Kinarus — A unique combination targeting unmet needs

Age-related macular degeneration (AMD) is the leading cause of blindness in older adults across western countries. As described in our prior sector report on AMD, there are two forms of AMD: dry and wet. Globally, the prevalence of AMD (wet and dry, all stages) in adults above age 45 is estimated at 8.7%.1 The dry form of AMD precedes wet AMD, which accounts for 10–15% of AMD cases.

The current SoC for wet AMD is to reduce angiogenesis (blood vessel proliferation) by blocking VEGF-A binding and activity. VEGF-A is a biochemical signal protein that promotes angiogenesis and tends to be over-expressed in hypoxic environments. Currently, the only effective, reliable approved mechanism to block VEGF-A in the retina is through IVT of antibodies or antibody fragments that bind and inhibit VEGF activity. For the past decade, the two dominant anti-VEGF agents used in this indication, both delivered via IVT, have been ranibizumab (Lucentis, marketed by Roche in the United States and Novartis in ex-US markets) and aflibercept (Eylea, marketed by Regeneron and Bayer). Both products act by inhibiting VEGF-A thus blocking angiogenesis (the growth of new blood vessels) and the formation of leaky blood vessels.

Anti-VEGF-A therapies dramatically improve or stabilise vision in the large majority of wet AMD patients, and their effectiveness in wet AMD has resulted in their evaluation and approvals in other retinal conditions involving pathological angiogenesis or blood vessel leakage, such as diabetic macular edema (DME), diabetic retinopathy (DR), and macular edema following retinal vein occlusions (RVO). Hence, should KIN001 eventually gain approval in wet AMD, we anticipate that it could also be investigated for use in these eye diseases.

Under current SoC, wet AMD patients require recurring (four to eight weeks according to approved prescribing information) IVT injections of anti-VEGF-A agents to reduce areas of CNV. Eylea recorded 2021 global net sales of $9.4bn (+19% y-o-y) and Lucentis recorded CHF1.35bn (c $1.5bn) sales in 2021 in the United States (as recorded by Roche, down 6% y-o-y) and $2.16bn in ex-US markets (recorded by Novartis, up 12% y-o-y). We estimate that wet AMD represents approximately 50% of the total anti-VEGF-A retinal drug market.

We estimate that each anti-VEGF-A treatment dose (eg for Eylea and Lucentis) costs between $1,800 and $2,000 in the United States per injection, but highlight that Biogen and Samsung Bioepis recently launched Byooviz, a biosimilar to ranibizumab, and are pricing the drug 40% lower than Lucentis. Biosimilars to aflibercept are being advanced by Samsung Bioepis/Biogen (SB15), Amgen (ABP938) and Sandoz (SOK583A1).

VEGF-A IVT therapy requires patients (who are generally older and may have other comorbidities or mobility restrictions) to have a regular visit to their ophthalmologist to receive IVT injections. In addition to the patient discomfort and inconvenience, there may also be additional costs involved such as caregiver support, transportation, or other related needs. Further, any IVT injection carries a small but non-zero risk of endophthalmitis (intraocular inflammation), a potentially devastating condition that often leads to blindness in the affected eye. A multicentre longitudinal study involving over 88,000 injections between January 2006 and November 2016 found that the cumulative risk of developing infectious endophthalmitis after 60 IVT injections was 0.84%.2 There is hence a need to develop new therapies to improve convenience, efficacy and/or reduce the frequency of invasive procedures. Most wet AMD patients require approximately five intraocular injections (for each affected eye) per year. Further, it has been estimated that 20–37%3, 4 of wet AMD patients’ vision continues to worsen despite anti-VEGF therapy, further prompting the need to develop new treatments.

Oral KIN001 is designed to provide a convenient way for patients to reduce the required dosing of anti-VEGF-A injections and hence act as a complementary therapy to anti-VEGF treatments already on the market and potentially future treatments targeting this pathway. We believe that even a c 30% reduction in dosing frequency can be impactful in terms of convenience to patients and cost savings (including reduced medical visits).

Once the planned Phase II study in wet AMD commences, KIN001 would be, to our knowledge, the only oral treatment for this condition in active Phase II or proof-of-concept level studies. The drug’s more convenient oral route of administration makes it generally unique among clinical-stage wet AMD drug candidates (the large majority of whom still require invasive injections and target the VEGF pathway).

KIN001 has been tested in two laser injury animal models: a mouse and primate model; both demonstrated KIN001 significantly inhibited CNV formation in the chosen models. In the mouse model, mice were divided into five treatment groups: control, pioglitazone, pamapimod, pamapimod/pioglitazone combined (KIN001) and a single IVT injection of Eylea (positive control). The KIN001 combination and individual agents (pamapimod and pioglitazone) were shown to reduce ocular CNV after laser damage. The effect on CNV is illustrated in Exhibit 2 as the area of isolectin-positive staining (marker for new blood vessels) in laser-induced CNV lesions, which shows that KIN001 reduced the isolectin-positive area to that seen with the single Eylea injection, in comparison to the control arm. Additionally, the KIN001 arm showed a lower level of fibrosis versus control (as determined through immunostaining for collagen 1a) and was generally comparable to Eylea in its effect.

KIN001 was also evaluated in a non-human primate model of laser-induced CNV (Exhibit 3), evaluating pioglitazone with either 25mg or 75mg pamapimod versus placebo, or IVT Lucentis (positive control). The number of Grade 4 retinal lesions was measured two weeks after laser injury. Results indicate a stronger effect of a fixed-dose of pioglitazone with 75mg pamapimod, which reduced the quantity of Grade 4 CNV lesions by approximately 75% versus the control group.

We note that there are limitations in translating or extrapolating a laser injury model to the complex inflammatory, oxidative stress and/or metabolic factors underling AMD, as AMD is widely recognised as a multifactorial disease. Hence it is not yet known whether the results seen in preclinical data will be reproduced in human trials. But overall, the data to date support clinical evaluation of oral KIN001 as a potential complementary therapeutic for the treatment of wet AMD.

Kinarus has received regulatory approval to conduct a randomised, double-blinded 12-month Phase II study in wet AMD patients (KIN001-201). Patients with diagnosed wet AMD on stable anti-VEGF therapy will be randomised to KIN001 (oral 150mg pamapimod and 10mg pioglitazone) or placebo. We believe most patients will be receiving either Eylea or Lucentis as their anti-VEGF therapy. The study follows a treat and extend approach to determine if KIN001 is able to prolong the treatment interval between anti-VEGF injections, by inhibiting the recurrence of macular edema, viewed as a diagnostic indicator for the recurrence of CNV. Retinal images will be captured using optical coherence tomography and evaluated centrally by an expert center for imaging in ophthalmology, which will help guide the investigator in determining the need for an anti-VEGF injection treatment. The company aims to enrol c 50 patients per arm (100 patients in total) and has powered the study to show whether KIN001 can reduce the required number of IVT injections by c 30% within the 12-month treatment period. Exploratory endpoints will include evaluation of the companion eye for conversion from the dry form of AMD to wet AMD, which may provide an initial insight as to the drug’s potential effects on dry AMD. Kinarus plans to initiate the study in Q422 and potentially report top-line data in H224.

We believe Kinarus is aiming to position KIN001 and its price so that its annual cost to the patient would be comparable to the cost savings from the reduced need for anti-VEGF-A injections and medical visits. Hence, we believe an annual price of $3,000 to $5,000 per year to be a reasonable estimate for a drug that reduces anti-VEGF-A treatments by c 30% (assuming an approximate average of five injections per year per patient). The prevalence of Caucasians in the United States with wet AMD was estimated at 1.1 million in 20155 and based on US National Institutes of Health (NIH) data6 that estimates that Caucasians account for 89% of all US AMD cases, we estimate that c 1.2 million US adults have wet AMD. A 10% market share at an average yearly price of c $4,000 per year per patient could result in potential sales in the United States of $480m.

Many companies are evaluating new therapies and modalities to extend the durability of wet AMD treatment to reduce the frequency of IVT injections.

Given that KIN001’s mechanism of action is not specifically limited to the VEGF pathway, and its potential positioning as a complementary oral therapy (to Anti-VEGF), the therapy, if approved, could obtain significant commercial adoption and usage even if more potent or longer-acting anti-VEGF treatments reach the market. However, it is also possible that such longer-acting wet AMD injectable agents could restrain the commercial appeal of KIN001, as a longer interval between injection doses (if supported by clinical data), may reduce the perceived need among stakeholders for a complementary oral treatment seeking to further reduce the anti-VEGF agent injection dosing frequency.

Hence, KIN001 may face indirect competition from other emerging drugs aimed at reducing the IVT treatment burden for patients. Roche recently received two product approvals seeking to alleviate wet AMD patients. Vabysmo (faricimab), a bispecific mAB that targets and inhibits both VEGF-A and angiopoietin-2 (Ang-2, a cytokine that functions in both inflammation and angiogenesis), was approved in early 2022 with a label indicating four-month maintenance dosing and recent clinical data suggested that after two years of treatment, c 60% of patients can be treated at every four months while obtaining comparable vision gains versus aflibercept dosed every two months. Roche’s Susvimo, approved in autumn 2021, is a small, refillable ocular implant designed to continuously deliver a specialised formulation of ranibizumab over time and be refilled about every six months. To maintain a competitive position, Regeneron/Bayer are assessing a higher dose (8mg) dose of aflibercept in wet AMD in a Phase III study, dosed at every 12 or 16 weeks versus the approved dose (2mg), with results expected in H222.

There have also been relatively high-profile setbacks in the wet AMD space. Novartis’s Beovu (brolucizumab), a mAB designed to reduce IVT dosing frequency versus Eylea/Lucentis, was approved in wet AMD in 2019, but has since been hampered by rare sight-threatening complications such as retinal vasculitis and intraocular inflammation, affecting market penetration (FY21 sales of $186m, notably lower than Lucentis and Eylea). AbbVie’s Abicipar pegol received an FDA Complete Response letter and Kodiak’s KSI-301 did not meet its Phase IIb/III primary efficacy endpoint.

Below we provide a selected list of later-stage candidates in wet AMD, which largely target VEGF. RGX-314 is worth monitoring as it is designed as a potential one-time (single-use) gene therapy product delivered via subretinal administration. RGX-314 was partnered with AbbVie in H221 and has shown a 70% reduction in the need for IVT anti-VEGF therapy post-implantation. OPT-302 is designed as an add-on to anti-VEGF-A IVT therapy. OPT-302 functions by binding and neutralising the activity of vascular endothelial growth factors C and D (VEGF-C and VEGF-D), and is intended to address the c 30% of wet AMD patients who become refractory to anti-VEGF-A therapies.

Altogether, while the above treatment candidates may lead to reduced injectable agent treatment frequencies for wet AMD patients, we believe that, if shown to be safe and efficacious, KIN001 could still be positioned as an effective complementary therapy (to further reduce injection treatment burden) given its differentiated mechanism of action and its convenient oral administration.

Longer term, more direct competition to KIN001 could be from product candidates that similarly seek a non-invasive (topical or oral) treatment approach, possibly also intending to be used as a complementary treatment to reduce IVT treatment frequency. Among these, AKST4290 (Alkahest, subsidiary of Grifols) is an oral small-molecule CCR3 inhibitor that blocks the action of eotaxin, an immunomodulatory protein. Alkahest completed a Phase IIb study, PHTHALO-205, in H221, which evaluated the efficacy of AKST4290 versus placebo in combination with aflibercept injections in patients with newly diagnosed wet AMD.107 patients were enrolled and the primary endpoint was mean change from baseline in Best Corrected Visual Acuity (BVCA). Results are yet to be published.

PAN-90806 (PanOptica) is a topically applied small molecule designed to block activation of VEGF receptor 2 through inhibition of the receptor’s tyrosine kinase activity. In 2019, PanOptica reported positive data from its 12-week PAN-01-102 Phase I/II dose-ranging wet AMD trial (NCT03479372), which showed that 51% (26/51) of the participants completed the trial without needing any ‘rescue’ IVT ranibizumab treatment (at 16 weeks, or one month after treatment cessation); of these, 88% (23/26) had either clinical improvement or stability of disease. The company had been seeking potential strategic transactions to support product development. In June 2021 PanOptica entered into a licensing arrangement with Zhaoke Ophthalmology for China/South-East Asia, but limited information has been disclosed since then.

Kinarus believes that KIN001’s antiviral, anti-fibrotic and anti-inflammatory properties could be valuable in the treatment of multiple stages of COVID-19. Although large-scale vaccinations and refinements in treatment algorithms, including the use of new drugs, have lessened its overall impact, COVID-19 remains a significant public health concern, particularly with the emergence of new, more transmissible variants such as Omicron BA.4 and BA.5.

The oral drugs Paxlovid (combination of protease inhibitors nirmatrelvir and ritonavir) and the RNA-dependent RNA polymerase Lagevrio (molnupiravir, Merck) have been authorised for use in high-risk COVID-19 symptomatic patients within five days of infection, but we note Paxlovid may lead to life-threatening toxicities caused by certain drug-drug interactions and both antiviral therapies may pose the threat of resistance. US officials are anticipating the possibility of another 100 million COVID-19 cases in late 2022 and given that many cases will lead to hospitalisations, potentially resulting in severe disease and/or death, there remains a significant need for additional therapies. While these drugs can be very effective when used in early stages of the disease, they are not recommended for use in patients with more severe disease, such as those who require hospitalisation. Generally speaking, antiviral or antibody drugs that target the virus itself are not expected to be efficacious once COVID-19 infection leads to more severe stages (such as those requiring hospitalisation), since at that point, treatment to modulate or control the resulting inflammatory reactions (and ‘cytokine storms’) would be indicated and antivirals or products targeting the virus would generally no longer be the best course on their own. KIN001’s multifaceted mechanism of action, described further below, could provide therapeutic effectiveness across both the earlier and later stages of the disease.

Kinarus proposes that oral KIN001 can treat COVID-19 in three ways:

In particular, the KIN001 combination of pamapimod and pioglitazone is believed to have synergistic effects in treating COVID-19 patients. The p38 MAPK inhibition that occurs with pamapimod may suppress the inflammation associated with SARS-CoV-2. The inflammatory response in COVID-19 infection is what generally leads to the ‘cytokine storm’ associated with the condition and the resulting fibrotic damage to bodily organs including the heart, lungs and central nervous system. This inflammation may be provoked or exacerbated by disproportionately upregulated p38 activity, explained by two mechanisms:

Pioglitazone may also exhibit anti-inflammatory properties, given that it can substantially reduce pro-inflammatory cytokines such as IL-6 and TNFα in an insulin-resistant animal model.

Kinarus recently conducted several in vitro studies to show the efficacy of pamapimod and pioglitazone, both separately and combined, in inhibiting SARS-CoV-2 replication in cells infected with various mutated forms of the virus, assessed using quantitative RT-PCR. The IC50 and IC90, which are the concentrations of the drug required for 50% and 90% viral replication inhibition, respectively, were used to assess the results. Data showed that pamapimod inhibited the replication of SARS-CoV-2 with IC90 values of approximately 3 µM. Pamapimod demonstrated similar antiviral activity against the SARS-CoV-2 Wuhan type and all VoCs across several cell lines. Pioglitazone also strongly reduced SARS-CoV-2 replication, with an IC90 of c 10–15 µM.

Exhibit 6 shows the IC90 values of pamapimod and pioglitazone individually against SARS-CoV-2 Wuhan type and other variants of concern (VOCs) in Calu-3 cells (human lung cells that express ACE2 and Transmembrane Serine Protease 2, or TMPRSS2, endogenously).

A separate in vitro study was performed to assess whether the KIN001 combination could have synergistic antiviral activity. Calu-3 cells were infected with SARS-CoV-2 (either wild type, Delta or Omicron variants), then treated with different concentrations of pamapimod and pioglitazone, alone or combined. Following treatment with increasing concentrations of pioglitazone (25–300nM) in combination with either 10nM or 50nM of pamapimod, a significant dose-dependent reduction in SARS-CoV-2 replication capacity was observed across all the tested variants. This ranged from 10–88% (using 10nM pamapimod) and 27–95% (using 50nM pamapimod); see Exhibit 7. Modelling of the data revealed synergistic antiviral activity of the combination.

The safety of KIN001 was evaluated in a three-month toxicity study in rats in accordance with good laboratory practice regulatory guidelines. The data showed no new findings from the combination versus the individual drugs.

The Swiss government awarded Kinarus a grant of up to CHF7m to evaluate KIN001 as a treatment for COVID-19 in two Phase II studies. The first study, KINETIC (EudraCT No. 2020-005849-16), began in H221 and is an eight-week, double-blinded, randomised placebo-controlled Phase II study assessing the effects of four weeks of twice-daily KIN001 (total daily dose of 150mg pamapimod and 10mg pioglitazone) in hospitalised COVID-19 patients. The primary objectives of the trial are to determine the efficacy of KIN001 to reduce mortality or severe respiratory failure. The company plans to enrol 430 patients across multiple sites in Europe and South America. The study successfully completed an initial safety analysis in April 2022 after the first 40 patients completed therapy, with the independent Data Safety and Monitoring Board recommending continuation of the study.

As of 6 June 2022, 130 patients were enrolled in KINETIC. Interim data following the assessment of c 130 patients is expected in late Q322, and top-line data are projected to be available in 2023.

KINFAST, a second Phase II trial of KIN001, is designed to evaluate its potential to reduce the severity and duration of COVID-19 in ambulatory COVID-19 patients not requiring hospitalisation. KINFAST recently received regulatory authorisation in Switzerland and Germany and is expected to start in Q322. The trial is designed to include 430 patients, who will receive KIN001 for two weeks (at the identical dose as in the KINETIC trial), and the primary endpoint is the reduction of the severity of COVID-19 symptoms and time to recovery, as determined using patient-reported outcomes. We note that this endpoint of patient-reported outcomes data has been proposed and recommended by the FDA in its guidance to industry ’for sponsors initiating clinical trials evaluating drugs for the prevention or treatment of COVID-19 in outpatient adult and adolescent subjects’. Kinarus will perform an interim analysis to assess the preliminary efficacy and safety of KIN001 after approximately 130–150 patients have completed treatment and follow-up.

Altogether we believe the data from KINFAST and KINETIC will inform future development strategies for the product candidate in COVID-19, namely whether the best development path lies in hospitalised patients or those with less severe COVID-19 disease. Over 32 million COVID-19 cases were reported in the United States by the Centers for Disease Control and Prevention in H122, and more than 1.17 million US residents were hospitalised over this period. We estimate 1.5 million annual hospitalised cases in the EU5 (UK, France, Germany, Spain, Italy) based on Our World in Data statistics. We continue to expect that there will be an ongoing need for effective treatment options for at least the next several years, and possibly longer, and hence the revenue opportunity for clinically relevant and efficacious COVID-19 treatments could be significant.

A selected list of approved or authorised COVID-19 pharmacological treatments is presented in Exhibit 8. We note that Pfizer reiterated FY21 guidance of $22bn in FY22 Paxlovid sales in May 2022, and Merck raised FY22 Lagevrio sales guidance to $5.0–5.5bn in April 2022. Gilead reported that FY21 Veklury (remdesivir) sales were $5.6bn and $1.5bn in Q122 (+5% y-o-y). Beyond current antiviral therapies or other products (eg antibodies) targeting the virus itself, we reiterate that once oxygen supplementation or mechanical ventilation is required, anti-inflammatory drugs (eg dexamethasone) or immunomodulatory drugs (eg Janus kinase inhibitor baricitinib, or interleukin-6 antagonist tocilizumab or sarilumab) can be used.7

A summary of selected drug candidates targeting SARS-CoV-2, which would be direct competitors for KIN001 if approved, is presented in Exhibit 9. We believe sabizabulin (Veru) could be close to approval. The drug is designed to bind to the ‘colchicine binding site’ of a and b tubulin and inhibits tubulin polymerisation, resulting in both antiviral and anti-inflammatory activities. A Phase III trial (NCT04842747) evaluated daily 9mg oral doses of sabizabulin versus the placebo in hospitalised COVID-19 patients at high risk of developing acute respiratory distress syndrome (ARDS). Following a planned interim analysis, the independent data monitoring committee halted the study ‘early for overwhelming efficacy’ following a finding of a significant 55.2% mortality reduction in the intent-to-treat population. The company submitted an EUA application in June 2022.

The COVID-19 treatment market remains broad, and the choice of treatment varies by disease stage. As stated above, antivirals or products targeting the virus SARS-CoV-2 itself (like Paxlovid and Lagevrio) can be effective when given in earlier courses of the disease but are not indicated in the more severe disease stages where treatments to modulate or control the disease’s resulting inflammatory and/or fibrosis-inducing reactions become necessary. As shown by Exhibit 9, a majority of the later-stage COVID-19 drug candidates in therapeutic development are targeting hospitalised patients with more severe levels of disease. KIN001’s multifaceted mechanism of action, where it has shown antiviral, anti-inflammatory and anti-fibrotic effects, could provide therapeutic effectiveness across both the earlier and later stages of the disease (excluding the most severe disease stages where mechanical oxygen or intubation is required).

As stated above, we believe the data from KINFAST and KINETIC will inform future development strategies for the product candidate in COVID-19, namely whether the best development path lies in hospitalised patients or those with less severe COVID-19 disease.

KIN001’s third targeted indication is IPF, a progressive disease that leads to lung scarring and fibrosis that hampers the lungs’ ability to adequately transport oxygen. IPF is one of the most common forms of interstitial lung diseases (ILDs), and symptoms include shortness of breath, a persistent dry cough and fatigue. Mean survival is only three to five years following diagnosis. IPF has an estimated global prevalence of 13–20 per 100,000 people, with approximately 100,000 people affected in the United States and an annual US incidence of c 30,000–40,000.

There are currently only two approved drugs for IPF, Ofev (nintedanib, Boehringer Ingelheim, $2.9bn in 2021 sales) and Esbriet (pirfenidone, Roche, $1.1bn in 2021 sales), although pirfenidone has recently gone generic. According to consensus estimates at Evaluate Pharma, global IPF therapeutics sales are projected to increase from $4.1bn in 2021 to $5.8bn in 2024, but then decrease to $1.7bn in 2028 following Ofev’s expected patent expiry in 2025. We believe there is significant unmet need as both approved drugs have had high rates of discontinuation due to adverse events and tolerability issues (Exhibit 10).

Both nintedanib and pirfenidone have been shown to reduce the rate of lung function decline (measured by forced vital capacity, or FVC) by up to around 50%. Pirfenidone has been associated with improvement of all-cause mortality, whereas nintedanib has shown trends (but not reaching statistical significance) towards this. Both approved treatments have significant side effects/toxicities (see Exhibit 10) that lead to high rates of discontinuation.

A recent study investigated the discontinuation profiles of pirfenidone and nintedanib in patients with IPF; the discontinuation rates within one year of antifibrotic treatment were statistically similar for both nintedanib and pirfenidone (50% vs 48.5%). Discontinuation rates were marginally higher for pirfenidone (81.3%) than nintedanib (68%) in patients over a three-year observation period.

The combination of pamapimod and pioglitazone in KIN001 is proposed to reduce both inflammation and fibrosis in IPF. Preclinical proof-of-concept has been demonstrated by the company in a 21-day IPF mouse model where fibrotic lung injury was induced by bleomycin (an antibiotic anti-tumour agent). In this study, pioglitazone and pamapimod individually and combined were dosed and lung fibrosis status was investigated using an eight-point Ashcroft score three weeks after bleomycin administration. Pamapimod and pioglitazone each reduced the fibrosis score, although the combination resulted in a greater reduction in fibrosis compared to either drug alone. KIN001 also was more efficacious in comparison to a pirfenidone comparator arm. The triple combination of pamapimod, pioglitazone and pirfenidone resulted in the lowest Ashcroft score, suggesting possible additive KIN001 effects on top of the current SoC.

To understand the KIN001 mechanisms of action, gene expression changes in lung tissue from the bleomycin study, were measured by RNAseq. The data demonstrated that the KIN001 combination of pamapimod/pioglitazone has synergistic effects in the animal model to downregulate numerous interleukin/interleukin receptor, TNF/TNF receptor and chemokine/cytokine mRNAs in comparison to the effects of the single agents.

Kinarus intends to initiate a 12-month randomised, double-blinded Phase II trial for KIN001 (oral pamapimod 150mg with pioglitazone 30mg) in IPF patients, in Q123. This Phase II trial is anticipated to enrol a cohort of c 75 patients in total (c 50 for KIN001 arm versus c 25 in placebo arm) in Switzerland and potentially other countries as well. The primary objective will be to assess lung function in terms of mean absolute change from baseline in FVC at 52 weeks and is powered to show a 40% improvement.

With the wide range of adverse effects from the two approved treatments and high discontinuation rates, we believe KIN001 could obtain material market share if it demonstrates a superior therapeutic profile (ie delivering a comparable improvement in lung function with an improved adverse event profile). However, we caution that the emergence of generic versions of both pirfenidone (2022) and Ofev (expected in 2025) may result in pricing pressure for KIN001 (and other emerging IPF treatments) and/or limit its potential market share if approved. The extent of market share captured by KIN001 will also depend on its therapeutic profile versus the existing approved drugs or potential competitors. Currently, pricing pressure has been modest with generic pirfenidone priced at a c 10% discount to Esbriet.

We note that several IPF drug candidates are in development, with trial data suggestive of significant reductions in FVC decline. A selected list of later-stage candidates is shown below.

We highlight that pamrevlumab (FibroGen) appears to be a promising potential IPF treatment based on the data from its 103-patient Phase II trial, in which pamrevlumab reduced the rate of FVC decline versus placebo by approximately 60% at the 48-week mark. Data from the first Phase III study (Zephyrus-I) is expected in 2023. Pamrevlumab is administered by intravenous infusion every three weeks.

We are also monitoring PRM-151 (RG-6354), also delivered by intravenous infusions, which is being developed by Roche following its acquisition of Promedior. In a 117-patient Phase II trial, PRM-151 demonstrated a 48% reduction in FVC decline versus placebo at 24 weeks. Roche initiated a 658-patient Phase III trial (Starscape) for the programme, and it is anticipating to launch the drug in IPF in 2024. And finally, in terms of oral IPF drug candidates, we are monitoring BI1015550 (Boehringer Ingelheim), a PDE4B inhibitor, which was granted Breakthrough Therapy Designation by the FDA. In a recent Phase II study, BI1015550 actually showed an increase in FVC (albeit it was only measured at 12 weeks), rather than just a slower rate of decline. A Phase III study is planned to start in H222.

Kinarus Therapeutics became public through a reverse takeover transaction of the privately held Kinarus AG by Perfect Holding SA in June 2022. Exhibit 14 shows the audited 2020 financials of Kinarus AG and the pro forma unaudited 2021 financials of the combined company (Kinarus Therapeutics), although pro forma FY21 cash flow statements were not provided. Kinarus AG’s FY21 EBITDA loss was CHF4.7m, and the pro forma FY21 statement showed a combined EBITDA loss of CHF5.1m. R&D expenses (for both Kinarus AG and Perfect Holding SA) were CHF1.7m in FY21.

Kinarus AG had an FY21 FCF burn rate of CHF1.1m, but this included a CHF4.4m prepayment from the Swiss government (as part of the COVID-19 grant described above). Excluding this payment, the normalised burn rate would have been CHF5.5m.

Kinarus AG had CHF5.3m in cash and equivalents at 31 December 2021 (vs CHF0.1m for Perfect Holding SA). Kinarus reported a pro forma end FY21 gross cash position of CHF8.8m, which also includes the CHF3.4m raised in a Series B financing round in February 2022 as if it were already in the pro forma balance sheet. Kinarus also has CHF3m in interest free debt on its balance sheet, guaranteed by third parties (90% by the Canton of Basel-Stadt) and due in 2025. Altogether, Kinarus Therapeutics had end December 2021 pro forma debt of CHF3.5m, resulting in an FY21 pro forma net cash position of CHF5.3m.

If we assume the company’s FY22e FCF burn rate is similar to Kinarus AG’s FY21 normalised rate (CHF5.5m), we would expect the company’s funds on hand to last into mid-2023, although this could be extended a few months further if the company receives the remaining CHF2.6m from the Swiss government grant. Kinarus in August 2022 announced an agreement with an entity managed by Yorkville Advisors, whereby the company may raise up to CHF20m in convertible notes, to be drawn in tranches, over the next 36 months. Kinarus may issue convertible notes tranches as part of the arrangement at its own discretion, subject to certain conditions. The unsecured convertible notes each have a term of six months and pay interest at a 4% annualised rate. The notes are convertible into Kinarus shares and the conversion would be the lower of:

We believe this facility may be used to support the funding needs of its planned KIN001 clinical trials in wet AMD and IPF. Once these studies begin, the company’s burn rate is likely to increase. Kinarus has guided that it expects its total expenditures, assuming all these studies are underway, will be between CHF20m and CHF25m between mid-2022 and year-end 2024.

Progression of the company’s three programmes and successful outcomes could drive potentially value-generating monetisation or product licensing/partnership event/outcomes, and/or support future financing rounds to further fund the pipeline’s internal development.

As shown above in Exhibit 13, Kinarus has outlined its timelines and projected financial needs and has identified what it considers to be potential strategic value inflection points. It expects to report interim KINETIC data in late Q322 and top-line data by mid-2023. The KINFAST ambulatory COVID-19 study, due to start in Q322, is expected to provide data in or around mid-2024. Both studies combined should cost c CHF9m, net of the total grant funding (CHF7m) from the Swiss government. The Phase II wet AMD study, with an expected cost of CHF5m, could start in Q422 and report top-line data in H224. The Phase II IPF study is currently anticipated to start in Q123 and complete in or around year-end 2024.

Kinarus is subject to the usual risks associated with drug development including clinical development delays or failures, regulatory risks and competitor successes. Kinarus will need to raise significant capital to continue KIN001 development until commercialisation or a major market licensing transaction. The company may face significant dilution if funding needs are met through equity issuances and/or convertible debt, and while a portion of funding needs may be met via non-convertible debt, we believe this is less likely and we note that rising interest rates may pose a challenge to the availability and cost of such potential debt.

We recognise that there is little in-human proof-of-concept data for KIN001 at this stage. The realisation of such proof-of-concept could drive a re-rating in the company’s valuation and/or facilitate strategic transactions. However, the failure to show proof-of-concept efficacy could jeopardise future business development prospects for KIN001.

Kinarus faces high product concentration risk given that it is singularly focused on a single drug candidate, where a setback in its development could have a substantial effect on the company’s pipeline and valuation. Concerns about pioglitazone’s possible association with the development of bladder cancer may also influence prescribing behaviour for its use in long-term therapy (eg wet AMD or IPF) if the drug is approved. To our knowledge, no country other than France has limited the use of pioglitazone for the chronic treatment of T2D.

With regards to the wet AMD indication, if KIN001 is successfully commercialised, it may be the first oral treatment for this indication. Substantial educational outreach to insurers, medical professionals and patients may be required to achieve significant market uptake and to inform these stakeholders of the benefits of long-term KIN001 usage, namely the expected reduction in anti-VEGF IVT agent dosing frequency. In IPF, Esbriet (pirfenidone) now having gone generic and Ofev’s patent expiring in 2025 may limit KIN001’s peak pricing potential and/or increase the hurdle to gain significant market share.