TVTX - Travere: Sparsentan Approved With A Mediocre Label Upgrading To A Sell Rating

Summary

• Sparsentan is approved for IgAN with a disappointing FDA label.
• We believe the approval is fully priced in, and we expect disappointing sales print during the first few years and fierce competition with Chinook's Atrasentan later on.
• Sparsentan is expected to launch in Feb 2023.
• We upgrade Travere from a Strong Sell to a Sell rating due to the commercial uncertainty moving forward.

Update: FILSPARI(sparsentan) receives FDA approval

On Feb 17, 2023, Travere's (TVTX) sparsentan received FDA approval for reducing proteinuria in adults with primary IgAN at risk of rapid disease progression. The FDA indication specifically states a urine protein-to- creatinine ratio (UPCR) >=1.5 g/g.

We note this indication is granted under an accelerated approval pathway based on a reduction in proteinuria, and so far, FDA has noted that it did not show a meaningful reduction in kidney function decline (eGFR).

It has not been established whether FILSPARI slows kidney function decline in patients with IgAN. The continued approval of FILSPARI may be contingent upon confirmation of a clinical benefit in the ongoing Phase 3 PROTECT Study, which is designed to demonstrate whether FILSPARI slows kidney function decline.

We highlight that the company need to show meaningful eGFR benefit during the full phase 3 PROTECT study readout (data expected in 2023) for full approval, which we remain cautious about considering the reasons that we mentioned in our article previously . We believe the positive proteinuria may not translate to meaningful eGFR separation vs. Irbesartan. Also, the fact that sparsentan did not show a meaningfully clear eGFR benefit in the company's FSGS phase 3 trial adds to our bearish view as we are unsure if whether Travere's full 2 years of data will show meaningful eGFR benefit. IgAN is historically a tougher disease to show eGFR benefits compared to FSGS, and lower doses were use in the IgAN disease vs. FSGS trial.

Besides the overhang around eGFR, the drug's label comes with lots of headaches, such as the FDA REMS program and liver toxicity monitoring, where physicians need to measure the patient's ALT and AST every 3 months.

...because of the risks of liver injury and birth defects, FILSPARI is available only through a Risk Evaluation and Mitigation Strategy (REMS) approved by the FDA.

This creates an additional administrative burden for prescribing sparsentan and will limit its usage to only patients who fail RASi (ACEi and ARBs). Furthermore, the high UPCR >=1.5 g/g likely puts sparsentan as the 2nd-3rd line agent, where it will need to compete with Calliditas's ( CALT ) Tarpeyo , which showed strong eGFR benefit previously. Moreover, uncertainty around reimbursement and pricing remains as we expect a relatively high price tag for the drug.

Risks

Risks around regulatory/clinical trials, capital raise risk, commercial risk as IgAN and FSGS landscape is getting more competitive, IP risks.

Conclusion

As the overhang around IgAN PDUFA has been cleared, we upgraded Travere to a sell rating from a strong sell rating. Based on the unfavorable label of Sparsentan and lack of eGFR benefit, we continue to exercise caution and expect lower than consensus commercial ramp. We stay on the sidelines until we see a few quarters of sales print from the company. We find the approval of sparsentan should be a net positive for Chinook ( KDNY ) as they have a standalone ERA going through phase 3, which we believe should be a more convenient option for prescribers as nephrologists can adapt and tailor the dosing (while combining atrasentan with cheap generic ACEi or ARBs).

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