Biocryst's Setback: An Opportunity For Brave Investors

Summary

Phase 2 OPuS-2 trial for Avoralstat fails to meet primary endpoint; BCRX stock price crashes 71% to $1.78.

The fundamentals indicate that BCRX’s class of kallikrein inhibitors is likely to successfully suppress attacks in Hereditary Angioedema; this is important as they have a safe drug that works.

BCRX needs to show effectiveness for 24 hours, preferably with one dose; BCX7353 seems to do this.

With the BioCryst Pharmaceuticals (NASDAQ:BCRX) stock down almost 90% over the past year (most of it in the last trading session) it is worth analyzing whether this is a terminal disaster (share price at $1.78) or whether it is worth a closer look. I summarised the major BCRX programs in July last year (when the share price was $16.19) and suggested that perhaps there was irrational exuberance and it was time for investors to consider taking profits. I refer readers to the earlier article to get an overview of the company's programs.

Nevertheless, I found that the company had interesting programs and a clear focus on a portfolio of small molecule oral treatments for Hereditary Angioedema. I suggested that the major focus on phase 2 trial OPuS-2 for Avoralstat had risks, because it required three daily doses, indicating that it had unsatisfactory short term persistence. At the highest dose this meant 15 tablets a day. Another Hereditary Angioedema inhibitor, BCX7353, has better persistence and possibly once daily treatment. In a presentation December 2015, BCX7353 at once daily dosing of 350mg or 500mg showed 90% plasma kallikrein inhibition after 24 hours, whereas Avoralstat kallikrein inhibition peaked at 75% (3hr) and by 8hr was 40% (below effective dose). With these results, I don't think that is was surprising that Avoralstat failed in the OPuS-2 trial. Note that the OPuS-2 trial had patients with a substantially lower attack rate (at least 0.45 or more/week) than for the successful prior trial OPuS-1 (at least 1.0 or more attacks/week). There was a different story between the two trials (OPuS-1 and OPuS-2) concerning interval between the 3 daily doses. There was close to 8hr between each dose in OPuS-1, while in OPuS-2 the dosing was not so even, with roughly 11hr/7hr/6hr between the 3 daily doses. This is a big deal for a drug that has rapid falloff in activity, and may be part of the reason that the OPuS-2 trial failed.

For OpuS-2 there was no difference between study arms in terms of numbers of daily attacks (primary endpoint). However, there was evidence of clinical activity. Severity, duration and quality of life was improved in patients in the 500mg 3x/day; in some cases this was significant. All doses were safe with no serious adverse events. There were some gastrointestinal problems, but not serious (and the suggestion is that these problems will go away using a solid dosing form of Avoralstat). The above comments are based on listening to the February 8 investor briefing.

Management plans to change to a solid dose of Avoralstat rather than gel dosing as used in the OPuS-2 trial. My question is "why keep going with Avoralstat when you have a really impressive program with BCX7353 that indicates it will work with once daily dosing?" The reason I'm concerned is that BCRX is in a tight cash position, so why burn a lot of cash when you have a better solution?

BCX7353 seemed to me the product to proceed with even last July. It looks like BCX7353 is showing considerable promise and it is now in phase 2 trials (APeX-1 proof of concept) with both Western and Japanese patients, with results due mid-2016. Late in 2016 BCX7353 might enter the sakigake process for accelerated approval in Japan.

Management suggests that there will be new and important data for both Avoralstat and BCX7353 this year, so good results might help a capital raise. Management claims they have cash until 2017, but at current burn there will be very little left at the beginning of 2017. I wonder why they continue to burn cash on an inferior treatment (Avoralstat)? … Surely it is time to bite the bullet?

The BCRX story is primarily about Hereditary Angioedema, but they do have several other interesting programs. These include next generation kallikrein inhibitors and two further (unnamed) rare disease oral drugs. All of these are pre-clinical programs, so hard to comment on.

They have two other programs not burning cash, which are interesting.

Firstly there is Rapivab (peramivir) which is an FDA approved injectable treatment for acute flu that was sold to CSL (OTCPK:CSLLY) for $33.7 mill, with a further $12 mill payment if CSL meets targets. BCRX retained the rights to Rapivab in Japan, South Korea and Israel, but there is little news about how these markets are progressing as yet. A flu outbreak would dramatically change fortunes for this drug.

Secondly there is BCX4430, which is a broad spectrum antiviral that may be a treatment for Ebola. This drug shows a favourable preclinical safety profile. BCX4430 development has been funded by National Institute of Allergy and Infectious Diseases (NIAID) for up to $26.3 million over 5 years, and more recently by BARDA (Biomedical Advanced Research & Development Authority) for up to $35 million. The target for BCX4430 is nasty viral hemorrhagic fevers (filoviruses) including Marburg Virus and Ebola. BCX4430 might be suitable for oral, intravenous and intramuscular delivery. The program is midway through phase 1 trials.

Conclusion

Notwithstanding the failure of the primary endpoint in the OPuS-2 trial, BCRX seems to have established that they have found the right class of inhibitor (kallikrein) to successfully treat Hereditary Angioedema. This is a big deal and is the basis for thinking about taking advantage of a 70% decline in the share price in the last 24 hours. My reservation is that management still thinks they have sufficient cash to proceed with two versions of their Hereditary Angioedema treatment (Avoralstat and BCX7353), even though it is becoming clear that BCX7353 shows more promise.

It is mad times for investors, and there are many other beaten up companies with less risk, but the Hereditary Angioedema opportunity remains intriguing.

Disclosure: I/we 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.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.