JNJ - Viridian Therapeutics Has Promise

2023-05-21 07:32:58 ET

Summary

• Shares of antibody therapy concern Viridian Therapeutics, Inc. are off some 40% since setting an all-time high of $39.00 in January following a positive readout on lead candidate VRDN-001.
• Despite pivotal trial data not due until mid- and late 2024, there are plenty of upcoming catalysts to keep shares of VRDN buoyant.
• With superior efficacy results versus a blockbuster therapy (to date), the recent insider buying merited a deeper dive.
• A full investment analysis follows in the paragraphs below.

"The right thing to do and the hard thing to do are usually the same ."? Steve Maraboli

Today, we take our first look at a promising developmental company for the first time. An analysis follows below.

Company Overview:

Viridian Therapeutics, Inc. ( VRDN ) is a Waltham, Massachusetts-based biopharmaceutical concern focused on the development of fast-follower therapies that improve upon existing treatment options for rare diseases, leveraging its expertise in antibody discovery and engineering. The company has two candidates - both IGF-1 antagonist compounds with different delivery systems - undergoing evaluation in the clinic for thyroid eye disease ((TED)). Viridian was founded in 2020 and acquired by failed microRNA biotech miRagen in the same year, with its first transaction as a merged company occurring at $17.33 a share. The stock trades near $29.00 a share and sports an approximate market capitalization of $1 billion.

TED

The company's sole clinical target is TED, a rare autoimmune disease that manifests as inflammation within the orbit of the eye, causing bulging eyes, redness and swelling, double vision (diplopia), pain, and (potentially) blindness. The disorder is progressive, featuring an initial active stage, followed by a transition to a secondary chronic phase. In the active (or acute) stage, fat tissue expands behind the eye, causing surrounding ocular muscles to become swollen, which in turn causes the eyelids to retract, creating distended eyes (proptosis) that become red and inflamed from the stress, leading to diplopia. This stage usually lasts 18 to 24 months and is followed by the chronic (or inactive) phase, which includes a reduction in inflammation but progression to fat tissue hardening, ocular muscle scarring, as well as continual eyelid retraction, proptosis, and diplopia (in some instances).

TED develops in parallel with another autoimmune malady known as Graves' Disease, in which antibodies form against the thyroid-stimulating hormone receptor [TSHR]. Healthy levels of IGF-1R and TSHR act in concert to regulate proliferation and differentiation of fibrocytes in the orbital socket. Autoantibodies against either IGF-1R or TSHR can initiate the progression towards TED and in severe cases can cause sight-endangering optic nerve compression.

Active TED afflicts more than 20,000 Americans and 35,000 Europeans. Chronic TED menaces over 75,000 Americans and more than 150,000 Europeans. Before the FDA approval of Horizon Therapeutics' ( HZNP ) Tepezza (teprotumumab) in 2020, moderate to severe cases of TED were addressed off-label with steroids. Tepezza is an intravenously administered monoclonal antibody, which acts as a partial antagonist of IGF-1R and is approved for the treatment of TED regardless of activity or duration. With a treatment price of ~$375,000 per patient (six months, once every three weeks administration on average) it rapidly developed into a blockbuster therapy, generating $1.66 billion (2021) and $2.0 billion (2022) in its first two full years on the market. Tepezza sales reached $493 million in 4Q2022. With peak global sales potential of ~$4 billion plus, it also attracted the attention of Amgen ( AMGN ) , Johnson & Johnson ( JNJ ) , and Sanofi ( SNY ), the former of which agreed to purchase Horizon for $27.7 billion, subject to Irish regulatory approval.

VRDN-001

Viridian believes Tepezza can be improved upon by a failed multiple myeloma treatment (2009) repackaged as VRDN-001. Like Tepezza, it is an intravenously administered monoclonal antibody, but it acts as a full antagonist of the IGF-1R signaling pathway. As such, the company believes this compound it in-licensed from ImmunoGen ( IMGN ) can demonstrate superior efficacy to the $2 billion therapy.

To date, that conviction has been rewarded, at least in patients with Active TED. In a Phase 1/2 study encompassing 21 patients over three dose cohorts (3mg, 10mg, and 20mg) and employing the same administration protocols as Tepezza, VRDN-001 was able to demonstrate a 71% proptosis responder rate (defined as a > 2-millimeter reduction in proptosis from baseline at week 6) with a mean change of -2.3 mm. This compares favorably to Tepezza, which produced a 56% responder rate and mean change of -1.9 mm in its Phase 3 trial (n=41). Furthermore, patients on VRDN-001 saw a mean change of -4.1 on the seven-point clinical activity score [CAS] (baseline 5.4) with 62% achieving a score of 0 or 1 (maximal or near-maximal therapeutic effect) at week 6 versus a -2.1 mean change in CAS (baseline 5.1) and 22% scoring 0 or 1 with Tepezza. Also, complete diplopia resolution occurred in 54% of VRDN-001 patients versus 36% for Horizon's blockbuster therapy. There were no reported serious adverse events across all three dose cohorts.

Since a sharp rally to an all-time high - at least since Viridian became Viridian - of $39 following VRDN-001's most recent data readout in Active TED (January 2023), shares of VRDN are off 31%.

Based on its Phase 1/2 performance, VRDN-001 was entered into a 120-patient, placebo-controlled Phase 3 trial (THRIVE) that enrolled its first Active TED participant in December 2022. They are being randomized 1:1:1 to receive either VRDN-001 10mg once every three weeks for eight cycles; VRDN-001 10mg once every three weeks for five cycles; or placebo. Topline results are anticipated in mid-2024.

VRDN-001 is also expected to readout data from a Phase 1/2 trial of Chronic TED patients in 2Q23. Assuming proof-of-concept is established, Viridian will initiate a Phase 3 trial (THRIVE-2) for this indication shortly thereafter with results expected by YE24.

Other IGF-1R Candidates

In addition to VRDN-001, the company is advancing VRDN-002, a partial antagonist of the IGF-1R that employs half-life extension technology, allowing subcutaneous delivery at low doses. In a Phase 1 study encompassing healthy subjects, VRDN-002 demonstrated a half-life of 43 days versus 10 to 11 days achieved by both VRDN-001 and Tepezza. Results from a Phase 2 study are anticipated in 4Q23.

It should be noted that due to VRDN-001's successful efficacy in its low dose cohort (3mg), Viridian is planning a Phase 1 study employing a subcutaneously delivered VRDN-001 with results due near YE23.

Viridian is also expected to enter VRDN-003 into the clinic in mid-2023. It is a cross of Viridian's first two compounds, employing the same full antagonist amino-acid sequence as VRDN-001 but with VRDN-002 half-life extension technology. Results from a Phase 1 study on healthy subjects are expected by YE23.

Potential Competition

Despite its superior efficacy profile over Tepezza (to date), VRDN-001 and its offshoots face competition from other TED aspirants. Immunovant ( IMVT ), in conjunction with Harbour BioMed, is developing a subcutaneously injected antibody fragment (batoclimab) to target the neonatal Fc receptor (FcRn) as an avenue for treating TED. It is undergoing evaluation in a Phase 3 study; however, it should be noted that in a Phase 2b study, its highest dose (680mg; n=14) only achieved a 43% proptosis responder rate (versus VRDN-001's 71%). Approved therapy for myasthenia gravis Vyvgart (efgartigimod), which is somewhat similar to batoclimab, is being tested by argenx ( ARGX ) with a pivotal trial expected to be initiated in 4Q23 with data due in 2025. Acelyrin ( SLRN ) has a subcutaneously administered anti-IGF-1R undergoing Phase 1 evaluation and Sling Therapeutics' small molecule IGF-1R inhibitor linsitinib is undergoing assessment in a Phase 2b study.

Relevant IGF-1R Licensing Agreements

As stated earlier, VRDN-001 was in-licensed from ImmunoGen in 2020, under which Viridian is obligated on potential developmental and commercial milestones totaling $143 million and mid-single digit royalties.

The company also has a similar agreement with Xencor ( XNCR ) covering IGF-1R technologies that could put it on the hook for $55 million in development and commercial milestones, as well as mid-single digit royalties.

On the other side of the ledger, Viridian granted Zenas BioPharma an exclusive development and commercialization license covering certain IGF-1R antibody products for non-oncology indications in greater China. Besides a $1.0 million upfront payment, specific terms have not been disclosed.

Balance Sheet & Analyst Commentary:

To advance its portfolio of TED therapies through the clinic, the company held cash and investments of $373.9 million at YE22 versus debt of approximately $5 million as of the end of the first quarter. This should provide Viridian Therapeutics a cash runway to 2H25. A good portion of these funds came via a secondary offering of common and preferred stock conducted in August 2022, raising net proceeds of $311 million. Viridian burned through around $50 million in cash during the first quarter.

Seeing superior efficacy data to a blockbuster therapy, Street analysts are unanimously positive on Viridian. Nine analyst firms including Needham and Wedbush and have reiterated or initiated Buy ratings on VRDN since April. Price targets proffered range from $44 to $57 a share.

CEO Scott Myers is in accordance with the sell-side prognosticators, investing nearly $262,000 into 9,500 shares of VRDN in March and April.

Verdict:

Although there is potential additional competition looming and the pivotal Phase 3 data from VRDN-001's Active TED indication is not due to readout until mid-2024, there are enough upcoming catalysts to propel Viridian higher. The company is well-funded. That said, positive news from the Phase 2 chronic TED trial in 1H23 or VRDN-002's Phase 2 study in 2H23 could be an excuse for a significant liquidity event to get its IGF-1R therapies to the finish line. That said, VRDN-001's results to date versus its market potential coupled with Viridian's stock recent four-month, 40% pullback suggest the investment is warranted. Options are also available against the equity to accumulate a position via covered call orders. They are somewhat liquidity challenged on some days, but I had some execute and also own some straight equity now within a small 'watch item' position for now.

"A body of men holding themselves accountable to nobody ought not to be trusted by anybody ."? Thomas Paine

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