NEW YORK, Nov. 15, 2021 /PRNewswire/ -- Argus Research, an independent investment research firm, has launched Equity Research Report coverage on XORTX Therapeutics Inc. (Nasdaq: XRTX)
Click Hereto view full Argus Equity Research Report.
COMPANY HIGHLIGHTS: Excerpts (as conveyed by Argus Analyst Steve Silver) include:
XRTX: Advancing Kidney Disease Therapeutics Into Late-Stage Clinical Trials
In our view, XORTX has assembled a compelling pipeline of therapeutic assets with the potential to treat progressive kidney diseases.
We expect the company to advance its two lead product candidates into Phase 3 study in 2022, and ultimately enter into strategic partnerships for their commercialization.
Subsequent to the June 30, 2021 quarter-end, XORTX completed a financing that raised approximately $12 million in gross proceeds in October 2021. The company has also received an additional $1.5 million in gross proceeds from the partial over-allotment exercise from its underwriters in connection with the October offering. We see the potential for additional proceeds from the exercise of warrants.
XORTX shares recently began trading on the Nasdaq and TSX Venture (both under ticker XRTX). We believe that the new listings will boost investor interest in the stock and help the company to raise additional capital.
Our sum-of-the-parts NPV valuation for the company's lead programs and licensing/milestone payments yields a fair value estimate of $13 per share (C$16), well above current prices near $3(C$4).
INVESTMENT THESIS excerpts (Click Hereto view full Argus Equity Research Report):
XORTX Therapeutics Inc., founded in 2012 and headquartered in Calgary, Canada, is a biopharmaceutical company with two Phase 3-ready clinical programs: XRx-008, for orphan indication autosomal-dominant polycystic kidney disease (ADPKD), and XRx-101, for acute kidney injury (AKI) associated with COVID-19. A third candidate, XRx-225, is a preclinical program for type 2 diabetic nephropathy (T2DN). XORTX's focus is on the treatment of progressive kidney diseases modulated by aberrant purine and uric acid metabolism.
XORTX's primary market of end-stage renal disease totaled $74.5 billion in 2020, according to Grandview Research, and is expected to expand at a compound annual rate of 12.7% from 2021 to 2028. The company's technology is underpinned by research on the biological and health effects of aberrant purine metabolism, and of oxypurinol, which is metabolized from allopurinol, a drug approved since 1966 for the treatment of gout. Allopurinol lowers uric acid by inhibiting xanthine oxidase, the precursor to uric acid.
Research has established a link between the progression of kidney disease and cumulative renal crystal burden. For example, nearly a quarter of ADPKD patients have a high incidence of gout and more than half have hyperuricemia (uric acid levels above the normal range). The prevalence of kidney stones in ADPKD patients is also many times higher than in the general population. Crystal deposition and accelerating ADPKD progression also have been linked. As such, XORTX believes that reducing renal crystal formation will slow the progression of ADPKD and other kidney indications, and stabilize kidney health. XORTX has developed a clinical plan for late-stage clinical studies and is now executing on this plan.
XORTX's pipeline is based on a proprietary technology platform, which modifies oxypurinol to increase its solubility and bioavailability to optimal levels based on the intended indication. It expects this process to reduce the side effects of oxypurinol, allowing it to be taken orally and used for chronic conditions. XORTX plans to repurpose second-generation combination drugs that use oxypurinol as the starting ingredient for the treatment of other diseases that are marked by aberrant purine metabolism and elevated serum uric acid levels, including pre-diabetes, insulin resistance, metabolic syndrome, diabetes, diabetic nephropathy, infections, and fatty liver disease.
To date, Phase 1 and Phase 2 clinical trials administering oxypurinol have been conducted in more than 700 individuals, with patients showing reduced rates of rash and liver enzyme elevation on oxypurinol compared to allopurinol. XORTX's drug delivery technology includes novel, proprietary formulations designed to enhance bioavailability and protect the kidneys. This approach to formulation has broad patent claims and recently was granted a patent in Europe with coverage through at least 2034. (We note that the team responsible for oxypurinol's development includes Dr. Richard Johnson, a leading kidney researcher who is also a member of XORTX's clinical advisory board.)
We are encouraged by XORTX's repurposing strategy, as we believe that focusing on well understood and previously studied compounds such as oxypurinol will result in accelerated drug development, lower development costs, and lower risk compared to the development of drugs based on new compounds. Oxypurinol has established a solid efficacy profile and has been through a full clinical development process in the U.S. Although oxypurinol has not been approved globally, despite being developed substantially as a replacement therapy for individuals with "allopurinol-intolerant gout," we think that its profile and the unmet need in its target markets bode well for its approval following confirmation in Phase 3 study.
Further, we think that targeting orphan indications, such as ADPKD, can provide economic incentives, including marketing exclusivity and the potential for higher revenue and margins.
XORTX's most advanced development program is XRx-008, a potential first-in-class therapy for autosomal-dominant polycystic kidney disease (ADPKD). ADPKD is estimated to affect at least one in every 1000 individuals worldwide, making it the most common inherited kidney disorder. Given the estimated 140,000 patients in the U.S., and the more than 50% of these patients likely to face end-stage kidney disease and require dialysis or transplantation, we see ADPKD as one of the larger orphan indications (i.e., indications with less than 200,000 patients in the U.S.), but one that represents an area of unmet medical need. According to a 2020 study from BMC Health Services Research, total annual costs attributed to ADPKD in 2018 were as high as $9.6 billion, equivalent to up to $68,000 per patient. Once dialysis is initiated, costs are estimated to be approximately $90,000 per individual, annually.
To date, only one drug has been approved for the treatment of ADPKD. Tolvaptan, marketed by Otsuka Pharma as Jynarque/Jinarc, is approved globally for the treatment of low sodium in the blood (hyponatremia) as well as for kidney function decline in adults at risk of rapidly progressing ADPKD. Other treatments are often prescribed for symptom management, including hypertension, kidney infections, gout, kidney stones, and pain.
In 2020, sales of Jynarque were approximately $620 million, reflecting its high annual cost of $156,000 per patient; only 5,000 patients have been treated with the drug. We attribute this low usage to the drug's black box warning for serious drug-induced liver injury, requiring extensive liver function monitoring under a risk evaluation and mitigation strategy program — a condition of FDA approval — as well as to its poor tolerability profile. In its U.S. Phase 3 trial, 23% of enrolled patients dropped out due to side effects. We estimate that more than 75% of ADPKD patients do not qualify for Jynarque prescriptions on medical grounds, or are unable to tolerate the drug once it is prescribed. As such, we see underlying demand for new treatments representing a global market opportunity well above $1 billion annually, and expect significant market expansion over time.
There are currently several clinical candidates for the treatment of ADPKD, including lixivaptan (Centessa), bardoxolone (Reata) and venglustat (Sanofi), all in Phase 3 study. However, we note that bardoxolone's Phase 2 results raised safety concerns, including cardiac disease risk, increased liver enzyme levels, reduced levels of magnesium, and increased muscle cramps. Also, venglustat recently saw its pivotal study halted due to futility at an interim analysis. While other newer drugs, such as PDE4 enzyme activators, have shown promise, both as standalone treatments or in combination with Tolvaptan, they remain in the early stages of development.
XORTX's primary goal for XRx-008 is to inhibit xanthine oxidase and reduce elevated uric acid in order to treat ADPKD. Research has shown strong correlations (i.e., statistically significant p-values) between uric acid levels/estimated glomerular filtration rate (eGFR) and endothelial dysfunction. The XRx-008 development program is designed to show that XRx-008 can slow the decline in renal function typically seen in ADPKD patients while avoiding the liver safety issues associated with Jynarque. Having recently completed a stock offering that raised approximately $12 million in gross proceeds, with potential for additional proceeds from warrant exercises, XORTX appears to have sufficient resources for the timely completion of manufacturing for XRx-008, and to conduct a pivotal trial of the drug as a treatment for ADPKD. This work will use a majority of the offering proceeds.
We expect XORTX to maintain rights to the XRx-008 program until later in the trial in order to maximize downstream economics, but eventually to out-license the drug for commercialization. We expect significant interest in XRx-008 given the favorable market opportunity provided by the orphan-drug indication, the current competitive landscape for ADPKD treatments, and the biology underpinning XORTX's approach. We also think that securing special protocol assessment (SPA) status for the trial could further accelerate the study timeline, increase the probability of success, and boost interest among prospective partners.
XORTX's second unique formulation based on oxypurinol is XRx-101, for the treatment of acute kidney injury (AKI), including AKI in patients with COVID-19. Recent published data suggest that a high number of patients hospitalized with COVID-19 enter the hospital with evidence of acute kidney injury and high uric acid levels (hyperuricemia). The data further suggest that COVID patients with high uric acid levels have greater risk of acute kidney and acute heart injury and potentially increased risk of sepsis. Two studies undertaken to date, in mouse influenza models and herpes infection, suggest that XRx-101 can inhibit xanthine oxidase and prevent uric acid from reaching levels that could trigger acute organ injury.
While COVID-19 represents a near-term application for XRx-101 as a front-line treatment for cases requiring hospitalization, AKI impacts more than three million people annually in the U.S., Europe and Japan, and carries a high mortality rate, particularly among patients requiring critical care. The CDC estimates direct healthcare costs related to AKI of more than $10 billion annually in the U.S. There are no approved drugs for AKI associated with respiratory viral infections, and current treatments focus on managing nutrition and using off-label medicines to regulate blood phosphorus and potassium levels in the blood. Continued accumulation of these metabolites typically leads to kidney failure and dialysis.
XORTX expects to initiate a late-stage XRx-101 study in 2022. The company is planning a bridging pharmacokinetic study and forming partnerships with academic clinical trial centers to support development of this program. This should allow for rapid enrollment in a proof-of-concept Phase 2/3 study. As in the case of XRx-008 for ADPKD, we expect XORTX to retain rights to XRx-101 until later in its development but ultimately to license the drug to a partner for commercialization.
Over the long term, we think that XORTX is well positioned to use its expertise with xanthine oxidase inhibitors to develop a pipeline of treatments for progressive kidney diseases. A third program, in the preclinical stage of development, is XRx-225 for type 2 diabetic nephropathy. This condition is a leading cause of kidney disease in patients starting renal replacement therapy that can affect up to 40% of type 1 and type 2 diabetic patients. We expect additional compounds to emerge from its platform. If the company successfully develops its current product candidates, we expect it to expand its R&D capabilities to focus on new drug discovery. We note that only a small portion of the proceeds from the October 2021 stock offering were used for early-stage R&D.
We have a positive view of the company's June 2020 partnership with the Icahn School of Medicine at Mount Sinai in New York, which is studying the incidence of acute kidney injury and hyperuricemia in patients hospitalized with COVID-19. The partnership's study of patients hospitalized due to COVID-19 between March 31 and December 31, 2020 established that high serum uric acid levels were associated with major adverse kidney events, as well as with multi-organ injury, including cardiac injury. Importantly, hyperuricemia was also associated with higher procalcitonin and troponin levels, which are often makers for sepsis and heart injury, respectively. XORTX has filed provisional patent applications for these indications, which could expand its potential market over time. Further, we believe that access to Mount Sinai's world-class infrastructure will enable XORTX to more efficiently identify patients and establish appropriate dosing protocols for future clinical trials.
The company has also formed a clinical advisory board that includes prominent nephrologists and cardiologists. We believe the presence of cardiologists is important, as regulators have in the past noted safety issues with oxypurinol in cardiovascular settings. We also think the board benefits from the presence of academic leaders in polycystic kidney disease and acute kidney injury and its biomarkers, specifically. As noted above, these specialists include Dr. Richard Johnson, a renowned expert on the mechanism of injury associated with aberrant purine metabolism and hyperuricemia in the kidney.
To date, XORTX has been granted three patents in the U.S., with four pending, and two in Europe. The patents broadly cover the use of uric-acid-lowering agents in various patient settings. We expect XORTX to continue to build its IP portfolio in the U.S. and Europe, in particular for the treatment of ADPKD and AKI in patients both with and without COVID. We also expect the company to pursue similar strategies in Japan and other markets. We expect XORTX to obtain an orphan-drug designation for its lead product candidate XRx-008, which would provide marketing exclusivity and tax credits for clinical trials.
Headquartered in Calgary, Canada, XORTX Therapeutics Inc. is a clinical-stage biotechnology company focused on the treatment of chronic kidney disease, including autosomal-dominant polycystic kidney disease (ADPKD), acute kidney injury (AKI) related to COVID-19, and type 2 diabetic nephropathy. The company's drugs target aberrant purine metabolism and xanthine oxidase in order to decrease or inhibit a mechanism of injury that includes overproduction of uric acid.
Headquartered in NYC, Argus Research (www.argusresearch.com) is a leading independent equity research firm (est. 1934) ̶ providing fundamental and quantitative research coverage on more than 1,600 companies across all 11 sectors of the S&P 500, as well as macroeconomic and equity market forecasts, thematic research, model portfolios and pre-IPO research. In addition, Argus has recently committed to providing a sponsored research solution for small & mid-cap companies seeking coverage. Argus's Equity Research/earnings estimates are available on major research / earnings estimate aggregator platforms, including Bloomberg, Thomson Reuters, Factset and S&P Global.
Argus Research Co. has received a flat fee from the company discussed in this report as part of a Sponsored Research agreement between Argus and the company. No part of Argus Research's compensation is directly or indirectly related to the content of this assessment or to other opinions expressed in this report. Please refer to the full Argus report and the disclaimer for complete disclosures.