Albireo Pharma: Updates To Thesis, Key Readouts In 2020

Jul. 12, 2019 9:07 PM ETAlbireo Pharma, Inc. (ALBO)7 Comments3 Likes

Summary

  • Shares have risen by over 50% since my initial recommendation in 2017.
  • I provide a recap of the bullish thesis and recent events.
  • Odevixibat appears to be a "pipeline in a product" with potential to treat multiple orphan pediatric cholestatic liver diseases.
  • Key phase 3 topline readout is due next year, while efforts in NASH provide optionality.
  • The stock is a Buy, albeit not without risk (disappointing clinical results, significant competition in certain indications).
  • Looking for a community to discuss ideas with? ROTY features a chat room of like-minded investors sharing investing ideas and strategies. Get started today »

Shares of Albireo Pharma (NASDAQ:ALBO) have risen by over 50% since I originally initiated a position in the stock as our fourth idea for ROTY (when it was just getting underway in mid-2017). The stock price has risen by 27% since my subsequent update piece was published in November of 2017.

The company popped up on my radar again on Tuesday after it provided an update on progress of the development of odevixibat for pediatric cholestatic liver diseases and elobixibat for NASH. With key readouts coming up in mid-2020, I'd like to revisit this one to determine if there's a near to medium-term opportunity for my readers to take advantage of.

Chart

Figure 1: ALBO daily advanced chart (Source: Finviz)

When looking at charts, clarity often comes from taking a look at distinct time frames in order to determine important technical levels to get a feel for what's going on. In the above chart (daily advanced), we can see shares lose some ground in the second half of 2018, followed by a steady rebound in the first half of 2019. In the past couple months, shares have corrected and are currently consolidating in a tight pattern around the $32 level.

Overview

In my last update piece (albeit quite dated), I touched on the following keys to the bullish thesis:

  • Lead clinical candidate A4250, a selective inhibitor of ileal bile acid transporter (IBAT), had demonstrated promising results in treating progressive familial intrahepatic cholestasis (PFIC). Data from a phase 2 open-label, dose-finding trial was presented in a late-breaking session at the International Liver Congress in Amsterdam and treatment across five cohorts for four weeks resulted in reduced serum bile acid levels with improvement in pruritus in the majority of patients. Final results in children with cholestatic liver disease (including PFIC, Alagille syndrome, biliary atresia or intrahepatic cholestasis) showed mean reduction in sBA levels (43% to 98%) in 80% of patients. Importantly, most patients showed improvements in pruritus on three different assessment scales (included improvement in sleep disturbance and in pruritus). It was a good sign that no serious adverse events related to the study drug were reported, and most adverse events (especially increased transaminases) were mild and transient in nature. Equally as important, there were no reports of diarrhea associated with multiple dose therapy. I noted that results for a competing IBAT inhibitor from Shire (NASDAQ:SHPG) were much more questionable, with high incidence of treatment emergent adverse events observed in a dose escalation study in PFIC and two double-blind, placebo-controlled trials in Alagille. The primary endpoint was not met in either study for the latter, while in the former, 6 of 20 patients were observed to have clinically meaningful responses despite also missing the primary endpoint. Despite this, SHP625 (maralixibat) received FDA Breakthrough Therapy Designation for the treatment of progressive familial intrahepatic cholestasis type 2 (PFIC2).
  • The company had announced a positive outcome of discussions with the FDA and EMA in regards to the design of a pivotal study, which will consist of a single randomized, double-blind, placebo-controlled study lasting six months and enrolling 60 patients. This represented an efficient path to potential commercialization.
  • A4250 appeared to have broad potential in other orphan pediatric cholestatic liver diseases - the initial indication targeted amounts to an estimated 10,000 patients globally, but success in this setting would likely result in a magnified move in the share price due to implications in other indications. These included Alagille syndrome (14,000 patients) and biliary atresia (10,000 patients).
  • I also noted that management had a high pedigree, including President and CEO Ron Cooper who served prior as president of Europe at Bristol-Myers Squibb (BMY). He was responsible for over 30 countries and sales approaching $4.5 billion. Chief Operating Officer (and Cofounder) Jan Mattsson worked in AstraZeneca's (AZN) GI R&D division while CMO Dr. Paresh Soni last served as vice president of Global Medical Sciences at Alexion (ALXN).

Figure 2: Pipeline (Source: corporate presentation)

While my initial impression is that the present is offering readers an opportunity to initiate or add to positions ahead of a potential run up into data (patience could prove necessary), let's dig deeper for any red flags or reasons that warrant skepticism.

Select Recent Developments

In March, the company announced the appointment of Pamela Stephenson as CCO (Chief Commercial Officer). Interestingly enough, she served prior as VP of global market access and value at biotech giant Vertex Pharmaceuticals (VRTX).

On April 13th, the company announced results in Alagille syndrome and biliary atresia patients from its completed phase 2 clinical trial evaluating A4250 in pediatric cholestasis (presented at the European Association for the Study of the Liver The International Liver Congress). We were reminded that the drug candidate is currently being studied in a phase 3 study in children with progressive familial intrahepatic cholestasis with plans to initiate a second pivotal trial in biliary atresia. In the phase 2 study, A4250 was administered orally in doses ranging from 10 microg/kg to 200 microg/kg once daily for 4 weeks. A4250 demonstrated marked sBA reductions of up to 92% in the majority of Alagille patients (majority showed improvement in pruritus as well). One patient had an elevation in bile acids versus baseline, with adverse events being mild, in general. Keep in mind that two Alagille patients with high baseline transaminase levels experienced further increases, which informed the decision to not dose escalate.

Figure 3: Odevixibat phase 2 primary endpoint of mean reduction in serum bile acids (Source: corporate presentation)

In June, additional phase 2 data for A4250, now dubbed odevixibat, were presented the 2019 European Society for Paediatric Gastroenterology, Hepatology and Nutrition (ESPGHAN) Annual Meeting. Much of data was in line with what we learned prior - results in two biliary atresia patients (sBA reductions of 57.6% and 50.8%) along with improvement in pruritus were also encouraging. We were reminded that Albireo is the only company to generate positive data, suggesting an effect on bile acids and pruritus in biliary atresia patients using a pharmacologic approach. Albireo plans to initiate a pivotal trial in biliary atresia in the second half of 2019. Consider the dire predicament of these PFIC patients, where accumulation of bile acids can cause debilitating pruritus and often lead to liver disease and failure prior to adulthood. Surgical intervention (PEBD) is often necessary and considered the gold standard, although it is quite invasive.

Lastly, on July 9th, the company provided an update on development of odevixibat for pediatric cholestatic liver diseases and elobixibat for NASH. We were reminded that the odevixibat PEDFIC program in PFIC consists of two studies, PEDFIC 1 (randomized, placebo-controlled, double blind study enrolling 60 patients who are PFIC type 1 or type 2) and PEDFIC 2 (open label extension to assess long-term safety and durability of response in patients rolled over from PEDFIC 1 as well as second cohort of PFIC patients who were not eligible for PEDFIC). Management seemed to be pleased with current enrollment rates, with over half of target number of patients already enrolled in the phase 3 PFIC study plus enough currently in screening and prescreening to complete the trial (thus guiding for topline data mid-2020). Consider that screening criteria were quite strict with one third of recruited patients having been screen failures (management focused on preserving integrity of study and thus bodes well for data readout, to an extent). In the update, we were also made aware that the phase 2 study evaluating once-daily elobixibat in NAFLD/NASH had screened its first patients.

Other Information

For the first quarter of 2019, the company reported cash and equivalents of $150.3 million (about 40% of current market capitalization). Net loss rose to $16.7 million, while research and development expense increased 35% to $8.3 million. G&A rose to $5.3 million. Management guided for full year total expenses of $75 million to $80 million, with operational runway based on current cash position into 2021.

On the conference call, management elaborated more on NASH efforts and opportunity (estimates it affects 2% to 3.5% of adults representing over 9 million people in United States and 10 million people in the European Union). There is a strong rationale for bile acid modulation as a potential treatment (elevated bile acid levels are one of the markers in these patients), with additional clinical data for elobixibat showing improved cholesterol profiles and increased levels of GLP-1 (also preclinical data showing reduction in pro-inflammatory markers and improving fibrotic markers). Consider that from a safety standpoint only, the program seems decently derisked in that elobixibat is approved in Japan to treat constipation and has been used to treat many patients. At this point in the NASH field, with many trial failures or those with subpar data, it is assumed that a successful treatment will likely be a combination of two or more therapies, and management believes there may be a place for elobixibat here. The phase 2 trial will enroll 46 patients with biopsy-confirmed NASH or diagnosis of expected NAFLD or NASH based on metabolic syndrome definitions. Enrollment criteria include LDL over 130 (over 110 if on lipid lowering medication) with greater or equal to 10% liver fat on MRI. The plan is to compare 5 mg once daily elobixibat to placebo over 16 weeks, with primary endpoint being change from baseline in LDL-C. Key secondary endpoints include liver fat by imaging, ALT, AST and serum bile acid levels. Exploratory endpoints include biomarkers for inflammation fibrosis and measures of glucose in insulin homeostasis. Importantly, the study is designed with recent NASH guidance from FDA. Topline data is expected in mid-2020.

As for upcoming milestones, I've touched on them above and they can be seen in the image below.

Figure 4: Pipeline (Source: William Blair Growth Stock Conference slides)

In regards to market opportunity, the company projects blockbuster potential revenues when all indications are taken into account and assuming a launch price of between $300,000 and $500,000. If estimates are cut in half for the sake of being conservative, market opportunity is still outsized relative to current valuation.

Figure 5: Market projections (Source: William Blair Growth Stock Conference slides)

For readers interested in digging deeper, I suggest tuning in to CEO Ronald Cooper's presentation in June at William Blair Growth Stock Conference. Here are a few highlights that caught my attention:

- Cooper describes Albireo as a bile acid company, with its strength coming from strong basic science, productivity (3 clinical stage assets) and solid financial position. For basic science, we are reminded that the company came into existence in 2008 when it was spun out of AstraZeneca (had made decision to exit early GI and scientists took their favorite assets to form the company). Cooper notes that, for lead program, they are eligible for priority review voucher (could be sold for around $100 million or so). The platform has already been validated in that elobixibat is approved for chronic constipation in Japan.

- Management sees lead program odevixibat as a "pipeline in a product", planning to commercialize it with a small sales force in the US and Europe. On the other hand, the plan with NASH program (and other larger indications) is to partner them out over time. For odevixibat, we are reminded that a second pivotal study will get underway this year in biliary atresia. The third product candidate is A3384 being developed for bile acid malabsorption disease, which affects 4 million individuals (no approved drug in the US). These patients have diarrhea all day long and take up to 16 grams of colestyramine (many find it unpalatable). With the company's prototype, they were able to reformulate it using proprietary technology in order to give patients 250 mg and 1 g per day in phase 2 study.

- Management has a track record of execution (slide 5), which gives me more confidence in this story. Since going public, they've finished a phase 2 study for elobixibat where data was given awards at EASL and ASLD and got FDA & EMA to agree to single pivotal study. As for finances, management was able to garner $55 million in non-dilutive capital plus multiple secondary offerings backed by prominent healthcare investors.

- We are reminded that target indications the company is going after with its lead program amount to an opportunity of around 40,000 patients in the US and EU. These are diseases that interrupt bile flow, and all are treated by the same doctors (pediatric hepatologists), of which there are just 100 or so in the US and same number in Europe (means can be served with a small sales force).

Figure 6: Target indications for lead program (Source: William Blair Growth Stock Conference slides)

None of these diseases has an approved pharmacological treatment, but management chose to target PFIC & BRIC first due to high unmet medical need as well as the fact that it's purely a bile acid disease (high probability of success).

- Case studies provided are touching, showing a patient with intense pruritus and 2 failed surgeries to divert bile acids followed by transplant. PFIC presents itself at age 1-2 and patients literally itch so much that they mutilate themselves (also progresses quickly, with median survival of 15 years or so). Kids are given off-label adult drugs to manage pruritus which work sometimes (but fail to address disease), followed by surgical choices of liver transplant or PEBD surgery (25% treatment failure rate). Obviously, liver transplant is high risk and high cost. PEBD surgery involves making a hole in the baby, draining the bile acid from the liver and works well for improving symptoms (but requires an external stoma bag, which you can imagine is quite undesirable). Benefits of this approach is that once daily oral capsule (treatment for life), convenient and drug barely gets into bloodstream (well tolerated, low potential for systemic side effects). Natural history data in PFIC2 patients contrasted to surgical intervention shows improved survival (lower bile acids by 70% or more associated with improved liver survival), so company's treatment should improve symptoms and be disease modifying. Phase 2 study showed mean reduction in 4 weeks (analogous to what PEBD would do in a year), but PFIC patients eligible for phase 3 study shows mean reduction of around 70%. Very significant p values (slide 17) give me more confidence in this program as well. The phase 3 study uses a longer time period (24 weeks) versus 4 weeks for phase 2 study, as management believes it gives time for placebo patients to deteriorate, given that disease is rapidly progressing (I feel for these placebo patients, as I still wish there was a better way to get drug to finish line). Primary endpoint in Europe is serum bile acids, while in US, it is change in pruritus, as that's what respective agencies asked for. IP protection appears good (composition of material into just 2022 to 2025, but method of use into 2031-2034).

As for institutional investors of note, Perceptive Advisors owns over 1.7 million shares. Baker Brothers and BVF both own small stakes as well. Federated Investors owns an 11.94% stake.

Final Thoughts

To conclude, Ron Cooper believes that the company is on the verge of doing something special as they focus on the development of IBAT inhibitors for a number of rare disorders while NASH/other large indications provide optionality. Long time readers know that I prefer companies with a focused approach, and the company's vision of establishing a pediatric liver disease franchise seems desirable in that light. Pipeline in a product plays have worked out well for us in ROTY in the past, such as argenx (ARGX) with efgartigimod targeting a number of severe autoimmune diseases. Add to this the low float (just 12 million shares or so), and there's potential here for an outsized move if and when positive news comes.

As the stock currently consolidates, I believe it is a Buy and suggest readers consider establishing a pilot position in the near term and patiently accumulate shares prior to 2020 readouts. For readers who have done well here, I suggest continuing to hold one's position while waiting for further appreciation.

Time Frame For Upside here is 12 months, as I consider this both a revaluation and catalyst idea.

Risks include disappointing data from ongoing and planned studies, safety issues, setbacks in the clinic (including delays), negative regulatory feedback and significant competition in certain indications such as NASH. Dilution in the near term does not appear likely (based on current cash position and burn rate). Also, keep in mind there is some ongoing litigation related to elobixibat (in February 2019, filed a complaint for breach of contract against Ferring International Center S.A. related to two phase 3 studies in chronic idiopathic constipation that were stopped with the latter citing an issue related to distribution of study drug).

As for downside cushion and elements of derisking, to my eyes, phase 2 data was quite promising for lead program, and cash accounts for almost 40% of market capitalization.

For our purposes in ROTY, I like the story but don't feel I have as much of an edge here at this point. Also, at the current valuation, we are offered less of a margin of safety than before. As data was pushed out to mid 2020, I prefer to revisit prior (perhaps toward the end of 2019). Lastly, consider that in regards to NASH efforts, we should remain skeptical, given that big pharmaceutical companies tried developing IBAT inhibitors in this indication and then gave up.

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This article was written by

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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.

Additional disclosure: Disclaimer: Commentary presented is NOT individualized investment advice. Opinions offered here are NOT personalized recommendations. Readers are expected to do their own due diligence or consult an investment professional if needed prior to making trades. Strategies discussed should not be mistaken for recommendations, and past performance may not be indicative of future results. Although I do my best to present factual research, I do not in any way guarantee the accuracy of the information I post. I reserve the right to make investment decisions on behalf of myself and affiliates regarding any security without notification except where it is required by law. Keep in mind that any opinion or position disclosed on this platform is subject to change at any moment as the thesis evolves. Investing in common stock can result in partial or total loss of capital. In other words, readers are expected to form their own trading plan, do their own research and take responsibility for their own actions. If they are not able or willing to do so, better to buy index funds or find a thoroughly vetted fee-only financial advisor to handle your account.

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