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Shield Therapeutics PLC - Feraccru: a potential game changer in the treatment of iron deficiency anaemia

Written by Riccardo Lowi

Feraccru - a potential game changer in the treatment of iron deficiency anaemia
Key investor's messages

Feraccru is a unique, non-salt, formulation oral iron: strong efficacy with “placebo-like” tolerability

Potential to change iron deficiency anaemia (IDA) therapeutic algorithm

Feraccru to become the preferred option for patients not adequately controlled or who are intolerant to generic oral iron supplements (before they switch to intravenous iron).

With an indication in Europe to treat iron deficiency, Feraccru’s use would prevent the occurrence/reoccurrence of iron deficiency anaemia

Feraccru European commercialisation expected to accelerate significantly following the licensing agreement with Norgine announced in September 2018

Key upcoming milestones: results of the head-to-head phase 3 study of Feraccru vs intravenous (i.v.) iron expected in first half (1H) of 2019; Feraccru PDUFA (Prescription Drug User Fee Act) date 27 July 2019

Current market capitalisation of about £40mln is by and large not reflecting Feraccru commercial potential

In a nutshell

Shield’s lead asset Feraccru is a novel and highly differentiated iron formulation, for oral administration, indicated for the treatment of iron deficiency, i.e. low levels of iron body stores, usually caused by blood loss or malabsorption.

Overview

Being the only non-salt iron formulation, Feraccru has a much better bioavailability (lower daily dose required) and tolerability (less gastro-intestinal side-effects) than other oral ferrous products (OFPs).

Shield announced in September 2018 an agreement with Norgine for the commercialisation of Feraccru in Europe, Australia and New Zealand. Given Norgine’s track record in the gastro-intestinal area, we expect a significant sales uptake in those markets to be reported over the coming quarters.

Around the same time, Shield filed a new drug application (NDA) for Feraccru, which now has a PDUFA date (expected approval) of 27 July 2019.

We expect Shield to finalise a partnership for the commercialisation of Feraccru in the US, with a company endowed with the right level of financial resources and infrastructure to support successful commercialisation activities.

As such Shield will continue to operate as a lean organisation, responsible for Feraccru’s further development (e.g. label expansion into the paediatric population) and manufacturing (outsourced), receiving growing royalty streams from Feraccru’s global sales.

An important milestone is due early this year. In the first quarter of 2019, Shield is expected to announce top-line data for the ongoing phase 3, non-inferiority study comparing Feraccru to a leading i.v. iron product, Vifor’s Ferinject (called Injectafer in the US).

Positive results will reinforce the positioning of Feraccru not just as a better OFP but as an alternative to intravenous infusion (IVI) that doesn’t require hospitalisation and related costs.

We value Shield as the net present value (NPV) of the future royalty streams that we forecast from Feraccru’s US and 5EU sales, as described in further detail below.

Shield Therapeutics NPV valuation
Source: Proactive Investors analysis

Our intrinsic value per share of 109p largely exceeds the current stock price. It is supported by our analysis of the addressable patient population in the US and Europe and is in fact broadly in line with the stock price levels seen before negative top-line data from an initial blinded analysis of the AEGIS-CKD study were announced (and later rectified) in February 2018 (more on this below).

 

Quick facts on iron deficiency, anaemia and related conditions

Iron deficiency is the most common cause of anaemia, hence the term iron deficiency anaemia (IDA) and is characterised by below norm levels of: 1) haematocrit (red cell blood concentration); 2) haemoglobin (< 13 g/dL in men and < 12 g/dL in women); 3) total body iron stores as measured by serum ferritin.

 
 

IDA is a common co-morbidity of several medical conditions including congestive heart failure, chronic kidney disease (CKD), inflammatory bowel disease (IBD), cancer and uterine bleeding.

 
Source: Source: D Niepel, 2018

Low iron reserves are responsible for lower production of red blood cells, the carriers of haemoglobin, and account for about 50% of cases of anaemia. Low levels of haemoglobin cause a wide range of symptoms such as easy fatigue, rapid heartbeat, shortness of breath, dizziness, cramps and insomnia.

It is estimated that 2-5% of the population is affected by IDA [1], a condition still often under-diagnosed (especially in the least severe cases).

There are essentially two options that restore the body’s depleted iron reserves and correct anaemia: oral iron supplements and intravenous (i.v.) iron.

[1] AF Goddard, 2011

 
Source: Source: AF Goddard, 2011

OFPs (widely available as generic/cheap prescription or over-the-counter supplements) are usually the first choice; however, currently available OFPs generally have poor tolerability (gastro-intestinal side effects reported by up to 70% of patients), and a sub-optimal absorption (thus requiring a daily intake of several hundred milligrams).

This translates to relatively poor compliance, hence effectiveness, thereby inducing physicians to prescribe IVI as they provide the certainty that the iron has been delivered to the patient.

IVI is therefore considered a second-line treatment, being used currently in very severe cases where haemoglobin (Hb) blood concentration is below 8 g/dL, or when oral treatments aren’t well tolerated.

IVI is considerably much more expensive than generic OFP because of both the price of branded IVI formulations and the recurring cost of episodic hospital administration due to the risk of anaphylaxis; however, we note that Auryxia, a branded OFP recently launched by Keryx in the US to treat hyperphosphatemia in dialysis-dependent chronic kidney disease (CKD) and IDA in non-dialysis-dependent CKD, has been priced at a significant premium to many IVI.

According to Vifor, the global market for IVI products was estimated to be worth about $1.7bn in 2018, up 15% on 2017. Publicly quoted market research by Beige Market Intelligence forecasts the global IVI and oral iron market will exceed the $3bn mark by 2021, growing at a compound annualised growth rate (CAGR) of close to 5%.

In the US, while the OFP market is largely generic (with the exception of Keryx Auryxia), the i.v. iron market is rapidly growing, driven by Vifor’s leading brands Venofer (mostly used in dialysis-dependent CKD) and Injectafer (indicated as a second line treatment for IDA from all causes except dialysis-dependent CKD).

 
Source: Source: Daiichi Sankyo Group Value Report 2018 (IQVIA data)

Most OFPs are generic and/or over the counter (OTC) drugs (tens of dollars for a month's supply), hence they are way cheaper than branded IVI treatments (hundreds of dollars for a month supply).

As such the iron drug market is split roughly 90:10 (OFP:IVI) in volume terms, but about 50:50 by value.

Feraccru

As the only non-salt oral iron product, Feraccru (ferric maltol) could become the preferred option for patients intolerant to or not well controlled by OFPs and thereby prevent the need for IVI.

Feraccru creates a stable complex for delivery by tightly binding ferric iron to three maltol molecules. It is this unique structure that helps make it an efficacious, stable, well absorbed and very well‑tolerated oral iron drug.

In the table below we show how Feraccru compares to both OFP and IVI across several key features.

 
 

Feraccru was originally approved in Europe (Committee for Medicinal Products for Human Use, or CHMP, positive recommendation of December 2015) for the treatment of IDA in adult IBD patients, based on the results of the AEGIS-IBD study.

As shown below, Feraccru produced a clinically meaningful increase of haemoglobin concentration (2.3 g/dL over 12 weeks, and a clinically meaningful response in just four weeks). Altogether, the incidence of side effects was similar in the Feraccru and placebo arms with most adverse events being related to the pre-existing IBD diagnoses in the recruited subjects.

 
 

Despite Feraccru already being marketed in Europe, Shield’s stock price took a significant hit when the company initially announced in February 2018 negative top-line data from the phase 3 AEGIS-CKD study, comparing Feraccru vs placebo in non-dialysis CKD patients. This was a rather surprising finding for an already approved oral iron product with a straight forward mechanism of action, and excellent tolerability.

Investigations identified confounding factors that led to the initial negative reading related to a surprisingly good response in the placebo arm and were due to patients who received i.v. iron, blood transfusions, erythropoietin (EPO), or who experienced bleeding.

In fact, a subsequent unblinded analysis of the data revealed that using the correct modified intention-to-treat population, the AEGIS-CKD study showed statistically significant benefit by the halfway point of the protocol and did indeed meet its primary endpoint at week 16.

Shield went on discussing these findings with the US Food & Drug Administration (FDA), and was ultimately able to file an NDA in September 2018 without running further clinical trials. The US regulator has now set a PDUFA date of 27 July 2019.

 
 

It’s worth noting that in February 2018, the European regulator (EMA) expanded Feraccru’s licence beyond the original label of “IDA in adult patients with IBD” (with an opportunity of about 300,000 patients in the EU) to a much broader “iron deficiency in adults” indication (a patient opportunity of around 40,000,000 in the EU) – a strong sign of confidence in Feraccru’s therapeutic value.

Feraccru is currently being evaluated in another phase 3 study, comparing it to Vifor’s Ferinject/Injectafer, the leading i.v. iron brand, with results expected in the first half of 2019.

Key parameters of this study are summarised in the table below. Positive data, i.e. non-inferiority to Ferinject/Injectafer, would reinforce the case for pricing the product in-line with Ferinject/Injectafer, while still offering better value because with Feraccru the costs of hospital administration (and the risks associated with i.v. infusions, such as hypersensitivity reactions) would be completely removed.

 
 

Valuation

We value Shield as the net present value (NPV) of our forecast royalty stream from Feraccru sales in EU and the US.

We implicitly assume that Shield will be able to find a partner for the US launch of Feraccru, which, given the attractiveness of the opportunity and management’s out-licensing track record (Norgine for the EU in 2018 with an upfront of £11mln, milestones of up to €54.5mln and royalties on sales up to 40%), seems highly likely, provided, of course, that the FDA gives Feraccru a green light in 2019.

The first step to size up Feraccru’s commercial opportunity is to define the addressable patient population.

Although potentially useful to treat IDA regardless of the underlying disease, Feraccru has been more extensively characterised in CKD and IBD patients. Moreover, Shield positions Feraccru as a differentiated oral iron supplement that is priced at a substantial premium to generic OFPs and in-line with the Vifor’s Ferinject/Injectafer, a leading i.v. iron product.

We identify Feraccru’s initial target patient population by matching the severity of anaemia and the severity of the underlying disease (CKD or IBD).

As with OFPs, Feraccru is currently indicated to treat most anaemic states, except the most severe ones (Hb £ 8 g/dL) when IVI treatment is generally preferred.

 
 

Moving on to underlying diseases, CKD affects about 10% of the US adult population and is the ninth largest cause of death in the US[2]. The effective prevalence points to about 30 million CKD patients in the US; however, it is estimated that fewer than three million are currently treated by a nephrologist.


CKD patients are stratified on a scale of 1-5, based on the severity of renal impairment, as assessed via the GFR (glomerular filtration rate).


[2] NV Dahl, 2017

 
 

Anaemia is very common in CKD patients and it is estimated that about 15% of them suffer from it (across all stages), about twice as much as the general population. IDA diagnosis and treatment rates increase significantly with CKD severity[3].

First line IDA treatment in CKD is represented by OFPs; GI side effects, poor compliance (30% of patients discontinue oral treatments1) and limited absorption are the main limits of oral iron supplements.

 
 

[3] S Fishbane, 2018

Currently, our model assumes Feraccru will not be indicated in dialysis-dependent CKD patients (i.v. iron is usually preferred and given during dialytic sessions), therefore its CKD addressable population is better defined as CKD stage 3 and 4 patients with mild to severe IDA. According to market analysis undertaken on behalf of Shield, about 10% of the total CKD patients (treated by nephrologists] fit into this description.

 
 

IBD affects roughly 1.5-2 million people in the US, and it is generally classified in four degrees of severity, based on disease activity.

 
 

Inflammatory Bowel Disease patients are also frequently affected by anaemia, which occurs in about 68% of in-patients and 16% of out-patients. It is most frequently caused by iron deficiency, which occurs in about 45% of the overall IBD population[4].

Physicians preference for oral vs i.v. iron, based on the severity of both IBD and IDA, are slightly different in the US (where they prefer OFP) vs Europe (where they prefer IVI).

We estimate that Feraccru will be most likely prescribed to patients with quiescent to mild-to-severe IBD and mild to severe IDA. Overall about 15% of the total IBD patients fit into this description, according to analysis funded by Shield.

 
 

We then estimate that Feraccru's initial target market will be made of about 800,000 patients, including both CKD and IBD.

In our model, we use the same disease prevalence figures for the US and 5EU market, as they have a comparable total population of about 320 million people.


[4] D Niepel, 2018

 
 

As such, broadly speaking, the CKD opportunity is twice the size of IBD based on the number of addressable patients.

Within those patient populations, Feraccru, as a better oral product, could change the current therapeutic algorithm and be used in patients who are intolerant/not controlled by cheaper, salt-based OFPs, but before patients are prescribed an IVI.

We would expect Feraccru to reach a peak market share of 25% in IBD (only branded OFP with an IBD label) and 15% in CKD (where Keryx Auryxia is also approved in the same indication).

 
 

Our model assumes that Shield’s operating expenses will be broadly netted off by future milestone payments to be received as part of the ongoing agreement with Norgine and from a yet-to-be-finalised similar deal with a US partner (which we think could include an upfront payment in the US$20-30mln ballpark).

Other key inputs of our NPV model are summarised in the table below.

 
 

When valuing Feraccru US, we risk-adjust US royalties, based on a probability of regulatory success of 85%, in line with industry average for filed drugs (source: Amplion/Biomedtracker, Clinical Development Success Rates 2006-2015).

Our NPV model yields an intrinsic value per share of 109p, of which 67p is related to the US market.

 
 

Further upside to our valuation may come from:

1.Use of Feraccru to treat IDA beyond CKD and IBD patients. As mentioned, IDA is a common feature of many diseases such as chronic heart failure (CHF), uterine bleeding and cancer. For instance, we estimate that treating a further 100,000 patients across the EU and US would add about 35p per share.

2. Use of Feraccru in paediatric patients. Shield estimates that about 1.6 million kids suffer from IDA in EU and US. The company plans to start a phase 3 study in the second half (2H) of 2019 to be able to expand the Feraccru label in the paediatric population. The study will seek to recruit about 90 patients and should report results in 2H 2020

4. Feraccru out-licensing for markets outside of the US and the territories covered by the Norgine agreement (Europe, Australia and New Zealand).

4. Development and/or out-licensing of PT-20, a phase 3 ready, iron-based phosphate binder for the treatment of hyperphosphatemia, that, like IDA, is a common occurrence in CKD stage 4 and 5 patients.

 
 
 
 

Key Financials

Shield declared gross cash of £3.5mln as of the end of June 2018. This was then supplemented by the £11mln upfront payment, received from Norgine.

Shield is entitled to receive up to £54.5mn of further milestone payments, and royalties in the 25-40% range on Europe, Australia and New Zealand sales, from Norgine.

Management commented in September that cash would be enough to cover operating expenses for at least 12 months (excluding income from licensing deals) and critically this is well beyond Feraccru’s anticipated PDUFA date of 27th July 2019.

In our view and pending Feraccru’s FDA approval, if Shield inks a deal for the US market that includes a sizeable upfront payment, the risk of a dilutive fundraising, particularly at current valuation, should be minimal.

 
 

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