INZY - Inozyme: A Major Catalyst Is Uncomfortably Far Off

2023-11-27 07:30:00 ET

Summary

• Inozyme is a rare disease therapy developer with a lead asset, INZ-701, targeting ENPP1 Deficiency and ABCC6 Deficiency.
• INZ-701 has shown safety and tolerability in trials and has the potential to improve plasma PPi levels.
• The ENERGY-3 trial for INZ-701 is expected to enroll up to 33 pediatric patients and will have topline data in 2025.

Inozyme Pharma, Inc. ( INZY ) is a rare disease therapy developer in mid-stage clinical trials. I covered this stock a few months ago. The lead asset is INZ-701, a novel enzyme replacement therapy or ERT, which is in a phase 2 trial targeting ENPP1 Deficiency. ENPP1 Deficiency is a rare genetic disease caused by mutations in the ENPP1 gene. This reduces levels of pyrophosphate (PPI') and adenosine in the blood, which in turn leads to abnormal mineralization and pathologic calcification, and intimal proliferation.

Nearly 50% of infants with ENPP1 Deficiency die within six months of birth. They also have rickets, while those that live to adulthood have softened bones or osteomalacia, and have various life-threatening pathological symptoms. ENPP1 Deficiency has no approved therapies. There are some 700 ENPP1 patients.

INZ-701 also targets ABCC6 Deficiency, which causes another calcification disease called Pseudoxanthoma elasticum (PXE'). As I noted earlier, "it causes low pyrophosphate levels leading to soft tissue calcifications in the skin, retina, and arteries, but can also cause kidney stones."

INZ-701 has demonstrated its safety and tolerability in various trials, and also its ability to improve plasma PPi levels. Topline data from a phase 1/2 trial highlighted some of these findings in various dosage strengths of the molecule. With a long half-life, it can be potentially dosed once weekly and was able to improve PPi plasma levels within 6 hours of dosing. Importantly, the molecule also improved outcomes data, although this was patient-reported, which is a concern in pediatric patients. However, there were also improvements in the clinician's global impression of change (GIC'), which shows clinical benefit.

In July, there was a news brief on Seeking Alpha which said that after a meeting with the FDA, the company "has decided to adopt the changes in plasma pyrophosphate (PPI') as a key goal in the U.S. for its ENERGY-3 pivotal trial for INZ-701 in pediatric patients." Looking through the trial records , I note that this is the exact primary outcome measure currently listed. As the company noted in the press release - "We have already observed that INZ-701 meaningfully increased PPi levels in our ongoing trial of INZ-701 in adults with ENPP1 Deficiency." So it stands to reason that this very natural outcome would be adopted as the primary measure, and not a clinical benefit outcome that has not been adequately studied. However, as I commented earlier, a strong relation between plasma PPi level and clinical or symptomatic benefit needs to be established. Note that the FDA also says so - "Based on recommendations from the FDA, the primary endpoint of plasma PPi should be supported by consistent trends in appropriate secondary endpoints."

The ENERGY-3 trial is expected to enroll up to 33 patients between the ages of one and less than 13 years across multiple sites globally and will topline in 2025.

The company has already begun patient recruitment, but there are no immediate catalysts in this program. The company does have a secondary catalyst in the expected topline data from the ongoing Phase 1/2 trials of INZ-701 in adults with ABCC6 Deficiency and ENPP1 Deficiency, which are expected in the first quarter of 2024. For both trials, positive interim safety, pharmacokinetic (PK'), pharmacodynamic (PD'), and exploratory efficacy data were recently announced.

Financials

INZY has a market cap of $228 million and a cash balance of $192 million. The company made a $60 million secondary offering in July, and closed this in August with net proceeds of $64 million. They also filed a $300 million mixed shelf offering on November 7, but have not raised any money. A mixed-shelf offering allows the company to raise cash and when needed, however, it also potentially raises a proverbial Damocles' Sword over the hapless investors' heads.

R&D Expenses were $13.3 million for the quarter ended September 30, 2023, while G&A expenses were $4.7 million. At that rate, INZY has a cash runway of over 10 quarters based on the cash balance alone, and ignoring even the funds they raised in August. Since the trials are enrolling only a small number of patients, I am not expecting a major spike in R&D spending in the coming months.

INZY stock has a large-ish institutional presence, followed by hedge funds and PE/VC firms. The retail public owns 10% of the stock, which is quite a bit less than my preferred 75-25 split. Longitude Capital, Adage Capital and Pivotal bioVenture are the largest shareholders. Insiders regularly purchase large volumes of stock, and there have been no sales at all in the last 2 years - this is very refreshing for a small, emerging company.

Risks

Low finances used to be a risk earlier, but with the recently raised capital, that risk is mostly gone, although the shelf offering may kick in any time, although I do not expect that to happen anytime soon.

The other risk is lack of major near-term catalysts, where the pivotal phase 3 trial will only read out nearly 2 years later.

Bottom Line

I do have a preference for rare disease players, and this one has decent data and decent cash. However, the lack of a mid-term catalyst gives me pause, because a lot can happen between now and then. I will, thus, maintain my previous stance, and wait for more clarity.

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