Author’s note: I am grateful to CMO & Senior Vice President, Dr. Christian Marsolais and management, for granting me the interview.
Theratechnologies (OTCPK:THERF) or TSX.TH is a small-cap ($431M) Canadian commercial stage specialty biopharmaceutical company that was founded 25 years ago. In the 2000s, with the HIV/AIDS health crisis in full swing, Theratechnologies began the clinical development of tesamorelin (TH9507) for HIV-infected patients. A clinical development plan that may have appeared ill-conceived at that time since there were several large cap biopharmas with HIV therapeutics, Theratechnologies, a small cap, was not one of them.
In need of the fastest path to revenue generation to survive, Theratechnologies chose to pursue approval in HIV Lipodystrophy, a condition associated with HIV and/or HIV treatments as the cost, size and length of Lipodystrophy trials were most optimal and the chances of approval greatest. At that point, there was only limited information on the clinical issue of excess abdominal visceral adipose tissue or lipodystrophy in HIV pathophysiology and no direct competitors for Theratechnologies in HIV Lipodystrophy. Notably, NAFLD/NASH was not perceived as an emerging global health crisis at that time.
In 2010, Egrifta (tesamorelin) was approved by the FDA specifically for the reduction of excess abdominal visceral adipose tissue (VAT) in HIV-infected patients with lipodystrophy. Egrifta contains tesamorelin, a stabilized synthetic peptide analog of growth hormone-releasing factor ("GRF"), and was commercialized in 2011 initially by EMD-Serono. In 2014, Theratechnologies came to the conclusion that it would make sense to regain commercialization in the US. In hindsight, it was an excellent clinical and possibly financially rewarding decision. While Lipodystrophy has been a somewhat limited market for Egrifta, the potential for this to change meaningfully with favorable data from the phase 2 NASH HIV trial is high.
My discussion with Dr. Christian Marsolais, focused on the potent clinically meaningful benefits of Egrifta in reducing visceral adiposity and how its therapeutic efficacy could bode well for the Phase 2 NASH clinical trial in HIV-infected patients.
Physiology Of Egrifta
Antiretroviral therapies have done therapeutic wonders for HIV/AIDS patients. Clinically, some HIV patients on long-term antiretroviral therapy develop lipodystrophy, a rare disease characterized by excess abdominal adipose fat deposits, together with increased prevalence of hepatic steatosis/fatty liver and metabolic syndrome ((MetS)).
Dr. Marsolais explained that the clinically meaningful benefit of Egrifta in visceral adiposity associated with HIV infection lies in its ability to physiologically increase the levels of the human growth hormone ("GH") in these patients. CMO commented that Egrifta was clinically designed to trigger pulsatile and controlled secretion of endogenous GH to physiologically normalize its level which are lower in patients with HIV lipodystrophy. It is noteworthy that GH is a metabolic modulator of fat and glucose, with lipolytic effects that induces the breakdown of fat. This may account for the potent therapeutic benefits of Egrifta seen in HIV lipodystrophy.
The incidence of NASH is becoming a global health crisis and the Western diet is now considered the major contributor to NASH pathogenesis. Several anti-NASH drug candidates including Aramchol by Galmed (NASDAQ:GLMD), MDGL-3196 by Madrigal (NASDAQ:MDGL) and NGM282 (NGM), that could induce/trigger fatty acid oxidation are now in clinical development. It has been proposed that by preventing the accumulation of fatty acids or carbohydrates in the liver by skewing fatty acids to oxidative pathways, their lipotoxic effects that induce and sustain the progression of NASH are also inhibited.
With that chain of thought, one can hypothesize that Egrifta could induce hepatic fat reduction to trigger a histological response in the liver of HIV patients to induce NASH resolution as seen with the aforementioned anti-NASH investigative drug candidates. Moreover, VAT is associated with digestive organs, of which the liver is an organ of the digestive system (Fig. 1).
Figure 1: A brief overview of VAT (source, Theratechnologies)
Egrifta In Obesity And Visceral Adiposity
Subcutaneous adipose tissues ("SAT") include abdominal and gluteal, as well as femoral whereas VAT is associated with digestive organs including liver (Fig. 1). Obesity, a component of the MetS, is a well-known risk factor for NASH. Dr. Marsolais noted that obese patients have reduced GH secretion, increased abdominal adipose fat ("SAT") as well as visceral adipose fat (VAT). Dr. Marsolais also pointed out that the decreased GH levels in obese patients with visceral adiposity may be associated with increased cardiovascular disease risk as reflected by increased carotid intima-media thickness ((cIMT)), dyslipidemia and increased inflammatory markers. The Cedars-Sinai Hospital defines :
CIMT test as a measure used to diagnose the extent of carotid atherosclerotic vascular disease. The test measures the thickness of the inner two layers of the carotid artery—the intima and media.
The clinical finding that Egrifta improved visceral adiposity, dyslipidemia to reduce cardiovascular risk attests to the potential broad therapeutic application of Egrifta in MetS, obesity and possibly NASH.
Egrifta In NASH And Visceral Adiposity In HIV
Egrifta was approved specifically for the reduction of excess abdominal visceral adipose tissue/VAT in HIV-infected patients with lipodystrophy. Lipodystrophy increases predisposition to metabolic complications including insulin resistance, dyslipidemia and hepatic steatosis (i.e. fatty liver).
Clinically, GH therapy has been demonstrated to regress NASH while positively improving dyslipidemia in normal adult with GH deficiency. Conversely, adult GH deficiency is associated with the development of NASH. Importantly, patients with defects in the hypothalamic and pituitary systems do develop MetS that could lead to NAFLD/NASH.
Based on the abovementioned clinical data, I commented to Dr. Marsolais that it was not difficult to imagine that therapeutic benefits of Egrifta at improving VAT would clinically translate to hepatic fat reduction that induces NASH resolution in HIV-infected patients. Diplomatically, Dr. Marsolais reiterated that he and management were very encouraged by the level of efficacy seen with Egrifta on VAT in HIV patients as they await the imminent data readout from the Phase 2b NASH trial in HIV patients.
Tolerability And Safety
Egrifta safety profile is well known since it has been on the market for a number of years. The main adverse events associated with Egrifta are arthralgia, injection sites reactions and mild pruritus. This is remarkable since HIV patients have pre-existing issues that could make them more susceptible to drug induced adverse events than general population. The good tolerability and safety signals of Egrifta are very encouraging and could make it much easier for Theratechnologies as it discusses the path forward for Egrifta in NASH with the FDA should the imminent trial results prove encouraging.
Beyond Phase 2 NASH And The Future
Pending a successful clinical outcome in the Phase 2 NASH trial, I asked what’s next. Dr. Marsolais commented that the company would initiate discussion with regulatory agencies, FDA and EMA, to discuss clinical programs for HIV NASH. If supported by FDA, a label expansion of Egrifta to include therapeutic application for NASH in HIV-infected patients may be the appropriate way to go.
This makes good business sense for the company since marketing tools and personnel are already in place and it is estimated that 30-40% of the HIV population suffers from NAFLD or NASH in the US and Europe. If Theratechnologies was able to gain even a small market share among these patients, its Egrifta franchise would likely grow to several times its current size and add significantly to its bottom line.
In 2018, the FDA approved a single vial formulation of Egrifta also known as “F4”. Given its significant benefits over the first version of Egrifta (no refrigeration, no mixing necessary, smaller needle, smaller drug quantity), it would have a significant advantage of the eventual initial version of Egrifta (its last patent expires in 2023).
Regarding evaluating Egrifta in NASH in the general population, Dr. Marsolais commented that all clinical options available to them to assess the therapeutic potential of Egrifta would be carefully considered including NASH in the general population.
Actionable Event, Financials And Risks
This is a stock that should be in your portfolio. It offers significant differentiation in its pharmacological target and HIV patient population. Its assessment of Egrifta in NASH is very timely. Egrifta has a clinical profile that could bear therapeutic resemblance to MGL-3196 by Madrigal (MDGL). The current stock price is a good entry point.
Theratechnologies has 2 FDA-approved therapeutics for treatment of HIV patients. Egrifta is used to treat excess abdominal visceral adiposity in HIV-infected patients with lipodystrophy. Trogarzo (i.e. ibalizumab) is approved to treat HIV-1 patients experiencing multi-drug resistance. Theratechnologies acquired the US and European marketing rights to Trogarzo from Taimed, a Taiwanese company.
Theratechnologies has a good earnings growth profile even before any NASH possibilities are considered. Should the soon-to-be-released NASH HIV trial results be good, multiple doors could open for the company which could potentially hold greater potential for growth than its current approvals allow.
As with any clinical trial, there are risks due to a potential negative clinical outcome since HIV patients are immunocompromised. Furthermore, no one knows if long-term antiretroviral therapy in HIV patients could affect the clinical outcome. However, the lack of safety signals of Egrifta is reassuring. The current NASH HIV trial involving Egrifta was funded by a grant from the NIAID/NIH.
At the end of November, 2018, cash, cash equivalents and bonds amounted to $54M (i.e. $71M CAD). Theratechnologies is expected to observe significant earnings growth in upcoming years and is already generating positive EBITDA. At the end of Q4/2018, Theratechnologies reported a 36.6% increase in revenue at $44M (i.e. $58MCAD) versus Q4/2017. Specifically, sales revenue from Egrifta were up 10% at $35M (i.e. $46M CAD) in Q4/2018 vs. Q4/2017. Trogarzo reported sale revenue of $8.7M (i.e. $11.6MCAD).
The company also announced that it is converting to reporting its financial results in US dollars from Canadian dollars, which some believe is a precursor for the company listing its shares on NASDAQ. If the NASH trial results are favorable, a NASDAQ listing seems inevitable.
NAFLD and NASH are becoming a global medical crisis in the general population. HIV infected individuals are typically underserved since they are normally excluded from all or most clinical anti-NASH trials. Presently, all anti-NASH therapeutics are being clinically developed for the general public with no clinical trial(s) targeting the HIV population.
This means that on approval, Egrifta may have no apparent competitor and would capture a sizeable share of the NASH addressable market with a focus on HIV patients, a market that is estimated to amount to roughly 300,000 to 400,000 patients in both the US and Europe. Notably, Theratechnologies has designed the clinical trial with a broad therapeutic approach for all HIV infected individuals diagnosed with NASH.
This is a stock to watch, and even more so given the upcoming data release of its NASH HIV phase 2 trial. On its recent conference call, the company stated those results should come in late March or early April. Additionally, if those results are favorable, the company could easily become a takeover target and its operations, as we have said previously, fit naturally with those of GILD. Since my initial report on Theratechnologies a short while ago, it is clear from its increased trading activity that more investors, likely US based, are discovering it. This is a process that is likely to continue given the likelihood of good clinical results from its current NASH HIV trial.
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Disclosure: I am/we are long THERF. 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.
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