2023-07-14 19:15:54 ET
Summary
- SLN has fallen 65% after my last article.
- They produced good early data, they have decent cash, and there's no negative news.
- I can identify no reason for the stock to have declined so much.
After I called out Silence Therapeutics ( SLN ) for its excellent data last December, the stock price is down 65%, from $17.14 to $5.84. Interestingly, the market cap is only down 35%. It was $350mn before, but it is now $215mn. In simple terms, market cap is the share price multiplied by the number of shares. So, in December, the number of outstanding shares must have been around 20 million, while now the number of outstanding shares must be around 36 million (I checked, this is correct). Thus, there seems to have been an 80% increase in the number of shares in the last 8 months. However, I am unable to find any news about how the number of shares doubled in these 8 months.
SLN’s pipeline looks like this:
Last time, I discussed data from the lead program SLN360, which posted positive phase 1 data from a cardiovascular disease trial. This data is from healthy volunteers, but with high Lipoprotein(a). SLN360, as well as its other gene silencing molecules, uses small interfering RNAs (siRNA) to silence messenger RNAs (mRNAs) from producing specific pathogenic proteins. In the trial, after just a single dose, Lp(a) reduction of 98% was observed, and the treatment effect lasted for 5 months.
In that earlier article, I also discussed two peers, Novartis (NVS) in a phase 3 trial and Eli Lilly (LLY) in a phase 1 trial, and comparing the 80% reduction seen in Novartis, I noted the following:
While SLN’s number is far greater, there are two issues - one, there is no clear indication that lowering Lp(a) has CV benefits; two, there is no clear indication that lowering Lp(a) more than 70% had additional CV benefits; three, NVS will read out in 2025 while SLN will have to run a very large trial for a number of years before it can commercialize; and four, CV drugs are not easy to sell (from Endpts ).
Despite this data, SLN stock is down 65%, as I noted earlier. If you look at the chart, the fall wasn’t sudden, but it was a steady fall. Indeed, the Nov-Dec period was its peak. So, what caused the steady fall of the stock?
Looking at their chart again, they reached their peak on December 2, and the decline started thereafter. However, in all their news items and press releases, I can find nothing specifically negative. There has been no data drop in these few months, and data drops, as we know, can be things that could have black or white colors, not gray. Other than that, news elements like their taking back two programs from Mallinckrodt, or clinical updates etc, could have confusing elements. For example, they announced in March that they are going to buy back two siRNA drug targets for complement-mediated diseases from Mallinckrodt, while a third program will remain. Now, if Mallinckrodt gave back the programs, that could have been negative. Here, however, it appears that SLN wanted those programs so they could develop them themselves. They did not have to pay Mallinckrodt anything now, although they will have to pay milestones and royalties. This is a strange situation, where the original developer will pay royalties to a partner developer. But it is not a negative; especially where they were able to poach a Mallinckrodt executive and induct him into their C-suite.
During this period, they also received two milestone payments, $10mn from AZN and $4mn from Hansoh Pharma. Nothing negative here.
In March, they provided a useful chronology of developments for their lead drug candidate, which will be helpful in assessing why the stock declined so much. Here's the data :
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In November 2022, we presented a further analysis from the APOLLO phase 1 program in healthy adults with high Lp(a) in a moderated poster session at the American Heart Association Annual Meeting. The analysis showed median time-averaged reductions during 150 days of follow up exceeded 80% in 300 mg and 600 mg treatment groups.
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In December 2022, SLN360's INN (international non-proprietary name) was approved – zerlasiran.
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In January 2023, we started dosing subjects in the ALPACAR-360 phase 2 clinical trial evaluating zerlasiran in patients with high Lp(a) ? 125 nmol/L at high-risk of atherosclerotic cardiovascular disease (ASCVD) events.
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In February 2023, we started dosing the last subject in the multiple dose portion of the APOLLO phase 1 study of zerlasiran in people with high Lp(a) ? 150 nmol/L and stable ASCVD. We remain on-track to report topline data in the fourth quarter of 2023.
Again, nothing negative here. Potential negatives could have been data delays, which a company will not usually mention in a single press release, so it is difficult to quickly figure out. So, in an earlier release, they will give a certain date, and then, maybe a year later, they will proffer a different date, and unless you thoroughly read both, you won’t be able to figure out that there has been a change. I paid special attention to this, and there have been no surprises. Their data drop deadlines have not changed.
They thus have some data catalysts up ahead - this includes the multi-dose portion of the APOLLO study, expected in Q4, and the data from an ongoing phase 2 study, ALPHACAR-360 study, planned for mid 2024.
Thus, the only conclusion I can come to is that the fall in the stock price is unreasonable - which is always an attractive thing for a contrarian, value seeking investor.
Financials
SLN has a market cap of $219mn (July 14) and a cash balance of £62.9 million of cash and cash equivalents, and U.S. Treasury Bills or approximately $77.8 million. They also have $14mn in milestone payments. Cost of sales for the three months ending March 31, 2023 was £4.5 million, research and development expenditures were £12.5 million, and general and administrative expenses were £6.5 million. At that rate, the company has a cash runway of 7-8 quarters.
Risks
Just because I have not been able to identify a reason for their stock price decline does not mean there isn’t one. It could be something as broad and difficult to identify as a general negative attitude towards the lipid lowering drugs market. Thus there is always that risk.
The other risk is that SLN is a small company among giants, and competition is going to be tough. While it can tout a few percentage points of better data than its larger rivals, whether it will be able to compete in sheer scale of marketing prowess is difficult to fathom.
Bottom Line
SLN has shown some good data and yet it has fallen, for no reason I can identify. It has a decent cash runway and a couple of upcoming data catalysts. Prices are attractively low. I would consider a buy at these prices.
For further details see:
Silence Therapeutics: No Reason For It To Fall So Much