IDRSF - Idorsia: Interesting Swiss Biotech But Commercialization Seems Uncertain

Summary

• Idorsia is a Swiss biopharmaceutical company with multiple commercial and pre-commercial assets.
• Idorisa's lead asset Daridorexant seems to be a more attractive option compared to SOC in Isomnia due to lower a) drug abuse, b) withdrawal symptoms, and c) rebound insomnia.
• The commercial ramp of Daridorexant was disappointing, but the prospect in 2023 seems brighter.
• Based on the cash-runway overhang and uncertainty around Aprocitentan, we initiate with a hold rating.

Background

Idorsia ((IDIA)) (IDRSF) is a Swiss biopharmaceutical company founded in 2017 and headquartered in Allschwil, Switzerland. The company specializes in the discovery, development, and commercialization of small molecule drugs for the treatment of diseases in areas of high unmet medical need, such as CNS disorders, cardiovascular diseases, and respiratory disorders. The company's near-term strategy is to launch at least three products to the market through commercializing inhouse and reach sustainable profitability by 2025.

The lead candidate Quviviq (daridorexant) is approved in the US and EU, and the product was launched last year. Another approved product is Pivlaz (Clazosentan), which is approved in Japan and completed a global phase 3 trial. The third most advanced candidate is Aprocitentan, which is a dual endothelin receptor antagonist targeting difficult-to-control hypertension, where the company filed an NDA last December, and MAA is under preparation.

Quviviq commercial launch

Daridorexant is a potent and selective dual orexin receptor antagonist ((DORA)). It works by blocking the effects of orexin, a chemical in the brain that regulates wakefulness. By blocking the action of orexin, Daridorexant helps to promote sleep and treat insomnia. Daridorexant is thought to work by balancing the levels of wake-promoting and sleep-promoting chemicals in the brain, leading to improved sleep and a reduction in the time it takes to fall asleep.

The orexin (also known as hypocretin) system is important for the regulation of wakefulness because it is responsible for promoting wakefulness and regulating the sleep-wake cycle. Orexin is a neurotransmitter produced by neurons in the hypothalamus that plays a crucial role in regulating the state of consciousness and the transition between wakefulness and sleep.

When orexin is released into the brain, it stimulates the orexin receptors and promotes wakefulness by increasing the activity of wake-promoting neurons in the hypothalamus and brainstem. This leads to increased alertness, reduced fatigue, and improved cognitive function. Conversely, when orexin signaling is suppressed, it results in a reduction of wakefulness, leading to increased sleepiness and the promotion of sleep. Therefore, the orexin system plays a crucial role in maintaining normal sleep-wake patterns and in regulating the state of consciousness, making it an important target for the treatment of sleep disorders such as insomnia.

Clinical trial data seems compelling

There were three main clinical studies conducted so far, two phase 2 studies in adults and elderly patient population with insomnia, and one phase 3 confirmatory study. During the clinical trial, the drug showed quick absorption and a short half-life, which is critical in avoiding the next morning residual effect. The trials showed no deterioration of the next-day functioning, no rebound insomnia, no withdrawal symptoms upon treatment discontinuation, and no safety concern so far.

Efficacy was compelling, where Daridorexant showed dose-dependent improvement in sleep onset, sleep maintenance, and total sleep time in adults and elderly chronic insomnia patients. We believe the datapoints in the "elderly" population to be important differentiators vs. Z drugs or benzodiazepine hypnotics.

The key unmet need in insomnia seems in the adult population and lowering certain unfavorable adverse events of the current standard of care therapies.

Insomnia is a sleep disorder characterized by difficulty falling asleep, staying asleep, or both, despite having adequate opportunities for sleep. This can result in poor quality sleep, decreased alertness and energy during the day, and difficulty functioning in daily life. A variety of factors, including stress, medical conditions, medication, and poor sleep habits, can cause insomnia. It can also be a symptom of other underlying psychiatric or medical conditions. Treatment for insomnia may include lifestyle changes, such as adopting good sleep habits and reducing caffeine intake, as well as therapy, medication, or a combination of both.

There are several classes of drugs that are used to treat insomnia, including:

1. Sedative-hypnotics: These drugs, such as benzodiazepines (e.g., lorazepam, temazepam) and non-benzodiazepine hypnotics (e.g., zolpidem, eszopiclone), are commonly used to treat insomnia due to their sedative effects. However, it is not recommended to use sedatives in older adults as the first choice for insomnia due to an increase in the risk of falls, fractures, vehicle accidents, and impaired cognition, and sedatives are only indicated to be taken for a short period of time (1-4 weeks) with the lowest doses and intermittent uses (no more than 4 times a week) is recommended due to risk of tolerance and dependence.

2. Antidepressants: Certain antidepressants, such as trazodone, can have sedative effects and be used to treat insomnia, especially if the insomnia is associated with depression.

3. Melatonin receptor agonists: These drugs, such as ramelteon, work by promoting sleep by regulating the circadian rhythm and increasing melatonin levels.

4. Over-the-counter ((OTC)) sleep aids: Some OTC sleep aids, such as diphenhydramine (e.g., Benadryl), can be used for short-term treatment of insomnia.

To date, the most commonly prescribed drugs are non-benzodiazepine benzodiazepine receptor agonists, also known as Z-drugs, such as eszopiclone, zopiclone, and zolpidem. Benzodiazepines are not recommended due to dependence, addiction, misuse/abuse, and high risk of falls, especially for the elderly population (especially with triazolam). Antidepressants and antipsychotics are not recommended unless the patient has underlying depression and should not be considered as a first-line treatment.

Z-drugs are fairly effective, but they are known to come with residual morning effects. Furthermore, Z-drugs are contraindicated for sleep apnea, severe respiratory depression, myasthenia gravis, a history of complex sleep behaviors, and severe hepatic impairment. Also, they come with potential side effects related to depression, and although less addictive and patients develop a lesser degree of tolerance and withdrawal compared to long-acting benzodiazepine, zopiclone can still be addictive. In contrast, Daridorexant seems to have limited residual morning effects and a lesser risk of depression.

To summarize, Daridorexant seems to be a more attractive option compared with the aforementioned standard-of-care drugs due to a) low risk of drug misuse, b) low degree of withdrawal symptoms, and c) lower degree of rebound insomnia. In the long-run, this can position the drug as a first-line therapy replacing Z-drugs.

Commercial uptake of Quviviq ongoing

During the JPM conference , the company provided a more detailed update on Quviviq's reimbursement trajectory, where the company now agreed with Express Scripts, and positive coverage decisions are expected in 2023. The company is targeting US coverage for the majority of the patient population with Insomnia. Looking at the compelling clinical data and positive news flow around reimbursement, we expect the sales ramp to take off during 2023. Although, we note Merck's (MRK) Orexin Belsomra , with 7 year of launch track record, may be a wildcard for the trajectory.

Aprocitentan's phase 3 data seems encouraging, and the company filed for an NDA

Aprocitentan is a dual endothelin receptor antagonist targeting difficult-to-control (resistant) hypertension. Currently, Idorsia is collaborating with Johnson & Johnson (JNJ) to commercialize aprocitentan.

Terms of the agreement with Johnson biotech are :

• Idorsia to receive milestone payment of USD 230 million

• Idorsia and Janssen Biotech to share costs of Phase 3 development equally

• Idorsia entitled to royalty payments on potential future net sales

Resistant hypertension is a form of high blood pressure that is not adequately controlled with the use of three or more antihypertensive medications, including a diuretic. It is defined as a systolic blood pressure (the top number in a blood pressure reading) of 140 mmHg or higher or diastolic blood pressure (the bottom number in a blood pressure reading) of 90 mmHg or higher, despite the use of multiple medications at optimal doses.

Resistant hypertension is a common and challenging problem, affecting about 10-20% of people with hypertension. It is associated with a higher risk of cardiovascular disease, kidney disease, and stroke and requires a comprehensive approach to management that includes lifestyle changes and careful monitoring of blood pressure and medications. In some cases, resistant hypertension may be caused by secondary factors such as sleep apnea, renal artery stenosis, or hormonal imbalances, and these underlying conditions must be identified and treated in order to effectively manage resistant hypertension.

The drug is currently under review in the US, and MAA is under view in the EU. The company seems to be preparing other filings. In early November 2022, Idorsia has reported key results of aprocitentan's phase 3 PRECISION trial, which was published in the Lancet and American Heart Association Scientific Session 2022. At week 4 point, although statistically significant, it seems like the placebo-adjusted reduction in SBP and DBP seems fairly modest, -3.8 mm Hg, which could lead to the questionable market positioning of Aprocitentan with other fourth-line therapeutic options (i.e., spironolactone), provided that the FDA requires 4 week days as an endpoint and BP lowering trend to continued up to ~9 months. Also, high occurrence of oedema or fluid retention could be a negative factor that impacts prescribing behavior. We note this may be the reason why the company has not yet signed a royalty monetization deal regarding aprocitentan.

Financials

The company currently holds around ~$700M in cash, and the company aims to reach operating profitability by 2025. We believe there is a funding gap that the company need to address, as Quviviq's revenue isn't ramping up as fast as some investors hoped for. To address this concern, the company seems to be planning to divest aprocitentan to add to its cash runway that it needs to commercialize Daridorexant.

We believe the commercial uptake of Quviviq to improve significantly more during 2023 with an improvement in payer coverage and market entry. Quviviq is under review with Health Canada, approved by EMA, launched in Germany and Italy, and approval in other European countries is expected to follow. In Asia, the drug showed compelling phase 3 results, and filing is expected in 2H of 2023.

Below is a chart of Quviviq's monthly prescribing showing compelling growth.

Commercial highlights of Idorsia, 9 month of 2022:

• QUVIVIQ ™ ( daridorexant ) acceleration in volume and number of patients treated after the start of the consumer campaign – poised to become the leading branded insomnia medication in the US in new-to-brand prescriptions.
• QUVIVIQ™ (daridorexant) Net sales of CHF 2.3 million since launch in May 2022, do not reflect the volume as broad commercial coverage is under negotiation.
• PIVLAZ™ (clazosentan) strong performance in Japan with net sales of CHF 25.1 million since launch in April 2022, with approximately 20% of aSAH patients treated in September.

Risks

Commercial risk: as the company have a limited track-record in commercialization, potential uncertainty remains around the commercialization of Quviviq and Pivlaz. Capital raise risk remains as the company need additional capital desperately to finance its operation and expedite the company's Quviviq commercialization. Clinical risk remains as the company is working on multiple clinical developments; any failure of an ongoing clinical trial can impact the stock negatively.

Conclusion

We like Quviviq's clinical profile and clinical data on hand; however, the commercial uptake seems tougher than what the Street is hoping for. Furthermore, we are lukewarm on aprocitentan's recent phase 3 data. Adding to that, the company seems to have a cash runway overhang, where the company is hoping to monetize aprocitentan's royalty, which has been slow. Due to multiple uncertainties and currency headwinds in 2023, we initiate with a hold rating until we see a few more quarters of a positive trend in Quviviq's sales in the US and until the company secures a proficient amount of cash buffer.

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