Baird: Potential Domination in HemB AAV GT; Initiating at Outperform, $85 PT
Macro: Hemophilia B (hemB) is a substantial orphan market (nearly $2B in 2018 sales) but unmet need persists for one-time therapies that long-term ameliorate the disease.
Micro: HemB adeno-associated virus gene therapy (AAV GT) AMT-061’s Phase 2b dose-confirmation data, combined with our proprietary factor IX (FIX) distribution analysis, give us conviction for success in the Phase 3 HOPE-B trial, for which enrollment completion is expected by YE19.
Intellectual property: Our proprietary analysis of the Simioni patent estate gives us conviction that QURE can have blocking IP among Padua variant FIX AAV GT competitors, including Spark/Pfizer and Freeline.
What the Bulls Are Saying
It feels like every Monday morning we open our emails to see another AAV GT company being
acquired by a big pharma firm for some substantial premium, indicating how much these large
companies feel having any decent AAV GT platform has gone from a curiosity to a necessity.
And QURE is no mere AAV GT platform; when you put together the firm’s manufacturing
capacity with (admittedly early) positive Phase 2b dose-confirmation data, you actually get
what this technology is supposed to be—a one-time treatment with the potential to (dare one
say) “cure” hemB. Moreover, the Phase 3 HOPE-B trial, unlike close competitors, can take on
essentially all hemB patients, giving AMT-061 the potential to be best-in-class among hemB
AAV GTs. Furthermore, as we believe AMT-061 was the first of the hemB AAV GT drugs to
begin patient dosing in its pivotal trial, QURE’s program could potentially also be first-in-class
in the space. And this focus on hemB, for all intents and purposes, ignores the remainder of
QURE’s pipeline, most notably AMT-130 in HD (think AveXis in spinal muscular atrophy only
with a 5-10x larger prevalent population), starting Phase 1/2 studies in 2H19. So QURE is an
arguable M&A candidate with a highly de-risked lead asset and a potentially massive follow-on
What the Bears Are Saying
While QURE might have been a great M&A candidate a few months ago, the name’s massive
recent move (+106% YTD versus +26% YTD for the XBI) has already priced in the takeout
premium which, paradoxically, hurts the company’s takeout chances. Beyond that, is a big
pharma firm going to bet on QURE with only three patients having shown initial efficacy with
AMT-061, the company’s only current clinical asset? Moreover, while AMT-130 in HD could be
huge, it is still preclinical, with zero evidence it can work clinically. With so many questions
around HD AAV GT (How much Huntingtin knockdown is required? In what fraction of brain
cells? In which brain regions? At what stage of HD?), success in HD might not be as simple as
in hemB. Finally, with HOPE-B not reading out until sometime in 2020 and having no sense of
when we get meaningful HD data, if one believes QURE has been priced out of a takeout,
there is little in the way of catalysts that make it necessary to buy QURE shares now.
Our QURE bull thesis relies upon three key features:
1) On a macro basis, hemB is an established orphan drug market, with unmet need for onetime
therapies. HemB is an orphan genetic disease driven by loss of clotting factor IX (FIX). As
such, FIX replacement therapy is an established orphan drug market, with 2018 revenues of
roughly $1.9B. However, FIX replacement therapy requires lifelong intravenous infusions,
which creates a substantial treatment burden on hemB patients, combined with variable
efficacy from peak versus trough FIX levels and safety concerns from infections due to venous
catheter insertions. Consequently, new therapies are necessary, especially with the potential
for one-time administration for lifelong management of hemB with steady FIX levels.
2) On a micro basis, we have significant confidence in AMT-061 in the Phase 3 HOPE-B trial.
In light of the unmet need in hemB, we are bullish on Phase 2b dose-confirmation results for
AMT-061, with FIX activity that we expect should essentially block bleeding events and FIX
consumption. Combining these results with our proprietary FIX activity distribution analysis and
QURE’s AAV5 vector relative resilience to anti-AAV antibodies (Abs), we have conviction in
success for AMT-061 in HOPE-B, for which completion of enrollment is expected by YE19. As
the FDA has guided that clotting factor activity on its own can support accelerated approval for
hemophilia gene therapies, we consider it possible for the rapid approval of AMT-061 as a
potential first-in-class and best-in-class hemB AAV GT.
3) On an intellectual property basis, we consider QURE’s Simioni patent family as effectively
blocking of the major competitors in the hemB AAV GT space. We believe QURE’s key
differentiation in the hemB AAV GT space is the firm’s IP leadership through the Simioni patent
family. In particular, our proprietary IP analysis makes clear that the Simioni patent family
effectively covers all competing Padua variant FIX AAV GT, particularly Spark Therapeutics’
(ONCE) and Pfizer’s (PFE) fidanacogene elaparvovec (FE, previously known as SPK-9001
and PF-06838435) and Freeline Therapeutics’ FLT180a. With several granted U.S. patents
and the potential for similar IP under review in Europe, we highlight to investors that the
Simioni patent estate has the potential to block its competition by permanent injunction due to
the unique single-dose aspect of AAV GT, a possibility we consider underappreciated by the
Street. Taken as a whole, the Simioni patent estate generates critical edge for QURE in the
hemB AAV GT space.