Ning Yang, Ph.D. and Andrew McDonald, Ph.D.
Aegerion's (AEGR) stock has risen roughly 50% since October 11, 2012. We attended the company's investor event in New York on October 23, and it's clear that investors are optimistic about the prospects of the company's sole drug candidate, lomitapide, to gain FDA approval ahead of a PDUFA date of December 29, 2012 and subsequent launch expected in January. On October 17, 2012, the Endocrinologic and Metabolic Drugs Advisory Committee (EMDAC) of the U.S. Food and Drug Administration (FDA) voted 13 to 2 that sufficient safety and efficacy data were presented by Aegerion to support the marketing of lomitapide for the treatment of patients with Homozygous Familial Hypercholesterolemia (HoFH) when used as an adjunct to a low-fat diet and other lipid-lowering therapies. One day later, the same advisory panel voted 9 to 6 that Sanofi (SNY) and Isis Pharmaceuticals (ISIS) had provided sufficient efficacy and safety data to support their drug candidate, mipomersen, to gain final FDA approval for its indication in HoFH. The advisory panel recommendations tend to heavily influence FDA approval decisions. These two announcements are in alignment with our first Seeking Alpha note on Aegerion, published here.
If both lomitapide and mipomersen are likely to gain FDA approval, we think that lomitapide will dominate the HoFH market because of three key reasons: 1) it demonstrated better efficacy than mipomersen in LDL-C reduction; 2) it is dosed orally as opposed to subcutaneous injection for mipomersen; 3) mipomersen tends to be plagued by injection site reactions, and has a much longer half-life than lomitapide (30 days versus 20 hours). We would, however, not be surprised if the FDA denied approval of mipomersen. Our analysis was further confirmed by a survey we conducted among lipidologists on their potential use of lomitapide and mipomersen, published here. The 43 responding lipidologists intended to prescribe a total of 254 patients lomitapide and a total of 152 patients mipomersen should both drugs gain FDA approval, equivalent to 1.67:1 ratio. At $300k per patient per year for each drug, this total of 406 patients translates into revenue of $121.8M, keeping in mind that this only accounts for <10% of lipidologists in the U.S. Hence, we think the total addressable market in the U.S. is closer to 3,000 patients.
Side effects like fatty liver remain a great concern for both drugs. However, no patients who were treated by lomitapide experienced symptoms of jaundice or met the qualification of Hy's law. We expect that routine liver monitoring will be required with the prescription of lomitapide. However, given the fact that HoFH can lead to fatal consequences if left untreated, we do not think that a fatty liver problem will significantly limit the adoption of lomitapide if approved.
We think there are approximately 3,000 "HoFH" patients in the U.S. and 3,000 "HoFH" patients in the EU Five (Germany, United Kingdom, France, Italy, and Spain) that are candidates for lomitapide. At $300k of annual cost per patient, HoFH provides a $900M market opportunity for lomitapide in the U.S. alone. Beyond this indication and expansion into other geographies, there is the possibility to expand into other indications. Aegerion is currently developing a protocol for a Phase II/III trial of lomitapide for the treatment of patients with Familial Chylomicronemia (FC). It is estimated that there are approximately 1,000 FC patients in the U.S. and Europe, which offers another $300M market opportunity for lomitapide. Hence, while the launch in the U.S. for HoFH is the first leg to the story, it is not the last.
Overall, we expect lomitapide to receive FDA approval and solid market adoption thereafter (launch expected in January). We ran our valuation using a DCF model. Assuming that lomitapide revenue will reach $630M by end-2015 (equivalent to 2,100 patients and 70% market share), we got an enterprise value (EV) of $1.73B using a trailing P/E of 10, a discount rate of 30%, and a profit margin of 50%, which is 3.3x higher than its current level as of October 23, 2012. However, if we use a P/E of 15, our model led to an EV of $2.45B, 4.7x higher than its current level. Hence, we believe that shares of Aegerion will be 4x-5x higher as it achieves a successful launch of lomitapide and the company will be the next Alexion (ALXN).