BIVI - BioVie: Bullish Signals From Blinded Data Presentation (Rating Upgrade)

2023-10-26 06:54:11 ET

Summary

• BIVI presented yesterday blinded clinical, imaging and biomarker outcome data of it phase 3 Alzheimer's Disease trial.
• Consistent improvements were seen in all above measures, which is suggestive of a treatment effect, as such improvements would be unexpected for untreated Alzheimer's Disease patients.
• Above findings reduce uncertainty and considering the asymetric risk/reward, I am updating my rating to a "Buy".
• However, it remains a binary and highly risky event and you should only invest what you can afford to lose. Waiting for the topline results is much safer.

Thesis

This is an update of my previous coverage on BIVI. BioVie Pharma (BIVI) is developing NE3107 for Alzheimer's Disease ((AD)) and Parkinson's Disease and BIV201 for ascites. Briefly, in my previous coverage I expressed my concerns on the upcoming topline results of the phase 3 trial due to very limited clinical data preceding the phase 3 trial. Specifically, the preceding phase 2 study was too small (n=23 patients) and too short (3 months). Furthermore, phase 2 study patients had much milder cognitive impairment compared to the phase 3 study (MCI/mild AD in phase 2 vs mild-to-moderate AD in phase 3) and patients with higher baseline cognitive impairment did not do as well in the phase 2 study. Considering the high uncertainty and binary upcoming event (phase 3 topline) I gave a "hold" recommendation (price at publication $3.66, closing price at the time of writing this update $3.15).

However, yesterday BIVI presented blinded outcome data from its phase 3 trial which I believe are bullish, significantly reduce the uncertainty and increase chances of a positive outcome.

Updated timelines

In the latest company presentation BIVI has altered its slide on expected catalysts and timelines. Notable are the following changes;

• Open label extension part from the phase 3 AD trial was removed, probably due to financial constraints.
• Earlier speculative timing for NDA filing was removed. This is reasonable in my opinion. Unless results of the phase 3 trial are impressive, showing a large and undeniable effect size, I believe FDA would want a second supportive trial in a more well-defined patient population and with longer follow-up.
• Timeline for initiating additional phase 3 trials has been delayed, also possibly due to financial constraints. Nevertheless, I think the updated timeline is much more reasonable. Starting another phase 3 trials a couple months before topline results of the first phase 3 trial would be irrational in my opinion (let alone the fact that BIVI wouldn't have the cash to do so).

Overview of the blinded data

Here's a summary of the results and why I believe these results are bullish;

• There was consistent improvement in multiple cognitive measures. Notably, a significant percentage of patients had major improvements in cognition, while many others worsened (as would normally be expected without treatment). The magnitude of observed improvements would be unexpected without a treatment effect. Normally, patients with AD would be expected to worsen.
• A significant reduction in amyloid burden from baseline was observed. Notably, 36.5% of patients with positive PrecivityAD® scores (a predictor of presence of amyloid plaques in the brain) at baseline reverted to having negative results after 30 weeks. Furthermore, FDG-PET suggested reduction in amyloid burden in 10 of 21 evaluated patients. These findings are objective and would be unexpected without a treatment effect.
• Median volumes increased in hippocampus and amygdala (data from n=23 patients).
• Consistent findings by multiple cognitive measures, biomarker and imaging data support a treatment effect.
• The study overall had a very low rate of adverse events (AEs) and only 10 subjects discontinued due to a reported AE (2.3%, blinded)

So why is the market not reacting positively?

I can think of the following fundamental reasons;

• It's still just blinded data and the outcome after unblinding remains uncertain.
• Some have argued that if there were big differences between treatment and placebo groups there should be 2 different distribution observable in each of the above-presented figures. This is a reasonable argument. Personally, I do think there seem to be 2 different (but overlapping) distributions in ADAS-Cog12 figure (I see a cluster of datapoints around and above zero and another cluster around -5 to -7). Similarly, for CDR SB figure.
• As acknowledged by BIVI "a plurality of subjects showed evidence of improvement and may have demonstrated effects unrelated to the administration of the study drug". Study participants would typically be expected to worsen or experience no change. Therefore, the observed improvement in majority of patients is inconsistent and suggests some effect unrelated to NE3107. Some explanations could be; placebo effect (discussed in prior coverage), " practice effect " (i.e. patients getting better at repetitions of the same cognitive tests), or positive effect from other standard practice interventions.
• BIVI still needs lots of cash.
• BIVI will likely still need to do another phase 3 trial before approval.

Unless I am missing something else, above reasons shouldn't be enough to keep BIVI's stock price so low going forward towards phase 3 results.

Financials

No update since my last coverage . BIVI will have to raise cash, probably following phase 3 topline results, to support planned clinical trials.

Risks

• The major risk is negative/suboptimal results of the phase 3 trial.
• Another risk is that BIVI will still need a lot of cash to support planned clinical trials. But with positive phase 3 results this shouldn't matter much (assuming that the market will react positively to positive results).
• Even with positive phase 3 results BIVI will most likely still have to conduct another trial, with likely a longer (at least 12-18 months) follow-up.
• Competition by other biotechs developing AD treatments. Based on its updated timeline, BIVI anticipates BLA submission for AD in 2026, which means competitors could reach the market earlier.

Conclusion

Considering bullish signals from the blinded outcome presentation the risk/reward balance has become more favorable, prompting my to change my rating to "Buy". However, market's reaction to the data (up to the time of writing) is concerning and there is still high uncertainty about the outcome. Phase 3 topline results remains a risky binary event and you should only invest what you can afford to lose. Waiting for topline results is safer and there should be plenty upside potential following positive results (i.e. it is safer to invest following topline results).

Your feedback is appreciated

Please comment below if you have any feedback (positive or negative), if you spot any mistakes, or if you believe I missed something important in my analysis.

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