CALT - Calliditas: Low Cash And Unconvincing Pipeline

Summary

• CALT has an approved product in the US and EU in IgAN.
• However, the rest of its pipeline consists of an unconvincing single product with a history of failure.
• They are also low on cash.

Calliditas Therapeutics (CALT) is a small Swedish company that describes itself as a "commercial stage biopharma company focused on novel treatments in orphan indications, with an initial focus on renal and hepatic diseases with significant unmet needs." The company has two modified generic corticosteroid products in the US and EU markets, respectively, and a third that submitted for approval in China last year. All three are targeting IgA Nephropathy (IgAN). The first product, Tarpeyo, is "the first and only FDA-approved treatment to reduce levels of protein in the urine in adults with IgA Nephropathy who are at high risk of disease progression."

The current pipeline begins with a NOX Enzyme Inhibitor called setanaxib, which is in a phase 2b/3 trial targeting primary biliary cholangitis. This asset has an interim analysis due in the second half of 2023, and topline data readout in 2025. The same asset is also in a phase 2 trial for head and neck cancer, and two other earlier stage trials for Idiopathic Pulmonary Fibrosis ((IPF)) and another kidney indication. This constitutes the whole of its pipeline. Basically, this is a company that began small, with a couple of drug approvals, and then moved on to its current pipeline. So far so good.

The US approved product is an extended release budesonide capsule called Tarpeyo which is indicated for IgAN. Tarpeyo started with positive Phase 2b results that were published in The Lancet. Thereafter, there was positive topline phase 3 data which was read out in November 2020. Both these trials met primary and key secondary endpoints. The US approval came in December 2021. In the last 4 quarters, sales figures have been $1.6mn, $6.6mn, $12.1mn and $20.5mn respectively, or $41mn for the full year 2022. The product is outlicensed to Stada in Europe, and to Everest Medicines in China. There are 130,000-150,000 US patients, 200k patients in the EU, and over 5 million Chinese patients.

The Everest partnership entailed an upfront payment of $15mn, and up to an additional $106mn in milestone payments, as well as low to mid-teen royalties on annual net sales. The European Stada partnership had an upfront payment of $20mn and up to an additional $77.6M in future milestone payments, as well as low 20s to low 30s tiered royalties on net sales. The company received $13mn in milestone payment following European Commission approval in July 2022.

Coming to setanaxib in PBC, NOX enzymes produce reactive oxygen species ((ROS)) which "have essential functions in cellular signalling processes, helping to regulate cell proliferation, differentiation and migration, as well as modulating the innate immune response, inflammation and fibrosis." As is well-understood, whatever assists in cell proliferation in normal people could be an enabler of cancer in diseased patients. Thus, NOX4 is highly over-expressed in cancer associated fibroblasts ((CAFS)). It helps with myofibroblastic activation within tumors, shielding tumor cells from CD8+ TILs. The company's hypothesis is that "targeting CAFs with setanaxib could improve patients' responses to immunotherapies, and function as an adjunctive." However, there is only preclinical data combining setanaxib with pembrolizumab.

There is, however, phase 2a data in PBC where patients saw statistically significant improvements in fatigue and liver stiffness. PBC is a progressive disease impacting 140,000 US patients, who are at risk of developing liver fibrosis due to cholestasis, the increased accumulation of bile acid in the liver. Existing treatments address inflammation, cholestasis and bile acid clearance, but do not meaningfully improve quality of life. The phase 2a study of 111 patients did not meet its primary endpoint of percent change in serum GGT from baseline to Week 24 , but it met key secondary endpoints "related to change in alkaline phosphatase ((ALP)) level, liver stiffness score, and important quality of life metrics." Calliditas is now running a phase 2b/3 confirmatory study. Frankly, the phase 2a trial data did not impress me much, and the design of the phase 2b/3 trial, where setanaxib is used as an add-on to UDCA (Ursodeoxycholic, approved for PBC), leaves much to be desired. This trial, it should be noted, now has ALP as the primary endpoint, where the phase 2a saw some positive data . Research has shown correlation between GGT and ALP, so it is surprising that setanaxib met the ALP endpoint but failed the GGT one. The molecule is not new to failure .

Financials

CALT has a market cap of $598mn and a cash reserve of $66mn. R&D expenses were approximately $10mn ($103mn SEK), and SG&A were approximately $18mn. At that rate, the company does not have cash beyond 2-3 quarters.

Bottomline

CALT was able to get its first approval after a few trial and errors. However, its second and only pipeline asset has a history of failures, and out of an abundance of caution, does not evoke a lot of confidence. Their cash balance is also precariously low. Given all of that, I am going to stay on the sidelines.

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