CBAY - CymaBay's Seladelpar: An Exceptional PPAR Agonist Candidate For PBC

2023-07-20 06:50:16 ET

Summary

• CymaBay Therapeutics' primary candidate, seladelpar, shows promising results as a potential treatment for primary biliary cholangitis, a liver autoimmune disease.
• Seladelpar demonstrated significant anti-cholestatic, anti-inflammatory, and anti-pruritic activity in Phase 2 and ENHANCE Phase 3 studies, improving patient quality of life.
• The ongoing RESPONSE Phase 3 study is critical for the company, with results potentially cementing seladelpar's position as a leading treatment option for PBC.

Introduction

CymaBay Therapeutics ( CBAY ) is a clinical-stage biopharmaceutical company aiming to develop innovative treatments for liver diseases and other chronic conditions with high unmet medical needs. The company's primary candidate, seladelpar, is a potent agonist of the PPARd receptor and is being developed to treat primary biliary cholangitis [PBC], a liver autoimmune disease. Current strategic objectives include advancing seladelpar's clinical development, seeking regulatory approval, reinforcing patent protection, and exploring new product opportunities. Their pipeline also includes MBX-2982, targeting hypoglycemia in Type 1 Diabetics.

Recent developments: Genfit's Phase 3 trial for elafibranor, targeting PBC, met its primary endpoint . This news triggered a ~24% surge for CymaBay Therapeutics, also developing a PPAR agonist for PBC.

The subsequent article examines the financial performance of CymaBay and assesses the potential of seladelpar for treating PBC. Towards the conclusion, an investment recommendation is provided.

Financial Performance

CymaBay Therapeutics reported a net loss of $28.8 million for Q1 2023, slightly higher than the $27.8 million loss in Q1 2022. Research and development expenses saw a slight increase to $18.6 million, up from $18.4 million, mainly due to higher employee compensation costs offset by lower project spending. General and administrative expenses rose to $8.3 million from $6.1 million as the company expanded its personnel and infrastructure. The increased net loss was mainly due to the rise in general and administrative costs, mitigated by higher interest income. Expectations for future operating expenses anticipate an increase as they continue developing and pre-commercializing seladelpar for PBC.

Seladelpar: Promising Treatment for Primary Biliary Cholangitis

Primary biliary cholangitis [PBC] is a chronic autoimmune liver disease that causes the progressive destruction of bile ducts. This process results in inflammation, impaired bile flow or cholestasis, and can eventually lead to cirrhosis. The disease is driven by an immune-mediated attack on small bile ducts, leading to inflammation and fibrosis. The primary treatment for PBC is ursodeoxycholic acid (UDCA), but many patients are intolerant to or do not respond sufficiently to UDCA and require subsequent therapy with Intercept's ( ICPT ) obeticholic acid . Despite these few options, there is a substantial market opportunity for new treatments in the United States, especially as PBC is estimated to affect 1 in 1000 women over 40.

Seladelpar, developed by CymaBay Therapeutics, has shown promise in several trials. In the Phase 2 open-label study initiated in December 2016, seladelpar demonstrated sustained anti-cholestatic and anti-inflammatory effects over 52 weeks and significantly improved pruritus, a common and distressing symptom in PBC patients.

The global, placebo-controlled ENHANCE (Phase 3) study was designed to evaluate the safety and efficacy of seladelpar. Although the study was terminated early due to initial findings in a separate NASH study, topline data from ENHANCE showed a potent anti-cholestatic, anti-inflammatory, and anti-pruritic activity of seladelpar after just 12 weeks. Specifically, 78.2% of patients on 10 mg of seladelpar compared to 12.5% on placebo achieved the primary composite outcome, and 27.3% of patients on 10 mg of seladelpar normalized ALP by 3 months. Moreover, significant improvement was observed in pruritus at 3 months in patients treated with seladelpar 10 mg. In July 2020, the FDA lifted the clinical hold, allowing seladelpar's continued development in PBC due to its demonstrated safety, tolerability, and efficacy.

Seladelpar: Advancing Towards Breakthrough Treatment for PBC

Investors can anticipate significant advancements in the development of seladelpar in the near future. The RESPONSE Phase 3 registration study, which finished enrolling participants in July 2022, is projected to announce top-line results during the third quarter of 2023. This study's objective is to assess the safety and effectiveness of seladelpar in patients with PBC over a 52-week period. The primary measure of success will be the composite biochemical responder rate after 52 weeks. Moreover, the ongoing ASSURE study, focused on long-term safety, is expected to include more than 300 patients. This will provide additional data on efficacy and safety, complementing the findings from the RESPONSE and ENHANCE trials and strengthening the New Drug Application (NDA) submission for seladelpar in PBC. With a population of over 400 distinct PBC patients treated with seladelpar, a robust database of efficacy and safety is being established, indicating a promising future for the medication.

Seladelpar demonstrates strong potential as a treatment for PBC, especially for patients who have an insufficient response or intolerance to the current first-line treatment, ursodeoxycholic acid (UDCA). The drug operates via a unique mechanism as a selective agonist of the peroxisome proliferator-activated receptor delta (PPARd), which directly or indirectly regulates genes involved in the synthesis of bile acids and metabolism of lipids, inflammation, and fibrosis.

The noteworthy results from the Phase 2 open-label study and ENHANCE Phase 3 study showed robust anti-cholestatic, anti-inflammatory, and anti-pruritic activity of seladelpar. The ability to improve pruritus, a common symptom in PBC patients, is particularly significant as it could improve patients' quality of life substantially.

In the upcoming RESPONSE trial, investors should look for key primary and secondary outcomes. The primary outcome is the composite biochemical responder rate at 52 weeks, with a responder defined by specific ALP and total bilirubin levels. Successful achievement of this endpoint could be a strong signal for seladelpar's efficacy. Secondary outcomes include the rate of normalization of ALP at 52 weeks and the change in pruritus level at six months for patients with moderate to severe pruritus at baseline. These results could further bolster seladelpar's unique position as an effective PBC treatment option.

My Analysis & Recommendation

The potential of CymaBay Therapeutics is undeniable, with seladelpar showing considerable promise as a potent treatment for PBC. Having observed the clinical trial landscape, it's apparent that seladelpar stands out as a potential best-in-class PPAR agonist, based on robust efficacy data from previous studies.

The ongoing RESPONSE trial presents a pivotal moment for the company. Given the substantial evidence from earlier phase trials highlighting seladelpar's anti-cholestatic, anti-inflammatory, and anti-pruritic effects, the odds are favorable for the drug achieving positive results in this study. The primary and secondary outcomes will provide critical insights into seladelpar's efficacy, potentially setting a new standard in PBC treatment.

While CymaBay's enterprise value of $1 billion may initially seem daunting, it's worth noting that the unmet need for PBC treatment is significant. If the RESPONSE trial proves successful, the potential for market penetration is immense, justifying the current valuation and anticipating substantial growth.

It's important to note the inherent risks associated with drug development and clinical trials. However, in this instance, the compelling evidence for seladelpar's efficacy, combined with the critical need for improved PBC treatments, suggests a more positive risk-reward balance.

In conclusion, considering seladelpar's potential as a best-in-class treatment and the encouraging indicators for a positive outcome in the RESPONSE trial, I would currently recommend a "Buy" position on CymaBay. The coming months promise pivotal data that could cement seladelpar's position in the PBC treatment landscape and significantly enhance CymaBay's valuation.

Risks to Thesis

When the facts change, I change my mind.

As I advocate a "Buy" recommendation on CymaBay, it's crucial to recognize some risks that could impact this investment. Firstly, the success of the company is heavily tied to the clinical outcomes of seladelpar in ongoing trials. While the drug has shown promise, the inherent uncertainty in drug development could result in unexpected trial results.

Secondly, even if the RESPONSE trial is successful, navigating the regulatory pathway to gain approval is another hurdle. Regulatory bodies like the FDA have rigorous approval processes and the possibility of not gaining approval cannot be ruled out.

Lastly, the market acceptance of seladelpar, if approved, poses another risk. The biopharmaceutical market is highly competitive and seladelpar's commercial success would depend on its ability to carve out a significant share in the PBC treatment market.

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