For parents, having a child with peanut allergies come into accidental contact with the protein, via unlabeled foods at a potluck event, birthday party, or school lunch can be devastating. The results range in severity, from minor skin reactions to life-threatening anaphylaxis. It's an event no parent wants to encounter but it happens more often than you think.
Fortunately, there are multiple drugs being investigated for this condition. One is Viaskin, created by DBV Technologies (DBVT 1.62%), which functions as an applied skin-patch that gradually increases the amount of tolerance for peanut protein in children with the allergy. The drug, however, is far from perfect and has to overcome severe hurdles before it has a shot at regulatory approval. Aimmune Therapeutics (AIMT) is another biotech with an innovative treatment aimed at helping children with peanut allergy. Without further ado, let's investigate these potentially cutting edge treatments to see if either biotech stock is a buy.
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The Viaskin clinical trials
During its original phase 3 clinical trial, children aged 4 to 11 with peanut allergies were treated with either Viaskin Peanut 250 micrograms or placebo for up to 12 months. The primary endpoint of the trial was to measure improvements in patients' tolerance of peanut protein. Top-line results revealed 35.3% of patients taking Viaskin witnessed improvements in this metric by the end of the study, compared to 13.6% of patients who received placebo.
Although the results were statistically significant, the drug failed to outperform a benchmark that measures the difference in treatment response, also known as a confidence interval. As a result, the company conducted an extended trial to measure the efficacy of Viaskin for up to three years.
In this trial, 75% of patients who took Viaskin saw their peanut tolerance increase, and 51.8% managed to eat up to 1,000 mg of peanut protein (or five kernels) in one sitting. Just 1% of patients in the Viaskin cohort reported treatment-related serious adverse events, compared to 2% of patients in placebo. Overall, Viaskin was well tolerated.
Just when investors thought the treatment was promising, in another twist of events, the Food and Drug Administration withdrew a scheduled advisory committee meeting for the drug in May, citing issues related to efficacy, and how the skin patch could be easily peeled off. At first glance, this may translate to significant upside for DBV's competitor, Aimmune Therapeutics, but even this company has its fair share of issues.
A competitor's woes
Aimmune's Palforzia is an oral immunotherapy that has become the first FDA approved drug for treating peanut allergies. The drug launched in February and investors should receive updates on its market share and traction data during Aimmune's Q1 conference call. Compared to Viaskin, Palforzia is rather expensive with a treatment cost of $890 per month and has several risk factors as outlined by its data.
In a pivotal clinical trial, 67.3% of peanut-allergic children and teenagers who took Palforzia were able to tolerate 600 microg0g of peanut protein (or three kernels) by the end of a 12-month therapy. While these results were statistically significant, 14.2% of patients in the treatment group experienced serious allergic events, compared to 3.2% in the control group. This also included one severe case of anaphylaxis deemed related to the treatment by Palforzia.
Although Palforzia does have first-mover advantage and better short term efficacy, its safety concerns cast a shadow on potential commercialization success. Meanwhile, neither safety nor long term efficacy is an issue with Viaskin.
Takeaways for investors
Hence, the main risk facing investors is whether or not DBV can improve the adhesion of its skin patch and convince the FDA's panelists with evidence of Viaskin's long-term efficacy. Currently, Viaskin is the company's only clinical candidate which has made it past phase 3. The company also has no revenues whatsoever and relies on stock offerings to continue funding its research and development expenses.
DBV has burned over $150 million per year for the past four years. Luckily, DBV recently closed multiple funding rounds and has more than $190 million in net cash on hand, which should theoretically mitigate dilution risk for 12 months. Fortunately, 12 months is all DBV needs for investors to witness results. The original Aug. 5 FDA action date to decide the fate of Viaskin is still on the table. Considering analysts are predicting the peanut allergy market will grow to over $4 billion by 2027, the company has significant long-term potential as it currently holds a market cap south of just $500 million.
Risk-savvy investors may wish to open a small stake now in case of a large pop in the event of approval. For more prudent investors, however, it's best to wait until Viaskin becomes approved to purchase the stock. The risks associated with relying on a single product to make or break a company are simply too great. If Viaskin's Biologic License Application is declined, shares may fall to sub-$2 levels.
Thus, conservative investors looking for exposure in novel peanut allergy treatments should consider buying Aimmune. Like DBV, the company has negligible amounts of debt, a less than $1 billion market cap, more than $140 million in cash, and has enough capital to sustain operations for at least another quarter without risk of dilution. Unlike DBV, Aimmune's Palforzia has already launched, and responses from allergists have been very favorable. In a race of two companies fighting to develop breakthrough therapies in this sector, I would argue Aimmune has taken the lead, for now.
