Kala PDUFA, And Other News: The Good, Bad And Ugly Of Biopharma (NASDAQ:KALA)


Kala Pharmaceuticals on the go with upcoming PDUFA

Kala Pharmaceuticals Inc. (KALA) is drawing close to an important catalyst as it awaits the FDA decision for Eysuvis 0.25% as a short-term treatment of dry eye disease. This is the company’s second attempt at gaining the regulator’s approval, as it was served with a Complete Response Letter in August 2019. Kala anticipates the therapy to be in the market in early 2021, subject to approval.

Note: Kala received approval yesterday after this was written.

In May of this year, Kala had announced the FDA acceptance of its resubmitted New Drug Application. The resubmission was a complete, Class 2 response to the CRL issued by the FDA in 2019. Kim Brazzell, Ph.D., Chief Medical Officer of Kala Pharmaceuticals said:

The FDA’s acceptance of our NDA resubmission signifies critical progress toward our goal of delivering EYSUVIS as the first prescription medicine for the short-term treatment of dry eye disease.”

Kala used the positive data from its STRIDE 3 for supporting its NDA. It also appended positive outcomes in earlier clinical trials of the drug candidate. STRIDE 3 had met both of its primary symptom endpoints. The data showed that Eysuvis was able to bring about statistically significant improvement in ocular discomfort severity in a predefined subgroup of ITT patients with more severe ocular discomfort at baseline and in the overall intent-to-treat population.

The data also showed the drug candidate was able to show statistically significant in conjunctival hyperemia at day 15 in the ITT population and ocular discomfort severity at day 8 in the ITT population, fulfilling the key secondary endpoints. Total corneal straining at day 15 in the ITT population also showed significant results. Eysuvis was found to be generally well-tolerated, confirming the findings of the previous clinical experiences. The adverse events and intraocular pressure increases were also comparable to vehicle.

Kala has developed Eysuvis using its AMPPLIFY™ mucus-penetrating particle Drug Delivery Technology. The use of this technology has boosted penetration of loteprednol etabonate into target tissues of the eye. The company expects that the drug candidate’s ability to provide rapid relief sets it apart from the competition.

Kala is a biopharmaceutical company and mainly focuses on developing therapies for eye diseases. The company has Inveltys 1% already in the market and is currently looking at EYSUVIS as a potential addition to the portfolio. Kala used its AMPPLIFYTM mucus penetrating particle Drug Delivery Technology to a corticosteroid, loteprednol etabonate for developing Inveltys.

Analysis: Kala’s EYSUVIS is the first prescription therapy approved for short-term treatment needs in dry eye disease, a market worth ~$4.22 billion in 2019 and estimated to reach ~$7.73 billion by 2026 at a CAGR of 6.9%. The company has a market capitalization of $432.78 million at a price of $6.28, near 52-week low in a range of $3.45 to $14.68. Major shareholders are institutions with 48.3% shares and PE/VC firms with 38.69% shares. The public has 12.17% shares and insiders 0.85%. 7 Wall Street analysts with an average score of 4.42/5 and a price target of $19.86 are bullish. Kala’s cash burn was $85.2 million, and revenue cost was $2.5 million in the TTM. The company has a cash balance of $184.56 million, a debt of $101.05 million, and revenue estimates of $7.7 million and $56.59 for 2020 and 2021 respectively.

Investment Thesis: The stock is trading at considerable discount and provides an interesting price point to build a position. The upcoming catalyst is expected to have positive impact on the stock price.

Kezar announces Phase 2 KZR-616 trial update for Polymyositis and Dermatomyositis

Kezar Life Sciences Inc. (KZR) provided updates pertaining to its Phase 2 trial of KZR-616 for treating polymyositis and dermatomyositis. The company stated that the FDA has given Orphan Drug Designation to KZR-616, a first-in-class selective immunoproteasome inhibitor with the potential to impact multiple drivers of immune-mediated diseases and inflammation.

Kezar is currently enrolling subjects for a Phase 2 placebo-controlled cross-over clinical trial, PRESIDIO. Orphan Drug Designation aims to expand drug development for rare diseases. Noreen R. Henig, MD, Kezar’s Chief Medical Officer said:

This recognition spotlights the significant unmet need for patients living with these autoimmune myopathies. KZR-616 has potential to truly modify the underlying pathophysiology of these two diseases.”

KZR-616 has broad potential for a wide range of autoimmune diseases. The data from preclinical research has shown that selective immunoproteasome inhibition may trigger broad anti-inflammatory response in animal models of several autoimmune diseases. It also was able to avoid immunosuppression in the meantime. Phase 1a and 1b studies showed that the drug candidate has a favorable safety and tolerability profile for treating chronic autoimmune diseases. The company is currently carrying out Phase 2 trials for severe autoimmune conditions.

Kezar mainly focuses on developing breakthrough treatments for oncological and immune-mediated disorders. It is developing small molecule therapies that work by modulating master regulators of cellular function. These therapies also control multiple drivers of disease using a single target. Apart from its lead asset KZR-616, the company is also working on KZR-261, the first clinical candidate for treating cancer. The pc is currently going through IND enabling activities.

Analysis: Kezar’s candidate has potential in the inflammatory myopathies market that was worth ~$652 million in 2018 and estimated to reach ~$931 million in 2026 at a CAGR of 4.6%. The company has a market capitalization of $260.42 million on a stock priced at $5.74, near midpoint in a 52-week range of $2.18 to $9.79. Insiders hold nearly 17% shares, with institutions holding ~53%, PE/VC firms holding ~17%, and the public ~17%. 5 Wall Street analysts with an average score of 4.8/5 are very bullish, targeting a price of $14.67. Kezar has a cash balance of $157.47 million and a debt of $5.93 million. Cash burn in fiscal 2019 and the TTM was $37.3 million and $40 million respectively, which suggests a cash runway of more than 36 months.

Investment Thesis: While the stock has remained pretty flat in the past year, the company’s diversified development pipeline makes it an interesting proposition for a long-term portfolio.

Mirati Therapeutics announces positive clinical data for adagrasib

Mirati Therapeutics Inc. (MRTX) announced positive preliminary data from its mutant KRAS selective inhibitor programs. The results included updates about adagrasib and initial preclinical in vivo data of MRTX1133.

The data showed adagrasib bringing robust and enduring anti-tumor activity in non-small cell lung cancer, colorectal cancer, and other solid tumors. The drug candidate was tested as a monotherapy and yielded 45 percent confirmed objective response rate in advanced NSCLC. It also showed clinically meaningful duration of treatment for NSCLC patients in the Phase 1/1b cohort.

The drug candidate also showed positive tolerability profile as a monotherapy and in combination with pembrolizumab, cetuximab, and TNO-155. Charles M. Baum, CEO of Mirati said:

We are initiating additional registration-enabling global clinical studies of adagrasib as both a monotherapy and in combinations as we expand the program to earlier lines of therapy in NSCLC and CRC.”

Mirati has completed the enrolment for Phase 2 cohort of adagrasib as a monotherapy treatment for patients in second/third line NSCLC. The company is looking to submit a New Drug Application in the second half of 2021. Mirati intends to start additional registration-enabling clinical studies for the drug candidate. The main aim is to boost the program to earlier lines of therapy in CRC and NSCLC.

Analysis: Mirati’s development program has an immediate target in the second line NSCLC market worth about $2.8 billion. The company has a market capitalization of $8.76 billion on the current stock price of $209.16, which is almost a 52-week high. 14 Wall Street analysts are bullish to neutral, with an average score of 4.14/5 and a price target slightly below the current price. Nearly 75% of shares are held by institutions. Mirati has priced its equity offering of 10/26/2020 at $202 to raise gross proceeds of about $800 million. Cash balance is $647.18 million and revenue estimate for 2021 is about $23 million. The company’s cash burn was $225.4 million and $307.8 million in fiscal 2019 and the TTM respectively.

Investment Thesis: Mirati is in strong position but also faces stiff competition in oncology space. Its stock has also shown strong run up in the recent past. Long-term investors may wait for a pullback to build position.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

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