Sequana Medical — Efficacy maintained in second interim analysis

Sequana reported positive data from the second interim analysis in patients in the roll-in cohort, from the POSEIDON pivotal study in patients with refractory or recurrent ascites (RRA) due to liver cirrhosis. As a reminder, POSEIDON is single-arm, open-label, within-subject crossover study, whereby patients will serve as their own controls. The study allows for up to 30 patients to be enrolled in a training (or ‘roll in’) cohort (which will be excluded from primary efficacy analysis), to ensure centres are experienced with the alfapump before the actual study (pivotal) cohort is enrolled.

Importantly, the second interim read from this roll-in cohort (26 subjects) confirmed the efficacy trends first reported in Q420 from the initial interim analysis (which reflected the first 13 patients in the cohort). As in that first interim analysis, the subjects had a greater than 90% reduction in mean frequency of TP versus baseline, and all patients experienced at least 50% reduction in mean frequency of TP per month versus baseline. However, these trends were now reported over a larger sample size (26 vs 13) compared to the initial interim analysis, which in our view, provides added confidence in the efficacy profile to date.

In the POSEIDON trial, patients in the pivotal cohort enter a three-month pre-implant observation period in which they will receive standard-of-care therapy, consisting of TP, before the alfapump is implanted. Eligible patients will be implanted with the alfapump and during the three-month stabilisation period their alfapump settings will be adjusted as needed and patients will be fully trained. After the stabilisation period, a three-month post-implant observation period will begin. The primary effectiveness outcomes include:

Before enrolment, the roll-in cohort subjects required on average 3.8 TP per month, and as stated above, the data from this cohort significantly exceed the primary endpoints as defined for the pivotal cohort, given a mean reduction of over 90% in the frequency of TP post-implant versus baseline and all patients having at least a 50% reduction in the mean monthly TP frequency.

Overall, the second and larger interim POSEIDON study analysis of the roll-in cohort provides us confidence the study is on track to meet the primary efficacy endpoint. Further, the company reported quality of life (QoL) data, determined through health-survey questionnaires SF36 (a general health quality survey) and Ascites Q (a questionnaire developed for patients with ascites), which demonstrate a rapid positive impact of the alfapump on patient’s QoL.

Management indicates that both the mean physical component score of SF36 and the mean score of Ascites Q show a clinically important improvement (exceeding the threshold for Minimal Clinically Important Difference, according to management) from baseline to six months post-implantation and the improvement in QoL measures was maintained for up to 12 months post-implantation (n=6 patients at 12 months). The reduced need for patients to undergo TP post-implantation largely explains these QoL improvements.

Sequana also announced that, based on an analysis of attrition rates between study enrolment and alfapump implantation, it anticipates c 10 additional patients will need to be enrolled in the pivotal cohort to meet its target of 50 implantations for the primary efficacy analysis. This is largely due to delays caused by COVID-19 restrictions on elective surgery, which for several patients resulted in their pre-implantation observation period exceeding the originally planned three months. As a result, some of the patients who were affected by the longer observation period experienced disease progression during the interval, and they no longer met study inclusion criteria by the (revised) time of expected implantation.

Consequently, the company now expects patient recruitment to complete in Q321 (instead of Q221) and reporting of the primary endpoint in Q322 (vs Q222, previously). It expects to file for PMA to the FDA in Q422, which is broadly in line with prior guidance. We believe the company is still able to meet our H223 US launch forecast. The additional delay may result in a minor increased cost for the POSEIDON study but management noted this is not expected to be substantial, given the bulk of study trial costs are for those patients who are implanted with alfapump and monitored afterwards (ie, costs for the three-month pre-implantation observation period is not as meaningful and it is for this component of the study where the company will now need to recruit additional patients). We do not believe the reason for the higher than anticipated attrition rate (largely due to a more rapid than anticipated deterioration of subject health) has any material bearing on the commercial prospects of alfapump in RRA. If anything, it illustrates the severe level of liver disease in such patients and highlights where a treatment aimed at improving QoL, such as alfapump, could provide benefit.

POSEIDON’s primary safety endpoint is the rate of alfapump related re-interventions as determined by the Clinical Events Committee (CEC), at six months post implantation. To this end, the company reported that its CEC determined or adjudicated that three out of the 26 roll-in patients experienced a composite primary safety event. Two of these three required explantations, one due to wound dehiscence (which management indicates is not unusual given the high level of underlying disease in the RRA subjects) and one following a motor-vehicle accident that resulted in persistent haematuria. There was also one subject who received an arterial injury during implantation, which resulted in the patient’s death. Arterial injury is a very low-frequency event that may occur in abdominal surgical procedures (such as laparoscopic surgeries, gastric tubes, TP, and so on). Management indicates the literature suggests an incidence in 1–3% of such procedures. Importantly, the company commented that out of the 850 alfapump implantations that have occurred since 2011 (mostly in Europe), this arterial injury event in the roll-in cohort was the first to have occurred with alfapump implantation and hence, given this historical track record, we do not believe there is a material probability of repeated arterial injury event occurrences in the pivotal cohort of the POSEIDON study.

The CEC adjudicated that two of the events (ie the hematuria and the wound dehiscence) were potentially related to the device, and the arterial injury was potentially related to the implantation procedure.

Given that refractory ascites patients are estimated to have a one-year survival rate under 50%,1 we believe the relatively low three out of 26 (c 12%) composite primary safety event rate at six months, if sustained in the pivotal cohort, should satisfy any FDA safety considerations when considering product approval. Further, the company commented there were no unanticipated adverse device effects during the trial among these roll-in patients. Hence, to date, we believe the safety profile remains encouraging.

We are maintaining our revenue forecasts for alfapump or the Direct Sodium Removal (DSR) programmes, as explained in our initiation of coverage report. The only adjustment to our expenditure forecasts is that we are increasing our 2022 R&D expense estimate by €0.7m to account for the minor (c three month) extension of the POSEIDON study and the need to recruit c 10 additional patients. We continue to expect Sequana’s funds on hand should be sufficient for it to maintain operations into Q222. We continue to model the company will raise €15m in 2022, €20m in 2023 and an additional €50m before FY26, the point at which we believe the company will reach consistent operating profitability. As per our usual policy, we model these financing requirements as illustrative debt.

The effect of the minor increase in our 2022 expense forecast is marginal on our rNPV valuation as we maintain our prior probability of success estimates (60% for alfapump in RRA in North American markets and 25% for alfapump DSR in heart failure). Altogether, we obtain a pipeline rNPV of €248.2m, versus €248.7m previously. After adding Q121e net cash of €22.2m (excluding lease liabilities), we obtain an equity valuation of €270.4m or €14.56 per share (€13.31 fully diluted).