Aerovate Therapeutics, Inc. (NASDAQ:AVTE) is developing a drug known as AV-101, which is being used to treat patients with pulmonary arterial hypertension [PAH]. The use of this inhaled drug is being explored in the ongoing phase 2b/3 IMPAHCT trial. Speaking of inhaled drug, this is highly promising. The reason why I say that is because AV-101 is an inhaled version of imatinib. It had done well in clinical trial when given to patients orally, but the problem was systemic side effects.
This is where the huge potential comes into play because the idea behind this treatment was to develop an inhaled version of imatinib. The purpose being to reduce systemic exposure to the patients who are being treated with PAH. The thing is that the ongoing study was split into two different portions.
Thus, this opens the door to have two catalyst opportunities for investors to look forward to. The phase 2b portion of this phase 3 IMPAHCT trial is to evaluate the primary endpoint of the placebo corrected change in pulmonary vascular resistance [PVR]. The importance of this is that results from this phase 2b portion are expected to be released in June 2024 any day now. Should the data to be released any day now turn out to be good, then that will give confidence towards the phase 3 portion of this phase 3 study.
However, it is important to note that the final phase 3 portion is going to use a different primary endpoint than the one I listed above. The timing of the release of data from the phase 3 portion of the study will be available once the phase 2 portion is released first. Still, this would be another catalyst for investors to look forward to.
AV-101 For The Treatment Of Patients With Pulmonary Arterial Hypertension
The use of AV-101 is being explored in the ongoing phase 2b/3 IMPAHCT trial for the treatment of patients with Pulmonary Arterial Hypertension. Before going over both portions of this late-stage study, plus any catalysts to come out of this program, it is first important to go over what Pulmonary Arterial Hypertension is and what the possible market opportunity for it could be.
Pulmonary Arterial Hypertension [PAH] is a type of disorder characterized as the arteries of the lungs becoming thick and narrow. This causes the patient’s heart to have to work harder in passing blood through these arteries, which then leads to these patients having a host of problems and symptoms. The global Pulmonary Arterial Hypertension market size is expected to reach $12.2 billion by 2032. The thing is that these patients experience several symptoms because of this disease, and they are as follows:
- Fatigue
- Shortness of breath
- Chest pain
- Coughing
- Swelling of the feet and legs
- Lips and/or fingers turning blue.
Believe it or not, but there are two ways that people get PAH. One of the ways is where the cause of the disease is unknown, which is known as idiopathic PAH. The other type is known as heritable PAH and is caused by a specific genetic mutation. It is said that approximately 15% to 20% of PAH patients have this type of PAH. There is always room to see an improvement for these patients, and this might be possible with AV-101. The reason why is that this drug actually helps treat the underlying cause of PAH. That is, it specifically goes after the hyperproliferation of cells on the blood vessels of the lung. By going after this type of hyperproliferation, it is believed that it could help treat these patients.
Consider that the 5-year survival rate for patients with PAH is 61% to 65% for newly diagnosed or prevalent patients. The truth is that vasodilators are drugs that have been approved for this disease. The problem is that while they do help a bit, they are riddled with problems. For starters, there is a need for a catheter to be in place to give drug to the patient. This puts the patient at risk of infection, along with many common side effects.
Despite the vasodilator market being huge at $6 billion, there is always room for improvement. Especially, since there are no PAH drugs that have been approved to treat the underlying cause of this disorder, which is to go after abnormal cellular proliferation that occurs. The very first vasodilator drug approved for the treatment of patients with PAH was Flolan [Epoprostenol]. This is just one example, and there are many other drugs approved since then that are both vasodilator and anti-proliferative agents.
The thing is that Imatinib had been extensively tested by Novartis (NVS). Matter of fact, this big pharma tested oral Imatinib in a phase 3 global trial known as IMPRES, which recruited a total of 202 patients. The thing is though that Imatinib was added on top of these patients already receiving two background therapies. The outcome was that oral Imatinib was able to do well on the primary endpoint of difference between drug versus placebo in a Six-Minute Walk Distance Test [6MWD] over a 24-week period. This difference in the primary endpoint was statistically significant, with a p-value of p>0.05. In terms of the other important Pulmonary Vascular Resistance [PVR] endpoint, treatment with drug was able to achieve a 32% drop. This resulted in a statistically significant drop, with a p-value of p<0.001.
This seems quite good, so why did Novartis choose to abandon this program? That’s because despite the remarkable data it could achieve with oral Imatinib, the big issue was major systemic adverse events [AEs]. That is, a lot of the patients dropped the treatment due to overwhelming side effects. Imatinib seems to work very well for these PAH patients, but is there anything that can be done?
Yes, there is, and this is where AV-101 comes into play. The goal for Aerovate Therapeutics was to take the use of Imatinib and convert it into a dry inhaled therapy instead. That’s precisely what it did, and it seems to be working quite well thus far. The reason for doing this was to actually keep or increase the efficacy of Imatinib, but at the same time to greatly reduce the systemic adverse events of it. This was proven in a phase 1 tolerability profile, where PAH patients who received AV-1010 had no serious adverse events [SAEs], along with the therapy being tolerable. The innovation could lead to this company being able to treat the underlying cause of this disease, but at the same time eliminate systemic AES to get Imatinib to market.
This is where a huge catalyst opportunity comes into play for this program. It is expected that data from the phase 2b portion of this phase 3 IMPAHCT trial is to be released any day now in June 2024. Should this data turn out to be positive, that is the first endpoint of PVR be met with statistical significance, then this might translate to a positive outcome for the primary endpoint of the phase 3 portion of this study. Enrollment of the phase 3 study is ongoing, and the company had stated that any timing of data from this portion won’t occur until the release of the phase 2 portion of the IMPAHCT trial.
Financials
According to the 10-Q SEC Filing, Aerovate Therapeutics had cash, cash equivalents and short-term investments of $99.3 million as of March 31, 2024. However, this is without factoring in the amount of $23.6 million it was able to raise through an “at-the-market” [ATM] program. The thing is that it still has $6 million worth of shares that it could sell under this agreement if it chooses to use this.
It believes that its cash on hand is enough for a cash runway to fund its operations into 2026. However, I’m inclined to believe that it is going to look into raising additional cash in the coming days/weeks. What makes me believe that to be the case? The first reason is that it is expected to release data from the phase 2 portion of the IMPAHCT trial any day now in June 2024.
If the data is good, plus causes the stock price to trade higher, then it is highly likely that management is going to take advantage of this. Thus, I believe it will enact a cash raise.
This leads me to the second reason why I think that Aerovate will raise additional funds. That’s because it filed an S-3 Registration Statement Form with the SEC on June 10th of 2024, where it noted that it intends to possibly sell occasionally up to an aggregate amount of $350 million worth of its common stock, debt securities, warrants and Units. The company burns about $24.6 million in cash per quarter.
Risks To Business
There are several risks that investors should be aware of before investing in Aerovate Therapeutics. The first risk to consider would be regarding the development of AV-101 for the treatment of patients with Pulmonary Arterial Hypertension [PAH]. The reason why I state this is that the phase 2 portion of data from the IMPAHCT trial using this drug to treat this patient population is to be released any day now in June 2024. There is no assurance that the data to be released from this trial is going to turn out to be positive, nor that the primary endpoint of PVR will be met with statistical significance.
A second risk to consider would be in terms of the evaluation of portion 3 of the phase 3 IMPAHCT trial. That’s because the ability to meet the primary endpoint of portion 2 of PVR is only half the battle. For the company to file for regulatory approval of AV-101, it is going to have to meet the primary endpoint of 6MWD with statistical significance. There is no guarantee that this primary endpoint will be met upon the release of data from this portion of this late-stage study.
A third risk to consider would be regarding competition in place. As I highlighted above, there are several vasodilators and anti-proliferative agents approved for the treatment of patients with PAH. There is no assurance that efficacy produced upon the release of final results from the ongoing phase 3 IMPAHCT trial will be superior to these other approved drugs. Not only that, but Winrevair [sotatercept] from Merck (MRK) was approved in 2024 as an activin signaling drug to treat patients with PAH. It was found to block vascular obliteration, thus opening the vessels.
On the flip side, the long-term potential of this drug has not been evaluated for starters. Not only that, but it is uncertain how this specific drug actually helps in terms of mortality rates. This is significant because, as I stated above, the 5-year survival rates for these PAH patients are not ideal. Winrevair when added to background therapy can become the standard of care [SOC] for these patients. However, if AV-101 can prove to not only be more effective and safer compared to Winrevair, then it could take the crown as the king in the PAH space. This remains to be seen, but is quite possible.
The fourth and final risk to consider would be in terms of a possible cash raise. I know that the company had stated that it believes it has enough cash on hand to fund its operations until 2026. However, I noted two reasons above on why I believe that it might actually raise cash much earlier than expected. Especially, for the fact that it has an upcoming expected data release from the phase 2b/3 IMPAHCT trial in June 2024. Thus, management might decide to take advantage of this.
Conclusion
Aerovate Therapeutics, Inc. has a highly promising PAH treatment drug, known as AV-101. In essence, it had taken what Novartis was able to prove in that Imatinib is active in being able to help patients with this disorder in terms of PVR and 6MWD, but changed the delivery method to eliminate systemic adverse events [AEs].
The thing is that investors have a major catalyst to consider in that data from portion 2 of the phase 3 IMPAHCT trial is expected any day now during this month and if positive, it could boost the value of this company for shareholders. I think the best premise of this biotech is that it could overtake the mantle of having the best standard of care [SOC] PAH treatment from Merck, of course, that will only happen if Aerovate can prove that AV-101 is far superior over Winrevair in being able to treat these patients.
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