Biotechnology
Trevena, Inc November 9, 2016 BUY (TRVN, $4.05) Jonathan Aschoff, Ph.D. 212.417.8277 1Q17 Brings Phase 3 Results for Oliceridine – Novel, Potent & [email protected] Safe in Post-Operative Pain: Initiating BUY/$13 TP
We are initiating coverage of Trevena, Inc. with a Buy rating and a 12-month target price of $13. Oliceridine is Trevena’s leading drug, in development for post-operative pain, and we believe it has the potential to deliver at least as much pain control as an opioid but with less severe adverse effects. Oliceridine can provide more pain relief than a standard 4mg dose of morphine, as well as have a faster onset of action, as shown in Phase 2 bunionectomy and abdominoplasty trials, yet have a superior safety profile. In 1Q16, Trevena received Breakthrough Therapy designation for oliceridine, the only such designation granted to a pain drug, most likely predominantly due to its differentiated safety profile.
The key near term investment catalyst for Trevena is release of Phase 3 results in 1Q17, and we expect no risk to this timeline given the robust enrollment. We project oliceridine to launch in 2018 in the US and 2019 in the EU and to generate almost $500 million in global sales at peak. Trevena ended 3Q16 with cash of $120 million, which should support operations into 2018, comfortably beyond our projected 1Q17 Phase 3 value creation event. With so many drugs and drug cocktails used for post-operative pain, comparative data is crucial for a drug's differentiation, and in our view Trevena should be able to show enough differentiation versus morphine to convince the FDA to allow such data to be in the drug’s label.
The market for post-operative pain is large. In 2015, there were about 32 million inpatient treatment days in the US using intravenous opioids, according to the IMS Charge Detail Master Database, and US sales of injectable post-operative pain drugs reached $1 billion in 2015. Even with our conservative modeling of a low single digit penetration rate, we are able to support a far higher valuation than the current. Our valuation only takes into consideration oliceridine; thus the oral drugs
Capital Markets TRV734 and TRV250 would represent upside to our revenue forecast.
Trevena’s pain and migraine drugs (oliceridine, TRV250, and TRV734) have novel mechanisms of action that dissociate opioid analgesia from a substantial amount of its adverse effects. Many companies are attempting to discover, repurpose or reformulate non-opioid drugs to meet medical needs where opioids are frequently used, but where opioid adverse effects are limiting. While it is difficult to argue against the efficacy of opioids, their adverse effects leave much to be desired. With this squarely in mind, Trevena has discovered different drug candidates that are selectively agonistic to the µ and δ opioid receptors. Trevena’s three opioid compounds are able to activate the pathway mediated by G protein coupling, but not the pathway mediated by β-arrestin. Other opioid drugs non-selectively activate both pathways, inextricably linking their potent efficacy with highly undesirable adverse effects such as respiratory depression, constipation, nausea, and vomiting. By avoiding activation of the pathway mediated by β-arrestin, we believe Trevena’s pain and migraine drugs should be able to substantially reduce adverse effects, while providing more than adequate analgesia. Rev ($M) 2015A 2016E 2017E Ticker TRVN 1Q $0.6 $1.9 - Last Price $4.05 2Q $1.9 $1.9 - National Mkt Cap ($M) $211 3Q $1.9 $0.0 -
Fiscal YE 31-Dec 4Q $1.9 $0.0 - 50d ADV (000) 275 Annual $6.3 $3.8 $0.0 Short int (M) 1.7 S/O (M) 52 EPS 2015A 2016E 2017E Annual Hi $13.02 1Q -0.33A -0.35A - Annual Lo $3.76 2Q -0.28A -0.37A - Cash ($M) $120 3Q -0.24A -0.57A - 4Q -0.3A -0.59E -
Opus Source: Big Charts Annual -1.15A -1.87E -1.74E Please see pages 12-15 for Important Disclosures 1
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Exhibit 1: Product pipeline
Source: Company documents
Valuation We derive our target price through a DCF analysis, assuming a 10% discount rate that is applied to all cash flows and the terminal value, which is based on a 4 multiple of our projected 2022 EBITDA of $250 million. We base our valuation for Trevena on revenue from oliceridine (previously known as TRV130) for moderate to severe pain. We believe that Trevena intends to market oliceridine on its own upon potential FDA approval. Outside the US, we believe that Trevena plans to seek one or more partners for the development and commercialization of oliceridine. Our valuation assumes US approval and launch of oliceridine for moderate to severe pain in 2018, and we conservatively (low single digit market penetration at peak) project an initial US price of $200 per course, based on the average WAC price for the current standard of care. Potential approvals for drug candidates beyond oliceridine, such as TRV734 and TRV250, would provide upside to our valuation.
Oliceridine for acute moderate to severe pain
Oliceridine background Severe nausea, vomiting, constipation and potentially life-threatening respiratory depression has always been associated with effective opioid therapy and, in our view, Trevena is on its way toward dissociating opioid analgesia from a substantial amount of its adverse effects by developing selective μ-opioid receptor ligands. Key to achieving this is the observation that mice with defective or silenced β- arrestin genes that were given morphine displayed analgesia, but without as much respiratory depression or gastrointestinal dysfunction as wild-type mice. Trevena is developing its internally discovered oliceridine to determine whether differential activation of μ-opioid pathways can elicit the G protein-coupling efficacy of morphine, while significantly decreasing the μ-opioid receptor phosphorylation, engagement of β-arrestin, and internalization that accounts for much of the observed adverse events. Furthermore, β-arrestin binding to the μ-opioid receptor has been shown to hinder G protein coupling, which reduces opioid efficacy, and thus oliceridine should be able to offer increased efficacy as well as decreased adverse effects. In February 2016, Trevena received Breakthrough Therapy designation from the FDA for intravenous oliceridine, which was the first and only Breakthrough Therapy designation granted to a pain management program, most likely predominantly due to its differentiated safety profile.
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Exhibit 2: Oliceridine mechanism
Source: Company documents
Market opportunity for oliceridine
The market for post-operative pain relief is large. In 2015, there were about 32 million inpatient treatment days in the US using intravenous opioids, according to the IMS Charge Detail Master Hospital Cost Database (16 million inpatient stays at an average duration of 2 days). US sales of injectable post-operative pain drugs reached about $1 billion in 2014, which seems low, but the overwhelming number of doses administered in this market are low cost generics. In 2015, approximately 51 million US hospital reimbursement claims for injectable opioids were submitted, which includes about 35 million hospital outpatient stays and about 16 million inpatient stays. Despite the extensive use of numerous currently approved drugs for post-operative pain, there is a significant unmet need for safe and effective treatments, as over 70% of in-hospital patients claim post-operative pain, and 50% of them experience severe or extreme pain before they are discharged (Apfelbaum et al, 2003). Even 11 years later, a publication (Gan TJ et al. Curr Med Res Opin. 2014;30(1):149- 60) demonstrated that this problem persists, as evaluation of 300 surgical patients showed that 75% had moderate/extreme pain immediately after surgery, 80% had AEs and 39% had moderate/severe pain after the first post-operative analgesic dose, and 74% had high levels of pain after discharge. Additionally, the study showed that post-surgical pain was the dominant pre-surgical patient concern.
The most effective analgesics for acute postoperative pain are μ-opioid agonists such as morphine and fentanyl. However, opioids have a number of side effects, including respiratory depression and the development of analgesic tolerance. Alternatives such as NSAIDs have the adverse effects of lowered gastrointestinal (GI) cytoprotection, platelet function, and renal function. Some products have been removed from the market due to an increased risk of heart attack and stroke. In fact, the post-operative patient receiving opioid therapy receives far more medicine to mitigate opioid side effects than to directly treat pain. It is also very difficult to predict which patients will have fatal opioid consequences or near misses, outside of the general alignment of complications increasing proportionally with age and weight, thereby presenting a clear opportunity for potent but safer alternatives. We believe oliceridine has the potential to be superior to standard of care opioids based on its strong efficacy, rapid onset of action, and fewer, less severe, and more predictable adverse effects.
Clinical trials with oliceridine
Oliceridine Phase 1b proof-of-concept trial Oliceridine at 1.5mg, 3mg, and 4.5mg doses was evaluated in a 30-patient proof-of-concept Phase 1b trial and responses in a cold pain test model of pain were compared to placebo and 10mg morphine. The trial was a randomized, double-blind, single-site, 5 period crossover trial in healthy male volunteers. The 3mg and 4.5mg oliceridine doses had higher peak analgesia than morphine, faster onset, and a similar duration, as more subjects doubled baseline cold pain test latency and achieved the cold pain test cutoff time of 180 seconds with 3mg and 4.5mg oliceridine than with 10mg morphine. If anything, the trial would have underestimated the increased efficacy of oliceridine over morphine due to the testing convention having a 3 minute cutoff. Respiratory drive reduction was greater after morphine than any oliceridine dose (-15.9 for morphine versus -7.3, -7.6, and -9.4hr * L/min, (p<0.05), and more subjects had severe
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Opus National Capital Markets Biotechnology nausea after morphine (n = 7) than oliceridine 1.5mg or 3mg (n = 0, 1), but not 4.5mg (n = 9). Regarding safety, 3mg and 4.5mg oliceridine reduced respiratory drive less than did 10mg morphine, and caused less vomiting and severe nausea.
Oliceridine Phase 2a/b bunionectomy trial In 4Q14, Trevena released positive top-line results from its adaptive design Phase 2a/b trial with oliceridine. The post-bunionectomy pain trial enrolled 333 patients and compared several oliceridine doses (0.5mg, 1mg, 2mg, 3mg, and 4mg) to both placebo and a standard reference dose of 4mg morphine every 4 hours. Patients had severe baseline pain (a rating of about 7 out of 10), and even the 3mg dose of oliceridine was able to reduce mean pain intensity by 6 points within 5 minutes of dosing, by comparison to morphine’s approximately 2 point reduction. The trial was conducted in two parts, with Part A (n=141) evaluating oliceridine (1mg, 2mg, 3mg, or 4mg) versus placebo and standard morphine, and with all interventions infused every 4 hours. Part B (n=192) was the adaptive phase of the trial evaluating oliceridine (0.5mg, 1mg, 2mg, or 3mg) versus placebo and standard morphine, but in Part B oliceridine was given every 3 hours and morphine was still given every 4 hours. Part B of the trial was stopped early after 8 of a planned 10 cohorts were enrolled because efficacy was sufficiently demonstrated. Oliceridine doses of 2mg and 3mg every 3 hours was statistically superior to placebo over 48 hours as measured by the primary endpoint of time-weighted average change in pain score (TWA0-48), with 2mg reducing TWA0-48 by 1.4 points (p=0.0024 vs placebo) and 3mg by 2.4 points (p<0.0001 vs placebo). More important for its potential commercial distinction, 3mg oliceridine was also statistically superior to morphine for TWA0-48 (p=0.014; a 1 point further pain score drop than morphine).
Success was also shown for the important secondary efficacy endpoint of pain over the first 3 hours after the initial dose, when post- operative pain is at its peak, with both 2mg and 3mg oliceridine beating 4mg morphine (p=0.0029 and p<0.0001), as is clearly evident in Exhibit 3. This shorter timeframe of analysis, especially the first hour of it, is important because it represents the purest comparison among trial arms given that patients were coached to avoid rescue therapy during the first hour if possible, and because it underscores the rapid onset of oliceridine action. In fact, there was a substantial amount of rescue in the trial, with placebo eventually dropping from a pain score of 7 down to about 3 or 4, so that first time window is particularly informative. Reporting of complete pain relief during this 3-hour period was 13%, 31%, and 52% for 1mg, 2mg, and 3mg oliceridine, vs 0% and 8% for placebo and 4mg morphine, which clearly demonstrates to us that oliceridine has the potential to effectively compete against an entrenched generic gold standard in acute pain control. Also during the initial 3 hours following the first dose, 2mg and 3mg oliceridine delivered greater peak pain relief than 4mg morphine (p=0.005 and p<0.0001).
Exhibit 3: Oliceridine Phase 2 trial efficacy vs. morphine
Source: Company documents
Although much of the published preclinical and early clinical literature on the μ-opioid receptor and GPCR biased ligands like oliceridine strongly suggests that there is a pronounced safety benefit from not activating the β-arrestin pathway, as well as an efficacy benefit from avoiding β-arrestin’s inhibition of G protein mediated analgesia, the Phase 2a/b trial underscored oliceridine’s increased analgesia far more than any clear safety advantages. Both oliceridine and morphine caused similar levels of opioid-related adverse events, including dizziness, headache, somnolence, nausea, vomiting, flushing, and itching, but a fixed dosing schedule is far less likely, to expose safety
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Opus National Capital Markets Biotechnology advantages, than the patient-controlled analgesia (PCA) dosing used in the Phase 2b abdominoplasty trial. By contrast to fixed dosing, PCA dosing results in patients dosing themselves to a similar pain reduction for both oliceridine and morphine, and given the increased analgesia from oliceridine vs morphine, an equianalgesic dose of oliceridine should be substantially lower than that for morphine and therefore low enough to allow safety advantages to become evident.
Phase 2b abdominoplasty trial Trevena announced positive results from its Phase 2b trial with oliceridine for post-operative abdominoplasty pain in 3Q15, consistent with our strong view that PCA variable dosing would allow for lower oliceridine dosing and thus for its superior safety profile to emerge. The 2:1:2 randomized, double-blind, placebo- and active-controlled abdominoplasty trial (n=200) achieved its primary endpoint of statistically significant pain reduction compared to placebo, measured over 24 hours post-operatively starting when pain became moderate or severe. The trial tested two double-blind loading doses of oliceridine, morphine or placebo, followed by PCA dosing. The first dose of oliceridine was a 1.5mg IV loading dose with a 0.1mg PCA regimen allowed as often as every 6 minutes, and the second was a 1.5mg loading dose with 0.35mg oliceridine PCA dose regimen. Low dose oliceridine reduced average pain score by 2.3 points (p<0.0001 vs. placebo), and high dose oliceridine reduced average pain score by 2.1 points (p=0.0003 vs. placebo), also achieving the key secondary noninferiority endpoint of oliceridine vs morphine, which reduced average pain score by 2.1 points (p=0.0001 vs. placebo). Rescue analgesic use for oliceridine also met secondary measures, as the percentage of patients using rescue was 31% with oliceridine 0.1mg, 21% with oliceridine 0.35mg, 25% with morphine and 64% with placebo (post hoc p<0.0005 for oliceridine and morphine vs. placebo). In addition, oliceridine provided equally rapid pain reduction over 24 hours compared to morphine (see Exhibit 4), but a better safety profile compared to morphine, as demonstrated in Table 1 (post hoc p<0.05 vs. morphine). No drug-related SAEs were reported, and the most frequently reported adverse events were nausea, vomiting, hypoventilation and headache, which are all opioid-related AEs and thus largely expected. Trevena also emphasized a lower prevalence of hypoventilation, nausea and vomiting, and less rescue medication use (see Exhibit 5) in treatment groups with both doses of oliceridine compared with morphine.
The abdominoplasty trial’s PCA dosing best mirrors the as-needed dosing most common with post-operative opioids. PCA is a helpful design feature because it allows patients to increase dosing if pain dictates and to limit dosing if adverse effects dictate. By contrast to the fixed dosing used in the bunionectomy trial, the PCA used in the abdominoplasty trial allowed for substantially less oliceridine to be given versus morphine and thus helped allow for its more favorable safety profile to emerge. Given that abdominoplasty generally involves less pain than bunionectomy, it was important to have a useful floor for baseline pain, as it should help trial arms differentiate from one another in terms of efficacy, and the abdominoplasty trial had baseline pain (NPRS) of 7.7 out of 10, clearly severe baseline pain. Oliceridine was shown to provide more pain relief than a standard 4mg dose of morphine, as well as have a faster onset of action, in a previous Phase 2 bunionectomy trial. The highly positive data from both Phase 2 trials enable Trevena to have a successful end-of- Phase 2 meeting with the FDA.
Exhibit 4: Phase 2b abdominoplasty PCA trial - oliceridine rapidly reduced pain intensity over 24 hours
Source: Company documents
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Table 1: Favorable safety and tolerability profile vs. morphine
Source: Company documents
Exhibit 5: Dynamics of as-needed analgesic use: rescue medication
Time after first dose (hours)
Source: Company documents
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Phase 3 program for oliceridine In May, the FDA accepted the oliceridine Phase 3 program plan, which includes two pivotal efficacy trials: the APOLLO-1 trial evaluating pain for 48 hours after bunionectomy, and the APOLLO-2 trial evaluating pain for 24 hours after abdominoplasty, both of which were initiated in early June 2016. 375 patients will be enrolled into each trial and randomized equally to one of five arms: three different regimens of oliceridine, morphine, or placebo, all administered via PCA (see Table 2), thereby supporting a PRN label. The Phase 3 design intends to give doctors information on a usefully broad range of doses, allowing patients to start on the lowest dose and have the capacity to titrate up to 0.5mg in clinical practice without the safety of higher doses being unknown. Supplemental study drug is allowed as often as every hour if PCA administration cannot adequately treat pain, after which NSAID rescue is allowed. The primary endpoint for both trials will be a responder analysis comparing the efficacy of oliceridine vs. placebo, which was successfully explored post hoc in the Phase 2b abdominoplasty trial. A responder is defined as a patient experiencing at least a 30% improvement from baseline as measured by SPID score at the end of treatment, without early discontinuation or rescue medication. About 30% of patients on placebo would typically be expected to have at least a 30% pain score drop without the need for any rescue medication, but the active treatment groups should have a substantially higher percentage of patients responding without need for rescue even if placebo responders are higher than typically seen. The responder analysis reflects a measure of safety/tolerability given its intolerance of early discontinuation, and favors a positive outcome via reducing variability in the data given the binary nature of the readout.
We believe that the validated primary endpoint and the active head-to-head comparison with morphine secondary endpoints, especially the safety endpoints such as hypoventilation, will easily set oliceridine up for approval if successful. Importantly, the Phase 3 trials intend to confirm the respiratory benefit seen in Phase 2b with a pre-specified focus on respiratory safety burden. Phase 3 respiratory depression is measured by the prevalence and duration of respiratory safety events, based on clinical assessment of sedation, oxygen saturation and respiratory rate, each measured every 30 minutes. Duration is important to measure because it takes a while for respiratory depression to alleviate with morphine, and that would be a useful point of differentiation. Measurements of respiratory depression are powered for statistical significance, but it is not clear what difference in respiratory depression will be viewed by the FDA as clinically meaningful. We believe the respiratory benefit, if concordance is seen between the Phase 3 efficacy trials, would deserve to be in the label and should be compelling differentiating evidence to support the commercial success of oliceridine.
To increase the chances of showing a safety differential versus morphine, Trevena offers supplemental dosing in the Phase 3 program. Supplemental dosing is an offer of blinded study drug (placebo for the placebo arm, 0.75mg oliceridine to any oliceridine dose arm, or 2mg morphine to the morphine arm), to patients still feeling enough pain to request rescue medication despite PCA, before actually giving them any rescue medication. Supplemental dosing is a helpful differentiation strategy because it not only simulates clinical practice, but also gives the morphine arm patients a higher chance of taking more morphine, thus making it easier to show the respiratory depression difference. As morphine is relatively slow acting, supplemental dosing for those patients should be more frequent than with the rapidly acting oliceridine.
The development program will include at least 1,100 patients exposed to the drug, as requested by the FDA. The ongoing open-label Phase 3 ATHENA-1 safety trial will assess the safety and tolerability of oliceridine in patients with acute moderate-to-severe pain in various settings (incorporating as needed bolus dosing as well as PCA), and it will importantly address the FDA’s desire for longer term exposure than what is expected in the APOLLO trials. Phase 3 enrollment is progressing well, facilitated by Trevena paying the full cost for abdominoplasty and bunionectomy procedures, thus the company is well on track to complete ATHENA-1 in time to file its NDA in 2H17.
Table 2: Dosing arms in each APOLLO trial
Regimen N Loading Demand Supplemental dose/mg dose/mg dose/mg Placebo 75 - - - Oliceridine 0.1mg 75 1.5 0.1 0.75 Oliceridine 0.35mg 75 1.5 0.35 0.75 Oliceridine 0.5mg 75 1.5 0.5 0.75 Morphine 75 4.0 1.0 2.0 Source: Company documents
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TRV250 - a potentially new migraine treatment Trevena anticipates submitting an IND for TRV250 to the FDA by YE16 and start Phase 1 in early 2017. In the US, TRV250 would be targeting 12 million acute episodic migraine patients, and more specifically the 25% of them that do not benefit from, or cannot tolerate, triptans. Migraines affect over 800 million people worldwide, yet the basic mechanisms underlying these severe headaches remain poorly understood. Current therapy is clearly effective for some patients, but there are many patients that do not respond sufficiently or poorly tolerate them. The majority of opioids commonly used for migraine target the μ-opioid receptor but they are not very effective for migraine pain and μ-opioids can even contribute to increasing the frequency of migraine that is resistant to other types of migraine therapy. This phenomenon is referred to as medication overuse headache and all too often leads to abuse of opioids in an attempt to counter an increasing pain at an increasing frequency. Triptans such as sumatriptan presumably exert their anti-migraine effect through agonism of the 5-HT1B/1D receptors on intracranial blood vessels and sensory nerves of the trigeminal system, but are not broadly effective enough to meet the medical need, thereby justifying Trevena’s quest for a differentiated migraine treatment that is presently focused on TRV250, a non-narcotic selective δ-opioid receptor agonist. This drug class is different from μ-opioid receptor agonists in that selective δ-opioid agonists are typically less effective when tested in models of acute pain, but they are effective in chronic inflammatory assays and neuropathic pain. Especially useful for a drug that would often be used chronically against migraine, δ-agonists do not cause the respiratory depression and constipation seen with μ-agonists, and they also do not induce hyperalgesia upon their chronic administration. Furthermore, δ-opioid receptor agonists apparently do not have the abuse potential of μ-opioid receptor agonists, despite the association of δ-opioids and enhancement of one’s emotional state. Corroborating these results is the observation that genetic deletion of either the δ-opioid receptor or its endogenous ligand increases anxiety and depressive behavior in animal models, while δ-agonists in normal animal models produce anxiolytic and antidepressant effects. Despite all of the preclinical evidence for the association of δ-agonists with anxiety and depression, and the clear clinical association of these symptoms with migraines, δ-agonists thus far have not been well studied for migraine and we look forward to Trevena’s initial clinical proof-of-concept. Trevena has already been able to show that TRV250’s selectivity against β-arrestin pathway activation is associated with a lower seizure risk in different animal models, as judged by EEG vs the nonselective δ-opioid agonists AZD2327, although the margin of safety in monkeys is smaller than in rodents and thus presumably in humans. TRV250 was also effective at reversing acute nitroglycerin-induced hyperalgesia in animals and animal migraine models, as well as effective in capsaicin models of peripheral and central pain.
TRV734 – an oral µ-opioid for acute and chronic pain TRV734 is the oral follow-on pain drug for oliceridine, and would be intended as outpatient therapy following post-surgical hospital recovery as well as for chronic pain. Like oliceridine, TRV734 capitalizes upon the same ability to selectively activate a µ-opioid receptor in an attempt to dissociate efficacy from adverse events, and thus TRV734 has a weak ability to recruit β-arrestin. Preclinical animal models have shown there to be less gastrointestinal dysfunction with TRV734 than equianalgesic doses of oxycodone or morphine. As with our expectation for oliceridine, we believe that TRV734 will be able to deliver either superior pain relief versus its oral competitors or less severe adverse effects along with similar pain relief. Its competitors are the same types of drugs described below for oliceridine and its US market opportunity can be estimated by 2014 figures for acute and chronic pain treated with opioids that total about $11 billion in the US.
Trevena’s first Phase 1 trial completed in mid-2014, and was conducted in two parts. The 76 male volunteer single ascending dose trial measured relative bioavailability and food effect, as well as safety, tolerability, pharmacokinetics, and pharmacodynamics. TRV734 showed dose-related increases in plasma concentration that peaked an hour after dosing. Efficacy was indicated by pupil constriction at doses of 80mg and higher, and mild-to-moderate adverse effects (no SAEs) were seen at 250mg, the top dose administered, which opens the possibility to deliver efficacy with fewer safety complications compared to approved opioids.
Trevena then conducted a two-part Phase 1 multiple ascending dose trial with TRV734 in 75 healthy volunteers, and reported data in 1Q15 on safety, tolerability, pharmacokinetics, and pharmacodynamics. In the first part of the trial, 13 males took 125mg TRV734 after a high fat meal, a standard meal, and in three split portions following a fast. Each case showed pupil constriction lasting 4-6 hours, consistent with prior results. In the second part of the trial, 62 males and females fed standard meals took either placebo, 10mg immediate-release oxycodone, or 1 of the supplied TRV734 doses (60, 80, 125, or 175mg) every 6 hours for 24 hours. Each TRV734 dose tested demonstrated pupil constriction and increased tolerability of cold-induced pain that lasted for 4-6 hours and that was similar to that seen with 10mg oxycodone. TRV734 was safe and well tolerated with no SAEs, and with opioid-related adverse events such as somnolence, nausea, headache, dizziness, and vomiting, with a trend toward less constipation.
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Competitive landscape for oliceridine and TRV734
In 2015, approximately 51 million US hospital reimbursement claims for injectable opioids were submitted, which includes hospital inpatient stays and outpatient visits, and 16 million of these involved inpatient surgeries. According to GBI Research, the 2014 US opioid pain management market was about $11 billion, with the rest of the world accounting for about an additional $5 to 6 billion. Oliceridine will mainly compete against currently available IV opioids, IV nonsteroidal anti-inflammatory drugs (NSAIDs), and injected drugs that are approved or in development, such as bupivacaine, but TRV734 as an oral would compete in the larger acute and chronic market.
Opioid analgesics. Opioids bind to specific opioid receptors in the nervous system and other tissues, especially the µ, κ, and δ receptors. However opioids have a number of side effects, including respiratory depression and the development of analgesic tolerance. Generic versions of opioid analgesics commonly used in the hospital include morphine, hydromorphone, hydrocodone, sufentanil, oxycodone and fentanyl.
NSAIDs. NSAIDs block the Cox-1 and Cox-2 enzymes and decrease inflammation, pain, and fever. NSAIDs can also selectively block the Cox-1 or Cox-2 enzyme. NSAIDs that block Cox-1 include ibuprofen and naproxen. Cox-1 enzyme inhibitors have the side effects of lowered gastrointestinal (GI) cytoprotection, platelet function, and renal function. Cox-2 enzymes inhibitors are a more modern discovery, which include meloxicam, celecoxib, and diclofenac. Cox-2 specific NSAIDs, similar to Cox-1, will decrease inflammation, pain, and fever, but will increase prothrombotic effects. Some products have been taken off the market due to increased risk for heart attacks and stroke.
K-opioid receptor. Cara Therapeutics is developing its selectively targeted peripheral kappa opioid receptor agonist CR845 that can be used in combination with µ-opioid receptors to induce pain relief. CR845 has been tested both as an oral and IV therapy. IV CR845 was shown to result in statistically significant pain relief and significant reductions in opioid-related side effects in three completed Phase 2 trials for acute post-operative pain (p<0.0001). CR845 also did not produce any of the CNS related adverse effects seen with centrally- acting kappa opioid agonists, and could be a potential competitor for oliceridine. CR845 also has potential in other unmet indications, exemplified by Cara’s recently announced positive results from a Phase 2 trial in moderate to severe uremic pruritus. Patients in the IV CR845 arm experienced a 54% reduction in worst itch score vs. placebo (p-value = 0.016). IV CR845 also provided an additional 71% reduction in the average total Skindex 10 score than placebo at the end the two-week treatment period (p=0.031). Cara is hopeful to begin its Phase 3 trial for multiple indications in 2016.
Intellectual property
Regarding oliceridine, Trevena’s patent portfolio includes 1 issued US patent (US Patent No. 8,835,488), which includes claims for oliceridine, compositions comprising oliceridine and methods of using oliceridine, This patent is expected to expire no earlier than 2032, as is any future issued oliceridine patent. Trevena also has 1 US patent application claiming oliceridine, other compounds and/or methods of making or using the same. A related PCT application was filed and national patent applications have been filed in South Korea, the EU Patent Office, the Eurasian Patent Office, Australia, Brazil, Canada, Israel, India, Japan, China, Hong Kong and New Zealand. Any ex-US patents that may issue from these national patent applications are expected to expire no earlier than 2032.
Regarding TRV250, Trevena has 4 provisional patent applications directed to compounds that modulate the d-opioid receptor. Three of the applications are solely owned by Trevena and one is co-owned by Trevena and Ligand Pharmaceuticals. Trevena has an exclusive worldwide, paid up, royalty-free license to any compound or method of use in the field of pharmaceuticals disclosed in the Ligand co- owned application. Trevena expects that any compound that modulates the d-opioid receptor that it chooses to pursue under its development program would be covered by the applications solely owned by Trevena. These applications are eligible for worldwide filing and may be used to establish non-provisional and national phase applications that, if issued, are predicted to expire no earlier than 2036.
Regarding TRV734, Trevena owns 1 issued US patent (US Patent No. 9,044,469) claiming TRV734, other compounds and/or methods of making or using the same, and it is expected to expire no earlier than 2032. A related PCT application was filed and national patent applications have been filed in South Korea, the EU Patent Office, the Eurasian Patent Office, Australia, Brazil, Canada, Israel, India, Japan, China, Hong Kong and New Zealand. Any ex-US patents that may issue from these national patent applications are predicted to expire no earlier than 2032.
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Financials Revenue. Our projected revenue stems from oliceridine sales for the treatment of moderate to severe pain in both inpatients and outpatients in the US. We expect Trevena to commercialize oliceridine in the US itself and partner oliceridine in ex-US territories. We project FDA approval and US launch of oliceridine in 2018, followed by approval and launch in the EU and the rest of the world thereafter, starting in 2019. With an assumed initial US price of $200 per course, we project oliceridine to generate about $486 million in global sales in 2022.
Expense. We assume Trevena to bear all expenses related to oliceridine in the US, as the company plans to develop and commercialize the drug in the US on its own. We project COGS for oliceridine to be 10% initially in 2018 and gradually decrease as sale increase. We project R&D expense to decrease by about 10% to $77 million in 2017, given the early 2017 end of the Phase 3 trial with oliceridine and the lower initial clinical costs for TRV250. We also project SG&A expense to substantially increase in 2018 and 2019 as Trevena prepares for the launch of oliceridine with a specialty sales force of about 75-100 reps.
Bottom Line. We project Trevena to be profitable in 2020, due primarily to oliceridine sales in the US. The 2020 diluted share count takes into consideration outstanding stock options and warrants, which can be converted into 6.6 million common shares. As of October 31, 2016, Trevena had about 52.3 million shares of common stock outstanding. Finally, we are projecting a 25% income tax rate in 2022 (to increase thereafter), given the consumption of NOLs.
Balance Sheet. Trevena had about $119.6 million in cash as of September 30, 2016. The company’s current cash position should be sufficient to support its activities at least into early 2018. Near term, we project significant stock price appreciation after the release of our expected positive top-line Phase 3 results with oliceridine in 1Q17.
Risks
• Clinical risk. Oliceridine could fail to deliver statistically significant results in late-stage clinical trials, substantially reducing the value of Trevena’s product candidates and therefore our target price.
• Regulatory risk. Oliceridine, even if successful in the clinic, could fail to be approved by domestic and/or foreign regulatory bodies, which would reduce Trevena’s value and therefore our target price.
• Financing risk. Trevena will need capital to fund its operations, and thus is reliant on obtaining additional outside funding, which may not occur or which could be substantially dilutive to existing investors.
• Competitive risk. Even if oliceridine is approved, it may not be well adopted in a competitive marketplace, which would adversely affect Trevena’s value and therefore our target price.
• High stock price volatility. This issue is common among small-cap biotechnology companies with relatively low trading volumes.
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Trevena, Inc. Income Statement Fiscal Year ends December (in $000, except per share items) 2012A 2013A 2014A 1Q15 2Q15 3Q15 4Q15 2015A 1Q16A 2Q16A 3Q16A 4Q16E 2016E 2017E 2018E 2019E 2020E 2021E 2022E Product revenue Oliceridine (TRV130) 13,577 75,566 193,744 297,881 388,598 Grant revenue 408 85 ------Collaboration revenue 400 50 - 625 1,875 1,875 1,875 6,250 1,875 1,875 3,750 Total Revenue 808 135 - 625 1,875 1,875 1,875 6,250 1,875 1,875 - - 3,750 - 13,577 75,566 193,744 297,881 388,598 COGS $ 1,358 $ 7,179 $ 17,437 $ 25,320 $ 31,088 R&D 13,295 18,760 40,547 10,599 10,275 9,650 13,550 44,074 15,753 17,203 25,549 26,826 85,331 76,798 65,278 65,931 66,590 67,256 67,929 SG&A 3,123 4,720 9,403 3,089 3,107 2,780 3,820 12,797 3,918 3,697 4,078 4,201 15,893 17,483 25,350 32,955 36,251 38,063 39,205 Total Operating Expenses 16,418 23,480 49,950 13,688 13,383 12,430 17,370 56,871 19,671 20,900 29,627 31,027 101,224 94,281 91,986 106,065 120,278 130,639 138,222 Operating income (EBIT) (15,610) (23,345) (49,950) (13,063) (11,508) (10,555) (15,495) (50,621) (17,796) (19,025) (29,627) (31,027) (97,474) (94,281) (78,409) (30,499) 73,466 167,242 250,376 Change in fair value of warrant liab. 45 242 122 (8) - - - (8) ------interest income (interest expense) (194) (149) (53) (31) - - - (31) 17 (191) (272) (14) (28) (25) (23) - - - - miscellaneous income 123 1 151 174 (11) (60) 30 132 ------Total Other (26) 94 221 134 (11) (60) 30 93 17 (191) (272) (14) (28) (25) (23) - - - - Net inc. (loss) before income tax (15,636) (23,251) (49,729) (12,929) (11,519) (10,615) (15,464) (50,528) (17,779) (19,216) (29,899) (31,041) (97,502) (94,306) (78,432) (30,499) 73,466 167,242 250,376 Income tax expense (benefit) - - - - - 62,594 Net income (loss), GAAP (15,636) (23,251) (49,729) (12,929) (11,519) (10,615) (15,464) (50,528) (17,779) (19,216) (29,899) (31,041) (97,502) (94,306) (78,432) (30,499) 73,466 167,242 187,782 EPS basic (0.95) (1.24) (2.02) (0.33) (0.28) (0.24) (0.30) (1.15) (0.35) (0.37) (0.57) (0.59) (1.87) (1.74) (1.39) (0.54) 1.28 2.88 3.21 EPS diluted, GAAP (0.95) (1.24) (2.02) (0.33) (0.28) (0.24) (0.30) (1.15) (0.35) (0.37) (0.57) (0.59) (1.87) (1.74) (1.39) (0.54) 1.15 2.59 2.88 Basic shares outstanding 16,500 18,800 24,656 39,251 40,810 44,214 50,770 43,761 51,350 52,175 52,205 52,466 52,049 54,131 56,296 56,859 57,428 58,002 58,582 Diluted shares outstanding 16,500 18,800 24,656 39,251 40,810 44,214 50,770 43,761 51,350 52,175 52,205 52,466 52,049 54,131 56,296 56,859 63,983 64,557 65,137 Source: Company reports, Opus National Capital Markets estimates
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IMPORTANT DISCLOSURES: Opus National Capital Markets is a DBA for National Securities Corporation 410 Park Avenue, 14th Floor, New York, NY 10022
REG AC ANALYST CERTIFICATION
The research analyst named on this report, Jonathan Aschoff, Ph.D., certifies the following: (1) that all of the views expressed in this research report accurately reflect his personal views about any and all of the subject securities or issuers; and (2) that no part of his compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by him in this research report.
IMPORTANT DISCLOSURES
This publication does not constitute and should not be construed as an offer or the solicitation of any transaction to buy or sell any securities or any instruments or any derivatives of the securities mentioned herein, or to participate in any particular trading strategies. Although the information contained herein has been obtained from recognized services, and sources believed to be reliable, its accuracy or completeness cannot be guaranteed. Opinions, estimates or projections expressed in this report may make assumptions regarding economic, industry, company and political considerations, and constitute current opinions, at the time of issuance, which are subject to change without notice.
This report is being furnished for informational purposes only, and on the condition that it will not form a primary basis for any investment decision. Any recommendation(s) contained in this report is/are not intended to be, nor should it / they construed or inferred to be, investment advice, as such investments may not be suitable for all investors. When preparing this report, no consideration to one’s investment objectives, risk tolerance and other individual factors was given; as such, as with all investments, purchase or sale of any securities mentioned herein may not be suitable for all investors. By virtue of this publication, neither the Firm nor any of its employees shall be responsible for any investment decisions. Before committing funds to ANY investment, an investor should seek professional advice. Any information relating to the tax status of financial instruments discussed herein is not intended to provide tax advice, or to be used by anyone to provide tax advice. Investors are urged to consult an independent tax professional for advice concerning their particular circumstances. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, either expressed or implied, is made regarding future performance.
National Securities Corporation (NSC) and its affiliated companies, shareholders, officers, directors and / or employees (including persons involved with the preparation or issuance of this report) may, from time to time, have long or short positions in, and buy or sell the securities or derivatives (including options) thereof, of the companies mentioned herein. One or more directors, officers, and / or employees of NSC and its affiliated companies, or independent contractors affiliated with NSC may be a director of the issuer of the securities mentioned herein. NSC and / or its affiliated companies may have managed or
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Opus National Capital Markets Biotechnology co-managed a public offering of, or acted as initial purchaser or placement agent for a private placement of any of the securities of any issuer mentioned in this report within the last three (3) years, or may, from time to time, perform investment banking or other services for, or solicit investment banking business from any company mentioned in this report.
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Research Disclosures Legend
Relevant Disclosures: 1, 7, and 10 1 National Securities (NSC) is a market-maker in the securities of the subject company 2 In the past twelve (12) month period, NSC and / or its affiliates have received compensation for investment banking for services from the subject company 3 In the past twelve (12) month period, NSC and / or its affiliates have received compensation from the subject company for services other than those related to investment banking 4 In the past twelve (12) month period, NSC was a manager or a co-manager of a public offering of one or more of the securities of the issuer 5 In the past twelve (12) month period, NSC was a member of the selling group of November 9, 2016 13
Opus National Capital Markets Biotechnology
a public offering of the security (ies) of the issuer 6 One or more directors, officers, and / or employees of NSC and / or its affiliated companies is / are a director (s) of the issuer of the security which is the subject of this report 7 NSC and / or its affiliates expects to receive or intends to seek compensation for investment banking services from the subject company at some point during the next three (3) months 8 A research analyst or a member of his / her household has a financial interest in the securities of the subject company as follows: a) long common stock; b) short common stock; c) long calls; d) short calls; e) long puts; f) short puts; g) long rights; h) short rights; i) long warrants; j) short warrants; k) long futures; l) short futures; m) long preferred stock; n) short preferred stock 9 As of the end of the month immediately preceding the date of publication of this report or the end of the prior month if the publication is within ten (10) days following the end of the month, NSC and / or its affiliates beneficially owned one percent (1%) or more of any class of common equity securities of the subject company. 10 Please see below for other relevant disclosures
Shares of this security may be sold to residents of all 50 states, Puerto Rico, Guam, the US Virgin Islands and the District of Columbia.
Distribution of Ratings Investment Banking* Rating # % # % BUY 25 52.1% 5 10.4% NEUTRAL 22 45.8% 3 6.3% SELL 1 2.1% 0 0.0%
*Investment banking services provided in the previous 12 months
MEANING OF RATINGS:
BUY: the stock is likely to generate a total return of at least 10% over the next 12 months and should outperform relative to the industry.
NEUTRAL: the stock is likely to perform in-line with the industry over the next 12 months.
SELL: the stock is likely to underperform (from a total return perspective) relative to the industry over the next 12 months.
NR: Not Rated
SP: Suspended
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Charts – TRVN
Source: Big Charts
TRVN Date Rating Price Target Initiation November 9, 2016 BUY $13
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