For analyst certification and disclosures please see page 5

Transcription

1 KOL Series July 13, 2017 LifeSci Capital KOL Series Wet AMD We recently hosted a Key Opinion Leader call on the topic of wet age-related macular degeneration (AMD). A replay of the webcast is available here. Topics discussed on the call included the current treatment landscape for wet AMD, the recent Phase III data with Novartis s RTH258, and promising clinical candidates in development. The speakers were Dr. Peter Kaiser, and Dr. David Brown. Dr. Kaiser is the Chaney Family Endowed Chair for Ophthalmology Research, and a Professor of Ophthalmology at the Cleveland Clinic Lerner College of Medicine. Dr. Brown is a practicing ophthalmologist and ophthalmic surgeon at Retina Consultants of Houston. He is a thought leader in the space, and has extensively published on the topic of Wet AMD. The following companies were mentioned during the call: Novartis (NYSE: NVS), Roche (VTX: ROG.VX), Regeneron (NasdaqGS: REGN), Bayer (ETR: BAYN). Ohr Pharmaceuticals (NasdaqCM: OHRP), Ophthotech (NasdaqGS: OPHT), REGENXBIO (NasdaqGS: RGNX), and Allegro Ophthalmics (private). Call Summary Analysts Sam Slutsky (212) sslutsky@lifescicapital.com Our call focused on the current treatment landscape for wet AMD, the recent Phase III data with Novartis RTH258, and promising clinical candidates in development. The list below summarizes the most interesting topics of discussion. Each bullet point is discussed in detail below. Wet AMD Treatment Landscape Continued Pressure from Payers to use Avastin as a First-Line Treatment for Wet AMD. Non-Injectable Add-On Treatments are an Appealing Option for Obtaining Coverage. Positive Outcomes with Add on Treatment to One anti-vegf will Likely Lead to Use with Any anti-vegf. Data Impression for Novartis RTH258 Top-Line Data with RTH258 is Encouraging, but Many Questions Still Loom. Trial Design for HAWK and HARRIER Increases Importance of RTH258 s Drying Ability. Other Treatments in Development Good Rationale to Inhibit Ang-2, Especially for Retinal Vascular Diseases. KOLs are Confident in the Potential for Ohr s Squalamine. KOLs Believe Squalamine Wrongly Linked to Failures of PDGF Inhibitors. Continuous VEGF Inhibition Approaches Could Lead to Improved Outcomes. Optimism Surrounds REGENXBIO s AAV Technology for Wet AMD. Wet AMD Treatment Landscape Continued Pressure from Payers to use Avastin as a First-Line Treatment for Wet AMD. During the call, Dr. Brown noted that there has been increasing pressure from Medicare Advantage Plans and managed care plans that incentivize physicians to favor the use of Roche/Genentech s Avastin (bevacizumab) for wet AMD, with some payers pushing for Avastin to be the exclusive first-line therapy. Although the 3 main VEGF inhibitors Avastin, Regeneron s Eylea (aflibercept), and Roche/Genentech s Lucentis (ranibizumab) are effective at improving visual acuity in wet AMD, this is interesting considering Eylea is the best drying agent, and has the least frequent dosing regimen amongst the VEGF inhibitors (every 8 weeks vs. every 4 weeks). Typically, Eylea s use is reserved for patients who have persistent fluid following the use of Avastin or Lucentis. In Dr. Brown s practice, roughly 1/3 of patients receive Avastin, 1/3 receive Lucentis, and 1/3 receive Eylea. Notably, many of the patients in Dr. Brown's practice have good insurance, and so the use of Eylea and For analyst certification and disclosures please see page 5 Page 1

2 Lucentis may be higher than other practices. Dr. Kaiser acknowledged that he also starts most of his patients on Avastin, with Eylea being used as a later line of therapy. Non-Injectable Add-On Treatments are an Appealing Option for Obtaining Coverage. Dr. Brown noted that many physicians use Avastin because they are worried about the financial implications that could occur if an insurer rejects treatment coverage of Eylea or Lucentis. Reimbursement for the anti-vegf therapies is based on a buy and bill structure. In this, a physician buys the treatments from a drug distributor, and has to pay the cost in a 60-day period. If Eylea, which has a WAC of $1,850 is administered to a patient, and an insurance company rejects coverage, then the physician is still liable for paying the distributor. Based on margins, which Dr. Brown mentioned were between 3% and 4%, it would take a large number of additional injections to make up the cost absorbed from 1 non-reimbursed injection. In the case of an eye drop, which is not administered by a physician, coverage is not part of the Medicare part B drug plan, and so physicians would not have any additional financial risks to prescribe the treatment. This insight could have important implications for future add-on therapies that are injectables, as there may be restrictions on their use from payers, and obstacles in place that curtail physicians willingness to use them. Dr. Brown did mention however that if an add-on injectable had very compelling data, then it may be less restricted by payers. Positive Outcomes with Add on Treatment to One anti-vegf will Likely Lead to Use with Any anti-vegf. There are several treatments for wet AMD being developed as an add-on treatment to anti-vegf therapy. Programs of note include Ohr s squalamine, Regeneron/Bayer s nesvacumab, and Tracon (NasdaqGM: TCON)/Santen s (TYO: 4536) DE-122. When asked whether a treatment combined with a specific anti-vegf inhibitor in clinical studies would be used in practice on top of any of the approved VEGF inhibitors, Dr. Kaiser felt this would likely be the case. Data Impression with RTH258 Top-Line Data with RTH258 is Encouraging, but Many Questions Still Loom. Novartis recently reported positive data from its Phase III HAWK and HARRIER studies evaluating the VEGF inhibitor RTH258, for neovascular AMD. The studies achieved their primary endpoint of non-inferiority compared to Eylea, which is considered the gold standard drug for wet AMD. However, approximately half of the patients were able to maintain a 12-week dosing schedule, which compares favorably to Eylea s recommended 8-week dosing regimen, and the 4-week dosing regimen for Lucentis and Avastin. Dr. Kaiser found the top-line data to be encouraging, but wants to see the breakdown of outcomes for patients who maintained the 12-week dosing regimen compared to those who switched to an 8-week regimen. Based on the study design, patients who switched from the 12-week to 8-week dosing regimen were unable to revert back to the 12-week dosing. Dr. Kaiser also mentioned that the safety profile of RTH258 versus Eylea would be scrutinized. Additional data points that were of interest to Dr. Kaiser and Dr. Brown include the following: Comparison of visual acuity change for 12-week and 8-week dosing regimen with RTH258 vs. Eylea. Range of visual distribution. If there are subsets of lesions that receive more benefit with one drug versus the other. Comparison of drying ability between RTH258 and Eylea. Trial Design for HAWK and HARRIER Increases Importance of RTH258 s Drying Ability. Based on the study designs with RTH258, patients receiving Eylea were not able to try a 12-week dosing regimen. Dr. Brown noted that this makes it difficult to confidently compare the two agents based on the top-line data since some patients are able to maintain a 12-week dosing regimen on Eylea. Dr. Brown believes that the drying ability of each drug will help retina surgeons to determine if one is a better option. If RTH258 is shown to be more efficacious than Eylea, Dr. Brown thinks RTH258 could be used after Avastin, with the potential for first-line use in patients that have premium insurance coverage. However, he did acknowledge that pricing would ultimately play a role in uptake. Page 2

3 Other Treatments in Development Good Rationale to Inhibit Ang-2, Especially for Retinal Vascular Diseases. Roche s RG-7716 and Regeneron/Bayer s nesvacumab are Ang-2 inhibitors being evaluated in Phase II studies for eye diseases. Although there could be a place for Ang-2 inhibition in wet AMD, both Dr. Kaiser and Dr. Brown felt that retinal vascular diseases such as retinal vein occlusion and diabetic macular edema (DME) are the most rational indications for Ang-2 inhibitors. The role of Ang-2 appears to be greater in the pathophysiology of these diseases, and the target is independent of VEGF, which may make it easier to show an additive effect. Based on the early data, it appears to both physicians that the biggest benefit of Ang-2 inhibition could be from improving the duration of effect. However, it is unclear to Dr. Brown if improving duration could warrant an FDA approval considering the agency has apparently said they would only approve an add-on therapy to VEGF if it improves visual acuity. Interestingly, the regulatory path could be different for RG-7716 and nesvacumab. RG-7716 is a VEGF/Ang-2 bispecific antibody, and so its approval could be based on a non-inferiority trial. On the other hand, nesvacumab is used in combination with Eylea, and so it will likely have to show superiority to Eylea alone in order to receive FDA approval. KOLs are Confident in the Potential for Ohr s Squalamine. Squalamine is an antiangiogenic agent delivered as an eye drop that inhibits VEGF, PDGF, and basic FGF by targeting calmodulin. In its Phase II trial, results from a prespecified analysis of patients with an occult CNV area of less than 10 mm 2 showed particularly encouraging activity compared to Lucentis. The use of squalamine led to a 5.3 letter improvement over Lucentis monotherapy in mean change in visual acuity (p= 0.033). Also, about 40% of patients gained 3 or more lines of visual acuity vs. roughly 25% for the control group. Ohr is currently enrolling patients with an occult CNV area of less than 10 mm 2 in its large ongoing study; Dr. Brown mentioned that this population makes up the majority of wet AMD patients. When asked about the Phase II data, Dr. Kaiser was impressed, and agrees with the Company s rationale of enrolling the described patient population in its ongoing study. Both KOLs feel that the study is properly designed and enriched to show a potential benefit with squalamine. Importantly, Dr. Kaiser noted that the results in the Phase II control group were an accurate representation of what is seen in the clinic with Lucentis, easing potential concerns of the control group underperforming in the prior study. When asked to predict a probability of success for Ohr s current wet AMD study, Dr. Brown stated a 50% probability, whereas Dr. Kaiser gave a 60% chance of success. This is encouraging to us considering the vast experience of both physicians in wet AMD drug development. Notably, Dr. Brown previously stated publicly that he thought Ophthotech s Fovista, which was previously a high-profile drug in development for wet AMD, had a 10% chance of success prior to its failed Phase III results. If the results in the wet AMD study with squalamine are positive, Dr. Kaiser noted that there are additional ophthalmic indications where it could be used. KOLs Believe Squalamine Wrongly Linked to Failures of PDGF Inhibitors. As mentioned, squalamine inhibits VEGF, PDGF, and basic FGF. Dr. Kaiser noted on the call that investor sentiment on squalamine was negatively affected by clinical trial failures with Fovista and Regeneron s rinucumab, which are both PDGF inhibitors. He disagrees with the sentiment, and both physicians remain optimistic on the potential efficacy of squalamine. This is in part because it may affect PDGF in a different cell type than Fovista, and could also have an additive effect by providing continuous VEGF inhibition since it is used daily. Fovista s proposed anti-pdgf activity was on pericytes, which are cells that wrap around endothelial cells and line the capillaries and venules. Squalamine however, inhibits PDGF in activated endothelial cells, which are more closely associated with the development of wet AMD. Continuous VEGF Inhibition Approaches Could Lead to Improved Outcomes. Current anti-vegf treatments are given as a single injection typically every 4-8 weeks, which is followed by a linearly decreasing pharmacokinetic (PK) curve prior to the next injection. With the use of daily squalamine, VEGF inhibition may be maintained at high levels, which could lead to improved visual acuity as well as the ability to increase the duration between anti-vegf injections. Overall, Dr. Brown felt treatments that can provide steady-state suppression of VEGF +/- other cytokines, such as REGENXBIO s anti-vegf gene therapy called RGX-314, a daily eye drop, such as squalamine, or sustained release technologies, or have the best chance of showing a benefit for wet AMD patients. Optimism Surrounds REGENXBIO s AAV Technology for Wet AMD. Both physicians expressed the field s enthusiasm for REGENXBIO s RGX-314, which is an AAV gene therapy technology that leads to the local production of an anti-vegf antibody fragment. Dr. Kaiser noted that the intellectual property, and delivery mechanism of the technology is very strong. Overall, physicians Page 3

4 feel comfortable with AAV vectors since they are not self-replicating. However, this could potentially be an issue in the long-term, since the transfected cells will likely produce less-drug over time, although the duration of effect is not yet known. If enough drug was produced through treatment to give steady state VEGF suppression, then Dr. Brown thinks it could have a major impact on the wet- AMD treatment landscape. If approved, he thinks it would initially be used as a second-line treatment or for patients who need more frequent dosing with anti-vegf treatments to manage their disease. Risk to an Investment Investors should consider the risk of any investment. These stocks can have high risk and high volatility. Clinical stage biopharmaceutical companies assets may not be successful in clinical trials or may fail to gain regulatory approval. If products are launched, it is possible that revenues will not meet investor expectations, or that the products will face unexpected competition. The revenues of approved products may also not meet investors expectations, and approval in one disease does not always correlate with success and approval in another disease. Overall market conditions may also affect the value of the underlying securities. Page 4

5 Analyst Certification The research analyst denoted by an AC on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an AC on the cover or within the document individually certifies), with respect to each security or subject company that the research analyst covers in this research, that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or subject companies, and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. DISCLOSURES This research contains the views, opinions and recommendations of LifeSci Capital, LLC ( LSC ) research analysts. LSC has provided investment banking and other broker-dealer services to one or more companies that are the subject of this report within the past twelve months. LSC expects to receive or intends to seek compensation for investment banking services from one or more companies that are the subject of this report in the next three months. Additionally, an affiliate of LSC has received compensation from one or more companies that are the subject of this report for providing non-investment banking securities-related services, nonsecurities services, and other products or services other than investment banking services within the past twelve months. LSC does not make a market in the securities of any of the companies that are the subject of this report. Please visit equity-research/ for disclosures related to each company that is a subject of this report. Alternatively, please contact us by telephone at (646) or by mail at LifeSci Capital LLC, Attn: Compliance, 250 West 55th Street, Suite 16B, New York, NY to obtain disclosures relating to any of the companies that are the subject of this report. Neither the research analyst(s), a member of the research analyst s household, nor any individual directly involved in the preparation of this report, has a financial interest in the securities of any of the companies that are the subject of this report. Neither LSC nor any of its affiliates beneficially own 1% or more of any class of common equity securities of any of the companies that are the subject of this report. LSC is a member of FINRA and SIPC. Information has been obtained from sources believed to be reliable but LSC does not warrant its completeness or accuracy except with respect to any disclosures relative to LSC and/or its affiliates and the analyst's involvement with each issuer that is the subject of the research. Any pricing is as of the close of market for the securities discussed, unless otherwise stated. Opinions and estimates constitute LSC s judgment as of the date of this report and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, companies, financial instruments or strategies to particular clients. The recipient of this report must make his/her/its own independent decisions regarding any securities or financial instruments mentioned herein. Periodic updates may be provided on companies/industries based on company specific developments or announcements, market conditions or any other publicly available information. Additional information is available upon request. No part of this report may be reproduced in any form without the express written permission of LSC. Copyright Page 5