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Trevena Analysis (TRVN)

|Includes: Trevena, Inc. (TRVN)

Trevena is a clinical stage biopharmaceutical company that discovers, develops and intends to commercialize therapeutics that use an alternative approach to target G-protein coupled receptors or GPCRs. GPCRs can normally be activated via a G-protein pathway and/or a b-arrestin pathway, where each pathway result in different physiological effects (Figure 1). The way to selectively target the GPCR activation pathway is known as biased activation, where the hypothesis is that by selectively targeting the known therapeutic GPCR-pathway some of the adverse effects may be avoided.

Figure 1: TRV130/ Oliceridine biased agonism. Source: D.G. Soergel et al. / PAIN 155 (2014) 1829-1835

Their clinical- and preclinical-development pipeline

Trevena's pipeline consists of (innovative) product candidates that is focused in areas of acute care, where the current treatment options leave significant unmet medical need. The lead candidate of the pipeline is a next generation IV analgesic drug called Oliceridine (TRV130) that is currently in phase 3 clinical studies where it is tested for the management of moderate-to-severe acute pain. Oliceridine was designed to optimize opioid receptor pharmacology and is intended to deliver an improved analgesic profile compared to conventional intravenous opioids and shortly we will look at the current clinical data to see how Oliceridine performs. Trevena will do this by selective targeting of the m-receptor G-protein activation-pathway as it is shown in Figure 1. Furthermore, Oliceridine has been granted Breakthrough Therapy status by the FDA, which basically means that the FDA has the option to grant priority review to Oliceridine (faster approval process).

If we look at the data from the phase 1b clinical proof-of-concept study, that was published back in 2014 we see that this study suggested that Oliceridine have an improved therapeutic index, producing superior analgesia, less reduction in respiratory drive and less severe nausea (unless for 4.5 mg), compared to morphine. The magnitude of nausea does in my opinion look very similar, if we look at Figure 2, where the black line is the median and each datum represents a single subject. We see roughly the same median however the Morphine and TRV130 4.5 mg data points are a bit more skewed towards a higher nausea score, than the 1.5 and 3 mg doses - more data points will reveal a more precise picture of the distribution.

Figure 2: Phase 1b proof-of-concept clinical study data from D.G. Soergel et al. / PAIN 155 (2014) 1829-1835

As mentioned we saw superior analgesia and this is also corresponding well with data in Figure 2. So Oliceridine showed proof-of-concept in this study regarding the efficacy and respiratory drive - but it seems a lot like the patients still get roughly the same amount of nausea or even a bit more when using Oliceridine (TRV130). However, judging from the data in the phase 1b study, it seems that dosages at 3 mg has the most desirable therapeutic profile.

If we look towards the phase 2/2b clinical trials Oliceridine has been tested over 48 hours in patients after bunionectomy and over 24 hours in patients after abdominoplasty. The results from the Phase 2 study in bunionectomy patients showed good safety in terms of adverse events, where no serious adverse events were reported, but percent change in oxygen saturation over 0 to 24.5 hours were only numerically smaller for TRV130 vs. Morphine and not statistically significant. However, according to the peer-reviewed scientific article published from the trial states that it did not include a sufficient number of patients to evaluate the effect of TRV130 on respiratory depression events. Regarding the efficacy of Oliceridine in bunionectomy patients, we see that 2 mg and 3 mg q3h significantly reduced pain intensity over 48 hours vs. placebo and resulted in a comparable pain reduction for 2 mg q3h vs. morphine q4h and a greater response than morphine at 3 mg q3h (Figure 3). Furthermore, TRV130 produced rapid analgesia with a median meaningful pain relief in less than 5 minutes.

Figure 3: Efficacy profile of Oliceridine (TRV130) in bunionectomy patients over 48 hours. Data from: E.R. Viscusi et al. 157 (2016) 264-272

By looking at the phase 2b data from the study in abdominoplasty patients it looks evident to me that the dose regimen has been optimized by utilization of the data they gathered from the bunionectomy study. The reason being that they are now using a dose regimen that produces significantly fewer adverse events than morphine, but at the cost of efficacy since TRV130 shows similar efficacy to Morphine in this study (Figure 4).

Figure 4: Efficacy in the Phase 2b study. Data from Trevena investor relations.

As mentioned the dose regimen has been optimized and TRV130 now shows the same efficacy as Morphine for a 1.5 mg loading with 0.1 mg on demand and a 1.5 mg loading with a 0.35 on demand dose. On an efficacy basis, this dose regimen looks worse than the previously used one where one dosing topped morphine in pain-management, however when one are considering the safety-aspects it becomes very interesting.

Figure 5: Safety profile of Oliceridine vs. Morphine in the phase 2b study. Data from Trevena Investor relations

Looking at Figure 5 we see that patients dosed with TRV130/Oliceridine has less opioid-related adverse events. So, as I see it Trevena think this is where Oliceridine is superior to morphine and it is herein their value proposition lies, they want to manage pain with more confidence by trading a bit of efficacy of for a better safety profile. From the top-line results from the phase 3 study we see that they have added another dosing arm to the trial, where they are providing a 0.5 mg on-demand dosage and this also have similar efficacy to morphine - it will be interesting to see the safety data on this dosing regimen. Unfortunately, the 0.1 mg on-demand dosing arm did not meet the secondary endpoint, which was efficacy comparable to morphine but I don't really see the problem in that if the safety-profile for TRV130 usage remains highly desirable in the other dosing arms. As I see it, it is Trevenas intend to market Oliceridine to the weaker patients who could benefit from a more safe-to-use analgesic drug. Such patients could for example be elderly people, renal patients or obese people. So, Oliceridine is probably not going to be a blockbuster drug when its only advantage over generic morphine is a better safety profile but I still believe the drug may be undervalued and let's have a look at that.

As previously mentioned I think the value proposition of Oliceridine is to manage pain with better confidence which ultimately means that they will need to market their drug in the niche area with weaker patients where considerable risks are associated with morphine administration. In 2015 51 million US patients were IV opioid-treated where 16 million was inpatients and 35 million was outpatients. If we just assume that Oliceridine could gain a 5% market share, which result in 2.55 million patients I do not think that it is impossible for Trevena to achieve net earnings at $100 million a year from the sale of Oliceridine. Assuming an FDA approval in 2018 and a 2-year ramp up period, 12-years of $100 million net earnings and then a 2-year ramp down years before patent expiry and Phase 3 clinical trial costs amounting to $23.5 million until FDA approval I have calculated the risk-adjusted net present value (rNPV) of Oliceridine to be roughly $229 million. This calculation is done with a 50% percent chance of success, which could very easily be an understatement of how big the chance of FDA approval is, since some talk about 60-75% and the normal probability of success for drugs in phase 3 clinical studies are at 67%. The discount rate used in this calculation is 15% which may not correspond correctly with Trevenas weighted average cost of capital (OTC:WACC). So even though I am very conservative regarding the earnings power and probability of success, the drug looks underpriced at current levels - as I see it, the only thing that could results in Trevena being a bad buy at current levels is the chance of the drug not being approved by the FDA.

There are some things that are concerning regarding Oliceridine and one of the things is its metabolic profile. Oliceridine is mainly metabolized by CYP2D6 and CYP3A4 just as the clear majority of all the other drugs approved - this could potentially result in unfavorable drug-drug interactions when it is co-administered with other drugs. Unfavorable drug-drug interactions could have a very serious impact on both the safety and the sales of the Oliceridine, since the "weaker" patients that this drug should be used in is probably already are getting some other medicines that may me metabolized by the same CYP-enzymes as Oliceridine. Another concern of mine is how Trevena is planning to market Oliceridine, this could potentially amount to a substantial sum in terms of marketing expenses since they will need their own marketing force. The next question here is: Do they have the necessary capital for this? If not, they will need to raise capital through share-offerings or bank loans and this could have an impact on the stock price.

Even though there is a lot of uncertainty left, Trevena looks a lot like a bargain at current valuation and the fair-value stock price for Trevena (Oliceridine and the cash and cash equivalents available to Trevena) is around $6.2 dollars, if my calculations are accurate. So at current levels it is trading at a $2 discount per share and you will get the rest of their pipeline for "free".

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.