Topline Phase IIb Data for AVI BioPharma’s Eteplirsen May Send the Stock Soaring

AVI BioPharma (AVII) is developing a treatment for Duchenne’s Muscular Dystrophy (DMD). A good overview of the disease and AVII’s clinical program was given in a presentation to a patient advocacy group. This article summarizes some of the key points from the presentation and looks at the investment potential of AVI BioPharma’s stock.

Overview:

Muscular dystrophy is characterized by the loss of dystrophin, a key protein involved in normal muscle function. Dystrophin levels are used to classify the different types of muscular dystrophy with DMD patients having less than 5% of normal dystrophin levels. Potential Muscular dystrophy therapies are commonly referred to by the exon (e.g. 44, 45, 51, 53, etc) they target. In the US, EU and Japan there are approximately 27,000 potential DMD patients for exon skipping therapies. About 4,000 patients are candidates for exon 51 treatment. AVI BioPharma’s potential treatment, Eteplirsen, targets exon 51 by moving the reading frame so a partially functional dystrophin protein is made.

There are no treatments for the underlying cause of DMD and most patients die before age 30. They show the first symptoms of DMD as a young child and progressively get worse until most are unable to walk by age 12. The only available treatments try to relieve the symtopms. This represents a huge unmet medical need.

The competition:

Currently there is a phase III trial underway in Europe conducted by Prosensa and GSK(P/GSK). The P/GSK clinical program utilizes an exon skipping platform similar to AVI BioPharma’s. It is importatnt to note that the P/GSK program has shown promising results so far. AVI BioPharma and P/GSK are in a patent battle and in a recent hearing the ruling was in AVII’s favor for 9 out of 11 exons. However, P/GSK had a favorable ruling for exons 46 and 51. Therefore, AVII is hesitant to pursue commercialization of an exon 51 skipping treatment in Europe. Although, AVII is open to a licensing deal. This decreases the pool of potential patients that AVII will pursue for now. However this still leaves a big market for AVII to pursue in the United States.

The Opportunity:

The market opportunity of Epteplirsen can be illustrated by Vertex Pharmaceutical’s success in developing Kalydeco, a treatment for Cystic Fibrosis(CF). Kalydeco works by improving the function of the malformed protein. KALYDECO was granted approval in approximately three months,      making it one of the fastest FDA approvals ever. The similarities to AVII’s Eteplirsen are many. Cystic Fibrosis is a genetic disease resulting in a defective protein. There are 30,000 people in the U.S. with CF. Kalydeco only treats 4% of the 30,000, or 1,200 CF patients. The treatment costs $294,000 per year.

These numbers are similar to those in a Barron’s article that put Eteplirsen’s target population at about 2,000 in the U.S. At a potential cost of $250,000 a year per patient, it could produce $500 million in revenue. If AVII is valued at 5 times revenue then the market capitalization will $2.5 billion which is a big premium to the current market cap of approximately $200 million with the stock trading at $1.50. There is a long road ahead before this potential can be realized. The data release on April 2nd may be another step in the right direction. This same Barron’s article indicates that if the data is strong the stock can go to $4 and Eteplirsen may be available to patients in 2014 or even earlier if the FDA grants special approval. However, if the data is weak then the stock price can be cut in half as Eteplirsen is AVII’s lead compound.