Last Updated on September 2, 2019 by Sultan Beardsley
Gene therapy is one of the fastest growing frontiers in medical science. Thanks to major advances in technology and gene sequencing, researchers have been able to either add new genes to fight deffective ones or even ‘turn off’ the problematic genes, setting the stage for a revolution in how diseases could be treated in the not too distant future.
It is estimated that there are more than 10,000 different disorders and diseases that are caused by a single mutation or flaw in a person’s genes which could be treated with targeted therapy. While these diseases are considered rare, the total cost of treating them could be as much as $2 trillion annually or as much as 40 percent of global healthcare spending.
Although the research behind this technology goes back years, practical applications are still in the developmental stages. However, the Food and Drug Administration (FDA) is seeking to accelerate this progress and recently launched a number of fast-track programs for promising biotech companies developing gene therapies illustrating the massive potential that this niche holds.
As a result, biotechs focusing on gene therapies have been steadily gaining widespread attention, not only among investors but also big pharma which has triggered massive consolidation through acquisitions. For instance, Biogen (NASDAQ: BIIB) recently revealed that it would be buying Nightstar Therapeutics in a deal worth $800 million while Bristol-Myers Squibb (NYSE: BMY) announced that it would be acquiring Celgene for a whopping $74 billion earlier this year.
While there is no doubt about the potential of gene therapy in overcoming serious genetic disorders, it is important for investors to be aware of the fact that not all biotechs pursuing this form of treatment are created equal. According to this report from Research and Markets there have been hundreds of clinical trials to confirm the efficacy and safety of gene therapies since 2012 but only about 50 to 60 will receive commercial approval.
One company that should however be on the radar of investors angling for a piece of this market should be Axovant Sciences (NASDAQ: AXGT) which has been reporting quite impressive results from its gene therapy pipeline.
Company Overview
Axovant started out by acquiring and licensing late-stage clinical drugs, with a particular focus on neurological disorders. These included failed neurological product candidates, as the intention was to modify them so as to get past clinical trials. For instance, the company paid roughly $10 million to GlaxoSmithKline (NYSE: GSK) in 2014 for interpedine which was being evaluated for the treatment of Alzheimers. However, interpedine failed its Phase 3 clinical trials with results indicating that there wasn’t any significant clinical outcome when compared to placebo.
After this, Axovant bought the global rights to nelotanserin, an inverse agonist of the 5-HT2A receptor from Roivant Sciences which was under evaluation for the treatment of visual hallucinations and REM sleep disorder in patients with Lewy Body Dementia. Nelotanserin also failed to meet its clinical objectives, forcing the company to change tact.
In early 2018, the company shifted focus to early stage gene therapy drugs and licensed its current lead product candidate, AXO-Lenti-PD from Oxford Biomedica for $30 million.
Axovant has a rich and promising pipeline as can be seen from the chart above.The main focus for investors, however, is likely to be the company’s lead drug AXO-Lenti-PD being evaluated for the treatment of Parkinson’s disease. Parkinson’s disease is a chronic neurodegenrative disorder that occurs when neurons that produce a chemical messenger in the brain called dopamine break down or die. The reduced dopamine levels result in abnormal brain activity leading to progressive and debilitating motor symptoms often characterized by resting tremors, slowing movement and muscle rigidity. As the company has stated in its various presentations, the goal of this therapy is to improve motor function and reduce dyskinesias.
Although there is no cure for Parkinson’s disease, a number of treatment options are available to help deal with the symptoms. These include levodopa, dopamine agonists (apomorphine, bromocriptine and pramipexole) and catechol-o-methyl-transferase (COMT) inhibitors.
For potential investors, the most important thing to know is that the results from all clinical studies done so far have demonstrated the efficacy and safety profile of AXO-Lenti-PD. The effectiveness of the therapy is evaluated using The Unified Parkinson’s Disease Rating Scale (UPDRS) Part III and ‘ON and OFF’ time for Parkinson’s disease. The ON time refers to periods when the medication is working effectively while the OFF time refers to the period when the medication starts wearing out and the symptoms associated with Parkinson’s disease reappear in the patient. The UPDRS Part III score is a physician-rated scale ranging from 0 to 108 used in assessing motor function with lower scores indicating improvement.
Before looking at AXO-Lenti-PD’s most recent data readouts, it is important to mention that levodopa is currently the most widely prescribed treatment for Parkinson’s disease. Once administered, it is converted into dopamine by the enzyme AADC in the same way that naturally occurring levodopa is converted to dopamine. On the other hand, the novel gene therapy AXO-Lenti-PD works by delivering three genes via a single lentiviral vector to encode a set of critical enzymes required for dopamine synthesis, with the goal of reducing variability that leads to dyskinesia and restoring steady levels of dopamine in the brain. In order to synthesize dopamine endogenously, three critical enzymes are required as shown in the image below.
According to three-month data from the first dose cohort in the open-label SUNRISE-PD Phase 2 trial, AXO-Lenti-PD was generally well-tolerated, and no serious adverse events were reported. The cohort consisted of two patients with advanced Parkinson’s disease who received a one-time administration of the lowest dose of AXO-Lenti-PD (4.2×106 TU).
These patients in the first cohort experienced an average UPDRS Part III (motor) OFF score improvement of 25 points at 3 months after administration of AXO-Lenti-PD, representing an average improvement of 42 percent from baseline. Individual patient improvements at 3 months were 14 points and 36 points, respectively. Improvements were seen across all subparts of the UPDRS scale, with an average UPDRS Total OFF score improvement of 54.5 points at 3 months after receiving AXO-Lenti-PD, which represented an average improvement of 55 percent from baseline.
The second dose cohort of the SUNRISE-PD study of AXO-LENTI-PD was initiated in April, and initial data from up to six patients in this cohort is expected in the fourth quarter of 2019. In June, Axovant provided a six-month update on the first cohort of AXO-LENTI-PD in Parkinson’s disease patients. AXO-LENTI-PD was observed to be generally well tolerated at six months and continued to demonstrate benefits in both patients across multiple measures after a single administration. At month six, the patients experienced an average improvement from baseline in UPDRS III (motor) OFF score of 17 points, representing an average improvement of 29 percent,
Axovant’s other product candidate that should get investors excited is AXO-AAV-GM2 which is being developed to treat Tay-Sachs disease. Tay-Sachs is a rare and fatal pediatric neurodegenerative genetic disorder characterized by impaired β-Hexosaminidase A enzyme production, resulting in the destruction of nerve cells in the brain and spinal cord.
The study is evaluating a total dose of 1.0x 1014 vg of AXO-AAV-GM2 in a 30-month-old child with advanced infantile Tay-Sachs disease, with initial data expected in the fourth quarter of calendar 2019. AXO-AAV-GM2 was administered into the cisterna magna and lumbar spinal canal only and it was shown to be generally well-tolerated with no serious adverse events having been reported as of the three-month visit.
β-Hexosaminidase A activity was determined using the 4MUGS assay, the standard assay for assessing activity of the enzyme. At baseline, the patient’s enzyme activity in the cerebrospinal fluid (CSF) was 0.46 percent of normal. At three months, there was an apparent increase in enzyme activity in the CSF to 1.44 percent of normal, an increase surpassing the 0.5 percent threshold that could represent a clinically important effect. Investigators recently dosed a second patient with AXO-AAV-GM2. The patient was a 7-month old with early symptomatic infantile Tay-Sachs disease. “We expect to enroll patients in a multi-subject clinical trial in the second half of calendar 2019 and into 2020 and expect to provide additional data in fourth quarter of calendar 2019,” the company said.
Investment Summary
It is estimated that up to 1,000,000 people in the United States and 7,000,000 to 10,000,000 people worldwide suffer from Parkinson’s disease. For potential investors, this means that there is a market, which researchers found was worth $4.24 billion in 2017 and is expected to grow to $5.69 billion by 2025 waiting to be tapped.
AXO-Lenti-PD has a clear edge over the popular levodopa due to a number of factors which I expect should be instrumental in making it become the standard of care for Parkinson’s. First, existing forms of oral levodopa are effective for only up to four hours following a single dose. Secondly, dosing needs to be highly controlled as some levodopa pills must be taken 30 minutes before a meal or 2 to 3 hours after a meal because protein interferes with its absorption. Finally, steady levodopa administration can only be achieved through permanent implantation of a tube in the small intestine.
In contrast, Axo-Lenti-PD aims to provide patient benefit for years after a single administration which is why its potential to transform how Parkinson’s disease is treated can’t be overstated.
According to Baird analyst Brian Skorney, if the results from the second dose cohort in the AXO-LENTI-PD study are positive, Axovant’s shares should trade significantly higher given the valuation gap between it and Voyager Therapeutics Inc (NASDAQ: VYGR), its key competitor. Voyager is currently conducting Phase 2 clinical trials for a single dose of its gene therapy product VY-AADC which delivers the AADC gene, one of the three genes contained in AXO-Lenti-PD, via an Adeno-Associated Virus and initial results have been equally encouraging.
At $6.70 per share, the market is valuing Axovant at $154 million compared to $754 million for Voyager but analysts are convinced that there is plenty of room for growth in the former’s valuation. According to Yahoo! Finance, the average 12-month price target from seven analysts covering Axovant is $22 which would imply probable upside potential of more than 200 percent.
Risks
Looking at the balance sheet, Axovant had $84.2 million in cash and cash equivalents, working capital of $37.7 million, total net debt of $39.4 million and long-term debt of $17.5 million as of June 30, 2019. With this in mind, one major challenge that potential investors should be aware of is the fact that the company will have have to raise cash in the near future which carries a high risk of dilution for existing shareholders. After a $40 million public offering earlier in the year, the company raised an additional $94.5 million in net equity, including $37.9 million of net equity financing led by existing shareholders and several new healthcare-dedicated investors.
Conclusion
Axovant’s multiple opportunities in gene therapy make it an attractive investment ahead of data readouts scheduled for the fourth quarter. For risk tolerant investors looking for either a short or long term play, Axovant presents the best of both opportunities.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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