Retrophin Bolsters Portfolio With Orphan Technologies Buyout
Executive Summary
The rare disease-focused firm will pay $90m up front to acquire Orphan Technologies and its Phase I/II enzyme replacement therapy for homocystinuria. Earnouts up to $427m are possible as well.
Retrophin, Inc. is turning to business development to build its rare disease-focused pipeline about a year after a Phase III failure threw its plans into disarray – the biotech has agreed to pay $90m up front with significant earnout potential to acquire privately held Orphan Technologies Ltd. and its enzyme replacement therapy candidate for homocystinuria (HCU).
The deal announced 22 October is expected to close before the end of 2020 and brings Retrophin Phase I/II OT-58, which addresses the underlying cause of HCU, a deficiency of a naturally occurring enzyme, cystathionine beta synthase (CBS). That deficiency makes it difficult for a body to metabolize homocysteine, sometimes resulting in life-threatening outcomes including heart attack and stroke, as well as ophthalmologic and skeletal complications and delays in development.
Perhaps best known as a company founded by notorious “pharma bro” Martin Shkreli, Retrophin’s main focus of late is developing sparsentan, a dual-acting angiotensin and endothelin receptor antagonist now in Phase III for both focal segmental glomerulosclerosis (FGFS) and Berger’s disease. (Also see "Life's A Musical For Martin Shkreli" - Scrip, 8 Jun, 2016.) In August 2019, the San Diego firm ended development of the drug that Shkreli originally built Retrophin around – fosmetpantotenate for pantothenate kinase-associated neurodegeneration (PKAN) – after it missed all endpoints in a Phase III study. (Also see "Retrophin's Focus Shifts After Phase III PKAN Drug's Failure" - Scrip, 22 Aug, 2019.)
During a 22 October investor call, Retrophin execs said they were encouraged by preclinical data showing OT-58 could reduce homocysteine levels by 70% to 90% and correct metabolite levels in mouse models. “We've been watching this program for some time,” said William Rote, Retrophin’s senior vice president and head of research and development. “One of the things that really impressed us was the fact that the approach goes right at the mechanism of the disease and that allows it to restore the metabolic defect that these patients have.”
Retrophin expects the ongoing dose-escalation study to report data in 2021, although it did not offer a more specific timeframe. Analysts speculated that because of the strong track record of approved ERT therapies and validation of enzyme replacement as therapeutic in rare genetic diseases, OT-58 might be able to enter a pivotal study soon after the Phase I/II trial reads out, if successful. Jefferies analyst Maury Raycroft said Retrophin’s intent to continue a natural history study of HCU begun by Orphan Technologies could help accelerate the development timeline.
“The development path could move quickly depending on Phase I/II results and pivotal design plan,” he wrote in a 23 October note. The natural history study “will establish efficacy and safety benchmarks and could be used as control in a pivotal [trial]. If Phase I/II is successful, we believe Retrophin could expand into a single registrational study,” Raycroft said, adding that it’s unclear what the approvable endpoint would be in HCU.
HCU An Underaddressed Medical Need
The current standard of care for HCU is vitamin B6 or betaine, a remethylating agent approved in 1996 and currently marketed by Recordati SpA as Cystadane. These remedies, along with dietary restrictions, are only modestly effective at best – less than half of HCU patients respond to vitamin B6, Retrophin CEO Eric Dube told the call. “There's about 160 different genetic mutations that can impact the function of the CBS enzyme,” added Rote. “And [only] some of those are amenable to B6 supplementation.”
Incidence of HCU is estimated at roughly 3,500 patients apiece in the US and EU, but Dube said early diagnosis will play an important role in building the ERT product commercially if approved. “Many of these patients are, in fact, diagnosed through newborn screening because it's a genetic disorder,” he explained.
“These patients can be effectively diagnosed early,” Dube continued. “However, newborn screening does not test exactly for homocysteine levels. And so, some of these patients that don't have elevated homocysteine levels at birth do actually progress in childhood and may be diagnosed later when they start to have issues with eyesight and lens dislocation. Others may be diagnosed in teenage or early adult years where they start to have thromboembolic events or sight problems.”
Because Retrophin already markets Cholbam (orally administered cholic acid) for bile acid synthesis disorders and Thiola (tiopronin) for cystinuria, it can leverage its existing relationships with pediatric geneticists when OT-58 reaches the US market, the exec added.
Dube said the commercial opportunity for OT-58 lies not just in patients who don’t respond to vitamin B6 but also in those who have inadequate response. “Even for those patients that are responsive, oftentimes, we see that they're not effectively controlled in their homocysteine levels,” he noted. “We believe that this could become the standard of care for these patients, not only because of the proportion of patients that could be controlled, but also because, again, it goes directly at … the enzymatic defect of these patients.”
Analysts: Good Therapeutic Fit, Smart Price
Analysts uniformly were positive on the deal, calling it a smart use of Retrophin’s roughly $457m cash on hand as of the end of July. In addition to the $90m in upfront cash, Orphan Technologies shareholders can realize up to $427m in development and commercial milestone fees as well as tiered single-digit royalties on US and EU sales of OT-58. Both companies’ boards have agreed to the transaction.
OT-58 has orphan drug and rare pediatric disease designations from the US Food and Drug Administration; the deal also provides for an additional milestone payment to Orphan Technologies shareholders if the investigational ERT obtains US approval and earns a rare pediatric disease priority review voucher.
WedBush Securities analyst Laura Chico said HCU could offer Retrophin up to a $600m peak revenue opportunity. “Simply put, we think the move incorporates an intriguing asset that ties in with Retrophin’s existing rare disease capabilities and offers a potentially rapid development path,” she said in a 23 October note. “For now, we look towards additional data updates in 2021 to better understand potential dosing and the regulatory path.”
The ongoing trial of OT-58 is testing four dosing cohorts in 40 HCU patients ages 12 and older. BMO Capital analyst Do Kim said in a 22 October note that the deal is fairly priced and predicted that Retrophin will pursue additional deals to add to its pipeline.
Jefferies’ analyst Raycroft speculated that OT-58 might be partially de-risked from a safety standpoint already because the trial has gotten through multiple data monitoring committee reviews so far.
The analysts also liked the deal because there is little competition on the horizon in HCU. Texas-based Aeglea BioTherapeutics, Inc. has AEB4104, an engineered human enzyme designed to degrade homocysteine, in clinical development outside the US, according to Biomedtracker. (Also see "Lilly and Novartis put VC cash into Aeglea's series B" - Scrip, 24 Mar, 2015.) The company is slated to present preclinical data on its candidate on 26 October at the American Society of Human Genetics virtual meeting. ERYTECH Pharma S.A., meanwhile, has a stem cell candidate, erymethionase, in preclinical development for HCU.
Dube said differences in mechanism of action between OT-58 and Aeglea’s candidate led Retrophin to prioritize acquiring the Orphan Technologies program, which it believes will be first-in-class. Apart from OT-58, the company anticipates Phase III readouts in 2021 for both of sparsentan’s indications.