CLTEF - Calliditas: A Trailblazing Triumph In IgAN Treatment

2023-04-27 09:17:35 ET

Summary

• Part B portion of Phase 3 NefIgArd trial reveals positive outcomes for nefecon, leading to a reaffirmed buy recommendation for Calliditas.
• Nefecon demonstrates statistically significant stabilization of eGFR levels in IgAN patients, with consistent benefits across the entire study population.
• We anticipated full approval of nefecon.
• Travere and Chinook's mediocre eGFR data (expected in 1H-2H 2023) could have a positive readthrough to nefecon (Tarpeyo) and Calliditas's stock price in 2023.
• Calliditas is expected to achieve its projected $120M revenue in 2023, driven by strong market access, favorable trial outcomes, and anticipated regulatory approvals in multiple regions.

Update to our thesis

We reaffirm our buy recommendation for Calliditas ( CALT ) in light of the persuasive outcomes from the recently published Phase 3 NefIgArd trial.

The Phase 3 NefIgArd trial examined Nefecon in the IgAN patient population and included 2-year data. The findings were quite remarkable, with Nefecon meeting its primary objective by demonstrating a statistically significant (p < 0.0001) stabilization of eGFR in comparison to the placebo, registering 5.05 mL/min/1.73m2 versus placebo at the 2-year mark. We emphasize that eGFR is a critical metric for assessing kidney function and serves as a reliable indicator for tracking the progression of IgAN, a kidney disease characterized by IgA accumulation in the kidneys. Tracking eGFR levels enables researchers to determine the most effective treatment approach for the condition.

Importantly, the company observed that the eGFR benefit was consistent across the entire study population, irrespective of baseline UPCR (proteinuria). This observation reinforces our belief that steroids will remain relevant even with the approval of complement inhibitors and ERA/RASi from Travere and Chinook. Looking ahead, we believe that full approval is a highly likely scenario, positioning Nefecon as the first fully approved disease-modifying drug for IgAN. In addition, the company mentioned that the safety profile was clean and in line with the findings of the first part of the trial (Part A). It is not unexpected as the drug was administered for only 9 months, and it is probable that the drug would be eliminated from the system relatively soon after it is discontinued.

Furthermore, as we move forward, we anticipate that investor focus will shift to the company's progress toward profitability. Calliditas previously guided a >$120M revenue in 2023, a target we believe is highly achievable given that IgAN patients are typically young and the majority of sales would likely come from commercial payers, making market access relatively straightforward compared to drug launches heavily reliant on Medicare and Medicaid. Moreover, the company has guided that it expects full approval with the EC, UK launch/reimbursement, and Asia launches during 2023, which could further boost sales in the 2023-2024 period.

Phase 3 readout from Travere and Chinook could be an underfollowed catalyst for Tarpeyo

In addition to assessing profitability and growth, we foresee several pivotal catalysts from competitors that can have a positive readthrough to Tarpeyo. Specifically, we are closely monitoring Chinook's Atrasentan phase 3 ALIGN trial with a readout anticipated in 3Q23, Travere's forthcoming FSGS outcome readout in 1H23, and the Phase 3 PROTECT IgAN trial, scheduled for readout in 4Q23. We expect the ERA or ERA/RASi combo won't show meaningful stat sig improvement in eGFR. For example, Atrasentan's AFFINITY trial showed no eGFR improvement , and the FDA rejected Travere's FSGS accelerated approval due to inadequate eGFR data previously. If both ERA or ERA/RASi trial results produce disappointing eGFR data, we believe this could represent a net positive inflection point in terms of market sentiment. Many investors have been discounting Tarpeyo as they believe in a direct relationship between proteinuria and eGFR (greater reduction in proteinuria = greater eGFR stabilization). However, we believe that the relationship may be proven false with the two aforementioned readouts. Underwhelming eGFR data from ERA/RASi should boost the sales ramp of Tarpeyo as it shifts the risk/reward of prescribing a steroid over ERA/RASi in certain cases. Tarpeyo may be used in earlier lines of therapy (after exhausting RASi) than what it is being positioned at the moment (after exhausting ERA and RASi), albeit we do not believe it to completely displace RASi or ERA in mild-moderate patients due to limitations around chronic usage/side-effects and mechanism of action differences.

Summary of IgAN drugs:

Drug

Company

Description

Status

Reduction in proteinuria

Tarpeyo

Calliditas

Oral formulation of budesonide

Approved (accelerated); eGFR data reported Mar 2023

34% (31% pbo-adjusted) in ph3 Nefigard

Filspari (sparsentan)

Travere

Oral endothelin type A & angiotensin II type 1 inhibitor

Approved (accelerated); eGFR data due Q4 2023

50% (35 points adjusted for irbesartan control) in ph3 Protect

Narsoplimab (OMS721)

Omeros

Anti-MASP2 antibody

Ph3 Artemis-IgAN ; proteinuria data due mid-2023

64% (no control arm) in ph2

Atrasentan

Chinook

Oral endothelin A receptor inhibitor

Ph3 Align ; proteinuria data due H2 2023

55% (no control arm) in ph2 Affinity

Iptacopan (LNP023)

Novartis

Oral complement factor B inhibitor

Ph3 Applause-IgAN ; proteinuria data due H2 2023

23% pbo-adjusted in ph2 *

Sibeprenlimab (VIS649)

Otsuka

Anti-April antibody

Ph3 Visionary ends Dec 2026

43% pbo-adjusted in ph2 **

*At highest dose (200mg BID); **pooled data with IV doses 2mg, 4mg & 8mg monthly. Source: Evaluate Pharma & clinicaltrials.gov.

Source: Evaluate Pharma

Risks

1. Clinical Trials Uncertainty: Calliditas Therapeutics' drug candidates' success hinges on clinical trial outcomes, which are inherently unpredictable due to factors such as safety and efficacy concerns. Adverse trial results may substantially impact the company's share price and future prospects.

2. Competitive Pressures: Calliditas Therapeutics faces stiff competition in the industry, with numerous companies developing therapies for similar indications. Such competition could constrain the potential market share and profitability of Calliditas Therapeutics' drug candidates.

3. Intellectual Property Challenges: The company's success relies on the robustness and enforceability of its intellectual property, encompassing patents and trade secrets. Any disputes or challenges to these intellectual property rights could adversely affect the company's market position and profitability.

4. Regulatory Hurdles: The drug approval process is protracted and uncertain, with regulatory bodies like the FDA and EMA holding the authority to delay or deny drug candidate approvals. These approvals are crucial for commercializing Calliditas Therapeutics' drug candidates, and any delays or rejections could negatively influence the company's financial performance.

5. Financial Vulnerability: As a clinical-stage biopharmaceutical company, Calliditas Therapeutics has a limited operating history and incurs significant expenses related to drug development. The company has reported net losses in recent years, and any substantial negative financial developments could affect its share price and future prospects.

Bottom Line

In conclusion, the compelling results from the Phase 3 NefIgArd trial reinforce our buy recommendation for Calliditas and validate the potential of Nefecon as a groundbreaking, disease-modifying treatment for IgAN. The robust eGFR benefits observed across the entire study population and the favorable safety profile underscore the drug's promise in the evolving treatment landscape. As investor attention shifts toward the company's profitability, we remain confident in Calliditas' ability to achieve its projected >$120M revenue in 2023, driven by strong market access and anticipated regulatory approvals across multiple regions.

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