AVTE - Aerovate: Smart Investment Opportunity With This Developer Of Inhaled Imatinib For PAH

2023-06-28 08:00:00 ET

Summary

• Aerovate Therapeutics is testing an inhaled imatinib formulation in PAH patients.
• Novartis tested imatinib in PAH and found it effective but with a poor safety profile.
• AVTE hopes that an inhaled version will be safer.

Aerovate Therapeutics ( AVTE ) is developing AV-101, a dry powder inhaled formulation of imatinib for the treatment of pulmonary arterial hypertension, or PAH. AV101 is in a phase 3 trial. Imatinib is a small molecule inhibitor of various receptor tyrosine kinases. Imatinib was a revolutionary drug when it was introduced back in 2001 by Novartis. It remains a bellwether in the targeted therapy of various cancers.

Due to its mechanism of action, it has previously been tested in PAH patients as well, but in an oral form. In patients taking two or more standard therapies, oral imatinib mesylate showed clinical benefit in a phase 3 study. Data showed that after 24 weeks of treatment, the mean treatment effect of imatinib compared to placebo on the 6-minute walk distance was 32 meters, with a 95% confidence interval of 12-52 meters (P=0.002). This improvement in exercise capacity was sustained in the open-label long-term extension study for patients who continued on imatinib.

Imatinib also showed a significant reduction in pulmonary vascular resistance compared to placebo. The decrease in pulmonary vascular resistance was 379 dyne·s·cm(-5), with a 95% confidence interval of -502 to -255 dyne·s·cm(-5) (P<0.001).

However, there were 8 cases of subdural hematoma in these patients, and the broad AE profile of oral imatinib was poor. Hematoma has been a persistent issue in certain patients with low platelet counts from the very beginning of imatinib usage. The oral route was probably not conducive to using imatinib in such patients. As a result, despite the efficacy, further developments were discontinued.

Aerovate is developing an inhaled version of imatinib to bypass these problems. A little over a year ago, the company presented phase 1 trial results for AV-101 from the SAD/MAD study in healthy adults. Data showed the following:

Eighty-two participants (SAD, n=48; MAD, n=34) were enrolled. For the SAD study, peak plasma concentrations of imatinib occurred within 3 h of dosing with lower systemic exposure compared to oral imatinib (p<0.001). For the MAD study, systemic exposure of imatinib was higher after multiple doses of AV-101 compared to a single dose, but steady-state plasma concentrations were lower for the highest AV-101 cohort (90 mg) compared to simulated steady-state oral imatinib at Day 7 (p=0.0002). Across AV-101 MAD dose cohorts, the most common treatment-emergent adverse events were cough (n=7 [27%]) and headache (n=4 [15%]).

This is an inhaled powder formulation and systemic exposure was lower than oral imatinib. However, the trial does not say how much lower, and what constitutes a low-enough exposure to avoid the more severe side effects seen in PAH patients. Like it says, the most common TEAEs were cough and headache. But these were healthy volunteers. This tells us nothing about either the efficacy at these doses, or the potential AEs.

Aerovate is currently conducting a Phase 2b/Phase 3 clinical trial named IMPAHCT (Inhaled imatinib Pulmonary Arterial Hypertension Clinical Trial) to assess the efficacy and safety of inhaled AV-101 in adults diagnosed with PAH. The trial is currently ongoing, with enrollment of participants still in progress. The topline data from the Phase 2b segment of the trial are anticipated to be available in either the fourth quarter of 2023 or the first quarter of 2024 (this has been moved back to the 2nd quarter of 2024 despite improvement in enrolling).

PAH has 70,000 patients in the US and EU. There is a significant unmet need because, as the company says, “despite three drug classes [being] approved, 5-year survival for newly diagnosed PAH patients is 61%.” Imatinib represents a tried and tested molecule in terms of efficacy. The goal is to find the sweet spot between efficacy and systemic exposure which will reduce the subdural hematoma and other SAEs which precluded its oral use.

Besides imatinib, other non-vasodilatory PAH therapies being developed include Merck/Acceleron’s Sotatercept and Gossamer’s Seralutinib. Pulmonary vascular resistance data for imatinib is comparable to Sotatercept at the latter's high dose, while in 6MWD, a key endpoint of PAH trials, Sotatercept does a little better. In all these trials, though, imatinib remains very competitive.

Financials

AVTE has a market cap of $416mn and a cash balance of $119mn as of March. Research and development (R&D) expenses for the first quarter ended March 31, 2023 were $13.5 million, while general and administrative (G&A) expenses for the first quarter ended March 31, 2023 were $4.2 million. At that rate, they have a cash runway of 6-7 quarters, or to the first half of 2025, as the company says.

In April, the company announced a $75mn ATM filing with BofA. That is a 15-20% dilution, although I doubt they will need to do it right now. The best way to do this would be on solid data - if they can wait.

Institutions and PE/VC firms hold most of the company. Key holders are RA Capital, Sofinnova and Atlas. Insiders hardly ever buy or sell. There are a large number of option exercises.

Risks

Despite the positive logic, there's a change IMPAHCT will go wrong. As I noted many times here, they do not really have clinical data in PAH patients yet, they do not have proof of concept. What they have is healthy volunteer plasma concentration data, and data from previous Novartis studies.

The PAH market is also quite diverse, and AV101 is by no means the only game in town. Besides approved products, there are a number of pipeline products, including the very promising Sotatercept.

Lastly, AVTE is a small-cap stock, with moderate trading volume. There is always the risk of investing in small-cap stocks. I have to note this in a proforma manner, although the niche where I invest in is mostly small-cap. So this is true of most of my coverage.

Bottom line

I like AVTE because the logic for an inhaled version of imatinib is clear. They have no real data, however imatinib has positive efficacy data in PAH. The poor tox profile comes from too much systemic exposure, which an inhaled formulation, by definition, should reduce. The trick is to reduce it enough for a good safety profile, but keep enough lung exposure for PAH efficacy. The upcoming phase 2b/3 trial will prove or disprove this thesis, but I see good chances of success. They also have adequate cash to see them through. Current prices are attractively low, making this a good investment opportunity.

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