Gemphire (GEMP): What’s Next After Disappointing Cholesterol Drug Data?

Gemphire Therapeutics (Nasdaq: GEMP) announced top line results this week from its Phase 2b trial of its lead candidate, gemcabene, in patients with high cholesterol. While the drug did show a statistically significant reduction in LDL cholesterol levels vs placebo, the reduction was less than had been observed in prior clinical studies. This is the classic example of the binary event risks that young biotechnology companies face throughout their existence, and in this instance, Gemphire came out on the wrong end. The only pertinent question now is: What’s next?

Heart disease and LDL cholesterol

According to the American Heart Association (AHA), heart disease remains the leading cause of death in the US. Coronary heart disease accounts for 1 in 7 deaths in the US, killing over 360,000 people each year. About 790,000 people in the US have heart attacks each year, and of those, about 114,000 will die. Despite improvements in awareness, lifestyle changes and medical advances, the direct and indirect cost of heart disease remain extremely high, with the most recent AHA estimates pegging the number at $200 billion annually.

Atherosclerosis – the process of fatty buildup called plaque in the inner lining of arteries, which causes them to narrow, weaken and be less flexible – is among the leading causes of heart disease. The arterial plaque reduces the amount of blood and oxygen that is delivered to vital organs, and the interrelated causes of atherosclerosis include high levels of blood cholesterol and triglycerides, high blood pressure and smoking.

Molecules called lipoproteins carry cholesterol in the blood, and the two primary types of lipoproteins are high-density and low-density (HDL and LDL). LDL cholesterol makes up the majority of the body’s cholesterol, according to the National Heart, Lung and Blood Institute of the NIH. LDL is known as “bad” cholesterol because having high levels can lead to plaque buildup, atherosclerosis and ultimately heart disease and stroke. HDL – the “good” cholesterol – carries cholesterol back to the liver, which flushes it from the body. Triglycerides are another type of fat in blood that the body uses for energy. The combination of high LDL with low HDL and high triglycerides can increase your risk for heart attack and stroke.

Source: American Heart Association

Top-line gemcabene results

The preliminary data from the gemcabene trial of 105 patients with an average age of 61 and an average baseline LDL level of 130 mg/dL showed a 17.2% average reduction in LDL vs 5.5% for placebo for the 600mg dose. While this result met the primary endpoint of the study, the reduction was significantly less than Gemphire had seen in a previous 2b trial whose top line data were announced in June 2017. In that trial of only 8 patients on varied dose regimens, the 600mg dose produced a 30.0% reduction in LDL levels. In addition to the dramatically fewer number of patients, the earlier trial also was on patients with a much higher average baseline LDL level of 374 mg/dL as compared to the more recent group of 105 patients with a 130 mg/dL average level.

Pipeline



Gemphire’s clinical pipeline is heavily dependent on the success of gemcabene. Beyond the cardiometabolic disorders caused by dyslipidemia (abnormal levels of cholesterol and triglycerides) the company’s only other current clinical target is for nonalcoholic steatohepatitis (NASH), a severe liver disease caused by inflammation and a buildup of fat. NASH affects between 2% and 5% of the US population, with an additional 10% to 30% affected by nonalcoholic fatty liver disease (NAFLD), in which a fatty liver hasn’t yet led to inflammation or organ damage. Progression of NAFLD/NASH can lead to liver cirrhosis, fibrosis, carcinoma, liver failure and death. Liver transplantation is currently the only treatment for advanced cirrhosis with liver failure, and there are no approved treatments for NAFLD/NASH.

GEMP stock

Unsurprisingly, the stock got hit hard this week on the clinical news, losing 47% on Monday and drifting further lower on Tuesday. At the time of this writing, GEMP is down 55% from last Friday’s close, giving the company a market valuation of about $89 million – essentially its post-IPO valuation from a year ago. The stock doubled last month on the results from the previous gemcabene trial that showed a 30% reduction in LDL, but then gave back all of those gains this week on the news from the most recent trial.

The company had $29 million in cash on the balance sheet at the end of March 2017, and will surely need additional capital before the end of 2018. The successful outcome of any future capital inflow, however, will obviously depend on the additional analysis and clinical work that Gemphire conducts on gemcabene.

What’s next?

Gemphire was co-founded by former Pfizer employees, Dr. Charles Bisgaier (current Chairman of the Board and Chief Scientific Officer) and David Lowenschuss (who was listed as Gemphire’s Chief Legal Officer and Secretary as of three months ago but who now appears to be focused on his own law practice), who licensed exclusive worldwide rights to gemcabene from Pfizer (NYSE: PFE) in April 2011. Given how critical gemcabene is to Gemphire’s future, the company will clearly be focused on analyzing the data sets so that it can follow up with the market on the results of that analysis and what it means for the rest of the pipeline.

If we may speculate, it may be the case that the drug is simply more effective in patients with a much higher LDL level than was tested in the most recent patient group. If so, there would still be a meaningful commercial market for the drug. Additionally, gemcabene has consistently demonstrated good safety in the clinic. “The ROYAL-1 study results support gemcabene’s safety profile as a potential add-on therapy to any statin intensity without signs of drug-drug interactions,” said Dr. Steven Gullans, Gemphire’s interim CEO. “The data, in combination with previous clinical data of gemcabene, including the recently reported results of the COBALT-1 trial, will be used to plan gemcabene’s future development.”

Another key concern investors will have is waiting for the eventual appointment of a new permanent CEO. Dr. Gullans became interim CEO when Mina Sooch resigned for “personal reasons” in May 2017. Dr. Gullans has been a board member since April 2016 and is currently Managing Director at Excel Venture Management, which he co-founded and where he has been employed since 2008.

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