Acer Therapeutics Inc. (NASDAQ:ACER) ("Acer" or the "Company") is a pharmaceutical company headquartered in Newton, Massachusetts, focused on the acquisition, development, and commercialization of therapies for serious rare and life-threatening orphan or ultra-orphan diseases with significant unmet medical needs.
Acer's lead drug candidate, EDSIVO for the treatment of orphan disease called vEDS, has an upcoming PDUFA date on June 25, 2019. Typically, investors would expect the share price of Acer to increase leading up to the PDUFA date in anticipation of the drug's approval by the FDA. Instead, as can be seen by the 3-month chart below, Acer's share price has been declining, suggesting that the market sentiment is that EDSIVO will not be approved by the FDA on or before June 25th. This article will attempt to address this issue and whether the market has perhaps overreacted.
For those unfamiliar with Acer, and for a more detailed discussion on Acer's clinical late-stage drugs EDSIVO, ACER-001 and Osanetant, as well as orphan or ultra-orphan diseases generally, I invite you to read my earlier articles published on September 25, 2018, February 11, 2019, and most recently my April 22, 2019 article, "Acer's Upcoming Catalysts". Acer's most recent quarterly financial release and corporate update on May 14th can be found here.
I also invite readers to listen to CEO Chris Schelling most recent webcast presentation (with accompanying slides) at Jefferies on June 6, 2019, which provides a very good overview of the company and its current activities. It also provides an excellent overview of vEDS.
Acer Corporate Summary
Outstanding shares: 10.1 million as of March 2019
Fully Diluted shares: 11.3 million shares fully diluted as of March 2019
52-week share price range: $15.22 to $34.10
June 11, 2019 @ 1 p.m. EST: $15.41
Average daily trading volume: 60,000 shares
Market Cap: $155 million @ close on June 10, 2019
Estimated Cash or equivalents: * $31.8 million as of March 31, 2019
Cash runway according to Acer: H1 2020
All dollar references are in $U.S.
Acer's Late Stage Clinical Drug Candidates
Acer owns two late stage clinical drug candidates, EDSIVO ™ and ACER-001, both for the treatment of severe genetic disorders. Both of these drug candidates have already demonstrated clinical proof-of-concept. Acer is seeking approval for these drugs in the U.S. using an expedited regulatory pathway set out under sub-section 505 (B)(2) of the Federal Food, Drug, and Cosmetic Act, (or "FFDCA"), that allows an applicant to rely for approval at least in part on third-party data. This expedited regulatory approval process will expedite the preparation, submission, and approval of these two drug candidates by the FDA.
EDSIVO: Granted Priority Review with Upcoming June 25, 2019, PDUFA Date
On December 26, 2018, Acer announced that the FDA had accepted Acer's NDA for celiprolol (EDSIVO) for review for the treatment of vEDS in patients with a confirmed COL3A1 genetic mutation, as well as granting priority review of the EDSIVO NDA with a PDUFA target action date of June 25, 2019.
vEDS is a very serious life-threatening vascular disease where patients' life span in the U.S. averages about 51 years.
Priority review accelerates the FDA review process for drugs that offer significant improvement in treatment or to provide treatment where no satisfactory alternative treatment exists. Celiprolol is already approved in Europe to treat hypertension but has also been used off label to successfully treat vEDS patients for the past few decades. In fact, according to Acer's CEO Chris Schelling, celiprolol's use is considered the gold standard in vEDS care in Europe.
Why is Acer's Share Price Moving Down Prior to the Upcoming June 25th PDUFA date?
The question I have been asked recently is, if it all sounds so good, why aren't we seeing a ramp up in Acer's share price leading up to EDSIVO's June 25th PDUFA date (which one would normally expect)? Instead, Acer's share price has continued to slump over the past number of weeks, reaching a 52-week low earlier today.
The short answer is that I really don't know.
The analysts who cover Acer all appear to be bullish on Acer's prospects. Most recently, on June 5th, William Blair came out with a $48 share price target.
Acer has an experienced management and scientific team, has recently hired an experienced commercial team and sales staff, adequate funding until H1 2020 and is actively ramping up to commercially launch EDSIVO in the U.S. in anticipation of approval of EDSIVO on June 25th.
EDSIVO has received Priority Review from the FDA who, according to Acer's management team, has provided Acer with encouragement and positive feedback about EDSIVO, so that vEDS patients in the U.S. with COL3A1+ mutation can finally get what appears to be a relatively safe and effective treatment option. vEDS patients currently have no other treatment option available to them in the U.S. In fact, in the U.S. doctors have been prescribing antihypertensives (off label) to treat vEDS patients. On May 31, 2019, Acer presented a pilot study at the Society for Vascular Medicine that provides encouraging evidence that such treatment is ineffective in treating vEDS (indirectly supporting Acer's value proposition for EDSIVO).
Response to a Bearish January 28, 2019, Article on Acer's Chance of EDSIVO Being Approved by the FDA
I have had a number of inquiries during the past few days about a January 28, 2019, article published on the pharmaceutical-technology.com website, which suggests that it is unlikely that EDSIVO would be approved by the FDA because of the inadequacy of the trial data filed by Acer with the FDA, which included the trial data published originally in Lancett on September 7, 2010 (corrected online August 2016). See here.
I have speculated over the past few days that perhaps the January 28th article is now circulating among investors and causing them to sell Acer shares and depressing share price. For that reason, I decided to do further research and write this article.
The author of the January 28th article argued, among other points, that the trial size reported in Lancet was too small, and that the efficacy wasn't sufficiently robust. It also suggested that, although there were no safety concerns indicated in the clinical study, there was a recent mouse study for EDSIVO which showed an increase in death in mice. The January 28th article, written prior to the publication of the Registry data published on April 16th in the Journal of the American College of Cardiology, also appears to be unaware of Priority Review being granted by the FDA.
My additional research included asking questions about the article of both Acer's CEO Chris Schelling and its COO & CFO Harry Palmin.
This is what I learned:
- In response to the allegation in the January 28th article that the clinical trial (as reported in the Lancett Journal) was too small, Acer's management indicates that the topic has never been raised or discussed between Acer and FDA as a potential concern.
- The "experts" that the author of the January 28th article quoted may not have been familiar with ultra-orphan clinical trials and the US s. 505 regulatory path taken to get their approval. Acer's management was kind enough to provide me with a list of examples of FDA-approved drugs in ultra-orphan indications, including trial design and primary endpoints, which strongly suggested that the data filed by Acer is not unusual.
- While the original trial randomized fewer patients than originally intended, powering a trial has to do with both "number of patients" and "intended benefit". In other words, fewer patients would be required if greater efficacy was demonstrated during the trial. Acer believes that it has demonstrated to the FDA that with 53 patients (in the trial reported in Lancett), with a primary endpoint p-value of 0.04, did in fact achieve statistical significance.
- In response to an allegation that the COL3A1 mutation was disproportionate in the control arm versus the treatment arm, Acer believes that it has been able to demonstrate to the FDA that this is a diagnostic - not prognostic factor, meaning, that a patient who is COL3A1+ isn't more/less likely than a COL3A1- patient to have a clinical event in a 5-year period. It simply means a COL3A1+ patient is guaranteed to have vEDS, whereas a COL3A1- is likely but not guaranteed to have vEDS.
- In terms of trying to extrapolate mouse data for human data, the better view is that such data does not directly correlate to human results and is not relevant (as has been scientifically demonstrated over the decades), particularly in light of the fact that several thousand vEDS patients on celiprolol (EDSIVO) have been treated over the past decade in Europe, and there has never been a safety concern related to drug. Additionally, there are millions of patient-years' worth of exposure on celiprolol in other indications, and there has never been a safety concern related to drug here either. As far as Acer is aware, all relevant parties believe that celiprolol (EDSIVO) is a safe drug.
- In response to the allegation that the efficacy data (as reported in the Lancett papers) wasn't sufficiently robust, Acer's view is that recruitment for that clinical trial was challenging because patients who were randomized had a 50% of being in the control arm, which meant that they had to agree not to go on any therapy for the duration of the trial (5+ years). While this is a common issue shared with nearly all ultra-orphan trials, it does not preclude these drugs from gaining FDA approval.
- While the trial had a smaller enrollment than originally planned, it was not because of overall disease prevalence. In fact, once the trial was stopped early because of the excellent results, those results published were published in Lancett in 2010. The BBEST investigators were then able to enroll nearly 400 vEDS patients throughout France into the Registry when they were guaranteed the opportunity to be on drug. Note that the 144 patients in the Registry publication were only those patients treated at the hospital in Paris.
- The treatment benefit in the COL3A1+ patient population was further demonstrated (after the January 28th article was published) via the published French Registry in 144 vEDS patients, 100% of which were COL3A1+, that showed an improvement in overall survival between patients receiving celiprolol and patients not receiving celiprolol (p < 0.001).
- Fatigue is the main side effect seen in vEDS patients who are on celiprolol, but it is manageable with dose titration, and no patients have discontinued therapy due to fatigue. Only one patient in BBEST discontinued celiprolol and had severe fatigue at the 100 mg dose; however, this patient was pregnant and, thus, it was determined that both her fatigue and subsequent discontinuation was likely related to this fact).
EDSIVO is already considered the gold standard of care in treating patients with vEDS in Europe. Safety does not appear an issue for EDSIVO. There is no approved drug in the US to treat vEDS, which is a deadly disease leaving patients with a shortened life span.
For the foregoing reasons, I believe it is more likely than not that EDSIVO will be approved by the FDA. Acer's management certainly believes so as they have been hiring the necessary marketing and sales staff to launch EDSIVO commercially in the very near future in anticipation of EDSIVO being approved.
On the other side of the coin, there are many sophisticated investors who are emphatic that the market is always right. If Acer's share price is going lower in anticipation of an upcoming PDUFA date for its lead drug, the market must know something negative about Acer's chances of getting EDSIVO approved by the FDA on or before June 25th.
Other sophisticated investors and advisors will certainly recommend that it is more prudent to stay on the sidelines until after the PDUFA decision is known, as there will be plenty of potential upside if EDSIVO is approved, and one can avoid any further fall in Acer's share price if EDSIVO is not approved.
Acer Therapeutics is a pre-revenue development stage pharmaceutical company. An investment in Acer involves numerous risks including, but not limited to, the FDA failing to approve EDSIVO on or before the upcoming June 25th PDUFA date or requiring additional trials be conducted, general regulatory risks relating to approval of the drug products, potential changes to regulations and laws relating to orphan and ultra-orphan drugs, the FDA failing to approve Acer's other drug candidates, clinical failures in bio-equivalence and other clinical studies, increased competition, intellectual property challenges, loss of key personnel, potential reimbursement challenges from payers, difficulty in raising new funds in the future, future dilution of shares, and general market conditions and risks.
For further details of the potential risks involved, see the risk factors set out in the company's most recent Form 10-Q filed with the SEC.
Before making an investment in Acer Therapeutics, please do your own due diligence and obtain professional advice to determine whether it is an appropriate investment for you as well as determining the sizing of such an investment.
For the reasons articulated above, I believe that Acer will likely gain approval by the FDA for EDSIVO, although there is certainly no guarantee that it will occur. In my view, the market has overreacted to bearish concerns. Nevertheless, investors need to be cautious at this point.
I continue to hold my shares in ACER and, in fact, added to my position yesterday afternoon. Acer shares represent a small percentage of my investment portfolio. While I am cautiously optimistic about EDSIVO's near term approval, I also understand and am willing to take the risk that EDSIVO might not be approved.
Disclosure: I am/we are long ACER. 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.