OTSKF - BioXcel Therapeutics: It Is All About Key Upcoming Clinical Data Readouts

2023-05-11 16:18:07 ET

Summary

• BioXcel Therapeutics, Inc. is currently in exciting times, awaiting very important clinical trial results in the coming weeks.
• The recently released BioXcel Therapeutics first-quarter results provided a low revenue figure for IGALMI, however, the market has not focused on that number.
• I expect a good BioXcel Therapeutics, Inc. share price appreciation in the coming weeks, and I see the price in the $40-$50 range by next summer.

On May 8, BioXcel Therapeutics, Inc. (BTAI) published the results of Q1 2023 . There was a lot of expectation regarding the sales figure of IGALMI, a drug that is still in the launch phase for acute agitation in schizophrenia and syndrome bipolar patients in Hospital settings. Look at the last article published in SA:

BioXcel Therapeutics: All Eyes On Igalmi's Ramp, Reiterating Hold Rating .

There was consensus in the market that the sales figure would be around $312,000. The sales figure was finally $210,000, a figure lower than most of the estimations. When the result was known, many bearish investors began to predict a real debacle in the share prices. Surprisingly though, the price ended up going up 15% that day! How had it been possible?

Well, very simple: as I have been commenting in my past articles , Igalmi in the currently approved indication (agitation in patients with Schizophrenia and bipolar syndrome in the Hospital setting) only represents approximately 10% of the total peak potential revenue of the entire BioXcel's pipeline (neuropsychiatry arm). Most of the weight is carried by the other 3 indications that are currently being tested: Agitation in patients with Schizophrenia and Bipolar Syndrome I and II in "at-home use," 2) Agitation in patients with Dementia and Alzheimer's, and 3) Major depressive disorder ("MDT"). And the results of these three clinical trials are expected in the coming weeks: Serenity III Part 1 (Phase III trial for patients with schizophrenia and bipolar syndrome), MDD (proof of concept trial), and Tranquility II (Phase III trial of Alzheimer's). So, 3 very important catalysts are expected very soon and that will give a big boost to the share price, in case of positive results. The market was aware of this and therefore of the strong positive reaction after the Q1 ER.

Regarding Igalmi's commercial result in Q1, although it is true that the revenue figure has been lower than expected, it is also true that the number of formularies approved has been much higher than I expected. My estimate was about 80 forms approved as of May 8, and the figure has been 130. In addition, there are 600 forms waiting to be approved, so it is expected that the forms number will increase exponentially in the coming quarters. And as we already know, in the Hospital field, approved forms are a necessary condition to be able to sell the drugs.

In fact, BioXcel at the Q1 Conference Call states that:

A notable increase in Igalmi sales is expected from the second half of this year 2023.

Therefore, although the start of the launch of Igalmi in the hospital setting is slower than desired, we must be patient and wait for the next Q3 and Q4 to see a noticeable increase in revenue.

In short, BioXcel in a few weeks will report several very important clinical data, and currently presents an exceptional time to enter as an investment.

With a market capitalization of approximately $805 million, I expect that value to double in the coming months, reflecting the very likely good results from the upcoming 3 clinical trials.

IGALMI in the hospital setting: An insignificant weight in the total of BXCL501

A picture is worth a thousand words:

Above: the Weighting of the peak potential revenue of each of the 3 indications over the total of BXCL501.

This estimate of the weighting of the peak potential revenue in the 3 indications is made based on the following data provided by BioXcel:

1. There are an estimated 139 million agitation episodes occurring each year in the U.S. across our 3 priority indications, bipolar disorder, schizophrenia, and Alzheimer's disease.

2) In bipolar disorder and schizophrenia, in the at-home setting, there are an estimated 23 million agitation episodes occur in the U.S. every year.

3) In Alzheimer's disease, a very large underserved market with no approved therapies, agitation episodes are one of the primary reasons for the patients to move into long-term care facilities. -- up to an estimated 100 million agitation episodes occur annually in the U.S.

4) for agitation in Schizophrenia and bipolar syndrome in hospital settings, there are 16 million episodes annually in the US.

How does this translate to dollars?

The price of each Igalmi film in the approved indication is $110. The company has communicated that it expects the price in the indication "at-home use" to be the same. And for the indication in Alzheimer's and Dementia, although BioXcel has not yet made a statement, it is likely to be lower, due to the lower dose contained in each film, and because it will be marketed for elderly patients in nursing homes, in assisted facilities and at home. Therefore, we are going to assume a price of $50 per film.

The percentage of penetration of each of the 3 indications is estimated at:

• - IGALMI in Hospital setting : This is the indication in which I think it will have the least market share, since in the hospital setting there are multiple barriers to entry that make it difficult to introduce new drugs (cheap drugs currently in use such as benzodiazepines, antipsychotics, etc.) which, although with a worse efficacy and safety profile, are cheaper, etc.). Here I calculate a market share of 8%.
• - IGALMI "at home use" . In this indication, I estimate that the market share will be greater, since the antipsychotics, mostly injectable, can only be administered in the hospital setting. Here IGALMI will have less competition. A 13% market share would be reasonable.
• - IGLAMI for Elderly Alzheimer's and Dementia Patients : This is where I estimate the largest market share because there are currently only one drug "Rexulti" recently approved but with a Black Box Warning and important safety restrictions. An 18% market share would not be unreasonable.

Therefore, we can now estimate the maximum annual potential revenue for each of the 3 indications:

IGALMI "hospital settings": 8%X16MX$110$= $140M .

IGALMI "at home use": 13%X23MX$110= $329M.

IGALMI "Alzheimer and Dementia": 18%X100MX$50= $900M.

Estimated total revenue potential for all 3 indications: $1.37 billion.

Upcoming key data readouts

1) Serenity III part 1

BioXcel intends to report the results of Phase III Part 1 (Serenity III) trial this May. In this first part of the trial, the objective is to evaluate the efficacy and safety profile of BXCL501 at a dose of 60 mcg to treat agitation attacks in patients with schizophrenia and bipolar syndrome. Part 1 of the trial has been developed in the hospital setting.

BioXcel seeks here to achieve a reasonable efficacy rate with a maximum level of safety and a statistical significance level of at least 0.05 (P=0.05). The objective is to achieve the expansion of IGALMI labeling for domestic use.

Regarding the level of statistical significance, the company affirms that they have already carried out previous tests and they achieve it with a test size of 200 patients. Therefore, this objective seems practically achieved.

Regarding the safety profile expected in Serenity III, it is practically guaranteed that the safety data is completely clean since IGALMI has already been tested in two Phase III trials at much higher doses (180mcg and 120mcg) with an excellent safety profile.

Regarding efficacy, BioXcel has already carried out an interim trial in patients with Schizophrenia and bipolar syndrome, obtaining good results (a difference of more than 1 point compared to placebo in the PEC agitation score and with a statistical significance level of 0. 05 or less). This difference of 1 point or greater would be enough (as long as it has an excellent safety profile and a level of statistical significance of at least 0.05), for the FDA to end up expanding the use of IGALMI to "use at home."

Therefore, since BioXcel has previously done interim trials with the 60 mcg dose, it seems reasonable to think that the data will be good: excellent safety profile, with a difference in efficacy of more than 1 point compared to placebo in the PEC score table, and a statistical significance level of at least 0.05.

We will check it in a few days.

2) Major Depressive Disorder ((MDD))

BioXcel will present, also this May, the results of the Phase I trial (proof of concept) to evaluate the safety profile of BXCL501 in healthy patients and to select the optimal dose for the next Phase II trial.

This test is perhaps the one that will have the least impact on the share price because it is still in a very early phase. In any case, the potential market for MDD is the largest in the entire BioXcel pipeline, so we will have to be attentive to the results of the following trials.

3) Tranquility II

The results of this test are, in principle, those that can have the greatest impact on the share price since, as we have seen previously, it is in this indication that BXCL501 obtains the greatest potential revenue. BioXcel intends to report these results in June. Here BXCL501 40 mcg is evaluated to treat agitation attacks in patients with Alzheimer's and moderate-grade Dementia, who can self-medicate.

In the last Phase II trial, BXCL501 was evaluated at 30 mcg and 60 mcg. Excellent efficacy was achieved for both arms, measured as the difference in PEC points from the placebo at two hours (2.5 and 4 respectively). Statistical significance was achieved in the 60 mcg (0.001) arm.

Regarding safety, very clean data was obtained. As mild adverse effects, I highlight mild hypotension only in 10% within the 60mcg arm. No cases of hypotension were reported in the 30 mcg arm. Based on these results, it is very likely that the data that will come out in a few weeks for 40mcg will be very good on both efficacy and safety. The data will also have statistical significance (P less than or equal to 0.05) due to the huge sample size:150.

It should be noted here that Otsuka's Rexulti has just been approved by the FDA for agitation in patients with Alzheimer's and dementia. It has become the first drug approved for this indication, but the label includes a severe Black Box Warning of the risk of death for elderly patients, as well as important safety restrictions. With this poor safety profile, the commercial capacity of the drug is very limited.

As I predicted a few months ago in my article :

Seeking treatment for agitation in Alzheimer's patients: a race for a multi-million dollar opportunity, and BioXcel´s BXCL501 leads the way.

Rexulti has become the first drug approved specifically for this indication, but due to the bad safety profile, I don't think it will have much market share.

Otsuka's Rexulti: The first BUT not the best.

Axsome Therapeutics, Inc. (AXSM) is another biotech that is testing a candidate drug (AXS-05) in a Phase III trial which data expected for the next year 2024. It is similar to Rexulti: a daily pill to prevent agitation attacks. But it won't get probably the approval until three or four years.

BioXcel´s BXCL501, without these safety concerns (Rexulti), and better efficacy data, will most likely become the most used drug for this indication and thus the standard of care ((SOC)). Next June, the Tranquility II results will probably confirm my thesis.

Risks

Like all biotechnology, BioXcel is not exempt from risks that any investor should be aware of:

• -The results of the next trials (Serenity III and Tranquility II) are not as expected. Poor results would cause a significant drop in the share price. This possibility I really think is very low.
• -With respect to the cash position , cash and cash equivalents totaled USD $165.5 million as of March 31, 2023. BioXcel believes that the full execution of its strategic financing with Oaktree and Qatar Investment Authority and revenue from IGALMI will result in a cash outflow enough until 2025. I don't expect a possible offering until next year 2024.

Conclusion

BioXcel Therapeutics, Inc. is currently in exciting times, awaiting very important clinical trial results in the coming weeks.

The recently released first-quarter results provided a low revenue figure for IGALMI, however, the market has not focused on that number, but on the data from the 3 very important clinical trials yet to come.

Igalmi in the currently approved indication represents only a small % of the total revenue potential that BXCL501 can generate.

Regarding the income of Igalmi, BioXcel expects a notable increase from the 2nd semester of this year 2023.

On the other hand, and as reported in Q1ER CC, BioXcel is very confident that the results of Serenity III part 1 will be very good. In fact, the company has interim data from trials carried out with BXCL501 60mcg where a margin of more than one point on the PEC scale was obtained compared to the placebo group, excellent safety data and a statistical significance level of less than 0.05. This suggests that the upcoming results will be very good in terms of efficacy, safety, and statistical significance.

As for the MDD trial, results are also expected in May. Phase I trial (proof of concept) BXCL501 is evaluated in healthy patients to determine the optimal dose in subsequent Phase II trials.

Finally, the Tranquility II data is expected for next June. Here, too, I expect very good results in terms of efficacy and safety. Data from the earlier Phase II trial in the 30 mcg and 60 mcg arms suggest that in the 40 mcg arm, sufficient efficacy and safety data will be obtained for FDA to finally approve BXCL501 for elderly patients with Alzheimer's and dementia. Due to the lack of treatments currently available, It is very likely that BXCL501 will become the standard of care ((SOC)) in the future for the treatment of agitation attacks in this group of elderly patients.

On the oncology side, BXCL701 continues to be evaluated in trials to treat resistant prostate cancer, through the Company subsidiary. It is expected to make an offering for a part of the subsidiary in a few months to raise funds to continue funding the trials.

With all this, I expect a good share price appreciation for BioXcel Therapeutics, Inc. in the coming weeks, and I see the price in the $40-$50 range by next summer.

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