ADVENTRX (NYSE: ANX), a San Diego-based biopharmaceutical company, has made significant strides in the development of a product candidate designed to treat disorders of the microcirculation, specifically sickle cell disease (SCD), an orphan drug market in the US and Europe with implications for millions of people worldwide.
Sickle cell disease is an inherited blood disorder characterized primarily by chronic anemia and periodic episodes of severe pain. The underlying problem involves hemoglobin, a component of red blood cells. Hemoglobin molecules in each red blood cell carry oxygen from the lungs to body organs and tissues and bring carbon dioxide back to the lungs. In patients with sickle cell anemia, the hemoglobin molecules bind together to form long rods within a red blood cell. These structures cause red blood cells to become stiff and assume a sickle shape. The red blood cells cannot be replaced fast enough; hence the blood is chronically short of red blood cells, which is why the condition is sometimes known as sickle cell anemia.
Unlike normal red cells, which are usually smooth and donut-shaped, sickled red cells cannot squeeze through small blood vessels. Instead, they stack up and cause blockages that deprive organs and tissues of vital oxygen-carrying blood. This process produces periodic episodes of severe pain, which leads to hospitalization for multiple days and ultimately damages tissues and vital organs and lead to other serious medical problems, including an early death. The life expectancy of a sickle cell patient is 40-50 years.
According to the CDC, SCA affects 1 in 5000 people in the US. The sickle cell trait occurs in 1 out of 12 African-Americans and 1 out of 100 Hispanic-Americans.
The ADVENTRX product candidate ANX-188 has the potential to reduce ischemic tissue injury and end-organ damage arising from red cell occlusion and ischemia. ANX-188 is designed to restore the natural hydrophobic surfaces on damaged cells and improves membrane hydration, which lowers adhesion and viscosity, particularly under low shear conditions, allowing for better micro vascular function. This broad-acting activity also allows the product candidate to be developed in a large number of applications, such as myocardial infarction, stroke, and peripheral arterial diseases.
**ADVENTRX was a recent participant in OneMedForumSF 2013, January 7-9. Click here to view the company’s presentation.
According to the company, more than over 95,000 hospitalizations and nearly 70,000 EMT/Paramedic responses occur as a result of the symptoms of sickle cell anemia.
This is more or less substantiated by a CDC estimate of over 1.7 million SCA related hospital visits from 1999-2007, an illustration of how costs add up both for medical professionals and people afflicted with the disorder in terms of time, resources and money, along with a leading NIH which concluded:
“Because government programs pay most of this cost, further government-funded research to develop interventions that prevent complications of the disease has great potential for cost savings as well as for reducing the suffering of those afflicted with this painful genetic disorder”
However, these numbers are for the U.S. alone. The recessive genetic disorder is active among populations from Indian, sub-Saharan African, Central American and African American descent stemming from natural immunity to malaria, which presents a significant unmet medical need as well as unique market opportunities.
Approximately 150,000, or 2 percent of all newborns in Nigeria are affected by sickle cell anemia. The carrier frequency ranges between 10% and 40% across equatorial Africa.
In Saudi Arabia, about 4.2% of the population carries the sickle cell trait.
Speaking in December to the potential market size and the rush to develop new therapies, ADVENTRX CEO Brian Culley discussed how ANX-188 puts the company in a unique market position; “We will be the only company with a new chemical entity in phase 3 for the treatment of sickle cell disease. We believe this leadership position can serve as a platform for us to make a significant positive impact in this important area.”
According to Edison Investment Research, over $163MM has been invested in companies developing novel SCA therapies over the past 12 months.
The presentation also described the use of ANX-188 as a potential treatment for hemorrhagic shock, detailing data from animal tests showing improved tissue oxygenation when administered with a blood replacement.
Investment banks Rodman & Renshaw and Brinson Patrick both initiated “Buy” ratings on ADVENTRX, and RIA Vista Partners mentioned the company in commentary earlier this month. All three base their consensus on the promise of the ANX-188 treatment and of the company having the only product in Phase III in an orphan market.
In their commentary on ADVENTRX, investment bank Dawson James projected ANX-188 to reach over $350 million in sales annually by 2020, assuming a product launch in 2015.
Still, some have questioned the company’s ability to remain well capitalized in respect to its market cap. The company reported $40 million in cash reserves as of September 2012 and a market capitalization of around $27 million as of mid- January with no debt – thus, the company should remain well capitalized through 2013. If and when the company chooses to undertake a round of financing for 2014-2015, it is conceivable the results of ANX-188 Phase III trial will be released.
Precedence suggests the SCA segment is a niche market that will attract both investors and M&A. The main driver of a need for creating profitable and effective treatments will further opportunity for all parties in the space. As evidence, ADVENTRX acquired the rights to ANX-188 via the acquisition of SynthRx in an all-stock milestone-contingent deal in 2011, with a lion’s share of the consideration paid to shareholders contingent upon initiation of the Phase III trial.
Privately-held Selexys previously underwent a $23 million Series A financing transaction with MPM Capital, along with a blockbuster option for a deal worth up to $665 million following the successful completion of a Phase II study for an anti-body based anti-inflammatory therapy that was made with Novartis. As further evidence of large pharma’s interest in sickle cell therapies, Pfizer inked a $340 million partnership with Glycomimentics, who is in phase III with an SCD drug candidate.
There is good reason to believe that ADVENTRX will continue to trade on the low end of the 52-week low at $0.55 – $0.60, due to expanded study costs related to ANX-188. Overall losses, however, decreased from $0.13 per share to $.07 per share, a very promising sign of management taking appropriate steps to minimize operational cost and retain cash.
In the coming next few months, however, it is not unreasonable to expect a move toward $0.75- $0.80, based on initial speculation surrounding the initiation of the ANX-188 Phase III trial. Additional upside potential at the $0.95 – $1.00 level should be also expected for any potential financing deal that emerges in the next 1-2 years, until the release of the ANX-188 trial data.
The ADVENTRX story is a sign that the orphan drug market will continue to be a major profit component for pharmaceutical companies in the coming years, and that the M&A and licensing markets – as evident in the Selexys and Glycomimentics deals – will be very active.