VK2809 - Viking Therapeutics
The Science
VK2809 is a thyroid hormone receptor agonist that possesses selectivity for liver tissue, it is currently being developed by Viking Therapeutics for the treatment of metabolic disorders, including non-alcoholic steatohepatitis (NASH).
Non-alcoholic fatty liver disease (NAFLD) is a condition in which excess fat is stored in your liver, it is an emerging global health problem and is a risk factor for Type 2 Diabetes and Cardiovascular Disease. Nonalcoholic steatohepatitis (NASH) is an advanced form of NAFLD in which you have inflammation and cell damage in the liver (Hepatitis), it is a predisposing factor for the development of cirrhosis and liver cancer.
The development of NASH is very complicated, as seen in the figure above. Environmental, metabolic and genetic factors contribute to the development and progression of NASH by affecting diverse organs such as the liver, the intestine, and adipose tissue.
In particular, excess caloric intake increases free fatty acids and lipid metabolites such as cholesterol in hepatocytes, leading to the build up of fat in liver cells. Subsequently, molecules released from these liver cells, such as cytokines and extracellular vesicles, stimulate inflammatory and fibrotic responses which lead to the development of inflammation and fibrosis in the liver.
VK2809 is a thyroid hormone receptor agonist that possesses selectivity for TRβ (Thyroid hormone receptor beta) in liver tissue, meaning it will bind to and active the receptor. When the TRβ receptor is activated, it lowers the lipid content inside liver cells and in the surrounding plasma. The targeting properties of VK2809 are also designed to reduce or eliminate TRα receptor activation, this reduction can be associated with increased respiration and cardiac tissue hypertrophy.
Thyroid hormones are known to reduce body mass, affect growth, modulate lipid metabolism and impact the functions of multiple organs in humans. Characteristics of thyroid hormone activity include the ability to reduce lipids associated with cardiovascular disease and to induce an increase in metabolism, resulting in weight loss. It is thought that my mimicking the action of these thyroid hormones, a similar response can be achieved and the harmful effects of NAFLD or NASH can be reversed.
VK2809 is taken orally in 5mg or 10mg doses. Treatment in the recent phase II trial was to give patients one pill per day for a course of 12 weeks.
Non-alcoholic fatty liver disease (NAFLD) is a condition in which excess fat is stored in your liver, it is an emerging global health problem and is a risk factor for Type 2 Diabetes and Cardiovascular Disease. Nonalcoholic steatohepatitis (NASH) is an advanced form of NAFLD in which you have inflammation and cell damage in the liver (Hepatitis), it is a predisposing factor for the development of cirrhosis and liver cancer.
The development of NASH is very complicated, as seen in the figure above. Environmental, metabolic and genetic factors contribute to the development and progression of NASH by affecting diverse organs such as the liver, the intestine, and adipose tissue.
In particular, excess caloric intake increases free fatty acids and lipid metabolites such as cholesterol in hepatocytes, leading to the build up of fat in liver cells. Subsequently, molecules released from these liver cells, such as cytokines and extracellular vesicles, stimulate inflammatory and fibrotic responses which lead to the development of inflammation and fibrosis in the liver.
VK2809 is a thyroid hormone receptor agonist that possesses selectivity for TRβ (Thyroid hormone receptor beta) in liver tissue, meaning it will bind to and active the receptor. When the TRβ receptor is activated, it lowers the lipid content inside liver cells and in the surrounding plasma. The targeting properties of VK2809 are also designed to reduce or eliminate TRα receptor activation, this reduction can be associated with increased respiration and cardiac tissue hypertrophy.
Thyroid hormones are known to reduce body mass, affect growth, modulate lipid metabolism and impact the functions of multiple organs in humans. Characteristics of thyroid hormone activity include the ability to reduce lipids associated with cardiovascular disease and to induce an increase in metabolism, resulting in weight loss. It is thought that my mimicking the action of these thyroid hormones, a similar response can be achieved and the harmful effects of NAFLD or NASH can be reversed.
VK2809 is taken orally in 5mg or 10mg doses. Treatment in the recent phase II trial was to give patients one pill per day for a course of 12 weeks.
The Opportunity
NASH affects a lot of people across the world so it is easy to see why pharmaceutical companies are fighting to be the first to bring an effective treatment to the market.
NAFLD is growing to become the most common chronic liver condition in Western populations in relation to the obesity and type 2 diabetes epidemics. In two different studies, the prevalence of NAFLD in the general population of the United States was found to be 34% (Kim, 2013) and 25% (Younossi, 2017). NASH is estimated to affect 20% of individuals with NAFLD.
I will take the average of the percentage prevalence of NAFLD for my calculations, which is 29.6% of the general population. After a quick search, I found there are approximately 325.7 Million people in the US. So 29.6% of the population would be 96,407,200 people with NAFLD. And 20% of these people with NAFLD have NASH, so that would be 19,281,440 people in the US or 5.92% of the general population.
In the recent Phase II trial, VK2809 was tested in patients that also had elevated LDL-Cholesterol (LDL-C) levels. As the results obtained produced statistically significant lower LDL-C levels, I feel this would be an avenue that Viking will want to target, which would make sense as excess lipids cause NASH. A drug that can do this would have a massive advantage as currently NASH resolution is not associated with improvements in LDL-C levels
68.5% of patients with NAFLD have elevated LDL-C levels, thus VK2809 may be able to treat them. So out of the 19,281,440 patients that have NASH, around 13,207,786 would potentially be treatable.
The price of VK2809 is currently unknown. However I found a very useful presentation from the NASH summit 2017, in which it explains that if the cost of the treatment exceeds $10,000 a year or $27 a day, the limitations on the patient pool would become detrimental to the health outcomes. Thus I believe it would cost less that $27.
In the same presentation, there was a very useful table that simulated the sales of a drug for NASH at varying prices points, see below.
The table explains that if the price is cheaper for a drug, the patient pool would be larger, the drug would reach more patients and the total revenues would actually be higher. This is something I haven't really thought about before, but will definitely factor it in to any future articles I write about drugs that are taken daily.
So, if we use the price of $5 per day (because lets face it, drug companies want to make as much money as possible), it would equal $1,825 per year per patient.
Lets say VK2809 commands 10% share of the market, this would be around 1,928,144 patients, each taking NASH every day at a cost of $1,825 per year, totalling $3,518,862,800 in revenue per year.
Taken from another article I wrote, Pharma companies generally convert 20% of their revenue to profit. 20% of the $3,518,862,800 in revenue is $703,772,560 a year of profit.
I recently read an article by Seth Robey and Frank S David called drug launch curves in the modern era. In this article they study the launches of 61 new drugs gaining FDA approval between 2000 and 2002 and determine that the sales follow an S-shaped launch curve to peak penetration.
If we factor this in using Robey and David's percentages for each year and the potential maximum profit from VK2809 to a peak penetration of 100% at Year 6, we get the figure below:
Now looking at how this profit will affect Viking Therapeutics financially, we have to take the current earnings figures, -$20,577,665 for 2017 (as 2018 figures have not been reported yet) and do some calculations.
It the table above I do make a couple of crude assumptions which could do with a bit more refining. I assume that the share price stays the same as the EPS becomes positive in Y1. I assume there is no change in the number of shares. I also assume the PE ratio does not change across Y1-Y6.
But it does give an idea of the rate of growth in Share Price of VKTX if VK2809 is approved.
I believe the share price has a 12-fold potential over the course of ~6 years.
Looking at the recent Phase II results for Viking's study of VK2809 in patients with NAFLD and elevated LDL-C, we can see the drug produced exceptional results.
The primary end point of the trial was the reduction in LDL-C in which VK2809 produced statistically significant ~ 20% reductions by 3 months.
The secondary endpoint was the reduction in liver fat of which 91% of patients experienced >=30% reduction in liver fat and 67% of patients experienced >=50% reduction in liver fat at 12 weeks.
On top of this, no SAEs were reported at all across the trial and the distribution of AEs across the trial was very even, with a slightly greater incidence among patients on placebo. This is extraordinary safety data.
Now Viking Therapeutic bears may say that the trial wasn't even run in patients that have the disease it hopes to treat (NASH) so how can they expect the drug to pass Phase III. I would like to shun this argument.
The point of a Phase II study is to test the safety and efficacy of the drug when it is introduced in therapeutic quantities to the organ or organs that it is thought to act on, in this case liver cells. And in the safety department it passed with flying colours. Showing the drug can be used very safely to treat liver problems. The safety data particularly from weeks 12 -16 shows the drug will fare well in longer Phase III trials.
In the efficacy department it also excelled, the drug can drastically reduce liver fat content, which is the leading cause of NASH. And can significantly reduce LDL-C, which suggests the drug could be very cardioprotective leading to long term benefits.
I would agree that in order to get the most benefit out of the Phase III trial, real world evidence should be taken into account and the drug should be used in patients with NASH and increased LDL-C. This looks extremely likely according to Viking's press statements.
Still a long Phase III trial to go, but I am quietly confident for VK2809.
I am long $VKTX. I may think about initiating a small position if the Share Price drops below $8 again.
-OC
Disclaimer:
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company who is mentioned in this article. This article is not investment advice, and can't be relied upon by anyone for any reason except, arguably, entertainment purposes. I am not an investment advisor.
NAFLD is growing to become the most common chronic liver condition in Western populations in relation to the obesity and type 2 diabetes epidemics. In two different studies, the prevalence of NAFLD in the general population of the United States was found to be 34% (Kim, 2013) and 25% (Younossi, 2017). NASH is estimated to affect 20% of individuals with NAFLD.
I will take the average of the percentage prevalence of NAFLD for my calculations, which is 29.6% of the general population. After a quick search, I found there are approximately 325.7 Million people in the US. So 29.6% of the population would be 96,407,200 people with NAFLD. And 20% of these people with NAFLD have NASH, so that would be 19,281,440 people in the US or 5.92% of the general population.
In the recent Phase II trial, VK2809 was tested in patients that also had elevated LDL-Cholesterol (LDL-C) levels. As the results obtained produced statistically significant lower LDL-C levels, I feel this would be an avenue that Viking will want to target, which would make sense as excess lipids cause NASH. A drug that can do this would have a massive advantage as currently NASH resolution is not associated with improvements in LDL-C levels
68.5% of patients with NAFLD have elevated LDL-C levels, thus VK2809 may be able to treat them. So out of the 19,281,440 patients that have NASH, around 13,207,786 would potentially be treatable.
The price of VK2809 is currently unknown. However I found a very useful presentation from the NASH summit 2017, in which it explains that if the cost of the treatment exceeds $10,000 a year or $27 a day, the limitations on the patient pool would become detrimental to the health outcomes. Thus I believe it would cost less that $27.
In the same presentation, there was a very useful table that simulated the sales of a drug for NASH at varying prices points, see below.
The table explains that if the price is cheaper for a drug, the patient pool would be larger, the drug would reach more patients and the total revenues would actually be higher. This is something I haven't really thought about before, but will definitely factor it in to any future articles I write about drugs that are taken daily.
So, if we use the price of $5 per day (because lets face it, drug companies want to make as much money as possible), it would equal $1,825 per year per patient.
Lets say VK2809 commands 10% share of the market, this would be around 1,928,144 patients, each taking NASH every day at a cost of $1,825 per year, totalling $3,518,862,800 in revenue per year.
Taken from another article I wrote, Pharma companies generally convert 20% of their revenue to profit. 20% of the $3,518,862,800 in revenue is $703,772,560 a year of profit.
I recently read an article by Seth Robey and Frank S David called drug launch curves in the modern era. In this article they study the launches of 61 new drugs gaining FDA approval between 2000 and 2002 and determine that the sales follow an S-shaped launch curve to peak penetration.
If we factor this in using Robey and David's percentages for each year and the potential maximum profit from VK2809 to a peak penetration of 100% at Year 6, we get the figure below:
Now looking at how this profit will affect Viking Therapeutics financially, we have to take the current earnings figures, -$20,577,665 for 2017 (as 2018 figures have not been reported yet) and do some calculations.
It the table above I do make a couple of crude assumptions which could do with a bit more refining. I assume that the share price stays the same as the EPS becomes positive in Y1. I assume there is no change in the number of shares. I also assume the PE ratio does not change across Y1-Y6.
But it does give an idea of the rate of growth in Share Price of VKTX if VK2809 is approved.
I believe the share price has a 12-fold potential over the course of ~6 years.
The Conclusion
Viking's price at the moment is no doubt reflective of the current stages of Clinical Trials its drug candidates are in - early phase. Serious money cannot be committed to drugs that still have a high chance of failing. That is why Viking is a very risky pick at the moment.
The primary end point of the trial was the reduction in LDL-C in which VK2809 produced statistically significant ~ 20% reductions by 3 months.
The secondary endpoint was the reduction in liver fat of which 91% of patients experienced >=30% reduction in liver fat and 67% of patients experienced >=50% reduction in liver fat at 12 weeks.
On top of this, no SAEs were reported at all across the trial and the distribution of AEs across the trial was very even, with a slightly greater incidence among patients on placebo. This is extraordinary safety data.
Now Viking Therapeutic bears may say that the trial wasn't even run in patients that have the disease it hopes to treat (NASH) so how can they expect the drug to pass Phase III. I would like to shun this argument.
The point of a Phase II study is to test the safety and efficacy of the drug when it is introduced in therapeutic quantities to the organ or organs that it is thought to act on, in this case liver cells. And in the safety department it passed with flying colours. Showing the drug can be used very safely to treat liver problems. The safety data particularly from weeks 12 -16 shows the drug will fare well in longer Phase III trials.
In the efficacy department it also excelled, the drug can drastically reduce liver fat content, which is the leading cause of NASH. And can significantly reduce LDL-C, which suggests the drug could be very cardioprotective leading to long term benefits.
I would agree that in order to get the most benefit out of the Phase III trial, real world evidence should be taken into account and the drug should be used in patients with NASH and increased LDL-C. This looks extremely likely according to Viking's press statements.
Still a long Phase III trial to go, but I am quietly confident for VK2809.
I am long $VKTX. I may think about initiating a small position if the Share Price drops below $8 again.
-OC
Disclaimer:
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company who is mentioned in this article. This article is not investment advice, and can't be relied upon by anyone for any reason except, arguably, entertainment purposes. I am not an investment advisor.
Vk2809 will have to undergo a phase 2-b study before phase 3... Putting it further behind Mgl-3196. Very promising initial data though, interesting to see how data changes in a Nash population of patients.
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