion in cash. The move was not entirely foolish on the part of Pfizer. Pfizer was protecting Lipitor then at the height of its success and also defending its star candidate in development, the HDL pill torcetrapib.
As a major shareholder in Esperion, Newton profited from the deal. And he stayed at Esperion, which was merged into Pfizer's research establishment. But the Esperion invented drugs did not make it to clinical trials due to manufacturing and other difficulties. And the HDL pill Pfizer was defending, torcetrapib, turned out to increase mortality in a big clinical trial and had been abandoned. With it went Pfizer's interest in cholesterol drugs.
In 2008 Esperion was spun out of Pfizer with the help of $22.75 million from venture firms Aisling Capital, Alta Partners and Domain Associates, and Arboretum Ventures. Separately Pfizer licensed rights to the famed compound, ApoA-1 Milano to the Medicines Company (MDCO) which is still working on it.
Newton used the initial $22.75 million to buy back the patent for the molecule, ETC-1002, also developed by the first Esperion and which, as he remarked, excited him more than anything he had ever seen before. He brought a number of former Pfizer and Esperion employees with him and restarted Esperion.
Selling a company for a billion bucks and buying it back for $23 million: that sums up in a nutshell the financial genius that is Roger Newton.
ETC-1002
In September Esperion Phase 2a study demonstrated that the oral, once-daily ETC-1002 achieved incremental LDL-C lowering of 22 percent at eight weeks, compared with 0 percent in the placebo group, when added to 10 mg of atorvastatin.
Newton commented:
"Since a 10 mg dose of atorvastatin provides 30 to 35 percent LDL-C lowering, the addition of ETC-1002 could potentially provide LDL-C lowering of greater than 55 percent with an oral dosing regimen. While statin therapy remains the standard of care for high cholesterol, it is estimated that 11 million Americans are still unable to reach their LDL-C treatment goals despite taking a statin."
ETC-1002 is an add-on to statin therapy in patients who have not achieved their LDL cholesterol goal on a statin alone. Analyst estimate this market to be $6 billion to $10 billion and perhaps four to five times larger than the statin intolerant market opportunity alone.
In clinical practice 10 milligrams of atorvastatin typically lowers LDL cholesterol in patients by 30 to 35 percent. An additional 22 percent coming from ETC-1002 makes this incremental reduction in LDL cholesterol over 50 percent.
The coming 2b study will enroll 322 patients with hypercholesterolemia, with and without a history of statin-intolerance.
As a rule, with statins, as you increase the dose, the efficacy is reduced and the side effects multiply. For example, when you go from 10 mg to 20 mg with a statin, you get a 6 percent reduction in efficacy and a further 6 percent with every doubling of the dose.
So in order to gain a 22 percent reduction you would have to go from of 10 milligrams of Lipitor up to an 80 milligrams dose. The incidents of side effects escalate along with the higher doses.
So Esperion's strategy is a statin sparing dosing regimen for diabetic patients with hypercholesterolemia, or for statin-intolerant patients who can tolerate a very modest dosing of statin. ETC-1002 gives an opportunity to help these patients get to their LDL goal in a much more tolerable way.
The drug also has additional benefits in other cardiometabolic risk factors such as hscRP, the blood pressure glucose in vein, which could benefit millions of patients who are intolerant to statins as well as those that are already taking one.
Market
The market consists of statin intolerant and so-called residual risk patients.
Statin intolerance is estimated to be as high as 20 percent in clinical practice. The FDA recently issued an alert regarding statins and increased risk of raised blood sugar levels and the development of type 2 diabetes and cognitive (brain-related) impairment, such as memory loss, forgetfulness and confusion.
The initial target of ETC-1002 are patients with elevated levels of LDL-C, or hypercholesterolemia, who are statin intolerant.
Various studies estimate that more than 50 percent of patients stop taking statins within one year of initiating treatment. The result of the poor statin adherence is worse cardiovascular outcomes. Although several reasons are cited for poor adherence, muscle pain or weakness is the most common side effect experienced by statin users and the most common cause for discontinuing therapy.
In addition to the 2 million U.S. adults who have discontinued statin therapy because of muscle pain or weakness, a significant proportion of patients still remain on statin therapy despite these side effects. A study published in the Journal of General Internal Medicine in August 2008 and cited above, estimated that up to 20 percent of statin-treated patients in clinical practice complained of muscle pain.
The residual risk market consist of patients who are unable to reach their recommended LDL-C goals despite using statins. The severity of hypercholesterolemia in these patients, their level of residual cardiovascular disease risk and their therapeutic options all vary widely. Using data from the CDC study, "Vital Signs: Prevalence, Treatment, and Control of High Levels of Low-Density Lipoprotein Cholesterol" Esperion estimates that 70 percent of the 11 million residual risk patients in the U.S., or 7.7 million people, are within 30 percent of their LDL-C goal. ETC-1002, if approved, could be a preferred therapeutic alternative for patients with residual risk, physicians and payors.
Competition
Several large companies have PCSK9 inhibitors in development that would compete with ETC-1002 including SAR236553/REGN727, a therapy in Phase 3 development being developed by Sanofi (SNY) and Regeneron (REGN), AMG-145, developed by Amgen (AMGN); and CETP inhibitors, such as MK-0859, a therapy that has completed a Phase 2b is being developed by Merck (MRK), and LY2484595, a therapy that is being developed by Eli Lilly (LLY).
The most recent new cholesterol drugs, Juxtapid from Aegerion Pharmaceuticals (AEGR) and Kynamro from Isis Pharmaceuticals (ISIS), have focused on patients with a severe genetic disease that causes their cholesterol to be very high. Newton and his team are going for a riskier strategy that would yield far more patients: they hope to do clinical trials for patients who can't take statins because of their muscle side effects. Amgen and Sanofi are pursuing similar strategies for their PCSK9 shots.
In order to really capitalize on the drug in a broad market, Esperion probably will need a large pharmaceutical company to partner with.
Investors' summary
Esperion reported a net loss of $6.9 million for the second quarter of 2013 and $11.2 million for the six months ended June 30, 2013, compared with a net loss of $3.2 million and $5.6 million for the comparable periods in 2012.
At June 30, 2013, cash and cash equivalents totaled $16.6 million compared with $6.5 million at December 31, 2012. The increase was primarily driven by net cash proceeds of $17.0 million from a preferred stock financing in April. Cash and cash equivalents at June 30, 2013, did not include the net proceeds of $74.9 million resulting from the completion of the IPO and the exercise of the underwriters' over-allotment option in July 2013, which is net of underwriting discounts and commissions.
The IPO has got a warm reception and the offering size was increased from 4.5 million to 5 million shares at $14 per share, hitting the midpoint of its proposed range of $13 to $15 per share.
Esperion expects to have cash of around $75 million at the end of December. The company believes that existing cash resources will fund it until at least the end of 2015. Full-year 2013 net cash used in operating activities is expected to be approximately $25 million.
Esperion has completed seven clinical studies of ETC-1002 to date, including four Phase 2a studies, and expects to start a robust Phase 2b clinical program in the fourth quarter of 2013.
The stock price in the past 52 weeks ranged from $13.55 - $20.10 and the market cap is $236.50 million.
When it comes to new drugs development these days, atherosclerosis is pushed into the background by cancer and neurological disorders.
After a series of high profile failures at Pfizer, Merck and AstraZeneca and the rise of cheap generic versions of statins, drug companies have fled the field. Amgen, Sanofi and others are developing PCSK9 inhibitors, in part because the genetic research behind it is too compelling to pass it by.
While cardiovascular mortality rates have declined in recent years, the disease remains the #1 cause of death in the U.S. Statin use helped to improve the statistics, but suboptimal lipid management remains a problem.
85 percent of patients with diabetes in the U.S. cannot control glucose, blood pressure & lipids. Statin intolerance is estimated to be as high as 20 percent in clinical practice. For these problems and others new therapies are needed.
It appears that the only one new cholesterol-lowering pill in mid-stage development is Esperion's ETC-1002.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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. (More...)
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