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BLPH: Zacks SCR Initiates Coverage of Bellerophon Therapeutics

08/06/2019
By Brian Marckx, CFA

NASDAQ:BLPH
NYSE:MNK

READ THE FULL BLPH RESEARCH REPORT

Brian Marckx, CFA, Senior Med-Tech Analyst with Zacks Small-Cap Research has initiated coverage of Bellerophon Therapeutics, Inc (BLPH) with a $3.25/share price target. See link for free access to the 37-page report.

SNAPSHOT
Bellerophon Therapeutics, Inc. (NASDAQ:BLPH) is a clinical development-stage medical therapeutics company focused on the development and commercialization of a novel nitric oxide therapy which, if successfully fully developed and approved for sale, will address serious and terminal chronic cardiovascular diseases with high unmet needs. The company has several mid-to-late stage clinical studies ongoing in three distinct clinical indications with multiple data readouts anticipated over the near term. These results should provide substantive additional insight into the clinical utility of the technology and related likelihood of eventual regulatory approval (via the relatively streamlined and inexpensive 505(b)(2) NDA pathway) and, as such, could represent potential value-inflection events.

INOpulse, the company’s flagship drug-device combination program, delivers (inhaled) pulsed nitric oxide to the lungs of patients suffering from diseases associated with pulmonary hypertension (PH), an uncurable condition that effects approximately 1% of the global population and for which there is great unmet need for more effective treatment options. Nitric oxide is produced by most cells in the human body including vascular endothelial cells, where it acts as a natural vasodilator (i.e. expander) of blood vessels.

Certain medical conditions such as PH are associated with reduced levels of nitric oxide and constriction of the pulmonary arteries. This can result in serious complications including a rise in blood pressure in the lungs, right ventricular failure (i.e. inability of the right heart ventricle, which is responsible for pumping blood into the lungs, to maintain sufficient blood flow through pulmonary circulation) and ultimately death. In addition to inhaled nitric oxide, current treatment for primary PH includes long-term oxygen therapy and the intravenously administered vasodilators epoprostenol (Flolan) and iloprost (Ventavis). This is in addition to a host of other available medications aimed at increasing blood oxygenation through opening and relaxing the blood vessels, stimulating production of endogenous vasodilators and enhancing blood flow.

Inhaled nitric oxide reaches the pulmonary arteries via alveoli, tiny sacs in the lungs responsible for gas exchange. The benefits of inhaled nitric oxide (iNO) as compared to other PH therapies includes a very rapid onset (which is similarly rapidly reversible) and the fact that, unlike other medications, it largely confines its vasodilator effects to the pulmonary arteries. These are important characteristics as it means iNO provides almost immediate improvement in perfusion and blood oxygenation and does so without the potential systemic risks and complications associated with (less targeted) oral and intravenously delivered medications.

Bellerophon licenses the INOpulse technology, which is protected by over 100 issued and pending patents, from Ikaria, Inc (a subsidiary of Mallinckrodt plc, (NYSE:MNK), the company’s former parent which markets the continuous-flow inhaled nitric oxide product, INOmax. INOmax, which has a current annual revenue run-rate of more than $600M, is used by hospitals for (the FDA-approved indication of) the treatment of term and near-term (> 34 weeks gestation) neonates with hypoxic respiratory failure associated with clinical or echocardiographic evidence of pulmonary hypertension, where it improves oxygenation and reduces the need for extracorporeal membrane oxygenation.

While the technology is similar, there are some important differences between the two products; INOmax delivers a continuous flow of iNO while INOpulse delivers the gas via pulsed action based on a patient’s breathing pattern, INOmax uses significantly more NO than INOpulse (which relates to the difference in delivery), INOmax is used exclusively in the hospital while INOpulse is being developed for home use (i.e. ambulatory use), INOpulse is portable and lightweight while INOmax is not, and INOmax is indicated for the short-term (up to 14 days) treatment of neonates while INOpulse is aimed at adult patients with chronic PH-related diseases. INOpulse allows for safe long-term use of inhaled nitric oxide by administering the gas in relatively small volumes of short bursts, mitigating any risk of drug-related toxicity.

Unlike prostacyclin vasodilators which provide a much more systemic (i.e. indiscriminate) effect throughout the pulmonary arteries, INOpulse delivers iNO mostly to the well-ventilated areas of the lungs. This targeted delivery provides for distinct advantages, particularly as it relates to the optimization of treatment (and, specifically, to the mitigation of related side effects) of patients with certain lung diseases in which both respiratory function is impaired and blood flow is constricted.

Treatment with systemic pulmonary vasodilators can cause ‘ventilation-perfusion mismatch’ in patients with these diseases, a potentially serious complication resulting in abnormal oxygen desaturation of the blood (i.e. hypoxemia). INOpulse avoids this ventilation-perfusion (V/Q) mismatch through targeted delivery made possible by its novel pulsed action (synchronized with a patient’s breathing rate) and the rapid inactivation of inhaled nitric oxide upon contact with hemoglobin. INOpulse’s ability to safely, effectively and significantly improve vasodilation/ventilation balance, increase blood vessel volume, decrease pulmonary arterial pressure (PAP) and increase exercise capacity in patients with highly debilitating and progressive pulmonary diseases has been demonstrated in randomized controlled clinical trials.

BLPH is pursuing three specific PH-related (potential orphan) chronic indications; PH associated with interstitial lung disease (PH-ILD) which includes PH associated with idiopathic pulmonary fibrosis (PH-IPF), PH associated with chronic obstructive pulmonary disease (PH-COPD) and PH associated with Sarcoidosis (PH-Sarc). As each of these are associated with impairment to both lung function and pulmonary vasculature and characterized by high unmet therapeutic needs and severe limitation to quality of life, they offer highly attractive commercial opportunities for BLPH and INOpulse.

While results of a Phase 3 study evaluating INOpulse in the treatment of pulmonary arterial hypertension, or PAH, (a specific subgroup of PH, the underlying causes of which have key differences than those of the PH-associated diseases that BLPH is now pursuing) was discontinued (in August 2018) due to a determination that the primary endpoint would not be met, it did provide valuable clinical (such as clinically and statistically significant improvement in NT-ProBNP, a marker of right ventricle dysfunction) and safety data, helping to reinforce the opportunity for INOpulse in diseases more likely to benefit from targeted iNO administration (such as PH-ILD, PH-COPD and PH-Sarc).

Earlier this year BLPH announced positive topline data from a Phase 2 portion (i.e. ‘Cohort 1’) of an ongoing Phase 2/3 study of INOpulse in PH-ILD. This includes a statistically significant improvement in multiple clinically meaningful activity parameters, which is particularly encouraging as the proposed Phase 3 (pivotal) study is expected to use the same measures as its primary endpoint. On August 1st BLPH announced that Cohort 2 (higher dose group) of the Phase 2 portion completed enrollment, results of which are anticipated later this year and which will inform on the optimal dose to be used in the Phase 3 study. If all goes well the Phase 3 study could begin early next year.

Meanwhile, BLPH also expects to build on statistically significant Phase 2a results in PH-COPD, which were announced in September 2017. Design of a Phase 2b (n=90) study was recently reviewed and finalized by FDA. The goal of this study, which will assess multiple endpoints including activity monitoring and oxygen saturation, is to inform design, including specifics around patient population and clinical endpoints, of a subsequent Phase 3 (pivotal?) study. BLPH anticipates commencement in 2020.

And finally, the PH-Sarc program currently consists of an ongoing Phase 2a dose-escalation study which will use right heart catheterization to assess the safety and hemodynamic effect of INOpulse. The study commenced in Q1 and could have topline results later this year.

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