HZNP - Viridian: A Second Buying Opportunity But I Am Waiting For A Better Price

2023-04-11 15:20:10 ET

Summary

• Viridian Therapeutics, Inc. has been a profitable investment for me.
• I am trying to get in again.
• I will wait for a further fall in the Viridian Therapeutics, Inc. stock price.

I bought Viridian Therapeutics, Inc. ( VRDN ) at around $15 last year, and was able to exit the stock in a few months at a nice profit, thanks to a nice price movement following excellent phase 1/2 data. The stock is now down quite a bit from last year's highs, so it is time to check for another opportunity.

Viridian develops VRDN-001, an IGF-1R signaling pathway blocker which has produced positive data from an ongoing phase 1/2 trial targeting Thyroid Eye Disease, or TED. The data they produced - I covered it here - is better than Horizon Therapeutics' ( HZNP ) Tepezza, the only approved drug in the indication. Now, Tepezza is a blockbuster drug with annual revenue of $2bn+; this is what excited investors about Viridian last year. Tepezza is also highly expensive, with some patients needing up to $500,000 worth of medicine per year. There are also some side effects - muscle cramps, nausea and diarrhea - that have been noted with some concern. VRDN-001 also has a shorter infusion time. Moreover, Viridian has two other versions, both subcutaneous forms, whereas tepezza is only IV. These could possibly be once-monthly doses.

The TED market is pretty large. There are 25000 U.S. patients for the active TED indication, the one both Horizon and Viridian are pursuing; and then there are 75000 more patients in the chronic TED indication, which comes next for Viridian. EU numbers are similar. Amgen (AMGN) recently agreed to purchase HZNP for $27.7bn, a huge figure which validates the potential for the TED market. VRDN's phase 3 data will come out in 2024, which is its most important catalyst. HZNP makes $2bn+ within two years of launch, and the total market is estimated to be over $4bn.

Despite all that, the stock has fallen steadily since February this year. There was a sharp spike after the company posted low dose data from the TED trial in early January. Then there was a correction, and finally, after the March earnings, there was a distinctive downward movement. Let us understand these events.

First, the trial had 3 dose cohorts, 3mg, 10 and 20mg per kg. We discussed data from the two higher doses earlier. In January, the company presented data from the 3mg/kg cohort, which saw solid efficacy. Data were as follows:

The results for the 3 mg/kg dose cohort showed an improvement in TED symptoms six weeks after the first dose, as 67% of patients were proptosis responders, and 67% achieved a Clinical Activity Score ((CAS)) of 0 or 1.

56% were overall responders, and 20% had complete resolution of their double vision.

Overall results for 21 patients who received VRDN-001 at all three doses indicate that 62% achieved a CAS of 0 or 1, and 54% had complete resolution of their diplopia.

As of Dec. 19, the latest data cut for follow-up, there were no incidences of adverse events (SAEs), no discontinuations, and no infusion reactions, the company added.

Compare that with the 10mg/kg cohort data, and what we see is that 83% versus 67% patients achieved proptosis response, while 83% versus 67% achieved a CAS score of 0 or 1. 75% versus 20% had complete resolution of diplopia.

So again, the 10mg/kg cohort comes out as best in terms of both safety and efficacy. However, the 3mg/kg cohort is not too bad either, on most metrics.

On February 6, Viridian got a new CEO, replacing founding CEO Jonathan Violin, Ph.D. with Scott Myers. There was a slight drop in stock price around that time.

Financials

Viridian Therapeutics, Inc. has a market cap of $1.06bn and a cash balance of $425mn. Research and development expenses were $39.3 million during the fourth quarter of 2022, while general and administrative expenses were $9.9 million. At that rate, the company has a cash runway of 9 quarters, or to 2025.

The ex-CEO has been regularly selling VRDN stock over the last 12 months, with large sales around when he exited. The new CEO bought some shares after onboarding. There's heavy institutional and funds ownership, key holders being Venrock, BlackRock, and other rock stars of the fund world.

Bottom Line

Viridian Therapeutics, Inc. has been a profitable stock for me in the last year. It hit my price target, and I exited, but there's further upside potential to VRDN stock. Viridian Therapeutics' problem has always been its second-fiddle position vis-à-vis Horizon. However, if it manages to get IV active TED med VRDN-001 into the market, it then has chronic, and it then has two versions of SC, which Horizon does not yet have. There are other differentiating aspects that make it something above and beyond a second fiddle.

I will probably wait for a little lower price for Viridian Therapeutics, Inc., ideally a price similar to the one I bought last year. We will see if it goes down to that level again, due to none but benign reasons.

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