Axovant Sciences Ltd (AXON) is approaching two key catalysts which may attract the attention of the markets. When I last wrote about the company, I noted that I didn't like the decisions being made at AXON. Throughout 2019 we may begin to see if the company's risky decision, to pivot into a gene therapy company, has paid off. The first chance to see some data from the company's new gene therapy programs is coming in March.
Figure 1: The AXON pipeline now consists entirely of gene therapies with the company having cast aside its small molecule drugs. There is however, still a focus on diseases affecting the nervous system. Source: February 2019 Corporate Presentation.
AXON confirms initial data expected in two trials
On February 7, 2019, AXON reported earnings for the quarter ending December 31, 2018, and confirmed that initial data from the company's phase 2 trial of AXO-Lenti-PD (SUNRISE-PD) in Parkinson's is coming March 2019. The company also confirmed that initial data is also coming from a trial of AXO-AAV-GM2, a therapy that may be of use in Tay-Sachs disease and Sandhoff disease.
SUNRISE-PD: Interim data provides a catalyst
The SUNRISE-PD trial of AXO-Lenti-PD in Parkinson's disease is theoretically the company's best shot on goal based on the data seen with an earlier 15 patient trial of a related gene therapy. Given data from that trial approaches in March 2019, a review of the data seen to date is prudent. AXON got its hands on the rights to develop and commercialize AXO-Lenti-PD (previously called OXB-102) by striking a deal with Oxford Biomedica (OTCPK:OXBDF). The deal involved an upfront payment of $30M from AXON to OXBDF with OXBDF also eligible to receive milestones and royalties on net sales.
AXO-Lenti-PD can be thought of as a next generation version of a gene therapy called ProSavin, developed in years gone by by OXBDF. Both ProSavin and AXO-Lenti-PD are intended to provide the function of three enzymes involved in the synthesis of dopamine, a process which becomes deficient in those with Parkinson's disease. The idea is however that AXO-Lenti-PD will produce increased expression of these enzymes compared to ProSavin and this might convert into a superior therapeutic effect. Preclinical data certainly suggests that human neurons exposed to AXO-Lenti-PD end up making more L-DOPA and more dopamine than those exposed to ProSavin.
Figure 2: Preclinical work shows AXO-Lenti-PD appears superior to ProSavin in terms of the amount of dopamine and L-DOPA (a precursor for dopamine) that cells exposed to the gene therapy end up producing. Source: February 2019 Corporate Presentation for the figure which is based on data from Stewart et al., Hum Gene Ther Clin Dev, 2016, 27(3):100-110.
ProSavin has produced positive results previously
We don't have any human data yet with AXO-Lenti-PD, but we do have human data with ProSavin to review. OXBDF published a key paper in The Lancet in 2014 reporting long-term data from a 15 patient trial of ProSavin, used at three doses (low, medium and high).
Figure 3: Mean change in Unified Parkinson's Disease Rating Scale (UPDRS) part III "OFF" score from baseline to 12 months. Error bars represent the standard error. * denotes a significant decrease at 12 months vs baseline (p=0.0001). Part III of the UPDRS assess the motor signs of Parkinson's disease. OFF scores refer to data collected in an off medication state. Cohort 1 received the low dose, cohort 2a a medium dose, cohort 2b a medium dose with a modified delivery method (designed to allow faster delivery and improve distribution of ProSavin throughout the area it was administered to), cohort 3 received a high dose also using the modified delivery method. Source: Palfi et al., The Lancet, 2014, 383(9923):1138-1146.
Although the 2014 publication notes no significant differences between the different dose cohorts, the mean change in UPDRS III "OFF" scores in these cohorts do show a dose-response relationship. This is the first encouraging piece of evidence that ProSavin works. Follow-up data from the above trial of ProSavin was published in 2018 and suggest durability of response beyond 12 months.
How does ProSavin compare to sham controls?
The second encouraging piece of evidence comes from a comparison of the above data with data from other trials of Parkinson's disease gene therapies. The comparison is made not to other gene therapies but rather the control group in trials of those therapies. These control patients undergo a sham procedure (surgery) but do no actually get treated with the gene therapy. AXON notes on slide 21 of the recent corporate presentation that sham-treated control arms in PD gene therapy trials tend to produce UPDRS part III "OFF" changes of -4.5 or -4.7. A quick look at the trials these numbers come from is quite informative (Figure 4 and Figure 5).
Figure 4: Results from a 51 patient trial of the gene therapy AAV2-NRTN (also known as CERE-120). Changes from baseline over time in the UPDRS part III "OFF" score in patients given a sham surgery or those actually treated with AAV2-NRTN. Source: Olanow et al., Ann Neurol, 2015, 78(2):248-257.
CERE-120 was unfortunately not effective overall in the above trial, but the control group suggests data with ProSavin are encouraging. Data from the second trial referenced by AXON (a trial of AAV2-GAD) were however positive. That trial also produced a similar response in the sham group at 6 months to that seen in the 51 patient trial of AAV2-NRTN.
Figure 5: Mean change from baseline in UPDRS part III "OFF" scores over time in a sham-treated controlled trial of the gene therapy AAV2-GAD. Data in the sham group comes from 21 patients, data in the AAV2-GAD group comes from 16 patients. The difference between groups was significant on a number of endpoints including UPDRS part III "OFF" scores at 6 months for the sham vs AAV2-GAD comparison (p=0.04). Source: LeWitt et al., Lancet Neurol, 2011, 10(4):309-319.
Neurologix Inc (OTC:NRGXQ), who produced the results in Figure 5, encountered financial difficulties and filed for bankruptcy in 2012. Apparently the above data weren't strong enough to encourage substantial investor excitement to keep the company alive, perhaps due to comparison to deep brain stimulation which works just as well and is better characterized. A 2017 publication of long-term follow-up data for the study of AAV2-GAD as well as an additional 2018 publication are available. This work seems to have spurred new interest in the drug, which is now in the hands of MeiraGTx Holdings Plc (MGTX) which thus represents an AXON competitor.
Comparing the -4.5 or -4.7 point change, in UPDRS part III "OFF" scores at 6 months, from the sham-treat arm of trials of AAV2-NRTN or AAV2-GAD to the ProSavin data does yield a favorable comparison. The average UPDRS part III "OFF" score change with the high dose (n=6) of ProSavin was -13.2 at 6 months and -14.8 at 12 months. The average change overall with ProSavin at 6 months and 12 months (pooled data from low, medium and high dose, n=15) was -12.7 and -11.8 respectively.
AXON left something out
There are some caveats before we suggest AXON is set to succeed with AXO-Lenti-PD. Firstly, 15 ProSavin-treated patients is a small dataset and six patients for the high dose group is even smaller. Further, ProSavin, as discussed, is an older version of AXO-Lenti-PD. AXO-Lenti-PD might not work so well, even though it is designed to be better. Next-generation therapies don't live up to expectations 100 percent of the time. Lastly, comparison to historical control groups can introduce selection bias. In this case there have only ever been so many sham-controlled trials of a Parkinson's disease therapy and so having only two trials to compare to is the more likely issue. Except there is a third trial.
Why didn't AXON mention it? Surely they know that AAV2-NRTN, which we mentioned above as being run in a 51-patient trial (Figure 4), was also run in an earlier 58 patient trial, results of which were published in 2010.
Figure 6: Results from a 58-patient study of AAV2-NRTN. Y-axis denotes the mean change from baseline in UPDRS part III "OFF" scores. Source: Marks Jr et al., Lancet Neurol, 2010, 9:1164-1172.
We can see at six months the difference from baseline is a little larger than -4.5/-4.7, here it looks to be about -6.5, at 12 months the paper reports it is -6.91. Thanks for telling us about it, AXON.
What can we expect in March
Part A of the SUNRISE-PD study simply involves dose-finding. AXON is smart to perform dose-finding studies given AXO-Lenti-PD is not quite the same as ProSavin. Investors won't get to see data from a randomized sham-controlled study until Part B. The first two patients in Part A were dosed in Q4'18 so it looks like interim data will come from those patients this March, or perhaps a few more if investors are lucky and the company has dosed more patients since. That data then will likely involve a lower dose, the response might not be that great and even if it is -10 or more points on the UPDRS part III the market might decide it doesn't care much as there is no control.
In the AXO-AAV-GM2 study the first patient was dosed in Q4'18. Interim data might only be from one patient then, or again a few more if the company has dosed a few more patients. I believe this data would potentially have even less impact but AXON will likely make comparisons of the data to what might be expected for an untreated patient.
For the quarter ending December 31, 2018, AXON reported a net loss of $34.3M and finished with cash and cash equivalents of $84.9M. At that burn rate AXON would be out of cash in about two and a half quarters, or by mid-Q3'19, not considering debt (discussed below). On the other hand, R&D expenses of $21.5M for the recent quarter were elevated due to a $10M upfront licensing fee paid to UMass Medical School to get hold of two gene therapies (AXO-AAV-GM1 and AXO-AAV-GM2). That being said AXSM is planning to start two new trials in 2019, the first of which, a trial of AXO-AAV-GM1, should enroll the first patients in H1'19. These start of these trials might mean cash burn might not fall that much even if AXON stops acquiring so many gene therapies. The company also has long term debt of $28.3M, $20.6M of which is current.
Table 1: AXON looks set to pay off a large chunk of debt in 2019. Source: Recent 10-Q.
Putting these numbers together, AXON would do well to raise some more cash soon. I would suggest the company is hoping for a positive reaction to data in March off which to raise with an offering of stock, but the company really needs to tighten its belt anyway.
There were 155.53M shares of AXON's common stock outstanding as of February 5, 2019, corresponding to a market cap of $194.2M at the close of $1.25 on Friday February 8, 2019.
I can't recommend a long in AXON right now. The cash situation is not ideal, the company has spent a little too much to fill the pipeline with six gene therapies that I am now not sure it can afford to develop. Upcoming data in March won't have a control group, will likely come from just a handful of Parkinson's disease patients, and dose finding studies tend to start with low doses and work upwards, low doses of AXO-Lenti-PD might not work so well. Data might come from just one patient or a few more in the AXO-AAV-GM2 trial in March which is also going to be challenging to move the market with. The counterargument might be that even low doses of ProSavin seemed to work better than historical sham-controls and so low doses of AXO-Lenti-PD might produce impressive data too. If such a bet were wrong however, the downside is quite great given AXON's cash situation.
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