VERA - Vera Therapeutics' Promising Atacicept Drug Targets IgAN

2023-08-17 17:47:04 ET

Summary

• Vera Therapeutics is developing atacicept, a treatment for IgA nephropathy, which showed positive results in Phase 2b trials.
• The company has strong financials with a cash runway of over two years, but posted an increased net loss in the recent quarter.
• Despite inherent biotech risks, a speculative 'Buy' recommendation is given for Vera Therapeutics due to the promising drug, strong financial position, and potential to transform IgAN treatment.

Introduction

Vera Therapeutics ( VERA ), a late clinical-stage biotech company, focuses on developing treatments for severe immunological diseases. Their lead product, atacicept, a fusion protein, targets IgA nephropathy and showed positive results in a Phase 2b trial. They plan to launch Phase 3 trials for IgAN and lupus nephritis. Vera also holds exclusive rights to MAU868, an antibody for BK virus infections, showing promise in Phase 2 trials.

Recent developments: Analyst, Guggenheim, initiated coverage of Vera Therapeutics with a buy rating, endorsing atacicept as a strong contender in the IgAN drug market. Guggenheim predicts a 75% success rate for the Phase 3 study, potential 2026 launch, and peak US sales of $1.25B by 2038.

The following article discusses Vera Therapeutics' progress in developing atacicept, a treatment for IgA nephropathy. The article covers positive Phase 2b results, the upcoming Phase 3 trials, and the company's financial situation.

Q2 2023 Earnings

Looking at Vera's most recent earnings report , the company posted a net loss of $20.2M for the quarter ended June 30, 2023, an increase from the $14.9M loss reported in the same period last year. The loss per share also improved slightly, at $0.46 compared to last year's $0.55. Vera used $44.1M in net cash for operating activities in the first six months of 2023, a noticeable rise from the $28.0M in the same period last year. As of June 30, 2023, Vera held $181.0M in cash, cash equivalents, and marketable securities.

Liquidity & Cash Runway

Turning to Vera's balance sheet , as of June 30, 2023, the company had a total of $33.9M in cash and cash equivalents, and $147.1M in marketable securities. Summing these, the company had a total of $181M in highly liquid assets. Over the six months ended June 30, 2023, the company used $44.1M in operating activities, giving an average monthly net burn rate of $7.35M. Dividing the total liquid assets by this monthly burn rate gives a cash runway of approximately 24.6 months. Vera Therapeutics' overall liquidity position is strong, with total current assets of $190.6M and total current liabilities of only $26.8M. The company has long-term debt of $24.9M, which is manageable given its liquid assets. As of now, with a cash runway of more than two years and a comfortable liquidity position, there appears to be no immediate need for additional financing. However, it should be noted that the company's net loss for the first six months of 2023 was $50.2M, which could impact future financing needs if this trend continues. However, these estimates are my own and may differ from other analyses.

Valuation, Growth, & Momentum

According to Seeking Alpha data: Vera's capital structure is notable for its small amount of debt relative to market capitalization, with cash holdings that are significantly larger in comparison. The company's enterprise value is $633.07 million. In terms of valuation, the company's price-to-earnings ratio is not meaningful due to negative earnings, and the company has a relatively high price-to-book ratio of 5.58. Regarding growth, earnings estimates are projected to improve in 2025 with a 15.52% increase in EPS. In terms of stock momentum, Vera has experienced significant positive momentum over the past 3 and 6 months, with a 121.96% and 124.78% increase, respectively. However, it has underperformed over the past year, with a -18.29% return.

Atacicept - Promising IgAN Phase 3 Investigational Treatment

Atacicept, developed by Vera Therapeutics, is a promising drug for the treatment of IgA nephropathy (IgAN), a chronic kidney disease. The drug works by inhibiting the cytokines BLyS and APRIL, which are involved in inflammation and autoimmune responses. In the Phase 2b ORIGIN trial , atacicept (150 mg) significantly reduced proteinuria, an indicator of kidney damage, and stabilized eGFR, a measure of kidney function, with minimal side effects. These positive results have led to the initiation of the Phase 3 ORIGIN 3 trial, designed to further assess the safety and efficacy of atacicept in IgAN patients. The trial will involve a 4-week screening period, a 104-week double-blind treatment period, a 52-week open-label extension, and 26 weeks of follow-up. Participants will be randomized to receive either atacicept 150 mg or a placebo once weekly, with the primary endpoint being the change in proteinuria at week 36. The trial also aims to determine the drug's impact on eGFR and Gd-IgA1 levels, as well as time to the first occurrence of composite kidney failure events. Vera plans to present additional data from the ongoing Phase 2b ORIGIN trial in the latter half of 2023 and 2024 and expects to announce preliminary data from the pivotal ORIGIN 3 trial in the first half of 2025. The development and potential approval of atacicept could offer a transformative treatment for IgAN patients, addressing the underlying causes of the disease and slowing its progression. The market potential for atacicept is significant given the lack of effective treatments for IgAN.

My Analysis & Recommendation

In conclusion, Vera Therapeutics is on the right track with its lead drug atacicept, which has shown encouraging results in the Phase 2b ORIGIN trial for the treatment of IgA nephropathy. The initiation of the Phase 3 ORIGIN 3 trial signals confidence in the drug's potential and represents a key step towards regulatory approval. Vera also boasts strong financials, with a healthy liquidity position and a cash runway of more than two years, reducing the immediate need for additional financing. However, investors should monitor the company's net loss trend, as sustained losses could eventually necessitate financing measures that could impact shareholders. The Phase 2b ORIGIN trial's additional data in 2023 and 2024 and the pivotal ORIGIN 3 trial's preliminary results in 2025 are key catalysts for the stock.

IgA nephropathy is a serious kidney disease with few effective treatments available . The current treatment landscape primarily involves controlling high blood pressure and suppressing the immune system, which slows down kidney damage but does not address the root cause of the disease. Vera's atacicept targets the underlying inflammation and autoimmune responses, potentially offering a breakthrough treatment for IgAN patients.

While Vera's stock has experienced significant positive momentum over the past 3 and 6 months, it has underperformed over the past year. This recent underperformance may be seen as an opportunity for investors to get in at a more attractive price. With a strong liquidity position, promising drug candidate, and significant market potential, the company appears to be well-positioned for growth. Guggenheim's recent endorsement and buy rating with a price target of $27 further supports this view.

As an investor, I would recommend a speculative 'Buy' for Vera Therapeutics. The promising Phase 2b results, initiation of the Phase 3 trial, strong financial position, and the potential to transform the treatment landscape for IgAN make this a compelling investment opportunity. However, investors should be prepared for potential volatility associated with biotech stocks and carefully monitor Vera's progress in the ongoing trials and any changes in its financial situation. Given the high potential reward, this stock may be suitable for investors with a long-term investment horizon and a moderate-to-high risk tolerance.

Risks to Thesis

When the facts change, I change my mind.

It is important to note that my 'Buy' recommendation comes with certain inherent risks that potential investors should consider. Firstly, Vera Therapeutics is a late-stage biotech company, which means that the stock's price could be highly volatile and sensitive to any news or developments related to its clinical trials. While the results from the Phase 2b trial for atacicept were promising, there is no guarantee that the drug will perform well in Phase 3 trials or receive regulatory approval. Failure in any of these stages could lead to a significant decline in the stock's price.

Secondly, although Vera has a strong liquidity position currently, the company is operating at a net loss. If this trend continues, the company may eventually need to raise additional capital, which could lead to dilution for existing shareholders.

Lastly, there is competition within the IgAN treatment market, and even if atacicept is approved, its success will depend on its ability to capture market share from existing treatments and competitors.

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