Description

Summary

UniQure N.V. (ticker: “QURE”) is a biotechnology company focused on the generation of AAV-based gene therapies for the treatment of hematological and neurological diseases. Founded in 1998, uniQure is a pioneer in the gene therapy space, having developed the world’s first approved gene therapy. Gene therapies deliver a specific gene of interest to a target cell to help generate a desired protein, ideally offering long-term treatment for a disease. These therapies are typically comprised of a gene and then a vector that carries the gene into the target cells. Once an individual’s cells have incorporated the gene, the cell theoretically can produce the target protein for many years. This reduces the need for chronically dosed therapies that require frequent hospital visits, improving quality of life. 

UniQure’s lead asset is HEMGENIX (EtranaDez), a one-time gene therapy for hemophilia B that functionally cures the disease.  HEMGENIX has excellent clinical trial data, received FDA approval in November of last year, and is expected to receive EU approval this quarter. With an approval in hand, the drug is being launched by the pharma company CSL Behring (ticker: “CSLLY”), known as one of the global leaders in treating bleeding disorders. Current estimates for the CSL Behring launch peg peak sales at $2.4B, which would be a $480M royalty to uniQure along with hundreds of millions in milestone payments; we don’t think the sales need to be anywhere close to that for the stock to work, and CSL is incentivized to market the drug given the $450M upfront they paid and the risk of competitive gene therapies eroding their existing business. QURE’s second pipeline asset is a high risk, high reward gene therapy to treat Huntington’s Disease (HD), a fatal neurological disorder with no current treatments.  QURE has had a few hiccups with their Huntington’s ranging from delaying data to walking back expectations, which inexplicably has sent the stock down into the low $20s below where it was when they received the hemophilia B approval. 

We view QURE at ~$20/share or ~$636M EV as an extremely compelling value investment given the cash-on-hand and the de-risked lead asset – if HEMGENIX does a conservative $1B in peak sales (~500 patients across US and EU), we think the royalty stream and existing balance sheet is worth at least ~$30/sh and provides a strong margin of safety to take a flyer on the platform. We believe the company’s pipeline, manufacturing, IP, and future clinical developments will materialize as NPV positive, which isn’t reflected in the current share price and ignores the fact the company has now taken two gene therapies through clinical trials into an approval. 

Approved and Clinical-Stage Assets

HEMGENIX (Approved - EtranaDez; AMT-061)

UniQure’s lead asset is HEMGENIX (EtranaDez), an AAV5 gene therapy for the treatment of Hemophilia B that was licensed to CSL Behring. Hemophilia B is a rare bleeding disorder that affects ~12,000 people in the US and EU. It’s caused by a mutation in the factor IX (FIX) gene, which encodes the factor IX coagulation protein. In patients with mild disease, bleeding will only be present after significant trauma or surgery, but patients with severe hemophilia suffer from spontaneous bleeds and are at risk for developing organ bleeding. The current standard of care for patients is replacement of factor IX with a clotting factor, which are developed in labs; patients with severe disease go through prophylaxis or routine treatment to maintain enough clotting factor in the bloodstream to prevent bleeds. Not only do these treatments require patients to get weekly or biweekly infusions, but it can also cost up to $500,000 annually for adults. Thus, uniQure developed a one-shot therapy that could significantly reduce the number of annual bleeding events (ABRs) to shift patients away from prophylactic replacement therapy. 

HEMGENIX is an AAV-5 gene therapy using an AAV vector carrying a gene that has shown sustained factor IX activity; the product carries a naturally occurring variant of the factor IX gene that’s hyper-functional. QURE licensed the drug to CSL Behring in June 2020 for $450M in cash upfront with $1.6B in milestone payments and double-digit royalties. HEMGENIX was approved based off a single-dose study enrolling patients with moderate-to-severe Hemophilia B. Participants first completed a 6+ month lead-in with the current standard of care routine of factor IX prophylaxis. Following the lead-in, the participants received a single intravenous dose of HEMGENIX and were followed for 5+ years. The primary endpoint of the study was non-inferiority of the annualized bleeding rate (ABR) compared to the lead-in prophylaxis treatment. The estimated mean bleeding rate during the evaluation period was 1.9 bleeds/year compared against the mean bleeding rate of 4.1 bleeds/year during the lead-in period, demonstrating success on the endpoint.

(Source: HEMGENIX FDA Label)

HEMGENIX received FDA approval in November 2022 for adults with hemophilia B that use prophylaxis factor IX therapy, have life-threatening hemorrhages, or have repeated, serious spontaneous bleeding. We found the label to be clean, and QURE is expected to receive $100M from CSL upon first US commercial sale. QURE is also expected to receive EU approval any day now and are eligible to receive another $75M from a first EU commercial sale milestone. Pfizer presented Phase 3 data for their Hemophilia-B gene therapy in December 2022, which we view as inferior on both efficacy and safety; acknowledging that these are cross-trial comparisons, Pfizer showed a 92% reduction in factor-IX consumption vs. uniQure’s 96%, and 16% of patients in the Pfizer trial had Severe Adverse Events (SAEs) vs. none of uniQure. As such, we view HEMGENIX as a first-in-class and best-in-class product commercialized by a company with a strong footprint in the existing standard of care.

AMT-130 (Phase 1/2 Studies)

UniQure’s lead asset in the pipeline is AMT-130, a AAV5 gene therapy for the treatment of early-manifest Huntington’s Disease with the goal of meaningfully slowing disease progression. Huntington’s Disease (HD) is a rare genetic, neurodegenerative disorder thought to be caused by an elongated CAG trinucleotide repeat (36+ repeats) in the huntingtin gene (HTT) that results in mutant HTT (mHTT). Patients with 40+ CAG repeats have ~100% chance of developing Huntington’s Disease. The exact function of huntingtin protein in adults is unclear, but Huntington’s Disease has been characterized by the accumulation of mutant HTT protein. As the mutant HTT protein accumulates, patients typically suffer from neurodegeneration and a decline in key clinical endpoints measured by the composite Unified Huntington’s Disease Rating Scale (cUHDRS), which measures a range of motor, cognitive, behavioral, and functional endpoints. Standard of care today has focused on symptomatic treatment, and there’s been no disease-modifying drugs approved to-date. 

AMT-130 is an AAV5 gene therapy that’s designed to silence mutant huntingtin mRNA to lower mHTT protein levels. The drug is a one-time, MRI-guided injection into the striatum of the brain, which is where Huntington’s typically manifests. We believe this is a better approach than the spinal fluid route used by competitors Ionis/Roche and Wave as direct injection into the brain yields a better distribution profile of the target regions. AMT-130 decreases both mutant and wildtype HTT protein, which is widely debated, but our view is that the neurological benefit of mHTT knockdown outweighs the potential drawbacks of wildtype HD, especially as these are typically adults. In animal models, AMT-130 showed the ability to reduce mHTT in the deep structures of the brain. Additionally, the models showed only a transient increase in neurofilament light chain (NfL), a protein that has been used as a marker for axonal/neuronal damage. 

(Source: Vallès, A., Evers, M. M., Stam, A., Sogorb-Gonzalez, M., Brouwers, C., Vendrell-Tornero, C., Acar-Broekmans, S., Paerels, L., Klima, J., Bohuslavova, B., Pintauro, R., Fodale, V., Bresciani, A., Liscak, R., Urgosik, D., Starek, Z., Crha, M., Blits, B., Petry, H., … Konstantinova, P. (2021). Widespread and sustained target engagement in Huntington’s disease minipigs upon intrastriatal microrna-based gene therapy. Science Translational Medicine, 13(588). https://doi.org/10.1126/scitranslmed.abb8920)

UniQure is currently undergoing a double-blind, randomized, controlled Phase 1/2 Study of AMT-130 in patients with early-stage HD. In the US, 10 patients were split in the low-dose arm (6 drug; 4 placebo), and 16 patients were split in the high-dose arm (10 drug; 6 control). 15 additional patients in Europe are being dosed with AMT-130 as well as part of an open-label study. The study is looking at safety along with potential efficacy endpoints including neurofilament light, mHTT in the cerebrospinal fluid, and other functional endpoints. In June 2022, the company presented first data from 10 patients in the low-dose cohort, where they showed no serious adverse events. Initial biomarker data evaluation of mHTT in the cerebrospinal fluid showed a mean decrease of 53.8% vs. baseline. The sham treatment arm showed a 16.8% decrease in mHTT at baseline, which suggests there’s some variability in the assay used for measurements, but we view the overall reduction as encouraging and a positive signal. Additionally, neurofilament light chain levels were used to characterize neuronal inflammation, and the data was in-line with the preclinical models.

(Source: QURE Investor Presentation)

In August 2022, uniQure announced that they paused enrollment of patients at the high-dose cohort following 3 reported suspected unexpected severe adverse reactions (SUSARs). Two patients treated in the EU had localized inflammatory responses after infusion, which we found statistically odd given both were at the same site. All patients were discharged from the hospital with improvements in symptoms, suggesting the adverse events were at the very least manageable. The pausing of enrollment was a company-made decision, and the US/EU regulatory never commented on the trial despite being informed of the adverse reactions. Thus, in November 2022, UniQure announced that the independent data safety monitoring board completed a safety review and recommended resumption of dosing at the high dose. Given there were no changes in the trial protocol, we found the adverse events to be a hiccup and easily manageable the treating physicians. We find the totality of the data to be a positive step in the right direction and in-line with the proposed mechanism of action. One-year data from the high-dose cohort of US patients is expected in Q2 2023 along with additional endpoints including MRI and functional data. 

We have a favorable view of AMT-130 heading into the upcoming data readout given management has been guiding conservatively across the new exploratory endpoints (e.g., volumetric MRI and functional endpoints). Mechanistically, our view is that a gene therapy injected into the deep brain ought to have better distribution than the molecules from Wave, Ionis, and Roche. Given the inability to accurately measure mHTT in the brain, clinicians instead measure mHTT in the cerebrospinal fluid. In the case of the competitors, researchers and investors are making an inference on what the deep brain penetration is based on what the knockdown in the spinal fluid is (e.g., 50% knockdown in the spinal fluid = 25% knockdown in the brain?). In uniQure’s case, it’s the reverse where the expectation is the mHTT knockdown in the deep brain is greater than the CSF measurement because the drug is administered to the brain. From our industry checks, we believe 50% mHTT knockdown should yield clinical benefit, however, there’s some theoretical concern of knocking down wildtype HTT by more than 75%. Regardless, we think uniQure’s low-dose has already reached that threshold based on the existing data and it’s a matter of waiting as uniQure has opted to treat earlier-stage patients for enrollment reasons. With additional news flow over the course of the next 12-to-24 months, we’re optimistic that the market will begin to wake up to the value AMT-130 offers.

Additional CNS Pipeline

UniQure has two other clinical assets that are early in development. First, there’s AMT-260 for the treatment of Temporal Lobe Epilepsy (TLE). Temporal Lobe Epilepsy starts in the temporal lobe area of the brain (behind the temples) and is the most common localized epilepsy. ~80% of these seizures start near the hippocampus, which is the part of the brain implicated in memory and learning. Although the majority of patients are able to control their seizures with existing medication, there are ~750,000 – 800,000 patients that are inadequately treated. UniQure acquired AMT-260 from Corlieve Therapeutics in June 2021, and therapy uses silencing technology to target suppression of aberrantly expressed receptors in the hippocampus of patients with Temporal Lobe Epilepsy. The company has shown in inhibition of epileptic activity in mouse models. Just last month, UniQure also made a licensing agreement with a private company, Apic Bio, for a gene therapy designed to knock down the expression of SOD1 in ALS patients. 

Valuation

QURE currently trades at ~$20/sh or a ~$950M market cap. In Q3 2022, the company reported $440M in cash and $126M in debt on the balance sheet, equating to net $6.72/sh. With first commercial sale of HEMGENIX in both US and EU, they’re expected to receive another $175M in milestone payments. Assuming there are ~1,800 eligible US patients with moderate-to-severe Hemophilia B, we assume peak penetration of 15% (~270 patients on drug) with respective sales of $783M, which would equate to a peak US royalty of $157M to QURE. This assumes net pricing of $2.8M or a 20% GTN discount to CSL’s list price of $3.5M with a 1% annual price increase; this is obviously high price tag but one that’s arguably justified given the annual costs of routine prophylactic replacement therapy. Making conservative assumptions about sales penetration and partially including the $1.0B+ in sales-based milestones, we believe the present value of cashflows due to QURE is at least $1.1B, which, when combined with QURE's existing cash, implies a floor valuation of $31/share. The rest of QURE's pipeline includes some exciting and potentially valuable early-stage programs. 

Along with QURE's AAV5 gene therapy manufacturing platform, we believe the current market attributes little value to these longer-term assets. QURE is expected to have opex of $250-$300M/year (~$6/sh per year) developing its pipeline, including AMT-130, so our estimated value could diminish at that rate to the extent that the pipeline investments do not bear fruit. We expect the opposite — that pipeline investments will translate to substantial NPV, and we are willing to think in terms of years even in a market driven by short-termism. Importantly, we believe QURE has enough cash to get into 2025 excluding the incoming royalties or even potential royalty monetization, which is ample runway to determine whether AMT-130 is an approvable therapy. If successful, we believe there’s ~43,000 Huntington’s patients across the US/ EU of which ~13,000 are early-manifest patients, ~3x the size of the HEMGENIX addressable population. As such, we envision AMT-130 to be a $2B+ blockbuster in a disease with both a higher unmet need and higher TAM than Hemophilia B – with a 20% probability-of-success for Huntington’s, we believe QURE SOTP is reasonably worth $50+/sh. This excludes any value from the pipeline opportunities in Temporal Lobe Epilepsy, ALS, and Alzheimer's, each of which can be blockbusters given the high unmet need in CNS disorders and volume of patients with no other treatment alternatives. 

Catalyst

Q1 2023: HEMGENIX EU Approval

Q2 2023: AMT-130 full low and high dose safety and biomarker data