La Jolla (LJPC)
Discontinuation of Ph2 GCS-100 Softened by
New Preclinical Assets Acquisition
On uncertain development path from FDA feedback, LJPC discontinues GCS-100
program for CKD, which we've viewed as a high-risk product. This is partly
offset by the acquisition of two preclinical candidates LJPC-30Sa & -30Sb (nextgen
gentamicin derivatives) for antimicrobial & rare genetics diseases (timing
for IND filing uncertain at present). For lead product LJPC-501 in CRH, Ph3 data
is on track for ~fall-2016.
From recent FDA feedback & expert discussions, LJPC has decided to discontinue
GCS-100 & LJPC-1010 programs for CKD. FDA indicated in recent discussions that
LJPC would be required to conduct additional chemical characterization of GCS-100 prior
to further clinical development (techniques enabling cross-trial comparison); feasibility/
timeframe of such is highly difficult/unknown based on its expert consultations. Thus,
LJPC is now seeking to out-license these product candidates. We previously estimated 30%
probability of success for GCS-100 in CKD given high clinical hurdles.
LJPC now adds two preclinical candidates LJPC-30Sa & -30Sb (next-generation
gentamicin derivatives) for antimicrobial & rare genetics diseases (e.g., CF,
DMD); timing for IND filing undisclosed. LJPC has entered into an exclusive agreement
to acquire the Indiana University Research and Technology Center's (IURTC) IP rights for
next-generation gentamicin derivatives. Two lead development candidates are LJPC-30Sa for
antimicrobial indications and LJPC-30Sb for rare genetic diseases (e.g. cystic fibrosis [CF] and
Duchenne Muscular Dystrophy [DMD]). LJPC notes low hurdles to advance these candidates
to clinic given specific guidance from the FDA (i.e., manufacture of final drug product, but
animal toxicology studies not required).
Resetting PT to $22/sh (from $25/sh) primarily on removal of GCS-100 for CKD
and roughly $100M asset value addition for gentamicin derivatives program
(albeit subjective). Our new $22 PT now includes LJPC-30Sa/LJPC-30Sb asset value of $100M
(~$5/sh). Previously we had ~$8/sh for GCS-100 in CKD.
Our $22 PT is based on ~$17/sh for LJPC-501 in CRH and ~$5/sh for early-stage asset value
(e.g., gentamicin derivative program for antimicrobial/rare genetic diseases). Risks include
clinical delay/failure for LJPC-501 in CRH and general industry risks.
Resetting PT to $22/sh (from $25/sh) primarily on removal of GCS-100 in
chronic kidney disease (CKD) from valuation partially offset by $100M
technology value addition for gentamicin derivatives program. Given
yesterday’s announcement of GCS-100 program discontinuation, we have removed our
previous GCS-100 revenue estimates from our sum-of-the-parts analysis (~30%
probability adjusted for both U.S/EU; $8/sh contribution on peak U.S. sales of ~$600M
and peak EU royalty revenues of ~$59M assuming ~20% royalty rate). This decrease in
present value is partially offset by the new addition of $100M in technology value
associated with LJPC-30Sa & -30Sb (next-gen gentamicin derivatives) programs for
antimicrobial & rare genetic diseases (e.g., CF, DMD), respectively. Given the early-stage
nature of the gentamicin derivatives programs (IND filing timeline uncertain at present),
we view it is prudent to assign a conservative technology value (vs. discretely valuing for
each) prior to clinical trial entry.
Our new $22 PT is based on an NPV analysis of ~$17/sh for LJPC-501 in catecholamineresistant
hypotension (85% probability-adjusted for both U.S./EU; peak U.S. sales of
~$250M and peak EU royalty revenues of ~$31M in 2030) and early-stage technology
value of ~$5/sh (total technology value of $100M for preclinical gentamicin derivatives
program), using an annual discount rate of 12%.