3 Approaches To Retinitis Pigmentosa

Includes: AMBS, NVLN, SCMP
by: Andreas Spiro

Editors' Note: This article covers a stock trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Ever since the passage of the Orphan Drugs Act of 1983, a total of 2,992 drugs have received orphan designation by the FDA. Orphan designation basically means that less than 200,000 people suffer from the disease for which there is no effective treatment. Of those 2,992 orphans, 457 have been approved. That's 15%, which is 1.5x higher than the overall approval rate for all drugs that make it to phase 1, which is 9.5%. In short, receiving orphan status mitigates risk for investors, and it also expedites the approval process. The average time from granting of orphan status until approval is 4 years. The average for all drugs is over 8 years, 12 if you count preclinical.

The Orphan Drugs Act, in my opinion, is quite misunderstood as being necessary for drugs that would otherwise be unprofitable. While that is true in a sense, it is mostly because the government so heavily regulates the drug development industry that barreling through that iron wall of regulation for a disease indication with few patients is what's unprofitable, not developing the drug itself and selling it absent the regulation. Most of what the Orphan Drugs Act does is simply lower the regulatory burden just a bit for certain drugs and the companies pursuing them. It's something akin to a school bully promising to steal less lunch money from people who suffer from rare food allergies. Praising the bully for his magnanimity in taking less money from these kids seems a bit out of place.

In some cases government grants are given for orphan drug development, but this is not a major aspect of the legislation.

Still, getting orphan status is nothing to sneeze at. It is important, especially for small companies. In this article, there is one orphan indication I would like to discuss specifically as far as recent developments are concerned, and that is retinitis pigmentosa.

Retinitis pigmentosa is a genetic disorder, usually autosomal dominant, where the rods and cones in the back of the eye on the retina die due to malfunctioning genes. The cause can be any number of different mutations on key genes responsible for producing proteins that protect these cells. The result is tunnel vision and eventually blindness by adulthood. The fact that it is usually dominant means that the chances of inheriting it from a parent are at least 50%.

RP is not a disease one generally hears much about. One telling statistic is that there are only 27 articles that even mention it on Seeking Alpha. But the patient base is not insignificant. Globally, it is in the median range for an orphan - 100,000 people in the US, another 100,000 in Europe, and 50,000 in Japan will end up blind from this disease, most of them by the age of 40.

Currently there are 3 publicly traded companies actively pursuing a treatment for RP, all in different stages of clinical development. Let us begin with the farthest down the line in phase 3 and that is Sucampo Pharmaceuticals (NASDAQ:SCMP), partnered with the Japanese biotech R-Tech Ueno.

Sucampo's Preservation Approach

Sucampo's RP treatment looks like a shoe-in for approval, if such a thing were possible. That is not meant to be taken literally, but considering the circumstances, chances look good on the FDA approving unaprostone for retinitis pigmentosa patients. There are three reasons for this. First and as discussed, RP is an orphan indication, which means statistically, there is a greater chance of it being approved. Second, unaprostone is already approved under the brand name Rescula as of December 2012 for open angle glaucoma and relieving intraocular pressure. Getting it approved for a second indication is far easier than starting from scratch. Third, phase 2 results were reported back in 2011 and they were very positive, with the high dose unaprostone group experiencing the best vision improvement and retinal sensitivity, with no serious side effects reported. Add to that the fact that enrollment was completed in October, and patients will be followed for 52 weeks following treatment according to the phase 3 trial protocol, and you have a fish in a barrel in less than a year from now.

By relieving pressure in the eye, unaprostone helps make it easier on remaining rods and cones to survive longer despite the genetic disorder. Both glaucoma and RP have very similar symptoms and progression and are both caused by retinal cell death. Considering SCMP's sharp price movements around good news, this is a great pick to take a low-risk position in a few months before approval of unaprostone for RP.

Cash Position

Sucampo has a healthy balance sheet with ample cash at $106M, and is mostly treading water while managing a small quarterly profit of $4.5M over the last 4 quarters. Its accumulated deficit since inception has shrunk an impressive 20% in two quarters, and it has a debt to equity ratio of 15%. Not bad at all for a small company on the verge of a very significant FDA approval. Existing Rescula sales will keep this company reasonably healthy, and approval of Rescula for retinitis pigmentosa will springboard it into another league altogether.

QLT's (QLTI) Replacement Approach

QLT Pharmaceuticals' approach is a bit different. Rather than protecting remaining cells from damage, QLT's synthetic retinoid product attempts to fill in one of the missing proteins called retinal pigment epithelium protein 65. Though this is closer to a "cure" approach than Sucampo's "preservation" approach since QLT is actually supplying what is lacking here, QLT is really going after a tiny subset of patients. There are only about 300,000 RP patients worldwide, and only 5% of them are due to a lack of this particular protein, narrowing the patient base down to 15,000 globally. The company though is pursuing treatments for similar conditions caused by lack of RPE65, not just RP. Phase 1B results showed 8 of 12 patients exhibited a clinically meaningful response. A phase 2a has been initiated for a different eye disease involving the same protein.

Cash Position

What is attractive about QLT is that its approach in protein replacement seems to deal with the core issue of these retinal diseases, at least the ones that are caused in part by lack of RPE65. The other thing QLT has going for it is its super strong balance sheet. With over $114M and zero debt, it has a lot of staying power. An average quarterly burn rate of $7.3M this year gives it almost four years on current fuel, but that's all it has. With an accumulated deficit of over half a billion dollars, this company sure has eaten through a lot of cash. With no revenue and none on the horizon, that number will keep getting bigger.

I hesitate to recommend this stock because it seems far away from any meaningful catalyst in the short run, barring anything unexpected. Nevertheless, investors should keep this phase 2a trial on their radar.

Amarantus' (OTCPK:AMBS) Fix the Protein Approach

Amarantus Biosciences is working on a product called mesencephalic astrocyte derived neurotrophic factor, or MANF. That is a mouthful. Translated into laymen's terms, MANF means a protein produced in the midbrain that helps protect and grow brain cells. This is a naturally occurring protein to which Amarantus has the research and development rights, and has been found in eye models to protect rods and cones from protein misfolding, thereby protecting them from damage. The concept is like this: The mutated genes in RP patients produce dysfunctional proteins. MANF is a protein-fixing protein, thereby protecting the rods and cones. Instead of replacing, it fixes, a very interesting third approach to the RP problem.

The long name may sound a bit convoluted. Indeed, MANF's job is to convolute other proteins. You can even pick up some MANF yourself from the Harvard Med Plasmid Store if you have an account there. Just search for MANF in the gene field and order a batch.

MANF, however, is nowhere near primetime. Amarantus hasn't even reached mouse models yet, so in my opinion it is not yet investable as a technology. So what makes Amarantus investable at all at this point? It does have a significant catalyst coming up in its LymPro Alzheimer's Disease diagnostic test. LymPro is due for pilot clinical performance data next quarter (Q1) and will be undergoing a 250 patient registrational trial under CLIA in the first half of 2014 (page 17). The first commercial revenues for Amarantus are expected to start coming in during 2H2014. CLIA trails are generally much faster than clinical trials for interventional treatments because there is no waiting time or placebo arm or blinding or anything like that. Either the test works or it doesn't.

Amarantus' CEO has said he will be looking to uplist to Nasdaq which means most likely a major reverse split, so those considering Amarantus need to balance the likelihood of that with the likelihood of a major jump in AMBS shares come 2H2014 if and when LymPro finds CLIA approval.

Cash Position

Amarantus doesn't have much cash, only just over $1M, but that should be enough for it to coast through next quarter when the LymPro pilot data are due. After that, it will need to reset the financial clock somehow no matter what happens. Though Amarantus has a debt to equity ratio of only 6% and can afford to take on more debt, watch out for dilution on any major price spike. Whether LymPro fails or succeeds ultimately, there will most likely be an equity financing after major news comes in, because Amarantus will need the cash to bring it to market. If the news is good, Amarantus will dilute into strength and shareholders will be sheltered from a fall in price. In fact, shares will probably spike in spite of it. If the news is bad, then a big drop looks likely. Given the data, I don't see failure as likely, especially for a diagnostic test where there are few safety concerns.

While LymPro is more solid, MANF is speculative, and will only become a factor once Amarantus gets some financial traction. Amarantus estimates the RP market to be at $10B globally, but before it can shoot for the stars, it has to be able to diagnose Alzheimer's first.


With three companies taking three different approaches to retinitis pigmentosa, this disease may well be triangulated sooner rather than later. Sucampo is the most logical play of the three, followed by Amarantus, but only as a bet on LymPro. MANF will be relevant later, but not until we know Lympro's fate.

Disclosure: I 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.