On June 5, 2012, Abbott Labs (NYSE:ABT) and Neurocrine Biosciences (NASDAQ:NBIX) announced that they had initiated a pivotal phase 3 clinical study designed to evaluate the safety and efficacy of elagolix in female patients with endometriosis. Abbott designed the protocol of the trial after over a year of back-and-forth discussion with the U.S. FDA, but chose not to pursue a formal SPA to avoid further delay in the start of the program.
The phase 3 trial, dubbed M12-665, is a randomized, double-blind, placebo-controlled study seeking to enroll 875 women, age 18 to 49, with moderate-to-severe endometriosis-associated pain. It will be conducted at approximately 160 sites in the U.S., Puerto Rico and Canada. The primary endpoint will be a dual-endpoint in reduction in Dysmenorrhea and Non-Menstrual Pelvic Pain (NMPP) for women on two doses of elagolix (150mg and a yet unannounced higher dose) vs. placebo in a 1:1:2 randomization over 3 months.
Efficacy will be assessed by a responder analysis for statistical evaluation. The inclusion of a yet unannounced higher dose of elagolix, perhaps 250mg or 300mg (150mg BID) is intriguing. Responder analysis from the phase 2b trial showed an 85% response rate with 150mg elagolix. We believe Abbott is looking for greater than 90% response rate in the phase 3 program through the inclusion of a higher dose.
Secondary endpoints include Dyspareunia and Patient Global Impression of Change (PGIC), as well as analgesic use. Following the 3 month controlled portion of the trial, patients will be eligible to enroll in a 6 month open-label extension study where Abbott will look for signs of persistent efficacy. For the safety analysis, patients will be followed for an additional 12 months, after which Abbott will conduct a DXA scan to assess changes in bone mineral density.
We expect that this program will take 12 months to enroll. Top-line data from the phase 3 trial should be available in the first half of 2014, with the full analysis in 2015. Abbott plans to conduct a second confirmatory phase 3 program mirroring the M12-665 trial expected to start in 2013. We expect that this program will include sites outside North America, with an emphasis on Western Europe. Full analysis from the second trial is expected in 2016, along with the New Drug Application (NDA) planned for 2016.
…Confident In Design…
We are confident in the design of the phase 3 trials, and the efficacy and safety previously seen with elagolix. In total, Neurocrine has presented data from 12 phase 1 programs and 6 phase 2 programs (2 phase 2a and 4 phase 2b) on roughly 1,000 patients. Results from the phase 2b (n=137) Daisy PETAL (Study-901) program first released in May 2010 provide the best proof-of-concept data for the planned phase 3 trials. Final results, released in November 2010, were statistically significant in all primary and secondary endpoints.
The planned phase 3 program will seek to enroll patients with more severe disease and employ a two-cycle (two-month) run-in period both designed to mitigate the placebo response. We note the 33% placebo response on both primary endpoints in the Daisy PETAL program was rather high, but elagolix at 63% for both was statistically significant at a p-value less than 0.01. All Abbott needs to do is replicated these results in the two phase 3 trials noted above and then show no clinically meaningful changes in bone mineral density and we think approval is likely.
Adjusting Target
While the above is all good news for Neurocrine shareholders, it comes about six months behind what we previously modeled. We remind investors that the end of phase 2 meeting took place in March 2011. The company’s “Update on Elagolix” press release from May 2011 guided to the start of the phase 3 trial in the fourth quarter 2011. However, finalizing the SPA with the U.S. FDA took longer than expected. Ultimately, Abbott believes they have implemented all of the suggestions from the SPA discussions, but did not want any further delay in the start of the trial.
We also expected that both phase 3 trials would start concurrently. Instead, Abbott plans to stagger the second phase 3 trial so it starts one-year later, in 2013. This is so that the second trial can include sites outside North America.
As a result, the planned NDA filing, now expected in 2016, is 18+ months farther out then our model. Therefore, we have adjusted our DCF model to now account for the launch of elagolix at Abbott in 2017. The result is a decrease in our price target from $12 per share to $10 per share.
Our $10 per share target is now the lowest of the five published targets we see listed on Thomson/First Call (previous range was $11.50 to $14.00). However, this should not be misconstrued by investors. We remain quite optimistic on Neurocrine and elagolix, believing the drug – with a full label to include both endometriosis and uterine fibroids - has blockbuster potential. We’ve written previously as to why we see elagolix as one of the more interesting late-stage biotech products. We clarify our position on Neurocrine as “optimistic, yet realistic” with respect to the stock price.
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Tags: Abbott Labs (ABT), Biotech, Fundamentals, Jason Napodano, Neurocrine Bio (NBIX)
Michael Kudrna
