So Far So Good For Revive
In my detailed article last month I noted that investors should pay attention for two important upcoming catalysts. The first is the clearance of the U.S. investigational new drug (IND) filing with the FDA allowing Revive to start the Phase 2 cystinuria trial in the U.S. To my surprise, this came earlier than expected. The company announced on July 6, 2016, that the U.S. FDA had accepted the IND and that the Phase 2 study would begin shortly (1).
I'm expecting that "shortly" means in the third or fourth quarter 2016. The Phase 2 study is targeting 30 patients with cystinuria in a multi-center, dose escalation trial to assess the safety and effectiveness of bucillamine on urinary cystine excretion and cystine capacity. Enrollment is expected to take place at five centers in the U.S. and take about 4-6 months to complete. That puts a best-guess on data in the first half quarter of 2017. I believe positive data will be a major valuation inflection for Revive, as the company will likely seek a development and commercialization partner for bucillamine in cystinuria on the backs of positive results.
The Phase 2 trial is expected to cost approximately $1.5 million. In this regard, the second pieces of good news from Revive over the past month came on June 20th and August 18th. On June 20th, the company announced that it has completed a rights offering raising gross proceeds of CAD$0.844 million. Per the terms of the deal, Revive issued 8.44 million shares at CAD$0.10 per share plus warrants to purchase an additional 4.22 million shares at CAD$0.18 per share. Officers and directors of Revive participating in the offering, accounting for just under 10% of the deal (2).
On August 18th, the company announced it has completed a private placement in the U.S., raising gross proceeds of CAD$1.5 million. Terms of the private placement were similar to the rights offering in Canada noted above (3). With nearly $2.4 million in recent gross proceeds, Revive now looks financially capable of completing the aforementioned Phase 2 study in cystinuria. This is a meaningful accomplishment because, as noted above, positive data from this Phase 2 trial sets the stage for a major increase in valuation for the company.
Quick Review of Revive
Cystinuria is a rare autosomal recessive genetic disorder characterized by an impairment of transport of the dibasic amino acids, cystine, ornithine, lysine, and arginine (COLA) in the kidneys; the important clinical manifestation of which is a build-up of cystine in the urine, which in turn results in crystallization and stone formation in the kidneys and bladder. No curative treatment of cystinuria exists, and typically patients have a lifelong risk of stone formation, repeated surgery, and impaired renal function.
Worldwide, the overall prevalence is one person per 7,000 of population. In the U.S., about one of out every 15,000 individuals has cystinuria, which equates to a target population of approximately 21,000 individuals (4). For patients that cannot reduce stone formation on conservative programs such as increased fluid intake and alkali therapy, pharmaceutical intervention is recommended. The two leading pharmaceutical products for the treatment of cystinuria are Retrophin's Thiola® (tiopronin) and Valeant's Cuprimine® (d-penicillamine).
Thiola® received FDA approval in 1988 for the prevention of cystine stone formation in patients with severe homozygous cystinuria with urinary cystine greater than 500 mg/day, who are resistant to treatment with conservative measures of high fluid intake, alkali and diet modification, or who have adverse reactions to penicillamine. Thiola® costs roughly $27 per 100mg pill (5), and with the majority of patients taking 1,000 mg per day (6), the yearly cost of the drug is roughly $100,000. Estimated sales of Thiola® to Retrophin in 2015 were $55 million. Evaluatepharma believes that peak sales for Thoila® will approach $250 million. At constant pricing, this equates to between 2,000 and 2,500 U.S. cystinuria patients on the drug - about half of the target market according to Retrophin management guidance.
Revive is developing bucillamine, a dithiol derivative of tiopronin for the treatment of cystinuria. Revive believes that bucillamine can offer patients a safer, more effective treatment option than either of the two monothiol drugs, Thiola® or d-penicillamine. Theoretically, bucillamine should be twice as effective as Thiola® at the same concentration or equally as effective at lower concentrations, potentially making the drug more tolerable to patients.
Bucillamine has been used in Japan and Korea for decades, with the majority of the use in rheumatoid arthritis. Researchers have conducted in vitro and in vivo (n=3) studies demonstrating theoretical proof-of-concept for bucillamine in the treatment of cystinuria (7). Bucillamine has received U.S. FDA Orphan Drug designation for the treatment of cystinuria in November 2015 (8). This will protect the drug from generic competition for 7-years post approval, along with tax incentives and the potential for expedited approval.
Revive is currently planning to initiate a Phase 2 clinical study with bucillamine (n=30) at up to five centers in the U.S. The estimated cost of the study is $1.5 million and management estimates the total study will take approximately six months to complete enrollment, with top-line data to follow shortly thereafter. Following the presentation of the data, I expect that Revive will sign a development and commercialization agreement for bucillamine as a treatment for cystinuria. Obvious interested parties include Valeant and Retrophin, although given the potential superior pharmacology of bucillamine to Thiola® and the Orphan Drug designation, I believe that Revive will have ample opportunity to shop the drug around and sign the best deal for shareholders.
Anyone who has followed my work over the past few years knows I like small, under-the-radar stories like this. Beyond being a simple and clean story, with obvious take-out potential, the science makes sense and the company now has the cash in hand to get to a major catalyst in 2017. And importantly, the valuation is incredibly low. Subsequent to the closing of the recent financings, the market capitalization is $10 million.
My valuation works in this area (see my detailed article from last month) tells me a Phase 3-ready drug for cystinuria with potential superior characteristics to the current market leader is worth between $40-50 million. As such, Revive has potentially 4-5X upside over the next year, and that is certainly a story worth liking.
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