SVRA - Savara: The Binary Bet On Phase 3 Data

2024-06-07 05:56:23 ET

Summary

• Savara is a biotech company focusing on the treatment of autoimmune pulmonary alveolar proteinosis.
• The company's valuation will be heavily impacted by the results of its upcoming IMPALA-2 trial for its drug Molgramostim.
• The trial results are expected to be announced by the end of Q2 2024, and we believe several measures are likely to show efficacy.
• SVRA is a moderate buy, with limited upside potential, in our opinion.

Introduction

Savara Inc. (SVRA) is a small clinical-stage biotech company focusing on the treatment of a single rare respiratory disease - autoimmune pulmonary alveolar proteinosis (aPAP). In April 2017, privately held Savara merged with the publicly traded Mast Therapeutics , with Savara holding 77% ownership in the new entity and Mast owning 23%. Post-merger, the company was renamed Savara Inc. and managed three drugs in its pipeline: Molgramostim, AeroVanc, and Aironite. In March 2018, Savara announced that Aironite failed to meet the primary endpoint in the Phase 2 INDIE study, and in December 2020, AeroVanc did not meet its primary endpoint in the Phase 3 AVAIL trial, leading to the discontinuation of both developments. In June 2019, the company released topline data from the IMPALA trial , which investigated Molgramostim in aPAP, causing the stock price to plummet from $10.57 to $2.62 per share. Although the trial missed its primary endpoint, it demonstrated significant potential through secondary endpoints, prompting the announcement of a follow-up trial, IMPALA-2, with a revised study design. The topline data from IMPALA-2 trial are expected by the end of Q2 2024, which will either de-risk the development and potentially boost the stock price or lead to market disappointment and a further decline in valuation.

Investment thesis

Savara, with a single drug in its current pipeline, presents a high-stakes situation due to its binary catalyst nature. Nebulized GM-CSFs, similar to Molgramostim, are already used in clinical practice for patients with aPAP, though their use is constrained by the drug’s availability and cost . The company’s valuation is heavily influenced by the results from both primary and secondary endpoints, which combined describe a comprehensive efficacy profile of the drug. However, as is common with clinical-stage biotech companies, the initial price action is strongly influenced by the statistical significance of the primary endpoint....

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