Selecta will present their “5+0” co-administered Phase 2 data at the American College Rheumatology (ACR) conference held October 19-24 in Chicago.
What to expect
1. 70%+ of patients with SUA level <6mg/dL after 5 monthly doses of co-administration
During the Cantor conference, CFO John Leaman suggested that Selecta will take the 0.15mg/kg svp-rapamycin + 0.2mg/kg pegsiticase dose into Phase 3.
After 3 monthly doses of 0.15mg/kg svp-rapamycin + 0.2mg/kg pegsiticase (Cohort 11, below) the company has reported that 8/10 patients (80%) maintained response. If we look at all expanded cohorts -22/27 patients (81%) have shown a response after 3 monthly doses.
We expect these numbers to be consistent at 5 monthly doses as well, which is why we expect response rates to be at least 70%+. The company believes anything over 65% response will be sufficient to show differentiation to commercial competitor Krystexxa, which has shown a 44% response rate.
2. 35% (or lower) of patients reporting gout flares
Gout flares are severe attacks in the joints that will impact day to day activity. For example, difficulty walking (if in the foot) or immobilizing fingers (if in hand). Generally these gout flares occur in the first month of treatment. If a patient does not get a flare after the first month, they will likely not get one the rest of the treatment.
Selecta has shown that 33% of patients on their drug report a flare. To compare, 52% of Krystexxa patients get flares. The company should be able to report a similar flare rate during this 5+0 readout.
We Think Selecta Should Trade $18/share Or Higher With Positive Phase 2 Data
CFO John Leaman mentioned that Selecta needs approximately $50-$100M to complete Phase 3 trials. The company currently has a fully diluted 26.5M shares outstanding fully diluted.
Selecta had $66.2 million in cash as of June 30, 2018. This is expected to be sufficient to fund the company through the end of Q3 2019. The current operating plan accounts for partial funding of SEL-212 Phase 3 trial, but will require additional $50-$100M financing to expand enrollment in the Phase 3 trial and to conduct the planned head-to-head trial against Krystexxa. We believe the company will raise money after the 5+0 data in October.
We made several assumptions for the $18/share, many of which are conservative:
- Assuming a $100M raise at ~$16/share. This means about 6.25M new shares. Totaling to ~33M shares outstanding
- Use Krystexxa’s 510M buyout from Horizon to determine enterprise value.
- No value given to Selecta’s other pipeline candidates
Bottom line: Overall, we are bullish on Selecta’s upcoming October data and think it will distinguish SEL-212 as a superior alternative to Krystexxa. We think SELB warrants at least $18/share with response rates in the 70% range. We plan to hold through Phase 2 data in October and will revisit the position shortly after, mainly due to the company’s financial position and lack of catalyst rest of 2018.
PropThink contributors are LONG SELB
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