gorodenkoff
On July 6, BioXcel Therapeutics (NASDAQ:BTAI) reported that its drug Igalmi (recently approved by the FDA) was now available for sale to treat acute agitation in patients with schizophrenia and bipolar syndrome. This is the first indication for which the BXCL501 molecule has been approved and the first drug that BioXcel manages to bring to market. The next indication for which the FDA will approve BXCL501 will likely be for acute agitation in patients with dementia and Alzheimer’s. For this indication, the company reported phase II results for 30 mcg and 60 mcg on January 5, 2021, with very good data on both efficacy and safety. They are currently running a phase II trial with two arms: 40 mcg and 60 mcg. They are also conducting phase III trials for these same doses, and final results are expected by the end of this year 2022, or the first quarter of the next year 2023. If there are no problems, BXCL501 is expected to be approved for its second indication (Agitation in patients with dementia and Alzheimer’s) during the year 2024. And it is precisely in this indication where the maximum revenue potential of BXCL501 resides. This is so, not only because of the high prevalence that dementia and Alzheimer’s currently had in more developed societies but also because, as we will see in the next section, there are currently no approved drugs that can compete with BXCL501 to treat agitation in this type of elderly patients.
The stock’s performance over the past few months has been very disappointing with a strong downtrend (bottomed out at $8 a few weeks ago). There really has not been a real cause that has justified this tremendous drop in the share price. To search for some cause, practically the entire biotechnological sector has accumulated a sharp drop for more than a year. From highs of 178 a year and a half ago, the XBI Biotech Index appears to have definitely bottomed out at 62 a few weeks ago and has since recovered nicely. It would not be unusual to see a bullish wave for XBI to take it back above 100 shortly. Similarly, BioXcel shares have made a nice comeback in recent days and are now hovering around $17. It seems that the break of the downward trend of the XBI index, and the good expectations that the market anticipates for the next phase II and III results of BXCL501 for agitation in patients with dementia and Alzheimer’s, maybe the cause of this good recovery.
As I mentioned, BioXcel has just started to market IGALMI for the treatment of acute agitation in patients with schizophrenia and bipolar syndrome. The first sales data is expected to be reported for the next Q3 ER (November). As I commented in my previous article: “BioXcel’s Igalmi: Potential Market For Acute Agitation In Esquizofrenia And Bipolar Patients”, I expect a maximum annual revenue peak in this indication of around $230M (this is a very conservative estimate). In this indication, the main risk I see is competition from other drugs currently used to treat acute agitation. They are very cheap drugs (antipsychotics and anxiolytics), but they are administered “off label” because there are currently no drugs approved specifically to treat this type of agitation attack (the only approved drug, ADASUVE, I do not take into account, due to the severe safety warnings -BLACK BOX WARNINGS- presented in its FDA label.
In the second indication, acute agitation in patients with dementia and Alzheimer’s, the revenue potential is much greater. In addition to the fact that there are currently no approved drugs, there are not even other drugs that can be administered “off label”, since both, Antipsychotics and benzodiazepines, are strongly contraindicated for this type of elderly patient.
According to data reported by the company, a total of 100 million annual attacks of agitation are estimated in patients with dementia and Alzheimer’s in the United States. Of all these attacks, the big question is to know what percentage of market penetration BXCL501 will be able to achieve. Knowing that there are currently no drugs approved to specifically treat this type of agitation, and that, as we have previously mentioned, the only drugs that are administered off-label are totally contraindicated by the FDA, we can estimate a very cautious percentage of 15% With a priced per film of $100 (the same price as IGALMI), BXCL501 would generate an annual peak sales in the United States of about $1.5 billion.
With a current market capitalization of around $468 million and considering BXCL501 revenue potential of over $1.8 billion for both indications, BioXcel is highly undervalued and therefore at current price levels represents an excellent investment opportunity in the medium and long term.
BioXcel’s BXCL501: a candidate drug, without other competing drugs, to treat acute agitation in elderly patients
As mentioned above, BioXcel Therapeutics is currently conducting Phase II and III trials with BXCL501 to treat acute agitation in patients with mild and severe dementia and Alzheimer’s.
The results of the phase II trial are expected very soon (this July or next August).
In both, phase II and phase III trials, doses of 40 mcg and 60 mcg are used.
In the latest phase II trial with 30 mcg and 60 mcg, excellent efficacy results were obtained for the 60 mcg arm with very few adverse effects. On the safety side, no worrisome side effects were reported. BXCL501 was very well tolerated in elderly patients, which is very important due to the special vulnerability of this type of patient. That is the main asset that BXCL501 has, since the drugs that are currently administered off-label, ALL have serious adverse effects on the elderly.
Data from phase III trials are expected in the next quarter or first quarter of 2023. I am very optimistic about these trials and I expect that they will confirm the good data that has been shown so far.
If all goes well, I hope that BXCL501 could be approved to treat acute agitation in patients with dementia and Alzheimer’s by 2024.
It is in this indication that I see BXCL501 as having the highest revenue potential. Not only because of the high prevalence of dementia and Alzheimer’s in advanced societies but also because for this type of elderly patient there is currently no approved drug to treat this type of agitation. In addition, the administration of antipsychotic drugs is totally contraindicated and benzodiazepines present many risks. Therefore, in this indication there are practically no drugs, not even “off label”, that can be administered in these elderly patients.
The Food and Drug Administration (FDA) warning on the use of antipsychotic drugs (both typical and atypical) has led to better awareness about the risk associated with the use of these classes of drugs in cognitively impaired and older people, including increased mortality
Source: NCBI
For all these reasons, BXCL501, if approved, will most likely be able to achieve a high percentage of market penetration due to the scarcity of currently existing alternatives.
The main off-label drugs (neuroleptics, antipsychotics, and benzodiazepines) currently used to treat episodes of acute agitation in patients with schizophrenia and bipolar syndrome, and which can be used off-label to treat acute agitation in patients with dementia, are detailed below, and the warnings presented by the FDA for elderly patients:
|
Drug |
Indication |
FDA waring for elderly |
|
Haloperidol (Neuroleptics) |
treatment of schizophrenia. |
BLACK BOX WARINIG (FDA LABEL): WARNING HALDOL® brand of haloperidol injection (For Immediate Release) Increased Mortality in Elderly Patients with Dementia-Related Psychosis: |
|
Quetiapine (atypical antipsychotics) |
Atypical antipsychotic indicated for the treatment of: • Schizophrenia (1.1) • Bipolar I disorder manic episodes (1.2)
|
BLACK BOX WARING (FDA LABEL): WARNING: INCREASED MORTALITY IN ELDERLY PATIENTS WITH DEMENTIA-RELATED PSYCHOSIS; and SUICIDAL THOUGHTS AND BEHAVIORS |
|
Risperidone (atypical antipsychotics) |
Atypical antipsychotic agent indicated for: • Treatment of schizophrenia in adults and adolescents aged 13-17 years (1.1) • Alone, or in combination with lithium or valproate, for the short-term treatment of acute manic or mixed episodes associated with Bipolar I Disorder in adults, and alone in children and adolescents aged 10-17 years (1.2) |
BLACK BOX WARNING (FDA LABEL): WARNING: INCREASED MORTALITY IN ELDERLY PATIENTS ® WITH DEMENTIA-RELATED PSYCHOSIS |
|
Lorazepam (benzodiazepines) |
Indicated for the management of anxiety disorders or for the short-term relief of the symptoms of anxiety or anxiety associated with depressive symptoms. Anxiety or tension associated with the stress of everyday life usually does not require treatment with an anxiolytic. |
BLACK BOX WARNINGS (FDA LABEL): WARNING: RISKS FROM CONCOMITANT USE WITH OPIOIDS; ABUSE, MISUSE, AND ADDICTION; and DEPENDENCE AND WITHDRAWAL REACTIONS PRECAUTIONS: Elderly or debilitated patients may be more susceptible to the sedative effects of lorazepam. Therefore, these patients should be monitored frequently and have their dosage adjusted carefully according to patient response; the initial dosage should not exceed 2 mg. |
As can be seen, currently the pharmacological offer to treat episodes of agitation in elderly patients with dementia and Alzheimer’s is very limited and there is only one group of drugs, from the group of antipsychotics and anxiolytics, that can be administered “off-label” but under medical supervision due to the high risks that its administration entails in this type of patients. This situation will allow BXCL501, once approved, to have an excellent opportunity to occupy a large market share in this space. To this must be added the greater convenience in the administration of BXCL501 (sublingual oral film) in relation to most antipsychotics (injectables).
Unlike IGALMI (trade name of BXCL501 recently approved as a treatment for acute agitation in patients with schizophrenia and bipolar syndrome), in which the main risk in its commercialization, in my opinion, will be to compete with other drugs currently administered off-label as a treatment at a very low price (antipsychotics and benzodiazepines), in the case of BXCL501 for patients with dementia and Alzheimer, this risk will not exist, since as we have seen, these drugs are completely contraindicated by the FDA for elderly patients.
On the commercial side, I consider the recent appointment of Michael P. Miller to the Board of Directors, to be very important and I expect that it will have a very positive impact on IGALMI’s sales.
Mr. Miller brings nearly 40 years of strategic leadership and commercial growth experience in the pharmaceutical industry, where he most recently served as Executive Vice President, U.S. Commercial at Jazz Pharmaceuticals.
Source: BioXcel
Considering the higher prevalence of dementia and Alzheimer’s than schizophrenia and bipolar syndrome, and the lack of pharmacological competition in the latter indication, the revenue potential of BXCL501 to treat acute agitation in patients with dementia and Alzheimer’s will be far superior to IGALMI’s potential. My estimate is that it could be X5 or X6 times the IGALMI´s sales.
On the other hand, once BXCL501 is approved for this indication, the FDA will most likely recommend that the drug be administered under the supervision of a healthcare provider (as has been the case with the recent approval for schizophrenia and the disorder bipolar syndrome). In this sense, I do not think that this recommendation is going to have a negative impact on the sales, since practically all patients with dementia and Alzheimer’s to a medium and severe degree are in the care of relatives, nurses, or doctors, in their respective homes, or in senior centers. This means that the FDA recommendation is always complied with and therefore there will be no obstacle to the marketing of the drug.
In my previous article, I estimated, very conservatively, a maximum potential annual revenue for IGALMI of around $230 million. Therefore, BXCL501 to treat agitation in patients with dementia and Alzheimer’s could reach a maximum potential annual revenue of between $1 billion and $1.5 billion.
For all these reasons, I consider very important the upcoming results of phase II and phase III trials to treat acute agitation in patients with dementia and Alzheimer’s. Results from Phase II are expected in July or August. And the results of phase III for the end of this year 2022 or the first quarter of next 2023. If they present good results, most likely, I expect a good rise in the share prices because it will practically mean that future FDA approval will be almost guaranteed (FDA has already recently approved the same BXCL501 molecule for another indication).
Risks
Like any biopharmaceutical company, BioXcel presents a series of risks that any investor should be aware of.
Currently, the main risk facing BioXcel is the commercialization of IGALMI. Now, in its first quarter of commercialization, the first sales data will be available in the next Q3 ER (November). Although the main challenge that IGALMI will have to face is the competition with the rest of the cheaper drugs that are currently administered off-label, the fact that currently IGALMI is the only drug approved specifically for the indication of agitation in patients with schizophrenia and bipolar syndrome, together with the excellent results in terms of efficacy and safety profile that IGALMI has obtained in the trials, the drug is in a good starting position. In this commercial section, it should be noted, as I have mentioned before, that the best is yet to come with BXCL501 for the indication of agitation in patients with dementia and Alzheimer’s.
As for the cash status, as of March 31, 2022, cash and cash equivalents totaled approximately $200 million.
In addition, BioXcel signed on April 19 with Oaktree and the Qatar Investment Authority a strategic financing agreement for an amount of $260 million.
The quarterly cash burn is approximately $33 million. Taking into account that BioXcel currently has a total of $460 million ($200 million+$260 million), it would be enough to easily finance the operations of the next 2 years, so there would be no risk of an offering in the next 2 years.
Conclusion
BioXcel currently lives very important moments in its history. The recent approval of IGALMI by the FDA is a milestone that has allowed the company to enter the commercial phase for the first time in its history. By Q3 ER (IGALMI has started to be marketed on July 1) we will have the first IGALMI sales data. But from a commercial point of view, the most important focus is on the BXCL501 molecule, currently in phase II and III trials to treat acute agitation in patients with dementia and Alzheimer’s. As we have seen above, the revenue potential in this indication exceeds $1 billion per year on a very conservative basis. The results of the phase II test are expected next July or August, and phase III by the end of this year or the beginning of the following 2023. These results will be good catalysts for the share price.
Given the revenue potential that BXCL501 has in both indications ($1.5 billion + $230 million), it’s easy to understand how undervalued BioXcel currently is. Applying a cautious P/S ratio of 4, given the potential revenue data ($1.73 billion), a market cap of $6.9 billion would be justified.
With good results in both tests, which will be the most likely, I believe that the market capitalization of the company could exceed $1.5 billion easily (current MC=$474 million) in some months. This would imply multiplying by 4 the current price of the shares.
In addition to all this, BioXcel is conducting trials with the other candidate drug BXCL701, a first-in-class oral activator of systemic innate immunity combined with pembrolizumab, in patients with metastatic castration-resistant multicellular neuroendocrine carcinoma (mCRPC) phenotype. Currently, in phase II trials, the results so far are very promising. This is another important asset that BioXcel has in its pipeline and we will have to keep an eye on the results of the next phase II.
In short, BioXcel is at an ideal moment as an investment, with great potential for revaluation in the coming months/years.
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