VYGR - Voyager Therapeutics: A High-Risk High-Reward Investment In The Gene Therapy Landscape

2023-07-11 17:30:00 ET

Summary

• Voyager Therapeutics, a biotech firm specializing in gene therapy and neurology, has seen significant financial growth in Q1 2023 due to strategic partnerships with Novartis and Neurocrine Biosciences.
• The company is developing drug candidates for neurological conditions such as ALS, Alzheimer's, Parkinson's, and Friedreich's ataxia, with a focus on reducing the spread of toxic tau aggregates in Alzheimer's disease.
• Despite the promising outlook, Voyager operates in a risky domain with potential challenges including clinical trial failures, dependency on partnerships, and a highly competitive landscape.

Introduction

Voyager Therapeutics ( VYGR ) is a biotech firm specializing in gene therapy and neurology. They focus on creating advanced AAV-based gene therapies to address unmet medical needs with high commercial potential. Their proprietary TRACER™ AAV capsid discovery platform enables development of capsids capable of crossing the blood-brain barrier, enhancing tissue delivery. Beyond exploring licensing opportunities for TRACER capsids, Voyager is developing drug candidates for neurological conditions such as ALS, Alzheimer's, Parkinson's, and Friedreich's ataxia.

Recent events: In March 2023, Novartis licensed Voyager's TRACER capsids for two neurologic diseases, yielding $25 million with up to $600 million in potential milestones. Voyager also partnered with Neurocrine Biosciences ( NBIX ) for gene therapy programs, gaining $175 million upfront with up to $4.2 billion possible in milestones. Earlier, Pfizer ( PFE ) licensed a TRACER capsid, providing $10 million and up to $290 million in potential milestones. Additionally, Voyager advanced its Alzheimer's candidate VY-TAU01, planning to present data at AD/PD 2023 and initiate a GLP toxicology study.

Q1 2023 Earnings

In Q1 2023 , Voyager saw significant financial growth compared to Q1 2022. Collaboration revenues skyrocketed from $0.7 million to $150.5 million, primarily due to strategic partnerships with Neurocrine Biosciences and Novartis. This led to a net income of $124.0 million, contrasting the net loss of $21.3 million in the previous year. Both R&D and G&A expenses increased due to higher staff costs and program-related expenditures, with the former rising to $18.6 million and the latter to $9.0 million. The company's cash and equivalent assets totaled $273.3 million by the end of Q1, excluding a $25.0 million option exercise payment from Novartis ( NVS ) received after the quarter's close.

Voyager's Innovative Anti-Tau Antibodies for Alzheimer's Disease

I'd like to take a moment to highlight a particularly interesting development to follow. Voyager is developing proprietary anti-tau antibodies for the treatment of Alzheimer's disease ((AD)), a condition affecting approximately 6 million people in the US. While anti-amyloid antibodies have been approved for AD treatment, there remains a significant unmet medical need. Voyager's approach focuses on reducing the spread of toxic tau aggregates, which are believed to be central to AD progression. Their anti-tau antibodies target specific regions of the tau protein, differentiating them from first-generation approaches.

Preclinical studies presented in August 2022 showcased high-affinity antibodies targeting the mid-domain and C-terminus of tau, demonstrating favorable biophysical characteristics and strong activity in mouse models. In January 2023, Voyager selected VY-TAU01, a lead humanized anti-tau antibody candidate, for its affinity, selectivity, and biophysical properties. They plan to initiate a GLP toxicology study in 2023 and file an IND in the first half of 2024.

My Analysis & Recommendation

Voyager Therapeutics is making commendable advancements in developing gene therapies for various neurological conditions. Its TRACER™ AAV capsid discovery platform has attracted significant partnerships with Novartis, Neurocrine Biosciences, and Pfizer. These collaborations, evident from the impressive jump in Q1 2023 collaboration revenues to $150.5 million from $0.7 million in Q1 2022, provide substantial financial resources and industry expertise, enhancing Voyager's ability to bring its therapies to market.

The partnerships also offer potential for future revenue via milestone payments and royalties, an appealing factor for investors. Plus, collaboration with established pharmaceutical players lends credibility to Voyager's work, potentially boosting its market visibility and investor confidence.

However, despite these positive aspects, Voyager operates in a complex and risky domain. Drug development, especially gene therapy, is inherently uncertain, and failures can significantly impact the company's valuation and future outlook.

With a market capitalization of ~$450 million, Voyager appears to be a high-risk, high-reward investment proposition. The significant milestones and royalties tied to its collaborations could provide substantial upside if the therapies succeed.

Given these factors, a "Buy" recommendation could be justified for investors with a high risk tolerance and a long-term investment horizon, willing to weather the uncertainties associated with drug development. However, more risk-averse investors might prefer to adopt a "hold" or "watch" approach, awaiting further clinical data and developments to reduce the inherent uncertainties.

Risks to Thesis

When the facts change, I change my mind.

Despite my speculative bullish stance, Voyager is not without major risks. Below are three key risks to look out for:

• Clinical Trial Failures: As a key component of my bullish perspective on Voyager, I acknowledge the inherent uncertainty of drug development. If Voyager's therapies fail in clinical trials or don't receive regulatory approval, it could significantly harm the investment thesis. Even promising preclinical data doesn't guarantee success in human trials.

• Dependency on Partnerships: Voyager's financial health and success are closely tied to its strategic partnerships. A dissolution or underperformance of these partnerships could put a strain on Voyager's resources and development timelines, potentially posing a risk to my bullish view.

• Competitive Landscape: The gene therapy space is highly competitive, with many companies working on similar therapies. If competitors bring effective treatments to market before Voyager, it could limit the commercial potential of Voyager's therapies, thus negatively impacting my bullish outlook.

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