Expert Financial Analysis and Reporting

Key Points:

• The surprising and unconventional approval of Radicava (edaravone) shows how desperate the FDA is to expedite the approval of drugs for ALS; this was the first such approval in 20 years.
• This urgency should extend to getting tirasemtiv on the market if results are generally positive; topline results from the phase 3 VITALITY-ALS trial are expected in December 2017.
• Tirasemtiv and edaravone have different mechanisms of action and are likely to be synergistic and will almost certainly be used in combination if tirasemtiv is approved.
• Edaravone is being priced at over $145,000 per year. I have been estimating that tirasemtiv will be priced at $60,000 per year if approved. The combined cost is on a par with or less than drug combinations used in life threating cancers. After some initial foot dragging, I think payors will reimburse for the combined use of these two drugs at these price points.
• I must admit that my jaw dropped with the approval of edaravone as it was based on a small phase 2 trial performed in Japan. There have been no trials in the US and the clinical evidence is sparse. However, the approval should result in this product reaching several hundreds of millions of dollars of sales.
• Radicava will be marketed in the US by MT Pharma America, which is a subsidiary of the Japanese pharma company, Mitsubishi Tanabe. I don’t know what this does to the investment outlook for that company.
• I continue to recommend Cytokinetics and anxiously await the topline results of the phase 3 VITALITY-ALS trial. If results are positive I think the stock could rise above $25 per share and if negative could drop to $7. It would be a strong buy at $7 based on the prospects for omecamtiv mecarbil and CK-107.

Introduction

On May 5, 2017 the FDA approved Radicava (edaravone) for the treatment of amyotrophic lateral sclerosis (ALS). MT Pharma America filed for marketing approval in the US in August 2016.The drug is expected to be available in the US in August 2017. This announcement was a complete surprise to me as I had never heard of the drug. I was questioning my lack of due diligence until I did an internet search. An FDA spokesman. Eric Bastings, M.D., deputy director of the Division of Neurology Products, explained the agency’s action as follows:

“After learning about the use of edaravone to treat ALS in Japan, we rapidly engaged with the drug developer about filing a marketing application in the United States. This is the first new treatment approved by the FDA for ALS in many years, and we are pleased that people with ALS will now have an additional option.”

The sponsoring company did not perform any trials in the US. The approval was based on a small 137 patient study in Japan. This led to an approval in Japan in June 2015 and shortly thereafter in South Korea. It is extremely unusual (I have never seen it) for a drug to be approved based on a small study (this was essentially a phase 2 trial) and without a clinical study in the US. I think that this was the result of the ALS community’s exasperation with having no new drug approvals in 20 years. The FDA made this extraordinary move as much as anything to provide some hope for desperate ALS patients and their care givers. Aside from the ALS specific reason, this also seems to reflect a trend by the FDA to be less rigorous in the amount and quality of clinical trial data required for approval for drugs addressing unmet medical needs.

Pivotal Clinical Study for Radicava (Edaravone)

The study was randomized with 69 patients on edaravone and 68 on placebo with 90% of patients also receiving riluzole (the only drug approved for ALS). The primary efficacy endpoint was a comparison of the change between the treatment and control arms in the ALSFRS-R total score from baseline to week 24. The ALSFRS-R scale consists of 12 questions that evaluate the fine motor, gross motor, bulbar, and respiratory function of patients with ALS (speech, salivation, swallowing, handwriting, cutting food, dressing/hygiene, turning in bed, walking, climbing stairs, dyspnea, orthopnea, and respiratory insufficiency). Each item is scored from 0-4, with higher scores representing greater functional ability

To date, the FDA has required ALSFRS-r to be the primary endpoint of all regulatory ALS drug trials. No previous phase 3 trial has been successful, although smaller phase 1/2 trial have been. As investors well know, drug development in ALS has led to failure after failure. The key results of the Radicava study were:

• Radicava showed a 5.01±0.64 decline in ALSFRS-r score over 24 weeks (remember less decline is better)
• Placebo showed a 7.50±0.66 decline in ALSFRS-r score over 24 weeks
• The treatment effect in favor of Radicava was 2.49±0.64
• the 95% confidence interval was 0.99 to 3.98
• the p value was a striking 0.00135
• the most common adverse reactions were bruising and gait disturbance which were not treatment limiting.

Radicava was administered as an intravenous infusion of 60 mg given over a 60 minute period according to the following schedule:

• An initial treatment cycle with daily dosing for 14 days, followed by a 14-day drug-free period (cycle 1).
• Subsequent treatment cycles with daily dosing for 10 days out of 14-day periods, followed by 14-day drug-free periods (cycles 2-6).

Pricing of Radicava

Mitsubishi Tanabe Pharma announced that Radicava would cost $1,086 per infusion. If taken annually for 12 months or 13 cycles, according to the dosing and administration per the label, the cost before discounts would be $145,524 per year.

Mechanism of Action

Edaravone is a free radical scavenger that was originally developed by Mitsubishi as a potential treatment for patients recovering from stoke. A free radical is any atom or molecule that has one or more unpaired electrons which results in its being very active in trying to acquire electrons from other substances. Free radicals are formed normally in the course of cellular respiration and metabolism. Some scientists suspect excessive production leads to tissue damage in heart disease and cancer and is also a factor in the aging process.

Numerous food supplements such as selenium, beta-carotene, vitamins C and vitamin E are antioxidants. The hypothesis exponded by some is that a high intake of antioxidants can normalize an imbalance in free radicals There is no clear evidence that I have found that any antioxidant nutrient, when taken in excess of normal dietary amounts, has value in the prevention or treatment of cardiovascular disease, cancer, or any other abnormal process except such as may be associated with nutritional or vitamin deficiency

Implications for Cytokinetics’ Tirasemtiv.

Neither tirasemtiv nor edaravone directly addresses the cause of ALS, which is not really known. Their mechanisms of action are very different. Tirasemtiv is a fast skeletal troponin activator that selectively activates the fast skeletal muscle troponin complex and increases its sensitivity to calcium, resulting in increased skeletal muscle force and power while delaying the time to muscle fatigue. This allows muscles to contract more easily. In ALS, muscles progressive weaken and death usually results from respiratory failure related to inability to contract the diaphragm. The hope is that by making muscles contract more easily that quality of life can be improved and duration of life can be extended.

Because the mechanisms of action of these two drugs are different, they will almost certainly be synergistic and would be used in combination if tirasemtiv is approved. Cytokinetics has not commented on the potential price of tirasemtiv but from statements made by the company I think it might be $60,000 per year. The price of the combination then could be $200,000 per years. This is in line with annual pricing of key new cancer drugs used in life threatening cancers; the outlook for ALS patients is obviously as dire. There should be some initial foot dragging on the part of insurers, but after they have time (a year or so) to include the cost in their premium determinations, I would expect reimburse to be straightforward.

The primary endpoint of the ongoing phase 3 VIYALITY-ALS trial of tirasemtiv is sustained vital capacity (SVC). This is believed to be the best indicator of respiratory function in ALS. In the previous phase 2b BENEFIT-ALS trial, tirasemtiv failed to reach the ALSFRS-r endpoint but achieved high statistical significance in the proscribed secondary endpoint of SVC. Cytokinetics did not ask for a Special Protocol Assessment for using SVC as the primary endpoint in the VITALITY-ALS phase 3 trial instead of ALSFRS-r. This has led some investors to question whether the FDA will accept SVC as a primary endpoint. I think that the agency’s aggressive action on approving edaravone suggests that the agency will readily approve tirasemtiv if it meets its primary endpoint.