By Illumination Capital:
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The ability of Provention Bio’s (PRVB) lead drug candidate, teplizumab, to delay the onset and potentially prevent Type 1 diabetes (T1D) can change the lives of people pre-disposed to getting the disease. This drug candidate has potential to revolutionize T1D treatment, as it is the only therapy of its kind being prepared for FDA submission later this year. As we stated in our first article on PRVB, those that develop T1D have an average life-span that is 16 years shorter than non-diabetics, endure a higher rate of health complications, and need to inject insulin every day for the remainder of their lives. Therefore, preventing or delaying the onset of T1D can provide significant benefits to patients with a high likelihood of being diagnosed.
Since we published our last article in late November 2019, the stock traded from $10 to a high of $18 but is now back to a level below where we began recommending it. Meanwhile, the fundamentals have only strengthened with a favorable FDA Type B meeting in 4Q 2019 that signaled PRVB to go forward in filing its biologics license application (BLA) for FDA review of teplizumab. This is important because PRVB will file its BLA on Phase 2 clinical results, not Phase 3, an indication of just how impressive the clinical effects of this drug have been so far. Insider buying right after this disclosure also raises confidence in the discussion that took place with the FDA at the Type B meeting. The filing is currently being prepared as a “rolling” BLA submission, meaning that the company will submit certain modules of the application over the next several months while it assembles other portions of the document. Notably, the company expects to have its BLA complete in 4Q 2020, with the potential for FDA approval by mid-2021. The good news is that the Coronavirus pandemic is not expected to have an impact on this process, as the data are already complete, and the company is in control of the preparations of each module supporting its BLA filing. With an estimated $2 billion in peak sales, a market cap of roughly $400million, and cash of $85 million with no debt, PRVB shares are currently offering a great entry point.
Other progress that has been made since our first article includes the hiring of a Chief Commercial Officer, positive Phase 1b data for a second product candidate, PRVB-2379 for Lupus, and additional insider buying. Hiring a chief commercial officer suggests that the company is confident in the ability to launch teplizumab for “at risk” T1D patients within a year or so, and perhaps even more importantly, recent insider buying by top executives demonstrates even more confidence by the people that know the company the best. The favorable safety and proof-of-concept data for PRVB-2379 is an added bonus, as analysts are modeling in little to no value for this opportunity, and any positive results here would represent upside to expectations.
In addition to the bargain valuation, there are potential value-creating events coming in the next few weeks and months for PRVB. Catalysts include 1) the release of additional supportive data for teplizumab in the “at risk” T1D patient population potentially in June at the upcoming American Diabetes Association (ADA) meeting, 2) initiation of the company’s Phase 2b study for PRV-015 in patients with refractory Celiac disease, 3) progress on regulatory submission of teplizumab in Europe, and 4) additional updates and completion of the BLA filing for teplizumab in the U.S. The potential for entry into pharma partnerships to commercialize teplizumab internationally, or even globally is also a possibility, and such a validating transaction would propel the shares higher.
Regulatory filing for “at-risk” indication progressing as planned; Phase 3 program paused due to Coronavirus has no effect but represents a positive catalyst when the trial resumes. On PRVB’s 4Q 2019 Earnings Call earlier this month, the company emphasized that its rolling BLA filing for teplizumab to prevent the onset of T1D remains on track to be completed by the end of this year. This is the main event for PRVB, and the continued progress means that investors can now enter into PRVB shares at a significant discount, with less time to go for this important milestone.
Recall that last year, the company took advantage of its Breakthrough Therapy Designation in the U.S., meeting with the FDA in November to determine if the FDA was aligned on the filing of a rolling BLA submission using the TrialNet “At-Risk” dataset. A positive meeting signaled PRVB to go ahead with the trial, and importantly, the filing will include data from over 800 newly diagnosed patients that were exposed to the drug in other trials, backing the favorable safety results. The company plans to file its non-clinical module of the BLA in the second quarter of this year, followed by the clinical section in 3Q. The filing of its chemistry, manufacturing and controls, or CMC module remains the gating factor, and this is anticipated to be complete in 4Q.
Source: Provention Bio Investor Presentation 2020
While this process remains on track, the downturn in the stock was brought on by the impact of both the Coronavirus pandemic and the pausing of the PROTECT study. This Phase 3 trial is evaluating teplizumab treatment in T1D patients within 6 weeks of being clinically diagnosed. The Phase 3 PROTECT trial is separate and distinct from the company’s BLA filing for teplizumab in at-risk patients. The company believes that early intervention of newly diagnosed patients can offer the ability to preserve remaining Beta cells in the pancreas, which could delay or reduce the severity of T1D. Enrollment of this study was recently paused due to the Coronavirus outbreak, which takes the target timeline for completing enrollment off the table. Until recently, the company expected to be fully enrolled in 4Q 2020. Despite this delay and the new timing uncertainty, these results have no impact on the timeline of the teplizumab BLA filing for “at-risk” patients, the drug’s lead indication and key value driver.
It is always beneficial to see management “eating their own cooking” and participating in insider purchases. At Provention, co-founders, Ashleigh Palmer and Francisco Leone, CEO and CSO respectively have consistently added PRVB stock to their holdings over the past several quarters alongside of their stock option awards. We find it especially important that more recent purchases were made after the company met with the FDA to discuss the rolling BLA filing. And in this latest round, the company’s recently appointed Chief Commercial Officer, Jason Hoitt, acquired stock in the open market suggesting that he sees the strong market opportunity and that there is a high chance of obtaining FDA approval for teplizumab. We all like to follow the “Smart Money”, and more often than not, the “Smartest Money” is the investment made by corporate insiders.
PRVB Insider stock purchases since FDA Type B Meeting November 2019
Looking forward to potential catalysts, including data from TrialNet At-Risk study around ADA conference. With the FDA expected to evaluate teplizumab’s approval potential on Phase 2 results, another potentially exciting catalyst is the ability for the company to show additional data on the treatment’s durability of efficacy and safety. Such positive data would further increase the chances of approval in the at-risk T1D patient segment. The highly successful Phase 2 study backing teplizumab, known as the TrialNet At-Risk study, continues to track patients from the trial including both treated and untreated patients. Dr. Kevan Herold, M.D., Professor of Immunobiology and Medicine at Yale University, and lead author of this trial, was quoted to say that “we look forward to learning more as we observe patients during the study’s follow-up period, which will also evaluate the long-term outcomes for those in whom the diagnosis of disease has been delayed to see if they will be diagnosed with T1D or are protected.”
In a research report published by SVB Leerink in December 2019, the analyst noted that he “spoke recently with a TrialNet investigator, who pointed out that close to 75 months out, there are 22 patients who have not developed T1D in the teplizumab arm vs. 7 in the placebo arm”. Assuming this is what the follow up data will look like, this is impressive and suggests that the benefits published so far are durable, and in fact, may become more robust over time.
New data from the TrialNet At-Risk study has potential to add additional color around the robustness of teplizumab versus placebo, however, Provention has not given timelines for such data as the TrialNet consortium is responsible for future study data and publications. Such information has potential to gain recognition at the largest diabetes meeting of the year, ADA in June, if released by the TrialNet consortium.
New proof of concept data support advancement of PRV-3279. PRV-3279 is a humanized bispecific antibody targeting the B-cell surface proteins, CD32B and CD79B. Dual binding of the CD32B and CD79B receptors triggers inhibition of B-cell function and suppression of autoantibody production, enabling the regulation of B-cells without B-cell depletion. The company is initially developing the drug candidate to intercept the development of lupus, a chronic autoimmune disorder characterized by an abnormal overactivation of B cells. In March, PRVB announced positive Phase 1b data from the PREVAIL study, demonstrating that the drug was well tolerated in healthy volunteers, there was dose-proportional and sustained binding of circulating B lymphocytes, and importantly there was no depletion of B cells.
Source: Provention Bio Investor Presentation 2020
Lupus is a chronic autoimmune disorder that can affect nearly every major organ system, causing inflammation, tissue injury, organ damage, and in some patients, organ failure. More than 1.5 million Americans are afflicted with lupus, and the company plans to initiate the Phase 2a portion of the PREVAIL study in patients diagnosed with lupus in 1H 2021, with treatment anticipated to run 12 weeks.
PRV-3279 has the potential to address several autoimmune conditions where B cells play a role. In addition to lupus, other potential indications include rheumatoid arthritis and multiple sclerosis, as well as certain orphan diseases such as idiopathic thrombocytopenic purpura, neuromyelitis optica, pemphigus or myasthenia gravis.
Estimated market potential of $2 billion at peak for teplizumab in the U.S. The target market for teplizumab will likely be children, and there are approximately 20,000 individuals <20 years old who are diagnosed each year in the U.S with T1D. The majority of those cases are due to autoimmune factors, yet a challenge for Provention will be to find those cases, as screening for T1D antibodies in the U.S. is not very prevalent at the moment. Sweden has implemented a broad screening program for T1D, and if teplizumab obtains U.S. marketing approval, Provention, the diabetes foundations in the U.S., and other patient advocacy groups could promulgate a similar approach in the U.S. Meanwhile, we assume that in the first year or two of teplizumab availability, those with family history of T1D diabetes, particularly children or siblings of those diagnosed, would be the initial targets for testing and teplizumab therapy if positive for T1D autoantibodies coupled with dysglycemia.
Based on these assumptions, the rising incidence of T1D, and that T1D screening is expected to increase with teplizumab availability, we estimate that the therapy could achieve sales of $500 million by 2025, and grow to approximately $1.5 billion by 2030 in the U. S. targeting the At-Risk population alone. Assuming that the company’s PROTECT study proves out early intervention when patients are first diagnosed (“New Onset”), this could add another $500-$600 million to peak sales, bringing the estimated total U.S. opportunity to $2 billion at peak (assumes ~42% of the At Risk T1D population <20 Y.O. receives teplizimab dosing). International sales could expand the market opportunity, as well as use in adults assuming that screening becomes more widespread globally. Additionally, we assume that the At-Risk and New Onset populations are distinct. Given that most patients will eventually progress to T1D, there is an opportunity for some to get treated in both the At-Risk setting, then again as a New Onset patient, which is not factored into our estimates.
Opportunity to own a revolutionary diabetes therapy at an attractive discount. With shares of PRVB selling off due to the temporary delay of the Phase 3 PROTECT trial, the opportunity to own teplizumab’s lead indication to prevent the development of T1D in at-risk patients is now significantly discounted despite remaining on track for BLA submission later this year. Several upcoming catalysts including the potential for more affirming data on teplizumab should propel the stock higher, particularly after the COVID-19 pandemic abates in the next few weeks.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.