ITCI - Intra-Cellular Therapies: Increased Confidence In MDD After Study 403 Success

2023-03-29 10:35:42 ET

Summary

• Intra-Cellular Therapies reported positive results from study 403 in MDD patients with mixed features and bipolar disorder patients with mixed features.
• The results were consistently positive on the primary endpoint - the MADRS score, the secondary endpoint CGI-S and in both subpopulations.
• The results bode well for the ongoing phase 3 trials of Caplyta (lumateperone) in major depressive disorder and for commercial uptake in bipolar depression.
• Clinical and commercial momentum could drive the share price of Intra-Cellular Therapies higher in the following quarters and years.

Intra-Cellular Therapies ( ITCI ) reported positive results from the phase 2 trial of lumateperone (Caplyta) in two populations – major depressive disorder (‘MDD’) with mixed features and bipolar disorder with mixed features. The study met the primary endpoint, demonstrating a statistically significant and clinically meaningful reduction in the MADRS total score compared to placebo at week six and the results were consistently positive in each sub-population and on the secondary endpoint of CGI-S score.

Mixed features are defined as “a patient having co-occurring subthreshold manic symptoms during their depressive episode or a patient having co-occurring subthreshold depressive symptoms during their manic episode.” These patients have higher rates of suicidal ideation and suicide, higher recurrence rates, and comorbidities. The company used the DSM-5 mixed features specifier to screen and enroll patients with mixed features in this trial.

There are three reasons this is a very positive outcome for Intra-Cellular Therapies:

• It adds a potentially very valuable shot on goal for Caplyta as these are distinct and large populations. There are 11 million patients in the United States with bipolar disorder with depression being the most common presentation of the disorder, and 21 million patients with MDD, and the company estimates approximately one-third of each population have mixed features.
• The clear success on the primary endpoint – the MADRS Total Score, provides greater confidence in the success of the three global phase 3 trials of Caplyta in major depressive disorder. Granted, the trials are different as Caplyta is being studied as an adjunct treatment in the MDD trial, but this is a clear efficacy signal in the MDD subpopulation.
• The positive results are very likely to improve the uptake of Caplyta in the existing approved indication – bipolar depression, and specifically in the subpopulation of patients with mixed features. The label is not specific for this patient population but the presentation of the data at upcoming medical conferences are likely to increase physician awareness of the efficacy of Caplyta in patients with mixed features.

Management was asked several times and in different ways on the investor call about the path forward for MDD and bipolar disorder patients with mixed features, but they declined to comment and want to interact with the FDA first before talking about plans for this indication in the future. My base case would be that at least one more trial will be needed to secure this as a labeled indication. The bipolar depression with mixed features indication could be easier to accomplish but the caveat for MDD is that it is being studied as an adjunct treatment as opposed to monotherapy in the 403 study.

The company has not provided a timeline for the readout of the first two phase 3 trials in MDD but management did say they plan to submit the supplemental NDA to the FDA in 2024. The company is also hedging its bet on the adjunctive treatment of MDD by adding a third study that could support the submission if one of the first two trials misses on statistical significance. This is a similar playbook the company used for clinical development in schizophrenia.

Investor focus should now switch back to Caplyta’s uptake in schizophrenia and bipolar depression. The initial launch in schizophrenia was relatively slow and prescription and sales growth accelerated significantly after the approval for bipolar depression.

The company guided for $430 million to $455 million in annual net sales this year, a 73% to 83% increase over 2022. Encouraged by the strong uptake in bipolar depression, management decided to expand the sales force by adding 50 neuroscience sales reps and the company is also expanding its direct-to-consumer campaign to raise awareness of the unmet need in bipolar depression and to educate potential patients about Caplyta and its benefits.

The stock is currently trading at approximately 12 times 2023 revenues and that is not too high for a company with Intra-Cellular Therapies’ growth prospects in existing indications and the additional and potentially very valuable pipeline shots on goal – major depressive disorder and, now, major depressive disorder with mixed features and bipolar depression with mixed features.

Longer-term, the early-stage pipeline also has the potential to create shareholder value, but it is still unproven.

Intra-Cellular is in good financial shape with $594 million in cash and equivalents at the end of 2022 which should be sufficient to get the company to profitability. Based on the current revenue and expense growth trajectory, the company could become cash flow positive in the first half of 2025.

ITCI stock shot up to approximately $55 per share after the success of study 403. There is some overhead supply to work through to reach new all-time highs and continued strong sales momentum and the success of the 403 trial could be sufficient to achieve that.

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