Sequana Medical — Additional POSEIDON data confirm benefits

Sequana Medical initially reported positive results in Q422 from the POSEIDON North American pivotal study of its implantable alfapump device in patients with RRA due to liver cirrhosis. The study met the primary efficacy endpoint and the primary safety endpoints were in line with expectations. Recently the company provided additional details on secondary safety endpoints and QoL data, which affirm our favourable view on the product’s likelihood of obtaining approval and we maintain our US commercial probability of success estimate of 80% in our valuation. Sequana expects to file a US PMA in Q423, which we continue to believe could lead to commercialisation in H224.

The alfapump device was shown in the POSEIDON study to lead to significant reductions in the need for RRA patients to undergo burdensome TP procedures, which should lead to improved patient independence and QoL given the limitations of current treatments, as discussed in our Outlook report.

The POSEIDON registration trial, which started in 2019, is designed to support alfapump approval and reimbursement in the United States and Canada. The study is a single-arm, open-label, within-subject crossover study, whereby patients serve as their own controls. Following enrolment, patients entered a three-month pre-implant observation period in which they received standard of care therapy, consisting of TP, before the alfapump was implanted. The study consisted of a roll-in (‘training”) cohort of 29 patients, followed by a pivotal cohort of 40 implanted patients.

As explained in a prior note and reported in the Q422, data from the 40 enrolled patients in the pivotal cohort of the POSEIDON study met the key primary efficacy outcomes. The first effectiveness endpoint is the median reduction in TP, where among the 40 patients, POSEIDON achieved 100% median reduction (p<0.001) in the post-implant implantation period (reflecting months four to six) compared to the pre-implant observation period, while the study’s aim was to show at least a 50% reduction.

For the second effectiveness endpoint, 77% of the 40 patients experienced at least a 50% reduction in the frequency of TP procedures in the post-implant observation period versus the three-month pre-implant observation period (p<0.001). The study’s aim was to show that at least 50% of patients achieve a 50% reduction in TP procedures.

Effectively, the 100% median reduction in TP procedures post- versus pre-implantation (the first effectiveness endpoint) indicates that the majority of POSEIDON patients required zero TP interventions during the post-implant observation period, as shown below.

We believe the results exceeded the pre-defined efficacy success thresholds required for approval by a reasonable margin, and should pave the way for the company to file a US PMA with the FDA in Q423, potentially leading to US market launch in H224. The company still needs to complete further product validation and verification work prior to submitting the PMA for the alfapump in RRA, but we do not expect any challenges in this process.

The reduction or near-elimination of the need for TP procedures is very meaningful, in our view, given that prior to enrolment, these patients required on average 3.2 TP procedures per month and had an average Model for End-Stage Liver Disease (MELD) score of 15.2, reflecting the highly decompensated state of these enrolled patients.

Altogether the POSEIDON results demonstrate that the alfapump is very effective at controlling RRA, virtually eliminating the need for large volumes of TP procedures and significantly improving patients’ QoL at life at six months post-implantation.

As we expected, the reduction in the need for TP procedures led to meaningful and statistically significant QoL improvements. Ascites, being the accumulation of protein-containing fluid in the abdomen and a frequent complication of late-stage liver disease, results in loss of appetite, shortness of breath, and mobility and sleeping difficulties. The conventional treatment, TP, to drain the excess fluid, can often take between one and five hours and sometimes longer. TP often requires patients to stay in hospital for up to 48 hours and only provides temporary relief, as often a cycle develops where patients undergo TP, feel much improved for up to a week but then ascites accumulates with symptom worsening before another TP procedure is needed. Hence, the ascites/TP cycle results in a heavy burden for patients, with the patients recruited for the POSEIDON trial requiring an average of 3.2 TP procedures per month prior to implantation.

Patient’s QoL was assessed via established health-survey questionnaires. Despite RRA progression in these patients, both the physical component score of the SF36 scale (a QoL measure assessing a general health QoL) and the Ascites Q score (a QoL measure specific for ascites patients) indicated clinically meaningful and statistically significant improvements six months post-implant compared to pre-implant (n= 26, p<0.001).

In our view, the improvements in QoL, accompanied by a favourable overall safety profile as described below, bode well for the product’s potential US approvability.

As stated with the Q422 top-line study results, primary safety endpoint data, including the rate of alfapump-related open-surgical re-interventions, explants or deaths adjudicated by the study’s Clinical Events Committee (CEC), were in line with expectations. Altogether, there were six primary safety events, of which three were explants due to wound or skin erosion, and three were explants due to patient-reported discomfort (all such patient-reported discomfort events were determined to be of moderate severity by the CEC).

Key secondary endpoints within six months, also adjudicated by the CEC, include the number of major adverse events (MAE), serious infections and acute kidney injuries (AKI). MAEs were pre-defined in the protocol as one of the following events: AKI > stage 2, hepatorenal syndrome, hepatic encephalopathy > grade 2, spontaneous bacterial peritonitis and recurrent or refractory infection related to paracentesis or the alfapump system, procedure or therapy.

As a reminder, all implanted patients were monitored for 90 days prior to alfapump implantation. The company noted that despite ongoing RRA disease progression, there was a similar number of MAEs in the 90 days post-implant versus the 90 days pre-implant (n=5 each), and a comparable number of serious infections post-implant versus pre-implant (n=3 vs n=2), with only one of the post-implant infections determined to be device-related.

The study’s principal investigator remarked that patients implanted with the alfapump need to be closely monitored for the development of AKI or infection. Fortunately, in the POSEIDON study, kidney-related events were readily resolved with the standard of care, according to the trial’s principal investigator, Dr Florence Wong. Sequana noted that there were 16 stage 1 AKIs in the six months post-implantation, which are not believed to be clinically significant. AKI stage 2 (n=4) and stage 3 (n=2) post-implantation events were resolved in three of the instances and unresolved in the three other instances at the time of patient death (from unrelated causes, which is not surprising given the level of underlying illness in recruited patients). Importantly, the company noted that notable measures of kidney health, creatine and eGFR, were stable over long-term follow-up (for the surviving patients), indicating that these AKI events had no material effect on their renal health.

Similar to preliminary interim data shown in the roll-in cohort of 29 patients for the POSEIDON study, which showed a 70% one-year survival rate among this group, data from the subsequent pivotal cohort (n=40) showed a 70% one-year survival rate. This compares favourably to published literature citing a c 50% one-year survival rate1 for refractory ascites patients.

We note that there are limitations in making direct comparisons between distinct populations across different time periods, given, among other factors, possible variances between the standard of care and the ongoing monitoring and treatment protocols between patients enrolled at POSEIDON study sites and the historical data. Nonetheless, we view this trend as potentially favourable for the product’s approvability and in eventual post-approval sales and marketing related discussions with stakeholders and physicians.

Among the 40 patients with RRA due to liver cirrhosis implanted with the alfapump in the POSEIDON trial’s pivotal cohort, 48% had an underlying aetiology of alcoholic liver disease and 38% suffered from non-alcoholic steatohepatitis (NASH). This NASH proportion among enrolled patients is suggestive of the growing prevalence and contribution of NASH as a key driver of liver cirrhosis, in our view.

Our underlying assumptions for the market opportunity for the alfapump in RRA are underpinned by the expected growth in the NASH population, which in turn should lead to a rise in RRA cases.

While the US population is growing at 0.6% pa, we expect the NASH population to grow at a faster rate (Estes et al2 estimate a c 3.3% CAGR between 2015 and 2030), aided in part by an ageing population. Our overall US RRA market growth rate estimates are consistent with Estes et al’s (2018) estimates for the growth in the decompensated cirrhosis population of a 7.1% CAGR through to 2030 in the US, due largely to increased NASH prevalence. We maintain our forecast for FY32 alfapump sales in North America of €190m, driven by a c 15% assumed market share of the c 40,000 new annual RRA cases estimated to arise in the region in FY32.

In addition to the commercial opportunity for alfapump in RRA, we highlight other recent operational advancements for Sequana’s Direct Sodium Removal (DSR) programme in congestive heart failure (CHF), including positive SAHARA data for the DSR 1.0 product in diuretic-resistant CHF patients with persistent congestion, and positive preclinical GLP and Phase I CHIHUAHUA study data for the second-generation DSR 2.0 product candidate. The company expects to recruit the first patient in the MOJAVE Phase Ib/IIa study of DSR 2.0 in Q223, as discussed in our prior note.

After including the €15.8m April financing, we estimate a pro forma (at 31 March) gross cash position of €22.9m and a net cash position of €10.4m. We have maintained our forecasts and valuation, as described in our prior note. We calculate a pipeline rNPV of €334.1m. After adding €10.4m pro forma Q123e net cash (ex lease liabilities), we obtain an equity valuation of €344.5m or €12.22/share (€11.14 fully diluted given options outstanding).

As a sensitivity, our equity valuation per basic share would be adjusted to €7.29/share if we assume that our total assumed future funding need (€105m) is met through equity issuances at the current share price (c €3.14/share).