Akari Therapeutics
Clinical update
ASH data highlight Coversin’s unique properties
Pharma & biotech
9 January 2017
Akari provided an update at the American Society of Hematology (ASH)
meeting on the Soliris-resistant patient who has now been well controlled
with Coversin for nine months. New data were released supporting a oncedaily dosing, with complete inhibition of hemolysis with 22.5mg and 30mg
Price
US$7.90
Market cap
US$93m
per day. The company also provided guidance on new indications either by
leveraging Coversin’s leukotriene B4 activity, or its ease of derivatization
into new longer lasting and targeted versions. Results from the Phase II
paroxysmal nocturnal hemoglobinuria study are expected in Q117.
Net cash ($m) at September 2016
50.6
ADSs in issue
11.8m
Free float
29%
Code
Revenue
($m)
PBT*
($m)
EPADS*
($)
DPADS
($)
P/E
(x)
Yield
(%)
12/15
0.0
(49.0)
(5.73)
0.0
N/A
N/A
12/16e
0.0
(17.4)
(1.44)
0.0
N/A
N/A
12/17e
0.0
(51.3)
(4.05)
0.0
N/A
N/A
12/18e
0.0
(75.6)
(5.68)
0.0
N/A
N/A
Year end
AKTX
Primary exchange
NASDAQ
Secondary exchange
N/A
Share price performance
Note: *PBT and EPADS are normalized, excluding amortization of acquired intangibles,
exceptional items and share-based payments.
Soliris-resistant patient continues to respond
Akari has been engaged in a Phase II clinical program to provide Coversin to
patients who are resistant to Soliris with the hemolytic disorder paroxysmal
nocturnal hemoglobinuria. Coversin binds at an alternate site on C5, and should be
active in this population. One patient has been treated on this protocol for nine
months, and has shown consistent suppression of hemolysis to below 1.5 times the
upper limit of normal and no loss of activity.
More evidence that patients prefer the sub-Q route
A recent survey of atypical hemolytic uremic syndrome patients identified the
burden of IV injections from a doctor as a primary concern and a significant desire
on the part of patients for a solution that allows them to treat themselves at home.
Recent data released from the Coversin Phase Ib dosing trial shows complete
inhibition of hemolysis with once a day dosing at multiple dosing strengths.
%
1m
3m
12m
Abs
5.2
(7.1)
(55.0)
Rel (local)
2.2
(11.8)
(60.7)
52-week high/low
US$18.9
US$6.7
Business description
Akari Therapeutics is a biopharmaceutical company
developing Coversin, a complement system
inhibitor for the treatment of paroxysmal nocturnal
hemoglobinuria (PNH), atypical hemolytic uremic
syndrome (aHUS), and other immune disorders
without a standard of care.
Multiple future directions
Next events
In addition to C5, Coversin also binds to leukotriene B4 (LTB4), a proinflammatory
cytokine that recruits immune cells to sites of inflammation. This activity could be
Data from PNH Phase II
Q117
Initiation of GBS Phase II
H117
used to treat a broader array of immune and inflammatory diseases such as
rheumatoid arthritis, psoriasis and pulmonary arterial hypertension. Additionally the
company is developing modified versions of Coversin with longer retention (for
once a week dosing) and targeted activity to specific tissues for other indications,
as well as other tick-derived proteins with anti-inflammatory activity.
PNH Phase III initiation
Summer 2017
Analysts
Maxim Jacobs
+1 646 653 7027
Nathaniel Calloway
+1 646 653 7036
[email protected]
Valuation: Increased to $398m or $33.78 per ADS
We have increased our valuation to $398m or $33.78 per basic ADS, from $376m
or $31.95. This increase is due to rolling forward NPVs to 30 September 2016, and
is partially offset by lower cash ($50.6m) and higher than expected SG&A costs.
We expect the company to need $180m in financing before profitability in 2020.
Edison profile page
Akari Therapeutics is a
research client of Edison
Investment Research Limited
ASH data supports advantages of Coversin
Akari presented new data at the American Society of Hematology (ASH) meeting in December
2016 on the unique profile of Coversin and provided an update to potential future directions that the
company may take. Coversin is being investigated for the treatment of the complement system
disorders paroxysmal nocturnal hemoglobinuria (PNH) and atypical hemolytic uremic syndrome
(aHUS) as well as for the antibody mediated autoimmune disorder Guillain-Barré syndrome (GBS).
The only approved C5 inhibitor is Soliris (eculizumab; Alexion), which is given as a biweekly
intravenous injection for the treatment of PNH and aHUS and had sales of $2.59bn in 2015.
Coversin has a series of potential advantages over Soliris and potentially other complement
inhibitors in development. First, Coversin binds to a site on the C5 protein different than the Soliris
binding site. There is a congenital polymorphism at this site (cysteine 345) that prevents Soliris
binding making it ineffective. The prevalence of this polymorphism in the general population is
unknown, but a study in Japan identified it in 3.5% of individuals.1 By binding at an alternative site,
Coversin can potentially treat these Soliris-resistant patients. One such patient has been
successfully treated for over nine months with Coversin (twice-daily self-injection) and has
demonstrated complete complement inhibition (as measured by 50% hemolytic complement activity
measure, CH50) and reduction in hemolysis to below 1.5 times the upper limit of normal (as
measured by serum lactose dehydrogenase LDH, Exhibit 1). The company has reported that a
second Soliris-resistant patient has been identified and may begin treatment shortly.
Exhibit 1: Prevention of hemolysis in Soliris-resistant PNH patient
Source: Akari Therapeutics. Note: Dashed line = 1.5 times the LDH upper limit of normal.
A second advantage of Coversin is its small molecular weight (17kDa). It is substantially smaller
than monoclonal antibodies like Soliris (approximately 148kDa), which significantly improves its
tissue permeability. Because of this, Coversin can be administered subcutaneously (SC) as
opposed to intravenous (IV) injection. An SC treatment would provide numerous quality of life
1
Mishimura J, et al. (2014) Genetic Variants in C5 and Poor Response to Eculizumab. N Engl J Med. 370,
632-639.
Akari Therapeutics | 9 January 2017
2
improvements over IV because IV injections must typically be performed by a medical professional,
whereas SC injections can be performed by the patient. This frees the patient from numerous office
visits, allowing them to miss less work or school and, for instance, plan vacations that are not
centered around their next injection. Numerous studies have demonstrated a preference for
alternatives to IV for the vast majority of drugs (exceptions being analgesics, vitamin K, and antivenom).2 A recent survey of aHUS patients confirmed that quality of life issues associated with
frequent office visits are the primary complaints with Soliris treatment (Exhibit 2), and that these
patients would prefer self-administration (Exhibit 3).
Exhibit 2: Survey of aHUS patients, difficulties with
Soliris
Exhibit 3: Survey of aHUS patients, preference for selfadministration
Source: aHUS Alliance 2016 survey. Note: Y-axis = number of
patients out of 233 respondents.
Source: aHUS Alliance 2016 survey. Note: X-axis = number of
patients out of 233 respondents.
The company released results at the American Society of Hematology (ASH) meeting in December
2016 of a Phase Ib dosing study that supports the use of Coversin in a once a day formulation.
These results showed a reduction in complement activity as measured by CH50 Elisa and sheep
blood lysis tests to below the limit of quantification with 22.5mg (n=4) or 30mg (n=4) daily dosing
(following twice a day dosing for the first 48 hours) compared to placebo (n=5) (Exhibit 4). Patients
were also dosed with 15mg of drug, although these patients had detectable complement activity.
Akari is pursuing Coversin in a once-daily SC format for the ongoing PNH Phase II clinical trial
(30mg daily adjustable to 45mg as needed).
We expect data from the ongoing Phase II clinical trial of Coversin in PNH (non-resistant
population) in Q117, and the company has announced that it plans to progress to Phase III in the
summer of 2017.
2
Jin JF, et al (2015) The optimal choice of medication administration route regarding intravenous,
intramuscular, and subcutaneous injection. Pat. Pref. Adherence 9, 923-942.
Akari Therapeutics | 9 January 2017
3
Exhibit 4: Inhibition of hemolysis with Coversin
Source: Akari Therapeutics. Note: Coversin inhibits compliment activity regardless if measured by Elisa testing
(top) or sheep blood lysis (bottom). Twice a day dosing through 48 hours and once a day thereafter.
Future directions
The company has a number of different pathways to further development of the pipeline and its
future directions. These can be broadly divided into three categories, roughly in order of their logical
development priority:

Development of Coversin for new indications leveraging its other biologic activities.

Modification of the Coversin protein to improve its pharmacologic properties or targeting.

Investigation of other tick proteins.
A differentiating factor of Coversin is that in addition to C5, the protein also binds leukotriene B4
(LTB4). LTB4 is a proinflammatory molecule secreted by leukocytes that recruits other immune cells
and activates them, resulting in a cascade of cytokine release and inflammation. This means that
Coversin inhibits both of the two main axes of immunity: antibody mediated (via anti-C5 activity)
and cell based (via anti-LTB4 activity). Although the current indications being examined were
chosen on the basis of Coversin’s complement activity, the clinical programs will monitor LTB4
levels in patients and examine its potential benefits. This may hypothetically improve some aspects
of the drug’s profile, such as limiting injection site reactions or reducing hemolysis induced
inflammation.3 However, the greatest potential for LTB4 inhibition is that there are a large number of
other immune, inflammatory, and thombotic disorders that could potentially be addressed via the
combined C5 and LTB4 mechanism (Exhibit 5). Coversin binds LTB4 very strongly (approximately
1nM binding constant), and significantly impact symptoms driven by this mechanism, especially
when applied directly to the site of inflammation. This positions the drug well to disorders of the
skin, joints, lungs and eyes.
3
Moteiro APT, et al. (2011) Leukotriene B4 Mediates Neutrophil Migration Induced by Heme. J. Immunol.
186, 6562-6567.
Akari Therapeutics | 9 January 2017
4
Exhibit 5: Potential future directions
Complement
PNH
aHUS
GBS
Myasthenia Gravis (MG)
Eicosanoid (LTB4)
Treatment-resistant asthma
Alpha-1 antitrypsin deficiency
COPD (frequent exacerbators)
Co-therapy cancer
Bioamine (histamine)
Atopic dermatitis
Neuropathic pain
Acute mastocytosis
Retinopathies
Dual C5 and LTB4
Sjögren’s syndrome
Pulmonary arterial hypertension
Severe pemphigoid diseases
Bronchiolitis obliterans
Source: Akari Therapeutics
The company is also investigating ways of derivatizing Coversin, which is possible because the
protein is easily modified at its N-terminus. The company is developing a PASylated version of the
protein, which would have dramatically increased serum residence times. This development
program is of a very high priority. PASylation is the addition of a repeating sequence of proline,
alanine, and serine amino acid resides (abbreviated PAS), which improves renal retention of the
drug and could enable once a week dosing. The company announced at ASH that the estimate
human terminal half-life of the molecule was four days based on mouse and rat models, and that it
would be moving to first-in man clinical studies in approximately Q417.
Akari also announced at ASH that it is investigating derivatives of Coversin that are targeted to
specific tissues. In particular, it is investigating the fusion of Coversin to a peptide that binds laminin
ɣ1, a protein specific to the neuromuscular junction. The targeting of Coversin in this way could
potentially be used as a treatment for complement disorders that attack the neuromuscular junction
such as myasthenia gravis, with significantly lower doses of drug and much more limited systemic
exposure and associated infection risk. The company stated that it is targeting initiation of Phase I
studies in mid-2018.
And finally, the last new avenue that the company is exploring is investigating other proteins
isolated from the tick with biologic activity. Coversin is only one of a number of molecules in tick
saliva that have evolved to limit engagement of the host’s immune system. The company has
proteins derived from ticks that inhibit leukotrienes and histamine, and other proteins that inhibit the
complement system in new ways. The company has identified a different C5 inhibitor of a very
small molecular weight that it is investigating for oral activity.
The company has stated that it will announce further details of its preclinical development and
future directions following the J.P. Morgan Healthcare Conference in January 2017. We expect any
future clinical development programs to incur significant costs, although current forecasts only
include preclinical development spending. We expect to update our valuation and forecasts when a
lead follow-on development program and path to market is announced.
Valuation
We have increased our valuation to $398m or $33.78 per basic ADS from $376m or $31.95. This
increase is due to rolling over our NPVs to 30 September 2016, and is partially offset by a lower
cash balance and an increase in unallocated costs (from an NPV of $36m to $37m) due to higher
than expected administrative costs. We expect to update our valuation with top-line data from the
Phase II clinical trial examining efficacy in the general PNH population, expected in Q117. The
open-label trial will enroll a target of six patients with PNH, and the primary efficacy endpoint will be
hemolysis as measured by LDH after 28 days of treatment. Additionally we may update our
valuation with the release of more information from the Phase II clinical trial in Soliris resistant
patients, which is ongoing.
Akari Therapeutics | 9 January 2017
5
Exhibit 6: Valuation of Akari
Development program
Probability of
success
20%
15%
25%
PNH (broader market)
PNH (poorly controlled)
PNH (Soliris resistant)
PNH (development costs)
aHUS
15%
GBS
5%
Unallocated costs (discovery programs, administrative costs, etc)
Total
Net cash and equivalents (Q316) ($m)
Total firm value ($m)
Total ADSs (m)
Value per ADS ($)
Margin
2020
2020
2020
Peak sales
($m)
507
470
92
2021
2021
432
366
65%
64%
Launch year
62%
63%
62%
rNPV
($m)
$130
$123
$44
($20)
$88
$19
($37)
$347
$50.6
$397.9
11.8
$33.78
Source: Edison Investment Research, Akari Therapeutics reports
Financials
The company reported operational spending of $7.5m for Q216 and $6.6m for Q316. The increase
over Q116 ($3.9m) is associated with the initiation of the PNH clinical program. Our estimates for
the total R&D spending for 2016 ($16.2m) remain unchanged. We are, however, increasing our
estimates for 2016 SG&A spending from $5.6m to $8.8m, which is carried forward to later years.
This increase is primarily due to larger than predicted share-based compensation. However, due to
the non-cash nature of the charges, this does not affect our future funding schedule ($180m
needed before profitability in 2020, $60m at the end of 2017, $50m in 2018, and $70m in 2019). We
have included capex of $5m for 2016 and $5m in 2017 to account for the manufacturing buildout
necessary to run a Phase III clinical trial. The company ended the quarter with $50.6m in cash and
equivalents.
Akari Therapeutics | 9 January 2017
6
Exhibit 7: Financial summary
$000s
2015
US GAAP
2016e
US GAAP
2017e
US GAAP
2018e
US GAAP
0
0
0
(5,799)
(5,502)
(11,311)
(11,301)
0
(19,283)
(30,585)
(37,662)
11,408
(48,963)
(56,838)
0
0
(48,963)
(56,838)
0
0
0
(16,239)
(8,804)
(25,077)
(25,043)
0
0
(25,043)
7,602
7,135
(17,440)
(10,306)
578
0
(16,863)
(9,728)
0
0
0
(40,238)
(9,244)
(49,517)
(49,482)
0
0
(49,482)
(1,779)
0
(51,261)
(51,261)
0
0
(51,261)
(51,261)
0
0
0
(52,750)
(9,706)
(62,491)
(62,456)
0
0
(62,456)
(13,179)
0
(75,635)
(75,635)
0
0
(75,635)
(75,635)
8.5
(5.73)
(6.66)
0.0
12.1
(1.44)
(0.85)
0.0
12.7
(4.05)
(4.05)
0.0
13.3
(5.68)
(5.68)
0.0
BALANCE SHEET
Fixed Assets
Intangible Assets
Tangible Assets
Other
Current Assets
Stocks
Debtors
Cash
Other
Current Liabilities
Creditors
Short term borrowings
Long Term Liabilities
Long term borrowings
Other long term liabilities
Net Assets
235
52
41
142
69,658
0
10
68,920
728
(20,717)
(20,717)
0
(49)
0
(49)
49,128
5,240
43
5,055
142
40,634
0
11
39,436
1,187
(10,713)
(10,713)
0
(56)
0
(56)
35,106
10,205
43
10,021
142
49,441
0
11
48,244
1,187
(11,800)
(11,800)
0
(60,056)
(60,000)
(56)
(12,209)
10,171
43
9,986
142
28,490
0
11
27,293
1,187
(12,466)
(12,466)
0
(110,056)
(110,000)
(56)
(83,860)
CASH FLOW
Operating Cash Flow
Net Interest
Tax
Capex
Acquisitions/disposals
Financing
Dividends
Other
Net Cash Flow
Opening net debt/(cash)
HP finance leases initiated
Exchange rate movements
Other
Closing net debt/(cash)
(1,912)
(3,054)
0
(11)
1,411
75,000
0
0
71,434
(2,794)
0
(122)
(5,186)
(68,920)
(24,321)
0
578
(5,048)
0
0
0
0
(28,791)
(68,920)
0
115
(807)
(39,437)
(44,393)
(1,800)
0
(5,000)
0
0
0
0
(51,193)
(39,437)
0
0
0
11,756
(57,751)
(13,200)
0
0
0
0
0
0
(70,951)
11,756
0
0
0
82,707
Year end 31 December
PROFIT & LOSS
Revenue
Cost of Sales
Gross Profit
Research and development
Selling, general & administrative
EBITDA
Operating Profit (before GW and except.)
Intangible Amortization
Exceptionals/Other
Operating Profit
Net Interest
Other (change in fair value of warrants)
Profit Before Tax (norm)
Profit Before Tax (IFRS)
Tax
Deferred tax
Profit After Tax (norm)
Profit After Tax (IFRS)
Average Number of ADSs Outstanding (m)
EPADS - normalised ($)
EPADS - IFRS ($)
Dividend per ADS ($)
Source: Edison Investment Research, Akari Therapeutics reports
Akari Therapeutics | 9 January 2017
7
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Frankfurt +49 (0)69 78 8076 960
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Akari Therapeutics
60325 Frankfurt
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London +44 (0)20 3077 5700
280 High Holborn
| 9 January 2017
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8