Analysts Question Avalanche Biotech Clinical Data, Could Jeopardize Regeneron Deal

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June 16, 2015
By Mark Terry, Breaking News Staff

Despite overall positive results, Avalanche Biotechnologies stock dropped after questions were raised regarding the company’s Phase II trial design for wet age-related macular degeneration.

Avalanche Biotechnologies, located in Menlo Park, Calif., announced results yesterday of its Phase IIa study and a Phase I 36-month follow-up safety study for AVA-101. Avalanche indicated that the Phase IIa study met its 12-month primary endpoint, showing the drug was well tolerated and had a favorable safety profile. Patients also showed improved best corrected visual acuity (BCVA) compared to the control group, and demonstrated a positive trend in response rate.

That all seems quite promising.

“The results of this study confirm the Phase I safety results and suggest that AVA-101 could potentially benefit a significant portion of patients with wet AMD who require regular treatment with anti-VEGF therapy,” said Samuel Barone, Avalanche’s chief medical officer in a statement. “The current standard of care in wet AMD requires frequent anti-VEGF infections, which present a significant burden for patients and their caregivers, and can result in reduced treatment compliance and under-treatment. Therefore, a product that can maintain or improve vision while reducing the number of treatment injections would represent a powerful new option for patients and physicians.”

But something went wrong during the conference call yesterday afternoon when analysts began to examine more closely the study’s secondary efficacy endpoints. These were related to visual acuity, the number of rescue injections and measurements of retinal thickness. These, apparently, had significantly less clear results.

In addition, analyst expressed concern that the way the study was designed did not show a statistically significant difference between the control arm and the AVA-101 patients.

Also, there is some questions regarding a possible development deal between Avalanche and Regeneron Pharmaceuticals, Inc. for the rights to AVA-101 now. On May 5, 2014, Regeneron and Avalanche announced a collaboration to develop drugs for ophthalmologic diseases, particularly utilizing novel gene therapy vectors and proprietary molecules. As part of that deal, Regeneron has a time-limited right to first negotiation for AVA-101.

Avalanche may provide more results at the American Academy of Ophthalmology (AAO) meeting in November about the drug and its possible deal with Regeneron.

Tim Lugo, an analyst with William Blair, said on Benzinga, “We believe the performance of Lucentis in the control arm raises more questions than answers.”

William Blair’s report went on to say, “While the next major catalyst for shares is a potential deal between both Regeneron and Avalanche, it is likely beneficial for both parties to wait until Phase IIb results to enter discussions as both parties (and the market) will likely have difficulty in valuing AVA-101 as an asset until additional results are available.”

Avalanche Biotechnologies stock was selling for $40.79 per share on June 11. It is currently selling for $18.75. It sold for a high of $60.08 on Jan. 7, 2015.

William Blair downgraded the stock from Outperform to Market Perform. Suntrust also downgraded the study from Buy to Neutral. Jefferies maintained a Buy rating.

On the other hand, analysts Joshua Schimmer, Steven Breazzano and Jerry Yang of Piper Jaffray are more positive overall about the company, noting in a research report, “the data is largely in line with our expectations, showing what we believe is real biological activity in a subset of responders with meaningful reduction in injection frequency, along with improvements in BCVA, but also with plenty of room for improvement.”

They note that it’s still early and that the company’s overall “expanding gene therapy pipeline and vector evolution strategy… is underappreciated in our view.”

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