The Threats And Opportunities In NASH: What Next For Allergan?

| About: Allergan plc (AGN)

Summary

Allergan stepped into the NASH space with the acquisitions of Tobira and Akarna announced in November 2016.

There aren't any drugs approved for NASH, and the market size is likely to be at least $10B.

AGN's lead compound for NASH is Cenicriviroc, which will enter in PIII in 2017 despite a mixed PII reported in 2016.

Key competitors will be Intercept, Genfit, Gilead and Novo Nordisk, with Intercept likely to be the first to enter the market in mid-2019.

I believe AGN's opportunity in NASH has been overlooked by the market because CVC could generate at least $1-2B sales, assuming only 10-15% market share for Allergan.

Allergan stepped in the NASH space with the acquisitions of Tobira and Akarna announced in November 2016 for around $650M of upfront payment plus additional milestones. I like the portfolio approach adopted by Allergan's management in NASH, and I think the market has overlooked its opportunity in this therapeutic area, which could be at least in the region of $1-2B of sales for Cenicriviroc.

What is NASH and how it's diagnosed or treated

"Nonalcoholic fatty liver disease (NAFLD) is a condition in which fat builds up in your liver. This buildup of fat is not caused by heavy alcohol use.

Two types of NAFLD are simple fatty liver and nonalcoholic steatohepatitis (NASH):

  • Simple fatty liver, also called nonalcoholic fatty liver (NAFL), is a form of NAFLD in which you have fat in your liver but little or no inflammation or liver cell damage. Simple fatty liver typically does not progress to cause liver damage or complications.
  • NASH is a form of NAFLD in which you have inflammation and liver cell damage, in addition to fat in your liver. Inflammation and liver cell damage can cause fibrosis and liver cancer."

- Source: NIH

Within NASH, there is a range of severity, from just inflammation to more extensive damage. The best measure of severity and the strongest predictor of mortality and morbidity is the extent of fibrosis classified as a scale where F0 means no fibrosis and F4 means severe fibrosis with cirrhosis.

Usually patients haven't had any symptoms in the early stages of NASH, while as NASH progresses and liver damage gets worse, a patient may start to have symptoms such as fatigue and general weakness.

Treatments for NASH are limited today, because there aren't any drugs approved for this condition. Thus, the best a patient can do is to reduce his cholesterol level to control diabetes and stop drinking alcohol.

Lastly, in order to diagnose NASH, the doctor can use different tests, like blood tests, abdominal ultrasound, CT scan or MRI scan, but usually the most informative test is a liver biopsy where the doctor takes a sample of tissue from the liver and checks it for signs of NASH. The problem is that a biopsy is an invasive procedure and it could not give univocal results.

In summary, the NASH disease is a silent condition, which may require years to show symptoms and which is not easy to be diagnosed. These are the key hurdles that the companies which are developing drugs in NASH will face in addressing the market in order to identify the right patients and to test their drug in the right subset of population.

How big could be the market?

"NAFLD is one of the most common causes of liver disease in the United States. Most people with NAFLD have simple fatty liver. Only a small number of people with NAFLD have NASH. Experts estimate that about 20 percent of people with NAFLD have NASH. Between 30 and 40 percent of adults in the United States have NAFLD. About 3 to 12 percent of adults in the United States have NASH."

- Source: NIH

Similar numbers have been provided by Genfit (OTCPK:GNFTF), one of the leading companies developing treatments for NASH:

Source: Genfit Presentation

I think that these expectations are too aggressive and unrealistic because they assume that 85% of NASH population could be treated, which equates to a global NASH market size of around $30-40B.

As stated before, there are different grades of severity within NASH, and only advanced fibrosis stage (F3/F4) are the key stages where a treatment is needed because patients start to feel badly for the symptoms.

Thus, if we focus on the high-risk NASH patients, as explained by Tobira Pharmaceuticals acquired in 2016 by Allergan, a more conservative estimate about the addressable NASH patients is about 6-10 mln people, which equates to a global NASH market size of at least $10B, which is still a really attractive opportunity for the pharmaceutical sector.

Source: Tobira Investor Presentation

Allergan's portfolio in NASH

Allergan entered into the NASH space with the acquisition of Tobira and Akarna announced in November 2016 for around $650M of upfront payment plus additional milestones.

AGN's lead compound for NASH is Cenicriviroc, which reported PII results from the CENTAUR study in July 2016.

"CVC is an oral, once-daily, potent immunomodulator that blocks two chemokine receptors, CCR2 and CCR5, which are intricately involved in the inflammatory and fibrogenic pathways in NASH."

- Source: Tobira-Akarna-Vitae Acquisitions Investor Presentation, 21th September, 2016

Key points of PII clinical trial:

  • About the efficacy profile, CVC failed on the primary endpoint of "2+ points improvement on NAS scale" and on the key secondary endpoints of "complete resolution of NASH" and "no worsening fibrosis," showing results very similar to the placebo.
  • However, CVC showed "a statistically significant improvement of at least one stage of fibrosis without worsening of NASH at year one (20% vs. 10% for placebo, p=0.023)" across all fibrosis stages and greatest in severe patients (NAS≥5).

Source: Tobira's Press Release From CVC's Phase IIb CENTAUR, 25th July, 2016

Source: Tobira Investor Presentation

  • About the safety profile, the drug was well tolerated with an incidence of adverse events similar to the placebo arm.

Source: Tobira Investor Presentation

Allergan CEO Brent Saunders seems enthusiastic about the opportunity for this asset:

"CVC could be the foundation of NASH therapy which is a growing health crisis."

Despite the failure on the primary endpoint in the PII study, Allergan plans to initiate a PIII study for CVC in 2017, using as primary endpoint "improvement in fibrosis by at least 1 stage and no worsening of steatohepatitis at month 12," where CVC showed the strongest results in the PII trial. The trial will enroll around 1,000 patients, and if successful, it should allow the company to enter the NASH space likely in 2020/2021.

Allergan has also acquired two other compounds with interesting mechanism of actions (Evogliptin and AKN-083), but with limited clinical data available, I think it's too early to assess their opportunity.

"EVOGLIPTIN is a DPP-4 which targets metabolic abnormalities. It's in an ongoing PI trial in NASH, administered with and without CVC."

"AKN-083 is a highly differentiated non-bile acid fxr agonist, which has demonstrated robust in vivo proof of concept in preclinical models; the first study in human has been planned for H1/2017."

- Source: Tobira-Akarna-Vitae Acquisitions Investor Presentation, 21th September, 2016

Competitors' approaches

I will analyze the clinical profile for the lead assets of the four closest competitors for Allergan in the NASH space: Intercept (NASDAQ:ICPT), Genfit, Gilead (NASDAQ:GILD) and Novo Nordisk (NYSE:NVO).

There are other players that are developing treatments for NASH, like Shire (NASDAQ:SHPG), Novartis (NYSE:NVS), Galmed (NASDAQ:GLMD), and Conatus (NASDAQ:CNAT), but there are insufficient clinical data available to assess their competitive profile.

Intercept

Intercept is the closest to market in NASH and the first among the FXR developers, with its drug called obeticholic acid (OCA). This drug is already on the market as a treatment for primary biliary cholangitis (PBC) and it reported positive PII data in October 2015 from the FLINT study.

Key points of Phase II clinical trial (FLINT):

  • About the efficacy profile, OCA met the primary endpoint of improved liver histology, showing 45% efficacy vs. 21% for placebo on the primary endpoint of "2-point NAS decrease and no worsening of fibrosis." OCA also showed a significant improvement in liver fibrosis, with 35% of the OCA arm vs. 19% for placebo.
  • OCA didn't show positive results on resolution of NASH in all completers.

Source: Intercept Investor Presentation

  • About the safety profile, OCA was generally well tolerated, but it increased pruritus and total LDL-cholesterol, in addition to slightly decreased HDL-cholesterol LDLs.

The Phase III trial, called REGENERATE, started in September 2015, enrolling 2,000 NASH patients with advanced liver fibrosis (F2 or F3) and with a biopsy confirmed NASH.

The trial has been designed with co-primary endpoints in order to look both at "fibrosis improvement with no worsening of NASH" and at "NASH resolution with no worsening of fibrosis." An interim analysis has been designed after 72 weeks of treatment on 1,400 patients, and if positive, will be used as basis for filing, thus targeting a launch in mid-2019.

In summary, OCA's efficacy profile seems strong and the drug has the key advantage to be likely the first on the market, but I believe that the side-effect profile (pruritus and LDL elevation) is a key concern which will likely hamper the long-term peak sales potential for this drug.

Genfit

Genfit is developing Elafibranor (GFT505), a dual PPARα/δ agonist, which reported mixed PII results in March 2015, from the GOLDEN-505 study.

Key points of the Phase II clinical trial:

  • About the efficacy profile, the product failed to reach statistical significant in the primary outcome of "resolution of NASH without worsening of fibrosis." Only adjusting for the baseline severity, the drug showed some activity in the global population on this primary endpoint. Lastly, in more severe patients (NAS≥4 with fibrosis), efficacy benefit was stronger with a good p-value.

Source: Genfit Investor Presentation

  • About the safety profile, GFT505 was safe and well tolerated, apart from a reversible increase in serum creatinine that looks like a manageable issue.

On the back of this PII data, Genfit announced the PIII study for GFT505, called RESOLVE-IT, in approximately 1,800 patients. The study population will include NASH patients (NAS≥4) with F2 or F3 fibrosis, with a likely interim analysis at the end of 2018.

In summary, the efficacy of GFT505 is still a question mark after the mixed PII study, but the safety profile could be really attractive. Thus, if PIII data on a more stringent and well-defined endpoint will be positive, the drug could be a key competitor for Allergan.

Novo Nordisk

Novo Nordisk is targeting the use of its GLP1 drugs, Victoza and Semaglutide, in the NASH space.

In 2015, Novo reported strong results from a PII study of Victoza in NASH called LEAN.

Key points of the Phase II clinical trial:

  • About the efficacy profile, Victoza reported better results than placebo on the primary endpoint of "resolution of NASH" and on a key secondary endpoint as "worsening of fibrosis." However, NAS improvement failed to reach statistical significance.
  • About the safety profile, Victoza was well tolerated, with the exception of some manageable GI issues.

The next step is a PII study with Semaglutide, Novo Nordisk's once-weekly GLP1 in development also for diabetes, which is expected to complete in mid-2019 and has been designed with primary endpoint of "NASH resolution with no worsening of liver fibrosis."

My view is that GLP1's efficacy seems very strong in NASH, but I see two drawbacks in Novo's approach which could limit the opportunity for the company:

  • It is late in the race, because the company is still doing a PII study, while other big players have already advanced their lead assets in PIII. Thus, Novo couldn't launch its drug before 2023/2024.
  • Semaglutide is an injectable drug while other competitors are pursuing oral approach.

Gilead

Gilead has pursued a similar approach of Allergan in NASH, developing a portfolio of assets. The key asset was recently discontinued, Simtuzumab, but GILD also reported positive PII results from a second compound called Selonsertib (GS-4997).

Key points of the Phase II clinical trial:

  • About the efficacy profile, 43% of patients showed fibrosis improvement, 37% showed a fibrosis improvement without worsening NASH, but only 3% of patients showed a progression in cirrhosis.

Source: Gilead Investor Presentation

  • About the safety profile, the drug seems well tolerated, even if there were some side effects as headache, nausea, abdominal pain and fatigue.

In 2017, Gilead will initiate a PIII trial for Selonsertib in patients with NASH and advanced fibrosis for a potential launch in 2021/2022.

GILD has also a FXR agonist called GS-9674 in PII, and an ACC inhibitor called GS-0976, which reported recently Phase 1, as further compounds in development for NASH.

My view is that GILD's approach is interesting, with different compounds targeting different pathways involved in the NASH disease, but more data are needed to be able to assess the profile of these three assets and their potential interactions. Anyway, Gilead looks like a credible player in the NASH space.

Conclusion

I believe Allergan's opportunity in NASH has been overlooked by the market. I like its portfolio approach, with different compounds developed for the same indication, which could also potentially be used in combination. Starting from the assumption that the NASH market could be >$10B, if Allergan will be able to achieve 10-15% market share with Cenicriviroc, the drug will generate around $1-2B of sales, which are currently not reflected in the stock price and in the consensus expectations. However, the results of CVC in the PII study were not excellent, thus it remains a high-risk program for AGN, but with a very compelling risk/reward profile.

Disclosure: I am/we are long AGN.

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.

Additional disclosure: Not investment advice. I am not an investment adviser.

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