Esperion Therapeutics: Investment Case

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About: Esperion Therapeutics, Inc. (ESPR)
by: Avisol Capital Partners
Summary

Esperion's bempedoic acid and ezetimibe combo will compete with PCSK9 inhibitors on pricing and ease of administration.

Current lowering of Repatha/Praluent prices to $5,800 and $4,500 respectively, coupled with the deaths in bempedoic acid's trial, have scared investors.

There does remain some value in the investment case for the company; however, the price reduction has significantly affected our bullish thesis, and we will downgrade the stock to neutral.

Esperion Therapeutics (ESPR) is the typical story of a small biotech built up on robust science and dreams of huge profits over a number of years. Way back in 2015, this stock was trading at all-time highs. Then, we had the news of its phase 3 trial delay while its competing drugs, the PCSK9 inhibitors Repatha and Praluent, got approved. That led to a huge fall in the stock. Then, over the next couple years, the stock built up momentum, helped by completion of enrollment in one of the delayed phase 3 trials. However, in May 2018, when the trial results were announced, despite strong signs of efficacy, the stock collapsed on the reported deaths of 13 patients in the drug arm compared to 2 deaths in the placebo arm. The stock hasn't recovered from that debacle despite clarifying comments from the CEO and others. Reduction in the price of Praluent and Repatha has not helped. This is, in brief, the story of Esperion Therapeutics and its lead and only drug candidate bempedoic acid, and this is a story every serious investor in biopharma probably already knows.

We covered this stock extensively before, and as recently as September 2018, we called for the stock to be held until PDUFA. At that time, PDUFA dates were not clearly known. However, now, we have a few further developments that have clarified these dates, and we also have some more light on the patient deaths that dampened enthusiasm last year. In this article, we will use the IOMachine to cover these developments and see if there's any update on our HOLD opinion for the stock.

Catalyst

Esperion filed two marketing applications in the US, one for bempedoic acid and the other for bempedoic acid plus ezetimibe statin therapy, both as "as complementary, cost-effective, convenient, once-daily, oral therapies for the treatment of patients with elevated low-density lipoprotein cholesterol (LDL-C) who need additional LDL-C lowering despite the use of currently accessible therapies."

In late May, we will come to know whether the fillings have been accepted. Assuming they are accepted, PDUFA date should be in March 2020.

The company already has two similar applications for review in Europe. It recently tied up with Daiichi Sankyo for commercialization in that geography.

Source

Previous trial data

We have thoroughly covered ESPR's trial performance before. What we have essentially seen is that 1) BA alone isn't competitive against the PCSK9 inhibitors in terms of reducing LDL-C alone, although 1a) it also reduces hsCRP, which is a good thing and 1b) BA+EZE is competitive in LDL-C reduction against PCSK9s; 2) ESPR has always claimed that its major advantage would be price point, which has now become something of a non-issue given the drastic, over 60% reduction in prices for the PCSK9s; 3) there have been 13 (14) deaths in the phase 3 trial in the drug arm against 2 in the control which has brought down the already-shaky stock despite 4) counters by the CEO and now by a host of experts in an NEJM article that say the deaths were unrelated to the drug and something of a major coincidence.

Briefly, we will recapitulate trial data from what we said before and what has happened since.

In two previous articles referenced above, we said the following about BA's efficacy:

As a monotherapy, ESPR's lead product candidate has been found to be effective but even at the highest dosage, the reduction in LDL-C (30%) was much lower than that for PCSK9 inhibitors. The argument against Esperion therefore was that even if its LDL-C lowering drug, if approved, is priced significantly lower than Praluent and Repatha, it was not as effective as a treatment option as PCSK9 inhibitors. But the combination therapy has been found to reduce LDL-C by almost 50% (highest dosage of bempedoic acid).

And in the following article, we said:

ESPR has done almost 20 trials of the drug from various angles. Here's a list of them, with outcomes:

Screen Shot 2018-09-25 at 3.19.32 PM.png

Source - company website

Besides these phase 2 studies, they have also declared results from all but one of the five phase 3 studies that were ongoing. In all these trials, even in the one with high mortality, bempedoic acid managed to lower LDL-C levels drastically, both as monotherapy and as combo therapy with ezetimibe and statins. The highest reduction we see here with ezetimibe and atorvastatin in combo is 64%, which is better than most trials of the PCSK9is.

As to the biomarker hsCRP, here's what we said:

Importantly, the drug also "achieved a significantly greater reduction of 34 percent in high-sensitivity C-reactive protein (hsCRP), an important marker of the underlying inflammation associated with cardiovascular disease, compared to the placebo group which had a reduction of two percent (p<0.029)." hsCRP has medical professionals divided as to its precise effect on CV diseases. Most researchers believe that reduction in hsCRP has an even better effect on reducing the of CV diseases compared to LDL-C. As the following report says: "data suggest that the C-reactive protein level is a stronger predictor of cardiovascular events than the LDL cholesterol level." In that way, bempedoic acid's ability to reduce hsCRP is an important achievement.

Notwithstanding all that, it does seem that all BA has been able to achieve is non-inferiority with PCSK9s at the highest dose when combined with statins. Let's not have any lack of clarity on that. Bempedoic acid is not better at reducing LDL-C in comparison to PCSK9is.

If so, what remains for it as a potential marketable product? Safety, of course, and pricing. If the drug can prove itself at par with PCSK9s and better at safety and can price it competitively, then there's a fighting chance it will sell.

The safety data was going well until we had those 13 deaths. That is the precise reason the stock collapsed.

Discussion

In multiple trials, as seen below, BA was safe and well-tolerated.

Pivotal Phase 3 bempedoic acid/ezetimibe:

In this 12-week study, the bempedoic acid/ezetimibe combo pill was observed to be safe and well-tolerated. The results showed no clinical differences between the FDC, BA, EZE and placebo patient groups in the occurrence of Serious adverse events (SAEs) with 8 percent, 6 percent, 9 percent and 2 percent, respectively. No SAEs were considered to be related to study medication. Discontinuations due to AEs with 7 percent, 8 percent, 9 percent, and 4 percent, respectively. No elevations in liver function tests (ALT/AST) of greater than three times the upper limit of normal, repeated and confirmed were observed.

Pivotal Phase 3 of bempedoic acid 180 mg vs. placebo:

In this study, bempedoic acid was observed to be safe and well-tolerated. The results showed no clinically relevant differences between the bempedoic acid and placebo treatment.

It is only in that one trial that the discrepant deaths occurred. As reported in a related editorial:

The primary end point of safety, assessed by means of the incidence of adverse events and changes in safety laboratory variables during the trial according to the Medical Dictionary for Regulatory Activities, did not differ meaningfully between the bempedoic acid group and the placebo group. However, patients in the bempedoic acid group had an excess risk of adverse events leading to discontinuation of the blinded trial regimen, an excess risk of gout, and higher blood concentrations of uric acid than those in the placebo group. In further analyses of nonprimary and secondary end points, there were additional potentially troubling signals, although the 95% confidence intervals were wide: 0.9% of the patients treated with bempedoic acid died, as compared with 0.3% of those in the placebo group (relative risk, 3.24; 95% confidence interval [CI], 0.73 to 14.34); 0.4% of the patients in the bempedoic acid group and 0.1% of those in the placebo group died from adjudicated cardiovascular disease (relative risk, 2.99; 95% CI, 0.36 to 24.82); and 0.6% and 0.1%, respectively, were hospitalized for heart failure (relative risk, 4.49; 95% CI, 0.57 to 35.38).

The editorial says that while these results were troubling, the author agrees with the company's assessment that these are "chance findings." He also raises an interesting point - "Are such effects biologically plausible?" Bempedoic acid lowers the LDL cholesterol level by means of inhibition of ACL, an enzyme upstream of HMGCR (the target of statins)." Therefore - and assuming various medical titbits that we don't think we should go into here (read the original article) - the safety profile of bempedoic acid should not diverge widely from that of statins. But then, the author goes on to negate some of the very assumptions he raised to suggest this interesting question by raising counter-assumptions.

He is thus leaving the lay investor in a curiously conflicted position - initially, the investment thesis was two-fold, non-inferior efficacy with better safety and a lower price point. With the drastic 60% reduction in price (the PCSK9is were not selling well), the pricing power is mostly out of the equation. As to safety, while most of the trials have seemingly produced solid safety data, there's this one glaring outlier which can neither be explained nor explained away.

Execution

The company has a market cap of $1.08B, a cash balance of $142.63M as of the December quarter per both Yahoo and Seeking Alpha, and Burn is -148.64M. Therefore, there is very little cash here, and we are looking at imminent dilution. However, per the company presentation, they have the following cash figures:

Source

Here's a chart showing recent insider buy/sells. There's a diverse spread of buys and sells here:

Source

And here's a quick snapshot of fund ownership:

Source

Competition

PCSK9 inhibitors are currently the main competition, with Repatha, Praluent, and also inclisiran from The Medicines Company (MDCO) in the running. There's just too much competition here, and for ESPR, we must daily remember that Bempedoic is all they have, there's no fallback option.

What we have to see now is the difference in safety profile between statins, PCSK9is, and bempedoic acid.

This is how ESPR positions its drug:

Source

What is interesting is that there is no real claim of better clinical benefit or even safety here. Injection and insurance are the key differentiating areas here - PCSK9is are injections, while bempedoic acid is oral. There have been efforts to develop oral PCSK9is. So, in that key patient population, who don't want to take these injections and do not need as much LDL-C lowering - and given a price point lower than even the reduced repatha prices, or for patients without insurance- in that niche market, bempedoic acid has been positioned.

Opinion

Before the patient deaths, we were quite bullish on ESPR. Even after the patient deaths, and considering the overall safety data, we could understand if the company wanted to label this as a chance occurrence. However, the reduction in the price of its competing drugs has made bempedoic acid much less interesting an investment now. Taking a subcutaneous injection once or twice monthly does not seem like a big deal here. Considering all that, we now downgrade the stock to neutral and adopt a wait and watch approach.

Disclosure: I/we 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.