VTYX - Ventyx: Too Risky Right Now After Some Poor Data

2024-01-18 08:36:24 ET

Summary

• Ventyx Biosciences has a mid-stage pipeline targeting inflammatory diseases, with lead assets VTX958, VTX002, and VTX2735.
• Phase 1 data for VTX958 showed high selectivity and excellent safety profile, but phase 2 trial results did not meet internal targets for further development in psoriasis.
• VTX002 demonstrated positive phase 2 data in ulcerative colitis, achieving primary and secondary endpoints and outperforming other molecules in clinical and endoscopic remission.

Ventyx Biosciences ( VTYX ) is a nanocap developer of small molecule assets targeting inflammatory diseases. Despite its small size, it has a mid-stage pipeline and data from multiple trials. The pipeline looks like this:

Lead asset is VTX958, a TYK2 inhibitor targeting Crohn's Disease. A second asset, VTX002, is a S1P1R modulator targeting Ulcerative Colitis. A third asset is VTX2735, an NLRP3 inhibitor targeting CAPS, and other potential indications including CV, dermatologic and rheumatologic diseases. These are all in phase 2 trials.

In August 2022, the company published phase 1 data from VTX958. Data showed that VTX958 is highly selective for TYK2 JH2 domain vs. Deucravacitinib, a JAK inhibitor, branded SOTYKTU, indicated for the treatment of moderate-to-severe plaque psoriasis. It has a greater than 4000 fold affinity for TYK2 pathways (IL-12, IL-23, IFN?) while avoiding the JAK1/2/3 pathways. This may help avoid unnecessary safety issues resulting from unwanted JAK inhibition, like a compromised immune system, for example.

Data also showed the following:

• VTX958 was well-tolerated across all SAD and MAD cohorts with an excellent safety profile

• Class-leading target coverage, with TYK2 IC50 and IC90 coverage up to 24 hours

• Robust dose-dependent pharmacodynamic activity and evidence of target engagement as measured by in vivo IFN? challenge and ex vivo IL-12/IL-18 stimulation assays

Note, IC50 is the concentration of a drug or compound at which it inhibits a biological process (e.g., enzyme activity, cell growth) by 50%, and so on.

A phase 2 trial was started, which declared results on November 6 of 2023. Unfortunately, the trial's efficacy results do not merit further investigation according to the company:

• VTX958 225 mg BID and 300 mg BID doses achieved statistical significance on the primary endpoint (PASI 75) and all key secondary endpoints at Week 16

• Efficacy results did not meet the internal target to support further development of VTX958 in psoriasis; Ventyx to terminate Phase 2 trials of VTX958 in plaque psoriasis and psoriatic arthritis

• The ongoing Phase 2 trial of VTX958 in Crohn's disease will continue to enroll; Ventyx intends to conduct an interim efficacy analysis in Q1 2024

So, this data forced them to abandon the plaque psoriasis program for VTX958, and the Crohn's Disease program is what is left. We will know very soon if this one is feasible or not.

The second program, VTX002, announced positive phase 2 data from its UC trial in October. Data showed :

VTX002 60 mg achieved the primary endpoint of clinical remission with a high rate of complete endoscopic remission

Both 30 mg and 60 mg doses of VTX002 demonstrated an excellent safety and tolerability profile

213 patients were randomized to two doses of VTX002, 30mg and 60mg, and placebo, in this 13-week trial. Key efficacy results showed that 28% of patients on the 60 mg dose and 24% of patients on the 30 mg dose achieved the primary endpoint of clinical remission at Week 13 compared to 11% of patients on placebo (p=0.018 for 60 mg; p=0.041 for 30 mg). Both p-values showed statistical significance. There was a secondary endpoint of endoscopic remission (Mayo endoscopic subscore of 0), which was also achieved by 29% of patients on the 60 mg dose and 21% of patients on the 30 mg dose. Only 7% of patients on placebo (p=0.001 for 60 mg; p=0.014 for 30 mg) achieved this endpoint.

The company compared this data with two other molecules, ozanimod and etrasimod, and on both endpoints, VTX002 did very well compared to these two molecules. These are all S1P1 inhibitors; however, in further comparison with molecules with other MoAs as well, including JAK1 inhibitors, VTX002 data was very competitive, with only one other molecule, a JAK1i called rainbow, actually beat its clinical remission figure. On the measure of endoscopic remission, VTX002 figures were superior to every other molecule.

Clinical remission primarily focuses on the resolution of symptoms and improvement in the patient's overall well-being. Endoscopic remission, on the other hand, assesses the visual appearance of the mucosa during endoscopy to determine the extent of inflammation and healing at the tissue level. While both are important endpoints, endoscopic remission provides by far the more complete picture, and so for VTX002 to shine in this particular measure is a very positive development.

Note, however, that the stock dropped 20% on this data drop, possibly because while on absolute lymphocyte count (ALC') VTX002 beat competition (and its internal target) roundly, on clinical remission, the difference was not that stark. Since ozanimod is approved in UC since 2021, and it happens to be developed by big pharma, and since etrasimod is also in much later stages and is being developed by Pfizer, the market probably wanted a larger difference between the numbers.

About the third program, there's not much to say except what they stated in their earnings release:

We are conducting a Phase 2 trial of VTX2735 in patients with familial cold autoinflammatory syndrome (FCAS). FCAS is the most common subset of cryopyrin-associated periodic syndrome ((CAPS)), a group of rare autoinflammatory conditions caused by gain-of-function mutations in the NLRP3 gene. Patient enrollment is progressing, and we expect to provide an update on the trial in the first quarter of 2024.

Financials

VTYX has a market cap of $126mn and a cash balance of $300mn. R&D expenses were $49.8 million for the quarter ended September 30, 2023, while G&A expenses were $8.2 million. The company reduced its workforce by 20% in December, spending $2mn but hoping to save some money (it had 99 employees before the cut). At this rate of expense, the company has cash for 3-4 quarters, at the least.

VTYX stock is held mostly by institutions, followed by PE/VC firms; retail presence is very small. Key holders are NSV Investments, Price T Rowe and BlackRock. Insiders regularly and heavily sell stock and have never purchased in the last two years. I have seldom seen such a depressing level of insider sell in any biotech.

Risks

VTYX is very small, and I almost never invest in such small stocks because of lack of transparency, liquidity and funds. In this case, however, the company has nearly 3x as much cash as its market cap, which, on the one hand, makes it cash rich, while on the other hand makes it a very contrarian play.

Poor data from one trial and high expectations from the other have decimated the stock. The stock is now very volatile, and poor data from the Crohn's Disease trial, to be announced this quarter, will further crush the stock.

Bottomline

VTYX stock is a clear avoid for the risk averse investor because, despite all that cash, the stock is dangling by a string, which will be all haywire if the data is bad. There's not huge upside if it is good, but a lot of downside if it is bad. The risk is just too much.

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