SELB - Selecta's New Gout Data Strengthens Evidence Of Inadequate Differentiation

2023-04-08 10:00:00 ET

Summary

• Selecta Biosciences recently announced the results of its DISSOLVE I & II Phase 3 clinical trials for SEL-212, a combination therapy for chronic refractory gout patients.
• The trials met their primary endpoints, but SEL-212's performance did not clearly differentiate it from existing competitor Krystexxa.
• Comparison of response rates during Month 6 showed Krystexxa co-administered with methotrexate had higher response rates than SEL-212 high and low dose groups.
• Both SEL-212 and Krystexxa co-administered with methotrexate had similar safety profiles, with serious adverse events reported in both treatment groups.
• The limited efficacy and safety of SEL-212 could impact Selecta Biosciences' future prospects, including the success of its preclinical ImmTOR platform. The DISSOLVE data had little effect, and Selecta is still viewed as a "Sell."

Introduction

Selecta Biosciences (SELB) recently announced the results of its DISSOLVE I & II Phase 3 clinical trials for SEL-212, a combination therapy designed for chronic refractory gout patients. Although the trials met their primary endpoints, the data, in my view, does little to change the overall market perception of SEL-212 as a tough sell compared to existing treatments. This article aims to provide an update on the recent data and its implications on the future prospects of SEL-212.

Financials

As of the end of 2022, Selecta Biosciences held $136.2 million in cash reserves, marking an increase from the previous year's $129.4 million as of December 31, 2021. The total revenue from collaborations and licensing in 2022 amounted to $110.8 million, mainly attributable to the licensing deal with Sobi, which involved clinical supplies shipment and reimbursement for the expenses associated with the Phase 3 DISSOLVE clinical trials. Throughout 2022, the company's research and development costs reached $72.4 million, while general and administrative expenses amounted to $23.9 million. For the entire year, Selecta declared a net income of $35.4 million, equivalent to a basic net income per share of $0.24.

While Selecta Biosciences' financial performance in 2022 was solid, with a cash position of $136.2 million and net income of $35.4 million, the company's future prospects will depend primarily on the success of its preclinical ImmTOR platform.

DISSOLVE I & II: New Data

The DISSOLVE I & II Phase 3 clinical trials were successful in meeting their primary endpoints compared to placebo ("percentage of patients who achieve and maintain reduction in serum uric acid < 6 mg/dL for at least 80% of the time during month 6").

In DISSOLVE I, 56% of patients receiving monthly doses of SEL-212 at 0.15 mg/kg achieved the main goal, while in DISSOLVE II, 47% and 41% of patients receiving high and low doses of ImmTOR, respectively, reached the main objective. The trials also demonstrated a significant and clinically meaningful overall reduction of 69% in mean SU levels in patients on SEL-212 at 0.15mg/kg in DISSOLVE I, compared to placebo.

It's worth noting that Selecta included subgroup analysis data atop their press release.

--In patients 50 years and older, response rate with high dose SEL-212 was 65% in DISSOLVE I and 48% in DISSOLVE II

Selecta

Safety and Tolerability

In terms of safety and tolerability, the study reported several adverse events [SAE] in patients receiving the treatment. Mild to moderate stomatitis occurred in 3.4% of patients on the low dose and 9.2% on the high dose, while no cases were observed in the placebo group. Additionally, both treatment groups experienced a higher number of infusion reactions at 24 hours and 1 hour after drug administration compared to the placebo group. Furthermore, treatment-related SAEs were observed in 6 patients. These included two cases of anaphylaxis and one gout flare in both the high and low dose groups.

Insufficient Differentiation from Existing Treatments

SEL-212's main competition, Horizon's ( HZNP ) Krystexxa (pegloticase), is an FDA-approved drug for chronic refractory gout with a well-established presence in the market. Although SEL-212 was expected to differentiate itself through its incorporation of ImmTOR to mitigate the formation of anti-drug antibodies, the COMPARE Phase 2 clinical trial results showed that SEL-212 failed to demonstrate superiority over pegloticase.

Comparing Response Rates

When comparing data from different trials, it's important to exercise caution as differences in trial design, patient populations, and other factors can impact results. With that said, it appears that in the specific case of comparing Krystexxa co-administered with methotrexate to SEL-212, the Krystexxa + methotrexate treatment group had a higher response rate during Month 6. Specifically, the Krystexxa + methotrexate group had a 71% response rate, while the SEL-212 high dose groups had response rates of 56% (DISSOLVE I) and 47% (DISSOLVE II), and the SEL-212 low dose groups had response rates of 48% (DISSOLVE I) and 41% (DISSOLVE II).

Moving Forward

Selecta Biosciences' out-licensing of SEL-212 has allowed them to shift their focus towards their preclinical ImmTOR platform. However, the performance of SEL-212 in clinical trials may raise questions about the potential success of the ImmTOR platform. In terms of efficacy, SEL-212 did not perform as well as Krystexxa co-administered with methotrexate in the studies mentioned earlier, as the response rates achieved during Month 6 were lower for both the high and low dose groups of SEL-212. This may indicate that the technology used in SEL-212, which involves combining a uricase enzyme with a proprietary pegylation technology may not be as effective as hoped in treating gout.

Additionally, the safety profiles of SEL-212 and Krystexxa combined with methotrexate seem comparable in the research, as both treatment groups exhibit a relatively similar frequency of serious side effects, including anaphylaxis and gout flare. This might imply that there are constraints in the technology employed in SEL-212, which could potentially affect the safety and tolerability of subsequent products developed using the ImmTOR platform.

My Analysis & Recommendation

In light of the recent data from the DISSOLVE I & II Phase 3 clinical trials, it is evident that SEL-212 has not demonstrated a clear advantage over its primary competitor, Krystexxa (pegloticase). The response rates achieved by SEL-212 during Month 6 were lower than those of Krystexxa co-administered with methotrexate. Furthermore, the safety profiles of both treatments showed similarities. These factors collectively contribute to the perception of SEL-212 as a tough sell compared to existing treatments. Given the performance of SEL-212 in clinical trials, concerns may arise about the potential success of the ImmTOR platform, particularly as the technology used in SEL-212 appears to have limitations in terms of efficacy and safety.

Based on the factors discussed above, I maintain a "Sell" rating for Selecta and advise investors to approach the company's stock with caution. While Selecta boasts a strong cash position and has demonstrated growth through its licensing and collaboration agreements, the potential success of its ImmTOR platform and the marketability of its SEL-212 treatment for chronic refractory gout remain uncertain, posing risks to its future growth. To make a sound long-term investment decision, investors should closely monitor the development of the ImmTOR platform and subsequent clinical trial results. It's also essential to consider the competitive landscape and progress of alternative treatments in the gout market, which could affect the commercial potential of Selecta Biosciences' products.

Risks to Thesis

"When the facts change, I change my mind."

-John Maynard Keynes

Certain factors may potentially change my negative perception of Selecta Biosciences.

For instance, if further research and development efforts lead to improvements in SEL-212's efficacy and safety profile, it may become more competitive against Krystexxa (pegloticase). Successful enhancement of the technology used in SEL-212, such as the combination of uricase enzyme and proprietary pegylation technology, could also result in a more effective treatment for chronic refractory gout.

Additionally, if Selecta Biosciences' preclinical ImmTOR platform demonstrates promising results in improving the safety and efficacy of gene and autoimmune therapies, the company's future prospects may improve significantly. This could potentially offset concerns stemming from SEL-212's performance in clinical trials.

Moreover, changes in the competitive landscape, such as new developments in alternative treatments for gout or disruptions to Krystexxa's market dominance, could also impact the commercial potential of SEL-212 and improve the perception of Selecta Biosciences.

Lastly, strategic partnerships or licensing agreements that boost the company's resources and capabilities may further enhance its research and development efforts, potentially leading to breakthroughs that could positively impact the company's prospects.

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