BioCryst (NASDAQ: BCRX): Beyond Galidesivir

 

BioCryst Pharmaceuticals (NASDAQ: BCRX) is a mid-cap biotechnology company that is developing medications on two main areas of focus, and has one commercialized medications. The two main areas that BioCrysts works in are the anti-viral space and the complement space. The currently approved medication for BioCryst is peramivir, which we will discuss further in this piece. Recently, BioCryst has received some press surrounding its clinical stage candidate galidesivir for the treatment of COVID-19. This medication is similar to the drug remdesivir (from Gilead Pharmaceuticals), which has received Emergency Use Authorization for the treatment of COVID-19 (note Emergency Use Authorization is not the same as traditional, full FDA approval). Here at MS Money Moves, we have dedicated a “Core Position” designation for BioCryst, and have shared our thoughts on the use of galidesivir for the treatment of COVID-19 previously. As such, this article will outline the rest of the BioCryst pipeline and why I am bullish on their prospects.

Peramivir (Rapivab)

Peramivir was the first FDA approved medication for BioCryst (December of 2014), and is approved for the treatment of acute uncomplicated influenza in patients 2 years of age and older. Where peramivir shines is the fact that it is the only intravenous anti-viral approved for the treatment of influenza. This means that patients who are unable to take oral medications (i.e. if they need a breathing tube), they could receive peramivir. As you may speculate, the sales of this medication are quite seasonal, given the seasonal variance we see in the influenza infections. In 2015, BioCryst licensed the worldwide rights to develop, manufacture and commercialize peramivir injection for the treatment of influenza except for Israel, Japan, Korea and Taiwan to Seqirus UK Limited (SUL). BioCryst retained the rights to sell peramivir as part of United State’s Government stockpiling, while SUL has rights for government stockpiling outside the United States. Under this agreement, BioCryst is entitled to receive tiered royalties in the mid-teens on net sales, and royalties of low-thirties percentage of the gross profit from government stockpiling purchases made outside the U.S. In 2018, BioCryst was awarded a $34.7 million contract for the procurement of 50,000 peramivir doses over a 5-year period from the United States Department of Health and Human Services. These doses will be sent to the Strategic National Stockpile for use in public health emergencies. In 2019, BioCryst devilvered two shipments of peramivir under the contract valued at $13.9 million, and they expect to deliver one shipment in 2020 valued at $6.9 million. Peramivir has been licensed to other companies other that SUL for commercialization in the excluded countries.

Interestingly, the BioCryst and SUL have entered into arbitration proceedings involving their agreement for commercialization. On March 4th, 2020, the International Chamber of Commerce Tribunal delivered a Partial Arbitration Award in favor of BioCryst. Under this, the tribunal found that SUL materially breached the agreement, resulting the termination of the of the SUL agreement, and restoring all rights to peramivir back to BioCryst as of March 17th 2020, or a date agreed upon by the two parties. BioCryst was awarded the attorney fees and expenses, and the $5 million milestone payment (plus interest) that SUL failed to pay upon approval in Europe. This development will be very interesting to watch in the future. Now, if galidesivir shows promise for the treatment of COVID-19, BioCryst could have the rights to two antivirals, giving them marketing and licensing flexibility. It is hard to estimate the exact value of peramivir, as the royalty revenue are lumped with other companies who have licensed the drug. One thing I will note, is that if BioCryst intends to begin commercializing peramivir, there would be some expenses associated with doing so, as they would need to build the infrastructure to do so.

The Pipeline

As alluded to earlier, the other main area of clinical development for BioCryst is complement-related diseases. The most advanced of these programs is beroralstat (BCX7353) for the prevention of Hereditary Angioedema (HAE) attacks. This drug has also been studied for acute attacks, however this indication has been de-prioritized given the emphasis given on prevention in clinical practice. The second candidate is BCX9930, which is a factor D inhibitor. Finally, unrelated to completement, BioCryst also has an oral ALK-2 inhibitor, BCX9250, in development for the treatment of fibrodysplasia ossificans progressiva (FOP) (not discussed in this article).

 

Berotralstat

As mentioned above, berotralstat is being developed for prevention of HAE attacks. What is HAE? HAE  is a genetic disease that results in a deficiency of a functional C1 inhibitor protein. This leads to a variety of alterations in biological pathways, ultimately resulting in “attacks.” These attacks take the form of skin swelling (cutaneous angioedema) and severe abdominal pain. Patients may also complain of genital, bladder, muscle, and joint swelling. The most notable form of an attack would be laryngeal swelling, which can be life threatening as it can prevent the patient from breathing.

Currently, there are three FDA approved medications for the prevention of HAE attacks. These three medications are Cinryze (Takeda), Haegarda (CSL Behring), and Lanadelumab (Takeda). However, these medications have their limitations. None of these three medications are oral agents, which berotralstat is. Instead, these three agents need to be given either by an IV or a subcutaneous shot. The frequency of these injections range from every 3-4 days up every 2-4 weeks. So the real differentiation here is the convenience of a once daily pill that patients can take to prevent attacks, instead of using shots and injections. Furthermore, BioCrysts field research has shown that patients are quite interesting in using berotralstat, even those already on therapy they are pleased with.

How does berotralstat compare with regards to prevention of attacks though? Recently presented data from BioCryst showed that patients in the APeX-2 trial experienced a 48% reduction in monthly attack rate at 24 weeks, and a 65.5% reduction in monthly attacks are 48 weeks. Broadly, Cinryze has reduced attack rates by 50%, Haegarda reduced attack rates by 95%, and Takhyzro reduced attack rates by 73.3% to 86.9%. So berotralstat falls in the middle of the competitors with regards to reduction in attack rate, however it does have the convenience factor associated with it. Furthermore, berotralstat has shown improvement in patients’ quality of life as measured in clinical trials. Finally, additional recent data has shown that only a small minority of patients on preventative therapy expect complete cessation of attacks, thus berotralstat does not need to be perfect in the prevention of attacks.

BioCryst has submitted the application for berotralstat to the FDA, and the target action date is by December 3rd, 2020. What is notable, is that BioCryst estimates that if approved, berotralstat could result in peak sales of $500M annually. At current times, this estimated value is over 50% of the current market cap. But the United States is not the only market that BioCryst has filed for approval of berotralstat. BioCryst has licensed berotralstat to Torii Pharmaceuticals for commercialization in Japan. The application has been filed, and awarded SAKIGAKE Designation, which is designed to accelerate the development of innovative medications. The approval of berotralstat in Japan is expected in the second half of 2020. If this occurs, BioCryst is eligible for a $20 million milestone payment from Torii. Furthermore, if approved, BioCryst is eligible to receive a 20% to 40% royalty on net sales of berotralstat. Finally, BioCryst has also submitted an application for approval in Europe to the European Medicines Agency. This application was validated in March of 2020, and full approval is anticipated in roughly 12 months after validation. Overall, the commercial value proposition of berotralstat looks strong, and provides patients an oral agent, removing the need to painful shots, with similar efficacy. As such, I anticipate that there would be fairly rapid uptake in prescribing if approved.

BCX9930

BCX9930 is an oral inhibitor of Factor D in Phase 1 of development. Complement is part of the innate immune system. This system is activated in 3 different manners, one of which is called the alternate pathway. It is estimated that the alternate pathway may account for around 80% of complement activation, even when the other pathways start the process. Factor D is an integral part of this process, which helps catalyze a positive feedback loop, accelerating the activation of the pathway. This culminates in a complex forming (C5) which will destroy the cells targeted.

Some of the most prominent complement mediated diseases in present time with approved drugs are paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome (aHUS). The most notable drugs approved for these areas are eculizumab and ravulizumab (Alexion Pharmaceuticals), which target the C5 protein (the terminal complex). These medications are intravenous medications that need to be given at various frequencies, however not all patients respond. As such, BioCryst hopes to develop BCX9930 as an alternative agent with a different target.

So far, BCX9930 has shown promising activity in treatmetn naive PNH patients in their phase 1 trial. They continue to work on optimizing the dosing an frequency, with the potential to obtain an oral, once daily pill. There is limited data to discuss so far, as we have only seen data in 3 patients, but BioCryst will be proceeding to higher doses, and an additional cohort with patients who have had poor responses to C5-inhibitor antibodies. These results are expected by the end of 2020. As this program is in the early stages of development, it will be several years till approval will be discussed. However, this does not exclude the potential for any licensing deals in the interim. Furthermore, as it is early, it is hard to speculate where this drug may fit into the treatment paradigm for PNH. I would speculate in these early days that the most likely treatment area will be patients with poor responses to C5-inhibitors. Currently, ravulizumab only requires dosing every 8 weeks, which is not as inconvenient as eculizumab, which requires doses every 2 weeks. As such, the oral convenience factor of BCR9930 differs from the convenience that could be realized by berotralstat.

Financials

For the first quarter of 2020, BioCryst recorded $4.8 million in revenue, with research and development expenses of $29.9 million. The selling, general, and administration expenses were $15.9 million, which is increased in preparation for commercialization and medical affairs. The arbitration award from the SUL dispute was also recognized in this quarter. The net loss for the first quarter was $37.6 million (operating cash use was $23.2 million). At the end of the quarter, BioCryst had $114.6 million. This balance was then increased with an offering that raised $115 million before underwriting discounts and commissions. Thus, BioCryst has strengthened the balanced sheet with an estimated >$200 million. It will be a balance to see how revenue and expenses balance in the coming quarters, as expenses are likely to rise with BCX9930 develop and commercialization of berotralstat, while approvals will lead to milestones and revenue generation. This is in addition to what comes of the returned peramivir rights.

Final Thoughts

With a strong balance sheet, an approved product, a product under review, and an innovative early stage candidate, its hard to not like BioCryst. Furthermore, all of this doesn’t even account for any catalysts from galidesivir for the treatment of COVID-19. Now that the offering has closed, there are several catalysts to watch for in the second half of 2020 including: COVID-19 updates (galidesivir), BCX9930 higher dose data in treatment naive PNH, BCX9939 data in treated PNH patients, BCX9250 FOP data (2H2020), berotralstat approval in Japan ($20 million milestone), and approval in the United States (December).

This is in no form a recommendation to buy/sell securities.

I/we long BCRX