Optimism persists for neuroscience drug R&D

The late-September failure of Axovant Sciences’ phase 3 Alzheimer’s disease candidate intepirdine is the latest in a long line of setbacks in neurodegenerative disease drug development. Intepirdine became the third small-molecule antagonist of the 5-HT ₆ receptor to flame out in recent years, following similar compounds from larger players Lundbeck and Pfizer. “Drug development in this indication has been risky,” Axovant CEO David Hung said when announcing the results on September 26. Nevertheless, he continued, the “fight against Alzheimer’s disease is far too important to be derailed by this setback.”

“Risky” is an understatement: Alzheimer’s drug development has had no successes in the past 15 years. Other neurodegenerative diseases have hardly fared much better. But Hung’s prediction that biopharma investors and drug developers will continue to try in Alzheimer’s specifically, neurodegeneration in general, and the broader central nervous system (CNS) space despite that track record of failure is backed by an increasingly active dealmaking and financing ecosystem. In fact, Axovant itself will continue to develop intepirdine (a compound it licensed for $5 million from GlaxoSmithKline in December 2014 and rode all the way up to a $3 billion market valuation), albeit in other indications. Its next data readout is for a phase 2b trial of intepirdine in patients with dementia with Lewy bodies, expected near the end of 2017.

Neurobiological discoveries, new therapeutic modalities (for example, stem cells, gene therapy and other oligonucleotide platforms), and better diagnostic tools are deepening the pool of potential drug candidates. Furthermore, these candidates are being propelled by a new wave of venture capital investment in CNS and piquing the interest of the cadre of mid-sized and large biopharma companies that have remained active in CNS drug development.

Investors backing CNS IPOs

Venture interest in new CNS companies has been sparked in part by successful initial public offering (IPO) exits for CNS-focused biotechs over the past several years. At least 46 biotechs with a focus on CNS therapies have gone public since 2012 (through September 2017), raising nearly $3.5 billion in aggregate. These companies typically featured mid-to-late-stage clinical assets, and were led by Axovant’s $362 million IPO in June 2015, a record haul for a clinical-stage biotech that was based largely on the promise of intepirdine (Table 1).

Though the flow of IPO capital peaked in 2015 (in CNS and across all therapeutic areas), several CNS companies have managed to go public since then. Most notably, in 2017, Biohaven Pharmaceuticals—a biotech established, like Axovant, with a model to in-license and develop pharmaceutical assets—raised nearly $194 million, leading nearly all biotech IPOs in the past two years (only the Actelion spin-off Idorsia Pharmaceuticals fared better—the Swiss biotech raised more than $1 billion in its June 2017 debut).

Alliance values increasing

The number of CNS therapeutics alliances with disclosed upfront payments has held relatively steady since 2012, with a high of 21 (in 2012 and 2013) and a low of 15 (in 2014). The total upfront deal value across all CNS deals and the average upfront deal value have trended upward since 2012 (Fig. 1).

The majority of alliances in the CNS area (in which there have been about 80 deals in total between 2012 and September 2017) feature larger pharmaceutical companies accessing technologies and assets from smaller biotechs in a variety of traditional alliances and option deals ( Table 2 ). The most lucrative deals featured a mix of therapeutic modalities, including traditional small-molecule and antibody therapeutics, as well as less established approaches such as oligonucleotide platforms and gene therapies. For example, in 2015, Sanofi’s Genzyme unit struck a deal with gene therapy upstart Voyager Therapeutics for ex-US rights to the biotech’s existing gene therapy candidates and options on any new treatments developed during the collaboration.

Voyager CMO Bernard Ravina likens the company’s most advanced candidate, a gene therapy for Parkinson’s disease, to an enzyme-replacement therapy approach to dopamine pharmacology. The motor symptoms of the disease are mainly due to the progressive death of dopamine-producing neurons in a part of the brain known as the substantia nigra. These neurons also convert the standard therapy, levodopa, to the desired dopamine, and so their death leads to more and more ‘off-time’ for patients when levodopa is not controlling motor symptoms effectively. To overcome this, Voyager injects VY-AADC01, which encodes the enzyme AADC (aromatic l-amino acid decarboxylase) that normally converts levodopa to dopamine, into an area of the brain known as the putamen that survives throughout the course of Parkinson’s disease. This also happens to be an area rich with dopamine receptors.

In this way, “if you can have good local conversion of levodopa to dopamine and a continuous supply of substrate, there’s the potential to eliminate these motor fluctuations and really offer tremendous improvements in function and quality of life to Parkinson’s patients,” said Ravina. The company announced positive phase 1b results for VY-AADC01 in early September, and plans to begin a phase 2/3 pivotal trial by the end of 2017.

The promise of gene therapies has also lured other CNS bellwethers to the field: Biogen’s broad May 2016 deal with the University of Pennsylvania to develop multiple gene therapy programs in diseases of the eye, skeletal muscle, and CNS could be worth as much as $2 billion to the university (though the deal’s $20 million upfront payment is relatively modest).

The CNS area also featured in more than 20 out-licensing deals by large pharmaceutical companies. In fact, 10 of the top 14 alliances that included upfront values saw large pharmaceutical companies offloading assets to smaller competitors. These were often deals for regional or global rights to on-market, non-core assets that have been marketed for years. But deals such as AstraZeneca’s late August 2017 deal with Takeda to jointly develop and commercialize the pharma’s Parkinson’s disease therapeutic MEDI1341 illustrate big pharma’s willingness to share risk and reward in this challenging therapeutic space (Table 3). MEDI1341, an antibody to the emerging Parkinson’s target a-synuclein, is expected to enter phase 1 this year. Takeda is paying AstraZeneca up to $400 million, including an undisclosed upfront payment and potential development and sales milestones. A notable ‘swap’ deal between Amgen and Novartis in which Amgen gained co-development rights to Novartis’s b-secretase (BACE) inhibitor for Alzheimer’s disease and Novartis agreed to co-develop Amgen’s erenumab, an antibody to the calcitonin gene-related peptide (CGRP) receptor for migraine, featured undisclosed economics and so is not tracked.

Compared with alliances, there have been relatively few acquisitions of CNS-focused biotechs since 2012, and only 37 announced included deal terms. Among the most lucrative M&A deals were the purchases of a handful of biotechs with near-market therapeutic candidates (Table 4). Celgene’s $7.3 billion acquisition of Receptos in July 2015 helped to expand the big biotech’s autoimmune/CNS franchise with the addition of the phase 3 multiple sclerosis and Crohn’s disease candidate ozanimod. Teva added Auspex’s phase 3 candidate Austedo (deutetrabenazine) for Huntington’s chorea—a drug that was eventually approved by the US Food and Drug Administration in April 2017 after initially being rejected by the regulator in 2016 (Teva added a second approval for Austedo in August 2017, in tardive dyskinesia, helping to justify the $3.2 billion deal).

New blood

An analysis by Datamonitor Healthcare suggests that total first-round venture capital raised by CNS-focused startups has increased every year since 2012 and that the number of CNS companies raising first-round venture capital has increased markedly since 2015. In total, 73 biotechs focused on CNS diseases raised their first rounds of venture funding from the start of 2012 through September 2017, with a particular focus on neurodegeneration (including Alzheimer’s and Parkinson’s diseases). Thirty-two neurodegeneration-focused biotech startups raised series A venture rounds worth a cumulative $988 million during that time period (Table 5).

Among the recently announced deals, Disarm Therapeutics raised $30 million in its September 2017 series A, amid what co-founder, chairman, and CEO Jason Rhodes describes as strong interest in funding neuroscience startups. Disarm was incubated by Atlas Venture, which was joined in the series A round by Lightstone Ventures and AbbVie Ventures. Biogen EVP and CMO Alfred Sandrock is on Disarm’s board. Having corporate investors to boost new approaches to CNS diseases is common: in series A funding rounds by CNS biotechs from 2012 through September 2017, 31 featured strategic investors.

Disarm aims to tackle a range of central and peripheral nervous system diseases by inhibiting SARM1, a protein the company believes lies at the center of axonal degeneration. “SARM1 is inactive in healthy neurons,” explained Rhodes, but is activated in response to autoimmune or pathogenic pressure. “What we’ve seen with SARM1 is if you knock it out, you can essentially protect animals from axonal degeneration,” a defining feature of diseases such as multiple sclerosis, glaucoma, amyotrophic lateral sclerosis and peripheral neuropathies.

SARM1 biology was first described in the literature in 2012, but not every target is so novel. The biotech E-Scape Bio raised $63 million in venture capital in July 2017 to finance its attempt to target apolipoprotein E4 (APOE4), an important genetic risk factor for Alzheimer’s disease. Other companies have used APOE4 as a tool to create more homogeneous patient populations for clinical trials, or to understand how a genetic subset may behave in terms of disease progression relative to other patients, said Leon Chen, interim CEO of E-Scape and a venture partner with Orbimed, the lead investor in E-Scape’s financing. Although APOE4’s significance has been known since the 1990s, until recently “nobody found a way to target it,” said Chen. E-Scape’s lead compound is a small molecule designed to bind to APOE4 and alter its structure to mimic that of APOE3, which is not associated with an elevated risk of Alzheimer’s disease.

E-Scape’s strategy also benefits from broader industry trends: the decades-long shift toward focusing on rare and orphan diseases “allows us to think about CNS diseases in a totally different way,” Chen commented. “Ten years ago, a genetically defined subpopulation in an already smallish indication, people wouldn’t look at that as a viable market,” he said. Indeed, as genetic studies and neurobiological discoveries yield new targets in areas such as Alzheimer’s or Parkinson’s disease, researchers are beginning to unravel some of the root causes of neurodegenerative disorders, driving yet more interest in drug development around these diseases.

In Parkinson’s disease, for example, “there are some genetics that apply to the whole population, some where we’re not sure, and some that are quite isolated,” said Merck & Co. neuroscience VP Darryle Schoepp. For example, a mutation in a gene that codes for the enzyme glucocerebrosidase is found in a relatively large contingent of people with Parkinson’s, said Schoepp. Several companies, including Lysosomal Therapeutics and Prevail Therapeutics, have launched over the past few years to pursue treatments for that subset of Parkinson’s patients. In January 2017, Allergan paid an undisclosed sum for an option to acquire Lysosomal Therapeutics if early-stage clinical data are positive.

Keen observers of the CNS drug development space would have decades’ worth of reasons to remain skeptical about Disarm’s, or E-Scape’s or Lysosomal’s chances. The CNS space has proven to be a harder nut to crack than most therapeutic areas. But just days after Axovant announced its intepirdine failure, the biotech Zogenix reported positive results in a phase 3 trial of ZX-008 (low-dose fenfluramine) for Dravet syndrome, a rare pediatric epilepsy. Those data were highly statistically significant across all endpoints, more than doubling the value of the company’s shares on the morning of the announcement. Thus even though failures such as Axovant’s can sap the field’s gathering optimism, the glimpses of success can restore it.