ARGNF - Uncertainty Looms Over Immunovant's Future As Batoclimab Faces Dim Prospects

2023-03-06 17:07:59 ET

Summary

• Immunovant's lead drug, batoclimab, is one of many FcRn antagonists, either approved or in development, for the treatment of autoimmune diseases, including myasthenia gravis (MG).
• In batoclimab clinical trials by Immunovant, safety concerns emerged when Phase 1 participants showed elevated total cholesterol and LDL levels. The company paused dosing to evaluate these effects.
• To mitigate risk, Immunovant is closely monitoring lab tests in the Phase 3 MG trial. They're also planning guidelines for managing lipid abnormalities and developing another FcRn antagonist, IMVT-1402.
• Despite not having been tested in humans yet, the introduction of IMVT-1402 in September 2022 inspired Immunovant's market value to surge from $600 million to over $2 billion within weeks.
• The enterprise value exceeds $1.75 billion, despite the bleak clinical, regulatory, and commercial outlook for batoclimab. The market's detachment from reality is evident, leading to a "strong sell" rating and making the stock a prime candidate for shorting.

Introduction

Immunovant ( IMVT ) is a biopharmaceutical company that develops and commercializes therapies to treat autoimmune diseases. Its lead drug candidate is called batoclimab, designed to treat a range of autoimmune disorders, including myasthenia gravis [MG]. Batoclimab is an FcRn antagonist, a class of drugs that works by blocking the recycling of immunoglobulin G [IgG] antibodies. The drug is expected to reduce the levels of pathogenic antibodies that cause autoimmune disorders, and it is currently in the late-stage clinical trial for the treatment of MG.

This article will examine and speculate on the clinical, regulatory, and market potential of batoclimab for autoimmune diseases, primarily focusing on its main application for myasthenia gravis.

Immunovant's Fiscal Third Quarter 2022 Financial Highlights

Immunovant released their financial highlights for fiscal third quarter ending December 31, 2022. The company's cash position as of December 31, 2022, was $432.6 million, expected to fund operations into the second half of calendar year 2025. Research and development expenses were $42.3 million, an increase primarily due to increased personnel-related expenses, costs related to the research and development of IMVT-1402, and higher batoclimab program-specific research and development costs. Acquired in-process research and development expenses were $10.0 million related to the achievement of a development and regulatory milestone for batoclimab in MG. General and administrative expenses were $11.8 million, primarily due to higher personnel-related expenses and information technology costs. The net loss was $63.2 million ($0.49 per common share), including $8.9 million related to non-cash stock-based compensation expense.

Current Treatment Recommendations for Myasthenia Gravis: Beyond Pyridostigmine as First-Line Therapy

Myasthenia gravis is a rare autoimmune disorder that affects the neuromuscular junction, causing muscle weakness and fatigue. The disease is caused by the antibodies that attack the acetylcholine receptors in the muscles, leading to decreased signal transmission and muscle weakness. Current treatment options for MG are limited and focus on suppressing the immune system to reduce the production of pathogenic antibodies. Pyridostigmine (a cholinesterase inhibitor) is commonly utilized as a first-line treatment option, but patients may not always respond effectively, and the efficacy may decrease over time. In this event, treatment recommendations are as follows:

Investigating the Efficacy of Batoclimab in the Treatment of MG: A Phase 2a Clinical Trial Analysis

Batoclimab differs from the FDA-approved efgartigimod ( ARGX ) , which also targets FcRn, in that it has a different binding site and is expected to have a longer duration of action. In 2019, a Phase 2a clinical trial for batoclimab was initiated to treat MG in a multi-center, randomized, blinded, placebo-controlled study. In this trial, a pre-specified pooled analysis of 15 subjects who completed Day 42 was conducted. The results showed that 10 subjects who received batoclimab had a clinical improvement in both the MG-ADL scale and the MGC scale.

Safety Concerns Emerge in Clinical Trials of Batoclimab, Raising Uncertainty for Long-Term Use

During the clinical trials of batoclimab conducted by Immunovant, safety concerns regarding the drug emerged. Some participants in Phase 1 studies showed elevations in total cholesterol and LDL levels, prompting the company to voluntarily pause dosing to evaluate these effects. Notably, individual variability may play a role in how the drug affects lipid metabolism, as these elevations were observed in some participants but not in others.

While short-term increases in LDL cholesterol are not expected to pose a safety concern for patients, the long-term effects of batoclimab on lipid profiles are still uncertain. This is particularly concerning since the drug is intended for chronic use in treating autoimmune diseases. Furthermore, it is unclear whether the lipid abnormalities are reversible upon cessation of treatment with batoclimab.

Immunovant is taking steps to address these safety concerns, such as conducting a Phase 1 drug-drug interaction study to evaluate potential interactions with other drugs and planning to include guidelines for managing any observed lipid abnormalities during long-term treatment. These measures aim to minimize potential risks associated with long-term administration of batoclimab.

IMVT-1402, another FcRn antagonist being developed, is expected to address safety issues associated with batoclimab.

Our second product candidate, IMVT-1402, has been observed in animal studies to reduce IgG antibody levels with minimal or no impact on levels of albumin and low-density lipoprotein (“LDL”) at doses well above the anticipated human effective dose; similar doses of batoclimab in animals were clearly associated with declines in albumin. We plan to initiate a Phase 1 trial of IMVT-1402 in early calendar year 2023 contingent on clearance of our Investigational New Drug (“IND”) application, with initial data results from this Phase 1 trial expected to be available in mid-calendar year 2023.

Immunovant

Assuming that IMVT-1402 is both effective and safe, it could take at least seven years before it becomes available in the market. At that time, the market for autoimmune disorders, including MG, could change due to the expected introduction of more FcRn antagonists, such as rozanolixizumab ( OTCPK:UCBJF ), which may receive approval later this year, and Janssen's ( JNJ ) nipocalimab (Phase 3, recruiting).

Balancing Efficacy and Safety: The Importance of Hitting the Sweet Spot in Drug Development for FcRn Receptor Targeting Drugs like Efgartigimod and Batoclimab

The importance of hitting the sweet spot in drug development is exemplified by drugs like efgartigimod and batoclimab, which target the FcRn receptor. These drugs need to bind to FcRn with sufficient affinity to effectively reduce the serum half-life of IgG antibodies and improve symptoms of autoimmune diseases, but if they bind too strongly, they can also interact with other proteins or receptors in the body, causing systemic off-target effects that may lead to adverse events, including lipid elevations.

Batoclimab's full monoclonal antibody nature binds to FcRn with high affinity and specificity, which may disrupt albumin homeostasis, leading to lipid elevations and the long-term potential for cardiovascular issues. In contrast, efgartigimod is an anti-FcRn fragment that binds to FcRn with lower affinity and specificity than batoclimab, reducing its propensity to interact with albumin.

The potential for batoclimab to cause lipid elevations may impact its clinical and market prospects for MG, especially given efgartigimod's proven safety and efficacy. The optimal therapeutic index of these drugs is critical for achieving both efficacy and safety.

Strategies to Mitigate LDL-C Increases Associated with Batoclimab: Insights from Immunovant's R&D Day and Implications for Patients with Myasthenia Gravis and Dyslipidemia

During Immunovant's R&D day last year, management spent a significant amount of time discussing strategies to reduce the increase in LDL-C associated with batoclimab. They presented data on 14 healthy volunteers, 6 of whom received 680mg batoclimab plus a placebo, and 8 of whom received 680mg batoclimab plus 40mg atorvastatin. After 6 weeks, the LDL-C levels in the group that received 680mg batoclimab plus 40mg atorvastatin were relatively close to baseline and significantly lower than those in the group that received 680mg batoclimab plus placebo. It should be noted that there are several confounding factors in this study, such as the fact that it was conducted on healthy volunteers, the short duration of the study, and the two weeks of lipid-reduction therapy that the atorvastatin group received before weekly dosing with batoclimab.

Assuming that statins can indeed reduce the increase in LDL-C levels associated with batoclimab, it is important to note that statins such as atorvastatin are used with caution in patients with MG due to case reports (example one , example two , example three ) of these drugs worsening the symptoms of MG. Moreover, what would happen to MG patients who are already taking statins and have cardiovascular risk factors if they also receive batoclimab? Would batoclimab nullify the effect of the statin?

Statins have the same indications in patients with MG as in the whole population: a patient with myasthenia and dyslipidemia should take statins. However, it is correct to inform patients that statins could worsen myasthenic symptoms in order to withdraw statins if this happens.

IJMS

Suppose you are a patient with a chronic, debilitating disorder, and your doctor presents you with two drugs, X and Y. She explains that these drugs have almost identical mechanisms of action, cost the same, and are thought to be equally effective. However, she also informs you that drug X is known to cause an increase in LDL-C, which is a key risk factor for cardiovascular disease. If you choose drug X, you will need to take an additional medication, which may worsen your symptoms, to reduce LDL-C. Given this information, which drug would you prefer to take?

Furthermore, consider the potential regulatory and indication implications of using batoclimab in patients with MG. Would these patients need to undergo frequent LDL-C monitoring through a REMS program , and is it necessary to prescribe a statin along with batoclimab? Additionally, is it safe for a practitioner to prescribe batoclimab to a MG patient who already has cardiovascular risk factors?

Speculative Efficacy Advantage: The Potential of Batoclimab in Comparison to Efgartigimod for MG Treatment Remains Unclear

While some investors speculate that batoclimab may offer greater efficacy compared to efgartigimod, without a direct clinical comparison between the two, this remains purely speculative. In my opinion, even if a head-to-head study were to take place, it is more probable that batoclimab would demonstrate non-inferiority rather than superiority to efgartigimod. In my opinion, it is unlikely for batoclimab to capture a significant portion of the market or outperform an established drug like efgartigimod, especially considering the cardiovascular-related safety concerns associated with batoclimab.

Conclusion

Immunovant's pipeline is limited to two drugs, batoclimab and preclinical IMVT-1402, which have the same mechanism of action and are being developed for autoimmune disorders such as MG. Batoclimab is currently undergoing Phase 3 trials for MG and is also being studied in various trials for other conditions such as Thyroid Eye Disease , Chronic Inflammatory Demyelinating Polyneuropathy , Graves' Disease, and Warm Autoimmune Hemolytic Anemia. However, efgartigimod, which is also being evaluated for these conditions, is more advanced in its development and does not face the same theoretical cardiovascular risks as batoclimab. Additionally, other FcRn antagonists are currently in development. While batoclimab may arguably be the "strongest" FcRn antagonist, this comes at the cost of off-target effects like LDL-C elevations, which is a concern for long-term treatment of autoimmune conditions. It is difficult to determine where batoclimab fits in with other FcRn antagonists in the autoimmune market.

Immunovant's market value has soared from approximately $600 million to $2 billion since the introduction of IMVT-1402 in September 2022. However, aside from a public offering , there have been no other significant updates from the company. It's worth noting that 1402 has yet to undergo human trials, meaning its potential arrival on the market could be several years away. Furthermore, it remains to be seen as to whether or not 1402 will prove effective and safe. Batoclimab faces several clinical, regulatory, and commercial obstacles related to cardiovascular risks and the attempted use of a drug class known to exacerbate MG symptoms, which could impede its success. These developments align with the aforementioned challenges:

• Immunovant's Phase 3 trial for MG includes close examination of laboratory tests for clinically significant changes (such as lipid profile) for up to 76 weeks as a secondary endpoint.
• A Phase 1 drug-drug interaction study is being conducted by Immunovant to evaluate potential interactions with other drugs (lipid-lowering agents). Guidelines for managing any observed lipid abnormalities during long-term treatment are also being planned.
• IMVT-1402 has been introduced by Immunovant and is planned for future development.

At present, Immunovant's enterprise value is over $1.75 billion, despite the dim clinical, regulatory, and commercial prospects for batoclimab. I believe the market appears disconnected from reality at this point. Consequently, Immunovant shares are a "Strong Sell," and the stock appears to be a good candidate for a "Short" position.

Anticipating Negative News on Batoclimab: Should Investors Short Immunovant Stock?

Investors who are anticipating negative news about batoclimab's safety profile in the coming year might consider shorting Immunovant stock. The idea behind shorting is to borrow shares from a broker and sell them, hoping to buy them back later at a lower price to make a profit. Nevertheless, shorting entails significant risks such as unlimited losses and short squeeze risk. Moreover, shorting Immunovant comes with its own risks, such as positive news about batoclimab or favorable regulatory decisions that could drive up the stock price.

It's worth noting that borrowing shares to short a stock can be expensive, and the longer the position is held, the higher the borrowing costs become. For example, borrowing $10,000 worth of shares at a 4% annual interest rate would cost $400 for a year.

An alternative approach for investors who are averse to risks is purchasing put options. This strategy allows them to sell the underlying asset, IMVT stock, at a predetermined price (strike price) on or before a specific date (expiration date). By doing so, they can limit their risk to the premium paid for the option, and they know their maximum loss upfront.

In conclusion, investors need to conduct thorough research and carefully consider potential outcomes before deciding whether to short a stock or purchase put options.

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