BLINDNESS: THE UNDERRATED INVESTMENT CASE
SECTOR BACKGROUND
A
s the scope and possibilities of science and technology continue to grow at exponential rates, many healthcare sector stocks have the potential to robustly outperform the market over the next decade, especially in light of COVID-19, maturity in Big Tech, slower economic growth and the low-yield environment. Within this trend, there are particular hotspots of investor potential. Edison has identified macular degeneration, a condition causing degrees of blindness, as having untapped investment potential. It has also received less media coverage and analyst recognition than almost any other.
INVESTMENT LOGIC
Age-related macular degeneration (AMD) is the leading cause of blindness in older adults across western countries. It damages the retina but its exact causes are not fully understood. The treatment market for neovascular AMD (often referred to as ’wet AMD‘) is already valued at more than US$5.7bn and is still expanding. Two treatments – ranibizumab and aflibercept – achieved combined sales growth of c 9% of in 2019. These treatments are targeted at c 2.8 million people across the US and Europe, most of whom would otherwise become legally blind. Another c 18–22 million people in these regions have earlyto-intermediate forms of ’dry AMD‘. Dry AMD can progress to geographic atrophy (GA), which we estimate affects a further c 2.7 million. There is no widely accepted and approved treatment for either condition and GA often also leads to legal blindness and loss of independence. Effective dry AMD and GA treatments could be ‘blockbusters’, adding billions of dollars to the market. There is also a signficant opportunity for investors as companies compete to improve the effectiveness of existing wet AMD treatments, make them more convenient and/or reduce the need for invasive procedures.
| Ticker | Market Cap ($m) | Price | region |
|---|
| Astellas Pharma | 4503.T | 2,780,549 | 1,496.00 | Asia |
| Roche | ROG.S | 273,379 | 319.95 | Europe |
| Pfizer | PFE | 206,688 | 37.19 | Americas |
| Novartis | NOVN.S | 202,321 | 87.69 | Europe |
| Regeneron | REGN.O | 64,250 | 603.00 | Americas |
| Bayer | BAYGn.DE | 43,467 | 44.24 | Europe |
| Ionis Pharmaceuticals | IONS.O | 6,773 | 48.48 | Americas |
| Molecular Partners | MOLN.S | 3,439 | 15.54 | Europe |
| Kodiak Sciences | KOD.O | 3,401 | 76.07 | Americas |
| Chengdu Kanghong Biotech Co Galderma | 300841.SZ | 3,132 | 522.00 | Asia |
| Apellis Pharmaceuticals | APLS.O | 2,699 | 35.70 | Americas |
| Adverum Biotechnologies | ADVM.O | 1,151 | 11.83 | Americas |
| Regenxbio | RGNX.O | 1,052 | 28.18 | Americas |
| Opthea | OPT.AX | 789 | 2.93 | Oceania |
| Oxford Biomedica | OXB.L | 658 | 800.00 | Europe |
| Iveric bio | ISEE.O | 544 | 5.93 | Americas |
| Graybug Vision | GRAY.O | 314 | 15.64 | Americas |
| Lineage Cell Therapeutics | LCTX | 194 | 1.29 | Americas |
| AbbVie | ABBV.K | 152 | 86.62 | Americas |
| Stealth BioTherapeutics | MITO.O | 67 | 1.36 | Americas |
| Nova Eye Medical | EYE.AX | 45 | 0.18 | Oceania |
| Pixium Vision | ALPIX.PA | 29 | 0.67 | Europe |
| Alkahest | – | – | – | – |
| Alkeus Pharmaceuticals | – | – | – | – |
| Allegro Ophthalmics | – | – | – | – |
| Iconic Therapeutics | – | – | – | – |
| Janssen | – | – | – | – |
| LumiThera | – | – | – | – |
| PanOptica | – | – | – | – |
| Regeneration Patch Technologies | – | – | – | – |
Source: Refinitiv price at 10 October 2020
DRY AMD THERAPEUTIC DEVELOPMENT SUMMIT – VIRTUAL EVENT OCTOBER 28-29, 2020
Introducing the Dry AMD Therapeutic Development Summit which is the only platform discussing issues present in the development of Dry AMD therapeutics. Uniting industry specialists from pharma, biotech, academia and solution providers to examine the most pressing issues important to bringing the next generation of Dry AMD drugs to market. Pooya Hemami, the author of this report will be chairing a panel at the event register to listen in on his panel.
Executive summary
What is AMD and how is it treated?
Age-related macular degeneration (AMD) remains the leading cause of blindness in older adults in western countries, and is characterised by damage to the macular region of the retina (see diagram), leading to central vision loss. The exact causes of AMD are not fully understood. There are two forms of AMD: dry and wet:
- The dry form of AMD accounts for about 85–90% of cases. As dry AMD advances, it can lead to an associated condition called geographic atrophy (GA). Dry AMD has no proven broadly approved treatment.
- The wet form of AMD (also known as neovascular AMD, or NVAMD) can be controlled in most cases with regular injections into the eyeball of what are called anti-VEGF drugs. However, there remains a need to improve NVAMD treatments, as recurring injections are burdensome, and about a third of patients will become resistant to anti-VEGF treatment over time.
Market Opportunity
We estimate that across the US and Europe in 2020 there are between 18 and 22 million cases of early-to-intermediate stage dry-AMD, and about 5.5 million cases of late-stage AMD. (Note: as all AMD cases start as dry-AMD, ’late-stage AMD‘ is defined as those with either geographic atrophy or NVAMD).
the NVAMD pipeline
The NVAMD market is already worth in excess of $5.75bn worldwide. We do not foresee significant reimbursement challenges for new treatments for NVAMD, as the greatest hurdle, in our view, is obtaining regulatory approval.
Companies are looking at ways to extend the durability of NVAMD treatment to reduce the frequency of injections into the eyeball and so improve compliance. Roche has two late-stage candidates (faricimab and PDS ranibizumab) seeking to do this. Meanwhile, Kodiak’s pivotal-stage KSI-301 may reduce dosing frequency to every six months.
In our view, the late-stage approaches we profile in the report generally carry relatively lower regulatory risk (thus a higher chance of obtaining approval) than some of the next-generation therapies we outline.
Next-generation NVAMD therapies
There are many new candidates on the horizon (such as OPT-302 or ICON-4), which may in the next half-decade or so provide new treatment options for NVAMD patients resistant to current treatment.
Other next-generation NVAMD products in the pipeline (such as GB-102) hold the promise of even more durable treatment effects, particularly those that may employ gene therapy (namely RGX-314 and ADVM-022).
Non-invasive NVAMD drug candidates may also allow for patient-administered therapy (namely AKST4290 or PAN-90806), greatly improving treatment compliance and overall safety by reducing the need for injections. However, we believe longer studies will be needed to confirm the durability of these non-invasive drug treatments.
Dry AMD continues to represent an untapped frontier
Given the prevalence of dry AMD, it is foreseeable that this market could easily eclipse the >$5.75bn size of the NVAMD market if treatments can be shown to have definitive efficacy and obtain approval in the largest markets (such as the US).
Several mid- to late-stage drugs are targeting inflammation and/or oxidative stress, and promising data have been released in the past 18 months for pegcetacoplan, Zimura and risuteganib. Zimura has already shown positive 18-month GA data in a Phase II/III study and a second Phase III is underway. There are also oral drugs (Oracea and ALK-001) in Phase III trials.
Proprietary light-based therapy (2RT and Valeda) may also potentially decelerate dry AMD progression in early-to-intermediate stage patients, although further clinical studies will be needed to confirm earlier data and drive adoption.
Altogether, we continue to expect the next five to 10 years to be potentially revolutionary in a segment that until now has had little to offer patients beyond dietary supplements and lifestyle modifications.
Visual rehabilitation for late-stage GA patients
Unfortunately, many patients with GA or NVAMD will progress into severe central vision loss. None of the treatments discussed above in the report is designed to benefit patients who have already developed such profound loss (as their intent is
more to preserve vision, since there is no known proven way to regenerate damaged retinal photoreceptors or downstream ganglion cells). However, Pixium Vision (ALPIX, Euronext Growth; a research client of Edison Investment Research) is advancing a photovoltaic retinal implant-based platform that aims to provide a new form of prosthetic vision to restore functioning to those with profound vision loss attributable to retinal diseases such as GA. We expect a registrationenabling study to start in H121, which could lead to EU commercialisation in H223.
Final word
Given the pipeline, the outlook for prospective patients and the industry for both dry AMD and NVAMD appears very promising, with blockbustersize revenue opportunities for products that can improve outcomes in the space or, in the case of NVAMD, at least deliver improved convenience or treatment durability.
EMERGING THERAPIES IN AMD
A second look at next-generation treatments
Age-related macular degeneration (AMD) remains the leading cause of blindness in older adults in western countries. While neovascular AMD (NVAMD, or wet-AMD) can be controlled in most cases with
recurring anti-vascular endothelial growth factor A (VEGF-A) intravitreal injections (IVT), there is a substantial unmet need for those with the dry form of the disease (whose prevalence is about six- to nine-fold higher), particularly those who develop geographic atrophy (GA). There also remains a need to improve NVAMD treatments, as recurring IVT injections are burdensome, and about a third of
patients will become refractory to anti-VEGF-A over time. This report provides an updated overview of many of the leading candidates and technologies that will shape the AMD market in the coming decade. We expect that while not all of these products will be successful, those that are could potentially generate significant returns for investors.
A second look at next-generation treatments
The NVAMD market size is already substantial, at over $5.75bn worldwide revenue, as ranibizumab and aflibercept combined had c 9% sales growth in 2019. All NVAMD cases are preceded by dry-AMD, and NVAMD reflects roughly only half of late-stage AMD patients. We estimate late-stage AMD (defined as those patients with GA or NVAMD) affects roughly 5.5 million people across the US and Europe, and most of these patients will become legally blind without treatment. Another c 18–22 million people in these regions have early-tointermediate forms of dry-AMD and could be at risk of developing late-AMD, but there is no widely accepted and approved treatment for this stage of the condition. Altogether, effective GA or dry-AMD treatments could add billions of dollars to an already huge AMD market.
Opportunities abound in the NVAMD space
Companies are looking at ways to extend NVAMD treatment durability to reduce the frequency of IVT instillations, and Roche has two late-stage candidates (faricimab, PDS-ranibizumab) seeking to do this. Kodiak’s pivotal-stage KSI-301 may
reduce dosing frequency to every six months. We also review alternate mechanisms including gene therapies that can provide extended treatment durations of potentially up to a year, as well as candidates targeting non-VEGF-A mechanisms to provide options for those refractory to current treatments. Topical and oral (non-invasive) drug treatments could go a long way in improving treatment compliance.
Dry-AMD continues to represent an untapped frontier
Several mid- to late-stage drugs are targeting inflammation and/or oxidative stress, and promising
data has been released in the past 18 months for pegcetacoplan, Zimura and risuteganib. Zimura has already shown positive 18-month GA data in a Phase II/III study and a second Phase III is underway. There are also oral drugs (Oracea and ALK-001) in Phase III trials in the untapped dry-AMD market. Proprietary light-based therapy may also potentially decelerate progression of early-to-intermediate stage patients although further clinical studies will be needed to confirm earlier data and drive adoption. Altogether, we continue to expect the next five to 10 years to be potentially revolutionary in a segment that until now has had little to offer to patients beyond dietary supplements and lifestyle modifications.
AGE-RELATED MACULAR DEGENERATION: WIDE OPPORTUNITIES
AMD remains the leading cause of blindness in adults over the age of 55 in western countries, and is characterised by damage to the macular1 region of the retina, leading to central vision loss. Prevalence increases with age, as about 2% of the population have the condition at age 40, rising to c 25% by age 80.2 AMD patients generally maintain their peripheral vision but the damage to central vision can be so severe in advanced cases as to restrict a patient’s ability to work, read, recognise faces or independently perform other habitual tasks. In early to intermediate cases, there may be a loss of up to one or two lines of central acuity on a standardised visual acuity (VA) chart as well as decreased contrast sensitivity, but often patients are not prevented from doing their day-to-day work or leisure activities.
While the exact pathophysiology is not fully understood, AMD is believed to be caused by oxidative stress, mitochondrial dysfunction, inflammatory processes and/or cardiovascular (lipid-cholesterol pathway) factors. Genetic and environmental factors (such as smoking historyor prolonged exposure to ultraviolet light) may also play a role in pathogenesis. There are two forms of AMD: dry (non-exudative) and wet (exudative).
Exhibit 1: diagram of an eyeball including the location of the macula
Source: Wikimedia Commons; Medical gallery of Blausen Medical 2014. DOI10:15347/wjm/2014.010
The dry form of AMD accounts for about 85–90% of cases3 (all AMD cases start as dry-AMD) and cellular atrophy is the primary cause of vision loss and photoreceptor damage in this form. This condition often evolves relatively slowly but currently has no proven broadly approved treatment, although lifestyle factors and dietary or nutritional supplement changes may help decelerate progression. As the dry form of the condition advances, it can lead to GA, where there are irreversible scattered or confluent areas of degeneration of the retinal pigment epithelium (RPE) cells, damaging the overlying photoreceptors and resulting in a loss of visual function.
