IP Group — Examining Istesso’s Phase IIb trial results

IP Group (LSE: IPO)

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IP Group — Examining Istesso’s Phase IIb trial results

Istesso, IP Group’s largest private life sciences holding (c 11% of end-June 2024 portfolio value), has announced the results of its Phase IIb clinical trial of leramistat in rheumatoid arthritis (RA). Leramistat demonstrated a statistically significant reduction in bone erosion, the key secondary endpoint, as well as improvements in disability and fatigue. As a result, Istesso plans to evaluate the drug’s potential to promote adaptive tissue repair in RA in combination with existing disease-modifying anti-rheumatic drugs (DMARDs), as well as for other chronic diseases. It highlighted that it is sufficiently funded to conduct these studies. That said, the study failed to meet its primary endpoint of improvements in ACR20 response versus placebo. IP Group will provide an update on Istesso and its (possibly reduced) valuation upon releasing its FY24 results in March.

Milosz Papst

Written by

Milosz Papst

Director of Content, Investment Trusts

Investment companies

Listed venture capital

27 February 2025

Price 43.50p
Market cap £418m
Shares in issue 961.0m
Code/ISIN IPO/GB00B128J450
Primary exchange LSE
AIC sector N/A
52-week high/low 55.8p 35.8p

Fund objective

IP Group helps to create, build and support IP-based companies internationally. The group focuses on companies that meaningfully contribute to regenerative (Kiko), healthier (life sciences) and tech-enriched (deeptech) futures. The group is mostly active in the UK, with an international footprint through investment platforms in Australia, New Zealand and the United States.

Bull points

  • Provides unique exposure to impactful technology businesses based on management’s extensive deal origination network and strong relationships with top universities.
  • Diverse portfolio across life sciences, deeptech and cleantech, nurtured over 15+ years with several potential catalysts on the horizon.
  • Trading at a wide discount to NAV.

Bear points

  • IP Group is yet to build a solid track record of NAV total returns.
  • The investment cases for some of IP Group’s holdings have a binary outcome.
  • Uncertain VC market outlook as recovery is at an early stage.

Analyst

Milosz Papst
+44 (0)20 3077 5700

IP Group is a research client of Edison Investment Research Limited

Development options for leramistat in RA

We believe that the trial results leave Istesso with several options for leramistat’s development, though the drug would need to demonstrate strong efficacy and/or a superior safety profile to overcome high competition, regulatory and reimbursement hurdles. RA is a well-explored area, with highly standardised and well-validated clinical endpoints, such as ACR20 response, which is defined by the American College of Rheumatology as at least a 20% improvement in tender/swollen joint counts, alongside several other disease-activity measures. This leaves little room for developers of RA drugs to work with regulators to redefine endpoints or adapt trial designs part way through development (which may happen, for instance, with novel drugs addressing rare diseases). Therefore, leramistat would need to meet an endpoint such as ACR20 in future trials, especially if it aims to improve outcomes for patients exhibiting resistance to DMARDs (the Phase IIb trial focused on patients showing inadequate response to methotrexate). The extent of statistical significance (the p value) of leramistat’s reduction of bone erosion is important in this context. This was not disclosed in the initial announcement, though may be available upon the release of the full trial results. Finally, we note that no new safety concerns arose on the back of the trial and the adverse event rate was similar to that for the placebo group, with the majority of adverse events being mild in nature and resolved without treatment.

There are several approved drugs for RA, including DMARDs. These focus on suppressing inflammation by immediately blocking a single cytokine or receptor and therefore have a relatively fast mechanism of action. Leramistat is an immunometabolic modulator that attempts to reprogramme immune-cell metabolism to curb inflammatory activity at its source, which may require more time to show clear positive patient outcomes. This may be a reason why the drug failed to meet the ACR20 endpoint within the three-month window of the Phase IIb trial. However, leramistat may boost the body’s ability to heal joint or bone damage according to Istesso, as opposed to DMARDs, which merely limit ongoing erosion arising from inflammation. Further evaluation of leramistat’s potential to promote adaptive tissue repair in combination with DMARDs would likely require a randomised trial; such trials tend to be more expensive and have long lead times.

NOT INTENDED FOR PERSONS IN THE EEA

In our view, it is possible that Istesso could decide to pursue another Phase II trial for leramistat as a standalone treatment (with bone and tissue repair as the primary endpoint and ACR20 response as the secondary endpoint) to prove its value-add compared to a standard DMARD treatment. However, there would be limitations to the trial duration for ethical reasons (ie keeping patients off other RA drugs), which make it less likely.

Development options in other indications

Leramistat has been granted both FDA Fast Track and Orphan Drug Designation to support its development and expedite its review to address the unmet medical need in idiopathic pulmonary fibrosis. In other chronic diseases, we see potential for leramistat in osteoarthritis (OA), an indication with significant unmet need given that there are no fully approved disease-modifying OA drugs. However, OA drug development requires long trials and has historically seen a high failure rate despite several large Phase II/III programmes.

Other potential indications include psoriatic arthritis and ankylosing spondylitis, as both involve chronic inflammation leading to joint and bone damage. While the market opportunity for these two indications is smaller than for RA, they each amount to at least several billion dollars worldwide. These diseases are already addressed successfully by biologics, but a meaningful number of patients develop resistance to these drugs, offering an opportunity for leramistat.

With special thanks to Jyoti Prakash from Edison’s healthcare team for her invaluable insights.

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