ESPR - Esperion - taking on the Statin market

Investment Analysis Clubs Where Angels Fear to Tread
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So I got turned on to this little guy, and unfortunately I only went in for under 1% allocation at the time. It has now grown over 1% thanks to about 220% gains in a very short period of time.

What is going on?
In short, it is a alternative to statins play.
Many know statins for cholesterol meds. I take statin pill daily myself, and have for a few years. I personally am not aware of side effects (except maybe poor investing results since 2022!) but apparently many folks have them.

I don’t know how comprehensive this first post will be, but will try and get a few things in. To work it backwards, here is latest “news” that helped start uptrend.

the U.S. Food and Drug Administration (FDA) has approved an updated LDL-cholesterol lowering indication for NEXLETOL and NEXLIZET to include the treatment of primary hyperlipidemia as a qualifier for existing approved populations. Additionally, the maximally tolerated qualifier for statin use has been removed, and the prior limitation of use stating “the effect of NEXLIZET or NEXLETOL on cardiovascular morbidity and mortality has not been determined” has also been removed.

These labeling modifications do not impact the full pending label approvals for cardiovascular risk reduction indications for NEXLETOL and NEXLIZET, which remain on track for anticipated approval in the first quarter of 2024. In June 2023, the Company announced its submission of four Supplemental New Drug Applications based on the landmark Cholesterol Lowering via Bempedoic acid, an ACL-Inhibiting Regimen (CLEAR) Outcomes trial, which demonstrated that bempedoic acid, contained in both NEXLETOL and NEXLIZET, can significantly reduce cardiovascular risk across a range of primary and second endpoints. These applications were accepted by the FDA which issued a PDUFA, or action, date of March 31, 2024. The Company’s EMA applications also remain on track, with anticipated approval in the first half of 2024.

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Ok, so there was a label change/improvement, plus we see more approvals potentially on track for June 2024. This is sort of like CELH and distribution agreements, in the sense that the more approvals/uses, the greater access to buying patients and improved TAM.

This means future revenue increases and/or increased liklihood of being a buyout candidate by one of the bigger pharma giants. Either way, this is where the risk/reward in higher stock prices is coming from.

Most recent ER

– Q3 U.S. Net Product Revenue Grew 45% Y/Y to $20.3 Million; Q3 Total Revenue Grew 79% Y/Y to $34.0 Million –

– Q3 Retail Prescription Equivalents Grew 33% Y/Y and 8% Q/Q, Demonstrating Sustained Momentum into 2H 2023 –

The label we anticipate receiving in March, will add a broad cardiovascular risk reduction indication in both primary and secondary population as well as remove current limitations.

From a commercial perspective, our addressable patient population will significantly increase when we get our new CVOT label next year. Right now, our therapies are only indicated for about 10 million secondary prevention patients, with documented ASCVD or HeFH and who are on maximally tolerated statin therapy.

Our new label, that we anticipate by March 31, will reflect our CLEAR outcomes data and enable us to be indicated for an additional 20 million high-risk primary prevention patients. And any 30 million patients in total, will be our primary focus. There are another 40 million patients in the US, who are untreated and in high-risk for the event, and those patients represent additional potential upside. We look forward to being able to address the needs of millions of patients, who are currently still unable to achieve their LDL-cholesterol levels on current therapies alone.

Litigation as a catalyst

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Current Status of the Daiichi Litigation

Esperion Therapeutics has initiated a lawsuit against its Nexletol partner, Daiichi Sankyo, seeking $300 million in milestone payments. This legal tussle is rooted in a 2019 arrangement where Esperion granted Daiichi exclusive rights to commercialize its drug, bempedoic acid (known as Nexletol in the U.S. and Nilemdo in Europe), in Europe and Switzerland. According to the agreement, Daiichi was to make regulatory milestone payments to Esperion based on specified outcomes, one of which is tied to the CLEAR outcomes study that examined Nexletol’s efficacy in reducing cardiovascular risks.

The crux of the disagreement lies in the interpretation of trial endpoints. The agreement specifies a $300 million payment if the CLEARS outcomes study demonstrates a “cardiovascular risk reduction” of 15% or more. Esperion claims they’ve achieved this, as the drug demonstrated a 27% decrease in heart attack risk. However, Daiichi refers to another endpoint, the MACE-4 outcome, which indicated a 13% cardiovascular risk reduction compared to a placebo. Daiichi contends that this specific metric should exceed 15% for the payment to be triggered. Esperion, on the other hand, argues that Daiichi’s interpretation is at odds with the clear terms of the agreement.

As of today, the case is currently in the discovery phase, set to conclude by March 2024.

Risks for Investing in ESPR:

  1. Litigation Outcome: The Daiichi litigation’s resolution remains uncertain. A verdict unfavorable to ESPR could significantly impact its financial standing and stock value.
  2. Reliance on Bempedoic Acid: ESPR’s valuation is majorly hinged on bempedoic acid. Any regulatory, commercial, or safety setbacks could adversely affect the company.
  3. Financial Sustainability: Despite potential reductions in R&D spend, ESPR’s financial health depends on achieving sales milestones and maintaining a manageable OpEx.
  4. Market Dynamics: ESPR operates in a competitive space, and new advancements or drugs from competitors could diminish bempedoic acid’s market share.

One reason I got interested and thought this moonshot play may be legit, was the mention by Peter Attia of their product. Peter is one of those popular online health/longevity guru types, and he seems well-respected enough.

Medication Nuances

While statins, like rosuvastatin (Crestor), are the go-to for many, there are alternatives like Bempedoic Acid (Nexletol) and PCSK9 Inhibitors. Each has its unique mechanism of action and benefits. For instance, PCSK9 Inhibitors can reduce Lp(a) levels by around 30%. Another medication, Ezetimibe, is often used alongside statins but comes with its considerations, such as potential liver enzyme elevation.

Nov 1, 2023 – Updated:

During Peter’s interview with Derek on MPMD he mentioned some updates, which I’ve listed below:

  • The stack he’s taking for cardiovascular disease is now: Ezetimibe, Rapatha & Bempedoic acid

Might follow up more with this, but given my initial investment was tiny, was inclination is to just let this thing run wild, one way or the other. Lot’s of “Ifs” but If litigation does well and Spring label changes go well, and TAM keeps growing and then this could truly have tremendous upside, coming off such as small mkt cap.

Obviously if it grows 30x or something nutso, I will likely sell, but seems like 2024 will be a news-worthy year for them, so just letting it ride for now.

Dreamer

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Bought more on dip.

Not clear that this was bad news.

The pharmaceutical company on Wednesday said it will receive a $100 million from Daiichi Sankyo in mid-January ahead of the expected type II variation approval for Nilemdo tablet and Nustendi tablet by the European Medicines Agency.

The company will receive an additional $25 million payment following the EMA’s decision on the pending application.

As part of the amendment to their collaboration, Esperion will also transition to DSE manufacturing and supply chain responsibilities in Europe, set to result in cost savings for both parties.

Dreamer

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Up near 50% since the unwarranted drop.

Steady going for this moonshot. Now at $3. Hopefully gets to $6-7 by EOY.
A buyout probably needs to be in the $20-30 range at minimum.

Still have a March catalyst of further label expansion/approval, plus another settlement they are working thru from a different partner.

Then it will be actual sales getting measured, starting with Q1 results (May 2024 likely). Expect Feb ER to be mostly forward-looking, as nothing earth-shattering about Q4 sales expected, as recent label changes won’t have kicked in for sales impact yet.

Dreamer

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New SA article

More buzz on Esperion, with March catalysts still to come.

Dreamer

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In case anybody is following and wondering why the plunge today:

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This might be a huge (but very speculative) opportunity.
Unfortunately I´m out of cash and the question is should I sell SMCI, IOT, CELH or TTD?

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just dropping in to drop this off.

Esperion’s partner for EU sales is Daiichi Sankyo (DSE) and DSE had ER today.

cliff notes: scroll down for EUR dollar values and you see approx $35m (USD) for this most recent Q. Note that DSE is not on calendar Q’s, and so this most recent Q was their “Q3” as their year ends after March. That $35m represents 135% or so y/y growth.

Got a little growth stock on our hands. ESPR only gets a cut of this EU revenue from DSE, but the US sales are expected to also be entering hyper-growth, especially if/as they get the expected label improvements at end of March.

So the drug works, and it sells. Just a matter of executing. I think after the ESPR May Q1 ER, we will start to see the stock move from being a speculative drug play to being measured on growth numbers in the following Q’s. If so, multiple expansion should occur.

Still a risky moonshot, but path getting clearer, me thinks.

Dreamer

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couple PRs today

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2nd PR.

Basically, their TAM increased officially (but as expected).
Yet another risk to stock thesis removed and increases their liklihood (hopefully) as a buyout candidate.

Conversely, should they have to go it alone the rest of the year, they now have larger TAM for their sales teams to go after, plus (and I think most importantly) hopefully this is the ammunition required to get insurers/payers on board, because reducing cost to insureds is a major tailwind for sales growth here.

Dreamer

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This thread got me into ESPR. First buy was January 15 at $3.12, changed my mind on 17th and sold 80%at $2.64… Bought 40% back on 2/2 at $2.05 and bought back the rest on 2/22 and 2/27. Did not sell any when I recently disgorged my stock holdings as I was at sub-1% holding. So, nice pop and nicer post market add-on. If it holds it will be a bit over 1.2% holding and I’ll take all the help I can get.

KC

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Saul was a heart doc, right? I think the time may come for this to be brought to attention of Saul board, but not quite yet. Understandably, they prefer to see growth trends in growth stocks.

Let’s check under the hood:

Esperion has US market, and effectively has partnered with DSE (for Europe and other countries) and Otsuka for Japan. DSE ramping growth rates quite well in Europe, but royalty rights are something like 10-15% so hasn’t become overly meaningful yet. Otsuka was in pause until a study completed and that is expected mid-year, is my understanding. Both agreements had lump royalty payouts too, tied to label expansion and other things. DSE has effectively paid theirs already, and Otsuka will after their study is done.

Ignoring all that, although a royalty revenue stream is nice and very SaaS-ish, let’s just look at US-only sales trends.

Here are US-only revenues for Esperion.

2020 13m
2021 40m (200% growth)
2022 56m (40% growth)
2023 78m (40% growth)

“Hey Dreamer…that looks like a growth stock, so what gives???”

In 2023, the Q revenues looked like:
Q1 $17m
Q2 $20.3m
Q3 $20.3m
Q4 $20.8m

As you can see, the y/y compares were solid, but Q/Q was relatively flat all year, putting into question the growth rates moving forward.

Guess what I think Q1 of 2024 is gonna come in at? Yeah…about $20m. Why? Label expansion hadn’t occurred yet (was announced end of March), and with a lack of expanded TAM to go after plus lack of payer coverage (meaning drug is expensive) the upside appears limited.

Hey!! What about, like, DSE…they are setting world on fire!! Ok, sure, but I am not a European prescription drug price expert, but either way, tomato tomahto. DSE shows what can happen.

But I think, in the US anyway, the label expansion was needed to get sales growth to another level.

So this is where Aug and Nov ERs come into play.
August (for Q2 ER) may not light world on fire. Label expansion is great, but this isn’t like Eddie Murphy just standing in the trading pits during “Trading Places” movie and making money without trying. Sales takes effort. I would like to see a modest increase though. Something like $25m. $30m would be great.

My goals for Q3 and especially Q4 would be more in the $35-40m range each Q. That conservatively gets you to $115m in US-only sales, which would be just over 45% growth.

The key there is two things: growth accelerating from 40% to 45%, and sales being over $100m. In following many SaaS/Tech and other industry growth stocks, many like to see at least $100m in sales, otherwise deemed “too small”.

But if you can accelerate growth rates off increased Revenue base, that is the recipe for multiple expansion.

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Why am I excited about this moonshot stock? Because it is SO DARN HARD to find companies with mkt caps under $2-3b.

The 2017/2018 period seems like a fever dream in hindsight. MDB, TTD, ZS, AYX…and probably OKTA and TWLO and many others were all in that ballpark of $2-3b mkt cap. And they were somewhat under the radar at the time. Mix in their rampant sales growth and subsequent multiple expansion, and you received the huge stock winners they became.

And since I am banned from Saul board because I think about valuation too much and macro too much, I will have to leave it to fine readers of this board to pass the word.

Again though - not sure time is right, as I don’t think we can validate this company’s US-only sales are back in growth mode until Aug ER, and even then it may be modest results, but hopefully with good forecast insight into Q3 at that point.

If things play out as hoped, or better than the below, I would be surprised if Saul board did not find it compelling then. Especially if payer/insurance news of the favorable variety is also popping up from now thru Nov.

2020 13m
2021 40m (200% growth)
2022 56m (40% growth)
2023 78m (40% growth)
2024 115m (this is my projected/desired goal, and would be 47%).

If Insurance/payers get on board, this truly has runway to $1b-2b in revenue.

Some TAM numbers:
47m americans on statins
How many intolerant of statins? Statin intolerance has been reported in 5-30% of patients (lowest in clinical trials; highest in observational studies)

What did recent label expansion do for Esperion?

“We are pleased to receive approval for our highly anticipated label expansions in the U.S., which will enable more than 70 million patients to now be eligible for NEXLETOL and NEXLIZET,” said Sheldon Koenig, President and CEO. “Importantly, these approvals expand the accessibility of our highly effective drugs to primary prevention patients, or to those who are at high risk of having a cardiovascular event, but who have not yet had one. These approvals also eliminate the statin use requirement, allowing patients to take NEXLETOL or NEXLIZET either with or without a statin, which significantly reduces previously existing prescribing limitations. We are confident these approvals position NEXLETOL and NEXLIZET as the non-statins of first choice within the cardiovascular risk reduction treatment paradigm.”

good luck out there,
Dreamer

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BH

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Dreamer-
Don’t know if you saw this…looks like Saul may be softening his stance…"

SaulR80683

3d

Thanks Gary, I have updated the Rules of the Board to clarify that while value investing is not what we are doing, discussing the valuation of our individual stocks is acceptable and useful.
Saul

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Since mid-Dec, the ESPR stock has rallied from low $2’s to low $3’s four times.
Now down to $2.15.

Since all the recent fundamental news has been very positive, it is either a buying opp or someone knows/leaked an incoming offering or something equally adverse.

My gut feels like this is just a “sell the news” selloff.
The company did just get a major tailwind catalyst with expanded label at end of March. Reality is results of selling growth due to label in Q2 aren’t reported until about August/Q2 ER. Anyone in sales can tell you that, outside of one-off AI ChatGPT explosions, most sales gains are gradual over time and not immediate.

So I expect gains to show in Aug/Q2 ER, but validation occurs in Nov/Q3 ER as growth “should” have kicked up another notch above the Q2 bump. Then you got yourselves what we in the financial stock trading world call “a trend”.

Anyway…outside of any positive payer/coverage news from now until August, and maybe a validation that their European partner (DSE) continues to ramp up sales in their (May?) next ER release, there isn’t too much to expect in news.

The actual Q1 ER (May?) should/will likely be a dud, in that I expect sales to be flat with Q3/Q4 of 2023, as this was still pre-label expansion and it seemed like they were hitting the top end of what they could do sales-wise without expanded label. The Q1 ER will just be a commercial about what is to come, which we kind of just heard on recent Needham call this Tuesday. Good call to check out here:

So, do your own DD, but prices in low-$2s, if you are interested in this stock, might be a good buying opp.

If another dilution event does come out of nowhere, I will be very disappointed and stock may take a further hit, but that may be the bottom of bottoms from here.

Dreamer

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Esperion partners in Europe with Daiichi Sankyo Europe aka DSE.

DSE just reported. They have odd FY calendar, so Q4 and FY2023 were just reported.

You can ctrl F for “Nilemdo” which is the European names for the Esperion drugs.
The data shows in EUR dollars so I converted here.

Well over 100% y/y growth and projecting (prob conservatively) at 84% growth in FY2024. As good as any growth stock out there. Now just need the US sales team to follow suit. Esperion gets royalties in a tiered system…a bit unclear on what the tiers are, but 15-20-25% payouts is what I am hearing. So this is a nice and growing residual business for Esperion. DSE is continuing to expand to other countries and they have a separate partner Otsuka that has Japan and is expected to start selling there later this year.

Data is USD (my conversion) and in Millions.

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Enjoy the weekend all!
Dreamer

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