Catabasis soars on fresh Duchenne trial data, proving biotech melt-up still in progress; but for how much longer?

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The News:

Recuperating from a trial flop involving its lead drug for Duchenne muscular dystrophy, Catabasis Pharmaceuticals Inc. (Cambridge MA) is charging ahead with a late-stage study, hyping new data on Wednesday intimating that the treatment can improve the lives of boys with the muscle-wasting disease, according to the Boston Business Journal.

Catabasis previously announced in January that a Phase 2 study of the drug, called edasalonexent, had failed to meet its primary goal–significantly reducing leg muscle inflammation compared to placebo after 12 weeks. At the time, the company said that boys who received a higher dosage had seen some improvement in muscle function, but that the changes weren’t statistically significant.

The trial failure crushed Catabasis’s share price, wiping out more than half the company’s market value overnight. But the 36-employee biotech never scrapped its plans for a larger Phase 3 study, hoping to become just the second company to win FDA approval for a disease-modifying Duchenne drug after neighbor, Cambridge-based Sarepta Therapeutics, did so last year.

On Wednesday (October 4, 2017), Catabasis released data from an extended portion of the Phase 2 trial, in which around half of the patients continued to receive edasalonexent for an additional 12 or 24 weeks. According to the company, these patients have continued to improve as measured by a handful of physical tests, including a timed 10-meter walk and 4-stair climb.

Catabasis now plans to launch a Phase 3 trial in the first half of 2018. In an interview, CEO Jill Milne said the study will last 12 months and involve around 125 boys, with initial data expected in 2020.

“We’re incredibly excited,” Milne said. “Our hope and our vision is that it could be a foundational therapy for boys with Duchenne.”

In Duchenne, the absence of a protein called dystrophin causes progressive muscle weakness. The Sarepta drug is designed to skip over a specific gene mutation shared by 13% of patients that prevents the creation of dystrophin. By contrast, Catabasis’s drug is designed to block a protein that contributes to inflammation and muscle damage.

According to Milne, Catabasis envisions its drug as a stand-alone treatment for all patients regardless of their gene mutation, but believes that boys taking the Sarepta drug could also benefit from it.

Steve’s Take:

Despite data, which as a whole have been a mixed bag and anything but stellar, Catabasis Pharma is now looking to test its experimental Duchenne drug edasalonexent in a late-stage trial after posting the last of the data from its Phase 1/2 work. This comes on the heels of the microcap biotech posting a Phase 1 trial at the start of the year that showed its drug was found to be safe when given to adults and reduced levels of NF-kb.

The latest data, reported by FiercePharma, were published in the Journal of Clinical Pharmacology, and the company saw its shares close up 43% Wednesday on that positive news. Edasalonexent (a.k.a. CAT-1004) is an oral NF-kB inhibitor and–unlike other DMD therapies such as Sarepta’s injectable Exondys 51 (eteplirsen), which was approved last year for a specific genetically defined group of patients–could potentially be used in patients regardless of their underlying mutation, says the company.

Back in February, the Cambridge, MA-based biotech said the Part B of its so-called “MoveDMD” phase 2 trial, which was always the bigger test, failed to beat out placebo in 31 Duchenne patients with the measure of change in lower leg muscles.

Its shares were routed, and closed at just $1.38 at the end of trading when the news was posted.

But the company pointed to an open-label extension portion of this test, known as Part C, that was still ongoing. Today, it revealed those data, which it says showed “positive efficacy” in regard to sustained disease-modifying effects, following 24 and 36 weeks of treatment with its med.

Bottom Line:

It’s time for biotech investors to take a chill pill and perhaps ease up on the throttle.

Max Nisen at Bloomberg points out that share prices have been soaring; the Nasdaq Biotech Index is up 28% this year. Drug failures are being punished more modestly. And now the definition of drug success appears to be getting more generous.

Steve's Take: #biotech #investors take a chill pill on @CatabasisPharma Click To Tweet

As far as today’s euphoria for Catabasis goes, have we already forgotten that its Phase 2 trial of the medicine for DMD bombed badly earlier this year. But its shares roared back Wednesday morning after the company claimed a subset of patients who stayed on the drug showed “clinically meaningful” improvement, sufficient to justify a final-stage trial.

“Clinically meaningful” is ambiguous at best, Nisen rightly notes and may not translate to statistically meaningful. And this new data comes with no placebo arm for comparison. Pushing a drug forward based on a failed trial and uncontrolled data from possibly cherry-picked patients is not usually a formula for achievement.

This follows an unfortunate trend of companies and investors hyping dubious DMD results. For example, on September 29, investors sent shares of PTC Therapeutics Inc. up more than 14% after a FDA-convened panel of experts declared the company’s DMD drug wasn’t a total failure.

The drug had flunked multiple trials, FDA scientists had panned its data, and the drug has a vanishingly small shot at approval. Investors chose to see the glass as half-full.

Amicus Therapeutics Inc. is another example of such capriciousness. Its shares jumped more than 8% on Wednesday after it said an early-stage trial of a drug for Pompe disease helped patients. But this was only a 20-person test, with no control group. Some of the positive data came from even tinier numbers of patients; there were multiple sub-groups, and patients started the drug at different times.

Amicus is plugging the possibility of an early FDA approval based on this data. But another trial will almost certainly be required to confirm the drug’s effectiveness. Despite this rather wimpy progress, shares have already gained nearly 200% this year.

Caveat Investor:

Mohamed A. El-Erian is a bona fide member of the global power elite (a former deputy director of the IMF and president of the Harvard Management Co.). Yet he writes in an accessible style on the Bloomberg website. When El-Erian talks, people listen, says Jim Rickards at Daily Reckoning.

In a recent article El-Erian raises serious doubts about the sustainability of the bull market in stocks because of reduced liquidity resulting from simultaneous policy tightening by the Fed, European Central Bank (ECB) and the Bank of England.

He says stocks rose on a sea of liquidity and they may crash when that liquidity is removed. Simply put, markets run out of buyers. This is a warning to other elites, but it’s also a warning to you and me.

It may be time for everyday investors to listen to the big money. They are the ones who see financial crashes coming first.

The exact date is unimportant. What is most important is that the crisis is coming and the time to prepare is now. It could happen in 2018, 2019, or it could happen tomorrow. The conditions for collapse are all in place.

And the irrational exuberance in biotech, where investors are literally throwing money at any development, no matter how speculative–just not miss the possible upside–presages and validates this looming crash.

If you’ve been mulling some traditional hedging strategies as markets keep setting record highs, the time to act may be sooner than later. Or now.

Steve Walker has no position in any stocks mentioned. MedContent Inc. has no position in any stocks mentioned. has a disclosure policy.

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