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Upcoming events: PEDigree Phase Ib/2a preliminary data Q4 2011 and additional Phase 2 trial data 2012.

LPath, Inc. (NASDAQ:LPTN) – based in San Diego, Calif., engages in the development and commercialization of lipidomic-based therapeutics. Utilizing their proprietary ImmuneY2 discovery engine, the company aims to leverage its technology platform to provide monoclonal antibodies targeting bioactive lipids in a safe, efficacious, and reliable manner. This company is an early stage biotechnology company currently beginning two efficacy trials for its ocular formulation of the humanized monoclonal anti-S1P antibody (Sphingomab), known as iSONEP, and in 2012 plans to begin two additional efficacy studies for the systemic formulation, known as ASONEP, for the treatment of cancer. The company has been in the news recently with an equity offering in the fall, and the signing of a partnership agreement with Pfizer (NYSE:PFE). What attracted my attention was both the extremely favorable terms of the deal (double-digit tiered royalties are quite high for a Phase I compound; double-digit royalties are usually reserved for Phase 3 and beyond), and the novel targeting of the bioactive, signaling sphingolipid sphigosine-1-phosphate (S1P).

Although S1P is of importance in the entire human body, it is a major regulator of vascular and immune systems. In the vascular system, S1P regulates angiogenesis, vascular stability, and permeability, thus making it a very promising target for cancer and the wet-form of AMD (age-related macular degeneration, the leading cause of vision loss and blindness among Americans who are age 65 and older). To the best of my knowledge, LPath is the only firm capable of developing therapeutic antibodies against bioactive lipids. They put these antibodies to the test recently in Phase 1 trials to study the safety of iSONEP and ASONEP with promising results that warrant a closer look.

ISONEP is currently beginning Phase 1b/2a trials for the treatment of wet-form AMD. With wet macular degeneration, new blood vessels grow beneath the retina and leak blood and fluid. This leakage causes permanent damage to light-sensitive retinal cells, which die off and create blind spots in central vision. Current treatment involves injection of Lucentis (or off-label use of Aventis), manufactured by Genentech [a subsidiary of Roche (OTCQX:RHHBY)] and marketed by Novartis (NYSE:NVS). Lucentis is a VEGF inhibitor (vascular endothelial growth factor, a signal protein produced by cells that stimulates the growth of new blood vessels), and as such is relatively good at preventing angiogenesis and clearing up the intra-retinal fluid. However, it does not resolve the underlying lesion (in Phase 3 trials, with 12 monthly injections, average reduction in lesion size was 2%), does not resolve RPE detachment (Retinal Pigment Epithelium, called PED) and is not effective for many patients. Many of the drugs currently being developed are variations of VEGF inhibitors, affording iSONEP the potential for first-in-class. While Phase 1 usually is for dosing and safety, LPath was able to get promising hints of efficacy.

The set of eyes allocated to this Phase 1 trial was poor; many patients had numerous treatments of Lucentis/Avastin with little to no improvement. Notably though, both patients with RPE detachment experienced complete or near-complete resolution of the condition with a single dose of iSONEP (no retreatment for 18+ months for one, and 105 days for the other). Most significant however, was the regression in CNV (choroidal neovascularization), which is the underlying cause of the disease that eventually leads to degeneration of the macula, the area of the retina responsible for central vision (non-Lucentis benefit). Of the seven patients that had a baseline lesion considered "large," four experienced a reduction exceeding 5mm and three experienced a reduction of greater than 75%, with a single dose of iSONEP. Seven out of the nine patients showed a decrease in retinal thickness (Lucentis-type benefit), and these patients had not been responsive to Lucentis treatment. Notably, of the five patients who had the strongest biological response, all had a component of occult-type CNV (as opposed to classical) and represented all patients in the trial with occult-type CNV, showcasing iSONEP’s potential efficacy against this indication.

Phase 2 Trials: Based on this promising set of data from a single dose (and no adverse drug-related events were reported), the first upcoming Phase 1b/2a trial, PEDigree, is designed to probe the efficacy of iSONEP to RPE detachment (~15-25% of the broader wet-AMD market) in a group of 30 patients unresponsive to 3+ anti-VEGF treatments and excluding those with subfoveal fibrosis. PEDigree will have two randomized arms of 0.5 mg and 2.0 mg doses of iSONEP administered initially and on days 30 and 60 if the PED is not collapsed. Results are expected by the end of the year. The larger study, Nexus, is a Phase 2a study for wet-AMD including four randomized arms of 40 patients each for a total 160 patients that have been "sub-responsive" to anti-VEGF treatments, and excluding those with PED’s and subfoveal fibrosis. The four arms represent combination therapy of iSONEP and Lucentis in two doses (to be determined), Lucentis alone, and iSONEP alone. Doses will be administered monthly for four months. The primary endpoint for the study will be change in best corrected visual acuity, with secondary endpoints of safety, CNV lesion area, and retinal thickness.

ASONEP is the systemic formulation with efficacy trials set to begin in 2012 (due to the optimization process in large-scale antibody manufacturing, which does not affect iSONEP due to the miniscule doses in ocular formulations). Many studies have demonstrated that cancer cells have abnormal levels of sphingolipids and related enzymes, resulting in conditions that favor cell survival. Furthermore, certain tumors express abnormally high sphingosine kinase-1 activity (an enzyme responsible for making S1P, which resists cell death and promotes neovascularization). The Phase 1 trial results indicated that of the 21 evaluable patients (variety of cancers) treated with ASONEP the treatment was well-tolerated and showed no significant overlapping toxicities with other agents. Twelve patients (57%) had stable disease beyond two months, including three patients for over six months, and one for over 30 months (carcinoid cancer, in which carcinoid syndrome disappeared as well, improving quality of life). Importantly, the side effect profile was better than Avastin, with roughly comparable efficacy. However, the small sample size precludes definitive comparisons. Given the different side effect profile and unique mechanism of action however, ASONEP may provide synergies with established anti-cancer treatments.

Phase 2 Trials: LPath plans to pursue a Phase 2 study in renal cell carcinoma based on strong preclinical data, and although the indication for the other Phase 2 study has not been released, logical choices based on preclinical models would be carcinoid cancer (the successful patient from the Phase 1 trial), prostate cancer, multiple myeloma, and neuroblastoma. Pfizer’s (PFE) first right of refusal for the ASONEP candidate should not be underappreciated. Given favorable results for the above candidates, Pfizer will need to opt-in, triggering an undisclosed but large payment, in order to prevent the pricing issue facing Genentech (Lucentis/Avastin). This first right of refusal extends to December 2013.

Risks Factors: While investors know that the FDA is wary of approving candidates targeting new pathways, the recent approval of Gilenya (by Novartis) for the treatment of MS (multiple sclerosis) mitigates some of this risk. However, it also highlights some of the potential side effects. Novartis’ compound is an S1P analog, and as such is phosphorylated by S1P kinase, and ultimately shuts down the signaling pathway. As mentioned earlier, the S1P pathway is involved in the immune system, and in Gilenya’s case, down-regulating it and significantly improving the lives of MS patients. LPath believes its antibody’s picomolar binding to only S1P (no cross binding detected to other targets) compared to Novartis’ less efficiently binding small molecule analog (small molecules are notoriously "promiscuous") will result in an approved side effect profile. So far, the preclinical and Phase 1 safety data support this hypothesis, although we will get a better idea in the future as more patients are enrolled and treated. Furthermore, with respect to ASONEP there is debate about how many months of additional survival is worth the high cost of many of these chemotherapy drugs. Even if ASONEP shows statistical significance in disease free progression, insurers may balk at paying $50,000 per year.

Pipeline: In addition to their two Phase 1/2 clinical candidates, LPath currently has an early stage preclinical compound, LPathomab. Details are thin, but Lpathomab targets the bioactive signaling lipid LPA (Lysophosphatidic acid). Additional details should emerge as preclinical development continues.

Fundamentals and Financials: With the recent capital raise of $4.7 MM (net), $14 MM upfront payment from Pfizer, and data pulled from the most recent 10-q and 10-k’s filed with the SEC showing ~$3 MM in cash as of Sept. 30, 2010, the company appears to have a strong balance sheet and believes they will have the resources to fund all the planned clinical trials through 2012. Per the agreement with Pfizer, costs of the iSONEP trials will be roughly split (~$6 MM each), with overruns covered by Pfizer. In its entirety, potential milestone payments are worth nearly $500 MM, and with tiered double-digit royalties, the company has not sacrificed future profit potential to fund current expenditures. Rather, management opted for a lower up-front payment and higher potential royalties. The company has 60 MM shares outstanding, and 80 MM fully diluted (with most warrants and options exercisable under 1.25). Insider ownership at 16% is favorable as well.

Conclusion and Future Directions: While it is challenging to assign a specific value to such an early stage biotechnology firm due to the uncertain timing of future clinical trials and approvals, the market size for successful development is large. With the baby boomers aging and living longer than ever, AMD cases will continue to grow quickly, making this a very large unmet need. Furthermore, due to the high variability of patient response to current treatments (Lucentis) and a complete lack of efficacy on certain sub-indications (many clinical trials exclude patients having them!) it is not completely necessary for LPath to hit a home run in its trials. Even the failure of one or more of the planned clinical trials does not spell disaster for the company, given the large market that exists for each trial indication as second line or combination treatment. As long as the treatment is safe (so far so good, but a real risk factor), modest efficacy numbers could result in approval. Additional upside potential between now and Phase 2 trial results include additional analyst coverage, up listing to the AMEX (share price > 2$) and possibly the NASDAQ, and partnering of preclinical compounds.

Ultimately, LPath has four shots on goal (2 for ASONEP, 2 for iSONEP), and while most drugs fail in Phase 2, I believe the glimpse of excellent efficacy data (albeit in very small sample sizes) in a tough set of eyes and the improvements in progression free survival with good safety numbers bode very well for the upcoming Phase 2 trials, tipping the risk/reward scales of playing early stage clinical trials in investors’ favor.

Source: LPath, Inc.: Multiple Phase 2 Trials and Pfizer Partnership Provide Path to Profits