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Bhavneesh Sharma
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Dr. Sharma is a US physician with board certifications in Pulmonary diseases, Critical Care medicine and Internal medicine and over 15 years of clinical experience. He has over 14 peer-reviewed scientific publications and has been an invited reviewer for several medical journals. He has an MBA... More
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Vasuda Capital Management, LLC
  • La Jolla Pharmaceuticals: A Potential Blockbuster Drug For Chronic Kidney Disease 0 comments
    Mar 18, 2014 2:32 PM | about stocks: LJPC

    La Jolla Pharmaceutical Company (LJPC, Nasdaq) announced the results of a phase 2 clinical trial of GCS-100, a galectin inhibitor (an anti-fibrotic agent) which met statistical significance in its primary end-point of improvement in kidney function in chronic kidney disease (CKD), stages 3b and 4 (as measured by glomerular filtration rate, GFR). The purpose of this article is to analyze the results of this trial and evaluate the commercial potential of GCS-100 in CKD.

    This was a randomized, phase 2, placebo-controlled trial, where the dose of 1.5 mg/m2 of GC-100 given weekly for 8 weeks improved GFR by 1.26 ml/min/1.73 m2 (from 29 at baseline to 30.26 after 8 weeks). The GFR improvement was accompanied by a reduction in galectin level. No serious adverse events were reported. The results are demonstrated in the graph given below.

    A brief overview of CKD: CKD is defined as "kidney damage for >3 months, as defined by structural or functional abnormalities of the kidney, with or without decreased GFR, manifest by either: (a) pathological abnormalities; or markers of kidney damage, including abnormalities in the composition of the blood or urine, or (b) GFR <60 mL/min/1.73 m2 for >3 months, with or without kidney damage (source).

    Chronic kidney disease is divided in 5 stages, as per the classification given below (source).

    Stage

    Description

    GFR (mL/min/1.73 m2

    1

    Kidney damage with normal or increased GFR

    >90

    2

    Kidney damage with mildly reduced GFR

    60-89

    3

    Moderately reduced GFR

    30-59

    4

    Severely reduced GFR

    15-29

    5

    Kidney failure

    <15 (or dialysis)

    Patients with CKD stages 3b or 4 have progressive worsening of their kidney function and many patients (especially with diabetes) may end up on dialysis within 5-6 years.

    GFR may vary minimally from one visit to another in a CKD stage 3b or 4 patient. Strict glucose control in diabetes, strict blood pressure control and medications like angiotensin-converting enzyme inhibitors may help to reduce the decline or partially improve kidney function (source).

    Drug Pipeline:

    Source

    A phase 1 retrospective analysis of GCS-100 from oncology trials showed 9.6 mL/kg/1.73 m2 improvement in GFR which was statistically significant (p=0.03). The improvement in kidney function had a weak correlation with reduction in galectin level (R2= 0.36) which reached statistical significance (p=0.003).

    Financial data: The company reported $10.7 million cash at end of 2013 with $ 0.57 million in liabilities.

    Valuation:

    GCS-100 in CKD: About 20 million patients have CKD in the United States and about 10 percent may have stage 3b and 4 CKD. Assuming $ 20,000 per year cost of the drug and 20 % market share, the company may have annual revenue of $ 8 billion from GCS-100 (considering drug launch in 2018).

    The company estimates that it may have 651 million shares after converting all preferred stock to common stock (as per the latest 10-Q form). Considering a price/sales ratio of 5, the company may trade at around $ 60. The anti-fibrotic action of GCS-100 may also have potential application in other fibrotic diseases like idiopathic pulmonary fibrosis and severe chronic obstructive pulmonary disease. Other drugs in the pipeline including those for hepato-renal syndrome and hemochromatosis may also add to the revenue if approved.

    Insider and institutional ownership: The CEO of the company, George Tidmarsh reported purchase of another 3000 shares in February 2014, thus increasing his ownership to 1.39 million shares. Institutional investors like Baker Brothers (22.6 million shares), RTW Investments (19.2 million shares) and Boxer Capital (23.6 million shares) reported large stakes in the company for the quarter ending in December 2013.

    Risks associated with investment: As with any other biotechnology company, the drugs may not succeed in late stage clinical trials and even if approved, may not gain market share. Commercial insurers may not reimburse for the drugs. A secondary equity offering may cause near term pressure on the stock price.

    Conclusion: In conclusion, the phase 1 results of GCS-100 showed a significant improvement in kidney function in CKD stage 3b and 4. A phase 2 trial with treatment duration of 8 weeks showed statistically significant benefit. The on-going phase 2 trial with longer term treatment duration of one year may show further clinically significant improvement in kidney function. The company has an interesting pipeline of drugs in various diseases with unmet need, which may translate to a much higher stock price.

    Disclosure: I am long LJPC.

    Additional disclosure: This article does not constitute any investment advice and represents entirely my own opinion.

    Themes: Long ideas Stocks: LJPC
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