The Sell-Off In Myovant Is Unjustified By Fundamentals – Seeking Alpha

Myovant Sciences (MYOV) had been a solid performer over the last few months until data related to a secondary endpoint from the HERO prostate cancer study was released at the end of September.

Figure 1: Myovant Stock Chart (source: finviz)

Since then, the stock has fallen from over $22 to around $14. The secondary endpoint at issue related to survival in the subset of patients with metastatic disease, meaning it had spread to beyond the prostate to lymph nodes or other organs. While I would have loved to have seen positive data, I viewed that data release as potential add-on upside, not as a make or break for Myovant being a long-term value. In this article, I break down the data we have to date on relugolix in prostate cancer and why the recent negative data doesn't change the overall thesis for the company.

I last published on Myovant about three months ago on August 3. In that article, I discussed how Myovant already had positive Phase 3 results in its three main indications for relugolix.

In particular, I noted how relugolix clearly outperformed the current standard of care drug, leuprolide, in prostate cancer, and I summarized the data showing a potential advantage relugolix could have over already approved elagolix in uterine fibroids.

I also talked about the dynamic of having Sumitomo as a majority owner of the company. I mentioned the balance sheet, and how I was hoping the cash burn rate would drop with several of these Phase 3 trials wrapping up. Finally, I noted that future discounted sales and earnings multiples looked extremely low for a company this close to garnering its first few approvals.

The only thing of substance that has changed since my last article is the data release on whether relugolix was more effective than leuprolide in metastatic prostate cancer patients which was a secondary endpoint in the HERO trial I previously discussed. As a refresher, leuprolide is designed to suppress testosterone levels, and testosterone is a major driver of growth of prostate cancer. Relugolix does the same thing but better at least by every measure that was released prior to September 29. On September 29, Myovant reported that relugolix performed the exact same as leuprolide in these patients with already metastatic disease.

Stated most negatively, relugolix was statistically a wash versus leuprolide in this particular subset. Thats it. There was nothing that undermined the prior data completely setting relugolix apart from leuprolide in terms of both efficacy and safety. I want to run through some of that data here because it very clearly demonstrates why relugolix should be able to rack up large - and likely even blockbuster - sales in prostate cancer alone. Quite simply, its a better mouse trap as compared to leuprolide.

The HERO Phase 3 trial showed this quite clearly because leuprolide was the active comparator in the trial, not a placebo, so the results seen are directly showing the difference between the two drugs.

Figure 2: Current Standard of Care Method of Suppressing Testosterone (source: HERO Study Results Webcast)

Leuprolide actually causes a testosterone spike before beginning to suppress it. This is because initially leuprolide stimulates a testosterone promoting pathway before the main mechanism of action kicks in. Given that testosterone is driving the cancer progression, this is obviously not ideal. Relugolix doesnt have this spike and results in quicker and more complete testosterone suppression.

Figure 3: Chart Comparing Relugolix to Leuprolide on Suppression to Castrate Levels at Day 15 (source: HERO Study Results Webcast)

Relugolix is also much faster acting. As you can see from Figure 3, after just over two weeks of treatment, virtually all patients on relugolix have suppressed levels of testosterone, but almost none have gotten to that point in the leuprolide group. The comparison looks even worse for leuprolide if you assess the proportion of patients that have actually made it to the profound levels of testosterone suppression that are thought to be ideal for treating prostate cancer. When looking at profound suppression rather than just castrate levels, only one percent of leuprolide patients have achieved the level at 15 days versus 78.4% of relugolix patients.

Figure 4: Chart Comparing Relugolix to Leuprolide on PSA Response Rate at Day 15 (source: HERO Study Results Webcast)

Relugolix also shows a much faster effect on PSA which is the standard measure of prostate cancer progression. Men on relugolix had a 4x greater PSA response rate at 15 days versus those on leuprolide. Relugolix also officially achieved statistical superiority over the entire course of treatment with an 8% higher response rate. Men taking relugolix were also demonstrated to have a quicker bounce-back in testosterone levels after cessation of therapy, with most men recovering to normal levels within 90 days versus very few showing a similar recovery on leuprolide. This is obviously important because having low testosterone comes with a plethora of undesirable side effects like low sex drive, erectile dysfunction, and even decreased memory and concentration.

Figure 5: Chart Comparing Relugolix to Leuprolide Over the Entire Course of Treatment (source: HERO Study Results Webcast)

As you can see from Figure 5, relugolix looks favorable to leuprolide at literally every point in time from the start of treatment through the post-cessation bounce-back period. I apologize if it seems like Im being a broken record, but the data released prior to September 29 is really just that one-sided.

Additionally, the safety profile is a critical difference here, too. The initial flare of testosterone levels comes with undesirable side effects. High testosterone has been linked to an increased risk of heart attacks, blood clots, and high blood pressure among other issues. Unfortunately, many of these men also already have comorbidities, so side effects are critical. Figure 6 shows just how common cardiovascular mortality is in prostate cancer patients.

Figure 6: Chart Showing Cardiovascular Mortality in Prostate Cancer Patients (source: HERO Study Results Webcast)

Because these cardiovascular risks are so significant for patients, any difference could be meaningful in adoption of relugolix. Relugolix perhaps shows its greatest difference from leuprolide in the area of adverse events, though. Patients in the relugolix treatment arm were 54% less likely to have a major cardiovascular adverse event when compared to those on leuprolide. Stated differently, more than double the percentage of men taking leuprolide would be expected to have a major cardiovascular adverse event as compared to those on relugolix.

Figure 7: Chart Showing Cardiovascular Adverse Event Comparison Between Relugolix and Leuprolide (source: HERO Study Results Webcast)

Relugolix has amply demonstrated its unique advantages over this current standard of care drug. Of course, finding a unique treatment advantage of relugolix in metastatic disease would have been even better, but the market seems to have lost sight of the fact that leuprolide has that same effect in metastatic patients and managed to sell $1.7 billion at its peak. Relugolix is better all the way around at suppressing testosterone, reducing PSA, and allowing levels of testosterone to bounce back after treatment, but the most important differentiator in my mind is the reduced cardiovascular risk. A 54% reduced risk is huge in a patient population that is already predisposed to such incidents.

Its also worth mentioning here that prostate cancer is the most common cancer in the US and an estimated 200,000 men per year need hormone suppressing therapy like leuprolide, or hopefully relugolix soon.

I couldnt write an article on Myovant without bringing up the unique situation of big pharma Sumitomo owning over 50% of the stock. On top of it being a major vote of confidence in Myovants technology, Sumitomo is providing a huge amount of support, financial and otherwise. At the end of Q2, Myovant had about $100 million in cash, but the company also had a $200 commitment in additional funding from Sumitomo, making its level of committed cash $300 million. In August, Sumitomo extended Myovant another $200 million in low-interest loan funding, bringing Myovants cash on-hand and available through loan commitments to $500 million.

Myovants cash burn rate has been high - about $260 million annualized - but this has already started to drop with the companys three major Phase 3 programs now largely wrapped up. Even if the burn rate stayed that high, which is unlikely also because product sales should start soon, Myovant would still have enough cash to get it through late 2022 before more was needed.

Sumitomo is also providing the support of one of its other portfolio companies, Sunovion. Sunovion is going to distribute relugolix post-approval as a non-exclusive distributor in prostate cancer and an exclusive distributor in the womens health indications. Lastly, lots of other institutional ownership, including Opaleye, speaks to further confidence in the opportunity. Myovant seems much more likely to be a solid value than a value trap at this point.

To wrap up, the data from the HERO trial, when viewed in its totality, strongly supports relugolix's use in prostate cancer because it demonstrates clearly that relugolix is a superior product to leuprolide in terms of both efficacy and safety. Leuprolide had $1.7 billion in peak sales, yet Myovant trades at a $1.32 billion market cap at present. Finally, Myovant has the backing from big pharma Sumitomo to be able to handle a successful product launch. All the way around, Myovant looks like a strong value at present.

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Disclosure: I am/we are long MYOV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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The Sell-Off In Myovant Is Unjustified By Fundamentals - Seeking Alpha