Initiating Coverage June 2, 2017 initiate a Phase II study with … · 2017. 7. 11. · Initiating...

Initiating CoverageJune 2, 2017

Genkyotex (GKTX.PA)Initiation Report

LifeSci Investment Abstract

Genkyotex (Euronext Paris: GKTX.PA) is a clinical stage biotechnology company focusedon the development of anti-NADPH oxidase (NOX) enzyme therapies. The Companyis developing lead asset GKT831, an inhibitor of NOX 1 and 4, for the treatment ofprimary biliary cholangitis (PBC) and potentially other fibrotic conditions. Genkyotex is alsodeveloping GKT771, a selective NOX 1 inhibitor, and plans to evaluate this compound forpatients with inflammatory pain or possibly other related indications. Genkyotex expects toinitiate a Phase II study with GKT831 for PBC in the second quarter of 2017, and interimresults are anticipated in the first half of 2018. The Company also plans to launch a Phase Ipharmacodynamics study with GKT771, which is set to begin in the second half of 2017.

Key Points of Discussion

■ Genkyotex and Genticel Recently Completed a Merger. On February 28, 2017,Genkyotex and Genticel announced the closing of a merger between the two entities.The resulting company is called Genkyotex and currently trades on the Euronext Parisexchange under the ticker GKTX. Post-transaction, Genkyotex shareholders own 80%of the combined share capital and voting rights. The Company reported cash and cashequivalents of $23.8 million as of March 31, 2017, which is expected to last into 2019.

■ Lead Asset GKT831 is in Development for PBC. Genkyotex is being assessed for thetreatment of PBC, a chronic autoimmune disease in which the immune system attacks bileducts in the liver. This blocks the efficient transport of bile to the gastrointestinal (GI)tract, which leads to fibrosis and scarring of the liver, followed by the eventual emergenceof irreversible cirrhosis. The Company’s GKT831 is an inhibitor of NOX 1 and 4, enzymeswhich play roles in various pathways of inflammation, fibrosis, cellular proliferation, andangiogenesis. This provides the rationale to pursue development of this compound infibrotic indications such as PBC and potentially non-alcoholic steatohepatitis (NASH),among others. Genkyotex recently announced FDA approval of an Investigational NewDrug (IND) application with GKT831 for PBC, and plans to initiate a Phase II study inthe second quarter of 2017. Interim results are anticipated in the first half of 2018.

Expected Upcoming Milestones

■ Q2 2017 – Initiate a Phase II trial with GKT831 for PBC.■ H2 2017 – Begin a Phase I pharmacodynamic study with GKT771.■ H1 2018 – Expect interim results from a Phase II trial with GKT831 for PBC.■ H1 2018 – Anticipate results from a Phase I pharmacodynamic study with GKT771.■ H2 2018 – Expect final results from a Phase II trial with GKT831 for PBC.

Analysts

Patrick Dolezal, M.S. (AC)(212) [email protected]

Market Data

Price $2.34Market Cap (M) $182EV (M) $159Shares Outstanding (M) 77.9Fully Diluted Shares (M) 78.9Avg Daily Vol 95,29752-week Range: $1.44 - $5.90Cash (M) $24.4Net Cash/Share $0.30Annualized Cash Burn (M) $15.7Years of Cash Left 1.6Debt (M) $1.0

Financials

For analyst certification and disclosures please see page 30

§ GKT831, an Inhibitor of NOX 1 and 4, May Have Clinical Value in a Range of Fibrotic Indications. GKT831 inhibits NOX 1 and 4, enzymes that play diverse roles in many biological processes, including inflammation and fibrosis. Expression of NOX4 is thought to be necessary for apoptosis in hepatocytes and hepatic stellate cell (HSC) activation, which subsequently leads to production of collagen and fibrosis. NOX1 has been shown to contribute to the pathogenesis of inflammatory pain, angiogenesis and other inflammatory and oxidative-stress related conditions. The development of GKT831 is important as it allows for targeting of NOX1 and NOX4 driven pathologies without affecting the physiological functions of other NOX isoforms. Due to its effects on NOX1 and NOX4, there may be clinical value in using this product in PBC and NASH, among other fibrotic diseases affecting the liver, lungs, and kidneys.

§ Prior Phase II Data Show Potential of GKT831 in PBC. Genkyotex conducted a Phase II study with GKT831 for the treatment of individuals with diabetic kidney disease. Patients treated with GKT831 showed statistically significant reductions in gamma-glutamyl transferase (GGT) and high-sensitivity C-reactive protein (hsCRP) as compared to placebo (p < 0.05). Both markers are relevant to inflammatory and fibrotic liver indications, and as such, the Company plans to initiate a Phase II study for PBC in the second quarter of 2017. The primary endpoint will likely be change in serum levels of GGT. A key secondary endpoint could be levels of alkaline phosphatase (ALP), which was the basis for the approval of Intercept’s (NasdaqGS: ICPT) Ocaliva (obeticholic acid) in this indication. Interim results are anticipated in the first half of 2018, with full data in the second half of 2018.

§ GKT771 has Potential in Inflammatory Pain and Oncology. GKT771 is a selective inhibitor of NOX1, an enzyme that has been shown to contribute to the pathogenesis of inflammatory pain, angiogenesis, and other inflammatory and oxidative stress-related conditions. The Company has also reported that GKT771 targets the NGF/TrkA/TRPV1 pain-processing pathway, a clinically validated target for pain therapies, and has been shown to have potent activity in in vitro and in vivo models of inflammatory pain. NOX1 is part of a signaling pathway that mediates vascular endothelial growth factor (VEGF) expression and neovascularization in cancer cells. Genkyotex has also reported that GKT771 blocks angiogenesis through the VEGF pathway and shows potent activity in in vitro and in vivo models of angiogenesis. Thus, we note the potential of this compound to treat patients with inflammatory pain, but also in various cancer indications. The Company plans to initiate a Phase I pharmacodynamic study in the second half of 2017, and results are expected in the first half of 2018.

Financial Discussion

First Quarter 2017 Corporate Update. On April 27, Genkyotex provided a business update for the first quarter of 2017. The Company noted several meaningful developments, particularly the approval of the combination between Genticel and Genkyotex. This transaction was comprised of a share exchange agreement, in which shareholders of Genkyotex traded 5,262,133 ordinary shares, or 100% of the company, for 62,279,951 shares of Genticel. This equates 11.8 shares of Genticel for every 1 share of Genkyotex, which represents a $127 million valuation for Genkyotex and a $32 million valuation for Genticel.

This occurred concurrently with management changes, including the appointment of several board members and Elias Papatheodorou as Chief Executive Officer. The Company mentioned they remain on track with clinical candidates GKT831 and GKT771, and is also investigating the potential of NOX inhibitors in oncology, hearing loss, and Parkinson’s disease. Genkyotex reported cash and cash equivalents of $23.8 million as of March 31, 2017.

June 2, 2017

Table of Contents Company Description .................................................................................................................................................................... 4

GKT831: A Novel Oral Treatment for PBC ............................................................................................................................. 4

Mechanism of Action ................................................................................................................................................................ 5

Preclinical Studies ....................................................................................................................................................................... 6

Safety ............................................................................................................................................................................................ 8

Primary Biliary Cholangitis (PBC) ................................................................................................................................................ 8 Symptoms and Diagnosis ...................................................................................................................................................... 12

Treatment ................................................................................................................................................................................. 13

PBC Market Information ............................................................................................................................................................ 15

Epidemiology ........................................................................................................................................................................... 15

Market Size ............................................................................................................................................................................... 16 Clinical Data Discussion ............................................................................................................................................................. 17

Phase I Trials with GKT831 in Healthy Subjects .............................................................................................................. 17 Phase II Study with GKT831 for Diabetic Kidney Disease ............................................................................................ 18

Phase II Study with GKT831 for PBC ................................................................................................................................ 18

Other Drugs in Development .................................................................................................................................................... 19 GS-9674 – Gilead Sciences (NasdaqGS: GILD) ............................................................................................................... 20

GSK2330672 – GlaxoSmithKline (NYSE: GSK) ............................................................................................................. 20

Seladelpar – CymaBay Therapeutics (NasdaqCM: CBAY) .............................................................................................. 21 Competitive Landscape ............................................................................................................................................................... 22

GKT831 for the Treatment of Non-Alcoholic Steatohepatitis (NASH) ............................................................................ 24

GKT771 for Inflammatory Pain and Angiogenesis ............................................................................................................... 25

Mechanism of Action ............................................................................................................................................................. 25 Collaboration with Serum Institute of India ............................................................................................................................ 27

Intellectual Property .................................................................................................................................................................... 27

Management Team ...................................................................................................................................................................... 28

Risk to an Investment ................................................................................................................................................................. 29

Analyst Certification .................................................................................................................................................................... 30 Disclosures .................................................................................................................................................................................... 30

June 2, 2017

Company Description Genkyotex is headquartered in Geneva, Switzerland and is establishing itself as a leader in antiNADPH oxidase (NOX) enzyme therapies. NOX enzymes are implicated in the pathogenesis of fibrotic diseases such as primary biliary cholangitis (PBC) and non-alcoholic steatohepatitis (NASH) as well as inflammation related pain conditions, cancer, neurodegenerative disorders, and many other inflammatory disease processes. The Company is developing lead asset GKT831 for the treatment of primary biliary cholangitis (PBC), a chronic autoimmune disease in which the immune system attacks the bile ducts in the liver. GKT831 is an inhibitor of NOX 1 and 4, enzymes which play roles in various pathways for inflammation, fibrosis, cellular proliferation, and angiogenesis. Genkyotex is also developing GKT771, a selective NOX 1 inhibitor, and plans to evaluate this compound in patients with inflammatory pain and potentially other related indications. Genkyotex expects to initiate a Phase II study with GKT831 for PBC in the second quarter of 2017, and interim results are anticipated in the first half of 2018. The Company also plans to launch a Phase I pharmacodynamic study with GKT771, which is set to begin in the second half of 2017. Genkyotex’ pipeline is shown in Figure 1.

Figure 1. Genkyotex’ Development Pipeline

Source: LifeSci Capital GKT831: A Novel Oral Treatment for PBC Genkyotex is developing lead asset GKT831 for the treatment of primary biliary cholangitis (PBC), a chronic autoimmune disease in which the immune system attacks bile ducts in the liver. This blocks the efficient transport of bile to the gastrointenstinal (GI) tract, which leads to fibrosis and scarring of the liver, followed by the eventual emergence of irreversible cirrhosis. While there are currently two approved therapies for PBC, neither drug can halt the disease nor reverse liver damage. Of the patients diagnosed with early-stage PBC, the progression to liver transplant or death is approximately 6% after 10 years and 22% after 20 years.1 PBC is an orphan disease that affects approximately 91,000 and 92,000 individuals in the US and EU, respectively, and patients are in dire need of novel treatment options.

1 Lindor, K.D. et al., 2009. Primary Biliary Cirrhosis. Hepatology, 50(1), pp291-308.

GKT831

Primary Biliary Cholangitis (PBC)

Phase I Milestones

Inflammatory pain & angiogenesis

Phase II Phase III

Interim Results: H1 2018

Interim Results: H2 2017

GKT771

June 2, 2017

The Company’s GKT831 is an inhibitor of NADPH oxidase (NOX) 1 and 4, enzymes which play roles in various pathways of inflammation, fibrosis, cellular proliferation, and angiogenesis. This provides the rationale to pursue development of this compound in fibrotic indications such as PBC and Non-Alcoholic Steatohepatitis (NASH), among other fibrotic diseases affecting the liver, lungs, and kidneys. Genkyotex has completed four Phase I trials and a Phase II study with GKT831 for the treatment of individuals with diabetic kidney disease. Patients treated with GKT831 showed statistically significant reductions in gamma-glutamyl transferase (GGT) and high-sensitivity C-reactive protein (hsCRP) as compared to placebo (p < 0.05). Both of these markers are relevant to inflammatory and fibrotic liver indications, and as such the Company has planned a Phase II trial with GKT831 for PBC. The Company recently announced the approval of an Investigational New Drug (IND) for this program and expects to initiate this study in the second quarter of 2017. Interim results are anticipated in the first half of 2018. Mechanism of Action Genkyotex is initially developing GKT831 for the treatment of PBC, a chronic autoimmune disease in which the immune system attacks bile ducts in the liver. This prevents efficient transportation of bile, which further damages the liver and leads to fibrosis and scarring. This process is driven by the accumulation of extracellular matrix proteins, including collagen. Advanced stages of fibrosis eventually result in cirrhosis, which affects the proper functioning of affected areas of the liver and can lead to liver failure. One of the primary contributors to collagen production in the presence of liver injury are hepatic stellate cells (HSC), which become activated in response to fibrogenic cytokines such as transforming growth factor beta 1 (TGF-β1), angiotensin II (Ang II), and leptin.2 Importantly, Ang II contributes to fibrosis through NADPH oxidase (NOX) activation, giving a rationale for the use of GKT831, an inhibitor of NOX 1 and 4, for the treatment of fibrotic diseases such as PBC and potentially NASH. These enzymes play important roles in the pathways related to inflammation, fibrosis, cellular proliferation, and angiogenesis. NOX Enzymes. The NOX family is composed of a group of seven transmembrane proteins (NOX1–NOX5 and DUOX1 and DUOX2). Their structure typically includes six a-helical transmembrane domains and conserved FAD- and NADPH- binding sites, as presented in Figure 2.3 The function of NOX enzymes is to generate reactive oxygen species (ROS) from oxygen. NOX-derived ROS play an important role in normal physiological processes such modulating gene expression, cell proliferation, migration, and angiogenesis. In pathological conditions, however, NOX expression and activation can be altered, leading to elevated ROS production that dysregulates cellular activity and causes direct damage to tissues. Oxidation of cysteine residues in particular has been identified as one of the routes in which enzymatic properties can be modified.4 Increasing ROS levels and the associated oxidative stress are also implicated in several fibrotic liver conditions, including cholestasis.5

2 Bataller, R. et al., 2005. Liver fibrosis. The Journal of Clinical Investigation, 115(2), pp209-218. 3 Bedard, K. et al., 2007. The NOX family of ROS-generating NADPH oxidases: physiology and pathophysiology. Physiological reviews, 87(1), p245-313. 4 Klomsiri, C. et al., 2011. Cysteine-Based Redox Switches in Enzymes. Antioxidants & Redox Signaling, 14(6), pp1065-1077. 5 Bataller, R. et al., NADPH oxidase signal transduces angiotensin II in hepatic stellate cells and is critical in hepatic fibrosis. The Journal of Clinical Investigation, 112(9), pp1383-1394.

June 2, 2017

Figure 2. Proposed Structure of NOX Enzymes

Source: Bedard, et al., 2007. Given that elevated levels of ROS play a pivotal role in the progression of multiple diseases, the need to maintain cellular redox balance and prevent harmful overproduction of ROS has become increasingly clear. In recent years, intense efforts have been dedicated to the development of NOX inhibitors. Most of these compounds have proven to be effective NOX enzyme family inhibitors but with no isoform specificity. It is important to develop inhibitors that target specific NOX isoforms and not all of the variants concurrently, as each has different functions. NOX4 is one of the most widely expressed members of the NOX family and is constitutively active.6 Expression of NOX4 is considered to be necessary for apoptosis in hepatocytes and HSC activation, which subsequently leads to production of collagen and fibrosis.7 NOX1 has been shown to contribute to the pathogenesis of inflammatory pain, angiogenesis and other inflammatory and oxidative-stress related conditions.8 The development of a NOX1/4 inhibitor by Genkyotex is important as it allows for targeting of NOX1 and NOX4 driven pathologies without affecting the physiological functions of other NOX isoforms. Furthermore, GKT831 has mechanistic rationale in PBC and other fibrotic indications due to the potential role of NOX isoforms in the pathogenesis in these indications. Preclinical Studies GKT831 and the effects of NOX4 inhibition have been assessed in several preclinical animal models. In the study detailed below, investigators employed several mouse models of NASH to better understand the relationship between

6 Miller, F.J. et al., 2009. NADPH Oxidase 4. Circulation Research, 105(3), pp209-210. 7 Sancho, P. et al., 2012. NADPH Oxidase NOX4 Mediates Stellate Cell Activation and Hepatocyte Cell Death during Liver Fibrosis Development. PloS one, 7(9), e45295. 8 Gimenez, M. et al., 2016. Nox1 in cardiovascular diseases: regulation and pathophysiology. Clinical Science, 130(3), pp151-165.

and that its COOH terminus and its NH2 terminus are facingthe cytoplasm.

Human NOX2 is a highly glycosylated protein thatappears as a broad smear on SDS-PAGE reflecting theheterogeneity of glycosylation. The fully glycosylatedform runs with an apparent molecular mass of !70–90kDa. Removal of the carbohydrates by endoglycosidase Fleaves a protein that runs at 55 kDa, demonstrating theextent of glycosylation (351). The carbohydrate chainsare composed of N-acetylglucosamine and galactose and,to a lesser extent, frucose, mannose, and glucose (351). Amutagenesis approach demonstrates that the carbohy-drates are bound to asparagine residues (132Asn, 149Asn,and 240Asn) in the second and third predicted extracellu-lar loops (929).

The activation of NOX2 occurs through a complexseries of protein/protein interactions (Fig. 2; for moredetailed recent reviews, see Refs. 328, 652, 844). NOX2constitutively associates with p22phox. Indeed, the NOX2

protein is unstable in the absence of p22phox, and phago-cytes from p22phox-deficient patients have no detectableNOX2 protein (217, 692, 828). Activation of NOX2 requirestranslocation of cytosolic factors to the NOX2/p22phox

complex (Fig. 3). The present working model is as fol-lows. Phosphorylation of p47phox leads to a conforma-tional change allowing its interaction with p22phox (327,843). It is thought that p47phox organizes the translocation

FIG. 2. Molecular interactions of cytoplasmic organizer and activa-tor subunits. NOX1, NOX2, and NOX3 require cytoplasmic subunits foractivation. In general, p47phox is thought to be the organizer subunit ofNOX2, and NOXO1 for NOX1 and NOX3. p67phox is the activator subunitfor NOX2, and NOXA1 is the activator subunit for NOX1. In the humansystem, NOX3 does not appear to require an activator subunit. A: the twoorganizer homologs, p47phox and NOXO1, share a similar set of motifs.Both have NH2-terminal “phox homology” (PX) domains that bind tophospholipids in the membrane, although they differ in phospholipidspecificity. They also both interact through tandem Src homology 3(SH3) domains with the proline-rich region (PRR) of p22phox. Onlyp47phox, but not NOXO1, has an autoinhibitory region (AIR) that isinactivated upon phosphorylation, allowing interaction of the tandemSH3 domain with p22phox. Finally, both p47phox and NOXO1 containCOOH-terminal PRRs, which allow interaction with p67phox and NOXA1,respectively. Both p47phox and NOXO1 might also directly interact withtheir respective NOX enzymes. B: the two activator homologs, p67phox

and NOXA1, also share a similar overall domain structure. Both haveNH2-terminal tetricopeptide repeat (TPR) domains that interact withRac. Both have activation domains (AD); the functional role of thisdomain is thus far only documented for the p67phox-NOX2 interaction.p67phox and NOXA1 have COOH-terminal SH3 binding domains, whichinteract with p47phox and NOXO1, respectively. The phox and Bem1(PB1) domain of p67phox interacts with p40phox.

FIG. 1. Proposed structure of the core region of NADPH oxidase(NOX) enzymes. No crystal structure data of NOX enzymes are presentlyavailable. A consensus regarding basic features of the core region ofNOX enzymes has emerged based on indirect data. All NOX familymembers share six highly conserved transmembrane domains. Trans-membrane domains III and V each contain two histidines, spanning twoasymmetrical hemes. The cytoplasmic COOH terminus contains con-served flavin adenine dinucleotide (FAD) and NADPH binding domains.NOX enzymes are thought to be single electron transporters, passingelectrons from NADPH to FAD, to the first heme, to the second heme,and finally to oxygen. Enlarged circles represent amino acids that areconserved through human NOX1, NOX2, NOX3, and NOX4.

THE NOX FAMILY OF ROS-GENERATING NADPH OXIDASES 249

Physiol Rev • VOL 87 • JANUARY 2007 • www.prv.org

by 10.220.33.3 on February 17, 2017http://physrev.physiology.org/

Dow

nloaded from

June 2, 2017

this disease and NOX4. NASH was induced in a NOX4 hepatocyte knockout model (NOX4hepKO) through dietary manipulation.9 For example, mice were placed on the fast food diet (FFD) or the choline-deficient L-amino-acid (CDAA) diet, both of which cause weight gain, resistance to insulin, and the emergence of signs of NASH histology assessed via biopsy, including steatosis, inflammation, and fibrosis. Investigators created the knockout model by crossing NOX4fl/fl with Alb-cre mice, resulting in the genetic knockout of the NOX4 gene in hepatocytes. Mice were then placed on a chow diet, or either the FFD or CDAA/CSAA diet. Mice remained on their respective diets for 20 weeks. Both dietary-based models aimed to recapitulate disease as it naturally occurs in humans, and a separate group of mice were treated with GKT831 to assess the effects of this compound. Liver tissue samples were taken and subsequent immunoblot analyses were performed to assess levels of NOX4, various inflammatory and fibrotic markers, RNA-activated protein kinase (PKR), and phosphor-eIF-2alpha kinase (PERK)-mediated stress signaling pathway. Study Results. The experiments focusing on NOX4hepKO mice, which can be viewed as having complete inhibition of NOX4 in hepatocytes, demonstrated several meaningful findings with relation to oxidative stress, lipid peroxidation, and fibrosis. NOX4hepKO mice had lower levels of ALT, oxidative radicals, and lipid peroxidation, as compared to wild-type (WT) control animals when receiving a FFD diet. Factors that contribute to both necrosis and inflammation were also modulated, as evidenced by decreases in tumor necrosis factor alpha (TNF-α), monocyte chemoattractant protein-1 (MCP-1), and interleukin-beta (IL-β) in NOX4hepKO mice receiving FFD as compared to WT. Finally, investigators also reported attenuation of fibrosis and decreased apoptosis in NOX4hepKO mice on both diets. Overall, these findings suggest a close relationship between NOX4 and several characteristics of NASH, including factors driving disease progression such as oxidative stress and lipid peroxidation, as well as late-stage concerns like hepatic fibrosis and apoptosis. This also provides greater mechanistic rationale for the therapeutic potential of GKT831 in treating this disease. In a related experiment with GKT831 for the treatment of FFD mice, study animals began receiving therapy from week 6 to 12 of the diet with either GKT831 or vehicle. Assessments focused on changes in levels of liver enzymes, and markers of inflammation and fibrosis. Results are presented in Figure 3, which highlight significant improvements in ALT (XA), inflammation (XB), fibrosis (XC), fibrogenic transcripts (XD), and insulin sensitivity. Investigators also reported the emergence of NOX4 mRNA and protein in the FFD and CDAA mouse models, which is known to result in steatosis without inflammation and fibrosis, indicating a potential association with NASH. This is also important when considering GKT813’s potential in PBC, as it is a disease characterized by inflammation of the bile ducts.

9 Bettaieb, A. et al., 2015. Hepatocyte NADPH Oxidase 4 Regulates Stress Signaling, Fibrosis, and Insulin Sensitivity During Development of Steatohepatitis in Mice. Gastroenterology, 149(2), pp468-480.

June 2, 2017

Figure 3. Results with GKT831 (inh) and Vehicle (veh) in FFD and Chow Fed Mice

*Denotes p < 0.05, ** denotes p < 0.01, and *** denotes p < 0.001

Source: Bettaieb, A. et al., 2015 Safety

The safety profile of GKT831 has been acceptable through four Phase I studies and a Phase IIa trial in humans. Genkyotex has not observed any dose limiting toxicities or safety signals. Less than 2% of drug is excreted through the renal system, and it undergoes biliary elimination as the parent molecule or after being metabolized through CYP3A4. The Company believes this pathway minimizes the risk of drug-drug interactions. Adverse events (AE) have not been an issue either, as a Phase IIa study for diabetic kidney disease showed significantly less moderate to severe AEs in patients receiving GKT831 as compared to placebo (p < 0.001). Doses of up to 1800 mg and 900 mg GKT831 per day have been tested in Phase I studies, and up to 400 mg GKT831 per day in a Phase II study. The safety profile of this compound overall is conducive to ongoing development.

Primary Biliary Cholangitis (PBC) Primary biliary cholangitis (PBC) is a chronic autoimmune disease in which the immune system attacks bile ducts in the liver, preventing efficient transportation of bile. This is known as cholestasis. Excess bile and other toxins

Bettaieb et al. Page 19

Gastroenterology. Author manuscript; available in PMC 2016 August 01.

Author Manuscript

Author Manuscript

Author Manuscript

Author Manuscript

June 2, 2017

accumulate and damage the liver, which in turn leads to fibrosis. This is a restorative process involving deposition of connective tissue, however, it is pathologic in the case of PBC and leads to tissue scarring. In a chronic state, normal tissues are eventually replaced by scarring such that the liver cannot function properly, a condition called cirrhosis. The liver cannot repair cirrhosis, so treatment focuses on delaying the time until liver transplantation or death. Bile is composed of bile salts, cholesterol, and bilirubin, among other components. Bile salts are synthesized through the catabolic conversion of cholesterol in the liver, and act as a detergent to solubilize dietary fat to enable absorption. Bile also functions as the primary means to remove excess cholesterol from circulation, and as such, inefficient bile secretion leads to elevated cholesterol levels. Bilirubin is generated via the degradation of hemoglobin, the protein that carries oxygen on erythrocytes, following the natural 3-4 month life cycle of these oxygen-carrying cells. The characteristic yellow color of bile is derived from the presence of bilirubin, and its inefficient excretion is what causes jaundice, or yellowing of the eyes and skin, during liver failure. After bile is produced in the liver, it is excreted through several bile ducts and carried toward the hepatic duct, eventually connects with the cystic duct to form the larger common bile duct. The common bile duct functions to transport bile to and from the gallbladder, which is the primary site of bile storage. The common bile duct is also responsible for transporting bile to the intestine, where it aids with digestion and removal of waste products. Figure 4 shows the aforementioned anatomy involved with bile production and transport, highlighting normal versus inflamed bile ducts. The panel mid-figure shows normal bile ducts, while the panel below shows inflammation and scarring that render the ducts inoperative, a defining characteristic of PBC.

Figure 4. Depiction of Bile Flow Through Normal and Inflamed Bile Ducts

Source: Mayo Clinic

June 2, 2017

Causes and Pathogenesis While there is little known about the initiating events in the pathogenesis of PBC, the current model, as illustrated in Figure 5, proposes a chemical or viral trigger occurring in genetically predisposed individuals. Cholangiocytes, which line the bile ducts and perform secretory functions, have been implicated as a causative cell type. PBC is thought to manifest through an unknown insult, likely including chemical or viral exposure, causing an autoimmune response to conserved mitochondrial and nuclear proteins in cholangiocytes.10 This results in chronic inflammation, which causes destruction of cholangiocytes and bile ducts. As these cells are responsible for secreting and transporting bile from the liver to the intestine, cholestasis also manifests. Interestingly, large bile ducts may be somewhat protected from degradation due to the expression of intestinal trefoil factor (ITF), which is thought to promote epithelial wound healing and protect the mucosal surface of the intestine.11 However, in PBC patients ITF is expressed to a lesser extent in smaller bile ducts, potentially making them more susceptible to damage.

Figure 5. Pathogenesis of PBC

Source: Ali et al. 2016

10 Strazzabosco, M., Fabris, L. & Spirli, C., 2005. Pathophysiology of cholangiopathies. Journal of clinical gastroenterology, 39, pp.S90–S102. 11 Kimura, Y. et al., 2002. Differential expression of intestinal trefoil factor in biliary epithelial cells of primary biliary cirrhosis. Hepatology, 36(5), pp.1227–35.

June 2, 2017

The bile that cannot leave the liver is hypothesized to generate reactive oxygen species that induce apoptosis in hepatocytes. Additionally, bile acids activate proinflammatory signals in hepatocytes and can also increase expression of major histocompatibility complex (MHC) class I, which can further induce autoimmune damage. Bile formation is impaired due to the liver damage, which exacerbates the cholestasis. Ultimately the cellular damage results in fibrosis and cirrhosis.12 Genetic predisposition to PBC. While the etiology of the disease is unknown, there is evidence that genetics play a role in susceptibility. A family history of PBC was reported for 6.4% of patients, which is much higher than the rate in the general population.13 Further, the concordance in monozygotic twins is high (5 in a study population of 8), while very low (0 in a study population of 8) in dizygotic twins. Studying monozygotic twins with PBC allowed greater analysis of the disease course and symptoms, and investigators found that both genetic and environmental factors contributed to the development of PBC.14 Specific genetic factors have also been identified, including single nucleotide polymorphisms (SNP) that are 1.5-3 times more common in PBC patients than in normal controls. The associated mutations occurred in several genes of the HLA class II complex, in addition to two immune modulation genes, interleukin-12 subunit A (IL12A) and interleukin-12 receptor subunit B2 (IL12RB2).15 There are multiple hypotheses about the association of HLA polymorphisms and autoimmune diseases, including that some variants may not present a large variety of auto-antigens to induce immune tolerance during development or that some variants may present endogenous antigens preferentially. Background on Immune Tolerance. The immune system is broadly divided into two branches, the adaptive and innate responses. Innate immunity recognizes broad molecular patterns that are atypical in the host and propagates general responses of adaptive immunity. Adaptive immunity, by contrast, is composed of cells that can recognize billions of specific molecular entities, termed antigens. Both the antibodies produced by B-lymphocytes and the T-cell receptors (TCRs) of T-lymphocytes are generated randomly. Some of the randomly generated receptors will specifically recognize auto-antigens. To prevent auto-reactive lymphocytes from launching an immune response against the host, cells are exposed to an array of auto-antigens during the cell development process and reactive lymphocytes are prevented from circulating.16 This process develops immune tolerance, or the ability to ignore auto-antigens. In addition to this level of tolerance, the liver is known as tolerogenic. Resident immune cells release cytokines to dampen liver immune responses. While organ transplantation must typically be accompanied by immunosuppression

12 Poupon, R., 2012. Ursodeoxycholic acid and bile-acid mimetics as therapeutic agents for cholestatic liver diseases: An overview of their mechanisms of action. Clinics and Research in Hepatology and Gastroenterology, 36, pp.S3–S12. 13 Jones, D.E. et al., 1999. Familial primary biliary cirrhosis reassessed: a geographically-based population study. Journal of Hepatology, 30(3), pp.402–407. 14 Selmi, C. et al., 2004. Primary biliary cirrhosis in monozygotic and dizygotic twins: Genetics, epigenetics, and environment. Gastroenterology, 127(2), pp.485–492. 15 Hirschfield, G.M. et al., 2009. Primary Biliary Cirrhosis Associated with HLA, IL12A, and IL12RB2 Variants. New England Journal of Medicine, 360(24), pp.2544–2555. 16 Alerts, B. et al., 2002. T Cells and MHC Proteins. In Molecular Biology of the Cell 4th edition. Garland Science, Available at: https://www.ncbi.nlm.nih.gov/books/NBK26926/

June 2, 2017

to prevent the immune system from recognizing the transplanted organ as foreign, humans can temporarily cease immunosuppression after a liver transplant without organ rejection, due to its tolerogenicity.17 Loss of Immune Tolerance in PBC. In autoimmune disorders such as PBC, tolerance is lost and the immune system recognizes auto-antigens as foreign. Up to 95% of all PBC cases are associated with circulating anti-mitochondrial antibodies (AMAs),18 with some arguing that the AMA negative cases are merely failures to adequately detect the antibody.19 Similarly, TCRs in PBC patients recognize the same mitochondrial protein presented in the context of MHC. MHC proteins are encoded in the human leukocyte antigen (HLA) gene complex, which is highly variable among individuals. In addition, approximately a quarter of all PBC patients generate antibodies to a protein in the nuclear membrane, independent of detectable AMA expression. These anti-nuclear antibodies (ANAs) are associated with more severe disease and poorer prognoses.20 Symptoms and Diagnosis Although many patients are asymptomatic during early stages of PBC, serum analyses include biochemical measures of liver function that can be used for diagnosis. Cholestasis is identified by biochemical liver tests, most commonly elevated ALP. The American Association for the Study of Liver Diseases (AASLD) recommends diagnosing PBC based on two of the following three criteria:

• Detectable AMAs or ANAs. • cholestasis. • Histological evidence of ductopenia.

Elevated levels of bilirubin and cholesterol are also associated with liver damage, as the production of bile requires both components. Bilirubin levels, however, are generally normal early in the disease progression. Liver ultrasound or other non-invasive imaging is used to detect liver damage, but early stage disease may not be identified. Liver biopsy is used to confirm the diagnosis when AMAs and ALP are undetectable. PBC samples typically display lymphocytic infiltration near necrotic cholangiocytes, indicative of an autoimmune reaction occurring in proximity to this pathological cell type. In late stage disease, fibrosis or cirrhosis may also be present.21 Natural History. The Mayo Clinic developed a mathematical model that uses age, clinical evaluation, and biochemical tests, including serum bilirubin, to calculate a Mayo Risk Score (MRS).22 MRS is an estimation of mortality risk where a higher score is associated with decreased survival. PBC progression and symptom presentation is heterogeneous, even among twins.23 The median time from diagnosis to symptom presentation is 2-6 years, while the median survival

17 Grant, C.R. & Liberal, R., 2017. Liver immunology: How to reconcile tolerance with autoimmunity. Clinics and Research in Hepatology and Gastroenterology, 41, pp.6–16. 18 Van de Water, J. et al., 1989. Detection of Autoantibodies to Recombinant Mitochondrial Proteins in Patients with Primary Biliary Cirrhosis. New England Journal of Medicine, 320(21), pp.1377–1380. 19 Ozaslan, E., Efe, C. & Gokbulut Ozaslan, N., 2016. The diagnosis of antimitochondrial antibody-negative primary biliary cholangitis. Clinics in Research Hepatology and Gastroenterology, 40, pp.553-562. 20 Invernizzi, P. et al., 2001. Autoantibodies against nuclear pore complexes are associated with more active and severe liver disease in primary biliary cirrhosis. Journal of Hepatology, 34, pp.366–372. 21 Lindor, K.D. et al., 2009. Primary biliary cirrhosis. Hepatology, 50(1), pp.291–308. 22 Dickson, E.R. et al., 1989. Prognosis in primary biliary cirrhosis: model for decision making. Hepatology, 10(1), pp.1–7. 23 Selmi, C. et al., 2004. Primary biliary cirrhosis in monozygotic and dizygotic twins: Genetics, epigenetics, and environment.

June 2, 2017

for symptomatic patients is 5-8 years. The most common symptoms are fatigue (up to 78% of PBC cases), somnolence, or severe drowsiness, and pruritus, which is skin itching often secondary to cholestasis.20 Daytime somnolence can be exacerbated by pruritus, which is often worse at night and severe enough to impair sleep. MRS is a predictor of pruritus, which affects approximately half (35-55%) of all patients and may increase in severity over time.24 Patients may also experience sicca syndrome, characterized by dry eyes and mouth. PBC can cause high blood pressure in the liver such that blood shunts through the esophagus or stomach. The resulting varices, or swollen veins, can result in serious bleeding.25 The important role of bile in fat absorption can lead to fat malabsorption symptoms in PBC, including deficiencies of fat-soluble vitamins, although this is uncommon before cirrhosis.26 PBC patients commonly have lower bone mineral density than sex- and age-matched controls27,28, which can typically be treated with supplemental calcium and vitamin D. Treatment There are two drugs approved by the FDA to treat PBC, ursodeoxycholic acid (ursodiol, or UDCA) and Intercept Pharmaceuticals’ (NasdaqGS: ICPT) Ocaliva (obeticholic acid). Unfortunately, neither drug can halt the disease entirely nor reverse liver damage. Second-line treatments that can be used off-label to treat PBC include fibrates, glucocorticoids, and antiretroviral therapies. Beyond the disease itself, the core symptoms of PBC are typically not controlled with use of these therapies either and patients may need to treat individual symptoms. For example, fatigue due to PBC can be debilitating and is not responsive to treatments. Also, pruritus is generally not responsive, but can be ameliorated by diphenhydramine or rifampin. Opiate antagonists are also used to treat severe pruritus, and in cases of uncontrollable itching which can lead to depression and suicidal ideation, liver transplantation may be indicated as a curative option.29 Considering the lack of treatments for PBC, its related symptoms, and the severity of disease, this indication represents a severe unmet need and people with the disease are in dire need of superior therapeutic options. Ursodeoxycholic Acid (UDCA). In 1997, the FDA approved UDCA for the treatment of PBC. This therapy is a non-cytotoxic, naturally-occurring bile acid that functions by stimulating ductal secretion, tempering inflammation, and protecting hepatocytes from apoptosis.30,31 In clinical trials, UDCA treatment was shown to lengthen the time to treatment failure as compared to placebo (p < 0.01). Treatment failure was defined as worsening of fatigue or pruritus, Gastroenterology, 127(2), pp.485–492. 24 Talwalkar, J.A. et al., 2003. Natural history of pruritus in primary biliary cirrhosis. Clinical Gastroenterology and Hepatology, 1(4), pp.297–302. 25 Patel, A. & Seetharam, A., 2016. Primary Biliary Cholangitis: Disease Pathogenesis and Implications for Established and Novel Therapeutics. Journal of Clinical and Experimental Hepatology, 6, pp.311–318. 26 Tabibian, J.H. & Lindor, K.D., 2015. Primary biliary cirrhosis: safety and benefits of established and emerging therapies. Expert Opinion on Drug Safety, 14(9), pp.1435–1444. 27 Springer, J.E. et al., 2000. Vitamin D–Receptor Genotypes as Independent Genetic Predictors of Decreased Bone Mineral Density in Primary Biliary Cirrhosis. Gastroenterology, 118(1), pp.145–51. 28 Seki, A. et al., 2017. Risk of secondary osteoporosis due to lobular cholestasis in non-cirrhotic primary biliary cholangitis. Journal of Gastroenterology and Hepatology, [Available before release as: doi: 10.1111/jgh.13746] 29 Lindor, K.D. et al., 2009. Primary biliary cirrhosis. Hepatology, 50(1), pp.291–308. 30 Poupon, R., 2012. Ursodeoxycholic acid and bile-acid mimetics as therapeutic agents for cholestatic liver diseases: An overview of their mechanisms of action. Clinics and Research in Hepatology and Gastroenterology, 36, pp.S3–S12. 31 Ali, A.H. et al., 2016. Emerging drugs for the treatment of Primary Biliary Cholangitis. Expert Opinion on Emerging Drugs, 21(1), pp.39–56.

June 2, 2017

progression by two stages or to cirrhosis, liver transplant, or death. While effective in over 50% of PBC patients, there is an unmet need for the 5-10% of patients that cannot tolerate UDCA and the 40% that are non-responders. UDCA is also ineffective in patients with late stage disease, underscoring the need for treatments that can impact the disease in more advanced patients.32 Ocaliva (obeticholic acid, OCA) – Intercept Pharmaceutical’s (NASDAQ: ICPT). In May 2016, the FDA approved Ocaliva as a monotherapy for PBC patients that cannot tolerate UDCA or as combination therapy with UDCA in those that fail to respond to UDCA. Ocaliva is a derivative of the strongest binding ligand to the farnesoid X receptor, which regulates bile acid production. By blocking the receptor, Ocaliva reduces toxic bile accumulation in the liver.32 In a one-year clinical trial, Ocaliva treatment was associated with ALP reductions of at least 15% from baseline in 77% of patients.33 There is not yet data about whether Ocaliva improves clinical outcomes, however, extrapolation suggests that the drug could increase quality-adjusted life years by 2.26 to 22.23.34 The cost for this improvement, however, is approximately $70,000 per year of treatment.35 Fibrates (bezafibrate and fenofibrate). Both bezafibrate and fenofibrate are FDA-approved drugs to treat hyperlipidemia and hypercholesterolemia. Fibrates activate the PPARa receptor, which augments the expression of genes involved in lipid metabolism. Pilot studies suggest that fibrate treatment reduces biochemical markers to a similar extent as UDCA, and can be an effective option for patients refractory to UDCA treatment.36,37,38,39 Longer studies suggest that bezafibrate may decrease liver damage as detected by histology,37 as well as decrease serum ALP and MRS. In one of the trials, creatine levels were significantly elevated, which could indicate an adverse reaction.40 Glucocorticoids (budesonide and prednisolone). Glucocorticoids are steroid hormones that modulate immune responses and reduce inflammation. Budesonide and prednisolone are both used orally to treat Crohn’s disease and ulcerative cholitis, which are driven by inflammation. Prednisolone decreased cholestatic symptoms of pruritus and fatigue, improved biochemical measures of liver function, but nearly doubled the rate of bone loss.41 A subsequent

32 The US Food and Drug Administration, 2016. Press Announcements - FDA approves Ocaliva for rare, chronic liver disease. Available at: http://www.fda.gov/newsevents/newsroom/pressannouncements/ucm503964.htm 33 Nevens, F. et al., 2016. A Placebo-Controlled Trial of Obeticholic Acid in Primary Biliary Cholangitis. New England Journal of Medicine, 375(7), pp.631–643. 34 Samur, S. et al., 2016. Long-term clinical impact and cost-effectiveness of obeticholic acid for the treatment of primary biliary cholangitis. Hepatology, 0(0), pp.1–9. 35 Pratt, D.S., 2016. Primary Biliary Cholangitis — A New Name and a New Treatment. New England Journal of Medicine, 375(7), pp.685–687. 36 Kurihara, T. et al., 2000. Bezafibrate in the treatment of primary biliary cirrhosis: comparison with ursodeoxycholic acid. The American Journal of Gastroenterology, 95(10), pp.2990–2992. 37 Kanda, T. et al., 2003. Bezafibrate treatment: a new medical approach for PBC patients? J Gastroenterol, 38, pp.573–578. 38 Liberopoulos, E.N. et al., 2010. Fenofibrate in primary biliary cirrhosis: a pilot study. The open cardiovascular medicine journal, 4, pp.120–6. 39 Iwasaki, S. et al., 2008. The efficacy of ursodeoxycholic acid and bezafibrate combination therapy for primary biliary cirrhosis: A prospective, multicenter study. Hepatology Research, 38(6), pp.557–564. 40 Hosonuma, K. et al., 2015. A Prospective Randomized Controlled Study of Long-Term Combination Therapy Using Ursodeoxycholic Acid and Bezafibrate in Patients With Primary Biliary Cirrhosis and Dyslipidemia. The American Journal of Gastroenterology, 110(3), pp.423–431. 41 Mitchison, H.C. et al., 1989. A pilot, double-blind, controlled 1-year trial of prednisolone treatment in primary biliary cirrhosis: Hepatic improvement but greater bone loss. Hepatology, 10(4), pp.420–429.

June 2, 2017

study found that liver function was biochemically unchanged, but histologically improved.42 Similarly, combination therapy of UDCA with oral budesonide for two years decreased biochemical and histological indicators of liver damage.43 Due to risk of portal vein thrombosis in late stage PBC patients, budesonide is not appropriate in patients that have already developed cirrhosis.44,44,45 Sulindac. Sulindac is a non-steroidal anti-inflammatory drug that increases bile secretion from the liver. When patients with an incomplete response to UDCA were treated with sulindac and UDCA combination therapy for a year, there was a small but significant decrease in biochemical indices of cholestasis accompanied by marginal decreases in histological damage.46 Antiretroviral therapy. A group that reported a human betaretrovirus in patients with PBC has found evidence that combination antiretroviral therapy (Lamivudine/Zidovudine) may decrease ALP and histological signs of inflammatory damage and bile duct injury.47 PBC Market Information Epidemiology. As a rare disease that is initially asymptomatic, estimates on the incidence and prevalence of PBC have been variable and historically unreliable. However, growing disease awareness and greater diagnosis have provided investigators with greater understanding of PBC epidemiology. Recent studies have indicated that disease incidence is currently stable or increasing.48 PBC also disproportionately affects women 10:1 relative to men, and those affected are typically middle-aged or elderly.49 In the US, the age-adjusted incidence was 4.5 per 100,000 women, 0.7 per 100,000 men, and 2.7 per 100,000 overall.50 Prevalence of PBC in the US is roughly 16-40 per 100,000 individuals. Estimates of disease incidence in the EU range from roughly 1 to 6 per 100,000 across various geographies, while prevalence is approximately 5-40 per 100,000 people.51 We estimate approximately 91,000 and 92,000 individuals are affected by PBC in the US and EU, respectively. Our analysis is presented in Figure 6.

42 Leuschner, M. et al., 1996. Ursodeoxycholic acid and prednisolone versus ursodeoxycholic acid and placebo in the treatment of early stages of primary biliary cirrhosis. Journal of Hepatology, 25(1), pp.49–57. 43 Leuschner, M. et al., 1999. Oral Budesonide and Ursodeoxycholic Acid for Treatment of Primary Biliary Cirrhosis: Results of a Prospective Double-Blind Trial. Gastroenterology, 117, pp.918–925. 44 Zhu, G.-Q. et al., 2015. Optimal drug regimens for primary biliary cirrhosis: a systematic review and network meta-analysis. Oncotarget, 6(27), pp.24533–49. 45 European Association for the Study of the Liver, 2009. EASL Clinical Practice Guidelines: management of cholestatic liver diseases. Journal of hepatology, 51(2), pp.237–67. 46 Leuschner, M. et al., 2002. The influence of sulindac on patients with primary biliary cirrhosis that responds incompletely to ursodeoxycholic acid: a pilot study. European journal of gastroenterology & hepatology, 14(12), pp.1369–76. 47 Mason, A.L. et al., 2004. Pilot Studies of Single and Combination Antiretroviral Therapy in Patients with Primary Biliary Cirrhosis. The American Journal of Gastroenterology, 99(12), pp.2348–2355. 48 Borman, M. et al., 2014. Changing epidemiology and natural history of primary biliary cirrhosis. Clinical Liver Disease, 3(1), pp12-14. 49 Poupon, R. et al., 2010. Primary biliary cirrhosis. Journal of Hepatology, 52(5), pp745-758. 50 Kim, W.R. et al., 2000. Epidemiology and natural history of primary biliary cirrhosis in a US community. Gastroenterology, 119, pp1631-1636. 51 Boonstra, K. et al., 2012. Epidemiology of primary sclerosing cholangitis and primary biliary cirrhosis: A systematic review. Journal of Hepatology, 56(5), pp1181-1188.

June 2, 2017

Figure 6. Individuals Affected by PBC in the US and EU

US EU

Population 325 M 512 M

Prevalence 28/100,000 18/100,000

PBC Patients

91,000 92,000

Source: LifeSci Capital

Market Size. A recent example of the market potential for an approved therapy in PBC is Intercept Pharmaceuticals’ (NasdaqGS: ICPT) Ocaliva (obeticholic acid), which was approved in May 2016. The labeling for this therapy indicates use of Ocaliva as a combination therapy with ursodeoxycholic acid (UDCA) for patients who are inadequate responders to UDCA, or as monotherapy in those who cannot tolerate UDCA. The performance of this asset in the years to come will help calibrate market expectations for PBC drugs going forward, as it is the first therapy to be approved in this indication since the 1997 approval of UDCA. The sales of Ocaliva were $13.4 million last quarter, beating consensus expectations of $15.1 million. The sales for the first three full quarters since approval are presented in Figure 7, and we note that sales ramps for orphan drugs do not typically occur immediately. Intercept has cited potential for sales difficulty in the first quarter of 2017 due to reimbursement headwinds, though significant growth is expected going forward. The full potential value of this therapy will be clearer as commercialization begins in the EU, but even more so if approved for non-alcoholic steatohepatitis (NASH), which represents an untapped multi-billion dollar market.

Figure 7. Initial Full Quarterly Sales of Intercept’s Ocaliva (obeticholic acid)

US Sales

Q3 2016 $4.7 M

Q4 2016 $13.4 M

Q1 2017 $20.6 M


Notably, the wholesale acquisition cost (WAC) of Ocaliva is $5,700 monthly or $68,400 annually, and the Company has noted that gross to nets are currently approaching 15%. This highlights the pricing potential of a therapy approved for PBC, a severe orphan disease with limited therapeutic options. Furthermore, Ocaliva was approved on a composite endpoint that assessed levels of alkaline phosphatase (ALP) and bilirubin, which may not be completely indicative of reductions in progression to liver transplant, death, or other outcomes. This approval clearly defines the pathway for approval in PBC, but also speaks to the substantial level of reimbursement such a therapy can attain. Given the pricing of Ocaliva and the size of the PBC patient population, we performed a scenario analysis in Figure 8. This analysis

June 2, 2017

found the global market opportunity for GKT831 in PBC to be $1,830M given a 20% penetrance rate. We used the following assumptions in this analysis:

§ PBC Patient Populations – We assume that 91,000 and 92,000 people are affected by PBC in the US and EU, respectively.

§ Pricing – We assume annual drug pricing of $50,000, which is a slight discount to the $68,400 annual price of Intercept’s Ocaliva.

Figure 8. Scenario Analysis of Market Potential for GKT831 in the US and EU

Market Penetration 10% 20% 30%

US Market $455 M $910 M $1,365 M

EU Market $460 M $920 M $1,380 M

Total Opportunity $915 M $1,830 M $2,745 M


Clinical Data Discussion Genkyotex has assessed GKT831 in four Phase I trials and a Phase II study for the treatment of individuals with diabetic kidney disease. The Phase I trials were performed in healthy individuals and there were not any observed safety or toxicity signals, while pharmacokinetic activity was found to be dose-dependent. The Phase II study did not meet the primary endpoint relevant to diabetic kidney disease, though several secondary outcomes were achieved that assessed various liver enzymes and inflammatory markers. Patients treated with GKT831 showed statistically significant reductions in gamma-glutamyl transferase (GGT) and high-sensitivity C-reactive protein (hsCRP) as compared to placebo (p < 0.05). Both of these markers are relevant to fibrotic liver indications, and as such the Company has planned a Phase II trial with GKT831 for PBC. The Company expects to initiate this study in the second quarter 2017, and interim results are anticipated in the first half of 2018. Phase I Trials with GKT831 in Healthy Subjects Genkyotex has performed four Phase I trials to assess the safety and pharmacokinetic profile of GKT831 in healthy individuals. The results of these studies did not show any safety signals or dose-limiting toxicities. These studies found that this drug is also absorbed rapidly following administration, with a time to maximum plasma concentration of about one hour following dosing. Also, the half-life of GKT831 is approximately 8-15 hours and less than 2% of GKT831 is excreted through the renal system. This drug undergoes biliary elimination as the parent molecule or is first metabolized through cytochrome P450 3A4 (CYP3A4). The Company has assessed the potential for drug-drug interactions (DDI) with GKT831 in a separate Phase I study because the compound is a CYP3A4 inhibitor in vitro, and found that there is a low risk of DDI with GKT831. Overall, these findings were supportive of the continued development of GKT831, as there were no observed safety or toxicity signals and the drug demonstrated dose-dependent pharmacological activity.

June 2, 2017

Phase II Study with GKT831 for Diabetic Kidney Disease Trial Design. This was a randomized, double blind, placebo controlled Phase II trial with GKT831 for the treatment of diabetic kidney disease. 136 patients with type 2 diabetes and macroalbuminuria were enrolled to receive either GKT831 or placebo twice daily for 12 weeks. Patients randomized to GKT831 received 100 mg twice daily for the first 6 weeks and 200 mg twice daily for the last 6 weeks. The primary endpoint was change from baseline in urine albumin-to-creatinine ratio. Secondary endpoints included levels of various inflammatory markers and liver enzymes, such as gamma-glutamyl transferase (GGT), high-sensitivity C-reactive protein (hsCRP), serum amyloid protein A, and interleukin-6 (IL-6). Trial Results. This study did not meet the primary endpoint of reduction in urine albumin-to-creatinine ratio, although significant effects were observed on various secondary endpoints that indicate the potential of GKT831 to modulate levels of certain liver enzymes and inflammatory markers. The secondary biomarkers assessed in this study are presented in Figure 9, which all showed trends of reduction over time and some achieved statistical significance. Of particular interest is GGT, as elevated levels of this liver enzyme are characteristic of damage due to cholestasis.52 Therefore, GGT reduction may represent a benefit against cholestatic damage, which is implicated in PBC and other fibrotic diseases. Another biomarker that may provide insight to GKT831’s activity profile is hsCRP, which is a marker for systemic inflammation that has also been found to be associated with hepatic inflammation occurring in non-alcoholic fatty liver disease (NAFLD).53

Figure 9. Secondary Biomarkers Showing Reductions from Baseline

Biomarker P-Value GGT p < 0.05 TG p = 0.066

hsCRP p < 0.05 Amyloid protein A p < 0.08

IL-6 p = 0.2


Genkyotex reported that GKT831 demonstrated a favorable safety profile in this trial, as the therapy was well tolerated and treatment was associated with fewer AEs. Participants receiving GKT831 reported a total of 15 moderate or severe AEs, as compared to 57 for the placebo group (p < 0.001). This study provided an abundance of relevant information for the future development of GKT831, as the safety profile was favorable and the activity profile of the drug and its relationship to biochemical pathways relevant to PBC and NASH were further clarified.

Phase II Study with GKT831 for PBC Trial Design. This is a randomized, double blind, placebo-controlled Phase II trial with GKT831 for the treatment of participants with PBC. Approximately 102 patients will be enrolled to receive 400 mg GKT831 once or twice daily,

52 Arbour, L. et al., 2005. Characteristics of primary biliary cirrhosis in British Columbia’s First Nations population. 53 Ndumele, C.E. et al., 2011. Hepatic Steatosis, Obesity and the Metabolic Syndrome are Independently and Additively Associated with Increased Systemic Inflammation. Arteriosclerosis, Thrombosis, and Vascular Biology, 31(8), pp1927-1932.

June 2, 2017

or placebo for a treatment period of 24 weeks. The primary endpoints will be change in serum levels of GGT, and we note that patients in a prior Phase II study for diabetic kidney disease reported significant reductions in this metric at a dose of 100/200 mg twice daily (p < 0.05). Secondary endpoints will include various markers of liver injury, fibrosis, cholestasis, and inflammation, particularly levels of alkaline phosphatase (ALP), bilirubin, and hsCRP. Fibrosis will be assessed by plasma levels of collagen fragments, transient elastography, and enhanced liver fibrosis (ELF) score. The Company plans to initiate this trial in the second quarter of 2017. Interim results are expected in the first half of 2018, with full data in the second half of 2018. Genkyotex recently announced FDA approval of their IND for this program. Other Drugs in Development

As an orphan indication with limited treatment options available and read-through to larger fibrotic indications such as NASH, there is great interest in developing novel therapies for PBC. For example, there are numerous late-stage drug assets being developed for this indication, which are presented in Figure 10. Of particular interest are Gilead’s (NasdaqGS: GILD) GS-9674, GlaxoSmithKline’s (NYSE: GSK) GSK2330672, and CymaBay’s (NasdaqCM: CBAY) seladelpar, which are discussed in greater detail below. Gilead’s GS-9674 is a farnesoid X receptor (FXR) agonist with potential for PBC, NASH, and primary sclerosing cholangitis (PSC), a similar inflammatory condition associated with cholestasis and progression to fibrosis and cirrhosis. GSK’s GSK2330672 is being assessed for the treatment of pruritus in patients with PBC, and we note that this therapy has demonstrated efficacy against this characteristic symptom but has yet to show disease-modifying potential. Conversely, CymaBay’s seladelpar is a PPARd agonist that has shown the ability to lower alkaline phosphatase (ALP), an approvable endpoint for PBC, and the Company is currently assessing lower doses to optimize the safety and efficacy profile.

Figure 10. Late-Stage Assets in Development for PBC

Drug Company Mechanism Phase

GKT831 Genkyotex (EPA:

GKTX) NOX 1 & 4 Phase II

GS-9674 Gilead Sciences (NasdaqGS: GILD)

Farnesoid X receptor (FXR)

Phase II54

GSK2330672 GlaxoSmithKline

(NYSE: GSK)

Ileal Bile Acid Transporter

(IBAT) Phase II55,56

Seladelpar CymaBay (NasdaqCM:

CBAY) PPAR delta Phase II57

Etrasimod Arena Pharmaceuticals (NasdaqGS: ARNA)

S1P receptor Pre-Phase II


54 https://clinicaltrials.gov/show/NCT02943447 55 https://clinicaltrials.gov/show/NCT01899703 56 https://clinicaltrials.gov/show/NCT02966834 57 https://clinicaltrials.gov/show/NCT02955602

June 2, 2017

GS-9674 – Gilead Sciences (NasdaqGS: GILD)

Gilead is developing GS-9674 for the treatment of PBC, NASH, and primary sclerosing cholangitis (PSC). GS-9674 is a farnesoid X receptor (FXR) agonist, which are a family of nuclear receptors that control synthesis and transport of bile acids, and are also implicated in regulation of glucose and lipid metabolism.58 The company initiated Phase II studies in PBC, PSC, and NASH in the fourth quarter of 2016. Interim results from the PBC study are expected in the fourth quarter of 2017, and complete results from the NASH study are expected in the first quarter of 2018. Design of a Phase II Trial with GS-9674 for PBC. This is a randomized, double-blind, placebo controlled Phase II study with GS-9674 for the treatment of PBC without cirrhosis.59 Approximately 75 patients will be enrolled into one of the following arms for 12 weeks:

§ 30 mg GS-9674 and placebo 100 mg GS-9674 § Placebo 30 mg GS-9674 and 100 mg GS-9674 § Placebo 30 mg GS-9674 and placebo 100 mg GS-9674

The primary outcome measures are incidence of treatment-emergent AEs, SAEs, and laboratory abnormalities. Inclusion criteria require participants to definitely or likely have PBC, which is defined by meeting 2 of the following 3 criteria: serum ALP levels above the upper limit of normal, presence of anti-mitochondrial antibodies (AMAs), histology of PBC via liver biopsy. Interim data from this trial are expected in the fourth quarter of 2017. GSK2330672 – GlaxoSmithKline (NYSE: GSK) GSK is currently developing GSK2330672 for the treatment of pruritus in patients with PBC and recently published favorable results from a Phase II trial. Investigators found significant reductions in several measures of itch in patients receiving GSK2330672 as compared to baseline measurements and placebo, respectively. The company is currently conducting a larger Phase II trial assessing this therapy for the treatment of pruritus in PBC, and guidance on the timing of data has not been provided. Phase II Trial with GSK2330672 for PBC-Related Pruritus. This was a randomized, double blind, placebo-controlled Phase II study with GSK2330672 for the treatment of PBC.60 22 patients were randomized in this crossover study 1:1 to receive GSK2330672 followed by placebo, or placebo followed by GSK2330672. Treatment was administered during two consecutive 14-day treatment periods. The primary endpoints were related to safety and tolerability, while secondary endpoints focused were various measures of itch. These included a pruritus numeric rating scale (NRS) from 1-10, PBC-40 itch domain score, and 5-D itch scale. GSK2330672 was generally well tolerated and secondary outcomes highlight the potential of this compound to significantly reduce pruritus, as presented in Figure 11. Other metrics reported were significant reductions in serum bile acids levels (p < 0.0001) and increases in serum C4 concentrations (p < 0.0001). Overall, these findings are supportive of the continued development of GSK2330672 to help patients with PBC manage the disease-defining symptom of pruritus, and GSK recently initiated a larger Phase

58 Mudaliar, S. et al., 2013. Efficacy and Safety of the Farnesoid X Receptor Agonist Obeticholic Acid in Patients with Type 2 Diabetes and Nonalcoholic Fatty Liver Disease. Gastroenterology, 145(3), pp574-582. 59 https://clinicaltrials.gov/show/NCT02943447 60 https://clinicaltrials.gov/show/NCT01899703

June 2, 2017

II study to continue the evaluation of this drug.61 However, we note that this drug is a symptom-treating therapy and may not meaningfully impact disease progression or the future treatment landscape.

Figure 11. Assessments of Itch as Compared to Baseline and Placebo

Change from Baseline Change from Placebo NRS -57% (p < 0.0001) -23% (p = 0.037)

PBC-40 -31% (p < 0.0001) -14% (p = 0.034) 5-D -35% (p < 0.0001) -20% (p = 0.0045)


Seladelpar – CymaBay Therapeutics (NasdaqCM: CBAY) CymaBay is developing seladelpar for the treatment of PBC, and is currently enrolling patients into a Phase II study. Seladelpar is a selective PPARd agonist, which is a nuclear receptor and transcription factor involved with the regulation of lipid metabolism and inflammatory response genes, among others. Proof of concept was achieved in a prior Phase II trial that demonstrated reductions in alkaline phosphatase (ALP) levels of 53% and 63% for patients receiving 50 and 200 mg seladelpar, respectively, as compared to 2% for placebo (p<0.0001). ALP levels are associated with tissue damage and liver fibrosis, and reduction of this biomarker has been established as an approvable endpoint in this indication. In terms of safety, 3 of 23 patients receiving drug experienced grade three transaminase elevations, and following discussions with the FDA, the company decided to initiate a second Phase II trial using lower doses. CymaBay is currently conducting the low dose study with seladelpar for PBC, and data are expected in the third quarter of 2017. Design of a Phase II Trial with Seladelpar for PBC. This is an open-label Phase II trial evaluating seladelpar in PBC patients who do not adequately respond to or are intolerant of ursodeoxycholic acid (UDCA) treatment.62 Similar to the prior Phase II trial, the primary endpoint of this trial is ALP reduction from baseline, which is an approvable endpoint for PBC. 36 patients will be enrolled into one of the two following treatment arms, with potential for a third pending data review:

§ 5 mg seladelpar for 8 weeks, with 5, 10, or 25 mg extension phase for 18 weeks. § 10 mg seladelpar for 8 weeks, with 5, 10, or 25 mg extension phase for 18 weeks. § Pending data review: 25 mg seladelpar for 8 weeks, with 5, 10, or 25 mg extension phase for 18 weeks.

A data review will be performed on the 5 and 10 mg seladelpar cohorts after 8 weeks of treatment and new patients will be enrolled into a 25 mg dosing group if results are acceptable. CymaBay anticipates data in the third quarter of 2017.

61 https://clinicaltrials.gov/show/NCT02966834 62 https://clinicaltrials.gov/ct2/show/NCT02955602

June 2, 2017

Competitive Landscape UDCA Therapy Has Suboptimal Response Rates and Does Not Alter Disease Course. Ursodeoxycholic acid (UDCA) is a naturally occurring bile acid that reduces inflammation and protects hepatocytes from apoptosis. This drug is one of two FDA approved products for PBC, and has been available for approximately 20 years. The effects of UDCA are highlighted in a randomized, double-blind, placebo controlled clinical trial, which demonstrated the ability of UDCA to lengthen time to treatment failure as compared to placebo (p < 0.01) after two years of therapy. While effective in over 50% of PBC patients, an unmet need remains, as 5-10% of patients cannot tolerate UDCA and 40% are non-responders who do not show liver function improvements. Furthermore, though UDCA therapy reduces the rate of disease progression in patients that do respond, the course of disease cannot be reversed, as UDCA use is not associated with better rates of regression to earlier disease states.63 Considering the lack of disease-modifying therapies for PBC, there is a large market opportunity for drugs that can impact disease progression. Newly Approved Ocaliva is Not a Magic Bullet. Another treatment was approved for PBC in May 2016, though it has pitfalls and is ultimately not a curative therapy. The label indicates use of Ocaliva as a monotherapy for PBC patients who cannot tolerate UDCA, or as a combination therapy with UDCA in those that fail to respond to UDCA, and thus offers patients a secondary treatment option. Efficacy was demonstrated in a randomized, double-blind, placebo controlled Phase III clinical trial with Ocaliva for PBC, in which 66% of participants responded to therapy as compared to 14% for placebo (p < 0.0001).64 This endpoint was a composite responder analysis defined by reducing alkaline phosphatase (ALP) concentrations below 1.67 times the upper limit of normal (ULN), total bilirubin less than or equal to the ULN, and a decrease in ALP of at least 15%. We note that approximately 34% of patients do not respond to Ocaliva therapy, and this population may overlap with UDCA non-responders, meaning some patients may not be able to slow progression at all despite utilizing the available therapies. Treatment is also associated with the side effect of pruritus (56-70%) and fatigue (19-25%), which are coincidentally the two primary symptoms plaguing patients. Of the patients experiencing pruritus, approximately two of three require intervention, consisting of dosage adjustment, treatment interruption, or initiation of therapy with bile acid binding resin or antihistamine. Furthermore, Ocaliva has not yet demonstrated the ability to improve patient outcomes, as approval focused on biomarkers. However, patients achieving reductions in ALP below certain fixed thresholds, including 2 times the upper limit of normal, have demonstrated advantages in survival.65 Although Ocaliva is the second approved therapy for PBC and can be useful, Ocaliva does not halt the progression of PBC or reverse liver damage, has an AE profile that includes the primary symptoms of PBC, and the proportion of non-responders is significant. Current Therapies Do Not Relieve Characteristic PBC Symptoms. Beyond disease pathology, the core symptoms of PBC are typically not controlled with use of the approved therapies and patients may need to treat individual symptoms. Pruritus due to PBC can be debilitating and can have a severe impact on quality of life, often leading to sleep deprivation which contributes to the other characteristic symptom of PBC, fatigue. Unfortunately, neither symptom is responsive to treatment, and can even be exacerbated by available therapies. Pruritus can be

63 Corpechot, C. et al., 2000. The effect of ursodeoxycholic acid therapy on liver fibrosis progression in primary biliary cirrhosis. Hepatology, 32(6), pp1196-199. 64 https://clinicaltrials.gov/show/NCT01473524 65 Lammers, W. et al., 2014. Levels of Alkaline Phosphatase and Bilirubin are Surrogate End Points of Outcomes of Patients with Primary Biliary Cirrhosis: An International Follow-up Study. Gastroenterology, 147(6), pp1338-1349.

June 2, 2017

ameliorated to a certain extent with diphenhydramine, rifampin, or opiate antagonists, although in cases of uncontrollable itching, liver transplantation may be indicated.66 Considering the lack of treatments for the core symptoms of PBC and the severity of disease progression, this indication represents a severe unmet need and patients could use superior therapeutic options for the disease and its symptoms. Genkyotex’ GKT831 has potential to offer patients another option, and its unique mechanism of action may avoid some of the deleterious aspects of current treatments. Although the pathogenesis of pruritus related to cholestatic liver disease is not fully understood, a potential cause is increased concentrations of bile acids in patients blood serum and tissues, including the skin.67 Given this information, the high occurrence of pruritus in people treated with Ocaliva (56-70%), a semi-synthetic bile acid derivative,68 becomes more logical. As a compound closely related to bile acid, which is linked to pruritus at high blood serum and tissue concentrations, it is not unreasonable to infer the possibility of pruritus resulting from a chemically similar compound. We believe the mechanism of GKT831 to be well differentiated from that of Ocaliva, as it is an inhibitor of NADPH oxidase (NOX) 1 and 4, which play roles in various pathways of inflammation, fibrosis, proliferation, and angiogenesis, and importantly, is not a bile acid or a derivative of one. If approved, GKT831 would be the only therapy of this class, and its unique mechanism has not been linked to the detrimental side effects of pruritus and fatigue. This would certainly provide a substantial competitive advantage in the market, while potentially yielding superior outcomes for PBC patients. PBC is an Orphan Disease and Ocaliva Uptake Will Size the Market. Though PBC prevalence has not been widely studied, the mid-point of the range of reported prevalence numbers to date allowed us to produce an estimate of 91,000 and 92,000 affected individuals in the US and EU, respectively. A recent example of the market potential for an approved therapy in PBC is Intercept Pharmaceuticals’ (NasdaqGS: ICPT) Ocaliva (obeticholic acid), which was approved in May 2016. The success of this launch in the years to come will help calibrate market expectations for PBC drugs going forward, as it is the first therapy to be approved in this indication since the 1997 approval of UDCA. The sales of Ocaliva were $20.6 million last quarter, beating expectations despite being relatively unimpressive considering the opportunity, which is in part due to anticipation of a slow sales ramp. Intercept has also cited potential for sales difficulty in the first quarter of 2017 due to reimbursement headwinds, though significant growth is expected going forward. The potential value of this therapy will be fully realized as commercialization begins in the EU, but more so if approved for non-alcoholic steatohepatitis (NASH), which represents an untapped multi-billion dollar market. GKT831 is Well Differentiated from Other Therapies in Development for PBC. As an orphan indication with limited treatment options available and read-through to larger fibrotic indications such as NASH, there is great interest in developing novel therapies for PBC. For example, Gilead’s (NasdaqGS: GILD) GS-9674, GlaxoSmithKline’s (NYSE: GSK) GSK2330672, and CymaBay’s (NasdaqCM: CBAY) seladelpar, are both in Phase II trials targeting disease progression or associated symptoms. Gilead’s GS-9674 is a farnesoid X receptor (FXR) agonist with potential as a treatment for PBC, NASH, and primary sclerosing cholangitis (PSC). GSK’s GSK2330672 is being assessed for the treatment of pruritus in patients with PBC, and we note that this therapy has demonstrated efficacy against this symptom but has yet to show any disease-modifying effects. Conversely, CymaBay’s seladelpar is a PPARd agonist

66 Lindor, K.D. et al., 2009. Primary biliary cirrhosis. Hepatology, 50(1), pp.291–308. 67 Alhmada, Y. et al., 2017. Hepatitis C virus-associated pruritus: Etiopathogenesis and therapeutic strategies. World Journal of Gastroenterology, 23(5), pp743-750. 68 Mudaliar, S. et al., 2013. Efficacy and Safety of the Farnesoid X Receptor Agonist Obeticholic Acid in Patients with Type 2 Diabetes and Nonalcoholic fatty liver disease. Gastroenterology, 145(3), pp574-582.

June 2, 2017

that has shown an ability to lower alkaline phosphatase (ALP), the approvable endpoint for PBC, and the Company is currently assessing lower doses to optimize the safety and efficacy profile. Overall, the PBC space is likely to be competitive going forward, although we note the potential of GS-9674 to cause pruritus and highlight that GSK2330672 is merely targeting symptomology. GKT831 has a well-differentiated mechanism unrelated to pruritus, based on current knowledge, and will be targeting disease progression. If effective in this patient population, GKT831 has the potential to become one of the mainstay therapies for PBC. GKT831 for the Treatment of Non-Alcoholic Steatohepatitis (NASH) Non-alcoholic fatty liver disease (NAFLD) is a condition in which excess fat accumulates in the liver. As the name suggests, hepatic fat accumulation in NAFLD is not due to alcohol use, but rather to a multitude of other pathologic processes. The clinical progression of NAFLD is still very similar to that of alcoholic liver disease, beginning with mild inflammation in the earliest stages and progressing to cirrhosis and eventually hepatic failure in the more advanced stages. Non-alcoholic steatohepatitis (NASH) is the middle stage of NAFLD, where inflammation is present that can lead to fibrosis and scarring. Despite prevalence as high as 30% in developed countries, the current best intervention for NASH is lifestyle modification, and patients are often noncompliant. Although there are no FDA-approved therapies for NASH, which makes it difficult to accurately assess the market, the disease burden and recent merger and acquisition activity highlight the potential opportunity and interest in this space. One study found that the annual direct medical costs of patients with various stages of NAFLD are $103 billion in the US, representing a significant economic burden that is expected to increase with greater disease incidence in years to come.69 This provides a strong pharmacoeconomic incentive for drug development in the field, as insurers have a substantial benefit in avoiding these costs. This has been validated by Allergan’s (NYSE: AGN) acquisition of Tobira Therapeutics for up to $1.7 billion, representing a 6-times premium over its market value prior to the deal. This transaction was primarily driven by the company’s Phase III-ready NASH asset cenicriviroc (CVC). Genkyotex is initially assessing GKT831 for the treatment of PBC, but we note potential read-through to NASH as a related fibrotic condition. We note the commonality and similarity of this approach to that of Intercept with Ocaliva, which is currently approved for PBC and being assessed in a Phase III trial for NASH. GKT831 is an inhibitor of NADPH oxidase (NOX) 1 and 4, which play roles in various pathways of inflammation, fibrosis, proliferation, and angiogenesis. The function of NOX enzymes is to generate reactive oxygen species (ROS) from oxygen. NOX-derived ROS play an important role in normal physiological processes such modulating gene expression, cell proliferation, migration and angiogenesis. In pathological conditions however, NOX expression and activation can be altered, leading to elevated ROS production that dysregulates cellular activity and causes direct damage to tissues. In the case of NASH, pre-existing insulin resistance and a high saturated-fat diet increases the concentration and trafficking of free fatty acids (FFA) within hepatocytes, which become toxic to the cells via oxidative stress.70 As a NOX inhibitor that functions to inhibit ROS production, GKT831 has the potential to reduce NOX activity, which may benefit

69 Younossi, Z.M. et al., 2016. The economic and clinical burden of nonalcoholic fatty liver disease in the United States and Europe. Hepatology, 64(5), pp1577-1586. 70 Tilg H. et al., 2010. Evolution of inflammation in nonalcoholic fatty liver disease: The multiple parallel hits hypothesis. Hepatology, 52, pp1836–1846.

June 2, 2017

NASH patients, and the data in PBC may provide additional insight as to how the drug may impact the disease in these individuals. GKT771 for Inflammatory Pain and Angiogenesis Genkyotex plans to assess GKT771 in a Phase I pharmacodynamic study and may further evaluate this compound for inflammatory pain and possibly other related indications. GKT771 is a selective inhibitor of NOX1, an enzyme that has been shown to contribute to the pathogenesis of inflammatory pain, angiogenesis, and other inflammatory and oxidative stress-related conditions. Inflammatory pain is defined by the presence of inflammation and is associated with tissue damage and infiltration of immune cells. Accumulating evidence indicates that the production of ROS is increased in the nociceptive system during inflammatory pain and that ROS can act as specific signaling molecules in pain processing. NOX1 has been shown to be a source of ROS implicated in inflammatory pain, giving mechanistic rational to pursue development of GKT771 as a NOX1 inhibitor. Genkyotex has also reported that GKT771 targets the NGF/TrkA/TRPV1 pain-processing pathway, a clinically validated target for pain therapies and GKT771 has been shown to have potent activity in in vitro and in vivo models of inflammatory pain. The Company has indicated that GKT771 is thought to function by preventing the oxidative activation of PKCe, which activates TRPV1 if present with inflammation. We note the potential of this compound for various cancer indications as well, as NOX1 is part of a signaling pathway that mediates vascular endothelial growth factor (VEGF) expression and neovascularization in cancer cells. Genkyotex has also reported that GKT771 blocks angiogenesis through the VEGF pathway and shows potent activity in in vitro and in vivo models of angiogenesis. The Company plans to initiate a Phase I pharmacodynamic study in the second half of 2017, and results are expected in the first half of 2018. Mechanism of Action. NOX1 belongs to the NADPH oxidase (NOX) family that comprises a group of seven transmembrane proteins (NOX1–NOX5 and DUOX1 and DUOX2). Although no crystal or NMR structure of NOX1 is currently available, its structure is expected to be very similar to the other members of the NADPH oxidase family, which are composed of six a-helical transmembrane domains and conserved FAD- and NADPH-binding sites. The function of NOX enzymes is to generate reactive oxygen species (ROS) from oxygen. NOX-derived ROS play an important role in normal physiological processes such modulating gene expression, cell proliferation, migration and angiogenesis. In pathological conditions however, NOX expression and activation can be altered, leading to elevated ROS production that dysregulate cellular activity and cause direct damage to tissues.71 Oxidation of cysteine residues in particular has been identified as one of the routes in which enzymatic properties can be modified.72 NOX1 has been shown to contribute to the pathogenesis of inflammatory pain, angiogenesis and other inflammatory and oxidative stress-related conditions.73 NOX1 for Inflammatory Pain. Inflammatory pain is defined by the presence of inflammation and is associated with tissue damage and infiltration of immune cells.74 Accumulating evidence indicates that the production of ROS is

71 Bedard, K. et al., 2007. The NOX family of ROS-generating NADPH oxidases: physiology and pathophysiology. Physiological reviews, 87(1), p245-313. 72 Klomsiri, C. et al., 2011. Cysteine-Based Redox Switches in Enzymes. Antioxidants & Redox Signaling, 14(6), pp1065-1077. 73 Gimenez, M. et al., 2016. Nox1 in cardiovascular diseases: regulation and pathophysiology. Clinical Science, 130(3), pp151-165. 74 Woolf, C.J. et al., 2010. What is this thing called pain? The Journal of Clinical Investigation, 120(11), pp3742-3744.

June 2, 2017

increased in the nociceptive system during inflammatory pain and that ROS can act as specific signaling molecules in pain processing. NOX1 has been shown to be a source of ROS implicated in inflammatory pain. In animal studies, NOX1 deficient mice showed attenuated response to inflammatory pain.75 Moreover, in the absence of NOX1 the analgesic effect of morphine was heightened, and analgesic tolerance was suppressed.76 Accordingly, targeting NOX1 represents a novel strategy for the treatment of inflammatory pain, and thus, there is an opportunity for GKT771 in this indication. NOX1 for Angiogenesis. Angiogenesis, the formation of new blood vessels, is a normal physiological function, but also plays a role in wide variety of disease states, including ischemic heart and limb disease, cancer, diabetic retinopathy, and chronic inflammation. It has been shown that ROS can function as signaling molecules that play a role in angiogenesis. NOX1 has been shown to be a major source of ROS in endothelial cells (EC). Endothelial NOX1 is activated by angiogenic factors such as vascular endothelial growth factor (VEGF) and angiopoietin1 (Ang-1), leading to ROS production. ROS then activate various redox-signaling pathways that lead to angiogenesis related processes such as EC migration and proliferation and expression of angiogenesis related genes.77,78 Most evidence implicating a role for NOX1 in angiogenesis is derived from cancer studies. As a downstream effector of the oncogenic Ras protein, NOX1 is part of a signaling pathway that mediates VEGF expression and neovascularization in cancer cells.79 It has also been shown that targeting vascular NOX1 inhibits tumor angiogenesis through a PPARa mediated mechanism. Consequently, vascular NOX1 appears to be a critical mediator of angiogenesis and an attractive target for antiangiogenic therapies. Genkyotex has reported that GKT771 blocks angiogenesis through the VEGF pathway and shows potent activity in in vitro and in vivo models of angiogenesis, showing potential for this compound for cancer indications as well. NOX1 for Other Inflammatory and Oxidative-Stress Related Conditions. In addition to use in inflammatory pain and angiogenesis, GKT771 also has therapeutic potential in many other inflammatory and oxidative stress related conditions that are driven by NOX1 activity.80 In lung epithelial cells, nicotine activates NOX1, which leads to intracellular oxidative stress and apoptosis.81 In addition, it has been shown that NOX1 is involved in human acute respiratory distress syndrome (ARDS) and is responsible for the damage occurring in alveolar epithelial cells.82 Therefore, GKT771 could have applications in respiratory pathologies such as nicotine related pulmonary diseases and ARDS.

75 Ibi, M. et al., 2008. Reactive oxygen species derived from NOX1/NADPH oxidase enhance inflammatory pain. The Journal of Neuroscience: the Official Journal of the Society for Neuroscience, 28(38), pp9486-9494. 76 Ibi, M. et al., 2011. Involvement of NOX1/NADPH oxidase in morphine-induced analgesia and tolerance. The Journal of Neurosciences: The Official Journal of the Society for Neuroscience, 31(49), pp18094-18103. 77 Ushio, F.M. et al., 2006. Redox signaling in angiogenesis: role of NADPH oxidase. Cardiovascular research, 31(49), pp226-35. 78 Garrido, U.S. et al., 2011. Targeting vascular NADPH oxidase 1 blocks tumor angiogenesis through a PPARalpha mediated mechanism. PloS one, 6(2), e14665. 79 Komatsu, D. et al., 2008. NADPH oxidase 1 plays a critical mediating role in oncogenic Ras-induced vascular endothelial growth factor expression. Oncogene, 27(4), pp4724-32. 80 Teixeira, G. et al., 2016. Therapeutic potential of NADPH oxidase 1/4 inhibitors. British Journal of Pharmacology, 174(12), pp1647-1669. 81 Zanetti, F. et al., 2014. Nicotine mediates oxidative stress and apoptosis through cross talk between NOX1 and Bcl-2 in lung epithelial cells. Free radical biology & medicine, 76, pp173-184. 82 Carnesecchi, S. et al., 2014. NOX1 is responsible for cell death through STAT3 activation in hyperoxia and is associated with the pathogenesis of acute respiratory distress syndrome. International Journal of Clinical and Experimental Pathology, 7(2), pp537-551.

June 2, 2017

More recently, NOX1 has been identified as a key driver in the development of atherosclerotic plaques. Increased NOX1 expression and ROS levels have been demonstrated in carotid arteries from patients with advanced atherosclerosis and in carotid arteries from non-human primates on an atherogenic diet.83,84 In a model of diabetes, it was demonstrated that high glucose levels activate NOX1, which in turn produces ROS that promote expression of pro-inflammatory and profibrotic genes. This leads to vascular inflammation and the development of atherosclerotic lesions.85 GKT771 could therefore have applications in addressing atherosclerosis and diabetic vasculopathies that are driven by NOX1dependent oxidative stress. GKT771 also has a potential application in eye diseases such as ischemic retinopathies. NOX1 has been shown to mediate vascular injury in ischemic retinopathy. In a murine model of oxygen-induced retinopathy that mimics retinopathy, mice with a NOX1 deletion were protected from retinal neovascularization, capillary vasoobliteration, and vascular leakage.86 There is also evidence for the involvement of NOX1 in hypertension. Although its exact role is not fully understood, NOX1 has been shown to be upregulated in vessels from spontaneous hypertensive rats and is associated with increased ROS production in response to Angiotensin II (Ang II). Multiple studies have shown that deficiency of NOX1 in mice protects against Ang II mediated hypertension. GKT771 could therefore have therapeutic potential in inhibiting NOX1 mediated hypertension. Collaboration with Serum Institute of India Genkyotex currently owns vaxiclase, an immunotherapy development platform, which was obtained as a legacy product from Genticel. The Company currently has a partnership for this asset with the Serum Institute of India, giving them rights to territories outside of the US and EU. The Serum Institute of India is a global manufacturer of vaccines and biologics, and plans to utilize vaxiclase to develop vaccines for infectious diseases such as whooping cough. This agreement has potential to yield Genkyotex up to $57 million plus royalties on sales. In late 2016, this collaboration yielded a $1.2 million payment due to achievement of a preclinical milestone. Intellectual Property Genkyotex has an intellectual property estate for GKT831 consisting of 3 issued US patents and 7 issued patents in total in the EU and Japan. The Company also has 1 patent pending in both the US and EU. A summary of Genkyotex’ intellectual property is presented in Figure 12. These patents protect the status of GKT831 as a new chemical entity

83 Madrigal, M.J. et al., 2012. HSP90 inhibition by 17-DMAG attenuates oxidative stress in experimental atherosclerosis. Cardiovascular Research, 95(1), pp116-123. 84 Stanic, B. et al., 2012. Increased epidermal growth factor-like ligands are associated with elevated vascular nicotinamide adenine dinucleotide phosphate oxidase in a primate model of atherosclerosis. Arteriosclerosis, thrombosis, and vascular biology, 32(10), pp2452-2460. 85 Gray, S.P. et al., 2013. NADPH oxidase 1 plays a key role in diabetes mellitus-accelerated atherosclerosis. Circulation. 86 Wilkinson-Berka J.L. et al., 2014. NADPH oxidase, NOX1, mediates vascular injury in ischemic retinopathy. Antioxidants & redox signaling, 20(17), pp2726

June 2, 2017

(NCE), its method of use, and pharmaceutical formulation. The NCE patents are set to expire in 2029, while the patents related to the pharmaceutical formulation are anticipated to expire in 2028. The Company has also mentioned that GKT771 has patent protection as a NCE and for its method of use through 2034.

Figure 12. Summary of Genkyotex’ Intellectual Property Estate

US Ex-US Issued 3 7

Pending 1 1

Source: LifeSci Capital Management Team Elias Papatheodorou Chief Executive Officer Mr. Elias Papatheodorou brings with him more than 20 years of experience with private and public biotechnology companies, as well as with The Coca-Cola Company and Philip Morris International. At Covagen AG he was instrumental in the closing of a CHF46 million series B round and in the subsequent acquisition of Covagen to Jannsen Pharmaceuticals, a J&J Company. Previously Elias was Senior Vice President for Operations and Business Development at Medigene AG. Elias has also served for a number of years as the CEO of novosom AG. During his tenure the Smarticles technology entered clinical trials in the U.S.A., the company raised funds and closed licensing deals with Isis Pharmaceuticals (NASDAQ: ISIS) and ProNAi Therapeutics. Finally, he engineered the sale of novosom's assets to Marina Biotech (MRNA). Elias has a track record in fundraising, business and corporate development and licensing transactions. He received his undergraduate education at Ithaca College, NY, and his graduate education at Cornell University, NY. Phillipe Wiesel, M.D. Executive Vice President and Chief Medical Officer Philippe joined Genkyotex in 2010 and is responsible for all clinical development activities. Previously, Philippe founded Genexion, a clinical development company focused on developing early stage clinical assets with emerging biotech companies and European venture capital firms. Prior to Genexion, Philippe was Medical Director at Serono's Swiss and US offices, where he was involved with the global development of several biologics and small molecules. In particular, he led the late-stage clinical development of Raptiva, achieving the first marketing authorization in Europe for a biological therapy targeting psoriasis. Philippe also led the development of onercept in psoriasis and managed clinical development programs for beta interferon, interleukin-18 binding protein, and atacicept. Prior to joining the biotech industry, he conducted basic research for over five years in the laboratories of Professor Edgar Haber at Harvard Medical School, and of Professor Hans Brunner at the Division of Hypertension in Lausanne. Philippe holds a MD degree from the University of Lausanne.

June 2, 2017

Alexandre Grassin Director of Finance and Administration Alexandre joined Genkyotex in April 2012. After management studies in the UK (Middlesex University) and in France (CESEM, Reims Management School) he started his career in 2001 in Paris as Financial Auditor with KMPG. He moved to Switzerland in 2004 first for Intrawest, a real estate company, and then oriented his career to the pharma/biotech industry with diverse experiences in Finance with Novartis from 2007-2010 and Alexion from 2010 to 2012. Risk to an Investment We consider an investment in Genkyotex to be a high-risk investment. Genkyotex is currently in clinical-stage development and does not have any marketed or approved products. The Company has not entered Phase III clinical trials for any program. Failure to show convincing results in future pivotal clinical studies or failure to reach FDA or EMA approval could adversely affect Genkyotex’s stock price. Regulatory approval to market and sell a drug does not guarantee that the drug will penetrate the market, and sales may not meet expectations. As a clinical-stage company, Genkyotex is not profitable and may need to seek additional financing from the public markets, which may result in dilution of existing shareholder value.

June 2, 2017

Analyst CertificationThe research analyst denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsiblefor this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies), with respect to eachsecurity or subject company that the research analyst covers in this research, that: (1) all of the views expressed in this report accuratelyreflect his or her personal views about any and all of the subject securities or subject companies, and (2) no part of any of the researchanalyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the researchanalyst(s) in this report.

DISCLOSURESThis research contains the views, opinions and recommendations of LifeSci Capital, LLC (“LSC”) research analysts. LSC (or an affiliate)has received compensation from the subject company for producing this research report. Additionally, LSC expects to receive or intendsto seek compensation for investment banking services from the subject company in the next three months. LSC (or an affiliate) has alsoprovided non-investment banking securities-related services, non-securities services, and other products or services other than investmentbanking services to the subject company and received compensation for such services within the past 12 months. LSC does not makea market in the securities of the subject company.

Neither the research analyst(s), a member of the research analyst’s household, nor any individual directly involved in the preparation ofthis report, has a financial interest in the securities of the subject company. Neither LSC nor any of its affiliates beneficially own 1% ormore of any class of common equity securities of the subject company.

LSC is a member of FINRA and SIPC. Information has been obtained from sources believed to be reliable but LSC or its affiliates (LifeSciAdvisors, LLC) do not warrant its completeness or accuracy except with respect to any disclosures relative to LSC and/or its affiliates andthe analyst's involvement with the company that is the subject of the research. Any pricing is as of the close of market for the securitiesdiscussed, unless otherwise stated. Opinions and estimates constitute LSC’s judgment as of the date of this report and are subject to changewithout notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchaseor sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances,objectives, or needs and are not intended as recommendations of particular securities, companies, financial instruments or strategies toparticular clients. The recipient of this report must make his/her/its own independent decisions regarding any securities or financialinstruments mentioned herein. Periodic updates may be provided on companies/industries based on company specific developments orannouncements, market conditions or any other publicly available information. Additional information is available upon request.

No part of this report may be reproduced in any form without the express written permission of LSC. Copyright 2017.

June 2, 2017

Initiating Coverage June 2, 2017 initiate a Phase II study with … · 2017. 7. 11. · Initiating...

Documents

Transcript of Initiating Coverage June 2, 2017 initiate a Phase II study with … · 2017. 7. 11. · Initiating...