Seeking Alpha published the below article 5 days ago. Since than Pliant is down 27%.
According to Pareto analyst Dan Akschuti:
Vicore seems to be the game-changing drug for IPF. It is the first IPF drug that turns a deadly disease into a survivable one.
VIcore has much stronger results than Pliant does. Despite that Pliant traded at 12 times higher valuation that Vicore. We might be seeing reverasal. Pliant is down 27% in last week. Vicore up should be next. Due to the rotation and due to very strong catalyst in next three weeks for Vicore.
Our family office is long Vicore.
We publish the whole SeekingAlpha article below:
Pliant Therapeutics: Bad Risk Reward, Buy Vicore Pharma Instead
Summary
- Pliant Therapeutics is a USD 1.8 bn US based clinical-stage bio-pharmaceutical company developing new treatments for idiopathic pulmonary fibrosis (IPF).
- Pliant reminds us of Belgian biotech Galapagos N.V., which first posted promising (at first glance) 12-week data but later had to terminate the program, losing over USD 3 bn in market capitalization.
- There are serious questions every investor should ask Pliant.
- Vicore Pharma has one IPF product and is at similar stage as Pliant. Vicore is trading at a 12 times lower valuation while having significantly stronger data than Pliant.
- We are short Pliant and long Vicore.
Pliant Therapeutics (NASDAQ:PLRX) is a US-based USD 1.8 billion market capitalization clinical-stage biopharmaceutical company developing new treatments for idiopathic pulmonary fibrosis (IPF) diseases.
IPF is a complex disease, and few available treatments for fibrosis exist today. Pliant indicates that its groundbreaking treatment may be game-changing. That is what´s behind its USD 1.8 billion market capitalization.
Pliant has been quite effective in marketing. In February 2022, Life Science Leader magazine ran a story on Pliant and its CEO. I would like to cut one quote from the article, which the author chose to emphasize in the box:
“Be strategic when disclosing data” quote could be taken in several ways. In my view, it is quite a strange quote from a pharma CEO. We believe it may be very symbolic for Pliant´s data readout.
Pareto Securities, a leading Scandinavian broker, Published on 17 March 2023 an analysis of Pliant’s latest readout. The quote below, in my view, may well represent the whole research piece:
The data looks positive at first glance as the placebo group looks to perform worse than treatment groups. However, having looked a bit closer at it, we conclude that Pliant’s 12-week data is inconclusive and with that we see a significant risk going forward….
What may be wrong with Pliant?
There may be three issues with Pliant´s data:
- Inconsistent results across dosage
- Irregularities in Pliant´s placebo population
- Decline in the effectiveness of the 320 mg lead dose
Inconsistent results across dosage
A key indicator if a drug is active or not is an assessment of its response to a dose increase. Generally, a higher dose should lead to a stronger effect until a plateau is reached (often capped due to toxicity). In Pliant´s case, there seems to be no dose response at the 12-week ending values:
- Placebo shows forced vital capacity (FVC) decline (-110.7)
- 40 mg shows FVC decline (-46.0)
- 80 mg shows an FVC increase (+25.7)
- 160 mg shows an FVC decrease (-25.6)
- 320 mg shows an FVC increase again (+29.5)
A decline in Pliant’s placebo population
Pliant compares the results of its medication with the results of its placebo clients. Pliant´s sample of placebo clients is not really placebo – 80% of the placebo clients were treated on Standard of Care (treatment that is accepted by medical experts as a proper treatment for a certain type of disease and that is widely used by healthcare professionals).
There are three completed studies on drugs on the market. These studies used real placebo (wholly untreated clients) comparisons. As 80% of Pliant´s placebo clients were treated on Standard of Care, Pliant´s placebo sample clients should show a smaller deterioration than placebo clients from the three samples.
My understanding of Pliant´s placebo clients shows the opposite. Pliant´s placebo clients seemed to decline at a rate around four times as fast as that of 1600 wholly untreated patients (from three completed studies of drugs on the market). If that understanding is right, then it is quite a worrying sign.
Data of the 320 mg lead dose
The 12-week study shows a strong positive effect in weeks 0-4, which is followed by a decline in weeks 4-12. The decline is the same as with the placebo clients indicating that the drug works only in weeks 0-4 and then is the same as the placebo.
I enclose a graph from the Pareto research that illustrates the above.
Unconvincing response from the company
I sent the issues raised in the Pareto research and summarized above to the company. The key part of their response was:
(this is) … mistake made by many other investors and analysts in trying to think about this as a linear calculation when backing out the placebos. As you may recall, this was a Mixed Models for Repeated Measures (MMRM) analysis that we implemented. In addition, they did not remove the outlier that appeared in the 40mg cohort (as part of the July 2022 dataset) that was identified as part of the placebo pool in conjunction with the 320mg data announcement and subsequently removed….
I wrote back asking for a detailed response to each of the points I summarize above. I got no reply to that.
Even if you accept that “the placebo decline is similar to what Boehringer Ingelheim saw in their trial”, due to Pliant´s use of Mixed Models for Repeated Measures and due to removing of outliers, you still have the issues of inconsistent results across the dosages and the positive effect of the drug only in the first four weeks with subsequent declines in line with placebo. The company did not provide any response to these points.
The above issues were covered in the Pareto research. I would have expected the company to be ready to address each of the points. I was surprised they did not. I tried twice.
I want to stress that the data may be too inconclusive to conclude that the drug is not actually doing something good. 12 weeks might simply be too short. I just note that the above are issues that concern me. And they should concern other investors too.
The Pliant share price has been rising sharply despite rumours of another capital raise. In my view, there is a significant downside risk in the stock price.
At the same time, these situations are hard to short. The pliant share price has positive momentum. We are short Pliant through long maturity deep out-of-the-money put options. Our position is small.
Introduction to Vicore Pharma
Vicore Pharma (STO:VICO) is a Sweden-based and Stockholm stock exchange-listed company with a market capitalization of 1.6 billion SEK ($160 million)
Pliant and Vicore are both focused on one IPF drug, and both are in a broadly similar stage of testing. In my view, Vicore Pharma has much stronger results. Despite that, Pliant is trading at a 12 times higher valuation than Pliant.
Vicore Pharma released the latest test results in November 2022:
After 12 weeks of treatment with C21
- Placebo – shows forced vital capacity (FVC) decline (-80)
- c21 patients – shows an FVC increase (+28)
After 24 weeks of treatment with C21
- Placebo shows an FVC decline (-120)
- c21 patients – shows an FVC increase (+213)
At 36 weeks of treatment with C21, shows an FVC increase (+633).
The company provided the below illustration of the results:
I understand no other drug has shown a profile like this in IPF.
Do compare the Vicore and Pliant graphs. The difference is significant. While in Pliant´s case, you see a positive result for the first four weeks followed by a decline. In Vicore’s case, you see a stabilization already in week 6. After week 18, you see a material improvement in lung function.
Vicore seems to be the game-changing drug for IPF. It is the first IPF drug that turns a deadly disease into a survivable one.
As mentioned above, Pliant´s trading at 12 times higher valuation vs a drug with much stronger results does not make sense.
Vicore shares trade in Stockholm. Investors can buy through brokers or online trading platforms. For example, Interactive brokers allows trading in Vicore.
Vicore valuation
There are two analyst covering Vicore:
- Pareto securities has a price target of 97 SEK per share, and
- DNB has a price target of 98 SEK per share.
Both price targets represent a 5x multiple vs the current share price of 20 SEK.
In my view, the upside may be very significant. There are two drugs on the market which sold more than USD 3.5 billion in 2021. Both drugs have incomparable results in comparison with Vicore. The USD 3.5 billion price tag represents a 35x multiple from the current share price.
If the readouts continue to produce such strong results, Vicore will be taken over by a major. The only question is how high of a price compared to the current price. Our target for Vicore is to make at least a 100% return.
It makes no sense that Vicore would trade at 1/12 of Pliant. The main reason is Vicore is listed in Sweden and off the radar screens of most investors. This may change soon – see below.
What is next – catalysts
Both companies will present the next readout during 2Q23.
Pliant’s next 24-week readout is expected within Q2 2023.
Vicore issued a press release that they will announce the next phase readout at the American Thoracic Society International Congress on May 21st in Washington, DC. This is a very bullish indicator for the stock. This is the biggest and most important event for the IPF. The fact that Vicore chose to announce the results there indicates that they are very bullish on the readout. You would not want to publish results in the most important event unless you have high confidence you can impress the industry. This is a very bullish indicator for Vicore. Not only does it give us confidence in the next readout, but it will also put Vicore on the screens of US investors. It could be a game-changing event for Vicore.
Conclusion
We believe there is a material downside risk for Pliant. The next readout may clarify the above issues. Or it may not. Given this uncertainty, its USD 1.8 billion valuation seems just too high to justify.
Vicore seems to be the game-changing drug for IPF. It is the first IPF drug that turns a deadly disease into a survivable one. The fact it is off the radar screens of US investors creates a great opportunity. The May 21 presentation at the most important IPF event could be a game-changing moment for Vicore.
We are short Pliant through options and long Vicore.
Link to the article:
Disclosure:
The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.
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