Insmed Inc. (INSM, Financial) recently took a huge step forward in the quest for better antibiotics, one that could pave a new way of tackling the antibiotic resistance problem for other companies in the space. Insmed has successfully blunted the side effects of a last-resort antibiotic known as amikacin. While the discovery of new antibiotics is certainly important, making current antibiotics more tolerable to patients can go a long way in terms of plugging the antibiotic resistance gap until new classes are discovered.
In September, the company succeeded in a crucial phase III study for its flagship pipeline drug ALIS, an acronym for amikacin liquid inhalation suspension. Amikacin is a powerful antibiotic with severe side effects, including deafness, loss of balance, kidney toxicity and paralysis. Needless to say, it can only be taken as a last resort.
Insmed’s technology suspends amikacin in a liposome, basically a lipid shield that keeps most of the drug out of direct contact with a patient’s blood. The liposomes are then taken up by immune cells that naturally try to get rid of the liposomes, the result being immune cells now have active antibiotic inside of them to fight an infection.
Insmed’s market cap doubled to over $2 billion on the announcement of the phase III results, and ALIS is its main asset. This indicates the current market value of a targeted formulation of amikacin like ALIS is somewhere around $1 billion. Insmed has two other early-stage clinical candidates in the pipeline, but most of its value stems from ALIS.
The trial data showed 29% of patients with nontuberculous mycobacterium (NTM) lung infections in the ALIS arm demonstrated full eradication of the disease after six months of treatment, versus only 9% of patients in the placebo arm. There are two important conclusions from this data. The first is the liposome technology Insmed has is effective at shielding the body from the side effects of amikacin. Normally the drug cannot be taken for more than a few days before patients start losing their hearing and risk potentially fatal complications. Second, ALIS can be delivered to the site of infection effectively.
There is another interesting twist in the ALIS story, and that is its previous failure in phase II in 2014. The results of that trial showed no statistical significance in the change of mycobacterial density versus placebo after 84 days of treatment. The company was brave enough and had enough conviction to trudge on to phase III despite the discouraging results, reasoning that 84 days may not have been enough time to show full efficacy in a disease like NTM, which normally takes many months to treat. They were right, and now Insmed’s market cap is up nearly $1 billion because of those convictions.
But that is still not the whole story. There is another company pursuing a similar formulation of amikacin, one that also protects the patient from its side effects by shielding direct contact with the blood. Matinas BioPharma Holdings Inc. (MTNB, Financial) has a version of amikacin in development that instead of being encased in liposomes, is encased inside solid lipid envelopes called encochleates. The idea is to have immune cells take up the encochleates, which then unfurl inside the immune cells and attack the infection.
The candidate, MAT2501, has two major advantages over ALIS. First, it can be taken orally rather than being inhaled. Second, encochleates do not leak any drug out of the protective shell, whereas liposomes do at a rate of about 30%.
Trials on infected NTM patients have yet to begin on MAT2501, but the company already has robust data on a different encochleated antimicrobial called amphotericin B. Amphotericin B is almost as poisonous as amikacin, and can also only be taken as a last resort. It is generally reserved for leukemia patients suffering from systemic fungal infections due to immunodeficiencies. There is no prophylactic treatment for these infections in these patients because other antifungals are processed in the liver, which could lead to dangerous interactions with other drugs these patients are already taking. Amphotericin B is not metabolized in the liver, making it safe in that respect, if not for the risk of other potentially fatal side effects.
Matinas’s encochleated version of the drug, MAT2203, has been proven effective against fungal infections in other genetically immunocompromised patients, and safe to boot. There have been no serious side effects in any of Matinas’ clinical trials for encochleated amphotericin B so far, and two out of two immunocompromised patients with mucocutaneous candidiasis in an earlier trial both showed a greater than 50% clinical response where no other antifungal had come close.
Coming back to amikacin, even though clinical trials on NTM patients have yet to begin on MAT2501, there is safety data on healthy volunteers. None of them exhibited any serious side effects, despite amikacin’s known acute toxicities.
Matinas may actually be unintentionally mimicking Insmed’s path, following a phase II trial perceived by markets as a failure, and the stock has fallen 60% since. Matinas recently reported results on a phase II trial for its encochleated amphotericin B on patients with vulvo-vaginal candidiasis (or VVC). This trial did meet its primary endpoint of safety, but was unable to beat out standard of care in efficacy against the disease. Efficacy was still observed, including an 80% reduction in symptoms over 12 days and a clinical cure rate above 50%.
It stands to reason that efficacy did not beat out standard of care for similar reasons that caused Insmed to fail its own phase II for ALIS back in 2014 – not enough time. Both drugs have to first be taken up by immune cells, which then have to fight the infection. An 84-day period was not enough for ALIS, but then it succeeded on a longer timeframe. It appears 12 days was not enough for MAT2203 to show full efficacy in VVC either, but the efficacy that was shown indicates it does work.
Matinas, like Insmed, is carrying on with encochleated amphotericin B despite the perceived failure, and the amikacin candidate MAT2501 as well. If ALIS post-phase III is worth about $1 billion, MAT2501 could be similarly valued if and when it passes phase III, quite a big leap for Matinas, which is currently only a $100 million company. This calculation does not even incorporate MAT2203, which would be valuable as a prophylactic against fungal infections for leukemia patients.
Maxim Group recently released a report on Matinas pointing out other advantages encochleated MAT2501 has over ALIS. First is the advantage of oral administration over inhalation for ALIS, where 30% of the amikacin becomes free drug in the lungs. Second, Maxim points out the way MAT2501 is administered could be effective for other infections besides the lung, whereas inhaled amikacin is only effective on lung infections. Maxim has put a price target on Matinas at $6, from the current $1.10 a share.
The main risk with Matinas is cash and time. The perceived failure of the phase II for encochleated amphotericin B in VVC has hammered the stock price, and Matinas has only about one year of runway at the current burn rate. The company will need more money eventually and dilution is a possibility at a reduced stock price. The next major catalyst is about six months away with initial data for MAT2203 in leukemia patients due in mid-2018. This is still within the company’s current cash runway, so it may still be able to refinance at a higher share price. If initial results are positive, the stock is likely to jump near to where it was before the VVC trial data was announced. If not, the stock could fall well below a dollar a share. Until the middle of 2018, not much movement in the shares is expected outside of any surprises.
Disclosure: The author has no positions in any of the stocks mentioned.
