Nile Therapeutics Heart Drug Passes Phase 2 - Analyst Blog

Written By, Jason Napodano, CFA

This morning, Nile Therapeutics (NLTX) announced that its lead compound, CD-NP, successfully completed a phase 2a study in patients with acute decompensated heart failure (ADHF) and mild to moderate renal insufficiency.

As a reminder, in July 2010, Nile Therapeutics announced it had completed enrollment in this phase 2a program at 77 patients. The trial, NIL-CDNP-CT005, was an open-label, single-blind, placebo-controlled study designed to assess the safety and tolerability of 4 doses of CD-NP (1.25, 2.5, 3.75, and 5.0ng/kg/min) when infused for up to 72 hours in patients with acute decompensated heart failure (ADHF) and mild to moderate renal insufficiency. Patients were followed for 30 days after infusion. The trial enrolled patients in the U.S. (~1/3rd), and Israel and Germany (~2/3rds).

The goal of the program was to characterize the dose-response and risk of hypotension. Based on the data, CD-NP infusion at 1.25, 2.5 and 3.75 ng/kg/min appeared to be well tolerated. A dose-dependent effect on blood pressure was observed, with minimal or mild blood pressure reduction at 1.25 and 2.5 ng/kg/min, and moderate blood pressure reduction at 3.75 ng/kg/min. Dose escalation was limited by significant blood pressure reduction at 5 ng/kg/min.

Secondary efficacy endpoints were also evaluated during the trial. The data show favorable effects of CD-NP on renal function, particularly at the 1.25 and 2.5 ng/kg/min doses, with respect to preservation or enhancement of renal function compared to placebo, as evidenced by favorable trends in several biomarkers correlated with kidney function, including creatinine and cystatin-c. However, given the small size of the trial at only 77 patients, we do not expect these results to be statistically significant.

Management may make additional data available early next year; however, we expect the full analysis to be presented at the American College of Cardiology (ACC) meeting in April 2011. The next steps for Nile is to finalize the design of a double-blind, placebo controlled phase 2b study and to discuss that trial design with the FDA and other regulatory authorities. Management's goal is to have this discussion with the U.S. FDA in early 2011.

We expect this program to test 2 doses of CD-NP and enroll roughly 300-400 patients, with endpoints to include relief of symptomatic dyspnea, as well as analysis of biomarkers for kidney function and ischemia, as well as safety assessments including risk of hypotension, renal function, cardiovascular events, and mortality.

Significant Opportunity

We see a significant market opportunity for CD-NP. There are an estimated 1.2 million hospitalizations each year in the U.S. with the primary admission cause of acute decompensated heart failure (ADHF). Nearly three-quarters of these patients also have stage II or stage III chronic kidney disease (CKD). The majority (~75%) present with a systolic blood pressure (SBP) above 120 mmHg and would be eligible for treatment with a vasodilator.

A product specifically indicated for the treatment of patients with ADHF with mild to moderate CKD, which is safe to use on top of Lasix, could have significant sales potential. This would be a key differentiator for Nile's drug versus J&J's Natrecor.

We estimate the cost of this planned phase 2b program is estimated to be between $15 and $20 million. Our expectation is that management will look to secure funding during the first half of 2011 around the presentation of the phase 2a data at ACC.

One potential outcome is a partnership for CD-NP with takeover potential upon successful completion of the phase 2b program. We think if CD-NP can demonstrate effectiveness in this trial, Nile can fetch $300 million on a takeover in 2012. In the meantime, we are looking at an upfront payment to fund the program in 2011.

What is clear to us is that with a market capitalization of only $25 million, Nile Therapeutics shares are bafflingly under-valued. We believe the company is worth at least $80 to 100 million. Taking the mid-range at $90 million, and then backing out the $20 million most likely required to fund the phase IIb program, we arrive at a value of $70 million for Nile Therapeutics. This equates to a price of $2 per share.

NILE THERAPEUTC (NLTX

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NILE THERAPEUTC (NLTX

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