By Brian Marckx, CFA
READ THE FULL GNMX RESEARCH REPORT
Q3 2018 Results / Business Update: ASCEND Enrollment Complete, Read-Out Now Expected Q1’19
Aevi Genomic Medicine (GNMX) reported Q3 financial results and provided a business update. There were no significant surprises on the financial side and were some meaningful progress-related updates on the operational front. The last few months have proven productive, particularly as it relates to AEVI-001, the company’s lead program. Part ‘A’ (i.e. mGluR+) of ASCEND, the phase II trial evaluating Aevi’s non-stimulant glutamatergic neuromodulator in pediatric and adolescent subjects with ADHD, completed enrollment in August. Just two months later, GNMX announced that part ‘B’ (i.e. mGluR-mutation free) was fully enrolled.
Management is now guiding for top-line results in January 2019. And while read-out timelines have consistently been pushed back (most recently due to the decision in June to increase enrollment), the fact that enrollment is now completed should mitigate risk of additional substantive delays. Also noteworthy is that while the initial plan was for parts A and B to enroll and read-out sequentially, given the rapid enrollment of part B, the expectation is now that top-line data will be announced for both in January. Interestingly, GNMX also mentioned in their recent PR’s and investor presentations that they expect to evaluate each parts’ data individually (which we interpret to mean; part A:active vs placebo, part B:active vs placebo) as well as with pooled analysis (which we interpret to mean; active:parts A&B vs placebo:parts A&B). The potential benefit of the pooled analysis is that the larger population might improve the chance of seeing treatment effect.
Assuming results are positive, the gameplan remains that the data will be used to optimally design a phase 3 study – which is expected to use AEVI-004, a co-crystal of AEVI-001 designed to maintain substantially similar solubility, dissolution and pharmakokinetics of fasoracetam but with greater stability and a higher melting point. See our refresher on AEVI-004, below.
Despite the slight additional delay to ASCEND, we continue to think there may be several pipeline-related events over the very near term that could potentially favorably influence equity valuation and related pricing of any near-term financings. This could include ASCEND topline data (now expected Q1 ’19, delayed from Q4 ‘18), initiation of AEVI-001 in ASD/ADHD (possibly early ’19) and topline results of 002 in severe pediatric onset Crohn’s (now expected mid-2019, delayed from late-2018). We also think there is high potential for additional pipeline-stocking over the next six to twelve months, particularly given the recent burgeoning discussions with, and interest from, outside parties which could also benefit GNMX’s share price.
Relative to the Q3 financials; operating loss was $7.3M, meaningfully lower than our $9.0M estimate with most of the difference related to less than anticipated R&D spend. We continue to expect R&D expense to trend higher with further development progress, particularly as it relates to the AEVI-001/AEVI-004 programs.
Cash used in operating activities was $4.7M and $19.1M ($6.5M and $21.8M, ex-changes in working capital) in the three and nine months ending 9/30/18, compared to $6.4M and $24.9M ($7.7M and $24.8M, ex-changes in working capital) in the comparable prior-year periods. Cash balance, recently bolstered by the sale of 5.4M shares (for gross proceeds of $5.3M) under the company’s previously announced ATM through JMP securities, was $19.6M at the end of Q3. GNMX anticipates that that will be sufficient to fund operations into Q1 ’19 (although current burn rate suggests they may get into Q2 or even Q3’19 until needing to raise additional capital). Additional near-term capital is available via the ATM, which covers the sale of up to $20M worth of common shares. Nonetheless, current cash balance should be sufficient to get them through Q1’19 – which is now when read-out of ASCEND is anticipated – which we continue to believe could represent a potential valuation trigger.
AEVI-001 (mGluR+) Refresher
ADHD: As a reminder, in March 2017 GNMX announced that while secondary data was positive, SAGA (i.e. the phase II mGluR+ ADHD study) failed to meet the primary endpoint. Then in April of that same year additional data from SAGA was released which demonstrated that ADHD patients which had mutations to nine of the 273 genes in the mGluR network showed a clinically and statistically significant response to AEVI-001 based on the primary and secondary endpoints. See below for full details.
In May 2017 GNMX announced plans for a new phase II study ("ASCEND"). ACEND was enriched for this high-responder population – that is, a population with mutations to one of eight specific genes in the mGluR network (CNTN4 and seven undisclosed GRMs and neurodevelopmental genes). The study design is very similar to that of SAGA, with certain exceptions in that ASCEND; includes younger subjects (6-17 vs 12-17 in SAGA) and incorporates two patient cohorts in each arm. Additional details;
‣ Multi-center (~20-25 sites) randomized (1:1), placebo-controlled
‣ Ages 6 – 17, ~75% of which are expected to be ages 6 – 12. This younger population should reduce placebo response as compared to SAGA
‣ Enrollment was in sequential stages with the 8-gene cohort (N = 64 per arm) enrolled first (“part A”) followed by those with no genetic mutation (N = 82 per arm). Part A enrollment completed in August and Part B in October 2018
‣ Treatment protocol (similar to SAGA): 4-week dose optimization (100mg, 200mg or 400mg, bid), followed by 2-week dose maintenance
‣ Endpoints (similar to SAGA); primary: ADHD-RS-5, secondary: CGI-I
Relative to enrollment size, in June 2018 Aevi announced that, after an interim look at the placebo arm, the decision was made to continue to enroll part A cohort to n=64 (and part B to 82) in order to “ensure sufficient power to detect a robust treatment effect”. In other words, in order to further reduce the risk of placebo effect. Importantly, this decision was based solely on a statistically-derived estimate of placebo response based solely on the placebo arm (i.e. no inferences relative to effectiveness, or lack thereof, of AEVI-001 should be drawn by the decision to increase enrollment). As a reminder, greater than expected placebo effect in SAGA diluted treatment delta in that study and ASCEND was designed to reduce placebo noise.
As we have noted in prior updates, clearly an important objective is to assess clinically significant response within a broader population (i.e. 8 genes) given that it represents a substantially larger potential commercial market as compared to the CNTN4+ population. This follow-on study should provide additional insight in that regard. As a reminder, the 9-gene subset data from SAGA was quite compelling - demonstrating statistical significance on the primary and key secondary endpoints.
View Exhibit I - ASCEND Trial Design
We continue to like the chances for success with the study redesign (as compared to SAGA). For one, while SAGA did not meet the primary endpoint, the data was nonetheless reasonably strong. This includes meeting statistical significance on the CGI-I secondary endpoint as well as on the ADHD-RS responder measure. Additionally, the ADHD-RS inattention subscale, just barely missed statistical significance (p=0.0515). And, importantly, AEVI-001 was deemed to be well tolerated with no associated serious adverse events.
As a reminder, SAGA showed that among those patients (n=42: 18 AEVI, 24 placebo) which had copy-number variation (i.e. mutations) to one of these nine genes of interest had a much higher and statistically significant response to AEVI-001 – which included the primary endpoint as well as CGI-I and ‘responder’ secondary measures. The response appeared to be even more robust among those patients (n=18: 6 AEVI, 12 placebo) with mutations to CNTN4.
We also think the pediatric population should further enhance the chances for success. SAGA was an adolescent study (12 – 17 years). There could be several advantages relative to improving upon efficacy by including (and weighting towards) pediatric subjects (6 – 12 years) including that mGluR network mutations are more prevalent in the pediatric population (~26%) as compared to adolescents (~20%) and inattentiveness is more pronounced in younger ADHD subjects. The ADHD-RS inattention subscale just barely missed statistical significance in SAGA – since pediatrics should further enrich for inattention, presumably it would improve upon the chances of AEVI-001 showing statistical significance on total ADHD-RS score. And, finally, protocol compliance (including dosing, particularly BID dosing) is more likely to suffer among adolescent-only clinical trials given the typical greater oversight by parents of younger children – this can result in a greater placebo response in adolescent, as compared to pediatric, studies.
Autism Spectrum Disorder: CNTN4 mutations have also been associated with more severe phenotypes and other disorders including Autism Spectrum Disorder. Management has referenced study data that indicated 65% - 85% of individuals with ASD also have ADHD. Using the CHOP database, Aevi found that approximately 6% - 10% of ASD patients have the CNTN4+ mutation. While GNMX had previously talked about potentially pursuing an ASD-primary endpoint study, that has since evolved to one that potentially could have an ADHD-related primary endpoint given that the latter may offer a potentially more straightforward regulatory pathway. And, importantly, (current) DSM-5 defines a combined diagnosis of ADHD and ASD. The current thinking is that if 001/004 can show improvement on ADHD symptoms, that that may be enough to demonstrate overall improvement. While there could be further tweaks to the proposed design, recent thoughts have been:
- open label dose-ranging (100 - 400mg bid), multi-center
- n = 15 - 20
- 6 - 17 years, 9-gene+ patients that are ADHD/ASD comorbid and with IQ of > 70 (rationale being that higher functioning = better chance of demonstrating treatment effect)
- ADHD-RS primary endpoint (also primary in SAGA and ASCEND). Secondary endpoints reflect established ASD measures.
- timeline: specifics TBD with decisions post-ASCEND topline. Could initiate following ASCEND data
AEVI-001/004 Subsequent Steps: We do not think there will be any major decisions relative to next steps for AEVI-001 until at least read-out of ASCEND top-line data. While the data may be the most substantive factor, other considerations including financial resources, time-to-market and near-term opportunity may also be significant considerations. In terms of market considerations, the relatively very high unmet need in addressing the core symptoms of ASD may mean a particularly receptive market for a related indication. We estimate that U.S. prevalence of ASD comorbid with ADHD and mGluR+ is approximately 75k – 125k children (slightly less if parsed for only IQ > 70) – which could represent an attractive orphan-opportunity – so that may also play into management’s decision-making.
AEVI-004 = AEVI-001+ IP + enhanced manufacturability…
Assuming positive results of ASCEND, a follow-on phase 3 study is expected to use an enhanced version of AVEI-001. In July the company announced that they expect to replace the current version of AEVI-001 with that of an enhanced version of the compound, dubbed AEVI-004. AEVI-004 provides the benefits of intellectual property protection (out to 2039) and is designed to maintain substantially similar solubility, dissolution and pharmakokinetics of AEVI-001 but with (per GNMX's press release) "greater stability and a higher melting point".
Our interpretation is that AEVI-004 is expected to retain the drug-delivery characteristics of AEVI-001 but enhance it with much more substantial IP (than fasoracetam) and better manufacturability - all of which are key to an eventual commercialized product.
For FDA purposes, AEVI-004 is considered a pharmaceutical 'co-crystal', which the agency (per FDA Guidance doc) describes as "crystalline materials composed of two or more different molecules, typically active pharmaceutical ingredient (API) and co-crystal formers (“coformers”), in the same crystal lattice. Pharmaceutical co-crystals have provided opportunities for engineering solid-state forms beyond conventional solid-state forms of an API, such as salts and polymorphs. Co-crystals can be tailored to enhance drug product bioavailability and stability and to enhance the processability of APIs during drug product manufacture (Schultheiss, N et al.)."
GNMX has already received initial classification-related feedback from FDA on AEVI-004, noting in their July PR that the agency provisionally agreed that AEVI-004 is considered a co-crystal and is eligible as a new chemical entity (NCE). Additionally, GNMX notes that FDA provisionally agreed that existing toxicology and pathology are sufficient to evidence of safety for use in human studies and that, with minimal bridging studies (preclinical and clinical), that AEVI-004 can be used in place of AEVI-001 in eventual phase 3 studies (assuming positive results of AEVI-001 phase 2 mGluR+ ADHD).
Anti-LIGHT Severe Pediatric Onset Crohn’s Phase 1/2 Signal Finding Study
The Anti-LIGHT program in pediatric onset Crohn's (AEVI-002) has been plagued by persistent delays due to extreme difficulties in recruiting and enrolling patients. While GNMX previously noted that screening at the primary site (CHOP IBD center) commenced in June 2017, no patients have yet to actually enroll. But, with three additional sites having now been activated (Salt Lake City, Emory and Vanderbilt), management hopes enrollment will begin. They are now considering adding one or more study sites outside of the U.S. in another effort to enhance patient recruitment. As it stands now, GNMX believes that if enrollment commences by the end of Q1 ’19, that initial data from a small number of patients may be available by mid-2019 (these revised timelines are a delay of ~4 – 6 months from the prior most-recent guidance). Importantly, no modifications to enrollment criteria appear to have been necessary - as a reminder, GNMX had previously indicated that they were also considering modifying some of the enrollment criteria (in particular, not restricting inclusion only to early-onset), if needed to aid recruitment.
As a reminder, these are patients with severe pediatric onset IBD with or without DcR3 loss-of-function mutations (10% - 15% of pediatric onset Crohn's patients have this DcR3 mutation) and which have failed anti-TNF alpha therapy. Anticipated to enroll 8 to 12 patients over the age of 18, AEVI-002 will be administered in one of two doses (1.0mg/kg or 3.0 mg/kg) via subcutaneous injection for 14 days. Clinical endpoints are endoscopic evaluation (i.e. healing) and the Crohn's Disease Activity Index. Aevi will use the topline data to decide whether to continue development (via their license with Kirin).
‘AEVI-005’ and further pipeline expansion
GNMX exercised their option under their existing agreement with Kyowa Hakko Kirin (i.e. related to their anti-LIGHT candidate), licensing rights to ‘AEVI-005. Citing competitive reasons, specifics regarding the compound (‘first in-class monoclonal antibody’), target (‘specific cell-surface marker) and disease/condition (‘autoimmune ultra-orphan pediatric disease as well as larger adult orphan diseases’) have yet to be disclosed. Currently in preclinical development stage. Preclinical research commenced in Q2 ’18.
Pipeline expansion is likely to continue. GNMX indicated lots of recent external interest from potential partners/collaborators. Access to CHOP biobank appears to provide GNMX somewhat of gatekeeper positioning, attracting interest from external early-stage, orphan-oriented programs. Indications from the Q4 ’17 call was that this has afforded GNMX greater selectivity and growing lists of potential options in the context of pipeline expansion.
Updates to our timelines and outlook have moved our calculated valuation from $350M to approximately $340M (~$5.25/share).
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