Concert Pharmaceuticals: Speculative Buy For Alopecia Drug (NASDAQ:CNCE)

Introduction

Alopecia Areata (AA) is an autoimmune disease which the physique mistakenly assault one’s hair follicles leading to hair loss. AA impacts males, girls and youngsters of various ages & ethnicities.

In response to National Alopecia Areata Foundation, “roughly 6.8 million folks in the US and 147 million worldwide have or will develop alopecia areata in some unspecified time in the future of their lives.”

Presently, there isn’t a FDA-approved therapy for AA. Nonetheless, there’s a heated 3-way race between Lilly (LLY) (along with INCY), Pfizer (PFE) and Live performance Prescription drugs (NASDAQ:CNCE) to have their respective drug candidates accredited and marketed for this indication.

For simplicity, I will use LLY to signify LLY and their companion INCY within the the rest.

Earlier than I dive in to concentrate on CNCE, the desk under summarizes a number of gadgets of relevance.

	LLY	PFE	CNCE
Identify of the drug candidate	Baricitinib (OLUMIANT)	Ritlecitinib	CTP-543
class of drug	JAK inhibitor	JAK3/TEC inhibitor	JAK inhibitor
FDA granted Break-By way of Remedy designation	Sure	Sure	Sure
Constructive P3 information (i.e. assembly main & secondary endpoints)	Yes	Yes	Yes
Stage in regulatory course of	Filed with FDA; Positive opinion obtained in EMA; Selections anticipated in 2022	plans to file with FDA in Q2, 2022 (slide 28)	plans to file in H1 2023 supplied the second p3 information (anticipated Q3 2022) can also be constructive

(Compiled by writer from corporations’ communications)

As seen above, these three drug candidates appear to share essential issues in widespread, e.g. class of drug, Break-By way of Remedy designation, constructive p3 information, and are all in shut proximity of finishing the regulatory course of, with LLY’s OLUMIANT (already accredited for rheumatoid arthritis and atopic dermatitis) within the result in probably be the primary drug licensed to deal with AA.

An image is price a thousand phrases

Earlier than we glance nearer into the constructive p3 information from these 3 completely different drug candidates, it might be helpful to point out the photographs from CNCE’s newest presentation of their trials.

Cross-trial comparability of CNCE, LLY, PFE’s p3 trials information

It’s lucky that every one three corporations’ AA trials share no less than three essential issues in widespread, so {that a} cross-trial comparability may be made.

Particularly,

1. They’re all randomized, placebo-controlled trials.
2. All of them research sufferers with extreme alopecia, i.e. sufferers who’ve a Severity of Alopecia Software* (SALT) rating ≥ 50 (i.e., who had ≥ 50% scalp hair loss) initially of the trials.
3. The trials’ main endpoint is on the finish of the research interval*, the proportion* of sufferers who’ve a SALT rating ≤20 (i.e., sufferers who had 20 p.c or much less scalp hair loss), in comparison with placebo.

*Notes:

• The decrease the SALT rating, the much less hair loss, e.g. SALT rating 0 is no scalp hair loss and 100 is complete hair loss.
• The research interval is 24 weeks for CNCE & PFE, and 36 weeks for LLY.
• The upper proportion of sufferers represents the higher outcomes, i.e. extra sufferers have skilled regrowth of hair.

The chart under reveals a cross-trial comparability of those AA trial main endpoint information.

The information for CNCE’s CTP-543 are 41% and 29%, each p value are <0.0001

For LLY’s OLUMIANT are 30%, 30%, 17%, 14%, all p value are ≤0.001

For PFE’s Ritlecitinib are 29%, 21%, 22%, 13%, statistically important.

Whereas all these p3 main endpoint information are statistically important, it’s famous that CTP-543’s high-dose group has the perfect information level, numerically talking 41%, in addition to probably the perfect p worth, i.e., probably the most statistical significance between therapy and placebo teams.

A number of issues to notice

On this half, I will point out gadgets which I discover price realizing if contemplating CNCE as an funding alternative.

1. As famous earlier, LLY’s OLUMIANT is within the lead in regulatory course of, and subsequently is probably to be the primary drug accredited to deal with AA.

PFE will in all probability comply with swimsuit as a detailed second, with a choice due late 2022 or early 2023, which might make CNCE the third finisher in submitting, to probably obtain a market authorization determination in 2023.

2. If launching a drug is a combat, this isn’t a combat amongst equals.

As of Thursday, June 2, 2022, the market caps of those corporations are:

(Compiled by writer)

Suffice to say {that a} >1000-fold distinction in market valuations between mega cap pharma resembling LLY & PFE vs. a micro cap CNCE in all probability imply a combat between not only one however two Giants in opposition to one another and in opposition to one shepherd boy.

For some traders, maybe merchandise #1 and #2 are sufficient causes to be pessimistic about CNCE’s prospect in AA.

Extra on this later.

3. Whereas all 3 corporations acknowledge the blockbuster (annual sale of $1B) potential of the AA area, CNCE is the one one which mentions CTP-543 being probably Finest-in-class.

This might imply greatest by way of efficacy, as seen above within the cross-trial comparability of CNCE’s first p3 information to LLY & PFE’s information, which can be repeated/confirmed in CNCE’s second p3 information.

It might additionally imply greatest by way of security profile, as LLY’s OLUMIANT, an oral JAK inhibitor carries a boxed warning about critical infections, malignancies, main antagonistic cardiovascular occasions (MACE) and thrombosis in its approval label for rheumatoid arthritis (RA) and atopic dermatitis (AD).

Though LLY reported “no deaths or venous thromboembolic occasions (VTEs)” of their trials, LLY described the security profile for AA sufferers is constant to these in RA and AD sufferers.

4. A recent win in patent dispute with INCY implies that CNCE can proceed with CTP-543’s commercialization as deliberate, if filed & accredited in 2023.

I haven’t got the authorized experience to totally perceive the patent dispute between INCY and CNCE. Nonetheless, in accordance with some analysts (here, here), a settlement will seemingly be reached, the place CNCE pays 10% royalty to INCY for CTP-543’s sale.

Funding consideration

As talked about earlier, the details that CNCE is prone to be the third finisher and the smallest participant is a no go for some.

Nonetheless, for me, I see a chance to be optimistic.

Why? Firstly, the time to market is shut sufficient, e.g. 1-2 years, among the many three to make the dominance by any unlikely, in my view.

Secondly, it is a sufficiently big want for multiple drug to make a significant contribution, if all of them are protected and efficient sufficient to be accredited.

Lastly, whereas LLY and PFE might have much more assets to safe a bigger market share, CNCE’s inventory will seemingly transfer much more for any significant gross sales of CTP-543, even when they must pay 10% of gross sales as a royalty to INCY.

This shall be particularly seemingly, if/when CTP-543 does present “best-in-class” potential, both in efficacy or security, or each, from section 3 trial information.

A fast back-of-the-envelop estimate can go like this:

Peak gross sales of $1B (a minimal quantity for a blockbuster drug), cut up 40%-40%-20% between LLY, PFE and CNCE, would counsel peak gross sales of $200M for CNCE, or $180M after royalty.

Utilizing P/S ratio of 5x would imply a market valuation of $900M (5×180), which suggests >400% of upside from the present MC of $170M (Yahoo).

This, after all, is a bullish estimation.

A bearish outlook can be the other, e.g. failure of CNCE’s second p3 (or if it’s not as constructive); delays in CTP-543 submitting; delays or denial of approval; delays within the business launch; or incapability of CNCE to be commercially aggressive or to be financially viable, despite constructive p3 information and approval, and many others.

Finance

In response to latest 10-Q form, the online loss for Q1 2022 is $37.7M and the money and money equal is $109M, which doesn’t embody the ~$47.5M raised within the recent secondary offering that can shut on or round June 6, 2022.

The corporate expects the money runway to final past CTP-543’s NDA (New Drug Utility) in H1 2023.

Concluding ideas

Within the midst of a biotech bear market, e.g. XBI down >51% from its 52-week excessive, I am inspired to see not only one, or two, however three potential efficient therapies nearing approval for Alopecia Areata sufferers.

Whether or not it’s from mega pharma like LLY, PFE, or from a micro cap biotech firm like CNCE, the tasks/actions on this sector are deeply significant to me, as an investor, and positively to sufferers who want therapy.

I hope that I’ve articulated clearly why I feel CNCE is a BUY for anybody who finds the upside definitely worth the time and the chance.

Because the title suggests, I view CNCE a speculative purchase, as there’s a lot hypothesis concerned for the potential upside to be realized, nothing is assured.

Given the present macro market situation, it is in all probability price reminding readers that it is prudent to solely use cash which one is ready to lose.

Additionally recently, I’ve felt checking my biotech portfolio each day appears not the wisest, nor useful factor to do, particularly when there is not any company-specific information.

I, after all, communicate principally as a long-term investor, not as a momentum or sentiment dealer.

Thanks for studying. All the perfect!