DBV Tech Stock: Plenty Of Cash And Regulatory Uncertainty (DBVT)

DBV Technologies (NASDAQ:DBVT) is developing an epicutaneous (on the skin) delivery system for the treatment of food allergies including peanuts and milk. After completing a Phase 3 trial in children ages 4-11, the company received a CRL from the FDA for their Viaskin peanut patch due to concerns about patch adhesion. The company redesigned the patch and will need to run a new Phase 3 trial using the modified patch for this age group. Recently, using the unmodified patch, the EPITOPE study met the primary endpoint in children ages 1-4. DBV Technologies is well capitalized after a recent raise that occurred after the EPITOPE readout. There is considerable uncertainty about the regulatory path but longer term these assets, if approved have significant value.

Peanut Allergies and Treatment Options

There are more than one million children in the US with peanut allergies. The prevalence in babies is increasing and as many as 5% of babies have a peanut allergy. Avoidance of peanuts is the primary strategy but accidental exposure can result in severe reactions.

Allergy treatments gradually increase the quantity of allergen that a child is exposed to. The goal of treatment is to desensitize the child and increase the quantity of peanut that elicits an allergic reaction.

There are no FDA-approved treatments for peanut allergies in children ages 1-3. At age 4, children would become eligible for Palforzia which is an oral immunotherapy. It is newly approved and can only be prescribed by a trained allergist and requires an FDA mandated risk mitigation plan due to the risk of anaphylaxis.

In the Palforzia program, under the supervision of a trained physician, children ingest increasing amounts of peanut protein. Dose escalation occurs in a certified physician’s office. At dose escalation, 67 % of patients reported abdominal pain, 36.5% experienced vomiting, 32% reported nausea and 31% reported oral itching. There was a 9.4 % rate of anaphylaxis during dose escalation and 8.7% during maintenance dosing. At the end of treatment, 67% of Palforzia patients could tolerate a 600 mg dose of peanuts. (600 mg is approximately 2 peanuts).

The EPITOPE study met the primary endpoint

Toddlers aged 1-3 who have a peanut allergy were enrolled in the clinical trial. On a daily basis, their caregivers applied a Viaskin peanut patch. The patch at the highest dose contains 250 micrograms of peanut protein which is a very, very small amount of peanut protein. (A microgram is one thousandth of an mg.)

The EPITOPE trial was one year in duration. 244 toddlers received treatment and 118 received placebo. At baseline and at the end of treatment, toddlers received a food challenge to determine their eliciting dose. The eliciting dose is the amount of peanut that causes allergic symptoms. At the end of treatment, patients who were successfully treated made the improvements shown in the chart below.

Before Treatment	After Treatment
Eliciting dose less than or equal to 10 mg	Eliciting dose greater than or equal to 300 mg
Eliciting dose greater than 10 mg	Eliciting dose greater than or equal to 1000 mg

Source: DBV Technologies

67% of children treated met the “success” response criteria at 12 months. In comparison, 33.5 % of placebo treated children met the endpoint. (Note: The placebo response was likely a result of a self resolving peanut allergy.) This result was statistically significant and the primary endpoint was met.

In the trial, there was one SAE which was swelling around the eye. The most common side effect was a reaction at the site where the patch was applied. 22.5 % of the children experienced a site reaction that was severe as compared to 8.5% of placebo patients. These reactions decreased during the one year treatment period. Eight children discontinued treatment due to side effects.

Four children (1.6%) treated with Viaskin Peanut experienced an anaphylactic reaction that was determined to be or may have been related to treatment. None of these anaphylactic reactions were serious. Three of these reactions resolved with epinephrine and one without epinephrine. A long term open label extension study is underway.

Revenue Projections

Palforzia pricing is $11,000 annually. Assuming similar pricing for the Viaskin patch, if approved, the company could generate significant revenue in the 1-4 years old patient population. If future clinical data is favorable, they may be able to obtain regulatory approvals to treat older children with peanut allergies and children with milk allergies. Clinical studies are underway in these indications.

Company Finances

A recent private placement was completed which raised $190 million at $3.22 per share. The placement also included warrants. Biotech hedge funds which participated included Venrock, Baker Brothers and RA Capital. At the end of the quarter, the company had $75 m which they stated would bring them to the first quarter of 2023. This additional cash ($190 m) should significantly extend their cash runway.

Conclusions

There are no FDA-approved treatments for children age 1-3 with peanut allergies. Viaskin Peanut appears to be efficacious in children aged 1-3 based on the EPITOPE study results. In addition, Viaskin peanut appears to have advantages when compared to Palforzia given the reduced incidence of GI side effects and fewer anaphylactic reactions.

The company will have discussions with the FDA regarding the regulatory path. The FDA previously issued a CRL due to issues with patch adhesion in children older than 4. Given this data set and the clear efficacy, the patch adhesion does not appear to be an issue in this age group. However, there is no clarity and additional modifications in the patch and/or additional clinical trials may still be required. The company has significant funding that will enable them to navigate through this uncertainty but the lack of a clear regulatory path remains a key risk for investors.

Viaskin peanut is a unique product that if approved would have no approved competitive product for children ages 1-3. If future clinical data is favorable, the company may end up with a portfolio of products for peanut and milk allergies which generate significant revenue. Given these are products likely only to be prescribed by allergists, marketing costs will likely be minimal. DBV Technologies has a path to profitability if they can navigate the regulatory path effectively. Aimmune, the small biotech that developed Palforzia, was acquired by Nestle Health for more than $2B suggesting assets to treat food allergies have significant value.