Extension trial back on track but with data delay

The main project uses hRPC (see Exhibit 1) to treat the degenerative eye condition RP. This might enter a pivotal study in H2 2022.

The exosome set of projects are for the delivery of high-value pharmaceuticals, probably genetic therapies like siRNA, to the brain, but also have potential as vaccine vectors. These exosome applications all require partnering.

There are some very early-stage projects in progenitor cells. These could mature into valuable projects from 2021–22 onwards. The CTX project in stroke disability requires one or more partners to progress further; in China, the partner is Fosun and development there is progressing.

ReNeuron is incorporated in the UK with offices in the UK and the US and the main laboratory in Bridgend, South Wales. A potential US share quotation is being considered alongside the current UK quotation, but probably requires further portfolio development and partnering.

The hRPC project is the critical lead project for ReNeuron. It is one of two cell therapy companies tackling RP. RP is a very diverse group of degenerative genetic eye diseases where photoreceptor cells progressively die. RP manifests through progressive night blindness (low light vision) with loss of peripheral vision. Eventually, high-resolution acuity and colour vision is lost. Gene therapies for RP only treat specific mutations, meaning that the patient pool for each is very small. Cell therapies can potentially treat many patient types.

ReNeuron’s approach is very different to gene therapy as it uses genetically healthy hRPC. The cells are an allogeneic cell line. The cells can be produced in standardised batches and stored and shipped frozen. This avoids the complex, very expensive, customised manufacturing needed for autologous cell therapies.

Our August 2020 outlook note discussed the science background in more detail. Theoretically, it is likely that hRPC cells secrete trophic factors: hormone-like proteins that encourage retinal cell survival. It is also possible but unproven that some hRPC grow and differentiate into functional light-sensitive cells. Practically, clinicians, payors and patients need to know how much visual acuity (VA) can be preserved and recovered, and the duration of action of a single dose per eye. Currently, the duration appears to be at least one year.

ReNeuron’s hRPC need to be injected close to the site required. This will be close to the centre of the retina, where most photoreceptors are situated. This subretinal injection is a precise procedure and temporarily distorts the retinal structure. The three- and six-month data from the extension Phase IIa study will pave the way for a pivotal trial.

As the eye cannot be sterilised, infection from bacteria naturally present on the patient’s eye surface is an inherent risk. Prophylactic eye drops can be used. There are low levels of intraocular eye infection post-surgery (endophthalmitis) in procedures like cataract operations, up to 0.7%. Even simple injections, as of Eylea or Lucentis (for neovascular retinal diseases), carry a risk (0.03%).

In terms of the June safety event, the investigation found no obvious cause of the infection and the trial has restarted in the US, with regulatory submissions currently underway to restart in the UK and Spain. ReNeuron has now specified the use of prophylactic antibiotics in the protocol. Additional measures to improve handling of the cell preparation in the hospital have been added.

The updated data, published on 6 January 2021 and updated in July, from the US Phase I/IIa trial (NCT02464436) is based on VA data from up to nine patients, depending on the time point. 1 VA is critically important to patients as it provides the ability to resolve details and perform day-to-day tasks, but it is a variable parameter.

VA in the trial is measured using the ETDRS2 chart. If a patient correctly reads three extra lines, (15 letters) their VA has doubled. This has been the historical FDA benchmark. Patient variability means that a one-line ETDRS chart difference (five letters) is not regarded as clinically significant, whereas a two-line difference is significant. The measure often used is best corrected visual acuity (BCVA), which means that the patients wear spectacles or contact lenses for the readings.

Exhibit 2 shows the individual VA gains measured in additional letters seen by the 1m cell dose cohort of Phase IIa patients at one year (seven evaluable cases). Of these seven, four showed VA gains of less than 10 letters, three of whom had gains of over five letters. One had a problem following the surgical procedure but recovered baseline level sight. Of the other three patients, one gained 10.5 letters and two patients gained the equivalent of three or more lines (15+ letters). The one year duration shows that the single hRPC injection efficacy has been maintained.

The extension study aims to recruit a further nine patients. As of 8 July, four in total had been recruited and treated. These new patients will add to the 10 Phase IIa patients already treated (of whom nine reported as above).

In the extension study, two blebs of 1m hRPC (2m cells in total) will be used on either side of the functional retinal area being treated. The aim is to retain the contact of the retina with vision with its blood supply to avoid the issues seen in two patients in the initial cohort (described in the January note and August Outlook report). The design also enables a doubling of the dose to try and gain additional efficacy. A wider range of pre-treatment baseline VA in patients will be eligible and the trial endpoints will be expanded to include VA (as before), microperimetry, visual field, retinal sensitivity and retinal structure. The primary endpoint remains safety. The secondary vision endpoints in the formal protocol are at six months. However, ReNeuron plans to release data on the three-month vision by late 2021. It is possible that not all the intended nine patients will have competed three months by that date; to do this would need all of the five remaining patients to be treated by early September.

Whether a Phase IIb or Phase III designation, this is planned to be a single pivotal study. As the treatment involves invasive surgery, there is no placebo control as it is unethical to ask patients to undergo such surgery to receive saline. The design is for about 100 patients randomised into three arms:

This could start in the second half of 2022.

There is one direct cell therapy competitor identified by ReNeuron and five indirect gene therapy competitors, one using an RNA approach. Exhibit 4 shows the competitor space.

The only cell competitor, jCyte, is a private academic company. In summer 2020, it reported data from a Phase IIb RP trial (NCT0307373). In 74 patients, a net mean 7.4 letter gain at the higher cell dose of 6m (n=23) was seen, but with little effect at the 3m cell dose (+3.0 letters, n=25). Untreated patients (n=23) gained 2.80 letters. Hence the 3m dose had no net effect and the net 6m gain was +4.6 letters. jCyte has started a pivotal study based on a subgroup.

We are cautious about data comparisons with hRPC. jCyte’s RP cell therapy, jCell, uses an intravitreal injection: into the vitreous jelly filling the inner eye. This is technically simpler to administer but the cells are then dispersed across a large volume. Hence, at least 6m cells per eye are required. The jCell formulation is also prepared fresh and cannot be cryopreserved. This means patients need to go to a centre next to the manufacturing site, which might limit its market.

Japanese eye specialist company Santen licensed the rights to jCell for $50m in cash, $12m in a convertible note offering and up to an additional $190m in milestones based on approval and initial sales plus a sales royalty. This provides a basic benchmark for any ReNeuron partnering deal, but we expect that ReNeuron could get better terms on good continuation data.

Spark Therapeutics (acquired by Roche) has the one approved (2018) product, Luxturna. It sells for £613,410 per treatment (ex-tax) in the UK and treats both eyes in patients with recessive RPE65-associated Leber congenital amaurosis mutations. The mutation is rare, about 2% of RP cases. Spark sold $21.2m of Luxturna (net of rebates) in H119 before its acquisition by Roche for $4.3bn. The value was due to the potential of Spark’s technology in conditions such as haemophilia.

Biogen is developing BIIB112 to treat X-linked RP (X chromosome linked disease is only in males of course). Unfortunately, in May 2021 the Phase II/III XIRIUS study reported that it did not meet its primary endpoint.

MeiraGTx, a UK and Ireland based company, has programmes against X-linked gene defects and an RPE65 project. The X-linked project is licensed to Jansen. Both projects are scheduled for progression into Phase III in the second half of 2021. The X-linked RP reported data in July 2020, finding statistically significant improvements in mean retinal sensitivity and central visual field progression rate. A mobility measure is also used.

ProQR uses an innovative RNA approach, QR-421a, to target exon 13 mutations by exon skipping in the USH2A gene. This is clearly highly targeted. ProQR reports good Phase I/II data and a Phase II/III is planned.

AGTC is developing AGTC-501 as an RP X-linked gene therapy. It has completed a 28-patient Phase I and is running two further studies: SKYLINE and VISTA, to evaluate safety and efficacy.

Exosomes are tiny lipid (oil) vesicles about 100nm in diameter that are secreted by cells, particularly mesenchymal stem cells (MSCs). ReNeuron also has early-stage induced pluripotent stem cell (iPSC) projects, not further discussed as it is in an earlier research phase.

Exosomes can be isolated and loaded with short RNA sequences and/or small therapeutic proteins or drugs. Exosomes also appear to pass through the blood/brain barrier, as shown by literature reports of down-regulation of brain proteins by exosomes injected into mice.

ReNeuron, over FY21, entered additional collaboration agreements with four major pharmaceutical and biotechnology companies and a further two with leading academic institutions. These are exploring multiple methods of loading exosomes. Exosomes could be the delivery component of a genetic or protein therapeutic. The technology can potentially generate royalties and milestones. We expect that at least one project might generate a formal deal within the forecast period. Proof of concept data is expected in late 2021. ReNeuron noted that the efficacy, probably delivery efficiency, of its exosomes was still lower than the desired specification. ReNeuron did note that it is optimising the use of specific peptides to sit on the surface of the exosomes to target them to specific tissues.

There are some exosome-focused specialist companies such as Evox Therapeutics, based in Oxford, UK. Evox announced a deal with Takeda in 2020 worth up to €803m. The US company Codiak has two clinical projects designed to stimulate anti-tumour responses. One of these, exoIL-12, produced positive safety data from an ascending dose Phase I/II study in December 2020 of an IL-12-displaying exosome therapy to stimulate anti-tumour responses.

With the delays to the extended Phase IIa, we do not expect much clinical newsflow this year. ReNeuron has committed to a three-month snapshot of the data as is by Q4 of 2021. This might be limited. The key events will be completion of the six-month endpoints in the extension Phase IIa now due in the first half of 2022 and potential partnering, not in our view before mid-2022. Progress on exosomes is expected by Q4 of 2021 and this could generate significant revenues.

For valuation purposes, we assume an RP prevalence of one in 4,500. On our estimate, there are 75,000 diagnosed and treatable cases in total across the US and Europe; ReNeuron estimates the number of cases could be up to 250,000. There are then about 1,100–2,500 new diagnoses per year (incidence) in the US and about 3,200 in Europe. Consequently, once all known (prevalence) patients with disease who can be treated, have been treated, the market becomes treatments of new cases (incidence).

As hRPC targets a bigger market than Luxturna, we have assumed a lower price of $275,000; this is to be more acceptable to payors and to achieve good levels of uptake. Our forecast has 2030 US sales of $428m, European sales of $367m and Japanese sales (through a partner) of $120m. This results in total forecast world sales of $915m. The background assumptions and rationale are unchanged from our August 2020 Outlook note.

We expect the potential hPRC approval (unchanged probability of 30%) around H2 of 2025. The immunotherapy and diabetes cell therapy projects (see August note) have good deal potential but are in their preclinical stages. Exosome projects to deliver RNA drugs are promising but require early licensing. Our indicative value remains at £190m pending more clinical data. With 56.94m shares outstanding, this equates to 334p per share. We note high deal values in the retinal therapy area, with one totalling $250m plus royalties in June 2020. Codiak, a pure exosome company with two Phase I clinical projects, is now valued at about $400m, down 44% from its late 2020 high.

The loss before interest and tax to 31 March 2021 was £13.4m, a drop from the £13.8m FY20 loss after the mid-2020 restructuring. The tax credit also fell to £2.1m from £2.4m. There was a currency adjustment in FY21 of £0.5m; this is non-cash as the currency is needed to cover largely US expenses.

The effect of restructuring is seen in expenses where R&D fell to £9.5m from £16.3 in FY20. Admin costs fell to £3.7m from £4.2m in FY20. The overall loss of £11.3m (FY20 loss: £11.4m) was unaffected after restructuring as there was a £6m milestone in FY20 and low revenues of £0.3m in FY21 (plus £0.1m of COVID-19 furlough grants). Cash flows were boosted by the December 2020 capital raise, which yielded £16.3m net of costs. Cash rose from £12.6m at FY20 to £22.2m (including £7.5m of short-term investments) at 31 March 2021.

Based on our updated two-year forecast, we expect ReNeuron to have cash into early CY23 (that is Q4 of FY23). Management notes that there is cash for at least 12 months. Although the cash position is strong at the current expenditure level, either a deal or further capital will be needed to initiate the expected pivotal study. Investors should consider further funding needs, as given the strength of the hRPC product on current data, avoiding a partnership until there is positive pivotal data would likely maximise value.