Last week Cambridge, MA-based Acceleron Pharma (NASDAQ:XLRN) had a successful IPO listing on the Nasdaq: it was trading up 30 percent to almost $20 a share from its IPO price of $15 at noon on its first day of trading.
Acceleron raised $84 million by offering 5.6 million shares, up from the originally planned 4.7 million. The company now has a market cap of approximately $514 million. Collaboration partner Celgene (NASDAQ:CELG) invested $10 million (700 thousand shares) in a concurrent private placement.
Acceleron has three mid-stage programs: Sotatercept, ACE-536 and dalantercept.
The first two are developed in partnership with Celgene. The treatments are designed to boost red blood cell production in patients suffering from rare cases of beta-thalassemia and MDS (myelodysplastic syndromes). ACE-536 has won an orphan drug status from the FDA.
The third drug dalantercept is designed to inhibit blood vessel formation that feed tumors.
Sotatercept and ACE-536
Sotatercept and ACE-536 are the Acceleron's lead protein therapeutic candidates, to treat anemia and associated complications in patients with beta-thalassemia and MDS.
Celgene initially signed a contract with Acceleron in 2008, and expanded the collaboration more recently to include the 536 compound.
Celgene took over responsibility for all costs of the two programs at the beginning of 2013 and is committed to pay up to $567 million in milestones. Acceleron has co-promotion rights in the U.S. with a generous 20 percent-plus royalty cut due from sales made by Celgene, while the commercialization costs will be entirely funded by Celgene.
Six clinical trials were conducted with sotatercept in over 160 healthy volunteers and cancer patients. ACE-536 had been tested in one trial with healthy volunteers. In these studies, both sotatercept and ACE-536 generated a dose-dependent increase in the number of red blood cells.
Plans are being readied for Phase 3 trials in one or both of the diseases by the end of 2014 or early 2015.
Beta thalassemia is a blood disorder that reduces the production of hemoglobin. Hemoglobin is the iron-containing protein in red blood cells that carries oxygen to cells throughout the body.
In people with beta thalassemia, low levels of hemoglobin lead to a lack of oxygen in many parts of the body. As a consequence, the patients have anemia, (a lower than normal number of red blood cells), and many experience a broad array of complications arising from their disease, including an enlarged spleen, skeletal deformities and serious organ damage, such as liver fibrosis and heart failure, resulting from the accumulation of iron.
Both sotatercept and ACE-536 promote the maturation of blood cells in the bone marrow.
There is no approved drug for the anemia of beta-thalassemia. Frequent blood transfusions are used to manage the disease, but they further contribute to the accumulation of iron and associated organ toxicities.
MDS (Myelodysplastic Syndromes Treatment) In these patients the blood stem cells (immature cells) do not develop into healthy red blood cells, white blood cells, or platelets, as it would be natural.
These immature blood cells, called blasts, either die in the bone marrow or soon after they go into the blood. This leaves less room for healthy white blood cells, red blood cells, and platelets to form in the bone marrow. When there are fewer healthy blood cells, infection, anemia, or easy bleeding may occur.
Drugs that stimulate the production of early stage red blood cell precursors, such as recombinant erythropoietin like Epogen and Aranesp from Amgen (NASDAQ:AMGN), are often used to treat anemia in MDS patients, yet many do not experience a substantial improvement with these drugs.
These are large markets.
The Thalassaemia International Federation estimates that there are approximately 300,000 patients worldwide with beta-thalassemia, 20,000 of which are in the U.S. and Europe.
These people are dependent on frequent blood transfusions. It is estimated that at least as many beta-thalassemia patients do not receive frequent blood transfusions. Many of these patients have hemoglobin levels that are half that of normal individuals and experience significant complications from the disease.
Although sotatercept and ACE-536 have similar effects on red blood cells, sotatercept has also been shown to increase bone mass. To take advantage of this, sotatercept is being studied in an investigator-sponsored Phase 1 and a Celgene sponsored Phase 2 trial in multiple myeloma patients. Additionally, many patients with chronic kidney disease suffer from both anemia and bone loss. Celgene is conducting a Phase 2 clinical trial of sotatercept in patients with chronic kidney disease.
Although not approved by the FDA for MDS, anemia drugs are used in these patients to the extent that they generate an estimated $500 to $700 million in annual U.S. sales, according to Acceleron's market research.
Acceleron has no partner in this program and retains worldwide ownership of the drug.
Dalantercept is designed to inhibit blood vessel formation in tumors through a mechanism that is distinct from, and potentially compatible with the VEGF (vascular endothelial growth factor) pathway inhibitors, the currently accepted class of cancer drugs.
The VEGF pathway inhibitors generate worldwide sales over $8 billion annually. Acceleron is developing dalantercept primarily for use in combination with these successful products.
Angiogenesis is a process by which new blood vessels are formed. Tumors depend on new blood vessels to supply them with nutrients and oxygen.
It is a two-stage process in the body. First, the vascular endothelial cells which are lining the inside of the blood vessels, increase in number. This is followed by a second stage during which the endothelial cells combine to form tubes, recruit perivascular cells and create fully functional blood vessels.
The initial stage is driven by the VEGF protein. Inhibiting VEGF-driven angiogenesis is an approved and widely-used approach in cancer therapy using drugs like Avastin sold by Roche.
However, many patients fail to respond or develop resistance to these drugs.
Acceleron has a different approach to inhibit angiogenesis, it inhibits ALK1 (activin receptor-like kinase 1). ALK1 is a regulator of the maturation stage of angiogenesis. ALK1 is one of the 12 receptors in the TGF-beta superfamily of regulatory proteins and found primarily on endothelial cells.
The ALK1 pathway was discovered while studying patients who are unable to fully form small blood vessels (capillary beds). These patients were missing a copy of the ALK1 gene.
A combination of ALK1 and VEGF pathway inhibitors could have application in a number of cancer types where VEGF inhibitors are already used, such as non-small cell lung cancer, colorectal cancer and renal cell carcinoma.
Dalantercept is currently in a Phase 2 trial in patients with head and neck cancer used as a single agent and in a Phase 2 trial combined with VEGF inhibitor Inlyta from Pfizer (NYSE:PFE) in patients with renal cell carcinoma.
Products approved to treat patients with MDS include iron chelation therapy, immunomodulators and various chemotherapies. In addition, erythropoiesis stimulating agents and red blood cell transfusions are extensively used to treat anemia in MDS.
Sotatercept or ACE-536, if approved for the treatment of chemotherapy-induced anemia or anemia of chronic kidney disease, would compete with Epogen and Aranesp, marketed by Amgen, and Procrit, marketed by Johnson & Johnson (NYSE:JNJ). Other therapies, including oral, small molecule treatments are developed by Astellas Pharma (OTCPK:ALPMY) and Fibrogen. Amgen's Aranesp is currently tested for MDS in Phase 3 trials.
While there is currently no drug approved for the treatment of anemia in beta-thalassemia, red blood cell transfusions are extensively used and sotatercept or ACE-536 would compete with this therapy.
HQK-1001, a hemoglobin stimulating agent being developed by HemaQuest Pharmaceuticals, has completed a Phase 1/2 clinical trial and an investigator sponsored Phase 2 clinical trial in patients with beta-thalassemia.
Revenues for the first 6 months of 2013 from collaboration, license and milestone payments, cost sharing and contract manufacturing were $41.4 million.
Net income (not loss) for 6 months was $14.7 million or earnings per diluted share 17 cents.
Cash and cash equivalents at the end of June were $28.5 million.
The company has incurred losses during most fiscal periods since its foundation. As of June 30, 2013, the accumulated deficit amounted to $286.1 million. The company has no approved product and it is uncertain when it will become profitable.
Celgene pays all development, manufacturing and commercialization and certain patent costs for sotatercept and ACE-536. For developing dalantercept and new protein therapeutic candidates will require substantial capital.
The company estimates that the net proceeds received from the IPO and the concurrent private placement, together with milestone payments and the cash on hand will be sufficient to fund the operating requirements through the first half of 2015.
Acceleron has another advantage: it manufactures its products in-house.
This can be an important advantage. Acceleron can move quickly from preclinical to toxicology and from there into the clinic. Smaller biotechs have to estimate their need ahead of time and then get in line with a commercial manufacturing partner. After producing a small batch they have to go back again and again. Scaling up can become a headache. A slowdown caused by manufacturing problems can be very expensive. Acceleron's deep pipeline keeps its manufacturing people busy at all times.
Assuming that its products will be approved, Acceleron at some point will have to face up to mighty Amgen and other industry giants in its drive toward large markets. Luckily for the company, it is not alone, Celgene is backing some of the efforts with an amazing amount of cash and support.
As the saying goes: no risk, no gain, and so far it appears Acceleron knows how to handle the big time.
Note: For the financials and some of the product information, the source was the company's S-1 filing with the SEC, linked to in the article.
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.