Long Idea of the Year

by DrKSSMDPhD | April 27, 2017 8:32 pm

Cat Escapes Bag: The Elusive Twelfth Biotech of Christmas

[Ed. Note: Dr. KSS writes about medicine and biotech stocks for the Irregulars. He has agreed to our trading restrictions, chooses his own topics, and his words and opinions are his own. You can see all of his old articles and his most recent comments on his Stock Gumshoe page[1].]

“Keep it quiet. (Go slow.)
Circulate. Need to know.
Stamp the date upon your file
masquerade, but well worth while.

“Wrapped in the warmth of you
wrapped up in your smile.
Wrapped in the folds of your attention.

“Wear an air (keep mum)
of casual indifference.
Careful how you go
about your usual business.

“Wrapped in daydreams of you
wrapped up by your eyes.
Wrapped in the folds of your attention.
Under wraps! I’ve got you under wraps.

“Tell you when (not yet)
soon the great unveiling.
Bless my boots! Upon my soul!
Secrecy, it is my failing.

“Wrapped in your Summer night
wrapped in your Autumn leaves.
Wrapped in the Winter of your sleeping.”

—Jethro Tull, “Under Wraps[2]”

Snidely Whiplash couldn’t have concocted a more devious plan: find a biotech in possession of the means to alter permanently and beneficially how a prevalent lethal disease is treated, but don’t don’t reveal its name until the eve of a long-awaited data announcement anticipated to be the most positive news in the company’s history. Gummie pop fuses with natural rally in shares which catapults shares into near-earth orbit. Will it pan out as such? Well, you need to be fastening seat belts anyway.

Let’s see….what did we tell you about the company? That it is tiny, non-American, and has what may prove functionally to cure HIV. “Functional cure” is a phrase that sets my purist linguistic teeth on end because its meaning is almost infinitely adjustable. Its intended meaning is that on drug, no direct evidence of virus can be found even though antibody remains in perpetuity. But “functional cure” tries to connote “magic bullet,” in that the treatment zaps a heretofore unappreciated target in cells and causing, without beating up the patient, the whole edifice of virus replication to tumble down. Good ART regimens don’t sail under a functional cure banner because breakthrough of virus is eventual and strange side effects like jaundice and lipodystrophy and kidney injury lurk.

About 6 of you forwarded guesses to me through back channels, and 4 of you were correct: congratulations on knowing the ID space well and on bringing into your purview some very complicated science. At least two people openly discussed the correct company on the biotech threads, though I posted no reply to their posts.

I’ve been in shares of the company for over a year, not to give me a lead time investing advantage over you, but rather to force myself to study this company FOR you, find any bugs in the situation, model its movements in price so as to have a better sense of when to flip the switch and turn Klieg lights on this hot player.

Oh, right….you want to know the company name. (Ostentatious throat-clearing). The compagnie is Abivax of Paris, France ($ABVX.PA, Euronext; $AAVXF, US Grey Market). Abi’s market cap in $69M euros, and company management recently announced plans to disclose results of a phase 2b trial in HIV patients of lead agent ABX464 on 2 May 2017. We don’t know how Abivax views its relationship with American investors, my point being that news may have already been announced before the dawn’s surly light hits your brow on Monday morning. Which leaves many would-be investors without a long interval of time for the diligence that is due.

I encourage you to try reading the foundational paper that appeared in Retrovirology in 2015, where Abivax scientists started from scratch studying HIV replication, assumed nothing, and discovered new mechanisms and a drug (ABX464) to subdue them. You can read it here[3] in full-text form with graphics. This is sumptuous, entrancing science, and it prompted a commentary[4] that I also encourage you to read.

Simplistically, HIV, which is an RNA virus, does two things in cells it infects. First, it must keep generating full-length copies of itself for virus replication, so that copies may fill budding-off viral progeny. But full-length virus is also a master template for splice snipping into many smaller shorter pieces of viral RNA that function like messenger RNA (mRNA) within the cell, driving the various pathogenic functions that go on in HIV infection. Each form of HIV virus—-the intact whole form, and the highly snipped form—respect the need for each other.

Now along comes ABX464, an agent that penetrates deeply into nucleus and cytoplasm of infected cell. 464 makes an infected cell oblivious to the needs of having full-length strands of viral RNA around for copying and packaging into new virions. Instead, 464 drives a pseudo-maturation of an infected cell: in its presence, viral RNA begins splice-scissoring itself up comprehensively into messages without regard to overall viral replication. I think of a nanobot that can sneak inside a Duracell battery and short out the battery internally, run it down. 464 destroys the adaptive equilibrium between intact virus strands and snipped pieces working as mRNA, and brings replicative activity to a grinding halt….and one from which the cell cannot throw itself somehow into reverse. As message ages, the cell finds itself HIV-free, and happier for it.

Abivax wound up this phase 2a[5] study of ABX464 just before I acquired shares, and presented the full data set[6] much later in 2016 at an NIH meeting. 464 is well-tolerated and essentially side-effect-free, and as monotherapy has both strong and rapid effects that result in diminution of serum HIV burdens.

On Monday, 2 May, we anticipate release of topline data from this study[7], also a phase 2a. HIV patients will be managed with antiretroviral cocktails including HIV protease inhibitors, and simultaneously receive ABX464. The implicit goal of this is whittling virus burden to nil. Then, on day 29, all oral therapy will be withdrawn. The clock begins, and investigators count days til virus rebounds (relapses) in serum. The working model of how ABX464 might be used in the real world to treat HIV would be that ART cocktail along with 464 is used to bring virus burden to undetectable levels, followed by cessation of all HIV therapies, followed by administration of one dose of 464 (mg dose not settled yet) every x days. Will x be 5 days? 10? Right now that’s tough to know, but it would become an anti-HIV maintenance medicine dosed periodically, and incurring high quality of life because it lacks side effects and would likely lack the expense of HIV cocktails.

As of now, Abivax has encountered no evidence of resistance by HIV to the effects of ABX464, and for complex molecular reasons, the barriers to resistance are high here. In order to resist 464, the cell would have to circumvent deeply innate and fundamental processes the disruption of which could easily be lethal to the cell cycle.

Here you can surmise, I believe, quickly why companies like Gilead ($GILD) and Glaxo ($GSK) are certainly attuned to what Abivax is doing and why partnering may be a forced issue in order to protect their positions in HIV therapeutics. Abivax has announced, moreover, that it will likely partner to develop ABX464 in phase 3 for HIV.

The chart below is Abivax’s development pipeline. The company has studied collateral pharmacology of ABX464[8] heavily, and stumbled onto the fact that 464 is highly anti-inflammatory as well as the apparent mechanism for this. Cytokines released by leukocytes are regulatory, which means that contrary to perception they’re as often anti-inflammatory as inflammatory. Interleukin-22 is highly downregulating to macrophages, and ABX464 can boost macrophage IL-22 expression as much as 50-fold. There’s thus much inherent logic in trialling ABX464 for inflammatory bowel disease even though IBD has nothing to do with viruses.


Much of the financial information about Abivax that interests you is difficult to get because the company is European. Gumshoe reader Cleveland (not his real name) is both personal friend and friend of this forum. Cleveland is a Big Money insider and former professional trader, and has access to informatics that evade the rest of us. According to Cleveland, Abivax shares now sell at a roughly 70 percent discount to the price at which they closed on their first day of trading on Euronext Paris, which was 26 June 2015. Abivax’s IPO was the largest biotech IPO in the history of that exchange, and shares debuted at US$23.77; they’re now a little under US$8, possibly laying out a garden path for hefty reflation upon good news 2 May 2016. We feel it’s not a question, in fact, of whether next week’s news will be good, but merely how good it will be. How long, for example, can HIV patients go between doses of 464? For how little of their time can we make self-medication a source of attention diversion?

Abi has 9.62M outstanding shares, 68 percent of which are owned by Truffle Capital[9]. Company managers and founders own 3.9 percent of the outstanding shares, but we don’t have granularity as to whom and how much. About 28 percent of the shares remain without bloc ownership, and we know of no pharmaceutical company with any stake in Abivax. I encourage you to review the company’s corporate presentation, here[10], before buying shares. For those intent on buying Abivax shares on the more liquid Paris exchange, Interactive Brokers is likely the best option; this requires lead time, however, and $10,000 of investable capital to open the account. I enquired about purchasing shares through one of my Fidelity brokerage accounts, but bailed out at the last minute rather than face nearly US$250 in fees. Despite their relative illiquidity, I’ve bought $AAVXF shares on multiple occasions through E-Trade, had no execution problems, and gotten prices that are both very near my limit price and that accurately reflect the share price in euros on the Paris exchange in that moment. My view has been that Abi will draw more American attention, have more American investors, and that the company will either uplist in the US or else see greater liquidity in $AAVXF shares. If activity on the Grey Market strikes you as thin, bear in mind that Abivax is under a penumbra, as if it always cruises below radar detection. And that fact alone, its relative unknownness in the context of stunningly elegant science, has exerted profound magnetism on me as an investor.

Is Abivax a house of scientific perfection? Let’s be clear: it’s not. Share price has languished badly since 2015 in part because of a program that made me teeth-clench in frustration when I first began reviewing the company: Abivax was chasing HBV via immunotherapy. We (everybody except Abi) knew how that one would end. The company also has an interest in polyclonal antibodies as therapeutic agents against viruses. An interesting idea with efficacy data for HIV and HCV to support it, but dealing with polyclonal antibodies incurs quality control issues that are epic nightmares….ratios of antibodies within the tincture, and how specificity drifts with time in such preparations. Polyclonal antibody programs are highly unlikely to justify their misery with profit, and Abi should abandon this. It’s almost impossible for me to see a biotech company getting a polyclonal past the FDA merely on CMC grounds. But these issues don’t eclipse Abi’s greatness and profoundness in other areas.

We’re proud of Abivax for pursuing agents to treat Ebola, dengue, Chikungunya, and Zika, though these alone don’t drive a long thesis. But I tend to get behind companies and push them when I stumble on things like this[11]: brilliant, novel, original work in how organisms govern caloric thrift versus expenditure. This is a fine paper by Abivax staff, and could lead easily to novel agents to combat obesity….and yet Abivax has not even announced it, not even done a press release on it. We like that kind of value-addedness.

Abi is furthering its characterization of ABX464 by assessing whether the agent can cause formal HIV reservoir depletion. Here[12] is the study protocol; the study will assess HIV in both rectal tissue (by biopsy at lower endoscopy) and in peripheral blood mononuclear cells.

In 2015, the global HIV therapeutics market was US$22.5 billion. If Abivax were to claim only 10 percent of that market, which understates its drug’s true potential, the company would still warrant a takeover selling price of nearly US$7B. Yet Abi’s present market capitalization is significantly less than US$100M, not because its products are second rate or its science hamfisted but because almost no one knows about the company and its prospects. 464 is patent-protected til 2030.

70-bagger anyone?

Acknowledgements and disclosures: I have a long position in $AAVXF, but not in other mentioned equities. I will not trade in shares of Abivax for 72 hours, reckoned in business days, after this column appears. I have never received anything of pecuniary value from a person or company presented by me at Stock Gumshoe. Follow me on Twitter @KSSMDPhD. This column is not a recommendation or solicitation that you purchase shares in Abivax.

Please feel free to comment below; you can check the guidelines[13] for posting rules and etiquette.

  1. Stock Gumshoe page: https://www.stockgumshoe.com/author/dr-kss-md-phd/
  2. Under Wraps: https://www.youtube.com/watch?v=rRnCOVJzwfE
  3. here: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4422473/
  4. commentary: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4515925/
  5. this phase 2a: https://clinicaltrials.gov/ct2/show/NCT02452242?term=abivax&rank=6
  6. full data set: http://www.abivax.com/en/news-events/press-releases/337-abivax-to-present-phase-iia-clinical-data-on-abx464-during-nih-niaid-sponsored-strategies-for-an-hiv-cure-meeting-2016.html
  7. this study: https://clinicaltrials.gov/ct2/show/NCT02735863?term=abivax&rank=4
  8. pharmacology of ABX464: http://labiotech.eu/from-france-and-cuba-a-phase-ii-hiv-antiviral-with-promising-results/
  9. Truffle Capital: http://www.truffle.com/
  10. here: http://www.abivax.com/images/pdf/ABIVAX%20Slideshow%20V117%20060317.pdf
  11. this: http://www.nature.com/ijo/journal/v41/n3/abs/ijo2016220a.html?WT.ec_id=IJO-201703&spMailingID=53572744&spUserID=ODkwMTM2NjI5OAS2&spJobID=1121220284&spReportId=MTEyMTIyMDI4NAS2
  12. Here: https://clinicaltrials.gov/ct2/show/NCT02990325?term=abivax&rank=2
  13. guidelines: http://www.stockgumshoe.com/2014/11/microblog-guidelines-for-new-members-posting-rules-and-etiquette/

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