DMD (Duchenne Muscular Dystrophy) Market Analysis
We have analyzed the current state of DMD treatments available, the meaningful clinical outcomes for a treatment and the potential market leaders in near term future
- The overall US market for DMD is expected to be in the $4B+ range by 2023, and $10B+ by 2030
- We’ve looked at the valuation of major players in the DMD space based on market potential and risk and identified the best investment vehicles based on our analysis. The companies mentioned in this article include Pfizer, Capricor, NS Pharma, Sarepta, PTC Therapeutics
What is Duchenne muscular dystrophy
Duchenne muscular dystrophy (DMD) is a genetic disorder characterized by progressive muscle degeneration and impacts approximately 6 per 100,000 individuals in North America and Europe
Market Size for DMD and Revenue Projections
DMD is the most common childhood onset form of muscular dystrophy and affects males almost exclusively. The birth prevalence is estimated to be 1 in every 3,500 live male births. Age of onset is usually between 3 and 5 years of age. The muscular dystrophies as a whole are estimated to affect 250,000 individuals in the United States alone – out of which about 50% are non-ambulatory. So far, the market has a handful of current and potential drugs that fall into the following three basic categories:
- Gene Editing Drugs – such as those from Serapta, Pfizer and NS Pharma that attempt to “edit” a faulty gene to fix the problem. These can be further segmented into more “Universal” drugs such as Pfizer’s PF-06939926 and specific Exon skipping drugs such as Exondys 51 from Sarepta which is an exon-51 skipping drug
- Steroids – Such as those from PTC Therapeutics
- Biologic Drugs such as CAP-1002 that use cell therapy to reverse the loss of motor function
Sarepta, NS Pharma and Pfizer and Capricor
Currently Sarepta has the biggest portfolio of approved drugs with Exondys 51 in 2016, Vyondys 53 in 2019 and AMONDYS 45 (Casimersen) in 2021 likely to all be in the market in 2021. Although these drugs are all available or soon to be available (Casimersen has an FDA decision pending in Feb 2021). The limitation of this portfolio is the lack of universal action or the inability to address the broad DMD population. For example, Exondys 51 is only effective on DMD patients that exhibit Exon 51 Gene skipping. The collective patient population of Sarepta’s entire portfolio of drugs is under 30% even when you throw Casimersen into the mix. Sarepta’ Exon-skipping platform is estimated to hold about 21.0% of the market share by 2023, driven by increasing competition from NS Pharma and the possible adoption of more universal therapeutics from Pfizer and Capricor therapeutics. Mutation-specific therapies, such as Translarna, are anticipated to face limited adoption due to premium pricing. Associated adverse effects of steroid therapy make them a less favored treatment option.
The biggest weakness for Sarepta is its inability to break into the universal gene therapy space. Its most promising candidate SRP-9001 failed to beat placebo in a phase 2 clinical trial. Functional motor ability scores in the SRP-9001 arm were statistically no better than in the placebo group, almost halving Sarepta’s stock price and raising doubts about a key program. Make no mistake – this was a huge setback for Sarepta since this has handed over the mantle of the first universal therapeutic to Capricor and Pfizer. We expect Sarepta to continue to lose ground to Pfizer, Capricor and NS Pharma going into 2023 due to the narrow applicability of its platform even with the expected approval of Casimersen.
Pfizer’s CIFFREO is a Phase 3 global, multicenter, randomized, double-blind, placebo-controlled study with the primary endpoint of the study is the change from baseline in the North Star Ambulatory Assessment (NSAA) at one year. Participants will be followed in the CIFFREO study for five years after treatment with the investigational gene therapy. Trial participants will receive commercially representative drug product manufactured at Pfizer’s state-of-the-art gene therapy manufacturing facility in Sanford, North Carolina. Given the universal nature of this gene therapy and the failure of Sarepta’s competing gene editing candidate SRP-9001, We anticipate that PF-06939926 will maintain its first-mover advantage as a universal therapeutic with Pfizer having ample resources to drive home the advantage. PF-06939926 received Fast Track designation from the U.S. Food and Drug Administration in October 2020, as well as Orphan Drug and Rare Pediatric Disease designations in the United States in May 2017
Capricor therapeutics’ lead candidate – CAP-1002 is an oddity in this field because it’s the only non-steroidal drug to demonstrate a physical benefit in a DMD trial. Their HOPE-2 Clinical trial results that were published last year demonstrated a long, durable treatment effect at 52 weeks (as opposed to some treatments that show strength at 12 weeks only to taper off later). It also demonstrated a stellar safety profile due to which it’s not restricted by the dose limiting toxicity that is typical with steroids. Other than Pfizer’s PF-06939926, this is the closest so far to providing a treatment option for a wider population as its not limited in applicability to a specific gene mutation. Based on the fact that this therapy has clearly demonstrated a benefit, and that they have been in communication with the FDA since the trial results have been published, we expect them to file a BLA sometime in the second half of 2021 followed by a potential entry into the market in 2022. We strongly believe in this scenario playing out due to the complete inaction by Capricor in launching a Phase-III trial and the advancement in their production contracts with the Lonza group.
Future Outlook for DMD Treatments
Based on the initial pricing disclosed by Capricor for CAP-1002, and the dosing information obtained from their Clinical Trials, they’re projecting 4 doses per year at about $150,000 per dose. When we break down this information to get a ballpark valuation, we’re looking at Revenue Projections of $450M in year 1 of approval based on 10% Market Penetration and about $2.25B by year 3 based on 50% Market penetration.
The next aspect to consider is the probability of earnings and the expectation of approval based on clinical data and the FDA approval process. A typical biotech with a Phase-II asset should be weighed with a probability of about 30% whereas a biotech with a Phase-III asset should be weighed with a probability of 50% based on the shorter runway in the path to approval. This is where most valuations for Capricor seem to be missing the point – for CAP-1002, for both indications – DMD and Covid-19 therapy, CAP-1002 is approvable based on their Phase-II data rather than Phase-III. This is because the precedent for approval for DMD therapies has been the Phase-II trial results for a majority of the approved therapies, and for Covid-19, the current CAP-1002 trial is essentially a Phase-III as it falls under the EUA guidelines.
Even if we ignore this crucial aspect in our projections, with 30% odds and $450M earnings for year 1, we anticipate $135M earnings projections which easily translates to over $1B+ in valuation which equates to about $45+/share as a starting point and $225/share by year 3. For this to come to fruition however, the market needs to wake up to Capricor’s potential and that will likely happen if some trigger such as a filing of a BLA under the Accelerated Approval guidelines provides the necessary basis.
Pfizer’s Gene Therapy
Pfizer announced in Jan 2021 that the first participant has been dosed in the Phase 3 CIFFREO study, which will evaluate the efficacy and safety of investigational gene therapy candidate PF-06939926 in boys with Duchenne muscular dystrophy (DMD). The CIFFREO trial is expected to enroll 99 ambulatory male patients, ages 4 through 7, across 55 clinical trial sites in 15 countries. The first patient was dosed at a site in Barcelona, Spain on December 29, 2020. In a previous Phase Ib clinical trial of PF-06939926 the preliminary results from nine ambulatory patients aged 6 to 12 years, the drug candidates was well-tolerated and demonstrated positive efficacy with manageable safety events. Given Pfizer’s resources and global reach, we project that the CIFFREO trial to complete by next year (projected to be September 2022). There’s no denying that Pfizer will be a major player in the DMD space next year (subject to positive results from the CIFFREO trial). Head to head, we believe this is a better therapy compared to Serapta’s SRP-9001 and it has the first mover advantage due to Sarepta’s missteps.
In December 2019, Roche obtained the exclusive right to launch and commercialize SRP-9001, Sarepta’s investigational micro-dystrophin gene therapy for Duchenne muscular dystrophy (DMD) outside the United States. In exchange, Roche agreed pay an upfront of $750million in cash and $400million worth in equity with Sarepta eligible to receive up to $1.7billion in regulatory and sales milestones, plus royalties on net sales. There’s been a dark cloud hanging over this deal since SRP-9001 failed in its clinical trial and put this entire revenue stream in jeopardy. We expect Sarepta to continue to push forward with its arsenal of Exon-skipping drugs, but with head-to-head competition imminent from Capricor and Pfizer, unless we see a revival of SRP-9001, we expect Serapta to continue to lose ground in the DMD space from next year. Even though Sarepta leads the Exon-skipping market, there are other players (like NS Pharma) who will continue to eat into their market share and provide stiff competition going forward.
The first thing you might notice is that this is a progressive disease where the limb performance keeps getting worse with time, but regardless of what time frame we pick, the patients on the treatment arm seem to consistently out-perform those on placebo. Also, the effect of CAP-1002 is definitely not a short-term bump at 12 weeks (which was the approval criteria for multiple therapies) – it seems to persist over a much longer time span as is evident from the above data set. In itself, the data is quite remarkable, but when you dig into the details, there was actually one patient (the blue dot at the top of the graph below) that showed an increase in mobility at 12-months compared to baseline. In a progressive disease where the loss of mobility keeps getting more and more over time, that is really a remarkable feat.
Conclusion : Our ratings below are based on current state of marketable therapies and the pipeline nearing maturity.
Capricor Therapeutics (CAPR)
We think the market is sleeping on Capricor’s potential with the assumption that a Phase-III is necessary for CAP-1002 to be approved for DMD. Capricor has not initiated a Phase-III trial for DMD because they likely believe in their chances for approval based on the data available from their Phase-II studies and some additional supporting data. That data – an Open-Label extension study for CAP-1002 for DMD which has been ongoing for over 7 months now and another Phase-II clinical trial (INSPIRE) for COVID-19 where CAP-1002 is being tried as a treatment – is likely to provide additional clarity by Summer 2021 at which time the pathway to accelerated approval for CAP-1002 will become abundantly clear and the valuation for Capricor will likely reflect that.
Sarepta’s struggles with SRP-9001 has gift wrapped the Gene editing drug leadership to Pfizer and with the depth of resources at their command, Pfizer is unlikely to relinquish this opportunity. Still, when we invest in a Large Cap, its with the understanding that we’re not going to generate extraordinary growth. In that respect, we expect Pfizer to play a major role in the DMD space in 2023, but the amount of upside is limited.
In late 2020, Sarepta was in cruise control mode with its first universal therapeutic candidate SRP-9001 about to cause a fundamental shift in its portfolio. However, its failure has raised significant doubts about a key program that was supposed to cement Sarepta as the unequivocal leader in the DMD space. For now, Sarepta has regressed back to being a niche player with a portfolio of exon-skipping drugs. Even with the expected approval of Casimersen, we project that this will peak sometime in 2021 with the looming risk of increased competition and the FDA requirement for confirmatory trials.