SymBio Pharmaceuticals — Treakisym has positive DLBCL results

SymBio announced it had met is primary endpoint in its Phase III study of Treakisym (bendamustine) in relapsed and refractory DLBCL when combined with Rituxan (rituximab). The primary endpoint was overall response rate, with progression free survival and overall survival as secondary endpoints. The study was designed to enroll approximately 60 patients, although the planned enrolment was revised down to 40 patients. The study was open label and single arm, but this may be able to support a label expansion for the drug to this indication considering the well-demonstrated activity in other studies. Although bendamustine is not approved explicitly for DLBCL in the US (although it is approved for indolent NHL), it has been demonstrated to have activity when combined with Rituxan,1 similar to the current study.

We estimate a target market of 11,200 second-line DLBCL patients, which would approximately double the current addressable market. SymBio did not release detailed data in the announcement of positive results, although we expect them to be presented shortly and we do not expect any surprises based on the historical data in this indication. It intends to have an NDA submission ready in H120. The DLBCL program is central to the company’s stated objective of becoming profitable in 2021 and to date, everything appears to be going to plan.

The company announced at the end of September 2019 that it has licensed worldwide rights to the antiviral brincidofovir from Chimerix Pharmaceuticals. The deal includes a $5m upfront payment, double-digit royalties and $180m in downstream milestones payable to Chimerix. Chimerix will retain the rights to develop the drug for smallpox, but SymBio will be able to develop the drug worldwide for all other indications. The company has stated that it intends to develop the drug for viral hemorrhagic cystitis (vHC) and HHV-6 encephalitis (HHV-6), two viral diseases that typically only cause symptoms in immunocompromised individuals after hematopoietic stem cell transplant (HSCT) or kidney transplant.

Brincidofovir is a derivative of the antiviral cidofovir, formed by conjugating a lipid tail to the drug. This improves the drug’s properties by increasing cell permeability, and importantly, it reduces the dose-limiting renal toxicity that is characteristic of cidofovir. Both molecules are broad-spectrum inhibitors of DNA viruses that work by inhibiting DNA synthesis. The lipid tail also improves oral bioavailability and the oral formulation of the drug was the major development focus for Chimerix. However, the oral form of the drug has been implicated in some of the severe GI side effects that have been reported in clinical studies. The IV formulation has been explored and Chimerix previously published data from a Phase I study showing improved tolerability of this form of the drug. Some GI toxicity was seen with 20mg given once a week, but 10mg twice a week only had one patient with nausea (out of nine). Exposure at this dose was similar to the 100mg twice a week oral dosing used in the Phase III clinical study (more details below), which had 61% diarrhea, 34% abdominal plain, 31% nausea and 24% vomiting. Future studies will focus on the IV formulation.

Although there is little doubt that brincidofovir is an active molecule, its clinical development history has been complex. The lead indication of the drug for a long time under Chimerix was for the treatment of cytomegalovirus (CMV) following stem cell transplant, which it investigated in a Phase III study that reported in 2015.2 The study failed to reach its primary endpoint: no improvement in clinically significant CMV infection rates was seen at 24 weeks (51.2% for brincidofovir vs 52.3% for placebo), although the reasons behind this appear to be complex. The drug showed antiviral activity during the 14 weeks that patients were on the drug, but this benefit deteriorated during the follow-up period. Moreover, patients on the drug arm had higher reported rates of graft-vs-host disease (GVHD) and other infections following the treatment period. There was a numerically higher rate of all-cause mortality on the brincidofovir arm (HR=1.6), although it failed to reach statistical significance (p=0.11). When investigating the cause of these surprising results, the study coordinators found that patients on the drug arm had over eight times the level of exposure to corticosteroids than the placebo arm. Moreover, the excess diagnoses of GVHD were attributable to acute GI GVHD. The rate of GI toxicity was very high in the drug arm (60.7% vs 36.2% for placebo), and one plausible explanation advanced by the study authors is that this toxicity was misdiagnosed as GVHD, leading to higher rates of steroid use in the drug arm and subsequently higher rates of infection. However, the authors mention that they were unable to differentiate GI GVHD from toxicity via histopathology.

The company subsequently investigated the drug for a range of viral infections and announced positive results in Phase II for the treatment of adenovirus in pediatric stem cell transplant patients.3 However the negative outcome for the CMV study appears to have had a lasting impact on the ability of the company to enroll patients in these new studies and in May 2019, it announced that it would be discontinuing all of its clinical programs for the drug due to enrolment difficulties across all of its trials. Chimerix continues to develop the drug for smallpox under the animal rule. The company also transitioned to a new management team during this period, signaling a major shift in its strategy going forward.

We view SymBio’s decision to license brincidofovir as highly strategic. The limitations of the drug that have overshadowed its development appear to be largely related to the GI toxicity related with the oral formulation. The hope is that the IV formulation can substantially reduce these risks, which appears to be the case with the 10mg dose (although some toxicity was seen at higher doses). This leaves the company with the worldwide rights to a molecule with well understood antiviral activity across a range of indications. Moreover, the original drug cidofovir has never been approved in Japan, so brincidofovir approval could be the first of its kind in that country. We expect SymBio to initially seek approval in Japan and then expand to the US and other markets, potentially transforming itself into a multinational pharmaceutical company.

Similar to the previous development programs for the drug, the company will initially be developing it for two indications, vHC and HHV-6, which are complications of allogeneic HSCT. Both are caused by viruses that infect a wide swath of healthy individuals without any symptoms, but can cause major complications in immunocompromised patients. vHC is typically caused by a virus called BK virus, and is characterized by irritation in the bladder and blood in the urine. One study found that 16.6% of HSCT patients developed hemorrhagic cystitis, of which 90% could be linked to this virus.4 HHV-6 more commonly causes symptoms in cord blood recipients (10% incidence) compared to HSCT (1%) for poorly understood reasons, and is characterized by cognitive disfunction and encephalitis.5 HHV-6 is also associated with solid organ transplantation and is estimated to cause clinical disease in approximately 1% of patients. The disease manifestation in solid organ transplant patients is different and is characterized by fever, liver dysfunction, colitis and graft dysfunction. Chimerix previously performed a post hoc analysis of its CMV trial, investigating whether it could identify activity against HHV-6 in this population and found that the drug reduced the incidence and severity of the infection.

The clinical development plan for brincidofovir has not been finalized yet. We understand that the previous Phase I IV brincidofovir study included Japanese patients and could potentially be used for the same purpose in Japan. Based on company guidance, the finalized development should be announced by January. If the PMDA approves the use of the existing Phase I study data, the company has guided us towards initiation of a Phase II study in vHC starting in Q320.

One hurdle to the company’s future operational plans is that Treakisym is slated to have generic competition in Japan starting in 2022. SymBio has therefore endeavored to protect its market share with the introduction of new formulations of the product, which provide a benefit to physicians using the product. As part of this the company in-licensed rights to patent-protected liquid formulations of Treakisym from Eagle in September 2017: the RTD (ready-to-dilute) formulation and the rapid infusion (RI) formulation. These formulations are protected by patents that extend to 2031. Both of these formulations improve the convenience factor for physicians by making the product easier to dilute and easier to infuse, respectively, and the company believes these factors can convert and retain physicians. The company reported in September 2019 that it has submitted the NDA for approval of the RTD formulation, which it expects to commercialize in Q121. The RI formulation is currently being investigated in a Phase III pivotal study that was initiated in April 2019. This product is expected to launch in 2022.

The RTD product is approved in the US under the name Bendeka and is marketed by Teva. Eagle reported revenue from the product of $25m in 2018, which based on the reported royalty rate of 25% suggests sales of approximately $100m during that period.

We have increased our valuation to ¥32.7bn ($300m) or ¥1,342 ($12.31) per share from ¥28.9bn ($255m) or ¥1,185 ($10.49) per share. This is driven by an increase in the probability of success for Treakisym in DLBCL to 90% from 60%, which increased its valuation to ¥9.2bn from ¥5.3bn.

Additionally, our valuation is lifted by the inclusion of brincidofovir in our model (¥838m). We only include the initial indication of vHC in our model and only in Japan at this time, but we may revise at a later date as the company progresses its clinical development plans. At this time we also conservatively assume for the purposes of this model that the company will be required to perform a Phase I study by the PMDA. If the agency does not require this study, this would increase our valuation by approximately ¥250m. Regardless of the PMDA decision, we assign a 30% probability of success, which is average for drugs entering Phase II, because we find the Phase I IV study sufficient. We assume that the drug will be able to command both a high price (¥10m at launch) because it will be the only available medication to treat this rare disorder. Additionally, because the targeted patient audience is already under close medical supervision and the drug will be administered in conjunction with an ongoing medical procedure (allogeneic HSCT), we estimate very high penetration, up to 75% at peak. We assume a 15% royalty to Chimerix. We include $10m in clinical and regulatory milestones, but do not include commercial milestones given our low revenue expectations for this indication (¥4,200m at peak). Based on current rates of allogeneic HSCT in Japan (approximately 3,700 per year),6 we estimate an addressable market of only 630 individuals per year in the country. We believe that the majority of the value of this asset will be in downstream label expansions and entrance into new geographies, but we want to see traction with the initial clinical program before including these in our estimates.

We have adjusted our expected financing requirement to ¥1.7bn from ¥1.8bn (included as illustrative debt in 2020) before profitability in 2021. This is driven by slightly lower than expected operational spending for Q319 (¥1.6bn), which includes the $5m upfront payment for brincidofovir.