LGVN - Longeveron: Alzheimer's Phase 2 Data Around The Corner

2023-09-07 05:17:14 ET

Summary

• Longeveron plans to report data from its placebo-controlled Phase 2 trial in Alzheimer's disease in October 2023.
• Early data from the Phase 1b trial showed promising results, but interpretation was difficult due to different dose efficacy.
• The company is also conducting trials in Hypoplastic Left Heart Syndrome and Aging-Related Frailty.
• Shares are cheap, but have shown high volatility, and an offering is taking place at the moment.

Thesis

As a company focused on the treatment of a neurodegenerative disease with a treatment candidate focused on the biology of aging, I believe Longeveron (LGVN) falls within my field of expertise. The company IPO'd in 2021, a time some trials had already taken place. It has seen little coverage, has little institutional ownership, but high insider ownership. A recent capital raise has taken down a share price that had already been under pressure for lack of remarkable readouts in a tough biotech market.

The company's treatment candidate is Lomecel-B, a treatment candidate based on medicinal signaling cells derived from healthy donors' bone marrow. Lomecel-B is considered to work by reducing anti-inflammatory cytokines, by cell-cell interactions, by exosome and microRNA release and mitochondrial transfer.

A coverage has now become imminent as the company is about to report on its placebo-controlled Phase 2 trial in Alzheimer's disease [AD]. The data from a non-placebo-controlled small Phase 1 study was interesting in that it significantly slowed down cognitive decline at the lower dose level. If a similar result would be able to be reproduced, chances are Longeveron may fly high on short notice. However, the higher dose level (5x as high) in the Phase 1 study did not produce better results. The Phase 2 trial is using different dosage levels and dosing time points, and may have learned from earlier studies.

Interestingly, in aging-related frailty, there was a correlation between dosage level and efficacy.

In hypoplastic left heart syndrome, the company's lead program, results so far coming from a small patient group look pretty impressive. The bar to approval here may be low, both in the US and in Japan.

Insider ownership is high. The company's share structure is complicated however, and the capital raise that occurred just recently, prior to the Phase 2 readout, may have created some volatility.

Longeveron's management appears to be qualified, and what is remarkable is that several persons have had high-placed functions at Japanese pharma company Otsuka Pharmaceutical, or Avanir which was Avanir Pharmaceuticals, Inc. ( Business Will Be Integrated Into Otsuka America Pharmaceutical, Inc. as of January 1, 2023) into Otsuka at the end of 2022 in a transaction valued at $3.5 billion.

Though I am bullish on Longeveron for the rare indication it targets, I am currently rating the company as a Hold for lack of clear insight into what the Alzheimer's readout will bring.

Company

Longeveron had an IPO in 2021 , at a time when several of its trial had already taken place. What we are seeing is, therefore, not a company that is still in the developmental stage. It has a clearly identified treatment candidate, a rigid manufacturing process and three ongoing phase 2 trials.

The company's lead program is in a rare disease, hypoplastic left heart syndrome. The two other indications the company is pursuing are aging-related frailty and Alzheimer's disease.

The company is pursuing these indications with one treatment candidate, Lomecel-B, which it manufactures in its own manufacturing facility with warehouse and storage space. Lomecel-B is an allogeneic treatment candidate derived from medicinal signaling cells [MSCs] originating from donor bone marrow extractions. MSCs are considered to be cells with multiple benefits, anti-inflammatory, pro-vascular, and other pro-regenerative properties, which move to sites of damage and inflammation. They do not require a tissue-type match, and are immunoevasive/immunoprivileged giving them a good safety profile.

With age, they become depleted and less functional. Through a rigorous screening process that tries to detect and subsequently refuse healthy young donors with metabolic risk or genetically unfavorable profile, Longeveron selects bone marrow extraction donors for this program. The bone marrow is extracted in a rather painful short procedure, and the extracted MSCs are subsequently grown in a cell culture.

They reported results from a Phase 2 clinical study using MSCs in subjects with spinal cord injury. After a single intravenous infusion of MSCs at approximately 40 days after the spinal cord injury, with regular standard of care, at six months, 12 of the 13 subjects showed improvement on the appropriate rating scales and activities of daily living, and patients with minor injury showed improvement one day after treatment.

Lomecel-B is considered to work by reducing anti-inflammatory cytokines, by cell-cell interactions, by exosome and microRNA release and mitochondrial transfer.

Lomecel-B for AD

The global AD treatment market size was valued at $ 4 billion in 2022. It is expected to be valued at $15 billion in 2029.

Preclinical tests had shown that treatment with MSCs can inhibit deposition of amyloid, a hallmark of AD, and promote clearance of amyloid. MCS's can cross the blood-brain barrier, promote neurogenesis and reduce apoptosis, and improve neuronal morphology and behavioral and spatial memory performance.

Contrary to other treatments focusing on the reduction of amyloid or tau, and similar to other companies I have covered in different neurodegenerative indications, Lomecel-B is supposed to exert its effects primarily by the reduction of inflammation, a third hallmark of AD and other neurodegenerative diseases.

Prior to its IPO, Longeveron had conducted a randomized placebo-controlled Phase 1b trial in 33 subjects, which was primarily designed to assess safety in mild AD patients, but also had cognitive endpoints. The trial used two different dosages: a low dosage of 20 million and high dosage of 100 million cells.

The trial showed no significant adverse effects throughout the 1-year follow-up, with neither adverse effects such as ARIA as seen with anti-amyloid antibodies.

The trial further showed a statistically significant effect on cognition in the low-dose group as compared to both the placebo group as well as the high dose group. On the MMSE rating scale, the low-dose group's cognition basically remained stable for 13 weeks, to then go down a bit up to week 26. The placebo-group declined fast quite rapidly over the course of the first 13 weeks, with minor further decline up to week 26. The high dose group decline rapidly over 2 weeks, to then remain stable up to 13 weeks before declining further and progressing worse than placebo up to week 26. These result seemed to be confirmed by the QOL-AD quality of life assessment scale and ADCS-ADL activities of daily living scale, where the low-dose group also outperformed placebo.

The Adas-Cog scores, however, showed no significant changes in any arm. Those scores showed the worst cognitive worsening of placebo, but in this case the high dose first did worse, to then finally outperform the low dose at week 26.

One could say, at least, that these results are hard to interpret.

The results on selected biomarkers showed an increase relative to placebo of pro-vascular biomarkers VEGF or vascular endothelial cell growth factor, IL-4 and IL-6, an increase in D-Dimer in the high but not the low dose, and increased anti-inflammatory biomarkers sIL-2R?, IL-10 and IL-12.

No significant changes had been detected for any neuronal-related biomarkers that had been examined.

The company is currently finalizing a 41-week Phase 2a trial in 48 patients with mild AD, with anticipated topline data in October 2023 . This time, there are four different treatment groups: placebo, a single 25-million cell dose, 4 doses of 25 million cells, and 4 doses of 100 million cells. Multiple cognitive endpoints will be explored, as well as multiple biomarkers.

Although the company is very much under the radar, this topline data may be interesting as the company should have learned about efficacy of Lomecel-B from other trials as discussed below. I will assume that at this point, Longeveron will report on the percentage difference of cognitive decline in comparison with placebo, which now seems to have become the standard to compare efficacy of treatment candidates for Alzheimer's disease. In case of positive reporting overall, and/or for different subgroups, I expect the market to take a particular interest in Longeveron. I would define success as a consistent result across rating scales for either the overall group and/or several subrgroups, of about 30-40% slowing of cognitive decline or more. Such result would be in line with efficacy reported from anti-amyloid antibodies, namely Eisai's/Biogen's (ESALF) (ESAIY), (BIIB) Leqembi and Eli Lilly's (LLY) donanemab.

Furthermore, the use of cell lines with regenerative and anti-inflammatory properties in a neurodegenerative indication has an interesting precedent, and a counterpart in Parkinson's disease. The precedent of note is Brainstorm Cell Therapeutics' NurOwn for ALS which is coming up for approval with an AdCom and PDUFA date set respectively in September and December 2023. Out of UT Health in Houston , an academic trial is being performed in Parkinson's disease with mesenchymal stem cells.

A good Phase 2 trial is about finding the right dose for the best efficacy, and this is obviously what Longeveron is aiming for here. The expectation should therefore not be to see the same response in all patients. It is very well possible that, for Alzheimer's, lower doses of MSCs, or repeat dosing, may provide more benefit.

What I am missing here, however, is a focus on a subgroup which may benefit most from Lomecel-B. If Lomecel-B's action is focused on reducing inflammation, it may have been worthwhile to consider enrolling only patients with sufficiently elevated markers of inflammation, to avoid non-responders. Alzheimer's disease is considered to be a disease of multifactorial nature, and one person may have more benefit from anti-inflammatory treatment than another.

Another point of attention is the small patient population of this trial, which is furthermore split up in four subgroups. That means the bar to reach statistical significance - it is, after all, a placebo-controlled trial - may be difficult to reach. This is a small trial, e.g. in comparison to the Phase 2b trial in aging-related frailty that will be discussed below.

Logically, though, with a massive treatment population, any success here could trigger substantial interest from investors.

Lomecel-B for aging-related frailty

Aging-related frailty is a medical condition which is often considered to be caused by the cumulative burden of stressors related to aging and biological function. A study from John Hopkins suggested that approximately 15% of individuals in the US above 65 years of age are impacted, which equates to roughly 8.1 million people.

The process of aging has been characterized as having multiple hallmarks including, but not limited to, stem cell exhaustion, mitochondrial dysfunction, and altered intercellular communication related to inflammation . The frailty syndrome is often the result of a pathologic or accelerated process of aging, and has been linked to the chronic elevation of various inflammatory cytokines, often referred to as inflammaging.

Longeveron has already completed a Phase 2b study in this indication in 143 patients spread over 54 treatment groups, with respectively 25, 50, 100 and 200 million cell dosages, but not with regular infusions. Patients needed to have elevated levels of TNF, a major inflammatory cytokine, to enroll in the trial. In this case, therefore, I note that Longeveron has included a focus on the subgroup with higher inflammatory markers, compared to its trial in Alzheimer's disease.

No significant adverse effects were reported. The trial further showed a statistically significant treatment response, which was furthermore correlated to dosage, on the 6-minute walk test or 6MWT rating scale, the primary endpoint of the trial and a standard test to assess aerobic activity and endurance in aging subjects.

Although the results of Lomecel-B treatment consistently outperform those of placebo at the 270 day timepoint - but only on that timepoint - there is no absolute dose response at 270 days. Apparently there was at the 180 days timepoint.

However, secondary analysis showed no statistically significant difference compared to the placebo with regard to patient questionnaire PROMIS, which involves physical function, or serum level of tumor necrosis alpha, which is an inflammatory cytokine.

According to a research update by Maxim's Michael Okunewitch of August 15, 2022, aims to leverage Japan's 'Act on the Safety of Regenerative Medicine' to potentially gain an early market entry on only safety and expectation of efficacy, supported by the prior P2b data.

Longeveron is currently performing a second Phase 2 trial in 45 patients in Japan, a country with 29% of the population aging, in which the prevalence of frailty is 8.7%.

Lomecel-B for hypoplastic left heart syndrome

Longeveron makes it no secret that hypoplastic left heart syndrome, for which it has received Rare Pediatric Disease Designation, Orphan Drug Designation and Fast Track designations, is its primary indication. As shown above, though the number of patients is rather small, the company estimates potential yearly revenues to be at $1 billion.

Hypoplastic left heart syndrome is a rare congenital heart defect which affects about 1,000 babies per year in the United States, typically requires three open-heart surgeries, and even then has a low overall survival rate, estimated at 50% to 60% at adolescence.

The goal of Lomecel-B is to improve cardiac function, by administering Lomecel-B directly into the heart at approximately four months of age, i.e. at the same time of the stage II Glenn procedure.

A phase 1b trial in 10 patients has yielded impressive results. There were no significant adverse effects, nor transplants needed during the one year of the study duration. The patients were followed for up to 3.5 years after the initial study duration, i.e. a total of 4.4 years. All of the patients stayed alive, and none of them required heart transplant. This compares well to a 20% mortality rate at 5 years for historical controls.

The trial furthermore showed improved myocardial function and preservation of myocardial structure.

Earlier studies had also shown that injections of MSC's in the heart had led to major reductions of TNF levels.

Longeveron is currently performing a randomized placebo-controlled trial entitled ELPIS II, in 38 infants with HLHS at Stage 2.

This trial has started enrolling at the end of 2021. It has currently enrolled more than 50% of patients. I did not retrieve when it is expected to complete, but once completed, study results should be able to be reported a year later.

Management

Longeveron's management has been quite a bit shaken up lately. CFO James Clavijo, who had also been selling shares in 2022, has notified Longeveron of his intention to resign in April 2023, effective June 9, 2023.

The current management is shown below.

Joshua M. Hare is a major shareholder of the company.

Remarkable is, furthermore, that three persons within the current leadership, two of which have recently been appointed, have links to the Japanese pharma giant Otsuka. CEO Wa'el Hashad had been leading Avanir which was bought out by Otsuka for $3.5 billion. EVP and current CFO Lisa Locklear , appointed on July 20, 2023, served as vice president and CFO at Avanir. CMO Nataliya Agafonova , who has been appointed on July 11, 2023, was previously active in Otsuka.

Financial guidance/Risk related to rights offering

For the last quarter, Longeveron reported a net loss of $ 5.6 million, with $ 8.6 million in cash. In comparison, at the end of 2022, the company had approximately $ 20 million in cash. With a half-yearly cash burn over $10 million, the company urgently needed additional funding. It has chosen to get that funding in a rather complex operation, where it has allowed existing shareholders of common A and B shares to subscribe and potentially oversubscribe to a rights offering for a total of $30 million at a price of $3. When announced, the price of Longeveron shares was trading above that price, but currently it has slipped under it. The subscription period began on August 22, 2023, and will end, unless extended, on September 21, 2023.

The rights offering is still ongoing and is expected to close on September 23, 2023. In case of a full subscription, the expected amount of common A shares should see a substantial increase, and the company's market cap may be quite different to the one prior to the rights offering. In fact, as mentioned in the prospectus , shares outstanding before the rights offering were 6,311,725 Class A common shares, and 14,855,539 class B common stock, and warrants exercisable for 1,271,399 shares of Class A common stock at a weighted average exercise price of $17.26. The differences between class A and class B shares, is that the latter kind is not publicly tradeable, generally appears to be reserved for insiders, and entitle holders to five votes per share.

After the rights offering, in case of full subscription, the amount of common class A shares will become 16,311,725 shares, whereas the common class B shares will remain unaffected.

I don't see that event as bullish right before a Phase 2 readout in Alzheimer's.

Unless mistaken, at the time of the company's 2021 PIPE offering, at a time the common stock was issued at $17.50 per share, 1,169,288 warrants were issued to purchase class A shares at an exercise price of $17.50 per share for a total price of $20.5 million. Those warrants expire 5 years from the date of issuance.

There are also still 106,400 warrants related to the IPO exercisable at a price of $12 given to the underwriter. 51,061 of these have been exercised. The remaining warrants are exercisable for four and a half years as of August 12, 2021.

Further risks

Investing in a biotech company with one treatment candidate, notably with a potentially pivotal readout coming up, always comes with a considerable number of risks. These risks relate to potential cancelling of programs, intervention of government-related authorities such as the FDA, and the competition. In this particular case, though Longeveron's annual report lists several IP rights, I am curious as to whether Longeveron's IP rights for Lomecel-B will remain valid for bigger indications such as Alzheimer's disease.

Longeveron's stock has recently also shown a particular amount of volatility.

Conclusion

Longeveron has a topline Phase 2 readout for Alzheimer's disease coming up. As its treatment candidate is one that focuses on reduction of inflammatory markers and bears similarities with BrainStorm Cell's NurOwn and other treatment candidates I am looking at in the space, I wanted to put this company on the map of Seeking Alpha readers prior to the readout.

In light of the trial readouts so far, it appears to me that Lomecel-B may exert some effects in Alzheimer's as well as in aging-related frailty. The Phase 2 trial focuses on different dosage regimens, and has a small population. Efficacy in one or more subgroups may be interesting to compare to recent topline data from bigger trials from anti-amyloid antibodies. The company may have also been able to learn from previous trials, though I noted several potential risks in the Phase 2 trial design.

The company has an ongoing second Phase 2 trial in Japan for aging-related frailty. Japan seems to be an appropriate venue for first approval, both in light of its aging population and its legislation which may allow for easier approval for a product such as Lomecel-B.

Lomecel-B for the company's lead indication, hypoplastic left-heart syndrome, has yielded impressive results so far. The company has received Rare Pediatric Disease Designation, Orphan Drug Designation and Fast Track designations for this indication which, though it affects only a limited number of patients, may be of considerable value, with an estimated potential yearly market value in the US of $1 billion.

The company is currently in the process of a substantial rights offering at $3, which should close by end of September, right before the Phase 2 readout in Alzheimer's disease. Subsequent to that rights offering, in case of full subscription, the class A common stock, which is the only kind that is publicly tradeable, should more than double. I do not see that event as very bullish prior to a Phase 2 readout in Alzheimer's.

There has been a recent change in ownership within Longeveron, with a particular link to Japanese pharma giant Otsuka. In fact, three members of the current leadership, namely, the CEO, CFO and CMO, have either worked for Otsuka Pharmaceutical or for Avanir, a company it bought for $3.5 billion. One does not know how people or companies work at all times. One consideration could in any case be that negotiations between Otsuka Pharmaceutical and Longeveron have taken place, and perhaps Otsuka has requested these persons to take the lead of Longeveron.

For further details see:

Longeveron: Alzheimer's Phase 2 Data Around The Corner