2023-05-10 14:45:46 ET
Summary
- Tegoprubart has the potential to become the first-line immunomodulatory agent after kidney transplantation, a $375M/year U.S. revenue opportunity.
- The company has a negative enterprise value, so investors are ignoring the pipeline despite promising early clinical data.
- Phase 1b data for Tegoprubart showed lower kidney function decline than the standard of care. Phase 2 data is expected in late 2024.
Eledon Pharmaceuticals ( ELDN ) is based in Irvine, CA. The company was founded in 2017 as Novus Therapeutics. In 2021, the company acquired Anelixis Therapeutics and its anti-CD40K pipeline and changed its name to Eledon Pharmaceuticals.
The company's lead product candidate is Tegoprubart, a highly selective humanized IgG1 anti-CD40L antibody. The CD40/CD40L pathway plays an important role in autoimmune disease, transplant rejection, and neuroinflammation.
Tegoprubart selectively blocks CD40L which does not result in lymphopenia seen with immunosuppressive agents that target CD40. It also has >2x longer half-life and less immunogenicity than anti-CD40 immunosuppressive agents.
After kidney transplantation, the standard of care immunosuppressive agent is Tacrolimus, which is nephrotoxic and reduces the eGFR, a measure of kidney function to monitor graft rejection. It also increases the incidence of new-onset diabetes eGFR is used as a marker of graft rejection and it is usually in the 50-51s mL/min/1.73 m2 at 6-12 months after current agents like Tacrolimus, Belatacept, and Iscalimab.
In a Phase 1b trial, Tegoprubart showed eGFR higher than the standard of care, SOC (77 mL/min/1.73 m2 at week 31 vs. in the 50s with SOC). There was no new-onset diabetes.
eGFR at 12 months is an early predictor of kidney graft failure and hospitalization rate, therefore, Tegoprubart has the potential for improving the clinical outcome of post-kidney transplantation patients. A Phase 2 trial is planned to start in mid the year and will compare the drug against the SOC with eGFR as the primary endpoint. The treatment duration is 52 weeks, so data could be expected by year-end 2024 .
Investor presentation
Another indication is Amyotrophic Lateral Sclerosis where the drug has shown dose-dependent B and T cell engagement at week 12 and decreased pro-inflammatory target biomarkers.
Investor presentation
The company's CEO David-Alexandre Gros, MD has over 20 years of experience in biotechnology and pharmaceuticals, including leadership roles at Sandoz, McKinsey, Sanofi, NantKwest, etc. He also served as the COO at Neurocrine Biosciences ( NBIX ), and Chief Business Officer at Alnylam Pharmaceuticals ( ALNY ).
Cash reserves are approx. $80 million after recent financing in which Sanofi participated, a bullish sign. The total financing deal value is $185 million. Cash is enough till 2024 end, and there is no long-term debt.
The target market in kidney transplantation is $375 million/year in the U.S. (at 250K procedures/year in the U.S. and an annual cost of $15K/patient similar to currently approved immunosuppressive agents). The enterprise value is negative at present, so the stock is very beaten down at present but is showing signs of a rebound.
Pharmaceutical stocks trade at an enterprise value of 4x peak sales. Even at just a 20% market share in post-kidney transplant, discounting at 15% cost of capital and peak sales in 2033, six years after the launch (assuming drug launch in 2027), the fair enterprise value is $18.5M. I have not included ALS in my assessment which could further upside. I believe the company is very undervalued at present with a negative enterprise value and investors are ignoring the pipeline. The mean analyst price target is $18.40 (573% upside) from Seeking Alpha .
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Risks in the investment include underwhelming data from the ongoing trials in kidney transplantation and ALS. Much of the above valuation is based on the kidney transplantation aspect of the pipeline. Any unexpected reduction in eGFR or side effects in the Phase 2 trial may result in a fall in the stock price. Investing in developmental-stage biotech/pharma stocks is risky and may not be suitable for all investors. It is possible to lose money by investing in developmental-stage biotech/pharma companies. This note represents my own opinion and is not professional investment advice.
For further details see:
Eledon Pharmaceuticals: Disrupting The Kidney Transplantation Landscape