On November 19, 2018, BELLUS Health Inc. (“BELLUS” or the “Company”) (formerly known as Neurochem) (OTCPK:BLUSF) (TSX: BLU.TO) announced positive top-line Phase 1 clinical trial results for its chronic cough drug candidate BLU-5937.
BELLUS is a bio-pharmaceutical development company based in Quebec, Canada. While the Company has other assets, its primary asset is a novel P2X3 antagonist drug, BLU-5937 to treat chronic cough. For more background information about BELLUS, including BLU-5937, please see my August 6, 2018 Seeking Alpha article, “Bellus Health: A Potential Ten Fold Return in the Next 2 Years”.
Since August 6th, the share price of BELLUS has increased by more than 60%.
BLU data by YCharts
Financial Summary:
BELLUS Health’s shares trade on both the Toronto Stock Exchange, symbol: BLU.TO and on the OTC Pink Sheets, symbol: BLUSF.
As at November 14, 2018, BELLUS Health had 120,197,581 common shares outstanding and 132,897,316 common shares outstanding on a fully diluted basis, including 11,593,000 stock options granted under the stock option plan and 1,106,735 warrants issued in relation to the public offering in December 2017.
Cash and cash equivalents (as at September 30, 2018) Cdn $18.1 million
Debt: n/a
52-week share price range on TSX: BLU – Cdn $0.33 to Cdn $1.20
Current share price: Cdn $0.92 (close on November 23, 2018)
52-week share price range on OTCPK: BLUSF – U.S. $0.26 to $0.93
Current share price: U.S. $0.68
Market Cap: Cdn $115 million; U.S. $81 million
The Company advises that it has funding sufficient to see it through both BLU-5937 Phase 1 and Phase 2 clinical studies for chronic cough.
Chronic Cough
Chronic cough is defined as a cough lasting over 8 weeks often associated with various pulmonary diseases such as asthma, chronic obstructive pulmonary disease, idiopathic pulmonary fibrosis, extra-pulmonary disorders, use of certain drugs and certain other non-identifiable causes. It can have a significant impact on a patient’s quality of life including both physical complications ranging from sleep deprivation to rib fractures, but can also cause social complications ranging from difficulty in conversing to the embarrassment of coughing in public, whether going on dates or attending concerts and other public events.
According to BELLUS’ September 6, 2018 presentation, chronic cough is a disease that accounts for 38% of pulmonologists’ outpatient practices in the U.S. and is estimated to affect up to 10% of the U.S. adult population or 26.5 million individuals, of which approximately 2.6 million have had coughs lasting for more than a year that is refractory to treatment or has no known underlying etiology.
There have been no effective chronic cough medicines developed and no new novel drugs approved in more than 50 years. Currently, available therapeutics include opioids and off label use of certain over the counter drugs such as Robitussin and NyQuil.
BELLUS’ BLU-5937 Drug Candidate for Chronic Cough
BELLUS’ lead drug candidate BLU-5937 is a small molecule antagonist of the P2X3 receptor, which has been clinically validated as a target for chronic cough. In pre-clinical animal studies, BLU-5937 was demonstrated to be a highly potent and highly selective P2X3 antagonist with approximately 1500x selectivity against P2X2/3.
Successful top-line Phase 1 trial results were announced by BELLUS after trading hours on November 19, 2018.
… The Phase 1 top-line data demonstrated that BLU-5937 has a good safety and tolerability profile, as well as a pharmacokinetic profile supporting twice-a-day (BID) dosing. At the anticipated therapeutic doses of 50 to 100 mg, BLU-5937 did not cause any loss of taste perception; only 1 out of 24 subjects reported transient taste alteration. Based on these data, the Company intends to advance BLU-5937 into a clinical Phase 2 study in chronic cough patients beginning in mid-2019.
…
Dr. Denis Garceau , Senior Vice President, Drug Development of BELLUS Health. “The clinical data confirm our expectation that at the anticipated therapeutic doses there is no or very limited effect on taste perception and further reinforce our position that BLU-5937 has the potential to be a best-in-class therapeutic for chronic cough patients.”
Merck’s MK-7264: The current leading P2X3 antagonist being tested for chronic cough is Merck’s (NYSE:MRK) Gefapixant (also named AF-219 and MK-7264) (“MK-7264″). Merck acquired MK-7264 by purchasing Afferent Pharmaceuticals for up to US $1.25 billion in 2016 ($500 million paid upfront and $750 million payable in milestone payments) after Afferent’s successful Phase 2b clinical study. Merck has now taken MK-7264 into Phase 3 clinical trials for chronic cough.
Merck’s MK-7264 Phase 2b clinical trial results clinically demonstrated the P2X3 receptor as being effective in the reduction of ‘Awake Cough Frequency’. However, 80% of patients treated with Merck’s MK-7264 suffered either taste alteration or taste lost, and 40% of those characterized the side effect as “very” or “extremely” bothersome. These results were presented by Merck at the American Thoracic Society 113th 2017 Annual Conference.
In contrast, in BELLUS’ pre-clinical guinea pig studies with its P2X3 drug candidate for chronic cough, BELLUS demonstrated that BLU-5937 is 10 times more potent and more than 2,000 times more selective than MK-7264 for the human receptor P2X3, thus demonstrating (in pre-clinical animal studies) equivalent reduction in cough frequency, but having no impact on taste.
If BELLUS can demonstrate that BLU-5937 has non-inferior efficacy than Merck’s MK-2764, but also ultimately demonstrate an improvement in safety (i.e., no impact on taste), BLU-5937 may become the best-in-class P2X3 receptor antagonist to treat chronic cough. The top-line Phase 1 results indicate that BLU-5937 indeed had almost no impact on taste, and while the study was not designed or powered to determine efficacy, the top-line results were very positive on all counts.
Notwithstanding Merck’s MK-7264 is now in Phase 3 clinical trials for chronic cough and at least 2 to 3 years ahead in development compared to BLU-5937, BELLUS’ Phase 1 top-line results suggest that BLU-5937 may turn out to be a far superior drug to MK-7264 for the treatment of chronic cough.
BELLUS now expects to initiate a Phase 2 clinical trial for BLU-5937 in chronic cough in mid-2019 with top-line results anticipated in mid-2020.
November 20, 2018 Conference Call and Webcast to Discuss Phase 1 Clinical Study Results
BELLUS’ management held a conference call and webcast on November 20th to discuss its Phase 1 clinical trial results and provided an accompanying slide presentation, currently available on the Company’s website.
Management first described the Phase 1 study design and pharmacokinetic profile and dosing. CEO Roberto Bellini indicated that the Phase 1 study data demonstrated that optimal projected therapeutic dosing was 50-100 mg BID.
See slides taken below from the November 20th webcast.
There were minimal adverse events and no serious adverse events even up to supra high dosing. At the anticipated therapeutic dosing (50 mg or 100 mg BID), there were almost no serious adverse event.
Most importantly, the Phase 1 study demonstrated minimal taste effect at BLU-5937 anticipated therapeutic doses (50 mg. to 100 mg BID). There was no complete loss of taste at any dose and only one subject out of 24 (4.2%) reported mild-to-moderate taste alteration at the anticipated therapeutic dose and even that loss was transitory on the first day of testing only. Even at supra-therapeutic dose levels (400 mg. to 1,200 mg BID), there was minimal taste loss and that was also transitory.
See incidence of taste effect at various dose levels in the slide below.
In comparison with Merck’s Gefapixant (50 mg), BLU-5937 (at 50 -100 mg) appears to be far superior at least in respect of taste profile.
Merck Representative Poses Question During the November 20th Webcast QA:
In my August article, I speculated that Merck might have some interest in acquiring or licensing BLU-5937 in the event that BLU-5937 turns out to be far superior to Merck’s chronic cough candidate. I was therefore surprised when a representative from Merck posed a question during the QA portion of the November 20th webcast. The question related to how BELLUS measured taste alteration for the purposes of its Phase 1 trial and whether it was self-reported. CEO Roberto Bellini responded to the question by advising that during the Phase 1 trial, “taste alteration” was self-reported, but that if a subject did report any taste alteration, they were required to complete a questionnaire providing details.
Following the webcast, I sent an email to CEO Bellini asking him how Merck had measured taste alteration in its Phase 2b clinical trial. Bellini responded in an email to me, “Same as us, self-reported. We did it that way to keep an apples-apples comparison.”
BELLUS Phase 2 Study Design
During the November 20th webcast, the proposed Phase 2 clinical trial study design was discussed. A total of 50 patients with refractory unexplained cough are expected to be enrolled in the Phase 2 study testing BLU-5937 in approximately 10 clinical sites in both the United Kingdom and the U.S. In an interesting trial design, 25 of the 50 patients will initially be treated with BLU-5937 at 5 dose levels escalated at 4-day intervals for a total 20 days of treatment (with the other 25 patients on placebo). After a 14-day washout period, the patients originally being treated will be given a placebo for 20 days, while the patients on placebo will be treated.
During the question and answer period, management advised that the anticipated “all-in costs” for the Phase 2 trial was about Cdn $7 million (U.S. $5.5 million).
Bayer’s P2X3 drug candidate BAY-1817080 for Treatment of Chronic Cough (and Endometriosis); an additional potential competitor
Since publishing my initial article on BELLUS in early August 2016, BELLUS’ September 6, 2018 corporate presentation now includes Bayer’s (OTCPK:BAYZF) (OTCPK:BAYRY) BAY-1817080 P2X3 antagonist drug candidate as an additional potential competitor in the P2X3 antagonist chronic cough arena. Bayer’s candidate was not mentioned in either BELLUS’ November 19th press release or its November 20th conference call and webcast.
As can be shown in the slide below taken from BELLUS’ September 6, 2018 corporate slide presentation, Bayer’s entry into the chronic cough space is being studied in Phase 2 trials and does have a higher selectivity for P2X3 than Merck’s 7264, although BAY-1817080′s selectivity is substantially lower than BELLUS BLU-5937. According to clinicaltrials.gov FDA website, the Bayer Phase 2 chronic cough study is currently being conducted solely in the United Kingdom, with the estimated primary completion date of June 2019.
Bayer’s drug candidate BAY-1817080 originally began as a promising small molecule drug for the treatment of endometriosis, which emanated out of a 2012 alliance between Evotec AG and Bayer to explore potential treatments for endometriosis. See press release from Evotec found here. Evotec’s molecule (a P2X3 antagonist) has promising treatment effects for endometriosis, as well as chronic cough. This new Phase 2 trial initiated by Bayer for chronic cough in July 2018 followed positive results from a Phase I study arising out of the ongoing Bayer-Evotec endometriosis alliance.
Interestingly, Merck has also begun a Phase 2 study with its P2X3 Antagonist MK-7264 for the treatment of endometriosis.
Should BELLUS consider expanding the treatment indication of BLU-5937 for Endometriosis?
Given both Bayer and Merck’s use of their respective P2X3 Antagonist molecule for the treatment of endometriosis, should BELLUS also consider expanding the treatment indications of BLU-5937 to include endometriosis? I posed that question to Roberto Bellini in an email and he responded that “pain related to endometriosis is definitely an indication we’re interested in”.
I expect that for the time being, BELLUS will focus its resources on BLU-5937 solely for the treatment of chronic cough. If, however, Merck and/or Bayer have success with their P2X3 Antagonist molecule in treating endometriosis, BLU-5937 may become an attractive asset for the treatment of endometriosis. Perhaps BELLUS could consider licensing out or joint venturing BLU-5937 for that purpose (or perhaps pursue that indication on its own). For the time being, I am not attributing any value for BLU-5937 for the endometriosis indication.
Creation of Clinical Advisory Board
On September 25th, BELLUS announced the appointment of a clinical advisory board (“CAB”), consisting of well known scientists and clinicians, to provide strategic guidance and support to the development of BLU-5937, as BELLUS prepares for its clinical Phase 2 study of BLU-5937 in 2019.
BLU-5937 Patent Protection to 2038
On October 31, 2018, BELLUS announced that it had been granted a new patent in the U.S. to protect BLU-5937′s intellectual property until 2038, excluding any potential patent term extension. The new patent claims:
…the use of imidazopyridine compounds that are selective for the P2X3 receptor as a means of minimizing taste perturbation in patients treated for chronic cough. In addition to BLU-5937, the patent claims the use of related selective imidazopyridine compounds and pharmaceutical compositions comprising BLU-5937. Patent No. 10,111,883 has an expiration date of 2038 .
This patent adds to BLU-5937′s intellectual property portfolio which already includes composition of matter patent protection for BLU-5937 in all major pharmaceutical markets (U.S., Europe, Japan and China) until 2034….”
Market Size for Chronic Cough
Last year, BELLUS engaged Torreya Insight to conduct a market assessment of BLU-5937 in chronic cough. Torreya interviewed a total of 21 primary care physicians (PCPs), specialists, and key opinion leaders (KOLs) in addition to performing a detailed review of peer-reviewed literature and databases. The market assessment also sought to better understand the pricing and reimbursement landscape for a condition that has no recently-approved therapies, and therefore no direct comparables. The survey was based on BLU-5937′s pre-clinical results and Merck’s MK-7264′s efficacy and safety data demonstrated in the Phase IIb trial. Bayer’s candidate BAY-1817080 was not considered at the time of the market assessment study; probably because it was not known as a possible chronic cough candidate.
The doctors surveyed were concerned about MK-7264′s side effect of taste disturbance, especially considering this drug would be for long-term use. Within the subjects in MK-7264′s Phase IIb trial, 20% had complete taste loss, 40% had bothersome taste effects, and 10% discontinued the study due to the taste issue. Doctors were worried that the majority of patients receiving MK-7264 would be affected in real clinical practice, with a reduced rate of compliance and/or potential higher rate of discontinuation. Some doctors expressed reluctance to prescribe MK-7264 unless patients were very sick and willing to tolerate the taste alternation or taste loss side effects.
The addressable market in the U.S. alone for BLU-5937 is the 2.6M idiopathic and treatment-refractory patients who cough for at least one year. However, there is an extremely significant potential upside if one includes a portion of the 9.1M patients who cough for eight weeks to one year.
Based on interviews with Key Opinion Leaders, prescribing physicians and payers, the consensus is that new chronic cough treatments, such as BLU-5937, will be priced similarly to drugs for chronic constipation, asthma, and partial onset seizures. The monthly price for these drugs varies between $300 and $600.
Based upon an estimated 2.6 million addressable patients in the U.S. suffering from chronic cough for at least a year, BLU-5937 could be addressing a potential multi-billion dollar per year market for chronic cough in the U.S. alone.
It is estimated that the market in Europe would be a similar size (but with somewhat lower drug pricing). Marketing approval in Europe is anticipated to take place about one year later than in the U.S. assuming approval by the FDA. China, Japan and the rest of Asia are other very substantial markets.
BELLUS’ Other Pipeline Assets
Apart from BLU-5937, BELLUS has 3 additional drugs in its pipeline which it has partnered as set out in the slide below. While these additional assets could certainly bring considerable value to BELLUS in the future, for the purpose of my analysis, I am focusing on the value of BLU-5937.
Upcoming Catalysts – Key Development Milestones for BLU-5937
Upcoming milestones for BLU-5937 (estimates save for anticipated release of top-line data from Phase 1 clinical trial):
a. analysis of complete Phase 1 BLU-5937 clinical trial results including full release of clinical data in Q1 2019;
c. after obtaining FDA feedback, the announcement of design of Phase 2 clinical trial in H1 2019 and commencement of its Phase 2 clinical trial anticipated to begin in mid-2019;
d. anticipated completion of the Phase 2 clinical trial and release of top-line data in mid-2020. Both Mackie and Bloom Burton anticipate that BELLUS will out-license BLU-5937 following a successful Phase 2 clinical trial for an upfront payment, substantial milestone payments and a royalty (estimated 20%);
e. assuming a successful Phase 2 clinical trial for BLU-5937, initiation of a Phase 3 clinical trial in H1 2021 with completion in 2022;
f. NDA filing in 2022 with FDA approval in 2023;
g. commercial launch in the U.S. in H2 2023;
h. approval and commercial launch in Europe in 2024.
Analyst Coverage
There is currently little analyst coverage on BELLUS. As far as I am aware, only two Canadian based companies, Mackie Research Capital Corporation (Andre Uddin, Ph.D.) and Bloom Burton Co. (David Martin, Ph.D.) are covering BELLUS. Interestingly, a representative of Raymond James also asked questions during the November 20th webcast and I anticipate they may begin analyst coverage on BELLUS as well if they haven’t already done so.
Following the November 20th webcast, Bloom Burton released an updated report on BELLUS and increased its share price target from Cdn $1.00 to Cdn $2.00 based upon increasing the probability of a post-Phase 2 study monetization for BLU-5937 from 15% to 30%.
During the past year, BELLUS has presented at various U.S. based healthcare conferences. With the top-line data success of BELLUS’ Phase 1 trial results, I expect that BELLUS will obtain much greater interest from both retail and institutional investors. I also anticipate they will likely up-list to a major U.S. exchange and obtain additional U.S. based analyst coverage.
Major Risks
An investment in BELLUS should still be considered high risk as its top-line Phase 1 clinical trial results, while promising, are still early stage. If the results from their Phase 2 or Phase 3 clinical studies fail or are less successful than anticipated, BELLUS’ share price could materially decline. There is no guarantee that the clinical trials will be successful or that regulatory approvals will be granted in all or any of the jurisdictions where approvals are being sought. There is no guarantee that BELLUS’ other assets will be successful.
While the company’s stated burn rate is relatively low and the company expects that they have sufficient cash runway for the next 2 years, there is always a risk of dilution in the future, particularly if Phase 2 trial costs are materially higher than expected. I wouldn’t be surprised to see the Company announce an equity financing to raise additional funds and bring in some new institutional shareholders sometime in 2019 particularly if it up-lists to a major U.S. exchange.
The Company is dependent on the enforceability of its intellectual property (in the U.S. until 2038, and worldwide patents to 2034). While I am unaware of any challenges to BELLUS’ IP, there is an inherent risk that patents could be challenged in future litigation or other regulatory processes.
Even if regulatory approvals are obtained, there is no guarantee that a commercial launch for chronic cough will be successful. There are also risks from existing or future competitors who may be substantially better funded.
For further details of the Company’s risks, please see the Company’s regulatory filings.
Disclosure: I am/we are long BLUSF.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
Article source: https://seekingalpha.com/article/4224560-bellus-health-announces-positive-top-line-phase-1-results-chronic-cough