Memorandum

Adocia 3Q18 – Five trials set to begin in 2019, including phase 3 for BC Lispro (still seeking partner in US/EU), second phase 1/2 for BC Pramlintide Insulin, final phase 1/2 for BC Glucagon; Lilly arbitration looms; ~$51 million in cash – October 23, 2018

Executive Highlights

  • Adocia provided today its 3Q18 update via press release and an accompanying slide deck. Most notably, the company is now planning phase 3 trials for ultra-rapid-acting BioChaperone Lispro, set to begin with a pump trial sometime in 2019 (slide 15). In the past, we’ve stated our expectation that Adocia would partner this candidate prior to phase 3 development, but management has also shared with our team that a go-alone pathway for BC Lispro in the US was not off the table. Our sense is that Adocia’s partnership with Tonghua Dongbao – which garnered the company $50 million and a source of active pharmaceutical ingredients (APIs) – made this a more attractive option.

  • Following positive phase 1 PD and safety results for BC Pramlintide Insulin (human insulin/pramlintide), announced in September, a second phase 1/2 trial has been scheduled to start in 1Q19. No details on the trial were given, and it is not yet posted on ClinicalTrials.gov as far as we can tell. We’re particularly curious if the study may include BC Pramlintide Insulin in a pump, as Adocia emphasized the combination’s long-term stability in pumps and on the shelf in a presentation at ADA 2018.

  • Initiation of the final phase 1/2 trial for BioChaperone Glucagon has been slightly delayed, from 4Q18 to 1Q19. Details on the investigation, which was originally announced in 2Q18, were once again absent, and there is no mention of the trial on ClinicalTrials.gov. This is expected to be the final trial before phase 3. All five of Adocia’s upcoming clinical trials are now set to begin in 2019, after the December 2018 hearing for Adocia’s second arbitration against Lilly, related to the terminated licensing agreement for BioChaperone Lispro.

  • As of September 30, Adocia held €44 million (~$51 million) in cash and cash equivalents, a significant dip from the €56 million (~$65 million) it held at the close of 2Q18 but equivalent to 3Q17. Management noted that the majority of this cash position (€33.6 million; ~$39 million) was attributable to licensing agreements signed with Tonghua Dongbao in April 2018.

    Adocia provided today its 3Q18 update via press release and an accompanying slide deck. Below, you’ll find our top takeaways for 3Q18 plus a pipeline summary table outlining the company’s major diabetes and obesity candidates.

    Top Five Highlights

    1. Ultra-Rapid BioChaperone Lispro: Adocia Planning Phase 3 Trials to Start in 2019; Still Looking to Partner in US, Europe, and Japan

    Adocia announced that it is planning phase 3 trials for ultra-rapid-acting BioChaperone Lispro, set to begin sometime in 2019 (slide 15). While we were aware that Adocia had planned to meet with FDA sometime this year to discuss a phase 3 program for this seriously promising candidate, this is the first we have heard of a timeline, and these are also the most definitive plans we’ve heard, by far. Of note, Adocia is still looking to partner BC Lispro in the US, EU, and Japan (slide 15). In the past, we’ve shared our expectation that Adocia would ink a dedicated partnership prior to phase 3 trials, but management has also previously shared with our team that a go-alone pathway for BC Lispro in the US was not off the table. The likelihood of this was certainly improved following Adocia’s June expansion of its April 2018 alliance with Tonghua Dongbao (THDB) for the development and commercialization of BC Lispro and BC Combo (75/25 basal insulin glargine/prandial insulin lispro) in China.

    In its 2Q18 call, Adocia emphasized that the $50 million up-front payment it received for this partnership is enabling R&D acceleration. Moreover, per the expansion, THDB will manufacture biosimilar insulin glargine and biosimilar lispro APIs (active pharmaceutical ingredients) for Adocia. With this API source secured and a strengthened cash position, it seems likely that the company is more confident in its ability to go solo in phase 3. With respect to partnerships, an API source has enabled Adocia to expand its search for a commercialization partner in the US, EU, and Japan beyond companies with insulin manufacturing capabilities. For context, development of phase 3-ready BC Lispro has more or less stalled since Lilly terminated its licensing agreement for the product in January 2017 (more on this below), but we’ve been impressed by Adocia’s commitment to carrying the product through development and into patient hands. From where we stand, the emerging ultra-rapid-acting mealtime insulin class (currently comprised of Novo Nordisk’s Fiasp and MannKind’s Afrezza) stands to provide serious benefits to patients, and entry of more ultra-rapid-acting products could improve patient access and affordability. 

    • Adocia intends to initiate its first phase 3 trial for BC Lispro in the insulin pump setting. Highlighted in the company’s slide deck (slide 15) is a phase 1 head-to-head trial in patients with type 1 diabetes on pump therapy, in which BC Lispro demonstrated significantly faster offset and similarly fast onset to Fiasp. Excitingly, the slides also hint at potential BC Lispro use in an artificial pancreas, stating that ultra-rapid insulin with a fast-on, fast-off profile is a key element need to “close the loop” (slide 16).

    • No updates were given on BC Combo or the milestone payments in Adocia/THDB’s partnership agreement. In addition to the $50 million upfront payment, the lucrative agreement landed Adocia a possible $85 million in development milestone payments ($50 million for BC Combo and $35 million for BC Lispro). The greater amount for the former is likely because it is much earlier in development and has promising phase 1b results under its belt. From a market perspective, BC Combo has serious potential in China, where premix insulin accounts for 65% of the overall insulin market (slide 13).

    • Adocia is still looking for a licensing partner for its phase 3-ready rapid-acting human insulin, HinsBet U100. Management maintained that they are actively seeking regional partners in emerging markets to continue development of and launch the product, which they hope to serve as an affordable prandial treatment option in markets dominated by human insulin. The last big update on HinsBet came way back in 4Q16, when the candidate demonstrated superior postprandial glucose control vs. Humulin in a one-hour meal test (p=0.0002), as well as non-inferiority vs. Humalog (p=0.537).

    2. BioChaperone Pramlintide Insulin: Second Phase 1/2 Trial Scheduled to Start in 1Q19 Following Positive Phase 1 Results

    Following the release of positive phase 1 PD and safety results for BC Pramlintide Insulin (human insulin/pramlintide) in September, a second phase 1/2 trial has been scheduled to start in 1Q19. No details on the trial were given, and it is not yet posted on ClinicalTrials.gov, as far as we can tell. We’re particularly curious if the study may include BC Pramlintide Insulin in a pump, as Adocia emphasized the combination’s long-term stability in pumps and on the shelf in a presentation at ADA. In the completed phase 1 study, BC Pramlintide Insulin (7.5 U insulin and 45 µg pramlintide) conferred a significant 97% reduction in postprandial blood glucose excursions in the first two hours after eating compared to Lilly’s Humalog (insulin lispro), conferring postprandial glycemic control comparable to separate injections of Lilly’s Humulin (human insulin) and AZ’s Symlin (pramlintide) without additional safety concerns. In Adocia’s press release, it was also noted that the pharmacokinetic profiles of BC Pramlintide Insulin and simultaneous injections of pramlintide and human insulin will be compared in a separate publication, which we’re eager to see. Importantly, this study marked the first clinical demonstration of feasibility for a fixed-ratio co-formulation of pramlintide and human insulin, indicating that the known synergistic effects of the two when administered separately are maintained in a co-formulation. In our view, fixed combinations of insulin and amylin analogs have significant potential as an innovative approach to improving postprandial glycemic control. To date, commercial traction for the only marketed amylin analog (AZ’s Symlin) has been slow, in part due to injection burden and difficulty in adjusting insulin dose when adding the analog; a co-formulation could make pramlintide significantly easier to use.

    3. BioChaperone Glucagon: Final Phase 1/2 Trial Slightly Delayed from 4Q18 to 1Q19, Set to Ready Candidate for Phase 3

    Adocia has delayed initiation of the final phase 1/2 trial for BioChaperone Glucagon from 4Q18 to 1Q19. Details on the study, which was originally announced in 2Q18, were once again absent, and we can find no mention of the trial on ClinicalTrials.gov. This is expected to be the final trial before phase 3 and will follow expanded phase 1 results presented at ADA 2018 (slide 23). As a reminder, BC Glucagon is under development both as a severe hypoglycemia rescue treatment and for use in a dual hormone closed loop system, and the candidate joins a fairly robust glucagon competitive landscape currently led by Xeris Glucagon Rescue Pen (NDA accepted today by FDA), Lilly’s nasal glucagon (filed with FDA and EMA in 2Q18), and Zealand’s dasiglucagon (filing expected 2H19). That being said, we see more than enough room for multiple next-gen products to expand the glucagon market (long in need of innovation) and garner commercial success. Indeed, Adocia forecasts that the glucagon market will grow to $400 million by 2025 following the introduction of ready-to-use products (slide 23). Moreover, this comparison is quite modest in comparison to Zealand’s $700 million market prediction for glucagon in 2025 and Xeris’ $2 billion estimate for the US glucagon market. If functional in dual hormone systems, BC Glucagon would also be in a particularly strong position down the line. Both Xeris’ and Zealand’s products are also being investigated for use in artificial pancreas systems.

    • All five of Adocia’s upcoming clinical trials are now set to begin in 2019 (see pipeline table below), after the scheduled December 2018 hearing for Adocia’s second arbitration against Lilly related to the terminated licensing agreement for BioChaperone Lispro. Notably, the phase 1 study for BC Glucagon GLP-1 and this final phase 1/2 trial for BC Glucagon were both delayed from previous timelines of 4Q18. We wonder about the timing of these trials relative to Adocia’s arbitration proceedings against Lilly. Understandably, these proceedings are likely consuming much of Adocia’s time and resources currently; outstanding in the second arbitration are Adocia’s additional damages claim of ~$1.8 billion and Lilly’s counterclaim of ~$188 million. Given these large sums of money relative to Adocia’s cash position (~$51 million; see below), we’re curious what different rulings might mean for each company as well as Adocia’s pipeline.

    4. No Updates to Obesity Pipeline; First Clinical Study of BC Glucagon GLP-1 Remains Set for 1H19

    Adocia’s first foray into obesity R&D – BioChaperone Glucagon GLP-1, a glucagon/GLP-1 dual agonist announced in January 2018 – remains on track to enter phase 1 in 1H19. Notably, Adocia continued to label its candidate “BC Glucagon GLP-1” rather than the former “BC Glucagon Exenatide.” While we maintain our suspicion that this is for clarity and efficiency, we continue to wonder whether the company might be considering other GLP-1 molecules for development in obesity; to our understanding, exenatide is likely the most accessible GLP-1 in terms of patent expiration. No other updates were given on BC Glucagon GLP-1, which joins a competitive landscape led by Sanofi’s phase 2 SAR425899 (set for a large phase 3 program in obesity and a proof-of-concept study in NASH in 2H18), OPKO Health’s phase 2b (currently recruiting) OPK88003, and AZ’s MEDI0382, which demonstrated ~7.4 pounds of weight loss and an additional 25% time-in-range over seven weeks in a phase 2a study presented at EASD 2018. All of this is on top of a host of phase 1 and preclinical candidates that includes dual and tri-agonists from Novo Nordisk. Doubtless, there has been much excitement about the potential of dual agonists in diabetes, obesity, and NASH – and with more and more phase 2 data reading out, they’re shaping up to represent one of the next waves of cardiometabolic treatment. We think Adocia is smart to expand with this emerging class, particularly into obesity where the unmet need is so high and highly efficacious agents could really make an impact. The first in-human trials for Adocia’s adjacent preclinical GLP-2 agonist teduglutide, for short bowel syndrome, also remain scheduled for 1H19.

    5. Adocia Closes 3Q18 with ~$51 Million in Cash; ~$13 Million Payment from Lawsuit with Lilly Still Pending, Expected in 2019

    As of September 30, 2018, Adocia held €44 million (~$51 million) in cash and cash equivalents, a significant dip from the €56 million (~$65 million) it held at the close of 2Q18 but level with its 3Q17 close at €44 million (~$52 million). Management noted that the majority of this cash position (€33.6 million; ~$39 million]) is attributable to licensing agreements signed with Tonghua Dongbao in April 2018. Notably, Adocia’s financial position will be bolstered in the near future upon receipt of a pending contractual milestone payment of €11.6 million (~$13 million) from Lilly, related to the terminated licensing agreement for BioChaperone Lispro. Payment of this milestone is expected sometime in 2019, after the second phase of arbitration proceedings for the case have concluded. Currently outstanding in the second arbitration are Adocia’s additional damages claim of ~$1.8 billion and Lilly’s counterclaim of ~$188 million. The reported cash position also does not include a research and tax credit of €7.6 million (~$8.8 million) generated from 2017 expenses, which is expected in the coming weeks.

    Adocia Diabetes/Obesity Pipeline Summary

    The table below reflects the latest status, as far as we are aware, of Adocia’s diabetes/obesity-related pipeline products. Items highlighted in yellow indicate notable changes to the pipeline in recent months.

    Product

    Indication

    Status

    Timeline/Notes

    BioChaperone Lispro (ultra-rapid-acting insulin)

    Type 1 and type 2 diabetes

    Phase 3-ready

    • Planning phase 3 to start in 2019, including a pump study

    • Secured Tonghua Dongbao as development and commercialization partner in China, retained rights to US, EU, Japan

    • Positive topline phase 1b results released in December 2017; Candidate showed significantly faster offset vs. Novo Nordisk’s Fiasp in first-ever head-to-head comparison of ultra-rapid-acting insulins

    HinsBet (rapid-acting human insulin)

    Type 1 and type 2 diabetes

    Phase 3-ready

    • Adocia plans to license to a “regional player” in emerging markets for phase 3

    • Preclinical U500 formulation in development

    • Positive phase 2a results reported in 4Q16

    BioChaperone Pramlintide Insulin (pramlintide/human insulin)

    Type 1 diabetes

    Phase 1/2

    • Second Phase 1/2 trial scheduled to begin in 1Q19

    • Positive phase 1 results released in September 2018; Candidate conferred significant 97% reduction in postprandial excursions compared to Humalog

    BioChaperone Combo (75/25 insulin glargine/insulin lispro premix)

    Type 1 and type 2 diabetes

    Phase 1

    BioChaperone Glucagon (liquid-stable glucagon)

    Ready-to-inject hypoglycemia rescue treatment (type 1 and type 2 diabetes); also in development for dual hormone AP (type 1 diabetes)

    Phase 1

    • Final phase 1/2 trial initiation delayed to 1Q19

    • Positive topline phase 1 results reported in 4Q17

    BioChaperone Insulin Lispro/Pramlintide

    Type 1 diabetes

    Preclinical

    • Apparently de-prioritized in favor of human insulin/pramlintide combo

    • Phase 1 initiation delayed from “end of 2017” timeline

    • Added to pipeline in January 2017

    BioChaperone Insulin Lispro/Exenatide

    Type 2 diabetes

    Preclinical

    BioChaperone Insulin Glargine/Liraglutide

    Type 2 diabetes

    Preclinical

    BioChaperone Insulin Glargine/Dulaglutide

    Type 2 diabetes

    Preclinical

    BioChaperone Glucagon GLP-1

    Obesity

    Preclinical

    • Phase 1 trials delayed to 1H19; adjacent with GLP-2 agonist teduglutide for SBS

    • Added to pipeline in January 2018 as one of Adocia’s first non-diabetes candidates

     

    --by Peter Rentzepis, Martin Kurian, Ann Carracher, and Kelly Close