Nicox — Revising NCX-470 forecasts after Mont Blanc

Nicox’s Mont Blanc Phase III study of NCX-470 0.1% met the primary efficacy endpoint of demonstrating non-inferiority to latanoprost 0.005% for the reduction in IOP in patients with open-angle glaucoma (OAG) or ocular hypertension (OHTN).

As a reminder, NCX-470 is a second clinical-stage compound based on the company’s proprietary NO-donating platform that combines a nitric oxide (NO)-donating molecule with an established PGA drug which, as explained below, provides an additional mechanism for the drug to reduce IOP. The technology has already been applied successfully in a first commercial glaucoma drug, Vyzulta, developed by Nicox and out-licensed to and commercialised by Bausch + Lomb. Latanoprost is one of the most frequently prescribed PGA drugs used to treat elevated IOP and, to our knowledge, Mont Blanc is the first registration trial whereby a monotherapy drug candidate was able to show statistical non-inferiority to a PGA drug. Given the favourable safety profile also shown, we believe these results bode well for the product’s likelihood of obtaining FDA approval, provided the second Phase III study, Denali, demonstrates similar efficacy parameters (Nicox expects results after 2024).

However, Mont Blanc did not meet the secondary endpoint of demonstrating statistical superiority to latanoprost, although NCX-470 showed statistically superior IOP reduction (p<0.049) at four of the six time points and numerically greater IOP reduction at all six time points. Altogether, the extent of NCX-470’s difference versus latanoprost does not appear to be as substantial as that shown in the earlier Dolomites Phase II study, which we believe may restrain current expectations surrounding the product’s differentiated positioning compared to the leading PGA drugs.

To this end, Nicox recently announced a refined development strategy for NCX-470 where it will seek to build on previously reported preclinical retinal data to help demonstrate that, in addition to lowering IOP (currently the only proven approach to managing glaucoma), NCX-470 may improve retinal perfusion or retinal cell health (which are subject to damage in glaucoma patients) and thereby provide a supplemental therapeutic benefit in this population. Nicox is now also actively exploring commercial partnerships for NCX-470 in both the US and Japanese markets. We believe that effective commercial positioning will be key in differentiating NCX-470 from other PGA drugs and, with potential FDA approval at least a few years away (we forecast in 2027), we believe that the company’s decision to start looking for a capable marketing partner is sound. We note that NCX-470 is one of the very few, if any, late-stage therapeutic assets available for licensing in the glaucoma space (please see our 26 October note for a selected summary of the current development pipeline of topical glaucoma drug candidates).

The Mont Blanc Phase III study began in mid-2020 and enrolled 691 patients with OAG or OHTN. Following the initial adaptive design phase of the study, subjects were randomised to take either NCX-470 (0.1% concentration) or latanoprost (0.005%) once daily in both eyes for three months. The primary endpoint is the mean IOP reduction from a time-matched baseline at 8am and 4pm time points at weeks two and six and month three visits.

The IOP-lowering effect from baseline in the 691-patient study was 8.0–9.7mmHg for NCX-470 versus 7.1–9.4mmHg for latanoprost (reduction in time-matched IOP at 8am and 4pm across visits at week two, week six and month three). The difference in IOP reduction between NCX 470 and latanoprost was up to 1.0mmHg in favour of NCX-470.

While NCX-470 showed statistical non-inferiority versus latanoprost, meeting the primary efficacy analysis, it failed to meet statistical superiority to latanoprost in a pre-specified secondary efficacy analysis of time-matched change from baseline IOP. NCX 470 was numerically superior to latanoprost at all time points and statistically significant (p<0.049) at four of six time points.

The Dolomites Phase II trial showed that NCX-470 (at 0.065%) delivered up to 1.4mmHg increased IOP reduction versus latanoprost, meeting statistically superiority criteria. In our recent note, we had estimated that a relative difference of at least c 1.5mmHg versus latanoprost in Mont Blanc would have enabled NCX-470 to solidly distinguish itself effectively against other glaucoma monotherapy drugs on the basis of IOP reduction.

While NCX-470 showed trends of a superior IOP-lowering effect versus latanoprost in Mont Blanc (such as numerically superior IOP reduction at all six time points), the top-line results did not differentiate NCX-470’s IOP-lowering competitive profile as a monotherapy drug by as much as we had anticipated, such as in comparison to latanoprostene bunod (Vyzulta) and bimatoprost.

Nicox reported that NCX-470 was well tolerated, with the most common adverse event being ocular hyperemia (11.9% of cases versus 3.3% of latanoprost patients), which is not surprising as NCX-470 (at 0.065%) also showed a c 10pp increase in the rate of ocular hyperemia versus the latanoprost arm in Dolomites. There were no serious ocular adverse events in Mont Blanc and the NCX-470 study discontinuation rate (4.3%) was lower than that in the latanoprost arm (5.1%). Given the favourable safety profile and the demonstration of non-inferiority of latanoprost, the trial met the efficacy requirements for approval in the United States, although confirmatory results from the second Phase III study (Denali) and long-term (12-month) safety data from that study will be needed for US approval.

To strengthen NCX-470’s competitive profile versus other PGAs and topical drug treatments, Nicox is seeking to demonstrate that the drug, likely because of its NO-release properties, may protect the retinal ganglion cells susceptible to glaucomatous damage through IOP-independent mechanisms such as improved retinal perfusion, as discussed in our prior note.

As stated previously, current approved glaucoma treatments are designed to reduce IOP, which may not fully prevent retinal ganglion cell degeneration and thus progression of the condition in many patients, particularly those with normal tension glaucoma (NTG). Certain IOP-independent risk factors, including ischemia (inadequate blood supply) or inadequate retinal perfusion, may contribute to optic nerve or retinal cell damage (particularly in NTG), and NO is known to be a potent vasodilator. We have already highlighted the exploratory preclinical study reported by Nicox whereby an endothelin-1 induced ischemia/reperfusion model in rabbits was used to mimic glaucoma pathophysiology. The results suggest that NCX 470 may improve ocular perfusion and retinal function in damaged eyes compared to vehicle and may therefore have protective properties not related to its effect on IOP.

To expand on these data, Nicox plans to conduct a series of non-clinical studies and two new clinical studies to explore the activity of NCX 470 in the retina. One clinical study will assess the effect of NCX 470 on ocular perfusion pressure through episcleral venous pressure and optical coherence tomography (OCT) measurements of retinal vessels in which NCX 470’s ability to lower episcleral venous pressure as well as enhance outflow through the trabecular meshwork (TM) will be assessed. We note that conventional PGA drugs exert IOP-lowering effects through the uveoscleral pathway and are not expected to have significant effects on the TM.

A separate clinical study will evaluate retinal blood vessel density using OCT angiography (a validated imaging technique) to fully understand NCX-470’s effects on retinal blood flow. Together, these studies are designed to help demonstrate that, in addition to lowering IOP, NCX-470 may also provide beneficial effects in terms of improving retinal perfusion, as has been observed in preclinical models. The company believes that as well as relaxing blood vessels and improving blood flow, NO could inhibit inflammatory cytokines and reduce oxidative stress (which are other contributors to glaucomatous damage).

We believe these clinical studies will be relatively short, as the relevant endpoints and clinical features will likely be measurable within 30 days of initial patient dosing, and only c 15–50 patients will likely be needed for each trial (given comparable retinal vasculature studies conducted on latanoprostene bunod, phenylephrine and netarsudil, and an OCT angiography study performed on latanoprostene bunod and timolol).

The two clinical studies are planned to start in H123, but the company reports that they are not expected to be completed by the end of its current cash runway (which it currently projects into Q423).

We are reassessing our view of NCX-470’s commercial sales uptake to reflect the Mont Blanc data. Our prior forecasts assumed that in its pivotal study programme, NCX-470 would at least match the Dolomites data in terms of relative improvement versus latanoprost (given that Dolomites had tested a lower drug concentration) and demonstrate statistical superiority. While it is possible that Denali may yet show stronger effects, we assume the most likely outcome is that the Denali results will be similar to Mont Blanc.

Mont Blanc showed a 1.0mmHg relative improvement in IOP reduction versus latanoprost and we note that the company’s internal research (see slide 24) estimated peak US sales of $200m for a product with 1.25mmHg superior reduction to latanoprost. Given the results from Mont Blanc, we are reducing our peak US net sales estimate (in 2032) from $386m to $257m. As explained in our Outlook report published on 19 May 2022, we previously estimated that NCX-470 at its peak would account for 3% of US glaucoma drop bottle prescriptions (estimated at 55m in 2019 by IQVIA) and we have reduced this peak share estimate to 2%.

While the existing preclinical data, which suggest improved retinal cell health or perfusion benefit, are promising, we believe it is currently premature to assume that the (non-human) data would carry much influence with prescribers (ophthalmologists and optometrists) yet. As it stands, relative IOP reduction and relative safety/tolerability remain the key criteria by which glaucoma therapeutics are assessed and valued in the community.

Further human data to be developed supporting non-IOP benefit would be needed, in our view, for NCX-470 to solidly distinguish itself from PGA drugs such as Vyzulta, Lumigan, and newer drugs such as Omlonti (discussed here), and Rocklatan. We believe Nicox’s strategy to develop these data is very sensible and, should the upcoming data readouts provide evidence of benefit on retinal health and/or perfusion, we may reassess our commercial NCX-470 sales estimates.

We have increased our total R&D cost estimates covering years 2023 through 2025 by €4m, to reflect the additional non-clinical and clinical activities the company plans to perform to demonstrate NCX-470’s potential non-IOP mediated benefits on retinal vasculature and cell health. We now assume FY23e and FY24e normalised PBT losses of €17.5m and €23.7m, versus our prior estimates of €16.4m and €21.5m, respectively.

Nicox reported €25.6m in cash and equivalents at 30 September, and we continue to calculate Q322 net cash of €5.0m, excluding lease liabilities. Nicox estimates that it is financed until mid-November 2023 (or mid-December 2023 assuming extension of the interest-only period of the existing Kreos debt), based on the development of NCX-470 alone.

We continue to expect the company will require €85m in added funding before the anticipated launch of NCX-470 (which we forecast in 2027). Our projections do not include any potential proceeds from the exercise of options or warrants which, if exercised, would lower our funding forecasts accordingly.

We have also updated our model to reflect $/€ exchange rate parity (versus $0.98/€, previously). While we have lowered our peak NCX-470 sales estimates, the effect on our valuation is significantly offset by increases in our PoS estimates for NCX-470, as we believe that Mont Blanc met the required thresholds for the first (of two) pivotal studies to support market registration in the US. We now assume PoS in the US and Chinese markets of 75% (from 50% previously) and 60% in Europe (from 35% previously).

Following these changes, we now obtain an rNPV valuation for Nicox of €190.4m (versus €236.2m previously). After including Q322 net cash of €5.0m, we obtain an equity value of €195.4m, or €4.52 per basic share (down from €5.58 previously). After considering the potential dilutive effect of options and warrants and their effects on net cash, our fully diluted valuation would be €4.36 (versus €5.29 previously) per fully diluted share.