AveXis Inc (NASDAQ:AVXS): Of Course The FDA Didn’t Ask For Placebo Data

AveXis Inc (NASDAQ:AVXS) just announced that it has secured a favorable trial design for its ongoing investigation of its lead asset, AVXS-101, in its investigation into spinal muscular atrophy (SMA) Type 1. The announcement came following the receipt of minutes from an FDA meeting concerning the drug, and the trial, and markets have interpreted (and on the surface, quite rightly) the news as positive for the company.

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AveXis is more than 26% up on its pre-announcement market capitalization, and mid session on Thursday the company looks set to gain strength further as late comers buy in and pick up an exposure to the planned trial.

As ever, our take isn’t as clear cut as the market response might suggest it should be. We recognize the benefit of the agreed design, but there are a couple of things worth noting that should at least serve to rein in some of the enthusiasm.

Here’s why.

First, a brief look at the drug in question. As mentioned, it’s called AVXS-101, and it’s targeting SMA. When patients have SMA, the malfunctioning of a gene called SMN1 leads to the loss of motor neurons and results in progressive muscle weakness and paralysis. The disease is divided into subsets depending on severity and onset – SMA1, 2, 3 and 4. Type 1, which the company is going after, affects 60% of SMA patients that have symptoms observable within the first six months after birth, and a child with onset this early has less than two years’ life expectancy. It’s the number one genetic cause of infant death. Put another way, it’s a potentially large market, targeting a terrible condition with no currently available option.

AVXS-101 is a gene therapy treatment that aims to deliver a functional version of the SMN1 gene into the motor neurons of the patient. This, in turn, is designed to stimulate functioning versions of the otherwise deficient protein that actually causes the neuron loss, and – by proxy – treat the patient.

That’s the theory, at least.

This candidate is still in very early stages of development – it’s about to enter a phase I trial, and it’s this trial on which the company is gaining strength.

So what specifically about the design is boosting the company?

As an outcome of the meeting with the FDA, the agency has suggested AveXis can collect the data it needs to support advancing development by way of a single arm trial. This basically means that every patient in the trial will get the drug, and none will receive placebo. In turn, the company can compare its data to historic data to determine performance against endpoints.

Now, here’s our issue with the seemingly overenthusiastic response:

We could have told you this was going to happen months ago.

What health authority, in any nation, would demand a company test a drug against a placebo arm of patients that have no alternative, are less than 6 months old, and won’t live past two years if they don’t receive the drug?

We’d have been amazed if the FDA had recommended a control arm.

But that’s not all. The fact that there’s no control doesn’t really weigh in on the drug’s chances. This is a disease with a very clear cut outcome, and no alternative treatments. The chances of a control arm performing any other way than historic expectations might suggest are incredibly slim.

Finally, our third gripe – this is a phase I safety trial. Sure, the company will probably set up a couple of secondaries looking at efficacy, but it’s safety that will determine whether or not this drug advances and (and we’re going to be blunt here) unless it starts killing babies then the safety profile versus non-treatment should come out on top.

Nevertheless, markets have viewed the agency’s input as very positive, and the company is up as a result.

That’s biotech.

We expect some degree of pullback across the coming quarters heading into the trial, as markets get a hold of themselves a little bit and think things over.

Trial commencing is set for some time during the first half of 2017.

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