Description

Inozyme is a sub-$300mm biotech company founded in 2015 by Axel Bolte. The company clambered through several development hurdles (unreliable enrollment timelines, wavering FDA discourse, etc.) until February 2023, when the company had its first big clinical breakthrough. This was followed by the arrival of current CEO Doug Treco in March, who took the reins after leading Ra Pharma to a $2.3bn acquisition by UCB. Today, following an important FDA decision in July, Inozyme faces a whole new set of questions that underscore the company’s new clinical relevance. How long will trials take to enroll? Does the drug demonstrate a functional, sustainable benefit beyond the obvious biomarker readouts? What will doctors need to see to endorse it?

This morning, Inozyme announced a September 26^th Analyst Day to further dissect the P1/2 adult cohorts for INZY-701. Most likely, the new data will bring closure to the findings in March; this alone is likely to move the stock. However, we also anticipate some hints of functional data, particularly as the first two cohorts of patients stretch well into their second years. While we were hoping to dig in further, we decided to fast-track this idea given the movement around the announcement (INZY was up +13% as of yesterday’s close). While it may not capture the nuance we initially intended, we hope it previews a company atypically de-risked for its stage, and with far more room for upside in coming years.

Indication Overview

Inozyme predominantly focuses on a series of infant disorders with overwhelming mortality that gradually mature into less-severe chronic adolescent disorders. This creates an interesting context for development; infant trials are tough, but regulators have appreciated the unmet need and blessed the trials with considerable leeway. As proof-of-concept, Inozyme is running concurrent trials in adults and adolescents – patients with comparably lower stakes – to cite endpoints of safety and efficacy.

Inozyme intends to replace deficient ATP and PPi in patients across age groups by restoring the effect of the ENPP1 enzyme. The enzyme replacement therapy caters to three distinct yet related markets – ENPP1 deficiency and ABCC6 deficiency (each with an infant / adolescent + adult phase of their own), as well as calciphylaxis. ENPP1 and ABCC6 deficiency in infants were once grouped under the umbrella term generalized arterial calcification from infancy (GACI). Dissected, the term betrays its rootlessness; for years scientists struggled to trace the cause behind the condition, attributing it to a frightening incidence of infant mortality and some strange observation of arterial calcification (hardening of the blood vessels because of excess calcium deposits within). The question has changed today; while the roots of the disease are better understood, it is the transition between disease phases that draws questions.

ENPP1 deficiency can be split into two different groups – GACI and a condition called autosomal recessive hypophosphatemic rickets Type 2 or ARHR2:

• GACI typically occurs during the first six months of infancy; calcification results from a lack of ENPP1 enzyme, and creates a tough mineralizing layer within the blood vessel. The result is brutal – newborns are relegated to the NICU, battling successive incidents of heart failure, strokes, and hypertension in the span of days. The mortality rate in infants with GACI is ~50% including stillborn deaths and miscarriages. Current treatment paradigms cater to symptom relief – antihypertensives, anti-coagulants, etc. – and very few have improved overall survival.

Note that GACI is easily diagnosable; a combination of low ENPP1 levels via genetic testing (Inozyme partnered with Prevention Genetics to provide free, cheap screening to prospective patients) and clear mineralization on ultrasounds tend to be the earliest signs.

• ARHR2 is a breed of rickets found in patients between one and thirteen years of age. Rickets, broadly speaking, is not life-threatening. After the first six months infant survival improves dramatically, likely attributed to a sudden inexplicable decline in the arterial calcification. However, it does arrive with fairly severe consequences in the opposite direction; bones weaken sharply due to a phenomenon called “phosphate wasting” atypical of most rickets. While still not understood, there is a notable rise in FGF23 in the body that appears to stimulate the lack of phosphate as calcification resolves organically.

After thirteen, ARHR2 devolves into a more chronic state of disease defined broadly as osteomalacia, or bone softening. While the disease state is significantly more stable it is characterized by bone stiffening, joint pains, and case-by-case issues ranging from hearing loss to long-term rickets.

ABCC6 deficiency functions similarly to ENPP1 deficiency at early stages; key differences include a lower mortality rate at ~10%, a lower probability of progressing to hypophosphatemic rickets, and about twice the number of patients. This deviates at the 12-month point into a disease called pseudoxanthoma elasticum (PXE), described below:

• PXE is a genetic disorder distinguished by mineralization of soft connective tissue in the skin, eyes, and arterial blood vessels. The skin lesions typically consist of small, yellowish bumps and join together to form large patches on the neck. There are also angioid streaks and red dots in the eyes which could impair vision, as well as miscellaneous effects like stomach bleeding and cramps.

Clearly, the signs seem to point to ABCC6 deficiency being a disease lower in severity when compared to its ENPP1 counterpart; the market therefore is in significantly lower unmet need.

Given the obvious PPI benefit, Inozyme’s target product profile hones in specifically on arterial calcification. In reality, ENPP1 and ABCC6 deficiency have other notable consequences to physicians. Aortic valve stenosis in particular bears mentioning. Caused by the narrowing of the aortic valve opening, the condition restricts blood flow and causes chest pain, fatigue and shortening of breath. While calcification appears transient, stenosis lasts into adolescence; as a result, it can be a key sticking point for physicians.

INZY-701

INZY-701 is a soluble protein designed to emulate the ENPP1 enzyme – in essence, a true enzyme replacement therapy. By circulating through the body, it aids in the cleavage of extracellular ATP to PPi and AMP.

In order to understand the vitality of the ENPP1 pathway, one must understand its components. The two end products of complete ATP hydrolysis are adenosine and PPi. Adenosine is responsible for preventing the buildup of soft epithelial cells in the blood vessels – essentially a precursor for stenosis – while PPi is an inhibitor of calcification. ABCC6 is the enzyme that initiates the pathway, and it is responsible for carrying ATP into the extracellular domain. ATP is then hydrolyzed into AMP and PPI by ENPP6, and this AMP is further broken down to adenosine and PPi by CD73. In the case of a mutated ENPP6, this first step of hydrolysis fails, leading to low circulating levels of PPi and adenosine. In rare cases of double-mutated ENPP1, the occurrence is far more devastating.

If approved, INZY-701 would be the first available therapy for ENPP1 deficiency. It would also go unchallenged; enzyme replacement therapies are notoriously challenging to recreate and overlooked by new entrants given the exceedingly rare nature of the disease.

In February, Inozyme released interim P1/2 data for INZ-701 in adult patients with ENPP1 deficiency. Three biweekly subcutaneous dose levels were tested – 0.2 mg/kg, 0.6 mg/kg and 1.8 mg/kg – each with a small sample size (N = 3). While patients were mature, the study confirmed an increase in PPi levels for patients lacking ENPP1 across doses. A fourth cohort – which tests a confirmatory 1.2 mg/kg SQ dose – is still ongoing in N = 3 patients.

All doses were considered safe, with mild adverse events found in 3/9 patients. One patient withdrew from the P2 trial for non-adverse event related reasons. One frequently-discussed issue with enzyme replacement therapies is the presence of anti-drug antibodies (ADAs). Marketed products like Strensiq, Aldurazyme, and Lumizyme encountered high levels of ADAs (2,048, 31,972, and >51,200 respectively), inadvertently setting an acceptable threshold for ADAs with their approval. INZ-701, on the other hand, demonstrated ADA titers at a dilution factor between 40-160, with the earliest ADAs oncoming at 79 days in the 0.2 and 0.6 mg/kg cohorts.

This is just backdrop of course; INZY-701’s value proposition lies in efficacy. Below, we outline a select few key points: a) early PPi levels have provided a window into pivotal efficacy and b) relatively forgiving standards for approval have been granted by regulatory authorities.

Validation and approval of PPi as a primary endpoint sets up a high probability of registrational success.

The FDA has not viewed surrogate-based approvals favorably in recent years. In Intercept’s case in 2020 and once again in 2023, the company attempted to secure accelerated approvals for OCA in NASH, only to have the rug pulled from beneath them on account of an “uncertain” predicted benefit. Also in 2020, Tricida received a CRL on its CKD asset verevimer requesting more data on the extent and duration of the drug on serum bicarbonate, a surrogate for treatment effect – and the list goes on. Granted, the poor outlook has been balanced by a few landmark wins – for instance, Sarepta’s victory in securing and sustaining accelerated approval for Exondys 51 despite regulator pushback or Biogen and Eisai’s Aduhelm and Leqembi approval on plaque reduction – but the jury remains as to the FDA’s cooperation going forward.

For years, Inozyme has anchored its development plan to pyrophosphate or PPi as a potential biomarker-based endpoint. Practically speaking though, PPi does not imply clinical benefit. To date, there have been no human trials aimed at PPi as an endpoint, nor is there robust literature observing an increase in biomarker among treated ENPP1-deficient patients.

One tangential point of evidence lies in an age-old solution: bisphosphonates. Bisphosphonates are PPi analogs that can cross the placenta; as a result, they can be administered maternally. Its lack of debate can be attributed to the rampant debate around its contribution to survival benefit. In one retrospective study conducted by Rutsch et al., 17 out of 43 newborn GACI patients were treated with BPs. Cumulative survival was clearly distinct between the treated (65%) and the non-treated (31%), suggesting an overall survival benefit. This was contrasted by an efficacy study by Ferreira et al. in 2021 placing a group of 63 BP-treated patients against matched controls. In this study, there was no survival benefit shown. However, a post-hoc subgroup analysis of patients treated within 6 months demonstrated an improved survival rate of 74% (vs. 47% in untreated patients). Furthermore, patients treated beyond seven days of birth were also at higher risk of mortality. As a side note, the paper revealed an overlapping pathology between ENPP1 and ABCC6 variants, with consequences for Inozyme’s ABCC6 studies.

If the bisphosphonate evidence, Inozyme’s own preclinical trials, and positive patient and physician feedback from the first cohorts of adult ENPP1-deficient patients stand true, INZY-701 has an impressive chance at success. The patient numbers may be small, but the signs seem indisputable. Across the aforementioned three cohorts of patients ranging from 0.2mg/kg to 1.8mg/kg dose levels, PPi levels were raised within the first six hours of treatment from baseline levels of ~300 nM to 600 nM to a healthy range between 1,000 and ~2,200 nM PPi. These levels were sustained nearly a year in even at the lowest dose levels, with low variance in activity at each time point assessed.

However, the question remained as to how actionable this data was. Without a PPi-based primary endpoint, the next best option funneled down to either a survival-based endpoint or a rickets-based endpoint like RGI-C, both of which were more so tossups given the target product profile. These concerns were assuaged during the company’s FDA review meeting in July; however, the two parties agreed to a broader development plan to provide requisite evidence. In order to submit a BLA / MAA filing, Inozyme must secure full data from the adult P1/2 trial (which is likely to be cemented after Tuesday’s data, save for a fourth confirmatory cohort testing a once-weekly dose in N = 3 patients), in addition to full data from its pivotal ENERGY-3 trial in N = 33 pediatric patients. In these patients (the largest Inozyme has committed to), PPi will be considered as the solo primary endpoint. Furthermore, Inozyme must present interim data from the P1b ENERGY-1 infant study (N = 8) initiated earlier this year, as well as the pivotal ENERGY-2 infant study (N = 10) scheduled for initiation in ex-U.S. cohorts in 2Q’24. This final study has a dual endpoint of PPi and survival – if successful on both, the odds of approval improve dramatically.

A lenient EU-recommended RGI-C threshold supports the necessity for a functional benchmark.

In the EU, the EMA has mandated a co-primary endpoint along with PPi called RGI-C. This will operate as a secondary, functional endpoint in the U.S. as well.

RGI-C stands for radiographic global impression of change. It is a seven-point scale to measure the severity of rickets, with utility validated in indications like XLH. The endpoint is wholly reliant on radiographic images – a board of independent physicians juxtapose two separate images from four areas of the body (wrist, knee, and bilateral long leg, and globally) and note the differences pre- and post- therapy. While the method appears subjective, the endpoint has demonstrated sufficient correlation to prior methods of rickets evaluation, serum phosphorus levels, and functional tests like six-minute walk tests, not to mention heavy endorsement from past clinical trials.

The last landmark trial success that utilized RGI-C was the study of Ultragenyx’s burosumab (now Krysvita) in X-linked hypophosphatemia. While the disease is very different from ENPP1 deficiency, it provides useful detail about the magnitude of effect required by regulators to justify clinical benefit. Ultragenyx designed the trial with the assumptions of a +1.8-point improvement, versus a control group improvement of +1.4 points. Combined with a p-value of 0.05 and designed for a power of 80%, the trial required around 60 patients to show success. In reality, burosumab achieved a +1.9-point improvement versus +0.8 points in the control group – the trial designers could have hypothetically hit statistical significance with a fraction of the patients.

Given the low patient numbers and low functional relevance, EU regulators are offering more leeway to INZY-701 with a p-value at ~0.2. This offers great leniency to INZY-701 in its ENERGY-3 trial (N = 33); using the burosumab trial design as a proxy, we believe INZY-701 needs only ~15 patients to justify the validated +0.4-point treatment difference. Put another way, INZY-701 can achieve statistical significance with less than a +0.3-point treatment difference, which verges on simple statistical error. Our overarching point: provided even a scratch of improvement in rickets, INZY-701 should be well-positioned to succeed in its pivotal pediatric trials.

Risks

Setting these points aside, below are some risks worth mentioning in INZY-701’s development.

1. ENERGY-1 readout in 2H’24 is a primary catalyst: Moving away from the realms of pediatrics and adults, an approval in the infant population is wholly tied to survival benefit. Considering a debilitating six-month survival rate of ~50% in newborn infants, conditions like arterial calcification or rickets fall sharply down the physician priority list. Unfortunately, there is no human data available today; the first readouts are likely to arrive in the interim ENERGY-1 data due 2H’24. Should the trial read out positively, this opens a near-guaranteed path to commercialization across all three age groups; as such, it becomes Inozyme’s most critical near-term catalyst.
2. Enrollment timelines seem unrealistic. Currently, there are only ~10,000 patients with ENPP1 deficiency worldwide. Rather than commercial, this concerns us from a development perspective. With >80 patients required to complete the plan outlined over the next two to three years, the logistics around enrollment seem unfeasible. It raises flags on a few different levels. For one, Inozyme is only capitalized into 2026; we believe commercialization may require on extra year into 2027. Second, Inozyme will have to raise soon to sustain efforts across the board, incurring significant dilution in the process. We believe Tuesday’s interim readout is too soon; rather, the ENERGY-1 readout feels much more appropriate.
3. Commercial risk necessitates investment in a less-attractive pipeline: Citing examples like Sarepta, Vertex, and Biomarin, carefully-selected orphan markets can enjoy significant uptake. Taking the more conservative view, we assume a 15-20% penetration, which at an annual price of $300k leads to peak sales of ~$600mm. On a risk-adjusted basis, this is not a safe bet; as a result, Inozyme may be forced to double down on its less-attractive ABCC6 franchise. While scientific rationale does exist, it is nowhere as strong as the ENPP1 opportunity. However, in a market twice as large, penetration in the low-single-digits can justify a similar return. Unfortunately, Inozyme will require substantial investment to sustain the effort yielding yet another source of dilution risk.

In terms of valuation, the binary outcome is wholly dependent on penetration, which itself is dependent on the survival outcome. A bull case scenario would encroach on the territory of leading rare disease players, with penetration around 40-50% leading to peak sales around $1.5-2bn. The base case scenario outlined above leads to a far more modest $600mm peak sales estimate. Both scenarios can support a valuation in the billions by launch however, or a >2-3x return over the next three years. While there are several obvious confounding factors – least of which include the binary outcome mid-next year – we believe the string of readouts will provide even more incremental data about efficacy of INZY-701. This positions Inozyme as a company with strong momentum, with several junctures to re-evaluate in the short-to-medium term.

Catalyst

Interim P1/2 Adult Data in 2Q'24

Interim P1b ENERGY-1 Data in Sept. '23