Clinuvel Pharmaceuticals (CUV: $16.62) has built a profitable business from the successful commercialization of Scenesse, a drug indicated for the treatment of EPP (erythropoietic protoporphyria). In the last financial year, revenue was up 19% and net profit was up 46% to $30.6 million. The company finished June with a cash balance of $157 million.
While the EPP market for Clinuvel can be expected to continually grow with no immediate competition likely to surface in at least the next three years, there is one core focus for the company that represents the greatest medium-term growth driver – the treatment of the autoimmune disorder, vitiligo.
Clinuvel has been pursuing this application for Scenesse since 2010, and has generated positive Phase II results. However the company now has a clear commercial path forward, with new competitors providing guidance on bringing this drug to market for the treatment of vitiligo. It has also reached an agreement with the FDA whereby Scenesse can be trialled with phototherapy (which is used off-label to treat the skin disorder). Gaining agreement with the FDA has been an impediment.
Clinuvel's Portfolio Diversification
Clinuvel has sought to diversify its business, reducing the reliance entirely on one product with its single, concomitant addressable market. The company is investigating the use of the active pharmaceutical ingredient in Scenesse (afamelanotide) for other indications. One of these is in the treatment of ischemic stroke.
It has had some encouraging results in using Scenesse in the treatment of stroke, and the current trial is assessing a higher, immediate release version of afamelanotide. Whilst early data continues to show encouraging results, it is nonetheless a challenging and higher-risk pursuit for the company. As such, it should not be expected that the program advance rapidly. Rather a more moderate, measured path forward is a more pragmatic expectation. For Clinuvel's CEO Philippe Wolgen, one of the most important facets that underpins the business is risk mitigation.
Clinuvel is launching a portfolio of photocosmetics, with subsequent products to include melanocortins (a peptide group of which afamelanotide is an analogue) delivered topically. Not being absorbed into the bloodstream means that regulatory approval will not be required. These products represent an addressable market of $60 million a year according to the company. They are not core to the firm's business but will help build the profile of Clinuvel's science and technology-driven ascendancy in the melanocortin field.
Clinuvel has accessed a drug master file (to support a regulatory filing with respect to manufacturing quality) for ACTH (a melanocortin) which will compete with two other products on the market, initially as a generic in an immediate-release form. The current ACTH products on the market generate approximately US$200 million in sales a year. Given that this is within the company's area of expertise, ACTH products are a logical extension of the company's business, with the first product anticipated to reach the market in around two to three years' time according to Wolgen. Only bioequivalence studies are expected to be necessary. Subsequent products are expected to be proprietary, modified-release products. These will require more substantial clinical studies.
Lowest Risk Market Extensions - Vitiligo (Adolescent EPP, VP and DNA Repair)
More than 15,200 doses of Scenesse have now been delivered to patients around the world with an established safety profile, giving the company comfort in extending the drug's use into new indications.
In July last year a topical formulation of a JAK inhibitor, Opzelura from Incyte, was approved by the FDA as the first treatment for vitiligo. It is indicated only for up to 10% of the total body surface area. The product has achieved reimbursement from payors with an annual treatment cost of around US$21,000. The product needs to be applied twice daily for potentially more than 24 weeks.
The progress with Opzelura delivers a path forward both with regulatory approval for Clinuvel as well as reimbursement acceptance by payors. Sales progress can be expected to be announced in 2024 by Incyte for this product. Incyte conducted two Phase III clinical studies with this product in 674 patients.
The other competitor to note is Pfizer with its oral JAK inhibitor, called ritlecitinib, which is currently being investigated in a 600 patient Phase III study. That study is expected to be complete in mid-2025. The annual cost of a systemic therapy for vitiligo may be around US$80,000. However, this potential therapy comes with the safety concern of decreased immune system functioning.
Clinuvel believes the addressable market for a systemic vitiligo treatment in the US to be around US$500 million a year using conservative estimates (see recent company presentation). For an annual price of US$80,000, assuming eight treatments a year, it can be expected that there will be a moderate reduction in the Scenesse treatment, which sells for around US$15,000 per dose for EPP. However accessing a market 10 times the size in the US alone would quickly compensate for any price reduction to maintain uniform pricing across EPP and vitiligo treatments.
Last month Clinuvel started the first of its two Phase III studies in vitiligo, which will seek to recruit 200 patients. Patients will receive seven doses of Scenesse over 20 weeks, with a six-month follow-up period. Clinuvel's trial will compare Scenesse with narrowband Ultraviolet B light (NB-UVB or phototherapy) against the treatment with NB-UVB alone. The study will not be blinded. The second 200 patient study is expected to start once recruitment in the first study has reached 60%-80%.
Other Label Extensions Underway for Scenesse
Clinuvel is also conducting studies with Scenesse for the treatment of variegate porphyria (VP, 3,000 - 4,000 patients in the US and Europe, a label extension to EPP), in the treatment of adolescents with EPP (to increase the current adult EPP market size by 21%, trial due to start in 2024), and in DNA repair in the ultrarare skin disorder xeroderma pigmentosum (XP, less than 1,300 patients worldwide). Patients with XP have the highest incidence of skin cancer on the planet said Wolgen at the recent AGM. Showing effects in DNA repair would significantly enhance the claims/benefits of Scenesse not only as a photoprotective agent but also as a therapy that can stimulate repair following disease.
Summary
Clinuvel is capitalised at $821 million. With a strong short, medium and long term outlook, the stock is an excellent core portfolio holding.
Bioshares recommendation: Buy
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