Searching For A Winner In The Alzheimer's Race

| About: Axovant Sciences (AXON)

Summary

Current approved drugs for treatment of Alzheimer's Disease (AD) are low in efficacy and only slow symptoms. Pharmaceutical companies are in a race to find better treatments.

44 million people suffer from AD (according to Alzheimer’s Disease International), doubling every 20 years.

Estimated treatment market size varies from USD 5-13bn by 2020 but a new high efficacy drug could push it significantly higher.

Over 60 trials ongoing with around 30 sponsored by listed pharmaceutical companies.

Over a series of three articles, we will highlight the best ones, the pretenders and non-public/non-US listed companies that could impact efforts by US listed companies.

Alzheimer's Disease International estimated that in 2015, there were around 46.8 million worldwide living with dementia, potentially reaching 74.7 million by 2030.

One study estimates that the AD treatment market could grow to USD 13.9bn annually by 2023 but a new high efficacy drug that reverses symptoms of AD or significantly slows progress of AD could push that way higher. Biogen's (NASDAQ:BIIB) aducanumab for example was pegged by Goldman Sach's Akinori Ueda to potentially reach peak sales of USD 8.4bn annually. Biogen's share jumped in market cap. by 30bn+ on news that aducanumab had shown early promise (chart below).

There are four drugs currently approved for Alzheimer's Disease (AD) in the US and their mechanism of actions are based on either slowing down the destruction of acetylcholine, a neurotransmitter involved in communication between neurons or preventing healthy nerve cells from being destroyed by the highly toxic glutamate (AD patients have too much glutamate).

These drugs only help slow the worsening symptoms of AD but fail to stop the destruction of healthy nerve cells over the long term and even then, phase 4 data has shown that it's arguable if they work at all.

To make matters worse, there hasn't been any new approval on treatment for AD over the past decade. This hasn't been for a lack of trying as a well publicized study had shown that of 244 compounds put to trial between 2000-2012, only one was approved. That is a 99%+ failure rate - contrast to say 86% for cancer drug trials.

Plenty of drugs too had shown promise in Phase 2 trials and even positive initial results in Phase 3 but ultimately fail due to statistically insignificant results that did not satisfy the end points the tests had set. (Examples here, here and here)

As well as being a potential blockbuster for pharmaceutical companies, there is a real need for a treatment for this terrible disease. Not only will the cost of care for these patients skyrocket but the aging demographic of the developed nations around the world would mean that most of us would have a loved one who is affected by the disease.

The Landscape Today

Scientist's understanding of what really causes AD is still sketchy but has made great progress over the past 5 years or so. We now know that the build up of amyloid beta (AmB) and tau forms AmB Plagues and tau tangles in the brain (a very good introductory video here). Over time, this kills neuron and causes the brain to shrivel and deteriorate over time.

Most of the failed compounds had mechanism of action which aimed to remove AmB or prevent their buildup. This continues to be the preferred path for most of AD's research effort although there have been noises that we are barking up the wrong tree (here, here and here). Nevertheless, some of the most promising candidates for treatment of AD in late stage phase 3 trials are AmB targeting compounds.

Compounds in development today and in late stage can be largely separated into two camps:

- Symptomatic Approach works on slowing the rate at which cognition function deteriorates, which is the primary symptom of AD. These approaches do not slow the progression of AD (they do not prevent the degeneration of the brain) but merely improve the function of neurons that are left in the brain.

One of the pathology that causes neuron degeneration is acetylcholine (and other neurotransmitter) deficiency and/or excess cholinesterase, which is an enzyme that removes acetylcholine (good video explaining this).

Most symptomatic approaches develop compounds which are agonist or antagonist that will either increase the amount of acetylcholine or inhibits release of cholinesterase respectively or both. All four currently approved drugs are symptomatic drugs.

- Disease Modifying Approach relies on our understanding that the two major neuro-pathological hallmarks of AD are the buildup of AmB (that aggregates to form amyloid plagues) and tau (that aggregate to form tau tangles). Most of the roughly 60 drugs in development currently aim to disrupt these pathological steps leading to AD - hence directly modifying the steps leading to AD. This is a significantly improved path over symptomatic approach and could lead to much higher efficacy in terms of measurable cognitive function improvements or delay in progression of AD.

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As mentioned above, there are close to 60 compounds in development today for treatment of AD in various stages of testing and possibly many more in early R&D. Just over half of these are sponsored by pharmaceutical companies that are listed, the majority of which are US listed.

Over a series of three articles, we will look at the most promising candidates that are in late stage development and the pharmaceutical companies sponsoring them. We break the articles down to cover drug candidates using Symptomatic Approach, Disease Modifying Approach and effectively, the rest (drugs by private companies/non-US listed companies or those with novel approaches).

Given the difficulty in predicting the probability of success of the compounds and my lack of a medical science background, it would be pretentious of me to assign probability of success to these trials. What I could do is look at the team, science and history of each of the late-stage, promising compound and aggregate industry opinions on them to give investors a best chance of benefiting from buying the shares of pharmaceutical companies on the path to potential success and shorting the ones that doesn't seem to be on the right path.

Article 1: Companies pursuing Symptomatic Approaches

Drugs via Symptomatic Approach are not in vogue within the AD research space as they would be trotting down the same path of the approved drugs and unless they can show far better efficacy, they won't consider a breakthrough for the treatment of AD. Of the candidates in phase 3, only one company is listed in the US, that of Axovant (NYSE:AXON). Pfizer (NYSE:PFE) has a candidate that is similar to AXON's compound but is still in phase 2.

A third candidate is more of a combination of Symptomatic and Disease Modifying approach, which is sponsored by vTv Therapeutics (NASDAQ:VTVT). We will take a look at this startup as well.

Danish company Lundbeck has a drug with similar approach to the candidates being sponsored by Axovant and Pfizer and is also in phase 3 and expected to conclude in 2016. If successful, they will obviously have first mover advantage.

Axovant

Company: Axovant

Profile: Axovant caused a bit of a stir last year with their IPO. It was led by a former hedge fund manager and a few Seeking Alpha contributors have pointed to its less than convincing story here, here and here. Axovant bought a failed drug from GSK for USD 5MM (and other payments upon milestones reached and royalty if approved) and has promised to re-start the program, claiming the original trial had shown better results than was originally presented if the analysis of the data was done on a sub-population of the patients who received the treatment.

Specifically, they did a completer analysis on GSK's phase 2b data, that is they only looked at patients who went through the entire trial without dropping out - rather than the original results which had presented data on patient's Intent-to-treat (ITT). The original trial had failed because the results were not statistically significant enough vs placebo but this improved significantly when analysis was carried out only on patients who completed the trials.

The chart below shows their current progress and expected conclusion date for phase 3 study.

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Science: The drug candidate is RVT-101 and it is an antagonist of the serotonin receptor 5-HT6. Essentially, blocking this receptor helps increase the release of acetylcholine and other important neurotransmitter that helps neuron to stay connected and stops them from decaying.

It is administered with Donepezil, an approved drug that inhibits release of cholinesterase (an enzyme that removes acetylcholine). It is thought that when administered together at the right dosage, it significantly slows the advancement of the symptoms of AD.

History: The drug was developed by GSK and their trial had shown that patients given a high dosage of RVT-101 in adjunction with Donepezil showed statistically significant improvement in their cognitive functions compared to patients on placebo for up to 48 weeks. However, all other combinations failed to show similar efficacy however; be it as a monotherapy or in adjunction with Donepezil at other dosage. As a result, the drug had failed to meet the end point originally set.

It was one of the first trial to come across a problem that had plagued a lot of other trials in the same period. Some patients on placebo did not show AD progression. That is they were misdiagnosed to be in the first place and were not actually suffering from AD (possibly other form of dementia, but not AD). This made the results statistically useless since if some patients on placebo did not progress then the comparison would be meaningless. It was felt that a new trial focused on high dosage of RVT-101 administered with Donepezil and on patients that were confirmed AD patients might show better result.

However, given that the data really lacks any strong evidence of efficacy, GSK decided to drop it.

Team: Axovant is lead by Vivek Ramaswamy, a high flying hedge fund manager previously with QVT Financial who founded Roivant Sciences. Roivant's lofty aim was to develop drugs that were cast aside after failed trials but that could prove to be beneficial to patients when re-visited.

Chief Development or Scientific Officer is the Lawrence Friedhoff MD, who led the successful development of Donepezil and has had 30years of experience in identifying AD drug candidates.

They have a strong scientific team with experience and track record in developing AD treatment candidates to approval.

Conclusion: The result from GSK's trial of the compound was pretty disappointing and to be sure, using completer analysis is a little bit like data mining and undesirable to say the least. However, the results in terms of slowing progress shown in the completer analysis are as good as any other compounds out there and on that basis alone, it was worth taking this further. The team of scientists has a strong track record of successfully taking compounds from trial to approval so they clearly know what end points they need to achieve to get FDA approval.

However, RVT-101 was proven to be useless as a monotherapy (that is when used on its own) and Donepezil's efficacy has also been questioned. It is questionable at best, to hope that an optimized trial of the two when administered together would produce significantly better results. Given that GSK's original phase 2b trial was designed based on an ITT paradigm, it is highly questionable to present the data using only complete cases to show statistically significant efficacy. It is effectively throwing out data and it could be data (though we cannot be sure) that shows that the drug is statistically not significant in its efficacy.

Besides, the list of compounds with Disease Modifying approaches have shown very promising results so far and it is possible that there will be a string of approvals in that space that would render RVT-101 inferior even if it was approved.

We recommend shorting AXON via OTM put options due to the expensive borrow and risk of a jump in price of strong news coming out of any progress in their trials.

Pfizer

Company: Pfizer

Profile: Pfizer is a giant in the drugs business and has had success in AD drugs with Aricept/Donepezil before, but has also had AD candidate failures in the past 5 years.

Science: The drug candidate is SAM-760 and is similar to Axovant's RVT-101 in that it is also a serotonin receptor (5-HT6) antagonist. It is however only being studied as a monotherapy.

History: The original research for the drug was done by Wyeth before Pfizer took over the development and a total of four phase 1 trials were carried out to test its safety and measure its pharmacokinetics. The drug was well tolerated in healthy adults that enlisted in the trial.

Phase 2 was started in late 2012 and enlisted 342 patients in the US and results are due Q1-2016.

Conclusion: SAM-760 has thus far been developing in relative confidentiality, with no real presentation of their results so far from Pfizer. In that respect, it is a little difficult to judge how good the results of the pending phase 2 conclusion is going to be. However, Pfizer is a giant with 180bn market cap and one drug is not going to swing its share price by the magnitude that was witnessed in, for example, Biogen with their AD drug candidate. I would not go long or short Pfizer on the basis of the success/failure of SAM-760, especially given that it is still in phase 2 trial.

vTv Therapeutics

Company: vTv Therapeutics

Profile: VTVT was renamed from TransTech Pharma in May 2015 and TransTech Pharma were the originator of the compound TTP488 which is a RAGE inhibitor that aims to reduce neuroinflammation and mediate amyloid beta buildup, hence slowing the progress of AD.

TTP488, brand named Azeliragon, is VTVT's lead candidate in its pipeline which also carries promising candidates in for treatment of type 2 diabetes and inflammatory diseases.

Science: Azeliragon is a Receptor for Advanced Glycation Endproducts (RAGE) inhibitor. AGEs form as a person grows older and is more pronounced in patients suffering from type 2 diabetes. When bound to their receptors (RAGE), AGEs cause inflammation and oxidative damage to the brain. Crucially, RAGE is also thought to contribute to AD pathology by primarily mediating influx of amyloid beta into the brain.

Azeliragon inhibits these receptors and blocks AGEs from binding to these receptors and reduces inflammation (slowing worsening of symptoms of AD) and block the Amyloid Beta buildup process (slowing progress of AD).

Source: vTv Therapeutic Click to enlarge

History: TransTech Pharma developed the original compound and licensed it to Pfizer to develop. Pfizer ran two phase 2 trials, a smaller one in 2005 to determine dosage and safety and then a larger trial in 2007 for safety and efficacy. However, the higher dosage was soon dropped due to safety concerns and lower dosage was dropped too when an interim analysis show that there was no statistical benefit (results here). Crucially, patients on the higher dosage were showing worse ADAS-cog (a test to measure cognitive functions) score than patients on placebo. Cognitive worsening is possibly the worst outcome you could have out of any AD drug trial.

It obviously doesn't end here otherwise VTVT would have never revisited this. The team continued to observe some patients who agreed to come back for tests even after the trial was stopped and patients were no longer on the treatment. Results were surprising as patients on high dosage were now back on par with placebo patients and patients on low dosage were now showing statistically improved ADAS-cog score compared to placebo patients. There were, however, no differences in other clinical outcome measures apart from improved ADAS-cog score.

On that basis, TransTech Pharma restarted the development of the compound and received fast-track designation from the FDA and in April 2015 it started its phase 3 trial to, effectively, repeat the same test Pfizer had carried out on low dosage and with improvement in diagnosing and ensuring patients were indeed suffering from AD.

Team: VTVT is led by Stephen Holcombe, who has not had experience in the pharmaceutical industry before his role at TransTech Pharma/VTVT. Chief Scientific Officer is Carmen Valcarce PhD who obviously has significantly more experience than their CEO but none whatsoever in the field of AD, dementia or neuroscience. The chairman of the board however, is Jeffery Kinder, a superstar appointment as Mr Kinder was CEO of Pfizer for 4 years.

Conclusion: The outcome of Pfizer's test were not inconclusive, they were conclusive to the negative and only some unexplained anomaly in the data had kept hopes alive that the drug could work. Furthermore, it is now led by a team that have had little experience in AD drug trials and a CEO that have had no experience in bringing promising drugs to the market in any capacity previously.

In their defence, they have a pipeline of promising type 2 diabetes drug that could blockbuster as well. However, these are further away from success and VTVT has marketed themselves as an AD treatment play in any case.

At best, this is a long shot and another contributor on Seeking Alpha had already poured doubt all over this. Like Axovant, we recommend shorting VTVT via OTM put options due to the expensive borrow and risk of a jump in price of strong news coming out of any progress in their trials.

Disclosure: I am/we are short AXON VIA OTM PUT OPTIONS.

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.