Adverum Announces Clinical Hold, But It Should Not Hinder Its Gene Therapy Path

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About: Adverum Biotechnologies, Inc. (ADVM), Includes: NVS, REGN, RGNX
by: Terry Chrisomalis
Summary

Adverum announced that the FDA has placed a clinical hold on one of its gene therapy products known as ADVM-022 to treat patients with wet age-related macular degeneration.

Responses for the FDA's issues with CMC have already been submitted to the FDA and the clinical hold is likely to be lifted in the coming weeks.

Adverum expects to release 24-week results from the phase 1 study using ADVM-022 to treat patients with wet age-related macular degeneration in the second half of 2019.

Adverum Biotechnologies had $205.1 million in cash as of December 31, 2018, which is expected to last into 2021.

Adverum (ADVM) announced that one of its gene therapy products, known as ADVM-022, was placed on a clinical hold. It was just an issue the FDA had with CMC data. This, in essence, deals with the FDA needing additional information for manufacturing and processing of the gene therapy ADVM-022 to treat patients with wet age-related macular degeneration (Wet-AMD). This shouldn't be a major issue and I believe in the coming weeks Adverum will get the green light to continue its program. Investors can greatly benefit from an upcoming catalyst of phase 1 results in the second half of 2019.

FDA Clinical Hold

The FDA clinical hold of the phase 1 OPTIC study is only a temporary minor issue. That's because the FDA only needs to review additional CMC data. Adverum received the notice of a clinical hold for this study in early April. However, it had already submitted its response to the FDA last week. What that means is that I expect the FDA to lift the clinical hold in the coming weeks. In my opinion, I don't see ADVM-022 as being toxic for any patient. I think it's just the FDA being cautious about the manufacturing process. For example, one can look to the recent advancement of ADVM-022 to see that the drug is safe to take. The first cohort of this phase 1 study, dealing with 6 patients, was already completed. An Independent Data Monitoring Committee (IDMC) already stated that there were no serious adverse events or dose limiting toxicities observed with only one injection of ADVM-022. What that means is that it got the green light by the IDMC to advance to the second cohort. All that awaits now is the FDA decision to allow the study to resume. I believe that this should happen in the coming weeks. If the FDA removes the clinical hold that will likely act as a positive catalyst for the stock. However, there is another catalyst towards the other half of the year. Adverum expects to release results from this phase 1 study by the second half of the year at a medical conference. These results will deal with patients in the first cohort who were evaluated over the first 24 weeks when given ADVM-022.

Massive Market Opportunity With Competitive Market

ADVM-022 has a chance to greatly improve the lives of patients with Wet AMD. Wet AMD is a disease characterized by blurred vision. It occurs because of abnormal blood vessels that lead fluid or blood into the macula of the eye. The Wet AMD market is expected to reach $10.4 billion by 2024. While this is a large market opportunity for Adverum, it won't be an easy target indication to go after. Not only does it still have to go through several clinical studies, but it also has to be able to challenge competitors. When you think about this disease, the one biotech that comes to mind is Regeneron Pharmaceuticals (REGN). That's because Regeneron has a product known as Eylea, which was approved by the FDA to treat patients with Wet AMD. The problem is that there are some other strong competitors out there. For example, Novartis (NVS) just filed its BLA for its Wet-AMD drug brolucizumab (RTH258) the other day. If all goes well with the regulatory filing, it can possibly be approved by the end of 2019. That's because Novartis went ahead and used one of its priority review vouchers to get quicker approval for it. The ultimate question will be whether or not gene therapy can overcome barriers in potentially being superior over many other approved Wet AMD products. In addition, Adverum will have to worry about its own gene therapy space. It is not the only one looking to develop a gene therapy to treat this disease. Regenxbio Inc. (RGNX) has its own gene therapy product, known as RGX-314, to treat patients with Wet AMD in a phase 1/2 study. If data goes well for it, it anticipates initiating a phase 2b study in late 2019. This is another competitor that Adverum has to worry about.

Financials

According to the 10-K SEC filing, Adverum Biotechnologies had $205.1 million in cash, cash equivalents, and short-term investments as of December 31, 2018. A huge chunk of that cash came from an offering that the biotech made back in February of 2018. That is when it sold 10,222,235 shares of its common stock and generated $64.3 million. Adverum believes that it has enough cash on hand to fund its operations into 2021. Pending the need for cash to either acquire a biotech or for another major corporate purpose, I don't see the biotech raising cash until at least mid 2020.

Conclusion

The clinical hold placed on ADVM-022 is bad news; however, the FDA only noted CMC issues as being the cause for the clinical hold. In addition, Adverum has already submitted responses to the FDA about the CMC issues. I believe that the hold will be lifted in the coming weeks. Investors can anticipate 24-week results from the phase 1 study by the second half of 2019. A major risk would be the competitors noted above. The Wet-AMD space has several established competitors in place. In addition, Adverum will also go up against other gene therapy biotechs developing products for eye diseases, like Regenxbio Incorporated. On the flip side, Adverum doesn't pin all its hopes on one program. Other targeted indications in the pipeline it has to include hereditary angioedema (rare disease with random swelling in parts of the body) and A1AT deficiency (rare genetic disorder caused by Alpha-1 deficiency, leading to liver/lung disease). I believe that Adverum will be in good shape as soon as its clinical hold is lifted.

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.