VKTX - 89Bio: Let's Not Give Up Already

Summary

• ETNB went down after Madrigal's success.
• It has a NASH molecule with a different mechanism of action.
• It has produced solid data.

89Bio ( ETNB ) is one of those NASH stocks that didn’t do too well on Madrigal’s ( MDGL ) success. It fell 30% on December 19, the day MDGL released those outstanding data. Meanwhile, Viking Therapeutics ( VKTX ) rose 80%.

The reason for that is that the market feels that MDGL has proven the THR-B agonism pathway, and other pathways are now less valuable than before because they are less proven, or something. So VKTX, which has a THR-B molecule just like MDGL’s resmetirom, has gone up; while ETNB, which has BIO89-100 or pegozafermin, a PEGylated version of native Fibroblast Growth Factor 21, or FGF21, has gone down. However, that may not be the right sort of analysis - let's discuss.

FGF21 is a hepatokine, or an enzyme secreted by the liver. BIO89-100 is a PEGylated version of native FGF21. PEGylation helps in improving drug solubility, enables lower dosage and reduces immunogenicity. FGF21 is known to modulate various metabolic processes:

Among this wave of therapeutic mechanisms targeting the underlying pathogenesis of NASH, the hormone fibroblast growth factor 21 (FGF21) holds considerable promise; it decreases liver fat and hepatocyte injury while suppressing inflammation and fibrosis across multiple preclinical studies.

A number of preclinical studies have shown that FGF21 administration may have direct benefits for NASH patients:

Administration of FGF21, FGF21 analogs or adenoviral delivery of FGF21 reduces hepatic steatosis in diverse rodent models of NAFLD and NASH ( 101 , 126 – 129 ). The reduction in liver fat results from pleiotropic actions of FGF21, particularly suppressing caloric burden in the liver, reducing de novo lipogenesis, and increasing fat oxidation in the liver.

As I observed in an earlier article :

FGF21 analogs are known to improve NASH symptoms and improve fibrosis by activation of adiponectin, which is in turn responsible for fatty acid breakdown and regulating glucose levels.

In fact, ETNB goes on to claim that pegozafermin actually has a much better profile than a lot of other molecules with different mechanisms of action:

The above diagram, if borne out in later stage trials, really differentiates pegozafermin from other molecules. Even resmetirom has a much poorer profile, in both efficacy and safety, than pegozafermin, according to this data. Relative reduction percentage in liver fat versus placebo is only 26% in resmetirom according to this data, while it is 70% at the higher dose of pegozafermin. Also note that pegozafermin is 27mg QW or once weekly, while resmetirom is 80-100mg once daily. It is always good to take lesser quantities of medicine if the effect is acceptable.

The problem with pegazofermin, however, is that Akero Therapeutics' ( AKRO ) efruxifermin and Bristol Myers Squibb's ( BMY ) Pegbelfermin are also FGF21 analogs. Pegbelfermin failed a mid-stage trial and BMY shelved the asset, while Akero posted strongly positive data from EFX this September. That confuses things, but that also gives more reasons not to give up on pegazofermin, like the market did this week.

In my August article , I noted:

The company's most important catalyst ahead is topline data from the ENLIVEN trial in NASH. Just last week, the company announced completion of enrollment of the 219-patient trial. ENLIVEN is a placebo-controlled Phase 2b trial in biopsy-confirmed NASH patients with fibrosis stage 2 or 3. The trial will topline in early 2023. With positive earlier stage data in the same indication, a number of analysts expect a positive outcome from this trial.

Since February, ETNB stock had been going down for a long time, and it was only revived after Akero posted positive data in September. A dilutive cash raise of $75mn in June also took ETNB down. The offering followed a data drop in SHTG, which was positive but failed to excite the market, which is fixated on the upcoming NASH data. Analysts have modeled $650mn in peak sales for SHTG, however the $3bn in peak sales estimates for the NASH indication dwarfs SHTG. The AKRO data raised ETNB sympathetically, because of their similar mechanisms of action.

Financials

ETNB has a market cap of $525mn and a cash balance of $193mn. R&D expenses were $22.2 million and G&A expenses were $4.8 million for the previous quarter. At that rate, they have cash for around 6-7 quarters. However, later stage trials will increase expenses.

Bottomline

ETNB has a major catalyst coming up early next year. The NASH market is quite exciting right now with MDGL’s success. AKRO’s positive data in FGF21 is also exciting. If ETNB does well next year in its ENLIVEN trial, expect a nice surge in price. Data so far shows no reason ENLIVEN won’t succeed.

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