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Thursday, March 5, 2015

DURECT's Endogenous Epigenomic Regulator DUR-928 - What You Need To Know

By Jason Napodano, CFA & Nisha Hirani, MD

On March 2, 2015, DURECT Corp. (DRRX) introduced to investors its Epigenomic Regulator Program, with the news that lead candidate DUR-928 had recently completed a Phase 1 safety trial. 

Management is clearly excited about adding DUR-928 to DURECT's pipeline, as it is part of a peak interest area in modern day scientific research and could be a game changer in the arena of metabolic disease, inflammatory conditions, and other orphan indications. During a conference call held on March 2nd, Jim Brown, CEO and President of DURECT, enthusiastically stated that "DUR-928 is the most exciting molecule" that he has worked on in his 30 year career in the industry.

DUR-928 appears to be an endogenous epigenomic regulator of many cellular systems and pathways, and thus may have a broad range of clinical applications. DURECT believes DUR-928 could be classified within a new class of steroids with completely novel mechanisms of action. The program was in-licensed in 2012, and DURECT holds exclusive worldwide rights with issued and several pending patents for the development and commercialization of DUR-928 and other molecules affiliated with the program. Management spent $5.8 million on the program in 2014, second only to POSIDUR.

In our article posted on Seeking-Alpha, we highlight some of the preclinical and initial clinical data on DUR-928, note potential future clinical plans and potential indications of use, and summarize with an overall conclusion about DURECT as an investment.

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Wednesday, March 4, 2015

A Deep Look At Amarantus’ Phase 2b Eltoprazine For Parkinson’s Dyskinesia

By Jason Napodano, CFA & Nisha Hirani, MD

On February 10, 2015, Amarantus Bioscience Holdings, Inc. (AMBS) announced the publication of Phase 2a results of eltoprazine for the treatment of Parkinson's disease levodopa-induced dyskinesia (PD-LID) in Brain – A Journal of Neurology entitled: “Eltoprazine Counteracts L-DOPA-induced Dyskinesias in Parkinson's Disease: A Dose-Finding Study.” The recently published findings hold significant potential for the treatment of PD-LID and improving the quality of life for patients with Parkinson’s disease.

On February 23, 2015, Amarantus filed an IND application with the U.S. FDA seeking to initiate a Phase 2b study with eltoprazine in the second quarter 2015. We believe future studies are critical to confirm the long-term effects of eltoprazine administration. Positive results from the Phase 2a trial published in Brain support progress into Phase 2b longer-term dosing studies for eltoprazine in the treatment for patients suffering with PD-LID. Below we provide a brief background on Parkinson’s disease, LID, and why Amarantus believes eltoprazine is an exciting potential new treatment option for this large, unmet medical need.

Quick Background On Parkinson’s Disease

Parkinson’s disease (PD) is a chronic, progressive neurodegenerative disorder that is classically characterized by the clinical tetrad of symptoms: resting/pill-rolling tremor, rigidity, postural instability, and slow movements (bradykinesia). James Parkinson, an English doctor and social reformer, published the first detailed description of the disorder in An Essay on the Shaking Palsy in 1817. French physician Jean-Martin Charcot attached Parkinson's name to the disease forty years later.

According to the Parkinson’s Disease Foundation, PD affects close to one million people in the United States and between seven to ten million individuals worldwide with 60,000 new cases diagnosed annually in the U.S. alone. PD can cause significant disability and impairment as well as decreased quality of life. The clinical manifestations of the disease arise from the degeneration of neurons in the substantia nigra of the midbrain (left), resulting in the gradual depletion of the neurotransmitter dopamine (center). Although the exact etiology of Parkinson’s disease remains unknown, it has been speculated that a combination of genetic and environmental factors may play a role in acquiring the disease (Schapira, 2009). For instance, mutations in the parkin or synuclein genes, and exposure to environmental agents such as toxins and pesticides could contribute to an increased risk of developing PD. A characteristic histopathological sign of PD is the abnormal accumulation of proteins, namely alpha-synuclein protein, in Lewy Bodies in nerve cells throughout the brain (right).

In addition to the aforementioned hallmark signs of Parkinson’s disease, there are many secondary motor and non-motor symptoms associated with the disease (left). As the disease progresses, motor coordination in PD patients is often dramatically reduced. Muscle pain and fatigue are common findings in PD patients. Freezing of gait, stooped posture, and shrinkage in handwriting (micrographia) can be seen in some patients (right). 

Additionally, the face can become mask-like or less expressive than normal due a decrease in facial movements. Drooling, difficulty swallowing and excessive saliva can also be observed. Speech often becomes slurred and difficult to initiate. Postural instability becomes more prominent over the course of the disease, resulting in difficulty walking and maintaining balance. Voluntary movement may unexpectedly halt. PD patients find it increasingly difficult to initiate and control movement as the disease advances, eventually leading to desperation, solitude, disability and the loss of independence.

PD patients can also exhibit non-motor symptoms like autonomic dysfunction (orthostatic hypotension, constipation, sexual dysfunction), cognitive impairment (memory difficulties, dementia, confusion and slowed thinking), sleep disorders, mood disorders (depression and anxiety), psychosis as well as hallucinations. Parkinson's disease psychosis (PDP) can be seen in up to 40% of PD patients ten years after initial diagnosis, and has been linked to antiparkinson drugs including but not limited to dopamine agonists (Poewe W, 2003). Visual hallucinations are the most observed clinical manifestation of PDP, along with dementia, anxiety, depression, and insomnia. This area is of particular interest to Acadia Pharmaceuticals (ACAD) and its late-stage inverse agonist of the 5-HT2A serotonin receptor, Nuplazid™ (pimavanserin).

Current Treatment Options for PD

There are no pharmacological agents that can cure, modify or reverse Parkinson’s disease on the market today. This is why the main focus for many researchers has been to find an agent capable of halting or slowing down disease progression. Current treatment options available for PD patients focus on management of symptoms while minimizing side effects through individualized treatment plans. These plans can include pharmacological agents, surgical procedures (such as deep brain stimulation) as well as physical therapy, alternative treatments, diet and exercise modifications. The most frequently prescribed treatment regimen of PD aims to increase dopamine levels in the brain. Current FDA approved pharmacotherapies for the management of PD symptoms include dopamine replacement therapies (DRTs) combined with dopa decarboxylase inhibitors, dopamine agonists, MAO-B inhibitors, NMDA receptor inhibitors, COMT inhibitors, and anticholinergics. When creating a patient-specific treatment plan for PD, physicians will take into account the age of the patient, severity of the disease, present symptoms, medication list, and other co-morbidities.

Levodopa formulations are the most commonly used and most effective DRTs for the treatment of PD motor symptoms. Levodopa (L-DOPA) was first studied in the 1960s and has been available for over 30 years. Dopamine is not effective in treating Parkinson’s disease because it cannot cross the blood-brain barrier. On the other hand, levodopa (the metabolic pre-cursor to dopamine) is absorbed from the small intestine and crosses the blood-brain barrier where it is converted to dopamine by dopa decarboxylase (a striatal enzyme) and subsequently stored in neurons. Although the administration of levodopa temporarily reduces the motor symptoms associated with the lack of dopamine in the substantia nigra, only a small amount of L-DOPA actually enters the central nervous system (CNS) due to the rapid metabolism of dopamine in other areas of the body. This leads to unwanted side effects such as nausea, vomiting, dyskinesia, low blood pressure and stiffness. To address this problem, carbidopa, a dopa decarboxylase inhibitor, stops the metabolism of levodopa to dopamine in the systemic circulation. This in turn allows for greater delivery of levodopa into the brain. Carbidopa also helps reduce the unwanted side effects of nausea and vomiting of levodopa. Co-formulations of carbidopa/levodopa (Sinemet®) are available and are the gold standard for the management of symptoms in PD.

Limitations & The Problems That Exist for Patients Due to Levodopa

Although levodopa provides great benefit in the treatment of motor symptoms in PD with minimal short-term side effects, increased dosage and extended use of the drug can lead to debilitating long-term side effects such as dyskinesia (involuntary movements), loss of levodopa efficacy, toxicity, and motor fluctuations. These motor fluctuations can include the “on-off” effect, the “wearing off” effect, and early-morning akinesia.

Despite the effectiveness of levodopa in the reduction of PD related motor symptoms, clinicians often attempt to delay levodopa therapy until the disease has progressed to a moderate-to-severe stage. However, since PD is a progressive, neurodegenerative disease, virtually all patients progress to the point where they require levodopa at some point over the course of their treatment. After a decade of therapy, almost all PD patients will require higher doses of levodopa as well as surgical options such as deep brain stimulation (DBS). It’s important to reiterate as the dose and usage of levodopa increases, incidence of levodopa-induced dyskinesia (LID) also increases.

One of the major shortcomings of levodopa is that it has a relatively short half-life, which therefore requires frequent dosing on average of 3 to 4 times a day. Some patients may even require several additional doses. Peak plasma concentrations of levodopa occur 60 to 90 minutes after dosing and this also coincide with peak side effects, such as dyskinesias. The necessity for recurrent levodopa dosing often turns into a nuisance for patients, leading to compliance issues especially around bedtime and during their sleep schedule. Frequent dosing leads to dramatic fluctuations of plasma levodopa concentrations, which contribute to erratic “off” and “on” periods noted above. This phenomenon is known as the “on-off” effect. These periods usually occur without any warning. An “on” period refers to times when levodopa is in the system and may manifest as uncontrollable movements of dyskinesia. On the contrary, “off” periods occur suddenly when levodopa has left the system. Oftentimes patients experience akinesia (frozen or rigid state) during these “off” periods. Treatment of these “off” episodes is of particular interest to Cynapsus Therapeutics (CYNAF) and their late-stage sublingual formulation of apomorphine, APL-130277.

“Wearing off” refers to levodopa becoming less effective over time and the re-emergence of motor or non-motor symptoms before the next dose is administered. Symptoms of Parkinson’s tend to return as the dose period progresses to its end and before the next dose become effective. Most patients develop some degree of wearing off within 5 years of treatment onset but the effect has been reported in patients within six months of initiation of levodopa treatment. The “wearing off” effect can become more pronounced as the disease progresses.

Dyskinesia is a clinical manifestation linked to long-term usage of levodopa. Levodopa-induced dyskinesia (LID) refers to the abnormal, involuntary movement following administration of the drug. The dyskinetic movements often coincide with the peak effect of levodopa (peak dose dyskinesia), but may also occur when plasma concentrations rise and fall (diphasic dyskinesia) or during off-time (off-period dystonia). LID can appear as sudden, uncontrollable writhing, jerking, or fidgeting motion of the head, neck, limbs or other body parts. The major types of dyskinesia include chorea (abnormal, unpredictable involuntary movements), and dystonia (abnormal postures, and sustained muscle contraction), and athetosis (slow, involuntary writhing movement).

The motor fluctuations mentioned above can sometimes be reduced or prolonged by adjusting the dosage amount and timing of levodopa administration. In the same way, physicians may add other medications, such as dopamine agonists or MAO-B inhibitors, to the treatment regimen to help alleviate these motor complications. As mentioned above, physicians often delay levodopa therapy, especially in younger patients, in hopes of delaying the onset of dyskinesia and other adverse effects of levodopa treatment. On the contrary, in advanced phases of the disease, patients do not respond well to levodopa and some clinician may try to increase doses in an attempt to reach effective plasma concentrations. Unfortunately, this usually exacerbates motor symptoms in PD patients. On the other hand, some physicians may attempt to prescribe more frequent, lower doses or ER formulations of levodopa are used to reduce dyskinesias at the expense of optimal motor function (Thanvi et al., 2007).

The changes in levodopa response patterns as PD progresses in the image above, emphasize the quality of life problems that currently exist for PD patients. According to an observational registry, Implications of Motor Fluctuations in Parkinson's Disease Patients on Chronic Therapy (IMPACT), the three most common issues facing patients on levodopa therapy are wearing off (reported by 81%), sudden onset (42%) and latency to on (40%). The average duration of an off period was 50 minutes. Results were presented at the 9th International Congress of Parkinson's Disease and Movement Disorder in 2005.

The Unmet Need & The Opportunity

There are no disease modifying agents to treat Parkinson’s disease. Similarly, there are no approved treatment options for Parkinson’s disease levodopa-induced dyskinesia (PD-LID). Although levodopa is the primary treatment agent to manage motor symptoms of PD, patient response to levodopa changes over time and long-term use of levodopa can induce harmful side effects, namely dyskinesias. A survey of KOLs (key opinion leaders) in the Parkinson’s treatment space highlighted the fact that dyskinesia is the most important unmet medical need in the treatment of PD after a disease modifying agent (Datamonitor, 2011). The current options out there are suboptimal and leave patients with a plethora of adverse motor and non-motor effects. PD-LID is debilitating and drastically reduces the quality of life for patients.

Two studies in Movement Disorders Journal showed that the annual cost to the U.S. economy associated with Parkinson’s disease is at least $14.4 billion dollars. Personal medical expenses were calculated to run approximately $22,800 per PD patient compared to $10,000 for a non-PD patient (Kowal et al., 2013 and Johnson et al., 2013). Some experts, such as Amy Comstock Rick, former CEO of Parkinson’s Action Network, believe that these numbers are actually much higher as data was limited for the studies, and in turn conservative estimates were made. The prevalence of PD is projected to double by 2040 as the baby-boomer population reaches retirement combined with the current trend towards increasingly longer life expectancy. In 2010, the CDC reported Parkinson’s disease as the 14th leading cause of death in the United States.

We see a large unmet opportunity for a product like eltoprazine. Due to the absence of therapies in the market that address levodopa-induced dyskinesia, companies like Amarantus have a meaningful opportunity to improve the quality of life of PD patients. We see significant clinical and pharmacoeconomic benefit as well. On the clinical side, neurologists and movement disorder doctors may be able to maintain effective doses of levodopa for longer periods of time if the significant dyskinetic side effects of the drug were tempered by a medication like eltoprazine. On the pharmacoeconomic side, a significant number of PD patients are moved into nursing homes and long-term care facilities as the disease progresses. Falls are the number one reason why patients move from home care to acute care facilities. An effective medication that mutes the dyskinetic side effects of levodopa and allows the PD patient to maintain greater motor control has the potential to keep patients out of nursing homes and long-term care facilities. This would be a significant cost savings to the U.S. healthcare system.

Amarantus sees this as a $1 billion or more opportunity. We discuss our thoughts below on potential peak sales for eltoprazine and what that may be worth given the current stage of development.

Background on Eltoprazine & Phase 2a Results

Eltoprazine is a selective 5HT1A/1B partial receptor agonist of the serotonergic system. The primary focus is on PD-LID; however, Amarantus is also studying the use of eltoprazine in Adult Attention Deficit Hyperactivity Disorder (ADHD). Eltoprazine was first developed by Solvay Pharmaceuticals (now Abbvie) and later acquired by PGI Drug Discovery LLC (formerly Psychogenics Inc.). Amarantus picked up eltoprazine in January 2014 for $100,000 in cash and $500,000 in stock. Amarantus recently paid another $500,000 in milestones to the company. In September 2014, Amarantus announced that it submitted a request to the FDA for eltoprazine in LID Phase 2b clinical trial design review.

Eltoprazine has demonstrated a good safety profile thus far in human clinical testing. According to Amarantus, eltoprazine has been evaluated in nearly 30 Phase 1 and 2 studies. The drug has been studied in 682 male and female subject, 306 of which were healthy controls. Another 307 subjects were schizophrenic or displayed aggression, 47 patients had ADHD, and 22 patients had PD-LID. Doses tested in human subjects range between 2.5 and 60 mg (30 mg BID), with 262 patients having exposure of at least 8 weeks (maximum exposure is 747 days). The expected therapeutic range in PD-LID is between 5 and 15 mg. The drug has displayed good oral bioavailability, no CYP inhibition and little CYP metabolism, and a plasma half-life of approximately 8 hours.

According to PsychoGenics, the eltoprazine pre-clinical data is extensive and multiple models in rodent and primates show that the drug effectively reduces LID. The rational for studying eltoprazine in LID is as follows (Carta et al, 2007):

1) Normal L-Dopa is taken up by dopamine terminals and converted into dopamine that is released in a controlled manner.
2) As PD progresses and dopamine terminals are lost, L-Dopa is taken up by serotonin terminals.
3) Lack of negative feedback on these serotonergic terminals for dopamine release causes excessive swings in dopamine levels, resulting in LID.
4) Activation of pre-synaptic serotonin receptors by 5HT1A/1B agonist controls dopamine release, thereby diminishing LID.

Positive Phase 2a human clinical trial data for the treatment of PD-LID with eltoprazine was recently published in BRAIN - A Journal of Neurology. The Michael J. Fox Foundation (MJFF), the world’s largest private funding organization for PD research, provided partial grant support for this proof-of-concept study via their Partnering Program back in 2012. As a side note, the MJFF has made a concentrated effort to repurpose drugs for the treatment of Parkinson’s disease, and they listed eltoprazine as one of these key drugs (slide 13) in their December 2012 presentation. This is not the first clinical trial to show efficacy of eltoprazine for PD-LID. The MJFF has funded additional work testing eltoprazine in combination with other candidates for PD-LID, including amantadine.

The eltoprazine Phase 2a trial was a double-blind, randomized, placebo-controlled dose finding study conducted at two sites in Sweden, the Karolinska Hospital and Lund University. Twenty-two patients with Parkinson’s disease and L-Dopa-Induced Dyskinesia received a single dose of placebo and eltoprazine, at 2.5, 5 and 7.5 mg, in combination with a challenge dose of levodopa over the course of five dosing visits (see figure below). Two independent, blinded assessors scored patients for dyskinetic and motor symptoms over a period of three hours following treatment via video-recordings. The patients were rated using the Unified Parkinson’s Disease Rating Scale Part III (UPDRS III), Clinical Dyskinesia Rating Scale (CDRS), and Rush Dyskinesia Rating Scale (RDRS). Secondary endpoints included the CDRS, RDRS and evaluation of the patients' mood using the Hospital Anxiety & Depression Score (HADS) and Montgomery-Asberg Depression Rating Scale (MADRS).

Clinical data from this study demonstrate that eltoprazine exhibited a statistically significant reduction of LIDs at both the 5 mg and 7.5 mg doses using the Combined Dyskinesia Rating Scale, without adversely affecting levodopa efficacy (as indicated by UPDRS Part III). The results equated to an approximate 9-15% reduction in LIDs. The 5 mg dose also showed significant anti-dyskinetic effects on the Rush Dyskinesia Rating Scale. All doses of eltoprazine were well tolerated with no significant adverse events reported. The most frequent treatment-emergent adverse events were fatigue, nausea, and dizziness (see full paper for more detail). These results show that eltoprazine administered with levodopa can have beneficial effects on the dyskinetic side effects of levodopa therapy. Primary and secondary endpoints have been met for eltoprazine in Phase 2 trials in PD LID.

Further analyses show that the largest antidyskinetic effect (measured by the change in CDRS) of eltoprazine occurred during the last hour of the test session at all three dose levels, and also indicated a dose-response relationship. In this study, PK analyses showed a Tmax of eltoprazine between 2 and 4 hours after dosing, while the Tmax of levodopa preceded that of eltoprazine by approximately 1 hour. Since levodopa and eltoprazine were administered at the same time, it is very likely that pre-treatment with eltoprazine before levodopa dosing would produce a more pronounced antidyskinetic effect. This leads us to believe that the overall antidyskinetic effects of eltoprazine are largely underestimated and warrant further exploration in upcoming studies with improved PK/PD of eltoprazine dosing. 

Professor Svenningsson, one of the lead investigators of the Phase 2a study stated that, “The treatment seems to be tolerated well by most Parkinson’s patients and counteracts L-dopa-induced dyskinesia via a new mechanism of action. If our initial findings can be confirmed, this type of therapeutic principle can be of immense clinical benefit to a particularly vulnerable patient group.”

Challenges & Competition

Although the Amarantus Phase 2a results for eltoprazine show potential, we do have some areas of concern. We need to be sure that future PD-LID drugs do not worsen parkinsonian symptoms with long-term usage and that they do not alter the efficacy of other PD medications that a physician may prescribe to a patient with PD.

As in the case with SSRIs (selective serotonin reuptake inhibitors), serotonergic receptors run the risk of desensitization upon chronic administration of a drug that acts on the serotonin pathway. Since eltoprazine is a selective 5HT1A/1B partial receptor agonist of the serotonergic system, it is important to find out if this phenomenon will also occur with chronic administration, and thus, render the drug inefficacious in the long-term. We discussed this issue with management recently. Management does not seem concerned about this situation arising and is pretty confident that the well-established safety profile of eltoprazine will allow for dose adjustments if the need arises. The company believes that if there is an issue, it should show up during the Phase 2b trial and can be addressed at that point.

Some researchers believe that the actual number of PD patients that experience LID severe enough (the ones that interfere with activities of daily living) to warranty therapeutic intervention is actually much lower than 50%. For example, Bargiotas et al., 2013 argues that while 50% may be a good number to use when discussing the overall percent of PD patients that experience LID, the number that experience LID to the severity to warrant medical treatment may be far lower.

Competition is another potential hurdle for Amarantus in cornering the PD-LID market. Several companies and organizations are working on pharmaceutical treatment options for LID. Below we will highlight some of the competition for Amarantus:

· Amantadine was initially developed as an antiviral medication to treat influenza in the 1960s and was coincidentally discovered as a treatment for Parkinson’s disease. Amantadine usually provides only mild relief, but is the only drug currently prescribed to treat PD LID. It is seldom used in early stages of PD. Amantadine is used in combination with levodopa to treat dyskinesias. Amantadine is commonly available as 100 mg capsule, although liquid and tablet forms can also be obtained.

· ADS-5102 is designed to address many of the limitations of immediate-release amantadine being developed by Adamas Pharmaceuticals (ADMS). Clinical studies demonstrated a two-fold increase in amantadine plasma concentration can be achieved with ADS-5102 vs. the immediate-release formulation. In the Phase 2/3 clinical study (EASED study), ADS-5102 met its primary endpoint and several key secondary endpoints. Results from the EASED study were presented at the 17th International Congress of Parkinson’s Disease and Movement Disorders and at the 9th World Parkinson’s Congress. On February 9, 2015, Adamas announced the publication of the EASED results in Movement Disorders. Adamas is currently conducting three Phase 3 trials for the treatment of PD-LID. If the Phase 3 registration trial of ADS-5102 is successful, Adamas plans to submit a New Drug Application (NDA) to the U.S. FDA for ADS-5102 in the first half of 2016. This is potentially two years before Amarantus would be in position to file the NDA on eltoprazine.

· Dipraglurant: Addex Therapeutics is developing dipraglurant, an oral negative allosteric modulator (NAM) of the metabotropic glutamate receptor 5 (mGluR5), for the treatment of PD-LID. Dipraglurant was examined in a randomized, double blind, placebo controlled Phase 2a trial in 83 subjects with moderate-to-severe Parkinson's disease. Results show that dipraglurant was safe and well tolerated with the most important side effects being vertigo, blurred vision, and a drunk feeling but none of these was severe. Results on the modified AIMS scale showed statistically significant improvement on days 1 and 14, with clinically relevant reductions in the dipraglurant group on all three periods tested (days 1, 14, and 28). We note Addex had specifically been looking to out-license dipraglurant for the initiation of a Phase 2b study since 2012. Addex recently announced partnering up with the Dystonia Medical Research Foundation (DMRF). The collaboration will focus on design for a Phase 2 clinical trial and will soon start clinical testing on cervical dystonia patients.

Eltoprazine Phase 2b Study To Begin Soon

As noted above, the IND application was filed on February 23, 2015. The Phase 2a study took place in Sweden. This will be the first U.S. clinical study with eltoprazine, so Amarantus had to clear the trial design and protocol with the FDA. Assuming smooth clearance of the IND, the company should be in position to start the Phase 2b study in April 2015.

The eltoprazine Phase 2b trial is suspected to be a double-blind, placebo-controlled, four-way crossover, dose range finding study with expert PD centers located in the U.S. and Europe. The purpose of the study will be to further evaluate the dose response effect of chronic dosing of eltoprazine on the safety, tolerability and dyskinesia using rating scales (like the Unified Dyskinesia Rating Scale), motion sensors and patient diaries.

According to management, patients will be dosed for 9 weeks with a twice-daily formulation. There will also be an opportunity to adjust dosing as needed. The motion sensor evaluation tool is of peak interest for the management team. This is a novel way to assess the severity of dyskinesia and will help evaluators see how well eltoprazine is working. It is an objective way of looking at dyskinesia severity, duration and occurrence and can differentiate between dykinesia, bradykinesia, tremor and normal movement. It will serve as a valuable tool, especially when comparing it to patient diaries, in interpretation of study data and the design of the pivotal Phase 3 program in 2016. Some clinicians are already using motion sensor technology, and this may have peaked the interest of the MJFF.

Previous animal model data was predictive of the therapeutic dose levels in the Phase 2a proof-of-concept study. In designing this next phase, animal pharmacokinetics and human pharmacokinetics will be used to establish the dosing profiles. The team will model the plasma concentration to treatment. There may be an opportunity to create a layered capsule with a modified release profile. A dedicated formula to reach effective plasma levels of the drug may require administering the formulation as two different capsules. There may be an interesting opportunity in the future to study the additive additive antidyskinetic actions of eltoprazine and amantadine.

Thoughts On What Eltoprazine Is Worth

According to a literature survey of over 2,000 publications, approximately 40% of PD patients will experience LID after 4 to 6 years on levodopa therapy. Another review found that up to 85% of PD patients will experience symptoms of LID. This number can rise to approximately 90% after long-term levodopa treatment (Del Sorbo et al., 2008). These statistics show that PD-LID continues to be a problem for patients and physicians alike.

According to Amarantus, up to 80% of PD patients will be diagnosed with PD-LID during the course of their disease. Management believes that the occurrence of LID is heavily underreported as individuals tend to accept LID to be a secondary effect of PD. Nevertheless, with 60,000 new PD diagnoses each year and an estimated 3 million individuals affected by the disease in 2032, eltoprazine presents as an interesting opportunity for investors as there is an unmet clinical need in the area of PD-LID treatment. There are currently no drugs that treat PD-LID on the market.

We have built a detailed financial model looking at the potential peak sales opportunity for eltoprazine in the U.S. We have input the following variables to the model:

· We start with approximately 1 million PD patients in the U.S., and use the most conservative 40% number as the percent that will develop LID over time (note this is significantly less than the company’s 60-80% estimate).

· We assume the Phase 2b study starts in April 2015 and completes later this year. That should lead to a Phase 3 study in 2016, U.S. NDA filing in 2018, and launch in 2019. We apply a 25% probability adjustment to these assumptions.

· We believe Amarantus will seek a commercial partner for eltoprazine after the Phase 2b data if successful. There are an estimated 16,000 neurologists in the U.S, about half of which specialize in movement disorders or treat Parkinson’s patients. This is clearly a specialty pharmaceutical promotion. We believe with strong Phase 2b data, Amarantus can partner eltoprazine for $30 to $50 million upfront and $300 to $400 million in total potential. We are using the May 2009 transaction between Acadia Pharma and Biovail for pimavanserin ($30 million upfront + $365 million total potential) as the key basis for what a deal might look like. In May 2009, pimavanserin was coming off positive Phase 2 data and had development potential in PDP, Alzheimer’s disease psychosis, and schizophrenia.

· We assume eltoprazine will cost approximately $15,000 per year when it launches in 2019. This is consistent with other Parkinson’s disease drugs and what we expect Acadia to charge for Nuplazid (pimavanserin) if approved in 2016. We assume Amarantus, or its commercial partner, can achieve 12% peak market share by 2026. This would place peak U.S. sales in the $1 billion range. We expect Amarantus will collect between 15 and 20% royalty on these sales (note Biovail agreed to pay Acadia 15-20% royalty on pimavanserin back in 2009). We believe the opportunity outside the U.S. is another $500 million or more.

· We are using a 25% discount rate, consistent with Amarantus cost of capital based on the company’s most recent financing. Our model forecasts cash flow to 2031, the time of the eltoprazine method of use patent expiration.

We arrive at a fair-value assumption for eltoprazine today of approximately $45 million USD. We believe this number could triple in value if the Phase 2b trial is successful. Our $45 million fair value calculation today assumes no contribution from eltoprazine in adult ADHD. We note that eltoprazine has been studied in 47 human subjects with ADHD, with data published in the European Journal of Pharmacology (Alexandrov et al, 2015). Human data with eltoprazine in adult patients with ADHD demonstrates a magnitude of drug effect comparable to stimulants, with statistically significant reductions in ADHD scores found for both 5 and 10 mg doses. We intend to explore the potential for eltoprazine in adult ADHD through an article later in 2015, once Amarantus outlines development plans for the drug in this indication.

Closing Thoughts

Amarantus as a company has a number of other value drivers, including the potential for LymPro and biomarker services revenue, the recently expanded diagnostic division, an engineered skin substitute for severe burns soon to enter Phase 2, and MANF for Orphan ophthalmologic indications. Amarantus currently trades with a market capitalization of only $90 million. We believe moving eltoprazine into Phase 2b studies in the next month is a major awareness event for the company and sets up an important potential catalyst and valuation inflection point when the data becomes available later this year.

Amarantus is now a commercial-stage company with LymPro and a clinical-stage company with eltoprazine and ESS. It’s also an Orphan-focused company with MANF. We believe Amarantus shares, although high risk, are highly attractive for investors today based on the potential success of its pipeline, and drugs like eltoprazine for the treatment of PD-LID.

Tuesday, March 3, 2015

Healthy Cash Balance And Multiple Catalysts Should Drive Tonix Shares Higher

By Jason Napodano, CFA

On March 3, 2015, Tonix Pharmaceuticals (TNXP) reported financial results for the fourth quarter and full year ending December 31, 2014. In the press release, management provides a nice update on the three clinical programs that should drive value-creation in 2015. These programs are TNX-102SL for fibromyalgia, TNX-102SL for PTSD, and TNX-201 for tension-type headache.

In our research report (download here) we have outlined our assumptions for the sales and market opportunity for each of the company’s three clinical programs. For TNX-102SL in fibromyalgia, we assume approval and launch in early 2019, with the drug costing approximately $15 per day. We are assuming Tonix (or its partner) can capture 5% of the market by 2023, with peak sales of $750 million. If we apply a 20% discount rate and 25% probability of success to the asset, we arrive at a net present value (NPV) for TNX-102SL in fibromyalgia of approximately $150 million. 

For PTSD, a slightly smaller peak sales opportunity of $450 million exists. We believe approval of TNX-102SL in PTSD is approximately one year behind the timelines noted above for fibromyalgia. Thus, our NPV analysis for TNX-102SL in PTSD yields a fair value valuation of approximately $50 million. We believe there is potential for Tonix to receive partial funding of the AtEase study from the U.S. Department of Defense (DOD) not currently factored into our model. Nevertheless, together, we believe TNX-102SL in PTSD and fibromyalgia are worth roughly $200 million in NPV. We remind investors that TNX-102SL is protected by a pharmacokinetic patent that does not expire until 2033 and a composition-of-matter patent that does not expire until 2034.

For TNX-201, we place slightly lower odds of success in our NPV model simply due to the earlier-stage nature of the candidate. However, even with applying as low as a 10% chance of success, we still believe this candidate is worth $40 million in NPV based on peak sales of approximately $450 million in 2023.

Summing up our NPV calculations we arrive at a total firm value of approximately $260 million. Based on the fully-diluted share count of approximately 17.1 million, we see fair-value at $14 per share. We remind investors that Tonix exited December 2014 with $38.2 million in cash and investments. Operating burn in 2014 was $23.2 million. In January 2015, Tonix raised approximately $27 million through a public offering. We model cash on hand as of March 31, 2015 will be approximately $59 million ($3.47 per share). We believe this is sufficient to fund operations through year-end 2016. Between now and then, Tonix should report:

- Full data from BESTFIT at EULAR in June 2015
- F203 Long-term safety study analysis from BESTFIT in August 2015
- Phase 2 data with TNX-201 in the Q4-2015
- Phase 2 data from AtEase in PTSD with TNX-102SL around mid-2016
- Phase 3 data from AFFIRM in fibromyalgia with TNX-102SL in the Q4-2016

We view Tonix high cash balance as a significant reduction in risk for investors. Cash currently makes up 58% of the value of the company. More importantly though, the soon-to-be three active clinical programs are sure to draw significant investor attention to the name throughout the year. Our model tells us the stock is worth $14 per share. We believe investors with a 12-18 month time horizon can buy Tonix today and see nice returns as clinical progress drives the shares higher.