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Introduction
BioCryst Pharmaceuticals (NASDAQ:BCRX) is a biotechnology company that develops treatments for rare and debilitating diseases. The company’s lead product, Orladeyo, is a plasma kallikrein inhibitor that is approved for the treatment of hereditary angioedema, HAE, a rare genetic disorder that causes recurrent episodes of swelling.
Orladeyo works by blocking the activity of plasma kallikrein, an enzyme that activates bradykinin – a peptide responsible for the swelling seen in HAE. By reducing bradykinin levels, Orladeyo decreases the frequency and severity of HAE attacks. Unlike the current mainstay treatment, C1 esterase inhibitors (C1-INH), which is a replacement therapy that requires regular infusions and can cause complications, Orladeyo is an oral medication that can be taken daily and may have a lower risk of complications. The FDA and EMA granted Orladeyo orphan drug designation, and it was approved by FDA in December 2020 for the prevention of HAE attacks in adults. Clinical trial results of Orladeyo were promising, showing a significant reduction in the frequency and severity of HAE attacks in patients.
Financials
Before we begin, let’s take a look at BioCryst financials. In Q3 2022, total revenue was $75.8 million, up 85% YoY. The increase was due to Orladeyo net revenue of $66 million. R&D expenses rose 6% to $52.7 million and SG&A expenses increased 6% to $36.9 million. Interest expense was $24.8 million, a 76% YoY increase. The company had a net loss of $42.5 million, or $0.23 per share. Cash, cash equivalents, restricted cash, and investments were $462.6 million, with operating cash use of $29.4 million in Q3 2022. Cash runway is estimated at 3 years.
The market capitalization, as of writing (February 1, 2023), is $1.96 billion.
Current Orladeyo Market Success
BioCryst recently announced preliminary revenues for Orladeyo for Q4 2022 at $70.7 million, a YoY increase of 53%. The full-year 2022 revenue was $251.6 million, up 105% from the previous year. The management team remains confident that Orladeyo is on track to reach $1 billion in annual revenue.
Future Barriers
Orladeyo has shown promise in clinical trials, but there are a few factors that could impact its commercial success. One of these is the limited patient population for HAE, which is a rare disorder and makes it challenging to generate significant revenue from Orladeyo sales. Additionally, the high cost of the drug due to its innovative and complex nature may be a barrier for some patients with high-deductible insurance plans. Competition with other HAE treatments, both current and future, including established C1 esterase inhibitors replacement therapy and Takhzyro, may make it difficult for Orladeyo to gain and/or retain market share. There is also the risk of insurance companies not covering the cost of Orladeyo, making it hard for patients to access the medication and limiting its potential. Finally, there is the possibility of unanticipated side effects or safety concerns arising during the post-approval period, which could negatively impact its commercial success.
Orladeyo (oral) vs Takhzyro (subcutaneous)
Orladeyo’s main competitor, arguably, is Takhzyro, a subcutaneous injection administered bi-weekly, approved February 2022 to prevent attacks of hereditary angioedema. Both treatments are primarily used for long-term prophylaxis. Alternative options such as intravenous or subcutaneous plasma-derived C1-INH concentrate, attenuated androgens, and antifibrinolytics are also available, but they come with increased precautions and appear less effective. It’s estimated that 20-70% of hereditary angioedema patients are eligible for long-term prophylaxis.
In general, taking pills orally is convenient and easy to do at home. It is also often less expensive than other forms of medication. However, it may not be absorbed well by the body in certain conditions and may interact with food or other medications, resulting in decreased effectiveness. Subcutaneous injections deliver the medication directly to the bloodstream for faster onset of action. This is useful for medications that are not absorbed well through the digestive system. However, injections can be painful and may require proper technique to avoid skin irritation or infection. They can also be difficult for patients to self-administer and are more expensive.
Patients generally prefer to take oral medication daily instead of receiving daily subcutaneous injections. Takhzyro’s bi-weekly administration helps reduce the burden of daily injections and is ready-to-use without the need for reconstitution, potentially reducing administration-related anxiety. It is important to note that Takhzyro must be stored in the refrigerator between doses. Both medications have demonstrated highly significant results in reducing attacks with a p-value less than 0.001 and are generally considered safe. At first glance, Takhzyro appears to be more effective than Orladeyo, but this is difficult to determine from different clinical trials. Orladeyo is slightly less expensive, costing around $485,000 per year, but is still considered expensive. The choice of which treatment to use ultimately depends on the patient’s personal preference and unique characteristics.
Future treatments for long-term prophylaxis
- Garadacimab, formerly known as CSL312, is a human IgG4 monoclonal antibody that blocks FXIIa’s activity. It is administered once-monthly, subcutaneously. A phase 2 study showed reduced HAE attacks with SC-administered garadacimab compared to placebo, with reductions of 89, 99, and 91%. A phase 3 study confirmed its efficacy and safety.
- IONIS-PKK-LRx (donidalorsen) is a ligand-conjugated antisense oligonucleotide under development as a prophylactic agent for bradykinin-mediated angioedema. A phase 1 study showed reduced plasma kallikrein activity and a phase 2 open-label extension study showed a mean reduction in attack rate of 95.3% and 98.3%, from Week 1 (after first dose) and Week 5 (after second dose), respectively. Donidalorsen is a subcutaneous injection administered every four to eight weeks.
- ALN-F12 is a siRNA inhibitor of FXII that reduces vascular permeability.
- PHVS416 is a Phase 2 softgel capsule formulation containing PHA121, a highly potent, specific, and orally bioavailable competitive antagonist of the bradykinin B2 receptor.
Market opportunity
Rough estimates for the incidence of HAE exist, with one estimate suggesting that around 7,500 patients are undergoing some form of treatment in the US. Management’s objective is to achieve over $1 billion in annual revenue for Orladeyo, which requires reaching over 2,000 US patients. All HAE patients should have access to therapies to treat acute episodes of angioedema, but only those who meet specific requirements, such as the frequency and severity of attacks, require long-term prophylaxis. It is noteworthy to mention that the percentage of HAE patients who require long-term prophylaxis varies from 20% to 70%. Despite this, management is optimistic about capturing a significant portion of the market, which is ambitious but feasible.
However, the latest corporate presentation seems to indicate that 100% of the HAE market is eligible for long-term prophylaxis, and estimates that only 25% to 30% of the US market is needed to reach $800 million, with the additional $200 million generated outside the US. This approach is not in line with current guidelines for diagnosing HAE and determining eligibility for long-term prophylaxis.
Perhaps, management deserves the benefit of the doubt as they have excelled in marketing Orladeyo and consistently met or exceeded revenue expectations.
Conclusion
In conclusion, Orladeyo has seen great success in the market, with preliminary revenues of $70.7 million in Q4 2022 and full-year 2022 revenue of $251.6 million, up 105% from the previous year. However, there are a few factors that may impact its commercial success such as limited patient population for HAE, high cost of the drug, competition with other HAE treatments, and the risk of insurance companies not covering its cost. The main competitor to Orladeyo, Takhzyro, is a subcutaneous injection with bi-weekly administration and is considered effective and safe. Ultimately, the choice of treatment depends on the patient’s preference and characteristics. Potential future treatments for long-term prophylaxis include garadacimab, donidalorsen, ALN-F12, and PHVS416. The HAE market is estimated to have around 8,000 patients in the US and management is optimistic about reaching $1 billion in annual revenue, however, it is worth mentioning that there is uncertainty in the market size and patient eligibility for long-term prophylaxis.
BioCryst appears to be fairly valued at approximately $1.75 billion in enterprise value. While it possesses other preclinical and early-stage assets, their value cannot be precisely determined at present. Thus, BioCryst’s valuation primarily hinges on the success of Orladeyo in HAE. If management is able to attain its goal of $1 billion, there is still potential for growth in the company’s shares. Nevertheless, the journey towards achieving this target will not be smooth, leading to a current assessment of BioCryst’s shares as a “hold.”
