Axovant Sciences (NASDAQ: AXGT) Huge upside potential as Gene Therapy preliminary results Exceed Expectations

At least two more data read outs are expected before the end of the year

Axovant Sciences (NASDAQ: AXGT): Huge upside potential as Gene Therapy preliminary results Exceed Expectations
Axovant Sciences (NASDAQ: AXGT): Huge upside potential as Gene Therapy preliminary results Exceed Expectations

Miami, FL–(EmergingGrowth.com Newswire – March 10, 2019) – EmergingGrowth.com, a leading independent small cap media portal with an extensive history of providing unparalleled content for the Emerging Growth markets and companies, reports on upside potential of Axovant Sciences  (NASDAQ: AXGT).

Discussion includes: Novartis (NYSE: NVS), Roche Holdings, (OTC: RHHBY), Biogen, Inc. (NASDAQ: BIIB), Pfizer, Inc. (NYSE: PFE), Spark Therapeutics (NASDAQ: ONCE), GlaxoSmithKlien (NYSE: GSK), Voyager Therapeutics (NASDAQ: VYGR).

Last month, RocheHoldings AG (OTC: RHHBY) offered toacquire Spark Therapeuticsfor $114.50 per share in a deal valued at $4.3 billion or a 120 percent premium despite of Luxturna’s relatively weak sales (about $27 million in net sales in 2018) coupled with a small market size estimated to be between 1,000 and 2,000 patients.  

Most recently, Biogen Inc. (NASDAQ: BIIB)revealed that it would be acquiring Nightstar Therapeuticsfor $25.50 per share or about $800 million, a 68 percent premium over the prior day’s close. The deal saw Biogen getting its hands on two gene therapies – NSR-REP1 for choroideremia currently in Phase 3 clinical testing and NSR-RPGR for X-linked retinitis pigmentosa, which is  in Phase 2/3. According to Nightstar’s expectations, gross sales could amount to between $415 million and $1.1 billion by 2024.Pfizer Inc. (NYSE: PFE)

Axovant Sciences (NASDAQ: AXGT)topped expectations when it recently released interim results for two of its gene therapies targeting neurodegenerative and a rare disorder. The stock surged 65 percent to about $2 per share before slightly declining to about $1.30 as at the time of writing.

Results from the company’s lead drug candidate AXO-Lenti-PD which is in Phase 2 clinical trials showed that it could improve motor function in patients with Parkinson’s disease. In addition, data from a study of the company’s AXO-AAV-GMT which is being evaluated as a potential treatment for patients with advanced infantile Tay-Sachs disease showed a “clinically important effect”.  

There has been a rapidly growing frenzy around gene therapies ever since Spark Therapeutics’ (NASDAQ: ONCE) Luxturna became the first gene therapy to be approved in the U.S back in 2017 and it doesn’t appear that interest is dissipating.

Thanks to a recent string of high profile buyouts targeting key players in the gene therapy space, investors have been able to reap sizeable gains as big pharma has shown its willingness to pay a hefty premium for promising companies.

For instance, last year Novartis AG (NYSE: NVS)paid $218 per share for AveXisin a deal worth $8.7 billion representing an 88 percent premium in spite of the fact that the company’s lead drug Zolgensma is yet to receive FDA approval. 

Last month, RocheHoldings AG (OTC: RHHBY) offered toacquire Spark Therapeuticsfor $114.50 per share in a deal valued at $4.3 billion or a 120 percent premium despite of Luxturna’s relatively weak sales (about $27 million in net sales in 2018) coupled with a small market size estimated to be between 1,000 and 2,000 patients.  

Most recently, Biogen Inc. (NASDAQ: BIIB)revealed that it would be acquiring Nightstar Therapeuticsfor $25.50 per share or about $800 million, a 68 percent premium over the prior day’s close. The deal saw Biogen getting its hands on two gene therapies – NSR-REP1 for choroideremia currently in Phase 3 clinical testing and NSR-RPGR for X-linked retinitis pigmentosa, which is  in Phase 2/3. According to Nightstar’s expectations, gross sales could amount to between $415 million and $1.1 billion by 2024.

Pfizer Inc. (NYSE: PFE)recently announced that it would be paying about $51 million for a 15 percent stake in Vivet, a French based biotech with an option attached to buy it out. Vivet’s lead drug VTX801 seeks to harness the power of gene therapy to cure Wilson disease, a rare disorder that affects around 10,000 patients in the U.S.

Accordingto Jefferies managing director and equity analyst, Michael Yee there will be continued interest in gene therapy going forward if the first three months of 2019 are anything to go by.

Background

Axovant wasn’t always a gene therapy focused biotech. When the company started out, its main strategy hinged on acquiring failed neurological clinical drugs with the intention of modifying them and then getting them through regulatory approval.

In one of the company’s recent filings, one key strategy highlighted was: “acquiring or in-licensing late-stage product candidates for the treatment of neurological disorders, in a capital-efficient manner.”

In December 2014 Axovant paid $5 million upfront to acquire the worldwide rights to intepirdine from GlaxoSmithKlinePlc (NYSE: GSK) as well as an additional $5 million in June 2016. Interpirdine which was being evaluated as a potential treatment for patients with Alzheimer’s disease unfortunately failed to make it past Phase 3 clinical trials with the company stating that results from the study showed there was essentially no difference between interpirdine and placebo. 

In October 2015, the company acquired the global rights to nelotanserin, a highly selective inverse agonist of the 5-HT2A receptor from Roivant Sciences. Nelotanserin was under development to address visual hallucinations and REM sleep behavior disorder (“RBD”) in patients with Lewy Body Dementia (LBD). However, nelotanserin was also unsuccessful and subsequently the company’s share price plunged well below its IPO price. 

However, after hiring its new CEO Pavan Cheruvu in 2018, it appears that Axovant shifted strategy and began pursuing early stage gene therapy treatments. The company’s lead product candidate AXO-Lenti-PD was licensed from Oxford Biomedica at an upfront cost of $30 million 

Pipeline update

(Source: Axovant)

As mentioned earlier Axovant’s AXO-Lenti-PD intends to treat patients with Parkinson’s disease. In order to fully appreciate the excitement surrounding the interim results of AXO-Lenti-PD, here is what investors should know. Parkinson’s disease is a chronic neurodegenerative disorder that primarily results in progressive and debilitating motor symptoms. It is characterized by multiple symptoms such as muscle rigidity, slowing of movement, and resting tremor.

Parkinson’s disease occurs when neurons that produce a chemical messenger in the brain called dopamine gradually break down or die. When dopamine levels decrease, it causes abnormal brain activity, leading to symptoms of Parkinson’s disease. The only available treatment option currently available to patients with this disease is levodopa medication which converted into dopamine by the enzyme AADC in the same way that naturally occurring levodopa is converted to dopamine.

AXO-Lenti-PD is an investigational gene therapy that delivers three genes via a single lentiviral vector to encode a set of critical enzymes required for dopamine synthesis, with the goal of reducing variability that leads to dyskinesia and restoring steady levels of dopamine in the brain. The gene therapy aims to provide patient benefit for years after a single administration.

Three genes in Axo-Lenti-PD (Source: Axovant Cowen conference presentation)

Three-month data from the first dose cohort in the open-label SUNRISE-PD Phase 2 trial showed that AXO-Lenti-PD was generally well-tolerated, and no serious adverse events were reported. The cohort consisted of two patients with advanced Parkinson’s disease who received a one-time administration of the lowest dose of AXO-Lenti-PD (4.2×106 TU).

Before going into the details of the results we will explain two things, The Unified Parkinson’s Disease Rating Scale (UPDRS) Part III and “OFF” period for Parkinson’s disease. The UPDRS score is a physician-rated scale assessing motor function, ranging from 0 to 108 with lower scores indicating improvement while the “OFF” period is when the levodopa treatment begins wearing out and the patient begins to suffer the symptoms associated with Parkinson’s disease again.

The OFF score is assessed after patients are washed out of their oral levodopa therapy, thereby capturing the benefit of the therapy without the potentially confounding effect of background medical treatment. Patients in the first cohort experienced an average UPDRS Part III (motor) OFF score improvement of 25 points at 3 months after administration of AXO-Lenti-PD, representing an average improvement of 42 percent from baseline. Individual patient improvements at 3 months were 14 points and 36 points, respectively.

Improvements were seen across all subparts of the UPDRS scale, with an average UPDRS Total OFF score improvement of 54.5 points at 3 months after receiving AXO-Lenti-PD, representing an average improvement of 55 percent from baseline. 

Similarly, the company’s second product candidate AXO-AAV-GMT which aims to treat Tay-Sachs disease reported equally impressive interim results. The study is evaluating a total dose of 1.0x 1014 vg of AXO-AAV-GM2 in a 30-month-old child with advanced infantile Tay-Sachs disease. AXO-AAV-GM2 was administered into the cisterna magna and lumbar spinal canal only and it was shown to be generally well-tolerated with no serious adverse events having been reported as of the three-month visit.

Tay-Sachs is a rare and fatal pediatric neurodegenerative genetic disorder characterized by impaired β-Hexosaminidase A enzyme production. The AXO-AAV-GM2 gene therapy is designed to restore β-Hexosaminidase A enzyme activity in the central nervous system.

β-Hexosaminidase A activity was determined using the 4MUGS assay, the standard assay for assessing activity of the enzyme. At baseline, the patient’s enzyme activity in the cerebrospinal fluid (CSF) was 0.46 percent of normal. At three months, there was an apparent increase in enzyme activity in the CSF to 1.44 percent of normal, an increase surpassing the 0.5 percent threshold that could represent a clinically important effect.

“This is the first time a gene therapy has been administered to a child with Tay-Sachs disease, and it is remarkable that we have not only seen good safety and tolerability to date, but also evidence of functional β-Hexosaminidase A enzyme activity,” said Dr. Gavin Corcoran, Executive Vice President of Research and Development at Axovant. “These encouraging early clinical results suggest that AXO-AAV-GM2 may offer a meaningful treatment option for patients who currently have no approved therapies.”

Significant opportunity

There are a couple of significant challenges facing the current treatment regimen for Parkinson’s disease. First, existing forms of oral levodopa are effective for only up to four hours following a single dose. Furthermore, dosing needs to be highly controlled considering that some levodopa pills must be taken 30 minutes before a meal or 2 to 3 hours after a meal because protein interferes with the absorption of levodopa. Steady levodopa administration can only be achieved through permanent implantation of a tube in the small intestine which is why Axo-Lenti-PD has the potential to revolutionize how Parkinson’s disease is treated. 

However, investors should note that the drug will be facing competition from a number of other drug makers. Axovant considers its most direct competitor with respect to AXO-Lenti-PD to be Voyager Therapeutic Inc (NASDAQ: VYGR)VY-AADC, which is also a gene therapy product. VY-AADC delivers the AADC gene, one of the three genes contained in AXO-Lenti-PD, via an Adeno-Associated Virus. Voyager is currently conducting Phase 2 clinical trials for a single dose of VY-AADC and interim resultshave been promising so far. 

Agilis Biotherapeutics is developing AGIL-AADC, another gene therapy that delivers the AADC gene, for the treatment of AADC deficiency, a rare disorder that involves loss of AADC gene function. In addition, DBS (Deep Brain Stimulation) is approved for treating Parkinson’s disease and is marketed by multiple device manufacturers, including Medtronic, Abbott and Boston Scientific. DBS treatment involves permanent placement of hardware in the brain via stereotactic neurosurgery and may require follow-up adjustments or even invasive device replacements. With that being said, the opportunity here is massive.It is estimated that up to 1,000,000 people in the United States and 7,000,000 to 10,000,000 people worldwide suffer from Parkinson’s disease. According to research firm Maximize Market Research’s recently released report titled ‘Global Parkinson’s Disease Treatment Market – Industry Analysis and Forecast (2017-2024)’ the global Parkinson’s disease treatment market is expected to reach $6.48 billion by 2024 from $4.02 billion in 2016 representing a CAGR of 6.15 percent. This clearly illustrates a lucrative opportunity for Axovant if its one-time administration of Axo-Lenti-PD proves its efficacy in the rest of the upcoming data readouts. 

On the other hand, the AXO-AAV-GM2 gene therapy also has massive commercial potential considering that there isn’t any currently FDA approved treatment for Tay-Sachs disease. However, even without pricing in the success of AXO-AAV-GM2, Axovant is clearly a bargain for investors with a long-term perspective due to the time it will require getting to the commercialization stage of Axo-Lenti-PD.

Financials and price target

Axovant reported second-quarter earnings back in November, posting $21.5 million in research and development expenses and $10.6 million in general and administrative expenses. The net loss for the quarter was $33.8 million, or 28 cents per share. The company also recorded it had $90.7 million in cash, $47.4 million in working capital and $33.3 million in long-term debt as of September 30.

The key challenge facing this stock as with other early stage biotech companies is that it will need lots of cash to further its clinical trials. On December 14, the company announced a public offering of 30 million shares for $1 per share while underwriters were granted a 30-day option to purchase up to an additional 4.5 million shares. In addition to this, the company recently announced a $40 million public offeringwhich means that existing and incoming shareholders will have to bear with dilution as Axovant furthers the development of its pipeline.   

At the moment, the market values Axovant’s shares at roughly $230 million but we expect that this figure could climb higher over the course of the second half of the year as more updates are delivered. The median 12-month price target from analysts covering Axovant is $5.5 which suggests a 320 percent upside from current levels.

Conclusion There is no doubt that betting on the success of Axovant’s gene therapies will have to be a long-term play, but a savvy investor could make sizeable returns even in the short-term. At least two more data read outs are expected before the end of the year and if results are similar to what has been reported recently, the share price will definitely edge higher with the possibility of hitting the analysts’ price target, or even a buyout. 

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