|Shares Out. (in M):||27||P/E||0||0|
|Market Cap (in $M):||41||P/FCF||0||0|
|Net Debt (in $M):||-127||EBIT||0||0|
|TEV (in $M):||168||TEV/EBIT||0||0|
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I’m going to keep this write-up relatively short because of its time-sensitive nature due to its heavy reliance on its drug portfolio’s position in the FDA pipeline. As of now, Galera Therapeutics provides a compelling stock to buy due to its undeniable clinical results and the numerous factors that make it a primary candidate for eventual FDA approval in 2023.
Galera currently has two drugs in its pipeline: Avasopasem and Rucosopasem. For the sake of this write-up and the practicality of timing Avasopasem for head and neck cancer, which Galera is planning to file an NDA for by the end of 2022, will be my primary focus and sourcing for my investment rationale. Rucosopasem, which is currently recruiting for Phase 2 of its FDA clinical trials (planning on completing enrollment for Phase 2 in 2H2023) won’t be referenced in this write-up.
Once the FDA accepts Galera’s NDA based on its ROMAN Phase 3 trial results, Galera will be able to get an expedited PDUFA due to its Breakout Therapy and Fast Track Designation it received after its strong Phase 2 results. With this in mind, Avasopasem should be ready for pharmaceutical use by Q3’23 assuming they submit their NDA application on January 1, 2023 (sixty-day NDA review period and six-month expedited PDUFA/BLA period), clearing the way for undisturbed, early access to the target market before the possibility of any other marketable drug for severe oral mucositis penetrating the market space.
Of the analyst projections that I’ve seen for Galera Therapeutics, the average analyst PT is a median estimate of $10 with a high estimate of $20 and a low estimate of $2 (net cash). Although my implied equity estimate comes down to $17 on a “very” conservative basis as you will see later, I fully expect this stock to trade at >$20 share price once European sales start to seep in after the approval by EUSOM. This is the general sentiment that yields the unorthodox, asymmetrical value-play that is Galera Therapeutics.
Oral Mucositis and Avasopasem
When people oftentimes think about what memories and moments struck them as the most painful and debilitating during their bout/s with head and neck cancer, most patients will immediately gravitate towards the oral mucositis that “immediately” follows radiation + cisplatin treatment. Oral mucositis, which is often thought to be a generalized side effect, can sometimes prove deadly in many patients.
About 30-40% of cancer patients who are treated with radiation + cisplatin therapy develop oral mucositis while nearly 90% of head and neck cancer patients develop oral mucositis. Mucositis, both gastrointestinal and oral, is a large addressable market that Galera is capitalizing on with its Ruscopasem manganese treatment for radiation-induced mucositis for lung cancer and pancreatic cancer (currently recruiting for Phase 2) and Avasopasem manganese that is being used for radiation-induced esophagitis (completed enrollment for Phase 2) and for radiation-induced severe oral mucositis from head and neck cancer (planning on submitting NDA filing by YE2022 )
While head and neck cancer radiation therapy is meant to destroy the rapidly dividing cancer cells in your body, radiation therapy also destroys a lot of the healthy cells in your body that are openly exposed to the radiation. This is where the harm comes in. Oral mucositis breaks down the Epithelial cells in your gastrointestinal tract. Epithelial cells are meant to cover the lining of your intestines, organs, and tissue to ensure protection from outside bacteria and elements. These Epithelial cells are the most vulnerable to the superoxide cells that enter your body through radiation therapy. Once the epithelial cells are destroyed and their DNA strands are broken, the mucous tissue underneath is exposed and reacts with the air that is brought in through one’s alimentary airways. Due to the sensitivity of the oral passageway, ulcers start to develop in one’s mouth even with the smallest form of irritation. The severity and incidence of these ulcers predicate the general warnings associated with oral mucositis rather than a broad range of symptoms. The general onset of symptoms occurs 2-3 weeks after radiation treatment and can last up to eight weeks in some cases.
The World Health Organization and National Cancer Institute both have oral toxicity scales that are used by radiation oncologists to determine the severity of oral mucositis. Both of the scales focus on the same general components (level of ulcer penetration), but I will be using the WHOs oral toxicity scale to describe the target market for Avasopasem.
If you want to follow along, here is a link to a site that contains all of the scales and the different components that define each stage: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5439125/table/T5/?report=objectonly
Overall, the severity of oral mucositis is determined by the level of interference it has in a patient’s ingestion of solids and liquids and the level of difficulty it presents them with. Avasopasem is specifically targeting stages 3 and 4 of oral mucositis, or the stages in which it is defined as severe. While other forms of mucositis sometimes go undiagnosed even with high levels of severity, oral mucositis is unique in that patients oftentimes experience and see their symptoms, making it more probable that they receive treatment relative to the other forms of mucositis.
Oral mucositis can sometimes prove deadly due to the prolonged period of symptoms (six to eight weeks) paired with the incapabilities of not being able to eat or drink (regularly or intravenously) over that same period of time if presented with a serious case. Oral mucositis is really counterproductive for a lot of the radiation oncologists who are administering radiation-induced therapy. Having to terminate or halt radiation therapy due to the onset of symptoms can create excessive time burdens for oncologists and excessive cost burdens for patients. These sorts of incidences (premature therapy termination) occur 15% of the time amongst oral mucositis patients who are going through radiation for HNC.
The current state of oral mucositis treatment is abysmal and adds another incentive for the FDA to act diligently on such a clinical trial. Analgesics are the primary form of medication given to oral mucositis patients that are going through severe pain associated with severe oral mucositis. In fact, according to the Multinational Association of Supportive Care in Cancer and the International Society of Oral Oncology, two percent topical morphine is the most generally recommended “treatment” for individuals experiencing severe oral mucositis. Although this is the primary form of morphine that is recommended to SOM patients, other mediums of morphine and narcotics are often given as well.
Most of the radiation oncologist contacts that I have consulted have shared the same general sentiment regarding SOM treatment: proper oral care is the functional base of the treatment paired with anything else that is deemed fit for the patient. Considering the fact that patients facing SOM that also have proper oral hygiene still have a large chance of facing the severity of SOM, there is no proper, standardized way of combating SOM.
Generally speaking, the number one bear case that I’ve heard in relation to Avasopasem hasn’t been related to its efficacy but more about the competitive landscape that it is currently trying to operate in (I will describe other SOM treatments that are currently in the pipeline later). This primary debate can be defeated on the checklist of efficacy and safety. One or the other might be present in a care option, but both of them are currently not available in any SOM treatments in the market. Natural agents and enzymes such as topical honey and probiotics have been seen to have a very low probability of producing adverse effects while also protecting the epithelial cells in the GI tract, but the correlation efficacy has been dropped due to the numerous amounts of combinations that haven’t yielded anything worthwhile in this field.
SOM natural remedies and their efficacy: https://www.frontiersin.org/articles/10.3389/fphar.2017.00354/full
Physical intervention and laser therapy to destroy the superoxide cells that are introduced into the body have been proven to be ineffective as well as costly for radiation oncologists to implement. As of now, the specifics of laser therapy are really in the air as the safety of different procedures has been in question relative to their use and which methods yield the “safest” results.
Details on how laser therapy for SOM needs more research in order to be more widely implemented by radiation oncologists: https://www.sciencedirect.com/science/article/abs/pii/S1368837519301617?via%3Dihub
Palifermin is the only SOM drug in the marketplace that is authorized by both the FDA and the European Medical Agency, but it has also been deemed risky due to the possibility that it allows cancer cells and tumors to grow in the administered patients. Additionally, Palifermin is used for Hematopoietic Stem Cell Transplants rather than HNC radiation treatment. With both the efficacious risks of Palifermin and the lack of FDA outlook towards Palifermin being utilized in HNC and radiation situations, they aren’t a peak candidate to compete against Avasopasem.
Avasopasem is a superoxide dismutase that breaks down the harmful oxygen cells that are introduced into one’s alimentary airways through radiation + cisplatin therapy. The superoxide dismutase breaks down the harmful superoxide cells into regular oxygen and hydrogen peroxide cells within the human body. Superoxide dismutase mimetics have been used since the 1960s for things like arthritis and radiation-induced fibrosis, but it has been recently used to help prevent cellular damage in the oral passageways and to help protect cellular metabolism as well. I won’t delve deeper into the science of mimetic regeneration or enzyme-based therapy as the information provided above should be sufficient in understanding Avasopasem’s method of delivery relative to other drugs.
Avasopasem Trials and Results
Galera participated in two clinical trials that both produced statistically significant results regarding the efficacy of Avasopasem in different clinical environments and settings for the treatment of SOM in head and neck cancer patients. Both of the studies reached their primary and their secondary endpoints with patients that were receiving Avasopasem before going through standard of care, intensity-modulated radiotherapy. 90% of the patients were sourced from a multicenter within the United States, and the standard of oral toxicity during the study was derived from the oral toxicity WHO scale I shared earlier.
Rand. Phase 2b
The first trial that is of relevance is Galera’s Rand Phase 2b Trial which included over 223 participants. In this specific trial, there were three experimental groups that were all getting treated for head and neck cancer. This study took the form of a three-arm placebo-controlled, randomized study. One of the experimental groups received 90mg of Avasopasem for a period of seven weeks. The second experimental group received 30mg of Avasopasem for seven weeks, and the third, placebo-controlled group received seven weeks of the placebo. The primary endpoint was an overall reduction in SOM duration while the secondary endpoint was a reduction in SOM incidence and severity.
Considering that Avasopasem had around 223 randomized participants in their 2b, it’s surprising to see such strong, correlated results paired with a lot of other benefits that weren’t connected to either the primary or even secondary determinations of the study. Amongst the placebo group in the 2b study, nearly 65% had an onset of SOM, compared to the 60% and 43% of the respective 30mg and 90mg groups. The p-value for the 90mg group was 0.009, yielding a very strong correlation between Avasopasem and SOM incidence (Generally, a p-value of <0.05 is deemed as statistically significant in a clinical trial study).
Additionally, Avasopasem yielded an overall 47% reduction in the incidence of Grade 4 OM between the placebo group and the 90mg group. The placebo group saw a 30% incidence of Grade 4 OM while the 30mg and 90mg saw a respective 21% and 16% incidence. The p-value for the 90mg, 16% incidence, was 0.045. Seeing that both the SOM incidence and probability of a Grade 4 OM incidence occurring were the secondary endpoints for Avasopasem’s 2b is the real deal of this Phase 2b study. Seeing consistent p-values of under 0.05, and even extremely correlated values of 0.009, on a secondary endpoint is telling of the general efficacy and consistency of Avasopasem.
The most statistically significant piece of information that came out of the 2b study was the results for the median days in which a patient experienced SOM. Seeing that this was the primary endpoint of the 2b study, this is what the FDA was primarily looking at when seeing if Galera should be allowed to take Avasopasem to Phase 3 clinical trials. Overall, the placebo experienced, on average, 19 days of SOM incidence. The median number of days drops by 58% for the 30mg dosage group and 92% for the 90mg dosage group. The p-value remained strong at 0.024.
Out of all of the observable adverse effects in the 2b study, none were eye-catching relative to the placebo group’s adverse effects. For nearly all of the grades and causes, there was a +/- 2% std dev. between the placebo and Avasopasem groups.
ROMAN Phase 3 Study
After reviewing the Phase 2b results for Avasopasem, the FDA made a surprising move in switching the primary and secondary endpoints of the Phase 3 study. The primary endpoint for Phase 3 is the reduction in the incidence of SOM while the secondary endpoint is a reduction in SOM duration and severity. The number of participants in this study doubled from 233 in Phase 2b to 455 in Phase 3. Instead of three experimental groups like Galera had in Phase 2, Phase 3 had two experimental groups. One of the groups would take Avasopasem 90mg dosages for seven weeks while the other group would take a placebo for seven weeks. Seeing that the FDA had generally approved the lowered severity of SOM that Avasopasem helped induce, Galera decided to take out the 30mg group and focus on the overall reduction in the incidence of SOM in the 90mg dosage group. Galera also used a randomization ratio of 3:2 between the placebo and experimental group in Phase 3.
The initial setting procedures during Phase 2b remained the same during Roman Phase 3: Avasopasem was going to be introduced before radiotherapy sessions, the WHO oral toxicity scale was going to be used for determinations, and a 90% U.S. patient population sourced from radiation multi centers. These similarities allow for a better judgment call between the 90mg dosage, smaller sampling group, and the 90mg dosage, larger sampling group.
A lot of bear cases were predicated on the fact that after the Phase 2b study’s significant results, Galera should’ve been reviewed for approval on the basis of just the 2b results. This was the bull case that was made for Sarepta in 2012 with its DMD treatment, but I think the FDA is trying to “kill two endpoints with one company”. Since Galera was able to garner such a large enrollment for clinical SOM while also mitigating adverse effects that wouldn’t strike different than the status quo, the FDA seems to be putting its full stock on Galera by giving it both fast track and breakthrough therapy designation after its Phase 2b trials while also exploring its more widespread through the changing of their clinical endpoints (recommendation was issued by the FDA for this). With the fast-track designation, Galera can expedite the process of submitting its BLA (Biological License Application) while currently waiting on the decision for its NDA by YE2022.
Although the results from Phase 3, weren’t more statistically significant than phase 2 (expectable with a significantly larger sampling size), they still yielded very significant results for both the primary and secondary endpoints. Overall SOM incidence decreased by 16% from the placebo group (64%) to (54%) in the Avasopasem group with a p-value of 0.045. The median days that a patient experienced SOM saw a reduction of 56% between the placebo (18) and the Avasopasem group (8) with a p-value of 0.002. The number of patients that experienced a Grade 4 OM incidence decreased by 27% from the placebo (33%) and the Avasopasem group (24%) with a p-value of 0.052. Galera also decided to track the average onset of SOM symptoms that was experienced between the placebo group and the Avasopasem group. The placebo group saw a 38-day onset of symptoms while the Avasopasem group saw a 49-day onset, a 29% decrease in delay with a p-value of 0.002.
The WHO oral toxicity scale of adverse SOM events remained consistent with the results seen in Phase 2b. The overall grades and causes of the adverse events didn’t deviate greatly from the adverse effects seen in the status quo (remained consistent with the +/-2% std dev. seen in the Phase 2b trials).
After talking to sell-side individuals that were bearish on Galera’s Avasopasem, I was able to compile a quick list of treatments that were deemed to be detrimental competitors that would deteriorate Galera’s TAM. Each of those will be listed below along with reasons as to why they aren’t “direct” competitors with Avasopasem.
Monopar currently has one drug in the pipeline for SOM: Validive. Validive is a novel mucobuccal tablet, meaning that clonidine (a drug that inhibits the production of SOM) is introduced into oropharyngeal cancer patients through a tablet. The main reason why I believe this treatment doesn’t have a competitive advantage over Avasopasem is that nearly all of Validive’s trials have been centered around oropharyngeal cancer patients with nearly all of its patients being sourced from this patient demographic. Validive is also behind Monopar in the clinical trial pipeline as they are set to release their INTERIM Phase ⅔ analysis in Q1’23. Additionally, the administration of Validive is a very time-intensive process that takes numerous hours to administer on a daily basis. Patients have to keep an oral mucobuccal tablet under their upper lip for several hours a day while the clonidine slowly seeps into their bloodstream through their saliva.
When talking with sell-side analysts regarding Avasopasem’s competitors, the number one competitor that I heard was MuReva Phototherapy and the photobiomodulation treatment that they plan on using to decrease the severity and incidence of SOM in HNC patients. I already described the mixed applications and views that radiation oncologists and various cancer specialists have with regard to PBMT, but this entry allows me to go more into detail on this form of treatment. PBMT uses the natural properties of different wavelengths on the color spectrum to catalyze certain biological responses. These wavelengths power the mitochondria of the cell, activating the gene expression that, when paired with the cascading effect of billions of other cells, leads to the creation of an eventual phenotype or physical property. This physical property would be the reduction of SOM ulcers in patients.
All of this seems promising doesn’t it, but it truly doesn’t take into account radiation oncologists’ capabilities and preferences during radiotherapy. Having to make physicians work with a mouthpiece-oriented technology while also framing the use of radiation therapy can have a lot of conflicts with the actual cancer treatment that is necessitated at that time. This goes back to the light therapy statement I made earlier about how the main problem with light therapy isn’t really the efficacy, but the feasibility of using it in the doctor’s office when presented with radiotherapy and chemotherapy. Also, PBMT doesn’t have the present capabilities of dealing with SOM. PBMT is a strenuous process that can only rid of small ulcers that aren’t as prevalent in Grade 3 & 4 SOM patients.
MuReva’s clinical trial pipeline is completely wonky as well. They have been recruiting for their clinical trial for the past three years with relatively simplistic inclusion and exclusion criteria (surprise surprise). Also, their sample size is also very small (~70 participants) relative to other SOM treatment clinical trials, so I wonder why this may be happening. Hmmm…..
Explanation of some of the logical fallacies surrounding the inclusion of PBMT in conjunction with radiotherapy: https://pubmed.ncbi.nlm.nih.gov/26852286/
Add in the fact that all the previous treatments and medical devices that I have highlighted as potential competitors of Avasopasem don’t have breakthrough therapy designation or fast track designation, and a clear picture of Galera’s competitive advantage is given. The thing about FDA clinical plays is that, quite frankly, it doesn’t matter what we think about the treatment. If the FDA likes what it sees, the regulatory process trumps any medical opinions that we may have about a specific medication or treatment.
Although most of the bear cases that I’ve addressed are the predominant majority of what I’ve seen and heard, there are a few individuals who I’ve talked to who have expressed concerns over the possibility of an NDA rejection by YE2022 due to the small deviation in efficacy and consistency between the Phase 2b and Phase 3 results that were presented in June 2022 at the Jeffries and H.C. Wainwright conference. Although I’ve already hit on most of the reasons why I think Galera will ultimately secure the NDA and eventually the BLA & PDUFA, I’ll rehash them quickly for the sake of clarity:
Avasopasem was able to meet both the primary and secondary endpoints for both its Phase 2b and Phase 3 study with a large sampling size of >200 participants. The studies saw NO LARGE DEVIATION in the onset of adverse effects and symptoms. Nearly every endpoint saw statistically significant results in both trials (statistical significance is defined as a p-value<0.05).
The current state of SOM is abysmal, to say the least. With advertisements for “magic” mouthwashes being the best treatment for SOM and natural remedies like honey and topical oils actually being recommended by doctors for something as severe as SOM makes it seem like SOM is the “wild west” of cancer treatment.
I didn’t hit on this point before because I believed it to be more fitting in this context, but the decreased use of narcotics like morphine due to the FDA approval of Avasopasem adds some “skin in the game” for government action. I don’t need to delve into narcotic usage and what a large problem it is in the United States, but I think it's in the government’s best interest to prevent these “accidental addictions” by providing better standard of care pain solutions rather than continuing status quo treatments that have higher chances of creating these addictions.
To quantify, Avasopasem users, in both of the clinical trials, saw a 13% reduction in narcotics usage after the start of radiotherapy relative to the placebo group. Galera also saw a 13% reduction in the number of individuals who used narcotics for SOM pain control within the Avasopasem group relative to the placebo.
There is less uncertainty surrounding a drug applying for an NDA that has received fast track and breakthrough therapy designations. I already delved into some of the benefits of receiving these designations (increased communications with the FDA over drug development and readiness, etc.), but the expedited process that would allow Galera to market their drug by Q3’23 is a huge advantage in the competitive markets.
After talking to management about Galera’s competitive security in the SOM market, I saw two avenues of protection that should allow Galera to penetrate the SOM market for a relatively long time. Galera has IP protections on the use of superoxide dismutase mimetics until the early 2030s while the patent term extension protections can be extended until 2035 for HNC. The cherry on top is that the IP protection provided for Ruscopasem is expected to exceed 2035 in protection extensions once commercialized. Additionally, the entire portfolio of superoxide dismutase mimetics has been retained within Galera and their robust uses of Avasopasem. Dennis P. Riley, the Chief Science Officer of Galera functioned and created superoxide dismutase mimetics for HNC use at the founding of Galera. Since then, he has filed and has been granted over nine different patents over the use of superoxide dismutase mimetics in different circumstances such as diseases and complications associated with excessive amounts of superoxide in a patient’s body (pretty sufficient patent).
Just this past week, Galera brought on Eugene Kennedy, MD, FACS as their Chief Medical Officer at a really convenient and great time. Eugene’s prior experiences with Lumos Pharmaceuticals and NewLink Genetics have made him an expert at clinical data presentation and streamlining. He helped file the first-in-human IND for a solid tumor CAR T-Cell Therapy while also helping to overlook NewLink’s clinical trials and overall pipeline as their CMO. With Galera planning on filing their NDA by YE2022, this is probably one of the best hires they could’ve made. If Kennedy is able to use Galera’s fast track and breakthrough designations to jumpstart more talks with the FDA and help enhance clinical trial presentation, the possibility of an NDA approval skyrockets in my opinion.
Lastly, oncologists have already started to take a liking to Avasopasem’s usage and are ready to move away from the rudimentary SOM “treatments” of the status quo. After talking to some of my industry contacts and other radiation oncologists, many of them are excited to see Avasopasem’s usage for HNC and are willing to help propel its usage for other radiotherapy-induced SOM cases for Pancreatic/Lung cancer (Ruscopasem). Tyler939, in his write-up for Sarepta Pharmaceuticals in 2012, described how physician sentiment is usually one of the best predictors of FDA approval, which I believe to be especially true with Avasopasem and SOM treatments. With treatments that are tied to the hip with other treatments (Avasopasem and Radiotherapy), it is significantly more important to gauge physician sentiment on the balance between the two and whether they are comfortable doing such procedures.
Think about it like this: If a doctor were to prescribe Tylenol to a patient (fictitious example), the only thing a physician needs to gauge is whether or not the patient is a viable candidate for such a drug and standardized usage. When a doctor has to prescribe Avasopasem, they have to make sure the patient is a viable candidate while also seeing if it can coexist (and be beneficial) with the treatment it is conjoined with. This single versus double checklist is why I believe positive physician sentiment is increasingly more important for Avasopasem relative to other drugs.
To further quantify the general disdain doctors have towards the status quo of SOM treatment, in a market research survey that was conducted by Galera’s research team with over 150 radiation oncologists, only 20% believe that topical ointments perform well against SOM. Additionally, Galera Research conducted a survey with over 125 IMRTs where over 72% of them stated that they had the capacity to administer Avasopasem with radiation therapy. These IMRTs were also highly likely to prescribe Avasopasem given the results of their recent Phase 3 study.
There are around 65,630 US patients that are diagnosed with head and neck cancer each year. Out of those patients, 42,000 are at risk for RT-induced SOM. Once Avasopasem gets approved, I expect them to penetrate around 75% of the RT-induced SOM market, which is equivalent to around 31,500 patients. Mel Sorensen, during his H.C. Wainwright fireside chat, said that Avasopasem would be priced at around $35,000 per treatment cycle. This is generally comparable with Amgen’s Neulasta treatment for chemotherapy-induced blood infections that falls in the range between 24,000 and 48,000 based on the number of chemotherapy sessions ($6,000 per dosage, recommend one dosage per chemotherapy session, an average of 4 to 8 chemotherapy sessions per patient).
I know that I said that I wouldn’t be focusing on any other treatments other than Avasopasem for HNC, but I think it would be a complete disservice to negate Galera’s promising clinical trial for Avasopasem in patients with non-small cell lung cancer Esophagitis. This Phase 2 trial was completed this year and offers another valuation perspective to Galera’s robust superoxide dismutase mimetic portfolio of drugs. For the “actual” sake of this valuation, I won’t focus on Ruscopasem Manganese because their trials for both pancreatic and lung cancer haven’t even completed enrollment for their Phase 2 trial (Expected to be complete 2H23).
Around 175,000 U.S. patients are diagnosed with non-small cell lung cancer. Of those patients, 50,000 are at risk for RT-related Esophagitis. I expect Galera to penetrate 55% of this market, which is equivalent to 27,500 patients.
Since Avasopasem has an estimated base price of 35,000 dollars per treatment cycle. That would equate to $962 million dollars in sales for NSCLC esophagitis and $1.1 billion dollars in sales for HNC SOM. Considering that all of the comps we are going to use have already completed their clinical trials and have also solidified their market, we’re going to have to discount Avasopasem’s sales. For NSLCLC esophagitis, a 70% discount would be adequate due to the lack of any FDA designations and this method of Avasopasem use only being in Phase 3 of their clinical trials. For anyone saying that this is too harsh of a discount for a drug that has seen great efficacy in HNC patients… I agree, but going from a patient sampling size of 29 in Phase 2 to >100 in Phase 3 can create adverse effects that can’t be betted on. Avasopasem proved itself with HNC, but it now has to prove itself more diligently with SLCLC esophagitis. A discount of 30% is adequate for HNC Avasopasem sales due to the designation moat and strong FDA trials. With these discounts in mind, a discounted, consolidated sales estimate would be $1.058 billion in annual treatment sales.
I also haven’t taken into consideration Avasopasem’s Europeans Safety Trial with EUSOM which yielded similar results to Avasopasems Phase 3 results with regard to both SOM incidence and the Median days of SOM. The adverse effects were also contained to a good standard deviation in the experimental group of this study as well. With all of these factors together, it would be surprising to see how Avasopasem’s yearly sales wouldn’t be over $1.5 billion.
Neulasta’s Amgen is a good, mature comparable to Galera’s Avasopasem. For Neulasta’s sales multiples, I will be using 2017 due to the situation that Neulasta was in. Neulasta had little to no market competition in 2017 and later saw its market share decrease due to the increased use of generics for chemotherapy blood infections. This market competition dynamic that Neulasta experienced is a similar situation to what Galera will experience for at least a year after their FDA approval. In 2017, Amgen’s Neulasta received $3.9 billion in sales with an attributable Neulasta market cap of $26.5 billion (21% of Amgen’s total market cap). This brings Neulasta’s attributable sales multiple to ~6.8x. With this multiple in mind and the previous $1.058 billion in annual Avasopasem sales, Avasopasem’s portfolio with Galera would be valued at ~$7.19 billion.
Financing (Continuation of Valuation)
In May 2020, Galera entered into a royalty agreement with Blackston Purchaser for the achievement of various clinical enrollment and trial milestones. The program lasted until July 2021 and provided on average ~$27 million per clinical milestone achieved, creating four tranches of clinical payments that were eventually all paid out to Galera. Galera has contractually agreed to pay an aggregate amount of product payments to Blackstone once it exceeds a set amount of the Royalty Purchase Price received by Galera.
Galera, in conjunction with this royalty package, issued two warrants to Blackstone Purchaser to purchase a total of 550,661 shares of common stock at an exercise price of $13.62 per share.
Galera entered an Open Market Sale Agreement with Jeffries in which they may issue and sell an aggregate value of up to $50 million ATM of common stock. As of June 30, 2022, there was $40.6 million of common stock remaining under the sales agreement. This would be equivalent to nearly 34.7 million shares remaining under the sale agreement on June 30, 2022. So, the current shares outstanding of 26.82 million being paired with the diluted shares that are exercisable by the warrants and common stock agreement equates to nearly 61.02 million shares outstanding. With this, our implied equity price for Galera is $17.34 for the diluted share count and $40.38 for the status quo equity condition. If the NDA were to get rejected by the FDA, I expect Galera to trade at net cash ($1.64). This number would probably be significantly lower due to the attempted dilutive financing done by Galera to dig themselves out of that hole.
Additionally, the cash burn rate without the exercised warrants and common stock agreement is fifteen months ($44.4 million estimated cash/$2.96 million cash burn) versus the 29-month cash burn with the exercised warrants and common stock agreement ($85 million estimated cash/$2.96 million cash burn). With or without the use of additional equity financing, Galera should be able to conclude Avasopasem’s clinical trials without over-diluting shares. I also wouldn’t be surprised if they received additional grants from other large-scale pharmaceutical companies to continue their trials (check Sigma Tau’s $5 million grant to Fennec Pharmaceuticals in 2016 for STS, an orphan drug designation drug that was in a similar pipeline situation) For further reference on this, check Nero123’s write-up on Fennec Pharmaceuticals back in 2016.
~ Dr. Ridgewell
NDA filing gets rejected by the FDA
Any IP developments that open up the market for other competitors
Significant liabilities that increase cash burn to the point where Avasopasem’s FDA process needs to be halted or reevaluated.
Strong FDA data or developments from any of the SOM treatment competitors.
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