EASD 2024: Positive Phase I for AT278 in Type II diabetes
Update | 17 September 2024
EASD 2024: Positive Phase I for AT278 in Type II diabetes
Update | 17 September 2024
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Detailed data from the Phase I study in Type II diabetes (T2D) of Arecor’s lead asset AT278, a unique ultra-rapid and ultra-concentrated insulin, were presented at the European Association for the Study of Diabetes (EASD) 2024 meeting. These data confirm its attractive profile, with faster onset and stronger early glucose-lowering effect in comparison to gold standard fast-acting insulin NovoRapid/NovoLog (NovoNordisk). Clinical data to date suggest a pertinent and highly differentiated profile that is suited for T2D patients with high insulin needs, and which could also enable miniaturised ‘next generation’ insulin delivery systems with longer-wear times. Given the data and unmet patient need, an optimal strategy for continued AT278 development is under evaluation by Arecor. This includes plans for a small pump study, alongside consideration of strategic co-development. Following the recent fundraise and trading statement, our reinstated valuation is £157m, or 415p/share.
| Year-end: December 31 | 2022 | 2023 | 2024E | 2025E |
| Revenues (£m) | 2.4 | 4.6 | 6.2 | 10.4 |
| Adj. PBT (£m) | (12.0) | (10.7) | (7.7) | (5.2) |
| Net Income (£m) | (9.3) | (8.6) | (8.7) | (6.2) |
| EPS (p) | (0.3) | (0.3) | (7.7) | (5.2) |
| Cash (£m) | 12.8 | 6.8 | (0.2) | (0.1) |
| EBITDA (£m) | (10.2) | (8.7) | 3.9 | 1.1 |
Update
17 September 2024
| Price | 80.0p |
| Market Cap | £30.2m |
| Enterprise Value | £23.9m |
| Shares in issue | 37.8m |
| 12-month range | 75.0p-199.0p |
| Free float | 36.4% |
| Primary exchange | AIM London |
| Other exchanges | N/A |
| Sector | Healthcare |
| Company codes | AREC.L |
| Corporate client | Yes |
Company description
Arecor Therapeutics is a clinical stage drug developer, with a well-balanced portfolio of in-house and partnered assets, and an internal focus on diabetes. Its proprietary Arestat formulation platform results in enhanced products with lower development risks and less onerous regulatory approvals.
Analysts
Lala Gregorek
lgregorek@trinitydelta.org
+44 (0) 20 3637 5043
Philippa Gardner
pgardner@trinitydelta.org
+44 (0) 20 3637 5042
Table of Contents
Arecor’s diabetes franchise is central to its investment case, with ultra-rapid and ultra-concentrated insulin AT278 making a significant contribution. AT278, a novel and unique U500 formulation of insulin aspart (IAsp), is Arecor’s key in-house clinical-stage programme. Its clinical profile opens the promise of miniaturised “next generation” automated insulin delivery (AID) pump systems with longer-wear times, and increased convenience and suitability for a wider range of patients, such as those with high insulin requirements (eg some Type II diabetes, T2D patients), irrespective of delivery device (pen or pump).
AT278 has the potential to be a disruptive insulin that is ultra-concentrated yet also ultra-rapid acting, unlike currently available U500 and U200 concentrated insulins, allowing high doses of a mealtime (fast-acting) insulin to be administered in smaller injection volumes, supporting better blood-glucose control.
Clinical data from Phase I studies confirm a superior pharmacokinetic and pharmacodynamic (PK/PD) profile to gold-standard rapid insulin NovoRapid U100 in both overweight/obese T2D patients (May 2024 Update) and in otherwise healthy Type I diabetics (May 2022 Update, September 2021 Lighthouse), suggesting a highly differentiated fast-acting profile irrespective of diabetes type and BMI. In the T2D trial, AT278 also showed superiority to a concentrated comparator, Humulin-R U500. Detailed data, summarised below, from the T2D study were recently presented at the European Association for the Study of Diabetes (EASD) 2024 meeting in a late-breaking oral session (‘Pharmacokinetic and pharmacodynamic properties of highly concentrated insulin aspart AT278 U500 in overweight and obese people with Type II diabetes’).
Data were presented at EASD 2024 from the randomised, double-blind, two-way crossover Phase I ARE-278-104 trial (Exhibit 1) evaluating 41 overweight/obese patients with Type II diabetes. Type II diabetes patients often have highly variable outcomes given the frequent incidence of high BMI (body mass index) in the overweight (BMI of 25 to <30 kg/m2) and obese (BMI of ≥30 kg/m2) ranges.
Patients enrolled in the study had a median BMI of 29.7 kg/m2, median HbA1c (a measure of blood glucose) of 58 mmol/mol (48 mmol/mol is the level for diagnosing diabetes), and a median diabetes duration of 18 years. Patients were allocated to receive a single subcutaneous 0.5 U/kg dose of AT278 U500 and Novo Nordisk’s U100 insulin aspart NovoRapid (NovoLog in the US), followed by a 12-hour euglycaemic clamp.
The study also had an added comparator of a high concentration insulin, Eli Lilly’s Humulin-R U500. While top-line results indicated that AT278 had superior absorption to both NovoRapid U100 and Humulin-R U500, data presented at EASD 2024 focused on the PK/PD profiles of AT278 and NovoRapid U100.
The data presented showed significantly accelerated early PK/PD profiles with AT278 U500 in comparison with IAsp U100 in high BMI T2D patients (Exhibit 2). The primary endpoint of non-inferiority for glucose-lowering effect (AUCGIR, 0-60min or area under the curve for the glucose infusion rate from time zero to 60 minutes) was met; in fact, AT278 demonstrated a 1.7-fold (95% CI: 1.32 – 2.96) higher glucose-lowering effect within the first 60 minutes and statistical superiority to NovoRapid (p<0.0001). A pre-specified subgroup analysis based on BMI showed that the difference in the primary endpoint (AUCGIR,0-60min) remained. The onset of glucose-lowering effect was more rapid with AT278 vs NovoRapid, with a five-minute earlier onset of action and 25-minute earlier time to half-peak metabolic activity (tEarly50%GIRmax). In addition, the glucose-lowering effect was higher with AT278 up to two hours post-dose.
With rrespect to onset of insulin exposure, a faster onset was seen with AT278 compared with NovoRapid, with a five-minute faster insulin appearance and 24-minute faster time to half-peak serum concentration (tEarly50%Cmax). Within the first 60 minutes, insulin exposure with AT278 was 1.5-fold (95% CI: 1.28 – 1.71) higher than with NovoRapid.
Both AT278 and NovoRapid have comparable offset and overall insulin exposure and glucose-lowering effect: treatment difference (95% CI)] tLate50%Cmax 30 min (-5; 64) and tLate50%GIRmax 26 min (-0.6; 53); treatment ratio AUCInsulin,0-12h 0.97 (0.93; 1.00) and AUCGIR,0-12h 1.06 (0.97; 1.16). From a safety perspective, both insulins were well tolerated with adverse events being mostly mild to moderate and unrelated to the study drugs.
Positive comparative Phase I results for AT278 in both Type I and II diabetics vs current benchmark rapid or concentrated insulins support further clinical development. If these results could be replicated in Phase II trials, AT278 has the potential to become the first disruptor insulin in several decades and is ideally placed to address various emerging needs from the evolving diabetes landscape and market from both a patient and device perspective (May 2024 Update).
Understandably, investors are focused on the likely format, and cost, of the next steps for AT278’s clinical programme, the regulatory pathway, and on possible partnering options and their timing. As the next generation of insulin delivery devices, including miniaturised and longer wear pumps, will only be able to be achieved with an insulin like AT278, we believe that strong relationships with device manufacturers will be critical. Hence, we view positively Arecor’s existing, albeit unrelated, collaboration with Medtronic (May 2024 Lighthouse) to formulate and develop a high concentration, thermostable insulin for use with a next-generation implantable pump.
On the theme of insulin pumps, Arecor has stated its intention that, subject to funding (which may include co-development options), it will conduct a small pump study to demonstrate AT278’s potential and provide important validation in this significant market segment. Data from this study could be a precursor to potentially high value strategic partnering for future development and ultimately commercialisation.
Our valuation has been reinstated following the recent £6.4m (gross) fundraise, with 7.13m new shares issued at 90p. Arecor has confirmed investment by two new strategic healthcare funds. Estimated net proceeds of c £5.8m will be invested to deliver significant value inflection points with: (1) £2.7m for continued R&D investment focused on an oral peptide delivery platform (including GLP-1) and enhanced injectables to drive significant future upside from licensing; and (2) £2.7m investment in Tetris Pharma to increase Ogluo sales, including building up inventory plus education and marketing, with an aim for Tetris Pharma to be cashflow positive in 2026. The remainder will provide general working capital.
An insight into current trading was provided during the fundraise, with unaudited H124 revenues of £1.9m. This excludes Q224 royalties on AT220, hence they relate to a mix of Arecor formulation business revenues and Tetris Pharma product sales, with Ogluo impacted by supply constraints. While the fundraise will ease this situation, we take our usual conservative approach and now forecast slightly lower £4.0m product sales in FY24 (from £4.4m), and £6.9m in FY25 (from £7.6m). Our updated FY24e and FY25e revenue forecasts are £6.2m (from £6.8m) and £10.4m (from £11.2m), respectively (Exhibit 4).
We value Arecor using a rNPV (risk-adjusted net present value) model, including the diabetes franchise, partnered assets, and the in-house Specialty Hospital research portfolio. This now reflects the £6.4m (gross) fundraise (including an estimate of current net cash) and reflects our near-term Tetris forecasts, whilst keeping the peak sales potential intact. Together with slightly later launches for AT292 (SAR-447537) and AT307, this results in a valuation of £157m, with this diluted to 415p per share based on the share count post the fundraise. An overview of our valuation, together with key assumptions, is provided in Exhibit 3.
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