The potential to address disease caused by genetic mutations is quickly becoming a reality, and one company that could be poised to benefit is Regenxbio (RGNX 0.05%).
In this clip from The Motley Fool's Industry Focus: Healthcare, host Shannon Jones is joined by Motley Fool contributor Todd Campbell to discuss how Regenxbio's proprietary viral vectors could present investors with an opportunity to profit from treatments for spinal muscular atrophy and wet age-related macular degeneration, two blockbuster indications.
A full transcript follows the video.
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This video was recorded on Sept. 26, 2018.
Shannon Jones: As fascinating as Amarin's fish oil pill is, there's an equally fascinating company on Todd Campbell's radar right now, in one of the hottest areas in biotech right now, which is gene therapy. Gene therapy really brings with it the promise of novel one-time treatments that target the underlying causes of disease at the genetic level. Todd, tell us about your top pick, and why you love it so much.
Todd Campbell: This is going to sound kind of funny for me to talk about this, because oftentimes, I'll say to people who ask, I typically try to avoid young, early stage companies. The risk of trial failure is so high. Yet, every once in a while, there'll be a company that has some pretty remarkable competitive advantages that basically makes me stand up go, "This is kind of an interesting company, it's definitely one worth exploring a little bit more." That was the case with this stock, Regenxbio, symbol RGNX.
The reason that I'm really interested and intrigued by this company is twofold. They have a proprietary collection of adeno associated viral vectors. Those AAVs can be used to enable gene therapies, to get into the tissue and actually do the work of creating that change in the way that the genes function.
There are about 6,000 diseases that are caused by genetic mutations. The whole concept with gene therapy is to be able to go in and either restore the gene function by adding some genetic code or restore appropriate gene function by deleting a part of code. We've talked about this in the past on the show, it's called gene editing.
Regenxbio's AAVs are intriguing because what they're used for is to deliver the gene therapy into the tissue to make the change and theoretically restore correct genetic function. They argue that their AAVs are the best there are out there, that their AAV platform will not only create less of an immune reaction within patients that they're given to, which allows for more durable, long lasting results; but they're going to be easier and cheaper to manufacturer, too. That removes a big hurdle that's been overhanging the gene therapy market.
Jones: You've got a really novel platform, and it sounds like they're going to be targeting some really high unmet need areas, as well. What can you tell us about the indications they're going after?
Campbell: They have two business approaches. The first business approach is a licensing approach, where they allow drug makers to come in and license the use of their AAVs in exchange for some upfront money, maybe some milestone payments, depending on their clinical trial success, and then royalties if a drug is eventually commercialized. That's one part of their business model. The other part of their business model is to develop their own internal candidates for genetic diseases that they can usher through their own clinical trials and theoretically partner out later on or just go ahead and launch them on their own.
Their own projects are pretty early stage projects. But one of those projects that's most advanced is incredibly intriguing because it targets wet age-related macular degeneration, a multibillion-dollar market that's dominated by Eylea, $5.2 billion a year drug. Their goal is to develop a gene therapy that can be a one-and-done -- or maybe a twice a year; who knows, we'll see -- therapy that would avoid the need for patients with wet AMD to go into the office every three months or eight weeks or whatever and have to have an injection done in their eye to help restore their vision. That is particularly exciting to me because they reported some data this past summer from a phase 1 study that showed that there was a dose-dependent reaction to their medication, to their gene therapy. And half of the patients in the highest dose cohort were injection-free after six months. They're actually continuing that study, ramping up to include another dose cohort that's a higher dose. Data from that additional cohort could be available before the end of this year. Phase 2 trials could begin for that medicine as soon as 2019. That's on the internal program side.
On the external program side, the closest drug that's to commercialization is a Novartis gene therapy for spinal muscular atrophy, SMA. Earlier this year, Novartis went out and spent $8.7 billion to acquire AveXis, to get its hands on this drug, AVXS-101. They plan to file for FDA approval of that drug soon, potentially getting that drug on the market next year. If so, if the FDA gives it to go ahead, then Regenxbio should be able to collect mid-single digits to low double-digit royalties on sales. That's significant, Shannon, because the one drug that's out there right now for use in that indication is Biogen's Spinraza, and that's tracking $1.5 billion in sales per year as of last quarter.
Jones: For our listeners that have been following along, Spinraza had a phenomenal launch trajectory. Granted, it's been tapering off over time. But when you think about the closest competitors, AveXis is top of mind for many investors right now, in terms of how the dynamics would change once they come to market, if they come to market, if the data are worthy of approval.
Going back to what you were mentioning, I'm really intrigued. This wasn't a company I followed -- I haven't been following it all, really -- until you mentioned it, Todd. That wet AMD indication is extremely intriguing for a couple of reasons. One, you mentioned the patient populations. That's a population that's really only going to increase as you see the baby boomer generation continuing to grow and live longer. You talked about the competitive landscape with Eylea. You've also got Lucentis, Avastin. Those, of course, require multiple doses. If Regenxbio can get a one-and-done or close to one-and-done approach, I think the opportunity is huge here.
It'll be really, really interesting to see, if this gets approved, where pricing will fall. Of course, with gene therapies, we know that they can easily command hundreds of thousands of dollars. Compared to the competitive landscape, that would be a huge jump for many prescribers and patients. I think the opportunity is interesting. It'll be really, really interesting to watch that space, too.
Campbell: Maybe you end up with some novel pricing programs that get announced if this thing ever does make it to market. Again, we're talking way out in the future. I always want to tamp down on a little bit of enthusiasm because the information that we've seen so far is phase I. That's as early stage data as you can get.
You make a great point. If you're talking about, right now, patients normally getting six or seven injections per year, you multiply the cost of each one of those injections. And then you say, "Well, what if I'm diagnosed with wet AMD, I'm 70, and I end up living until 85? The next 15 years, I'm going to have six of these injections per year." How do you price that? So, that will be interesting.
But, I think it's a multibillion-dollar indication. Theoretically, this could shake it up if data in phase 2, and eventually in phase 3, confirm what we saw in this very, very small phase 1 cohort.
Jones: Todd, what do you think in terms of their cash runaway right now? Do you feel like they've got enough on the books right now to fund those trials moving forward?
Campbell: They'll need to tap cash at some point, tap investors for cash at some point. Maybe that'll be a little bit dilutive. That's not unexpected for clinical stage companies. But one of the reasons that I like this company is because it does have the potential to bring in those royalty payments beginning next year. That will offset the risk and slow the cash burn for this company. They have about $306 million on the books right now. I think the projecting that they're going to finish the year with somewhere between $250 [million and] $260 million on the books. That should give them some pretty good runway. Then we'll have to see what happens with AVXS-101 at the FDA, and whether or not Novartis can successfully launch that out against Spinraza.
Jones: So much to look forward to in 2019. This is a truly an interesting company. Gene therapy has really taken off and has gained so much investor enthusiasm and support. We'll see where that one goes.