ProQR Therapeutics N.V.
PRQR: Price: $7.30; Market Cap (M): $233
Rating: Buy; Price Target: $20.00
Andrew S. Fein
Li Wang Watsek
Corporate Refocus May Begin Yielding Catalysts; Reit Buy and $20 PT
Skin and ophthalmic disease focus should begin to yield catalysts. With last week’s announcement of initiation of the WINGS study, a Phase 1/2 trial of QR-313 in recessive dystrophic epidermolysis bullosa (DEB), PRQR continues to transition itself into a RNA repair company focusing on rare disease, rather than a cystic fibrosis (CF) company that utilizes a novel RNA technology. As we alluded to in our previous note (March 1, 2018) the shift towards DEB, Leber’s congenital amaurosis 10 (LCA 10) and Usher syndrome 2A (USH2), in our opinion, allows PRQR to maximize its technology while targeting diseases in which it can: (1) more readily reach the target tissue; and (2) be able to directly measure if the target protein has achieved sufficient expression levels to yield a functional outcome. We believe that with the interim data readouts for both DEB and LCA 10, as well as initiation of a clinical trial in USH2 all planned for 2H18, PRQR is poised to validate its RNA technology and we reiterate our Buy rating and, using an updated valuation methodology, arrive at a $20 PT.
WINGS trial is the first in human topical gene-therapy approach for “butterfly wings.” DEB is a dermatological condition caused by mutations in the COL7A1 gene encoding for type VII collagen (C7) protein which is responsible for anchoring the layers of skin together. Mutations in COL7A1 result in blistering and areas of missing skin from simple every-day friction of the skin surface. Affected patients are often referred to as Butterfly Children, because their skin is as fragile as a Butterfly’s wings, thus the aptly named trial name, WINGS. QR-313 is an antisense RNA oligonucleotide, formulated in a topical solution that functions via exon-skipping and is specifically designed to treat cases of DEB caused by a mutation in exon 73 of the COL7A1 gene. Preclinical studies with QR-313 demonstrated high degrees of exon-skipping in both fibroblast cell lines as well as human skin equivalent models. In both cases, QR-313 generated a greater than 70% efficiency of exon-skipping and collagen expression was detected in 70-100% of dermis or epidermis samples tested. We view the preliminary data as particularly strong and also note that although other ex vivo gene therapy approaches are being developed, this approach using a topical carbomer-based hydrogel which should provide several advantages including: (1) consistency with current treatment protocols; (2) a non-invasive approach; and (3) rapid therapeutic intervention, with no need to remove biopsies for treatment. We are not alone in our opinion of QR-313 as earlier this month (June 12, 2018) PRQR received an award of up to $5 million in co-funding through partnerships with the non-for profit organizations, EB Research Partnership (EBRP) and EB Medical Research Foundation (EBMRF), which we view as a vote of confidence on QR-313’s prospect. Briefly, these foundations will match funding generated by PRQR up to $5M. In our opinion, perhaps even more relevant than the financial support is the validation that these foundations provide to the PRQR platform. Note that earlier this year (Feb 2018) the Foundation Fighting Blindness also entered into a similar partnership to develop QR-421a for USH2, with a milestone-based co-funding of up to $7.5 M.
Although this is a small MAD trial, we expect WINGS to provide significant insight into both safety and tolerability, as well as preliminary proof of concept. The WINGS trial is a randomized, double-blind, placebo-controlled Phase 1/2 trial investigating the safety and efficacy of QR-313 in recessive DEB (exon 73 mutations) patients. Per its protocol, the study consists of 2 cohorts. In the first cohort, 8 patients will receive topical QR-313 or placebo, 2 to 3 times a week for 4 weeks, with a follow-up period of 8 weeks after the treatment period. A second cohort of 8 patients will then be studied after the interim analysis of the first cohort, expected 2H18, is completed. Aside from the requisite safety and tolerability evaluations, management proposes to collect skin biopsies and measure the degree of exon skipping and thus production of collagen VII protein mediated by QR-313, which we view as a hard and more objective biomarker for efficacy. Additional secondary endpoints include parameters that we believe may be particularly useful in determining the potential clinical utility of this treatment, namely time to wound healing, delay before forming new blisters and skin strength. Although it remains unclear, precisely how much collagen VII will be required to make the patients asymptomatic, we are encouraged by the preliminary data that generated a large number of cells expressing collagen VII after treatment with QR-313. We believe positive responses in these endpoints could be strong candidates for PRQR to propose in future discussions with the regulators in the design of possible registrational trials. According to management, the proof of mechanism (exon skipping) will be available in 2H18 with preliminary proof of concept and wound healing data available in 2019.
Continue to await data from ophthalmic programs in 2H18 as well. Per management, Interim data from the open-label Phase 1/2 for QR-110 in LCA10 remains on tap to have a 6-month interim readout before year-end. As a reminder, LCA 10 is caused by a point mutation in the CEP290 gene that results in production of a non-functional CEP290 protein and loss of photo transduction in both rods and cone cells. QR-110 is an RNA oligonucleotide designed to target the mutation and restore normal message and therefore CEP290 protein. Additionally, a third Phase 1/2 trial for QR-421a in USH2 is scheduled to begin in 2H18. Mutations in the USH2A gene coding for the Usher protein are known to result in a loss of functional protein. QR-421a is targeting mutations within exon 13 of USH2 that cause this disorder and preclinical data have thus far shown complete exon skipping that generates a smaller yet functional USH2 message.
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