Piper Sandler_Bioinsights - Tackling Psychiatric and Mood Disorders.

JUNE 2020 Piper Sandler_Bioinsights - Tackling Psychiatric and Mood Disorders. David Amsellem SR. RESEARCH ANALYST | Eleanor M. Maughan, Ph.D. SR. RESEARCH STRATEGIST | Zachary Sachar RESEARCH ANALYST | Christopher J. Raymond SR. RESEARCH ANALYST | Piper Sandler does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decisions. This report should be read in conjunction with important disclosure information, including an attestation under Regulation Analyst Certification, found on pages 125 - 128 of this report or at the following site: Piper Sandler Investment Research At Piper Sandler, our biopharma investment research team delivers to clients market-driven and actionable insights across the biotech and pharmaceutical sectors. We build strong partnerships with clients, and they trust our unique perspective to guide their investment strategies. David Amsellem Sr. Research Analyst Joseph Catanzaro, Ph.D. Sr. Research Analyst Christopher Raymond Sr. Research Analyst Edward Tenthoff Sr. Research Analyst Tyler Van Buren Sr. Research Analyst Eleanor Maughan, Ph.D. Sr. Research Strategist 2 | BioInsights: Beyond Blue: Tackling Psychiatric and Mood Disorders Piper Sandler Investment Research Contents 01. Executive Summary 02. The Current Psychiatric and Mood Disorders Landscape • Depression • Attention Deficit Hyperactivity Disorder • Post Traumatic Stress Disorder • Schizophrenia and Related Psychoses • Agitation 03. Key Considerations for Clinical Development 04. Emerging Clinical Development Landscape Piper Sandler Investment Research BioInsights: Beyond Blue: Tackling Psychiatric and Mood Disorders | 3 Executive Summary 4 | BioInsights: Beyond Blue: Tackling Psychiatric and Mood Disorders Piper Sandler Investment Research The Evolving Clinical Landscape for Psychiatric and Mood Disorders: A Unique Market Opportunity Psychiatric and mood disorders represent a unique market opportunity given the prevalence and impact of these conditions, and the reality of suboptimal outcomes for a sizable portion of patients despite a wealth of pharmacologic options. We believe there is considerable potential for innovation in this space particularly in the context of decades of a relatively narrow clinical development focus (eg, agents targeting monoamine deficiency). Notably, there is a strong need for faster-acting, well-tolerated, effective antidepressants and other medications for a range of other psychiatric and mood disorders. More progress in terms of the development of novel agents has been made in recent years, and the pace of innovation is brisk. Recent approval of products such as Spravato (Janssen Pharmaceutica/Johnson & Johnson [JNJ]) and Zulresso (Sage Therapeutics [SAGE]) for depression indications in 2019 are illustrative in this respect. In this report, we cover current and evolving treatment landscapes across a range of conditions, including depression (ie, major depressive disorder [MDD], treatment-resistant depression [TRD], bipolar disorder [BPD], and postpartum depression [PPD]), attention deficit hyperactivity disorder (ADHD), post traumatic stress disorder (PTSD), schizophrenia (particularly negative symptoms), and agitation. We discuss the roles of currently available treatment modalities in these settings (eg, the role of atypical antipsychotics), as well as the potential for novel modalities and formulations in development. Nearly 1 in 5 (near 50M) US adults suffer from a psychiatric or mood disorder. The total US psychiatry market, encompassing all forms of mental health disorders including schizophrenia, mood disorders (ie, anxiety, depression, bipolar disorder), behavioral disorders (ie, ADHD, agitation), substance abuse disorders, and other mental and behavioral disorders, is around $94B in the US, which is nearly half of the total global psychiatry market (~$200B in 2019, and expected to grow to $250B-$260B by 2023, reflecting a global growth rate of ~7%), per ResearchAndM. Over the past few decades, practitioners have relied more heavily on pharmacologic options, owing to the availability of a wide range of new agents that tend to be better tolerated than first-generation psychotropic medications. Another key driver of the growth in the overall psychiatry space includes the continued migration to a diagnosis and treatment paradigm that leverages the rapid growth in telemedicine in psychiatry (certainly this is accelerating amid the COVID-19 pandemic). This paradigm leans heavily in pharmacologic management of patients. Lastly, another key driver of growth in the space is the continued transition from the inpatient (hospital) setting for severe mental illness (eg, schizophrenia) to more patients being managed in the outpatient setting (in that vein, more psychiatrists managing patients with severe mental illness are growing their practices in the outpatient setting, and also lean heavily into pharmacologic management). Keeping a close eye on patient subgroups for which there are no FDA approved therapies to date (eg, negative symptoms of schizophrenia. We believe that promising product candidates for select indications can capitalize on the lack of proven, existing treatment options and reliance on off-label use of medications to capture significant market shares. Exemplifying this deficit in approved treatments, Neurocrine Biosciences (NBIX) is developing TAK-831, a first-in-class D-amino acid oxidase inhibitor, for the treatment of key negative symptoms of schizophrenia. Phase II data are expected in 2021. Source: Piper Sandler Research. Piper Sandler Investment Research BioInsights: Beyond Blue: Tackling Psychiatric and Mood Disorders | 5 Psychiatric and Mood Disorders: Challenges and Opportunities Exist for Innovative Drug Development A shift from exploiting monoamine deficiency towards novel targets and formulations. Despite decades of research and drug development, the therapeutic armamentarium for the treatment of psychiatric and mood disorders is still largely based on the monoamine hypothesis, which postulates that the underlying cause of these conditions is a deficit in monoamine neurotransmitters (serotonin, dopamine, norepinephrine). This emphasis on targeting monoamine deficiency has led to multiple approved agents, including selective serotonin reuptake inhibitors (SSRIs), serotonin-noradrenaline reuptake inhibitors (SNRIs), monoamine oxidase inhibitors (MAOIs), serotonin modulators, noradrenaline reuptake inhibitors (NRIs), and noradrenaline-dopamine reuptake inhibitors (NDRIs). Many of the marketed drugs targeting this pathway are now generically available. Importantly, the monoamine deficit hypothesis does not fully explain these disorders (if they did, treatment outcomes would certainly be more optimal). In that vein, a significant chunk of clinical development activity in psychiatry is focused on alternative therapeutic approaches, most notably non-monoamine-based targets. That said, more optimal drug formulations and delivery approaches can confer meaningful patent benefit, and with that in mind, there are a number of companies focused on these approaches. Companies exploiting non-monoamine neurotransmitter systems implicated in psychiatric/mood disorders, such as -aminobutyric acid (GABA), include Sage Therapeutics (SAGE), Otsuka Pharmaceutical (OTSKY), and others. Companies developing novel drug formulations for psychiatric and mood disorders include Alkermes (ALKS), Axsome Therapeutics (AXSM), and others. The payer landscape is undoubtedly challenging in a highly genericized space. This is also a function of the consolidation of the broader managed care/pharmacy benefit manager space, and the trend towards more active and restrictive control on the part of payers towards a range of pharmacologic classes. Given that there is a wealth of generic versions of numerous psychiatric agents Source: Piper Sandler Research. available, step-throughs and prior authorizations are simply going to be a reality for novel agents entering the market. The good news here is that the high rate of treatment failures (including patients who have failed multiple agents) points to real limits regarding the extent to which payers can be restrictive towards novel agents. Throughout this report, we make mention of more than 40 key and emerging players within the broader psychiatric space. We profile 23 of these companies in detail. Finally, we also provide insights from our recent survey which suggests psychiatrists view SPN-812 (Supernus Pharmaceuticals [SUPN]) as a viable, non-stimulant treatment option for ADHD. The survey is an illustration that even incremental innovation (in this case, a novel chemical entity that nonetheless focuses on a well-established target) can be impactful. Key Public and Private Players Profiled in This Report Psychiatric and Mood Disorders – Key Public Players Market Cap (>$10B) Market Cap ($1B–$10B) Market Cap (<$500M) Source: Company Websites. Piper Sandler Research. Psychiatric and Mood Disorders – Key Private Players On the following three slides, we summarize currently approved and investigational assets being developed by select companies profiled within this report. Further detail on these and additional companies is provided in Section 4.