2023-12-19 09:10:24 ET
Summary
- Mirum Pharmaceuticals, Inc. stock dropped 16% after its lead asset, Livmarli, failed to meet primary or secondary endpoints in a phase 2 trial for biliary atresia.
- This looks like an overreaction considering the small addressable market and no negative implications for Livmarli in other indications.
- Livmarli's strong start in ALGS and an incremental opportunity in PFIC put it in a good position for continued growth despite the increasing presence of Ipsen's Bylvay.
- The acquisition of the bile acid portfolio from Travere Therapeutics is a good fit, but both products lack patent protection and face potential generic competition that has not materialized for Travere in recent years.
Shares of Mirum Pharmaceuticals, Inc. (MIRM) were down more than 20% at one point yesterday (December 18th) and closed the day 16% lower. The stock fell after the company announced that its lead asset Livmarli (maralixibat) failed to meet the primary or secondary endpoints in a phase 2 trial in patients with biliary atresia.
This is more than likely an overreaction, since this was a very different treatment setting for Livmarli compared to the approved indication. In this failed trial, Livmarli or placebo was given as an adjuvant therapy to Kasai surgery in patients with biliary atresia and the primary endpoint was mean change in bilirubin from baseline to week 26. This compares to the approved indication of treatment of cholestatic pruritus in Alagille syndrome patients or progressive familial intrahepatic cholestasis ("PFIC"), for which it should gain approval in March 2024.
Biliary atresia was also a very small additional opportunity for Livmarli. The annual incidence is estimated to be between 380 and 600 in the U.S. and EU combined. I would estimate that it would not account for more than 10% of potential peak sales of Livmarli, and as such, believe that a negative reaction of up to 10% would be appropriate, although it would require a fully valued Livmarli to get to the maximum of 10%, which I do not believe is the case.
I see Mirum as well positioned to drive value in the coming years, driven primarily by Livmarli in the currently approved indication and with some incremental upside in PFIC, by cash flow contributions from the acquired bile acid portfolio and some upside from Chenodal in CTX, and with upside optionality from volixibat for the treatment of pruritus in PSC and PBC. I would also expect the company to do more business development deals going forward that could enhance shareholder value.
Livmarli's uptake in Alagille syndrome to date looks good, additional opportunity in PFIC
Livmarli's effect on pruritus and serum bile acid reduction in the clinical trials along with a good safety and tolerability profile have translated to strong uptake in Alagille syndrome ("ALGS") since launch in late 2021. The rare disease price tag makes the relatively small patient population, estimated to be between 4,000 and 5,500 in the United States and Europe combined, worth pursuing.
Net sales more than doubled year-over-year in the third quarter to $38.7 million compared to the same quarter last year.
$28.6 million of sales came from the United States and the rest from the strong start in Germany, France, and distributor markets. Management warned that we should continue to see quarter-to-quarter variability in international revenue.
The additional opportunity is in progressive familial intrahepatic cholestasis, or PFIC, with a PDUFA date in March 2024. This is an even smaller patient population, estimated to be just above 1,000 in the two major territories combined, and represents a nice incremental opportunity for growth.
Ipsen S.A.'s ( IPSEY ) Bylvay has had a head start in PFIC since it was approved in July 2021, and competition for patients in the ALGS has likely increased considerably since Bylvay's FDA approval in June of this year.
The markets the two companies are targeting are small in terms of patient numbers, but large enough considering the very high price tags for Mirum to generate considerable annual sales. Considering the entry of Bylvay and the growth rates of Livmarli to date, I expect the annual sales of Livmarli to reach $500 million to $600 million in 4 to 5 years.
Acquisition of Cholbam and Chenodal
Mirum surprised the market in July by acquiring the bile acid portfolio from Travere Therapeutics ( TVTX ), consisting of Chenodal and Cholbam, for $210 million upfront and up to $235 million in potential sales-based milestones.
On the surface, this may sound like a steal since these products generated more than $100 million in annual sales last year, but the reason it looks like a steal is that both products lack patent protection. This was a sword hanging over these assets for years when they were owned by Travere. However, not much was happening all these years, and Travere continued to generate modest revenue growth, and ultimately, to cash in and no longer carry the risk of generic competition.
There is also some regulatory protection upside in the cerebrotendinous xanthomatosis ("CTX") indication for Chenodal. Chenodal is approved for radiolucent stones in the gallbladder, but it is being primarily used off-label for the treatment of CTX. Mirum recently reported positive results from a study Travere conducted in this patient population, and the company believes it can get seven years of orphan exclusivity for this indication.
The results from this trial also represent a growth opportunity, as Mirum anticipates an opportunity for an increase in diagnosis rates and also the freedom to promote the use of Chenodal for CTX as an on-label indication. The NDA submission to the FDA is expected next year. Even so, I would not have high expectations here because this is a very small, ultra-orphan population and it would be more important to protect the product from generics rather than to drive growth.
I should also note that orphan drug exclusivity may not prevent the approval and launch of generic Chenodal for the treatment of radiolucent stones in the gallbladder, and orphan drug exclusivity may provide limited protection against the use of generics for the treatment of CTX.
Even so, it seems that Mirum did not overpay, although I believe there is not much upside from this deal.
Volixibat in PSC and PBC
Volixibat is in development for the treatment of immune-inflammatory liver diseases primary sclerosing cholangitis ("PSC") and primary biliary cholangitis ("PBC"). Volixibat would address the pruritus side of the disease, and it is estimated that nearly two-thirds of patients in both populations are affected.
Phase 2b trials are ongoing with interim data from both trials expected in the first half of 2024.
I would not give Mirum too much credit for volixibat in these two indications and would want to see more clinical data before that happens. However, the risk-reward for investors looks pretty good, and the upside could be decent, while I doubt there is much value assigned to volixibat at the current valuation.
Conclusion
The failure of Livmarli in the biliary atresia trial has a modest impact on the upside potential of this asset and Mirum as a company. Mirum Pharmaceuticals, Inc. looks well positioned to continue to drive sales growth and potentially expand its product portfolio and pipeline in the following years.
I see Livmarli's present value in the $43 to $57 per share range based on annual sales of $500 million to $600 million by the end of 2027, and currently value the bile acid portfolio at its purchase price. I give no credit to volixibat in PSC and PBC and consider it as an upside optionality for the company in 2024 and beyond. Putting this together translates to a $47 to $62 per share range compared to an analyst consensus that starts at $37 per share and goes up to $78 per share.
The company is well capitalized to execute its commercial and development plans. It ended the third quarter of 2023 with $306 million in cash and equivalents and $316 million in convertible notes due 2029. The current growth trajectory of Livmarli and the revenues from the acquired bile acid portfolio could bring the company to cash flow breakeven in the back half of 2024.
For further details see:
Mirum Pharmaceuticals: Market Overreacts To Livmarli's Phase 2 Miss