Ovid Therapeutics (Nasdaq: OVID) has recently piqued our interest. The company’s stock plunged earlier this year after its partner, Takeda Pharmaceuticals (NYSE: TAK), announced a late-stage clinical setback with its Ovid-licensed drug, soticlestat. As is often the case, the market’s reaction was swift and ugly, trading Ovid below its cash balance and placing no value on its pipeline. Five months after the Takeda fallout, it could be time for investors to revisit Ovid. The company still trades near its $77mm (06/30) treasury balance, with an appealing, albeit busy, pipeline. The asset we are focused on is OV329, Ovid’s early-stage anti-epileptic drug (AED), which should have Phase 1 safety and biomarker data by year-end. Including two validating biomarkers makes this Phase 1 more like a proof-of-concept study, raising the stakes for these impending data. Investor interest in epilepsy, following last month’s acquisition of Longboard Pharmaceuticals (Nasdaq: LBPH) by Lundbeck and Bright Minds Biosciences (Nasdaq: DRUG) >3,000% sympathy surge, is arguably the highest it has ever been, making the timing ideal for Ovid’s data.
Adding to Ovid’s epilepsy narrative is soticlestat. Investors may have written the drug off, but we’re not sure Takeda has. Takeda’s body language suggests they are leaning towards filing an NDA for soticlestat for Dravet syndrome. Investors should have clarity on the situation by 1Q2025.
Ovid had a pipeline beyond OV329. In fact, next week, they are hosting an investor event to discuss their KCC2 activator platform. However, in the near term, the Ovid story revolves around epilepsy.
Xenon Parallels & Nostalgia
We see parallels between Ovid’s early-stage GABA-AT inhibitor, OV329, and Xenon Pharmaceuticals (Nasdaq: XENE), late-stage Kv7 opener, XEN1101. Long-tenured Xenon investors will recall that XEN1101 was developed to overcome the limitations of Valeant-developed (GSK-commercialized) first-generation Kv7 opener, ezogabine. Ezogabine, marketed as Potiga, as the only FDA-approved Kv7 targeting AED, was expected to be a big success for GSK. However, shortly after its commercial launch, reports of blue pigmentation, particularly in the eyes, began to surface after chronic ezogabine use, and FDA quickly slapped a black-box warning on the drug. Because of the toxicity concerns, ezogabine was never able to achieve the commercial potential envisioned by GSK at launch, and eventually, the drug was removed from the U.S. market.
XEN1101 is a more potent and safe next-generation Kv7 opener targeting a proven anti-epileptic mechanism. Xenon creatively included transcranial magnetic stimulation (TMS) in their Phase 1 program for XEN1101. Using TMS in early studies allows a company to test an experimental epilepsy compound’s ability to dampen neuroexcitation in healthy volunteers. To our knowledge, Xenon was the first company to use TMS as a pharmacodynamic endpoint in an early study for an AED. Today, trading at $40+ with Phase 3 focal epilepsy data expected next year, investors can be forgiven for forgetting the history of Xenon and how they successfully stickhandled XEN1101’s early development. However, it was the TMS data from healthy volunteers demonstrating XEN1101’s ability to dampen neuroexcitation that was the critical first building block on what, thus far, has been a remarkable success story for Xenon.
Source: Xenon 1101 Corporate Presentation May 2018
Sound Familiar….
Ovid has developed OV329 to overcome the limitations and improve upon the first-generation GABA-AT inhibitor, vigabatrin. Vigabatrin, sold by Lundbeck under the brand name Sabril, is the only FDA-approved GABA-AT inhibitor for epilepsy. GABA-AT is an enzyme that degrades (reduces) GABA, the brain’s primary inhibitory neurotransmitter. GABA-AT inhibitors attenuate the enzyme, thereby increasing GABA, controlling neuronal excitation, and reducing seizures.
Developed in the 1980s, vigabatrin was expected to be a successful AED for Lundbeck. However, in 1997, reports began surfacing of visual field defects caused by retinal toxicity with chronic use of vigabatrin. Retinal damage and blindness, caused by the drug’s accumulation in the eye, occurred in 25-40% of vigabatrin-treated patients. Despite the retinal toxicity, FDA approved vigabatrin in 2009, with a black box warning, for the treatment of infantile spasms and refractory focal seizures. Vigabatrin was moderately successful for Lundbeck in the U.S. Globally, it approached $1bn in peak annual sales before going generic, but because of its toxicity issues, it never achieved its expected commercial potential. Sound familiar…..
Ovid believes OV329 is 100x more potent than vigabatrin (allowing for lower dosing) with a dramatically improved safety profile, providing an attractive therapeutic window. Recently, the company presented preclinical data from what Meg Alexander, Ovid’s President and Chief Operating Officer (COO), called at her September Cantor presentation the “killer experiment,” demonstrating that, at doses well above those expected to be reached in humans, OV329 did not accumulate in the eye. Developing a next-generation drug to overcome the safety liabilities of a first-generation drug was a formula that unlocked substantial value for Xenon; could it do the same for Ovid?
Source: Ovid Corporate Presentation September 2024
“Stimulating” Data Imminent
Ovid is conducting a randomized, placebo-controlled Phase 1 study with OV329, which, in addition to safety, includes assessing TMS and Magnetic Resonance Spectroscopy (MRS). As discussed earlier, TMS will provide a pharmacodynamic readout of OV329’s ability to dampen neuroexcitation, whereas MRS will evaluate OV329’s target engagement by measuring GABA activity in the brain.
Including TMS and MRS arguably makes this Phase 1 study more like a proof-of-concept study than a traditional safety study. Recall that after Xenon reported positive TMS data from their Phase 1b healthy volunteer study, they proceeded straight into a Phase 2b 300-patient focal epilepsy study, which FDA has agreed can now be included as one of their pivotals.
Source: Ovid Corporate Presentation September 2024
Epilepsy Optionality
Assuming OV329 is safe and shows activity in the TMS and MRS experiments, Ovid should have plenty of options on where it goes for Phase 2. The obvious choice would be to pursue infantile spasms, an orphan indication where vigabatrin is effective, approved and used frequently. Another possible orphan indication Ovid could pursue is tuberous sclerosis, where vigabatrin is frequently used off-label. In their September Cantor presentation, COO Alexander mentioned possibly pursuing a Developmental and Epileptic Encephalopathy (DEE) basket study similar to Longboard’s Phase 2 approach. One last option, and arguably the most ambitious and costly, would be to follow Xenon’s strategy and pursue focal epilepsy.
So You’re Saying There’s a Chance?
The other near-term potential catalyst on our radar for Ovid surrounds Takeda’s plans for soticlestat. In March 2021, Takeda paid $196mm upfront to Ovid for the global rights to soticlestat, a first-in-class cholesterol 24-hydroxylase inhibitor for treating rare epilepsies. Takeda enrolled two pivotal studies with soticlestat, one in Lennox-Gastaut syndrome (LGS) and one in Dravet syndrome (DS). In June of this year, Takeda reported that soticlestat failed to achieve the primary endpoint in either study, but the DS data were only near miss, with soticlestat demonstrating a reduction in seizure frequency from baseline vs placebo (p-value=0.06).
Before the June data release, Takeda had guided that it would make regulatory filings for LGS and DS before its 2024 fiscal year-end, March 31, 2025. After the data, LGS was dropped from Takeda’s pipeline chart, but there still appears to be a commitment to the timing of a DS filing. On their 1Q2024 call shortly after the June data release, the company’s President of Research and Development said when discussing soticlestat, “…the totality of data from this study with meaningful effects on key secondary endpoints, combined with the highly significant results from the large Phase II study, suggest clear clinical benefits for soticlestat in Dravet patients with a differentiated safety profile. Given the large unmet medical need in Dravet, we are investigating a potential regulatory path forward.” In their 1H2024 fiscal year presentation from last week, the company continued to have soticlestat on their pipeline chart with a target regulatory filing date, as previously guided, for the end of the fiscal year. Ovid could earn up to $660mm in milestones (less a small portion for LGS) if Takeda forges ahead with soticlestat in DS. Ovid would also be entitled to royalties on commercial sales for soticlestat. As stated earlier, investors may have written off soticlestat, but we’re not sure Takeda has.
Final Thoughts
When Xenon reported positive XEN1101 TMS data in 2018, there was only lukewarm investor interest in epilepsy, and still, the stock doubled off the results. Juxtapose that to what happened a few weeks ago, when Bright Minds went up over 3,000% as a sympathy play after their epilepsy peer, Longboard, was acquired by Lundbeck for $2.6b. Bright Minds, also a Phase 1 epilepsy company, subsequently raised $35mm with prestigious biotech investors, including RA Capital and Perceptive Advisors. Suffice it to say that investor interest in epilepsy has likely never been higher. So, with investors keenly focused on epilepsy, how much upside could there be if Ovid reports good Phase 1 safety and biomarker data?