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Saniona: Comment on FDA Feedback

Redeye Research Note timeStamp 2020/10/12

FDA's feedback presented both clarity and some challenges that Saniona needs to address. Redeye factors in an updated timeline in the HO indication, but we argue that the news isn't more dramatic than that at this stage.

Short Background
Saniona has received written feedback from the US Food and Drug Administration (FDA) regarding pre-Investigational New Drug (pre-IND) submission for tesomet in Prader-Willi Syndrome (PWS) and Hypothalamic Obesity (HO).
Regarding PWS, FDA recommended Saniona conduct a phase 2b study followed by a phase 3 study. It is a small deviation from the intended plan where a phase 2b study could serve as a single pivotal trial. FDA also recommended Saniona to evaluate tesomet in children, given the unmet medical need. This could even become important as a priority review voucher could be granted, presenting a significant non-dilutive cash opportunity.

Regarding HO, FDA recommended Saniona conduct a phase 2b study followed by a phase 3 study. The agency expressed concerns with the potential use of off-label prescription of tesomet in the general obese population and suggested that this needs to be evaluated, possibly through a cardiovascular outcomes study, or that Saniona presents clear actions to restrict access exclusively to the HO population.

Concluding Remarks and Updated Valuation
Two separate divisions of the FDA have expressed different concerns; The Division of Diabetes, Lipid Disorders, and Obesity within the Office of Cardiology, Hematology, Endocrinology, and Nephrology in HO. The Division of Psychiatry within the Office of Neuroscience in the case of PWS. It appears to be more clarity on the path forward in the genetic disorder, PWS, than in HO. The latter is acquired morbid obesity and could be seen as a subset of general obesity. It is also noteworthy that different endpoints are used; hyperphagia in PWS, and weight loss in HO.

Saniona now has to work with the FDA on this issue. It appears to be a couple of options:

– Conduct cardiovascular outcome studies to strengthen the safety and tolerability profile of tesomet.
– Clarify how to restrict access exclusively to the HO population. It could potentially be through a strict and well-defined label, or by a restricted distribution model, we judge.

The regulatory process and further interactions with FDA is something we need to follow closely. What we can say at his point is this:
– Going for the broad general obese population with tesomet, or abandoning the HO indication is not an option in our view, at this stage
– We strongly believe there is a path forward for tesomet in HO in the US. There are no available drug therapies and with a significant unmet medical need. We argue that the issue of only providing access to a rare subset population cannot be unique for this case. Moreover, HO is an indication we’re becoming increasingly fond of. Especially with regards to our first-hand research among medical doctors, and the phase 2 results, which were relatively flawless.

Given this news, we factor in a one year delay in the HO indication, with market launch in the US in 2025. It leads to a new Base Case of SEK 72 per share (75), effective immediately. We argue that the stock price reaction on Friday implies something far worse than a one year delay.

We believe the next catalyst to be the open-label data in HO. It could get presented relatively soon. We hope to see a maintained trend in efficacy, and especially that the safety profile over a longer treatment period remains favorable. We will come back with another research note afterward.

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