AlzeCure Pharma — Progress on all fronts and evolving into Phase II

AlzeCure has two distinct approaches to tackling AD. The NeuroRestore platform is focused on novel symptomatic treatment of AD (lead compound ACD856 is in Phase I). The Alzstatin platform (preclinical) was developed to be a preventive and disease modifying therapy of AD and has a differentiated mechanism of action from the anti-Aβ antibodies.

NeuroRestore is AlzeCure’s lead platform in AD. As a reminder, in August 2021, the company reported results from the SAD part of the Phase I trial investigating ACD856 in healthy volunteers. Safety and tolerability data were good and AlzeCure proceeded to the next step, the MAD part, in October 2021.

More recently, AlzeCure also presented Phase I SAD data at the AD/PD conference, in Barcelona, in March 2022. The poster presentation provided more granular details. In addition to a good safety/tolerability profile, the data showed that bioavailability was high, even after feeding, and a half-life of c 20 hours means the compound is well suited for once-daily dosing. Since ACD856 will be used to treat AD patients with cognitive impairment, optimal dosing is crucial, in our view.

At the same conference, AlzeCure also presented new preclinical data, with another compound, AC-0027136, from the NeuroRestore platform and similar to the lead drug candidate, ACD856. The new data showed that AC-0027136, in addition to a dose-dependent effect on neurotrophins, positively affected mitochondrial function. Mitochondria, which produce intracellular energy, are impaired in neurodegenerative diseases such as AD. Further in vivo experiments with the same compound showed that AC-0027136 could also significantly improve learning and long-term memory in aged animals.

In March 2022, AlzeCure announced that preliminary data from the MAD part of the study showed that the NeuroRestore lead compound ACD856 successfully crosses the blood-brain barrier, which is a key step towards successful completion of Phase I development. The final results from the MAD part are expected around mid-2022, which will then lead to a Phase II study.

ACD856 improves the signalling of neurotrophins, including brain-derived- neurotrophin-factor (BDNF) complementing as well as nerve growth factor (NGF), through positive modulation of the TrkA and TrkB receptors, and is expected to improve cognitive function and memory. It is therefore expected to be a symptomatic treatment, although there is a scientific rationale for disease modification potential as well. It is targeting several potential indications of cognitive disorders, for example in Parkinson’s disease, traumatic brain injury (TBI) and sleep disorders.

AlzeCure’s second platform focused on AD, Alzstatin, is dedicated to the development of disease-modifying drug candidates. These are small molecules capable of modulating γ-secretase, a target involved upstream in the production cascade of toxic Aβ-aggregates. Modulation of γ-secretase produces shorter, less toxic Aβ-peptides while not changing overall levels of Aβ. This is a novel approach where modulation rather than full inhibition of γ-secretase is expected to circumvent the safety issues previously found by large pharma with γ-secretase inhibitors. In addition, shorter Aβ-fragments, ie the Aβ37 and 38 isoforms formed after gamma-secretase modulation, have been reported to have beneficial effects by themselves by inhibiting Aβ-aggregation. Moreover, recent data also indicate that higher amounts of these shorter fragments correlate with a better cognitive outcome in AD.

The latest preclinical data from this platform were presented in April 2022 at the second Swedish Meeting for Alzheimer Research. In vivo studies with one of the compounds from this platform showed that it had a good pharmacokinetic profile, the molecule efficiently crosses the blood-brain barrier and reduced the amount of harmful Aβ42 by more than 50%, which makes it a suitable candidate to investigate for disease-modifying therapy in AD.

ACD440 is AlzeCure’s lead drug candidate in the Painless platform. It is a topical vanilloid receptor 1 (VR-1) antagonist that completed a Phase Ib trial in 2021. The VR-1, more commonly known as TRPV1 or the capsaicin receptor, has been a well-established target for the treatment of pain and has been implicated in the transduction of pain (nociceptive, inflammatory or neuropathic). The discovery of this mechanism by professor David Julius was awarded the 2021 Nobel Prize in Physiology or Medicine at University of California, San Francisco, United States. His fundamental research led to the identification of the specific protein responsible for the sensation of burning pain, TRPV1, in 1997. In our initiation report, we discuss the history of the development of TRPV1 antagonists and AlzeCure’s solution.

The most recent development in this project is the approval by Swedish regulatory authorities for the initiation of Phase IIa trials in peripheral neuropathic pain. In addition to the FDA’s response to AlzeCure’s pre-IND application, the company now has all regulatory approvals needed to start the trial. As a reminder, before initiating with a trial, the company submitted its intentions to the FDA. This extra step, while somewhat time consuming, will help to address unforeseen questions from the FDA when AlzeCure submits a full IND application (which is needed to conduct trials in the US). With the FDA’s input, the company can now proceed to initiation of the trial. The company has not yet provided any guidance on the specific design or timeline, but the fund-raise is complete so we expect the company to announce the details shortly.

Peripheral neuropathic pain is a symptom of a broad group of different, underlying conditions such as diabetic neuropathy, chemotherapy-induced pain or herpetic neuralgia. Given the potentially large patient heterogeneity across this indication, we believe management will likely investigate ACD440 in specific sub-populations of patients.

As a reminder, the latest preclinical data from AlzeCure’s TrkA-NAM project were presented at the IASP Congress in June 2021. This project investigates a small molecule negative allosteric modulator targeting the TrkA receptor. This is a novel analgesic mechanism that involves inhibiting the activity of the pain mediator NGF by blocking its receptor TrkA.

So far, AlzeCure’s lead optimisation efforts in the Trk-NAM project have identified potent and selective potential TrkA-NAM drug candidates. These molecules demonstrated pain relief in preclinical in vivo models, both in neuropathic pain and arthritis, suggesting broad indication potential. AlzeCure expects to select and announce a drug candidate in the near future.

Large pharma companies have explored this pathway extensively using NGF targeting antibodies. For example, Pfizer/Lilly’s anti-NGF antibody tanezumab has been investigated in Phase III trials in osteoarthritic pain and showed potent efficacy in pain management. However, although proven to be effective, in a small group of patients it caused rapidly progressing osteoarthritis, which ultimately stalled its approval. Without the safety issues, this drug could have been a novel blockbuster pain killer, in our view. AlzeCure’s TrkA-NAM approach is differentiated from the NGF targeting antibodies. TrkA-NAM could offer a safety improvement over anti-NGF antibodies through selectively attenuating NGF/TrkA signalling, while sparing NGF/p75NTR signalling (see our initiation report for a more detailed explanation of the mechanism of action).

In March 2022, AlzeCure completed a SEK48.5m (gross) rights issue. The issued number of shares corresponded to 57.3% of the total offered. An additional 2.1% of shares were subscribed to without the support of subscription rights, so the final subscription rate was 59.4%. In total, 80% of the issue was secured, so the balance of shares was allocated to the underwriters. In total, the number of shares increased by c 12.1m to 49.9m and is now 50.7m. The rights issue price was SEK4.00 per share versus SEK6.96 per share the day before the announcement.

We note that the capital raise was achieved during a period when market conditions made it difficult for biotech companies to raise capital. Both the NASDAQ Biotechnology and the STOXX Europe Total Market Biotechnology indices had contracted, by c 30% and c 25%, respectively, from their peaks in 2021. With the new funds in place, AlzeCure indicated that it can now carry out the Phase IIa study with ACD440, which is a key near-term catalyst.

Our updated risk-adjusted NPV of AlzeCure is at SEK1.08bn or SEK21.3 per share from SEK847m or SEK22.4 per share previously. Our absolute valuation was positively affected by rolling the model forward and we have also increased the success probability for ACD856 to 7.5% from 5% based on the Phase I MAD progress described above. These updates were more than offset by dilution on a per-share basis. We keep our other assumptions unchanged. A full breakdown of our valuation and underlying assumptions can be found in our initiation report.

We note that as at end Q1 (31 March 2022), net cash raised through the late March rights issue of SEK41.3m (reflected in other current receivables) had not yet been recorded as cash in the company accounts. However, for the purpose of our valuation, we include these net proceeds, which, added to the reported end March cash of SEK25.7m, results in a cash position of SEK67m. AlzeCure’s FY21 results showed operating spending of SEK77.9m, slightly up year-on-year. Cash was SEK66.7m at the end of Q122, which includes the funds raised in March 2022. According to our model, this means the company is sufficiently funded until 2023. We assume an illustrative long-term liability of approximately SEK80m in 2023 in lieu of equity funding, as per our research principles.