Annovis and Buntanetap: Asymmetric Risk/Reward Ahead of Interim Phase 3 Parkinson’s Data Readout
12-Month Price Target: $117/share (+430%)
This article also posted here to collaborative stock research platform Seeking Alpha.
Key Points
Interim Phase 3 Parkinson's data to be presented tomorrow (3/30/23) at AD/PD 2023.
Lead asset buntanetap represents a differentiated, potentially disease-modifying mechanism of action in neurodegenerative diseases.
Micro-cap status ($180 million market cap) significantly undervalues clinical potential ahead of full-length Phase 3 readouts in Parkinson’s and Alzheimer’s in early-2024.
Minuscule tradable float (5.6 million shares) presents potential for demand-driven liquidity squeeze.
Intro
With an interim readout of Phase 3 Parkinson’s disease (PD) data due tomorrow (3/30/22) and shares finishing up 13% on the day, the primary goal of this article is to serve as an effective landing page for anyone that may become interested in Annovis Bio (ANVS) in the coming weeks or months.
The interim data—which will report results from 150 early-PD patients after two months of treatment with Annovis’s lead asset, buntanetap—will be presented tomorrow at the AD/PD Alzheimer’s and Parkinson’s Disease Conference in Gothenburg, Sweden. It represents the company’s first new data since a series of intriguing, yet ambiguous results from a 68-patient Phase 2a combined PD (54 patients) and Alzheimer’s disease (AD; 14 patients) study were reported between May and October of 2021, during which time the stock more than 5x'ed to $120/share, peaking at a $960 million valuation, before cratering violently back to earth.
After an eventful 2021, Annovis has spent the last 12-18 months quietly and steadily advancing buntanetap into two currently-ongoing Phase 3 trials—one in PD (its lead program) and one in AD—while the market has effectively forgotten about the stock. At $22.10 (closing price on 3/29/23), even after trading up 35% in the past week, Annovis currently trades at a piddling ~$180 million market cap, and, we argue, presents a compelling and asymmetric risk/reward profile given the prospects of its lead asset, which: has a novel, potentially disease-modifying mechanism of action; negligible side effects, even at 4-10x the selected Phase 3 dosages; reported promising (yet flawed) Phase 2a efficacy data in PD and AD; is currently enrolling (expeditiously) in Phase 3 studies for both PD and AD; and announced last week that it will report interim data from its Phase 3 PD trial tomorrow (3/29/22).
While Annovis has a robust, multi-asset, multi-indication profile (pictured above), this piece will focus on buntenatap for the treatment of PD and AD, with an emphasis on buntanetap’s mechanism of action, an interpretation of its Phase 2a data, recent developments and outlook for the ongoing Phase 3 PD trial, and other potential catalysts. While we believe a positive readout at tomorrows AD/PD 2023 conference could drive significant (58%+) upside in the short term—especially considering the stocks extremely small float (5.6 million shares)—we are focused primarily on the attractive positioning of Annovis and buntanetap to deliver positive full-trial Phase 3 readouts in both Parkinson’s and Alzheimer’s in early 2024.
12-Month Price Target: $117/share (+430%)
Buntanetap: Mechanism and Scientific Rationale
Buntanetap (previously known as posiphen and ANVS-401) is an interesting molecule with a considerably different mechanism from other neurodegenerative biotech assets—especially from mAbs like aducanemab and lecanemab—which may come closer to addressing at least one of the true underlying causes of the aberrant protein aggregation (e.g. amyloid beta in AD), chronic inflammation, impaired axonal transport, and, neuronal death that accompanies neurodegenerative diseases.
Buntanetap works by inhibiting the translation of the mRNA that code for various proteins associated with neurodegenerative diseases, including APP (precursor to amyloid beta), alpha synuclein (PD), tau (AD and PD), huntington (Huntington’s disease), and TDP-43 (ALS). The company refers to these as “neurotoxic” proteins, though the name is slightly misleading because each of these proteins has a role in supporting cellular function in healthy neurons.
While far-fetched at first blush, buntanetap is able to selectively inhibit the translation of these neurotoxic proteins—without affecting other proteins—by potentiating the binding of a regulatory protein called IRP-1 (iron regulatory protein 1) to an untranslated region (5’UTR) of the neurotoxic protein’s mRNA known as an IRE (iron-responsive element). The particular IRE that buntanetap potentiates binding to is “atypical” and homologous (i.e. of common evolutionary origin, likely indicating related cellular functions) across the neurotoxic proteins listed above. This serendipitous discovery explains the mechanism by which one molecule is able to inhibit the translation (i.e. production) of “neurotoxic” proteins, and why Annovis refers to buntanetap as a TINAP, which stands for translational inhibitor of neurotoxic aggregating proteins. IREs and neurotoxic proteins are discussed in detail in Chen et al., 2021.
Iron and Neurodegeneration
Interestingly, buntanetap’s translation inhibition implies a relationship between intracellular iron concentrations, which regulate IRP-1’s binding to IRE, and neurodegenerative protein aggregation. Under high-intracellular iron conditions, which may be caused by oxidative stress, among other things, IRP-1 does not bind to the atypical IRE on the mRNA of neurotoxic proteins (APP, alpha synuclein, etc.), allowing higher levels of each protein to be translated and which, under certain (largely unknown) circumstances, can begin to aggregate and disrupt neuronal function.
Essentially, buntanetap mimics a low-iron intracellular environment by potentiating IRP-1s binding to the IRE, inhibiting the (over)translation of the potentially-toxic proteins. While proteins like APP and alpha synuclein have important functions in healthy cell functioning, it is their overexpression in response to environmental stressors that is hypothesized to cause the pathophysiological cascade associated with neurodegenerative diseases. Neurotoxic protein overexpression is discussed in independent papers such as Chan et al., 2021).
Accordingly, buntanetap’s Phase 3 dosages (10mg and 20mg) were selected with the goal of inhibiting translation to a degree that would result in approximately healthy “neurotoxic” protein expression. There is extensive literature on the connections between iron homeostasis, IRPs, IREs and neurodegenerative diseases, including a seminal 2019 review paper by Joppe et al., 2019.
Root Causes and “Cures”
We note that while buntanetap’s mechanism does not technically represent a true “cure” of the root cause of neurodegenerative disease—in the sense that a true cure would identify and correct the reason for disrupted intracellular iron homeostasis in the first place—it does appear that buntanetap is much further “upstream” in the pathology of neurodegenerative protein-aggregation diseases than most companies. Regarding true “root causes”: It seems Alzheimer’s, Parkinson’s, and some other neurodegenerative diseases are increasingly being understood to result from a heterogeneous and overlapping set of environmental, metabolic, and other extraneous factors, suggesting the further “upstream” a treatment can go in resultant inflammatory and neurodegenerative cascade, the better.
Takeaway
Buntanetap’s scientific rationale, while purely theoretical on its own, offers context with which to understand the company's robust preclinical results, which are not discussed in detail here but demonstrated, among other things, the restoration of cognitive function in Alzheimer’s disease model mice to that of healthy control mice (Teich et al., 2018).
In all, the well-researched molecular mechanisms by which buntanetap is proposed (key word) to halt/slow the neurodegenerative process, combined with a congruent preclinical data package, provides a strong foundation upon which buntanetap entered clinical development, beginning with a four patient trial mild cognitive impairment (MCI) trial (discussed in the 2020 10-K), and then a Phase 2a trial in PD and AD.
Phase 2a: Potential Amidst Ambiguity
Reactions to Annovis’s Phase 2a data—different parcels of which were responsible for the stock’s 400% rise and subsequent 85% decline in 2021—were disparate, to say the least.
In our view, the data (which we discuss below) should be interpreted through the following lens: 25 days is an exceptionally short treatment period in PD and AD, and 68 patients (54 in PD, 14 in AD), is a small sample size. The 54 PD patients may seem like a decent size, but spread across six dosage cohorts (including placebo), there were only nine patients per treatment group. The study should be taken with a (large) grain of salt.
However, despite being significantly underpowered to detect clinical efficacy—the trial was primarily designed to test safety, dosages, and biomarkers—the company reported statistically significant improvements on a number of clinical efficacy assessments across multiple dosing cohorts. Inevitably, buntanetap did not reach statistical significance on various other efficacy endpoints, leading to confusion and dissenting opinions.
Matters were further complicated by Annovis’s attempts to highlight the positive aspects of the data by releasing a constantly-evolving combination of charts and written descriptions of the data—many of which appeared to be constructed by CEO Maria Maccecchini in a less-than-intuitive fashion—that made it difficult to understand which arms of the study showed statistical significance vs. placebo versus those that showed statistical significance over baseline versus those that showed neither, etc.
While the data are hard to understand and of limited value, some of the positive findings are interesting, given the right context, and may turn out to have foreshadowed future data.
Phase 2a Parkinson’s Data
The results of the Phase 2a were formally published in the The Journal of Prevention of Alzheimer’s Disease (JPAD) in October 2022. The company’s website also has a page providing an overview of the data. The PD patient data is larger (54 patients versus 14 in AD) for logistical reasons: PD patients are younger, more autonomous, and easier to enroll.
The MDS-UPDRS is the gold-standard rating scale for Parkinson’s standard outcome measure. Buntanetap showed statistically significant improvement from baseline (not versus placebo) in the 10mg and 20mg cohorts, the doses currently being trialed in its Phase 3, but not the other three cohorts. We regard this data mostly useless.
The Phase 2a also tested PD patients on the WAIS Coding test (short explanatory video), which is a digit symbol substitution test (DSST) intended to measure thinking speed, working memory, and fine motor movement. The WAIS Coding test is thought to be more sensitive to small, short-term changes in cognitive function than the MDS-UPDRS (at the expense of being able to specify between neurodegenerative diseases). The data (shown below)—while still subject to the limitations of a 25-day treatment duration and small sample size—are potentially encouraging, specifically on account of their consistency in showing (nominal) improvement from baseline across all five treatment arms while the placebo group declined, as well as statistically significant improvement over both placebo and baseline in four of five treatment groups.
Phase 2a Alzheimer’s Data
Briefly, in the 14 AD patients (one treatment group: 80mg/mg) included in the Phase 2a, buntanetap also showed statistically significant improvement over baseline (not placebo) on the WAIS coding test after 25 days.
Additionally, and likely the largest contributor to Annovis’s meteoric rise beginning in May 2021, the 14 AD patients also reported a statistically significant 4.4 point reduction from baseline on the AD gold-standard Alzheimer's rating scale, the ADAS-cog11. The 3.3 point reduction versus the placebo group (which improved 1.1 points over baseline) was not statistically significant (adding to market confusion), solely because the AD trial’s tiny sample size was not nearly powered to detect statistical significance in the event of anything less than a dramatic improvement in cognition.
For context regarding buntenatap’s effect size in Alzheimer’s patients: Biogen’s 2019 EMERGE study of aducanemab reported a 1.4-point improvement on ADAS-cog13 after one year of treatment, and Cassava Sciences’ simulfilam reported a 1.6-point improvement in ADAS-cog11 after six months. Both studies were significantly larger than Annovis’s and were thus sufficiently powered to deliver statistical significance, despite reporting significantly smaller effect sizes.
Note: The preceding discussion regarding previously-completed trials does not discuss the four-patient MCI study, nor the biomarker data included in the Phase 2a PD/AD study, both of which we view as supportive of buntanetap’s clinical profile.
Phase 2a Interpretation and Opportunity
In conclusion, we believe the confusion and diverging interpretations of the data at the time of its release was a function of the opposing and contradictory results reported across the various endpoints and treatment arms of the study, exacerbated by the company’s confusing and often-clunky attempts to display the finer details of its results. In truth, the rush of value accrued to Annovis in its run up to $960 million, which was likely driven almost exclusively by retail investors (discussed in Other Catalytic Considerations below), was likely overdone considering the inherent limitations of the Phase 2a trial design (25 day treatment period and ~9 patients per treatment group).
From our perspective, the Phase 2a data may have some readthrough to the Phase 3, particularly in the WAIS Coding data, but should be treated as little more than an additional piece of context to add to buntanetap’s broader scientific portfolio. The FDA appears to agree, considering it approved a six-month, 450-patient Phase 3 study in Parkinson’s to follow up a relatively-small (and not unilaterally positive) Phase 2a. Those truly invested in the story of Annovis will gain (a likely wanting) degree of clarity after tomorrow’s presentation, while we expect the (near-)full picture to be revealed on the release of the full Phase 3 data in early 2024.
From an investment perspective, we believe the confusion left behind by the Phase 2a results has caused investors to forget about—or, more likely, be unaware and ignorant of—any other aspects of buntenatap’s clinical profile, presenting an attractive entry point into an asset with strong scientific and mechanistic rationale, positive preclinical, Phase 1, and biomarker data, a near-pristine safety profile, and strong Phase 3 enrollment.
Phase 3 and Recent Developments
Tomorrow's presentation will report data from the first 150 early-PD patients to complete two months of treatment, split between three treatment groups: placebo, 10mg/day, and 20mg/day of buntanetap. The pre-specified interim readout is designed to evaluate the adequacy of the current 450-patient sample size to deliver statistical significance on its primary endpoint. Depending on the data, the company will have the option to increase or decrease the trial’s sample size by up to 25%.
The clinical efficacy measures specified in the trial design include the MDS-UPDRS Part II+III (primary endpoint), the MDS-UPDRS Total Score, the WAIS Coding test, the MiniMental State Examination (MMSE) the Patients’ Global Impression of Change (PGIC) scale, and the Clinical Global Impression of Severity (CGIS) scale. It is unclear which (if not all) of these measures will be included in the interim readout.
Dosing its first patient in late August of 2022, Annovis’s time-to-achieving 150 two-month patients—we assume this occurred earlier in March, implying the 150th patient was dosed in January of 2023—is another indicator of the Phase 3 trial’s apparently-strong patient demand and enrollment. In fact, CEO Maria Maccecchini, in a video interview with Slice of Healthcare last Tuesday, said Annovis actually has more PD patient candidates than it can treat, even across its 84 currently-registered clinical sites, noting that there is a waiting list for enrollment. Maria attributed a portion of the demand to anecdotes from patients of the Phase 2a study that said they felt they were able to write faster. She also noted that enrollment is helped by the fact that buntanetap is an oral, once-daily pill with little-to-know side effects, versus some other neurodegenerative disease trials that include infusions, injections, more-severe side effects, imaging studies (PET, MRI), etc.
Speculatively, Maria’s tone, phrasing, and assumptive (of success) framing in the recent interview and elsewhere are, in our view, potential indicators of encouraging interim results, though we note that this could attributed to Maria’s confident baseline disposition and belief in/attachment to the company she started.
While the interim Phase 3 data will likely provide additional insights into buntanetap’s potential, two months of treatment is still a very short timeframe over which to expect a measurable improvement in Parkinson’s, and the larger sample size will negate any favorably-skewed data variance that Annovis experienced in the Phase 2a.
Clinical Pathway and Cash Position
Maria stated in the interview last week that she expects the Phase 3 PD trial to conclude in December of 2023, with top line data to be reported in January, and that the Phase 3 AD trial will likely report data a month or two thereafter, but could conceivably finish contemporaneously with the PD study (AD trial is 320 patients versus 450).
Annovis’s current understanding with the FDA is that a second, similarly-designed, longer-duration Phase 3 trial in later-stage PD (and AD) patients would be required to support approval in either indication. The studies are planned to treat patients for two years, but depending on the data yielded by the ongoing Phase 3 studies, we believe there is potential for an expedited approval pathway. Maria also stated that Annovis is currently considering conducting short studies in each of moderate-to-advanced stage AD and PD as a next step before embarking on larger, longer studies.
While Maria seemed to indicate in the recent interview that she plans to raise cash after reporting results from the ongoing Phase 3 studies in early 2024, its capital position appears tight, with $32 million of cash on the balance sheet at 9/30/22 (most recent results) and now two active Phase 3 trials. Annovis spent about $7.5 million on R&D and G&A in the 3Q22, which, if we we assume increased to $10 million per quarter to account (likely conservatively) for the Phase 3 PD trial beginning about two-thirds through the 3Q22 and the Phase 3 AD study beginning in early-February 2023, would leave Annovis with around $12 million at the end of the 1Q23.
We expect Annovis to aim to raise $50+ million in the next few months, ideally at or above $50/share at which it raised $50 million in 2021, though without substantially positive data tomorrow, shareholders will likely face significant dilution (20-30%) at current share price levels.
Other Catalytic Considerations
There are a number of other considerations that make Annovis a unique situation and add to its attractive risk/reward profile.
Under the Radar
Annovis is a microcap at $180 million and seems to have been forgotten by the market, trading on the order of $1 million of market value daily throughout much of 2022 and early-2023. Additionally, Annovis has essentially zero accounts following it on Twitter and only 358 followers of its company account; does not hold quarterly earnings calls; is not covered by any of the major equity research firms (most notable coverage is H.C. Wainwright: $40 price target); and has only 3.5k followers on Seeking Alpha (compared to 25k for Cassava Sciences), the vast majority of which have likely not looked at the company since adding it to their watchlist in 2021.
Liquidity and Share Ownership
The company’s small market cap is accompanied by a very small public float: of the 8.6 million shares outstanding, 5.6 million (68%) are floated, which could create a liquidity squeeze in the event of a positive data catalyst tomorrow (less likely) or in late-2023 and early-2024 when full-length data is reported. Interestingly, 86% of the float are held by retail investors (more accurately: 86% of the float is held by non-13-F filers).
Inversely, the company has virtually-nonexistent institutional ownership. The largest institutional shareholders are Vanguard (3% stake) and Blackrock (1%), which own constitutively tiny amounts as part of passive investment strategies. The largest active institutional owner is Kieger AG (.6%), a Zurich-based healthcare-focused asset manager, which owns just $1 million (at current prices). Lack of current institutional awareness could add to short-term illiquidity dynamics for the stock if hedge funds and other asset managers begin to get involved.
A version of these liquidity dynamics began to present themselves in today’s trading ahead of tomorrow’s data release. The stock gained 13% on the day and traded about 350k shares. At an assumed $21/share average, the stock gained 13% and added $19 million of market cap in one day while trading a mere $7 million of market value. It is likely that the current shareholders of Annovis stock have largely bought into the long-term potential of the stock and will be unlikely to sell shares on small pops.
CEO Maria Maccecchini owns 1 million shares (13% stake; second-largest shareholder) and seed investor, Chairman of the Board, and Trustee of the Rockefeller University (where Dr. Maria Maccecchini did her fellowship as a PhD in Biochemistry) Michael Hoffman owns 1.4 million shares (17% stake; largest shareholder). Neither sold any shares during 2021 or since.
Unusual Behavior
Annovis has not yet submitted their 2022 10-K, while 2021’s 10-K was submitted promptly on March 2nd of last year. I sent an email inquiry regarding timing of the 10-K to Annovis's LifeSci Advisors IR contact on 3/16/23, as well as a follow-up on Monday of this week, and have not heard anything back. We believe it is possible that Annovis has had material information relating to its Phase 3 PD trial data for some weeks and is waiting to file its 10-K until data is reported at the AD/PD 2023 conference. We believe Annovis most likely would have released the interim data around the time of receipt if the data were negative, rather than waiting to present it at an international conference.
Price Target
Various aspects of Annovis make it even more difficult to predict the future movements than for a typical clinical-stage neurodegenerative biotech. In the event of meaningfully-positive Phase 3 interim data, we expect Annovis could trade up at least to in-line with BioVie Pharma, which also has a non-mAb, unique approach to neurodegenerative diseases and is in late-stage trials in both PD and AD, and which trades at a $284 million market cap, representing 58% upside from today’s close.
As a longer-term, higher-conviction estimate, we believe Annovis could trade back up to its 2021 peak market cap of ~$960 million (430% upside) following the release of its full Phase 3 data in PD and AD in early 2024. This would imply $117/share, which is our 12-month price target. Coincidentally, this valuation is almost identical to that of the hotly-debated and, in our view, dubious Cassava Sciences ($993 million).
Risks
The primary risks facing Annovis are:
Data risk: The current trials are the first large-scale studies of buntanetap, and Phase 2a results were too small and brief to yield dependable results. The interim Phase 3 PD data is only a two-month treatment period, which would be considered by many experts to be an inadequate duration to observe a clinical response. The improvements shown in the Phase 2a could very easily be a short-term effect that eventually reverses, similar to those initially seen in donepizil (Aricep) in Alzheimer’s and in l-DOPA (Levodopa) in Parkinson’s.
Cash position: With two ongoing Phase 3 trials and an estimated $12 million in cash at the end of the 1Q23, Annovis will need to raise additional capital in the next few months. Without a significant stock price reaction to positive data, shareholder’s will experience significant dilution. If the company were to raise $60 million at $20/share, shareholders would experience 36% dilution.
Dosages: The 10mg and 20mg doses, while perhaps supported by preclinical and pharmacokinetic/pharmacodynamic studies, do not appear as clearly the most efficacious doses from the Phase 2a data. The 14-patient Phase 2a AD data, some of the “strongest” of the trial, used and 80mg/day dose.
Uncertain market conditions: Annovis’s previous run up to a ~$950 million valuation occurred in a vastly different market environment and was likely caught up in the “meme stock”. With recent financial events, it is possible that the market overlooks anything short of stellar data from this short two-month interim analysis.
Takeaway
We believe Annovis’ downside is limited in the event of neutral or confusing interim data, considering the very short treatment duration and buntanetap’s relatively-established (and manifestly supported by the FDA) clinical profile. In the event of negative data, which we do not expect, we believe ~$12 (-45%) is an established floor for the stock, and doubt the market would completely throw out the stock on the basis of two-month interim data.
Conclusion
We believe Annovis’s buntanetap represents an overlooked and misunderstood clinical asset with the potential to treat multiple unaddressed neurodegenerative disease markets, starting with Parkinson’s disease (~1 million US patients). Annovis was thrust into the spotlight in 2021 when their small, short, and unorthodox Phase 2a trial unexpectedly reported statistical significance on various clinical endpoints—and not others—leaving the company to try to make the most of an inherently limited and seemingly-contradictory dataset. As the dust settled, Annovis receded into relative anonymity (and attendant micro-cap status) as it steadily progressed buntanetap into two Phase 3 trials, the first of which will report two-month interim data from 150 early-PD patients tomorrow. Regardless of the data presented tomorrow, which is likely to offer as many questions as it does answers, long-term investors will continue to be focused on the rich and extensive mechanistic, preclinical, and clinical profile of buntanetap, which presents an asymmetric risk/reward proposition as we approach the release of full Phase 3 data for PD and AD due in early 2024.
If my own experience as a trial participant wasn’t so positive, I would be long gone given how they keep tripping over their own feet on PR and investor relations. But keep the focus on the science….