In a Feb. 6 research report, ROTH Capital Partners analyst Yasmeen Rahimi highlighted three major developments in Albireo Pharma Inc.'s (ALBO:NASDAQ) efforts to produce and commercialize novel treatments for rare and life-threatening pediatric liver diseases that don't have an approved pharmacologic treatment option.
Based on these developments, Rahimi anticipated that 2019's first half will set the stage for "a transformational year" for Albireo and estimated a price target for the clinical-stage biopharmaceutical company of $86 and a projection of sales of more than $1.2 billion in both the United States and the European Union.
In her report, Rahimi said that 2019 "started off with a bang" for Albireo because the FDA granted in January an orphan drug for biliary atresia designation to the company's main asset: A4250.
The FDA's Orphan Drug Designation Program provides orphan status to drugs and biologics intended for the safe and effective treatment, diagnosis or prevention of rare diseases or disorders, according to the agency's website.
Just a month before, Albireo's A4250 received in Europe a designation similar to the FDA's orphan status, added the report.
A4250 is an ileal bile acid transporter (IBAT) inhibitor. Albireo is developing it for the treatment of progressive familial intrahepatic cholestasis (PFIC), a rare and life-threatening liver disease with no approved pharmacologic treatment option. The drug is in a clinical testing phase.
Roth Capital Partners recently held talks with management of Albireo to closely discuss what 2019 has in store with respect to its A4250 development.
A4250's clinical tests
In her report, Rahimi first underlined the rapid enrollment at the A4250's current clinical trial program. The A4250 is conducting a phase 3 trial program. The program consists of a 24-week study on clinical sites of 60 pediatric patients.
Albireo is currently running over 30 clinical sites to test the A4250. Rahimi anticipated that all 35 to 45 guided clinical sites should be up and running by next month. The first results of the trial program are slated for readout during the first half of the year, added the report.
"Any way you dice the multiple scenarios, we think A4250 bile acid reduction in PFIC positions ALBO as a winner," she wrote. She recalled that the previous clinical study showed a 71% bile acid reduction when compared to patients that took a placebo instead of A4250.
The report also forecasted that bile acid reductions in clinical studies of A4250 in Europe could lead to an approval of the drug in the European Medical Association (EMA) and the creation of a 4,000 to 5,000 market of patients that suffer from PFIC.
That approval, Rahimi added, could influence the FDA's decisions on A4250.
A4250's second indication
Second, Rahimi highlighted that Albireo is also planning to disclose a second pediatric liver indication for A4250 during the first half of this year.
In her report, she explained that "discussions with the FDA are ongoing."
"We could see either biliary atresia or alagille syndrome, both ALBO orphan drug designations, chosen," she wrote.
Biliary atresia is a rare gastrointestinal disorder characterized by the destruction or absence of all or a portion of the bile duct that lies outside the liver, according to the National Organization for Rare Disorders' website.
Alagille syndrome is a genetic disorder that can affect the liver, heart and other parts of the body, according to the US National Library of Medicine's website.
Third, Albireo also plans to start early this year phase 2 of a study design on elobixibat, another inhibitor of the IBAT and the company's second leading asset.
Albireo's elobixibat has completed a successful phase 3 trial in Japan for the treatment of chronic constipation.
Rahimi's arrives at a price target for Albireo of $86. The valuation took into consideration three assumptions. The first was a price of $28 per share driven by a possible 2020 launch of A4250 for PFIC patients and peak sales of $593 million in the United States. The second assumption was a price of $39 per share driven by a possible launch of the experimental drug in the European Union (EU) in 2020 and peak sales of $693 million in that market. The third was a price of $19 per share driven by last year's launch of elobixibat in Japan and peak sales of $196 million in that market.
Rahimi also arrived to a projection of sales of A4250 in both the United States and the European Union amounting $1.222 billion based on another three assumptions. The first one was that there are approximately 3,200 to 5,000 persons suffering from PFIC in both the United States and the EU. Secondly, that a launch of A4250 in 2020 for 2% of PFIC patients would grow to a 65% penetration in both the United States and the EU. In her third assumption, Rahimi modeled a $325,000 annual price for A4250 in the United Stated with a gross-to-net adjustment of 15%, a model lowered to a $243,000 annual price in the EU based on the lower pricing in other drugs prescribed for rare diseases.
Then, Rahimi projected her model to 2028 with a discount rate of 9% and acknowledges that clinical, regulatory and reimbursement risks may impede shares from achieving the slated price target.
According to the report, the primary clinical risk of her Albireo valuation is both a failure of the current phase 3 clinical study of A4250 and meaningful time delays in the availably of the study's results.
Rahimi also acknowledged that the "long-term safety profile for A4250 has yet to be determined" because the previous phase 2 clinical study was based "on safety, tolerability, and efficacy over a maximum of four week dosing period."
In contrast, the current phase 3 clinical testing of A4250 "is likely to test dosing periods of up to three months and will be accompanied by a long-term extension study, which is crucial since it is intended as life-long therapy."
The main regulatory risks, explained Rahimi, is that "there a no definite regulatory pathways for PFIC therapy development since no treatments exist." "With that said, ALBO is actively working with the FDA and EMA to establish acceptable surrogate endpoints, for approval in PFIC," she clarified.
Rahimi, on the other hand, estimated that the high pricing pressure debate in the biotech space may lead to "significant reimbursement challenges, including increased coverage restrictions, coverage denials, or shifting costs to patients."
Finally, and according to the report, Albireo reported last September cash and cash equivalents amounting $173.6 million.[NLINSERT]
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Disclosures from ROTH Capital Partners, Albireo Pharma Inc., Flash Note, February 6, 2019
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
ROTH makes a market in shares of Albireo Pharma, Inc. and as such, buys and sells from customers on a principal basis.
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months.