On March 16, Aimmune Therapeutics (AIMT +0.00%) announced that the first patients in the U.S. had begun treatment with its recently approved immunotherapy for peanut allergies, Palforzia. On the same day, investors learned that the U.S. Food and Drug Administration (FDA) had questions about the efficacy data for a rival peanut allergy treatment in development by DBV Technologies (DBVT 0.55%). Will this lead to a delay for DBV? Will Aimmune get a longer head start than expected, making it an attractive option for investors?
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Palforzia approved
The FDA approved Palforzia on Jan. 31 for children between the ages of 4 and 17 with a confirmed peanut allergy. The treatment, a powder containing the peanut allergen, seeks to gradually desensitize the individual to small amounts of peanuts that may be hidden in food. It is given in addition to a peanut-free diet. The powder is mixed into semi-solid food for the patient to then ingest.
A downside of Palforzia is an increased risk of anaphylaxis. This makes logical sense, since the treatment consists of a small, controlled dose of the allergen responsible for the body's reaction. To manage this in the real world, the FDA requires Aimmune to have a Risk Evaluation and Mitigation Strategy, or REMS. This adds an additional burden to commercialization and likely explains the month-and-a-half delay between approval and the announcement of patients receiving commercially available Palforzia.
The REMS program requires physicians to be certified and trained in order to be able to prescribe Palforzia. Patients must also be registered, and only certified pharmacies can dispense Palforzia. The initial dose and any dose increases must be given in a healthcare setting with trained medical staff. These extra layers aim to safeguard patients from a treatment that is potentially harmful if taken incorrectly. Aimmune noted in March that more than 600 allergists (of the about 4,500 in the U.S.) are certified and able to prescribe Palforzia.
Delayed competition?
The FDA gave DBV an Aug. 5 PDUFA target date to weigh in on its peanut allergy patch, which also aims to treat children ages 4 to 17. However, on March 16, DBV announced that the FDA had asked "questions regarding efficacy including the impact of the patch-site adhesion." Because of the request for additional information, the FDA canceled an Allergenic Products Advisory Committee meeting that had been scheduled for May 15 to discuss the product.
Investors need to gauge whether the request for more information, coupled with the ongoing COVID-19 pandemic, could delay the FDA's ability to meet the Aug. 5 deadline. It is unclear whether the advisory committee will need to reconvene to discuss any new information. Any delays for DBT will benefit Aimmune. The additional time will allow more patients and physicians to try Palforzia, increasing its market share.
Is it time to own?
Aimmune faces many challenges. Trying to launch a drug in the current locked-down coronavirus environment will be tough. Because Palforzia is given in addition to a peanut-free diet, parents may choose to simply continue watching food intake as they have been all along. Also, the first dose and each increased dose of Palforzia needs to be given in a healthcare setting such as a doctor's office. Will parents and doctors risk potential COVID-19 exposure for kids to get this therapy? Not likely.
On April 15, Aimmune's chief financial officer, Eric Bjerkholt, presented at the Needham & Co. Virtual Healthcare Conference. He commented that allergists had effectively put a hold on starting patients on new treatments; however, on a positive note, the extra time has allowed the company to certify more doctors and conduct virtual trainings. The company is also using this time to educate payers on the benefits and value of Palforzia to gain insurance coverage.
Expect the first-quarter earnings press release to be light on revenue, with greater detail on the activities surrounding Palforzia's launch. Quantitative numbers -- such as how many physicians are registered in the REMS program -- will shed light on how eager doctors are to try to prescribe the therapy. In mid-March, the company noted that more than 600 doctors had signed up. Biotech investors should keep tabs on how many more get certified.
Aimmune has $443 million in cash on its books to support the commercial launch of Palforzia. This includes a recent $200 million investment from the Health Science unit of Nestle (NSRGY 2.22%). Nestle, a strategic partner to Aimmune dating back to 2016, previously invested $243 million into Aimmune. Nestle's Health Science unit focuses on developing and marketing products for food allergies, so it made sense to collaborate to tap into mutual areas of food allergy expertise.
Aimmune's stock price is down more than 50% this year despite the company's first drug approval. The stock trades for about $15 per share, implying a company valuation just below $1 billion. Analyst target prices range from $29 on the low end to north of $50. Based on those projections, investors can double or triple their money with this stock. Clearly, some kids and teens need a treatment like Palforzia to help avoid severe peanut allergy reactions. Even though the commercial launch will take time, I like the stock at these prices.
