TVTX - Travere: Pegtibatinase Takes The Lead In The HCU Treatment Race

2023-04-24 22:42:47 ET

Summary

• Upgraded rating: TVTX's pegtibatinase shows promise for HCU treatment, especially with AGLE's disappointing competitor data.
• Positive pegtibatinase results: Dose-dependent tHcy reduction in COMPOSE study; favorable clinical threshold.
• Regulatory risk reduced: FDA accepts tHcy as the primary endpoint; Phase 3 trial initiation in 2H23.
• Risks: Clinical trial failures, regulatory challenges, competitive landscape, intellectual property disputes.

Update: now pegtibatinase is the only late-stage candidate for HCU

We increase Travere Therapeutics' ( TVTX ) rating from sell to hold based on the encouraging potential of their pegtibatinase program in treating classical homocystinuria (HCU), which is further accentuated by the subpar competitor data from Aeglea BioTherapeutics ( AGLE ), substantiating our rating improvement.

Aeglea BioTherapeutics' phase 1/2 trial for pegtarviliase (AGLE-177) revealed an underwhelming reduction in total homocysteine (tHcy) levels and the development of anti-drug antibodies (ADAs) in the highest dose cohort. We are not too concerned with ADAs as they usually don't lead to meaningful clinical material efficacy differences if the drug is dosed long enough and receptors are saturated.

We highlight that TVTX's pegtibatinase (TVT-058) demonstrated a dose-responsive decrease in tHcy during its 12-week COMPOSE study (phase 1/2). The highest dose cohort (1.5 mg/kg twice weekly) achieved a ~55.1% mean relative reduction (fast and consistent reduction were shown) in tHcy compared to baseline and maintained tHcy below the clinically significant threshold of 100 ?mol. Of note, tHcy levels are well agreed primary endpoint for the phase 3 trial by the FDA, de-risking regulatory risk in our view. Net-net, with AGLE going back to the drawing board and reassessing the duration and dosing to re-evaluate pegtarviliase's (AGLE-177) clinical development strategy, we believe TVTX's pegtibatinase is now the fastest horse in the race. Although it is hard to build a high degree of conviction due to the lack of phase 3 data at this point, we believe additional data from COMPOSE study can bring in additional enthusiasm for some investors. Regarding upcoming catalysts, we expect TVTX to announce additional COMPOSE study data around mid-2023 and initiate a phase 3 trial by 2H23.

Risks

1. Clinical trial failures: The possibility of unsuccessful clinical trials or unanticipated adverse effects could negatively impact TVTX's pegtibatinase program and future approval prospects.

2. Regulatory risks: Potential challenges in obtaining FDA approval or meeting other regulatory requirements might delay or prevent the commercialization of TVTX's products.

3. Competitive landscape: The emergence of new, more effective treatments from competitors could diminish pegtibatinase's market potential and affect TVTX's revenue prospects.

4. Intellectual property disputes: Legal challenges or disputes concerning intellectual property rights could lead to costly litigation or hinder the development and commercialization of TVTX's products.

Conclusion

We upgrade Travere Therapeutics Inc. stock's rating from a sell to a hold based on the potential optionality of the pegtibatinase program for treating Homocystinuria (HCU). This program represents a potential hedge against the short to mid-term disappointing sales ramp of FILSPARI (sparsentan). In terms of FILSPARI's launch, we anticipate a fairly modest sales ramp due to several reasons. Firstly, the REMs program adds cumbersome hurdles for community physicians, making it challenging/discouraging for them to prescribe the medication. Secondly, we expect headwinds in terms of payer and market access due to the high price. Lastly, the potential entry of KDNY's atrasentan in the near future with a superior clinical profile, such as being more convenient, having SGLT-2 data, and potentially being cheaper (although this is unclear at this point), is expected to affect FILSPARI's sales further. We remain hesitant to upgrade TVTX to a buy rating because we are uncertain about the efficacy of FSGS's phase 3 2-year data, which may not show enough eGFR separation to persuade the FDA. The evidence/slope of proteinuria and eGFR in FSGS is not as well understood compared to IgANs, and there is a high degree of uncertainty around the approvability of FILSPARI in FSGS; if it receives a CRL, we believe it can have 20-30% downside impact to the stock price. We anticipate Travere to release FSGS outcomes in 1H 2023 and Phase 3 PROTECT trial studying IgAN's disease by 4Q 2023. In conclusion, while we are upgrading TVTX's rating to hold, we encourage investors to exercise caution and keep an eye on the upcoming developments in the HCU and FSGS programs, as they could significantly impact the company's future.

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