Last Friday, an early top-line Phase III data release for Duchenne Muscular Dystrophy (DMD) oligonucleotide therapeutic drisapersen devastated shares of Dutch biotech Prosensa (RNA). After a 70% drop in share price, Prosensa's valuation stands at $207 MM. Prosensa's partner for the development of drisapersen is GlaxoSmithKline (GSK) - and fortunately for GSK shareholders the company is too large to be affected by a small clinical trial failure.
The Phase III trial - DMD114044, or DEMAND-III -was a 186-patient randomized, double-blind, placebo-controlled study that tested the DMD drug at a 6mg/kg/week dose in 125 patients. The placebo arm contained the other 61 patients. Patients were assessed over a 48-week period.
The primary endpoint, designed to measure the efficacy of drisapersen, was based on improvements in Six Minute Walk Distance (SMWD) between the 6mg/kg/week drisapersen arm and the control group. The company was specifically looking for a 30+ meter improvement, which would allow the company to report statistically significant improvements in walking distance with 90% power. Unfortunately, drisapersen fell short by quite a bit.
From the press release (link):
The difference in 6MWD (mean (CI) 10.33m (-14.65, 35.31), p=0.415) between drisapersen and placebo groups did not reach statistical significance.
With a p value that large, Prosensa/GSK cannot use this for FDA approval since the drug has not formally established its efficacy as a DMD treatment. In addition to this, we note that the toxicity remains a serious issue that mars the safety profile of the drug. Drisapersen nearly doubled rates of renal adverse events (proteinuria), and caused an injection site reaction in 78% of drisapersen arm patients versus 16% in the placebo arm.
Full evaluation of the trial is not completed at this point, although the current data suggest that the drisapersen program may be irreparable from a data standpoint. It's unclear whether GlaxoSmithKline will drop the program at this point, although the market seems to have wiped out almost all of the drisapersen's value in Friday's move.
Because of the company's favorable financial situation, we see that the enterprise value (the theoretical takeover price) of the company is a bit lower - at $177 MM. A small portion of this remaining value should reflect the remaining value of drisapersen, while the rest reflects the value of two other muscular dystrophy pipeline compounds in development - PRO044 and PRO045. There is also intrinsic value in the antisense oligonucleotide technology that built Prosensa's pipeline, and in preclinical compounds.
PRO044 and PRO045 are very similar to drisapersen in that they induce exon-skipping to induce a positive effect on dystrophin production in patients with Duchenne Muscular Dystrophy. PRO044 skips exon 44 in the dystrophin gene, and targets about 6% of all DMD patients with particular mutations that affect this portion of DNA. PRO045 skips exon 45, and targets about 8% of all DMD patients.
Drisapersen and Sarepta Therapeutics' (SRPT) eteplirsen are based on the same technology, and skip exon 51. This targets approximately 13% of all DMD patients, and represents the largest subpopulation. A high estimate for the number of US patients in this subpopulation is ~1500.
Since drisapersen appears to be out of the picture, eteplirsen only needs to receive FDA approval to target an indication that could realistically generate over $300 MM/year in the US alone. This has led to increased bullishness by many analysts covering Sarepta, although the numbers from Drisapersen's Phase III suggest that there exon-skipping drugs might have problems treating DMD. As noted by Baird, this Phase III blowout may actually have negative repercussions for eteplirsen due to the shared mechanism of action.
Still, it seems that a lot of DMD investment support has shifted to Sarepta on the long side. Last Friday, shares of SRPT closed 18.02% higher to $43.30. Short interest data from late August showed that roughly 40% of SRPT float was held in short positions, implying that Sarepta short sellers collectively lost ~$80 MM on Friday.
Going forward, all eyes will be on SRPT as the company looks for accelerate approval and brings eteplirsen into late stage development. RNA appears to be a dead money trade, although investors should not forget about the other pipeline compounds.