My Verve Therapeutics (NASDAQ:VERV) thesis rests on the idea that while the clinical hold that the FDA put on VERV-101’s IND crushed the stock, the hold will be lifted in a limited number of months, which will see a quick spike in the stock. That thesis rests on the related idea that while this process is ongoing, VERV stock will not go down further. It also rests on the final hope that the hold will be lifted in “a year or less.”
After 4 months of holding the stock, I am happy to report that after falling 20% in April, VERV stock has now come back to where it was in February. I hope this lasts, because while I expect the stock to rise on the lifting of the clinical hold, my baseline is the February price, and I do not intend to double down.
In March, the company gave the following update about the CRL:
In the fourth quarter of 2022, Verve was informed by the U.S. Food and Drug Administration (FDA) that its Investigational New Drug (IND) application for VERVE-101 was placed on hold and subsequently received a clinical hold letter from the FDA that outlined the information required to resolve the hold and initiate dosing of patients in the U.S. Verve is addressing requests from the FDA regarding the clinical hold and intends to submit a response as expeditiously as possible.
As usual, companies do not mention what the clinical hold is about, and a big mystery is created. Here too, there is nothing. However, in an earlier 8-K, the company did list the reasons for the hold on their IND, which was that through additional data, the FDA wanted to know:
(i) potency differences between human and non-human cells, (ii) risks of germline editing, and (iii) off-target analyses in non-hepatocyte cell types.
The FDA also requested data from a New Zealand trial that was ongoing, called the heart-1 trial. Further, the FDA wanted them to “modify the trial protocol in the United States to incorporate additional contraceptive measures and to increase the length of the staggering interval between dosing of participants.”
The question of germline editing is the key concern here. It means the FDA wants to know that patients do not pass on the edited high cholesterol gene to their children. Verve has preclinical data to allay this particular concern. Here’s the data:
In the study to assess potential germline editing of male nonhuman primates, sperm samples collected after VERVE-101 dosing showed no evidence of PCSK9 editing. Among 436 offspring of female mice treated with a saturating dose of VERVE-101mu, the PCSK9 edit was transmitted in 0 of 436 animals.
Thus, in both murine samples and NHP samples, there was no evidence of PCSK9 gene editing across generations, or rather, in sperm samples. In mice, this was shown directly in the next generation. This is an experiment difficult to conduct in humans, so I believe non-human data will suffice. It could possibly be conducted in germline cells, but not in actual humans. Anyway, this is the data they do have, and it is convincing.
About the off-target effects asked in point 3, Verve has preclinical data from NHPsl, which shows a solid safety profile. The heart-1 trial is ongoing with initial data expected in the Second Half of 2023.
In May, the company gave the following similar sounding update:
In parallel, Verve is executing a comprehensive plan to address the U.S. Food and Drug Administration’s requests on its Investigational New Drug (IND) application for VERVE-101, which is currently on hold. The company intends to submit a response letter as expeditiously as possible.
An analysis by Wells Fargo shows that the FDA took a median of 4.1 months to clear gene editing holds, with one taking as little as 28 days, and one for Stoke Therapeutics still ongoing after 3 years. However, I do not put much stock in this sort of analysis especially where each case is so very different. The New Zealand trial will read out in 2H 2023, and we can expect the earliest resolution of the hold a few months after that, given that Verve will need to show this data to the FDA.
Risks
Beam Therapeutics, which was in a similar situation last year, had its own clinical hold lifted on Dec 2. There wasn’t much movement in the stock that day, or in that time period. This is a considerable counter to my thesis, except that each situation is different.
Cash is not a risk, because Verve is very well capitalized right now, with $508mn in cash. They spend around $60mn, $47mn of which is in R&D, which I find to be considerably high for an early stage company. Even then, they have a long cash runway – although they definitely should conserve cash.
Bottomline
In February, I had a buy rating on VERV. The stock went down, went back up and is steady at near-February prices now. I am going to get out of the stock, for a variety of reasons. One, I am less sanguine about my position right now, given my long term bearish view about the asset’s prospects, and some of the other issues we discussed here. More importantly, I have a couple of very solid stocks I want to buy, and I do not like to have too many stocks in my portfolio. Third, I will make a very small profit on VERV if I exit now, and I am fine with it.
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