Off the Radar Dermira Targets a Billion Dollar Opportunity

Off the Radar Dermira Targets a Billion Dollar Opportunity

Now and again we like to uncover an off the radar stock in biotech. Here’s one such case – Dermira, Inc. (NASDAQ:DERM). Dermira is a development stage biotech with a focus on (as its name suggests) dermatological conditions, Its current primary focus is a psoriasis candidate, which the company picked up the rights to develop from multi billion dollar behemoth Belgian biotech UCB S.A. (OTCMKTS:UCBJY) back in July 2014. The deal saw Dermira get the rights to develop and commercialize the drug in question, Cimzia, and receive a $5 million upfront stock purchase from UBS, plus tiered royalties on future sales (sales will be recorded by UBS).

While other biotech’s boomed throughout 2015, Dermira had a pretty quiet year, quietly enrolling patients for three separate phase III trials, investigating the efficacy of Cimzia against both placebo treatment and a currently approved product, Enbrel, currently commercialized marketed by Amgen Inc. (NASDAQ:AMGN) and Pfizer Inc. (NYSE:PFE). Enbrel generates a little over $1.3 billion a year, so if Dermira can demonstrate statistically significant relative to Enbrel, which is the endpoint of the third of the three trials, it has real blockbuster potential.

Dermira just announced the completion of enrollment for the trial in question, meaning all trials are fully enrolled, and we finally have an estimated top line release date. With this in mind, and before we look at timeframes, let’s have a look at the drug in question, and see what implications a successful phase III might have on Dermira’s market capitalization going forward.

First then, the science. The drug is what’s called a TNF inhibitor. Psoriasis is caused by an overexpressed immune response, which causes inflammation. TNF plays a big role is this inflammation, and in psoriasis sufferers, it causes red swelling and scales on the skin of sufferers. TNF inhibitors such as the one Dermira is trialling stop the production of a particular type of TNF called TNF alpha. In doing so, it reduces the level of inflammation and – in turn – the severity of the expressed symptoms of the condition.

Estimates put about 7.5 million psoriasis suffers in the US, and about the same across Europe, meaning the population size Dermira will be targeting comes in at about 15 million (the company is targeting both FDA and EMA NDA submissions).

We’ve already touched on the trials, but let’s go a little deeper.

The first two are called CIMPASI-1 and CIMPASI-2, and these are designed to compare Cimzia with placebo only. Endpoints are stat sig improvements in PASI 75 and PGA, which are two industry standard progression measurements in dermatological conditions, at 12 weeks from initial dosing.

The third is called CIMPACT, and as mentioned, will pitch Cimzia against Enbrel and placebo, with an endpoint of stat sig improvement in just PASI 75, this time at 16 weeks from dosing. Both trials can go on for an additional 96 weeks of treatment, if the patient wishes.

So what are we looking at from a time frame perspective, and what are the near term catalysts?

Well, the company has now enrolled over 1000 patients, and we will likely see interim data released at the 12-week point from enrollment completion. This comes in this quarter for both CIMPASI trials, and during Q2 for CIMPACT. Topline for all three is expected during the first quarter of 2017, and assuming efficacy, the NDA submission and subsequent acceptance by the FDA both have the potential to inject some upside into the company’s market capitalization.

What’s the takeaway? That we’ve got a company that has had a tough twelve months, but has just completed enrollment in three global phase IIIs for a promising drug in a billion indication. With a little over twelve months to wait before topline is presented, now could be an opportunity to get in at a discount ahead of the wider market attention.