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2019-10-11 03:21:26

ESSA Pharma Inc. (NASDAQ:EPIX) [TSX-V: EPI] is a Canadian/U.S. pre-clinical stage pharmaceutical company focused on the development of novel treatments of prostate cancer in patients whose disease is progressing despite treatment with current therapies, including abiraterone and enzalutamide.

On September 27th, I had a chance to meet with ESSA's CEO Dr. David Parkinson, MD, EVP & COO Peter Virsik, and CFO David Wood.

I was impressed with ESSA's story.

In the article below, the slides referenced are all taken from ESSA's presentation at Ladenburg Thalmann on September 24, 2019. The slides and webcast are currently available on ESSA's website at www.essapharmac.com

For a micro-cap biotech company, ESSA has a highly accomplished and experienced management team.

Dr. David Parkinson, MD, President & CEO* of ESSA Pharma Inc. since January 2016, and as a Director of the company since June 2015. Prior to joining ESSA, he had been a Venture Partner at New Enterprise Associates, Inc. From 2007 until 2012, Dr. Parkinson served as President and CEO of Nodality, Inc., a biotechnology company focused on the biological characterization of signaling pathways in patients with malignancy. Until October 2007, he was SVP, Oncology Research and Development at Biogen Idec, where he oversaw all oncology discovery research efforts and the development of the oncology pipeline. Previously, he had served as VP, Oncology Development, at Amgen and VP, Global Clinical Oncology Development, at Novartis. In those roles, he oversaw the successful clinical development of a series of cancer therapeutics, including Gleevec, Zometa, Femara, and Vectibix. Dr. Parkinson worked at the National Cancer Institute from 1990 to 1997, serving as Chief of the Investigational Drug Branch and then as Acting Associate Director of the Cancer Therapy Evaluation Program (CTEP). He is a past Chairman of the Food & Drug Administration (FDA) Biologics Advisory Committee, a past member of the FDA Science Board, and is a recipient of the FDA's Cody Medal. He is a past editor of the Journal of Immunotherapy and past president of the Society of Biological Therapy. He has served on the National Cancer Policy Forum of the Institute of Medicine and is a past co-chair of the Cancer Steering Committee of the NIH Foundation Biomarkers Consortium. A past Board Director of the Ontario Institute for Cancer Research, he currently serves as a Board Director for the Multiple Myeloma Research Foundation. He served as Chairperson of the American Association of Cancer Research (AACR) Finance and Audit Committee for 15 years and is a previous elected Board Director of AACR. Dr. Parkinson was a Director of Facet Biotech, Inc., until the acquisition by Abbott Pharmaceuticals, and was a Director of Ambit Biosciences until the acquisition by Daiichi Sankyo. He was also previously a Director at Threshold Pharmaceuticals and Cerulean Pharmaceuticals. He currently serves as Director on the Boards of Tocagen Inc., 3SBio Inc., CTI Biopharma, Inc., and is a Co-Founder and Director of Refuge Biotech, Inc. He has held academic positions both at Tufts and at the University of Texas MD Anderson Cancer Center, and has authored over 100 peer-reviewed publications.

*Above biography of Dr. Parkinson taken from ESSA's website

For more details on the background of the other members of ESSA's management team, I refer you to the foregoing link.

Share PriceData by YChartsData by YChartsCorporate Summary (All dollar figures are in $US unless otherwise stated)

Symbol: (EPIX); [TSXV: EPI-V $Cdn]

Outstanding shares: 32.7 million

Warrants: approx. 500,000 @$35.36

Options: approx. 1.1 million @$4.59

Share price: EPIX: $3.10 close on Tuesday, October 8, 2019

Market Cap: $101.37 million

Cash: $55 million

Debt Principal: $3.4 million with Silicon Valley Bank

Cash sufficient until 2023 (according to ESSA)

Head office in Vancouver, British Columbia with additional offices in Houston, Texas and South San Francisco, California.

Top Shareholders: 80% of shares outstanding held by their top shareholders which include Soleus Capital, Biotechnology Value Fund, RA Capital, Blackstone Group, Omega Fund, Eventide Asset Management, and Orbimed.

Background on Prostate Cancer

According to the American Cancer Society, prostate cancer is the second most diagnosed cancer among men, with 165,000 men diagnosed in the U.S. each year; 29,000 die from the disease. About 1/3 of men treated for local prostate cancer end up with recurrent or advanced disease. Patients with advanced disease often undergo androgen ablation therapy using analogs of luteinizing hormone-releasing hormone or surgical castration, referred to as androgen deprivation therapy or ADT .

Most advanced prostate cancer patients initially respond to androgen deprivation therapy. However, many experience a recurrence in tumor growth despite the reduction in testosterone to castrate levels; at that point, they are considered suffering from castration-resistant prostate cancer or CRPC .

Following a diagnosis of CRPC, patients are generally treated with anti-androgen therapies that either inhibit androgen synthesis or block the binding of androgens to the androgen receptor. One significant problem is that, over time, the prostate cancer becomes resistant to anti-androgen therapies and the cancer returns.

Current Anti-Androgen Therapies

The two most common anti-androgen therapies on the market today are:

(1) Zytiga (abiraterone acetate), which inhibits androgen synthesis, owned by Janssen Biotech (in turn owned by Johnson & Johnson; and

(2) Xtandi (enzalutamide), which blocks androgen binding, owned by Pfizer (PFE) and Astellas (ALPMF).

Two newer anti-androgens include Erleada (apalutamide) from Johnson & Johnson (JNJ), and Nubeq (darolutamide) from Bayer (OTCPK:BAYZF). While writing this article, fellow SA contributor Terry Chrisomalis came out with an article on Johnson & Johnson's Erleada, Johnson & Johnson's Nod For Prostate Cancer Drug May Offer Hope To Specific Patients , which is worthwhile reading.

Together, the current market leaders Zytiga (abiraterone acetate) and Xtandi (enzalutamide) generated over $6 billion in annual sales in 2018, with Xtandi generating $3 billion in annual sales alone.

In January 2018, the U.S. Patent Trial and Appeal Board invalidated Janssen's Zytiga's 2027 patent after an inter partes review ( IPR ) challenge from Argentum Pharmaceuticals. Janssen's appeal was dismissed for reasons set out in the May 14, 2019, decision by the US Court of Appeals for the Federal Circuit. Johnson & Johnson is hoping that its next-generation Erleada will help replace Zytiga's sales now that patent protection has been lost and a generic version has now entered the market.

ESSA's Novel Approach

According to ESSA, the current anti-androgen therapies on the market target the C-Terminal portion of the Androgen Receptor Ligand-binding domain, which contains some anti-androgen resistance mechanisms.

The C-Terminal is on the right-hand side of the cartoon diagram below of the Androgen Receptor.

See slide #6 below from ESSA's September 24th Ladenburg presentation.

In a novel approach, ESSA targets the other end of the Androgen Receptor referred to as the N-terminal domain (seen on the left-hand side of the above cartoon diagram).

CEO Dr. Parkinson explained that a couple of scientists from the University of British Columbia and the BC Cancer Agency serendipitously discovered the mechanism of action of the N-terminal when they discovered an extract from a marine sponge found in a harbor that shut down the androgen biology. It was later found that the chemical was actually a chemical pollutant in the harbor absorbed by the sponge. This led to the discovery of an Aniten (ESSA'a first-generation EPI-506) which targeted the N-terminal of the Androgen Receptor (a novel approach to the existing mechanisms of action).

The first generation Aniten drug ESSA brought into Phase 1 clinical trial (EPI-506) was tested in patients with CRPC. While the Phase 1 data with EPI-506 demonstrated signs of anti-tumor activity with lower PSA numbers, there were limitations with the drug, including lack of potency, a very short 1/2 life, stability issues and side effects related to the drug formulation when given to patients at high doses. Despite initial positive Phase 1 clinical results, ESSA decided to abandon EPI-506 and begin looking for a more effective Aniten compound with higher potency, a longer half-life, higher levels of on-target specificity, ease of manufacturing and commercial formulation.

EPI-7386: Next Generation Aniten (Planned IND filing in Q1 2020 with Phase 1a/1b clinical trial beginning shortly thereafter Q1 2020)

ESSA examined more than 400 potential new compounds before selecting EPI-7386 as its Next Generation Aniten and as its IND candidate to be filed in Q1 2020 with the FDA, with anticipated Phase 1a/1b clinical trials to begin in or about the end of Q1 2020.

The characteristics of Next-Generation Aniten EPI-7386 has now been tested in vitro as well as in mouse and some dog studies. The results are summarized in the slide #13 below which indicates more than 20X increased potency (compared to EPI-506), improved anti-tumor activity, a greater than 24 hour 1/2 life in humans, minimal off-target binding, manufacturing process being straightforward, minimal drug-drug interactions and strong IP coverage with patent expirations anticipated to be 2038 or later.

The potential patent life expiration of ESSA's EPI-7386 into 2038 or later may be of particular importance given that Pfizer/Astellas' Xtandi patents expire in 2027.

The potential combination of EPI-7386 with either Zytiga (an androgen synthesis inhibitor), or Xtandi or other similar anti-androgen drugs may itself be patentable such that it could potentially extend the effective patent life of one or more these anti-androgen drugs; that would make EPI-7386, if eventually clinically validated, a very valuable potential asset indeed!

Given that EPI-7386 is a next-generation Aniten, being a more effective, more targeted, longer-lasting and more stable version of ESSA's first-generation Aniten EPI-506 which has already demonstrated proof of concept efficacy in the treatment of refractory prostate cancer patients in Phase 1 clinical trials (but halted due to poor drug stability and a short 1/2 life), EPI-7386 may be considered somewhat a more de-risked drug.

In pre-clinical studies, EPI-7386 exhibits similar anti-tumor activity to Xtandi (Enzalutamide) ( ENZ ) even where the pre-clinical studies compared EPI-7386 with ENZ dosed at levels twice as high as normally given to humans, and comparing dosing of EPI-7386 at 1/2 of the exposure of ENZ.

See ESSA's slide #17 below.

There were some very encouraging pre-clinical data when EPI-7386 was used in an even longer time frame of 52 days in dosing mice. At a point where ENZ was quickly losing its effectiveness, EPI-7386 kept its anti-tumor effect. Even more interesting was the anti-tumor data which came from combining both EPI-7386 and ENZ.

See ESSA's slide #18 and the waterfall data contained in slide #19 below.

Slide #19 above demonstrates (at least pre-clinically) not only the improved anti-tumor effect at Day 41 but the important anti-tumor effect in the Combo of ENZ and EPI-7386.

ESSA Present Pre-Clinical Data at ESMO on September 28, 2019

ESSA presented its preclinical data on EPI-7386 at the European Society for Medical Oncology ( ESMO ) on September 28, 2019, in an oral poster presentation titled found at the link, EPI-7386 is a novel N-terminal domain androgen receptor inhibitor for the treatment of prostate cancer .

According to its September 28th press release, the poster presented ESMO shows that EPI-7386 demonstrates:

• Activity in multiple in vitro full-length androgen receptor (AR) and AR-V7 splice variant driven cellular models.

• Robust antitumor activity as a single agent and in combination with enzalutamide in the VCaP xenograft prostate cancer model.

• Antitumor activity in enzalutamide-resistant prostate cancer xenograft models, 22Rv1 and LNCaP95, with no antitumor activity, as expected, in a non-functional androgen receptor PC-3 prostate cancer xenograft model.

• Wide therapeutic index as demonstrated by a broad dose-response in the VCaP model.

• High plasma exposures in animal studies using a new suspension formulation.

Clinical Development Strategy for EPI-7386

The company plans to file an IND and initiate Phase 1 clinical trials in various U.S. sites for EPI-7386 in Q1 2020 in patients progressing on current anti-androgens such as Xtandi. The company believes there is also an opportunity for early Phase 1 combination trials with anti-androgens therapies. I expect that Janssen and Pfizer/Astellas will be closely monitoring ESSA's clinical trial progress.

Initial Market Opportunity for EPI-7386

According to the company, the total market size in the U.S. and Europe for prostate cancer patients with mCRPC progressing on second-generation anti-androgens (such as Xtandi or Zytiga) is about $3.3 billion, while the market opportunity for EPI-7386 in combination with second-generation anti-androgens in earlier CRPC or hormone-sensitive prostate cancer is several-fold larger than this initial mCRPC market.

If EPI-7386 was approved and gained a 25% market share, that would represent $800 million in annual peak sales for mCRPC progressing on second-generation anti-androgens. The potential annual sales figure for EPI-7386, if used in earlier CRPC, could be closer to $1.5 to $2 billion.

If clinical trial results are successful, EPI-7386 has the potential to become a blockbuster drug with very outsized returns for ESSA's shareholders.

Of course, given the:

potential therapeutic fit combining EPI-7386 with Xtandi or Zytiga (if pre-clinical data plays out in clinical trials); andthe potential for Janssen and/or Pfizer and Astellas to extend their patent protection for Zytiga or Xtandi by combining EPI-7386 (with its patents expiring in 2038 or later) with their own drug,

ESSA is a potential takeover target, particularly if EPI-7386's Phase 1a/1b clinical results are positive.

See ESSA's slide #21 below summarizing EPI-7386 market opportunity.

ESSA Upcoming Milestones

Q1 2020: IND filing with the FDA of EPI-7386

Q1 2020: ESSA anticipates first patient dosing in a Phase 1a mCRPC study with EPI-7386 (likely a 3 +3 dose-escalation study) to determine safety and maximum tolerated dose ( MTD ) of orally administered EPI-7386, the recommended Phase II dose (RP2D), to evaluate the PK of EPI-7386 and to measure PSA as a PD marker of response.

Phase 1b dose-expansion study to begin after MTD determined. The primary Phase 1b objective is to further evaluate the safety, tolerability, PK and preliminary anti-tumor activity of the MTD or RP2D of EPI-7386 (as measured by PSA changes over time) of EPI-7386.

Target population: second-generation anti-androgen-resistant mCRPC.

H1 2021: Phase 1a Clinical Trial Results (my own estimate)

H2 2021: Phase 1b Clinical Trial Results (my own estimate)

Analyst Coverage

David Martin, PhD of Bloom Burton - US $9.00 price target (August 28, 2019, report)

Joe Pantginis, PhD of H.C. Wainwright - US $14.00 price target (August 14, 2019, report released prior to ESSA's recent $36 million financing which closed on August 27th.)

Zacks - US $6.00 price target (August 26, 2019, report).

ESSA As a Possible M&A Target

If EPI-7386 demonstrates safety and efficacy in its Phase 1 clinical trials, ESSA will likely become an M&A takeover target especially since it is a novel approach blocking the Androgen Receptor which appears effective (in vitro) in both monotherapy, but even more so in combination with current Anti-Androgen Therapies, where it has demonstrated (preclinically) continued anti-tumor effectiveness when other Anti-Androgen Therapies are losing their effectiveness. As well, it may potentially help extend patent protection by 10 years or more for companies such as Pfizer/Astellas or Janssen for their own blockbuster Anti-Androgen Therapy drugs if used in combination with EPI-7386.

I would not be surprised to see a target share price for ESSA in an M&A takeover in the $15.00 to $20.00 range, or higher, following positive Phase 1a/1b clinical data. I am calculating that Phase 1 top-line results may become available in 2 years or less (possibly in H1 2021), assuming that Phase 1 EPI-7386 clinical trials begin in or about late Q1 2020.

Investment Risks

An investment in ESSA has numerous risks. It is an early-stage pre-clinical biotech company without any current or predictable revenues. Investment risks include, but are not limited to, the possibility of clinical trial failures, competition, IP infringements and challenges, loss of key personnel, share dilution, and general market risks.

Developing new treatments for prostate cancer is a very competitive area. Research and development are being conducted around the world by some of the world's leading companies and institutions.

For further details of the potential risks involved, see the risk factors set out in the company's most recent prospectus filed in August 2019 on SEDAR and EDGAR.

ESSA should be considered a high-risk investment. Before making an investment in ESSA, you should do your own due diligence and obtain professional advice to determine whether it is an appropriate investment for you and the sizing of such an investment.

Disclosure: I am/we are long EPIX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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