Reason for the update: New clinical data readout
The most recent clinical data from NewAmsterdam Pharma (NASDAQ:NAMS) has showcased the potential of obicetrapib in treating early Alzheimer’s disease (AD), specifically in patients with the apolipoprotein E4 mutation (ApoE4). Building upon the company’s previous preclinical studies and third-party genetic research, this trial explored the theory that inhibiting cholesteryl ester transfer protein (CETP) might offset the risk of ApoE4-associated Alzheimer’s disease. This is achieved by preventing the build-up of amyloid plaque in the brain through enhanced cholesterol metabolism, which, in turn, could potentially decelerate disease progression.
The design of the Phase IIa trial was meticulous, centering on understanding obicetrapib’s impact on lipid metabolism in early AD ApoE4 carriers. Key biomarkers of interest, such as 24- and 27-hydroxycholesterol, were analyzed due to their historical correlation with cognitive impairment progression. In our view, the results from the trial were highly optimistic.
Notably, there was a decrease in the levels of the aforementioned oxysterols and an increase in the Aβ42/40 ratio in the patient’s plasma, implying a positive effect on brain lipid metabolism, especially in ApoE4 patients. Moreover, the drug exhibited good safety profiles with no significant adverse events linked to the drug.
Potential of the Alzheimer’s Pipeline for NAMS
In our view, despite the prevalent view of NAMS as a cardiovascular-centric company, its recent venture into Alzheimer’s research could represent an undervalued growth avenue. Alzheimer’s remains one of the most complex neurodegenerative diseases, with limited effective treatments available. This positions obicetrapib as a potentially disruptive agent in the AD therapeutic arena, given its positive biomarker indications. We believe, if NAMS can further validate this theory with larger, placebo-controlled studies in the future, the Alzheimer’s pipeline could emerge as a vital, yet currently underappreciated, component of the company’s value proposition.
Financials: robust cash runway until 2026
With approximately $400M cash in hand (at the end of Q2 2023) and cash runway until 2026 (considering ~100-200m annual OPEX burn expected considering that the large LDL-c lowering and CVOT trial-related cash burn to slow down as we get close to the end of full enrollment), which is (in our view) a highly attractive level of runway for pre-commercial biotech with negative cashflow. That being said, we believe that balancing the investment between cardiovascular studies and potential Alzheimer’s research will be crucial, especially if the latter requires more substantial funding, as we have seen with recent AD phase 3 studies from big pharma.
Investments in NAMS are not without risks. The recent Phase IIa Alzheimer’s study was open-label and single-arm, limiting the breadth of its findings. The data interpretation can be challenging, given the small sample size and potential for wide standard deviations. Investors might be skeptical about the real-world application of the biomarker improvements until they can be linked to tangible cognitive benefits in patients.
Net-net, NewAmsterdam Pharma presents a compelling investment narrative in two attractive therapeutic areas (dyslipidemia and AD). In our view, the recent data on obicetrapib showcases its potential as a groundbreaking treatment option for early AD in ApoE4 carriers. The possibility of unveiling an efficacious AD treatment further complements NAMS’ robust cardiovascular portfolio and de-risks the investment thesis moving forward. Furthermore, we believe the company’s current valuation (EV of ~$340m) might not yet fully encapsulate the potential upside from the Alzheimer’s pipeline and the optionally of the target. With its ongoing Phase III trials, including the critical cardiovascular outcomes trial, there is an optimistic outlook for data readouts by the second half of 2024, which we believe can move the stock meaningfully higher in the billion-dollar territory (provided that the trial is positive), please read our previous article for more detailed analysis on the company’s cardiovascular pipeline. Balancing these insights with the risks, the buy rating on NAMS is maintained. It is anchored on the company’s innovative approach to both cardiovascular and Alzheimer’s treatments and the potential for transformative therapeutic solutions that could greatly benefit patients and yield significant investor returns.