Pharmaceutical firm Insmed Inc. (INSM, Financial) was nearing new all-time highs again as markets continued to digest the surprisingly good news last week that its lead drug Arikayce succeeded in Phase 3 trials. Arikayce is an inhalable version of the antibiotic amikacin for nontuberculous mycobacteria. The news initially brought shares up 108% overnight, and they continue to edge higher this week.
The interesting thing about Insmed though is not the jump itself. These happen a lot in biotech when trial stage companies succeed in late-stage trials. The interesting part is that Arikayce actually failed Phase 2 trials back in 2014, which is what may have misled insiders into selling the stock too early. Take a look at the guru trades page for Insmed, and you’ll find many sell orders from company insiders who dumped shares in the low teens. Shares are now approaching $31.
Results for the Phase 2 trial that Insmed failed were reported in March 2014, when Arikayce reportedly did not meet statistical significance for its primary endpoint, and adverse events were also an issue. Shares fell 13% on the news that day. On top of that, NIH advisers including pulmonologist Dr. Ken Olivier, who was involved in the Phase 2, did not continue with the company for Phase 3 due to the drug’s worrying side effects profile.
Despite these previous discouragements, Arikayce still succeeded in Phase 3, meeting its primary endpoint this time, and shares immediately made new all-time highs.
Were there any clues that a Phase 3 could succeed, given the discouraging Phase 2 results? The answer is yes. The primary endpoint was an arcane statistical measurement with a predefined level for statistical significance that happened not to be reached, leading to technical failure for the trial. On the secondary endpoint of culture conversion (meaning getting rid of the bacteria), 11 out of 44 patients tested negative for the bacteria by day 84, compared with only three out of 45 patients on standard of care plus placebo.
Bottom line, there were signs the drug worked. It’s just that the technical primary endpoint decided on was not met.
There may be another company in this same boat, meaning failing Phase 2 but may yet succeed in Phase 3 come the time. Matinas Biopharma Holdings (MTNB, Financial) recently failed a Phase 2 trial for its version of antifungal amphotericin B called encochleated amphotericin B. The drug, code-named MAT2203, encapsulates the antifungal in tiny lipid envelopes that are then swallowed by macrophages, which then attack the infection with antifungal already inside them. The idea is to shield the patient from the side effects of the drug by keeping it out of the bloodstream but inside actual immune cells.
The trial tested MAT2203 on vulvo-vaginal candidiasis (VVC), a topical fungal infection; 55% of patients in the high dose arm demonstrated clinical cure with 80% showing improvement in symptoms after five days. The drug was also proven safe, which is crucial because free IV amphotericin B is known to be fatally toxic after 10 days of administration. Despite showing some efficacy, MAT2203 did not outperform fluconazole, the standard of care, and so the trial was seen as a failure. Shares have been cut in half since then.
But here’s the catch. MAT2203 works best when the most macrophages are activated and travel to the site of infection. If the drug is not first swallowed by these cells, it won’t work as well. Encochleated drug cannot attack the infection on its own because the envelope shields the drug from the infection as well as the patient. In topical nonlife-threatening infections like VVC, the immune system is in no hurry to activate and does not attack with full force nor send as many macrophages to the site.
Knowing this, why did Matinas choose VVC? It actually didn’t. The FDA wanted it to start on a nonlife-threatening topical infection to test safety, so it did. What the company is really aiming for though is MAT2203 as a prophylactic for immunocompromised leukemia patients susceptible to serious fungal infections. These patients cannot take fluconazole because fluconazole is metabolized in the liver, which could cause serious drug-to-drug interactions with other medications these patients are taking. Amphotericin B is not metabolized in the liver, but it is extremely poisonous so these patients have no choice but to wait until they get a fungal infection, and then take a life-threatening drug and hope the infection is killed before they are.
The strong safety profile of the drug, though, will give the company the opportunity to go forward with a prophylactic study on these patients, expected to start by the end of next year. In the meantime, Matinas has data coming in next year on its own encochleated version of amikacin for nontuberculous mycobacteria, the same drug and indication that doubled Insmed’s market cap overnight.
The main risk with Matinas at this point is capital. It has enough cash to get through 2018 without a capital raise, but beyond that, dilution is possible. By the end of 2018 though, a Phase 3 on leukemia patients should be about to begin, and we will already have data on encochleated amikacin. Knowing what happened with Insmed in its own Phase 2, Matinas will hopefully be able to avoid the same issue regarding failing statistical endpoints and just focus on culture conversion.
Disclusore: Long Matinas.
