by DrKSSMDPhD | August 28, 2015 8:12 pm
[Ed. Note: Dr. KSS writes about medicine and biotech stocks for the Irregulars. He has agreed to our trading restrictions, and his words and opinions are his own. You can see his past articles and most recent comments here.]
“Doctor doctor, what do you say, let’s put the id back in yid,” Portnoy groused to his shrink in Philip Roth’s novel. A patient of mine was a drag queen of considerable stage presence who’d starred in a Van Halen video; at office visits he could not resist flashing faux decolletage, swaggering past the nurses and slapping me with a white glove saying, “I wanna be the sass in your parilla bay-bee!” (Sarsaparilla, “sassparilla,” was a 19th-century American soft drink.) But many Gummerati, long-suffering in a biotech summer that simmers not, may be wondering is whether there will ever be any Au (the atomic symbol for gold) in Aurinia Pharmaceuticals ($AUPH), the lean clear-eyed British Columbian small-cap biotech to which we introduced readers in March 2015 (see “Saving Flannery O’Connor). It’s been a year thus far of no news from them, which can feel like being hobbled and is disquieting.
Glenn Newberry and I decided to do a six-month check-up on Aurinia, and sat down recently for a thorough conference call with its executives. In fact, August has brought Gumshoe biotech readers, all working on MBA’s at Dean Travis Johnson’s famed Gumshoe University, interesting case studies on the utility of live interaction with company leaders as a hedge against lack of recent guidance by those companies. Humans are, after all, a kind of primate: we often have remarkable skills of interpretive discernment, ones who source is unclear, that give us vibrant impressions from social interactions. Tone, elocution, word choice, parsing what’s said and what isn’t said, and with what degree of alacrity, can inform the most instinctive of human decision-making. As a frequent public speaker, I’ve been a subscriber to and participant in forums by Point Taken, a fine Boston communication consultancy, one ever fond of pointing out that 97 percent of the message a human gets from a interaction with another human comes from non-verbal content, conveyed in ways other than words.
Let me jog your memory a little on Aurinia. It owns worldwide rights ex-China to a novel immunosuppressive drug called voclosporin. Voclosporin is a so-called calcineurin inhibitor, which places it in the same class as two other vaunted agents familiar to most physicians, cyclosporin A and tacrolimus (which many of us still call by its investigational name FK-506). All three agents have strong abilities to suppress lymphocyte function. Cyclosporin A and tacrolimus are de rigeur for patients following solid organ transplantations, but use of the former has shifted to the latter because of milder side effects. Cyclosporin A grows hair absolutely like gangbusters on the scalp, face and legs, and most women resent coming to your office sporting new beards. Both are kidney-toxic in high doses, drive up blood pressure, and require very persnickety monitoring of blood levels. Cyclosporin A famously provokes gallstones in some, and both must be dosed like clockwork at precisely 12-hour intervals. I was on the phone yesterday with a patient sashaying happily through life, now 10 years out from a liver transplant I ushered him through, who says the sole flyspeck in his life “is remembering to take that damn tacrolimus twice a day at 6 o’clock on the dot.”
But the potential uses for immunosuppressing drugs in medicine are legion: I treat autoimmune hepatitis patients using tacrolimus off-label, and have fantastic results. An entire spectrum of problems from scleroderma to lupus to psoriasis to autoimmune pancreatitis might benefit from them were they not so costly and finicky to use.
You may well wonder why simpler medicines won’t do. After all, isn’t prednisone immunosuppressive? Many readers have no doubt gotten Medrol dose-packs or prednisone tapers for allergy outbreaks, beestings or skin conditions. The problem with prednisone and drugs like it, especially when used in the long-run, are horrible side effects: weight gain, insulin resistance eventuating in type II diabetes, bone density loss, hunger, skin thinning and striae, stomach ulcers. Prednisone causes psychiatric problems in many, including depression, anxiety, and insomnia. Occasionally, and without warning, prednisone can trigger so-called steroid psychosis, in which patients become combative, disoriented, self-destructive and need heavy doses of serious psychotropes like haloperidol or Seroquel to return them to reality. (This shouldn’t be confused with the steroid psychosis accompanying anabolic steroid use; anabolic steroids are illicitly used by body builders and athletes, and have profound dangers.)
More important, while prednisone is immunosuppressive, its effects on the immune system are diffuse and often rather superficial. For serious autoimmune illnesses, especially ones where lymphocytes are beating up organs, the targeted, robust effects of calcineurin inhibitors become mandatory and save lives.
Aurinia’s voclosporin enters the drug development fray with many attributes that could make it the best calcineurin inhibitor. These were presented in “Saving Flannery O’Connor” and perhaps the best of them is that voclosporin can be dosed casually, twice daily but not every 12 hours on the mark. It’s been around the block a few times in the hands of others. In a good 2011 study out of Stanford, it was compared with tacrolimus for kidney transplant recipients and found to be as good at preventing rejection while not carrying the small risk of triggering type II diabetes that accompanies tacrolimus. Our very own Eyedoc, a Californian ophthalmologist, could likely serenade us with voclosporin’s virtues as an agent to treat non-infectious anterior uveitis (see studies do, re and mi). By the way, all the studies posted at the above links are recent, full-length and not merely the abstracts. In 2008, Lancet published results of a phase III trial of voclosporin for plaque psoriasis.
Voclosporin was identified, “invented” via a collaboration between Isotechnika and Roche ($RHHBY). Apparently it has received limited study for use in liver transplantation, though no results have apparently been published. Readers are always correct to be cynical about biotech investments: since voclosporin has been around for nearly a decade and not exactly taken fire, is it actually any good? My reply is that we see this often with otherwise good drugs that go on to do well. Dalbavancin (Allergan, $AGN) was a near orphan drug (in the sense of needing a home that believed in it) before its considerable virtues became apparent. Bempedoic acid, Esperion’s ($ESPR) effective drug for lipid management, was well known to Pfizer ($PFE) before Esperion back-formed out of Pfizer and acquired rights. Many drugs are born not in the right place at the right time and need time to find footing and believers. Some don’t fit with the contemporaneous agenda of their discoverers. Axovant ($AXON) is premised exclusively on RVT-101 for Alzheimer dementia, yet RVT-101 is a complete cast-off (on efficacy concerns) from GlaxoSmithKline ($GSK).
Glenn and I were glad to catch up with Stephen Zaruby (see photo), the Washington State-based CEO of Aurinia. Zaruby was joined from Canada by Chief Medical Officer (see photo below) Neil Solomons, MB, BS, trained at Guys Hospital Medical School in London, and a specialist in anesthesia and critical care medicine. Also present was Michael Martin (no picture available), co-founder of a prior private incarnation of Aurinia and chief operating officer of Aurinia at its Canadian headquarters. This is a calm, competent, precise, reasoned group of men who work well together and have interdigitating interdependence. What may at first come across as reticence is merely that they choose words carefully and phrases diligently, all the while being clearly delighted to discuss the company and proud of it.
An important forerunner to Aurinia’s present efforts is that Zaruby and Solomons collaborated heavily on the touchstone Aspreva Lupus Management Study (ALMS) via Vifor Pharma (formerly Aspreva). Lupus, overwhelmingly a disease of women, is commonly accompanied by lupus nephritis, a self-attacking kidney disease that leads to urinary protein wasting, hypertension, and eventual renal failure. Lupus is three times commoner in women of African ancestry than in Caucasian women…and this fact may underlie the surprising reality that no new drug for lupus has been approved by the FDA in more than 50 years. About 240,000 Americans have lupus, and all are at risk for lupus nephritis. Risk rises with duration of disease. As a medicine intern rotating on a rheumatological and autoimmune diseases inpatient service, my commonest type of hospital admission was another woman being admitted for pulse cyclophosphamide therapy for lupus nephritis. Cyclophosphamide is an old-fashioned chemotherapy agent that decimates lymphocytes. Patients would get an infusion of this, and then stay in the hospital overnight for forced iv hydration in order to prevent bladder hemorrhage caused by the caustic effects of the cyclophosphamide as it is being cleared in urine. The ALMS study moved the field of lupus nephritis forward by demonstrating that lupus nephritis could be just as well maintained (not driven into remission) by use of a recenter immunosuppressive called mycophenolate mofetil (CellCept). Mycophenolate is oral and easy to tolerate, and subdues the immune system by inhibiting an enzyme called inosine monophosphate dehydrogenase. They moved the ball forward by showing there’s an easier way to “maintain” kidneys in the disease.
But what about healing the kidneys? Pharma lines redrew themselves, and one company’s cast-off drug looked appealing to Zaruby and Solomons. Solomons knew of voclosporin’s virtues: that it is more powerful than mycophenolate, and that it lacks nearly all the disadvantages of cyclosporin A and tacrolimus. One strategizing thought in the minds of drug developers is the following, one that few outside of medicine recognize: if the FDA approves a drug for any indication, once that drug is to market, it can legally and ethically be prescribed for any condition, including conditions for which it was not approved. Physicians are presumably practicing good judgement using data-backed reasoning when they prescribe off-label. Off-label use is common in medicine: there was a time when I was curing a far statistically higher percentage of HCV patients than my peers by using three drugs, each in an off-label manner. Colleagues accused me of thumbing my nose at the stentorian FDA, to which I said, “You’re right…..they’ve not acted in the best interests of these patients!” If they could find a way to get voclosporin to market for any indication its use might well bleed into other indications over time. Because of Zaruby’s and Solomons’ experience managing the ALMS study, they conjectured that voclosporin could be an excellent drug for both halting and reversing lupus nephritis, and that so trialling it could draw attention to the drug and to the disease. They felt that could play in Peoria better than anyone recognized because with current norms of care, treating lupus nephritis costs US$80,000 per year per patient! Hemodialysis costs even more.
Zaruby, Solomons and Martin pitched this idea so well that an attempt at Series A fundraising was 85 percent oversubscribed. Not wanting to dilute eventual shareholder value, they held onto $52M of the approximately $90M war chest they were offered. Aurinia’s present cash position is $25M, enough to complete the present phase 2 voclosporin lupus nephritis trial, about which more in a moment. They’ll need to raise capital via a Series B fundraising or secondary offering, depending on market mood at the time, to put voclosporin through phase 3.
But there’s good news flowing from Aurinia. Because of the diligent efforts of managing all the phase 2 study sites by Solomons and study principal investigator Mary Anne Dooley, MD, MPH (see photo at left; Dooley is a personal friend and taught me in medical school before she changed institutions), enrollment is well ahead of schedule. Aurinia expects to announce that the study is fully enrolled by or before the end of 3Q2015.
Solomons then led us into the innards, the fine print of the trial, for why the upcoming date is important. Here’s the study protocol for you to review. The trial’s final endpoint is clinical status after 48 weeks of therapy, but the protocol calls for unblinding (not interim analysis) at 24 weeks for a major endpoint. When completion of enrollment is announced, one can add 24 weeks to that date plus perhaps two weeks for data scrubbing. We will get a price-sensitive look at the data by early in 2Q16.
Solomons is proud of the protocol because of its nuance, because of how it can advance care for lupus nephritis. An important arm of the study, for example, is examining the extent to which patients can be weaned away from steroids or stop them altogether. It’s more than a binary outcome, and is in fact examining two twice-daily dose regimens and monitoring pharmacokinetics. Solomons told us that before designing the study, he and colleagues (the documents are non-public) modeled drug efficacy and dose with disease severity to conclude that the overall likelihood of success for voclosporin to induce remission in lupus nephritis is X (here X is a high number). Yet, the degree of efficacy sought in the statistical powering of the trial is such that the trial will be deemed successful if about 0.4X is achieved. Accordingly, they are highly optimistic about phase II success.
Glenn asked what the company’s view is, at this admittedly early point, of partnering to complete development and market voclosporin. Zaruby made a pause-drawing observation: “Good biotech companies get bought, but they are not sold.” No names were mentioned, but what leaps to mind is Faheem Hasnain, CEO of newly-erstwhile Receptos ($RCPT; now a unit of Celgene $CELG), simpering on his final appearance with Jim Cramer on “Mad Money” that NO, they didn’t want to go it alone and they were worth $380 a share (one thinks of Sharon Stone gone commando, uncrossing her legs, in Basic Instinct). Zaruby, who reminds me a little of late actor Edward Herrmann, is calm, resolute and very confident, breezy in a Howard Schultz way. You’ll never hear him singing “Love me!” like Dudley Moore in Bedazzled. He’s already contemplating knocking this one out of the park.
In an amiable quick-cut conversation in which all of us were nearly talking at once, the Aurinia guys ran some numbers for Glenn and me. Say 200,000 Americans have lupus (there are more). Statistically, about 40 percent of those will get lupus nephritis. Now suppose that only 15 percent of the lupus nephritis patients get placed on voclosporin, and that the drug costs $10,000 per year (sharply undercutting prevailing costs for managing lupus nephritis, and a plausible retail cost, though price has not been set). That’s $120M revenue per year from the US alone. Voclosporin’s global rights belong to Aurinia except for China and three small territories. If we used more realistic numbers based on prevalence in the US and EU we arrive at $266M, again by serving only 15 percent of the population in need.
Glenn also asked about their bias in first seeking EMA authorization vs. the FDA. Being Canadian, the company is well hooked in with continental norms, and Solomons is British. They felt they’d seek approval in both places concurrently and let work in one country help feed the NDA in the other country. I asked Solomons if the company is considering asking for Special Protocol Assessment. He demurred in that SPA is a paperwork-heavy undertaking, and that the need for it implicit in a request is belied by the company’s well ahead-of-schedule enrollment in phase 2. Most SPA requests are declined, and Solomons seemed to think his energy might as well be put into getting two pivotal RCT’s done. As regards Aurinia’s national identity, Zaruby pointed out it uses IFRS accounting standards and reports in US dollars.
I asked the team if it would be fair to peer in on the competitive landscape, as they no doubt have intimate familiarity with it, and my last review of it was in March. $GSK is supposedly developing belimumab (Benlysta) for non-renal lupus, but seems in no rush: phase 3 data have been known since 2009. Aurinia has considered studying voclosporin for non-renal or extra-renal lupus, but first wants the lupus nephritis indication on firm footing. Bristol-Myers Squibb ($BMY) owns abatecept (Orencia), but this has twice failed in phase 3 for lupus nephritis. A third is in progress. Biogen Idec ($BIIB) has BIIB023, but Aurinia is enormously ahead in development. Anthera ($ANTH) has blisibimod, an antagonist of B-cell activating factor, in trials to treat lupus, but not lupus nephritis.
“Voclosporin is the only oral drug in development for lupus nephritis and,” sighs Zaruby, “that’s not very sexy.” Or is it? Time was, patients considered their pharmacotherapy to have been upgraded to box seats when it went from being a pill to being an infusion, or being a shot they give to themselves at home. But here I think of a blade of grass, in botanical terms the highest form of plant life because it accomplishes life with essentially one structure, has no specialized features, and lives with an elegant, simple, non-bombastic economy. As our biotechnology surpasses itself, we are learning we may not need the complexity of proteins, monoclonal antibodies, soluble receptors and interferons to do the dirty work of killing disease. We’ve climbed out of that foxhole, and are now using our newest technology in making small, orally-available molecules to speak to the receptors that need wooing to heal disease. Thursday is the new Friday night, and in modern biotech, pills are sexy indeed. I couldn’t get beyond a certain large irony that while two recent Gumshoe Biotech encounters with American management accomplished nothing but the deepening of misgiving, while a tidy 60 minutes with Canadian Aurinia left us laden with more happy information than we’d come expecting to get. Clever folks those Canadians. I felt as if I’d mainlined espresso after the call. Ever notice that your American movie or TV show always has its bombshell American female star, but that when that show’s casting needs a beautiful woman of intelligent substance, of deep weave, well-read, contemplative but alluring, they always go Canadian? Kristin Lehman, Stana Katic, Malin Akerman, Carrie-Anne Moss, Natasha Henstridge….need I go on?
A briefer outing than you’re accustomed to, but let’s adjourn early for the weekend. Glenn and I supremely appreciate the time Zaruby and his lieutenants took to converse with us, and thank them for one of the most productive encounters we’ve ever had with biotech management. A company with focus, a hot product, a clear vision, whizkid trial design (what I’d give to share cocktails with Solomons), global rights and a serious entree into an unmet medical need that could save the global health system billions of dollars at fruition? What’s not to like about Aurinia? And while we realize that you have your choice of other biotech forums, don’t ever forget who first told you about Aurinia.
Disclosures: I am grateful to Glenn Newberry for helpful discussions in preparation of this article. My columns are journalism leavened by opinion that aims to be informed, and are not personal investing advice. While I endeavour to cover major points that should inform an investing decision, reading these columns does not supplant personal due diligence, and no column is intended as an inducement to buy a particular equity. Of companies mentioned today, I have long positions in $AGN, $AUPH, $BMY, $CELG, $ESPR, $PFE. Prior to its sale to Celgene, I had a long position in $RCPT. I will not trade in any security mentioned for a period of 7 days after this column appears. I have no short positions or options. I have never either sought or received anything of pecuniary value from any person or company depicted by me at Stock Gumshoe or in other media. Have a question, tip, or idea? Please let me know by emailing me via firstname.lastname@example.org. For biotech investing ideas and updates and generous dollops of mirth, follow me on Twitter @KSSMDPhD. Votre pays ce n’est pas un pays, c’est l’hiver…but we love our Canadian Gummies.
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