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http://seekingalpha.com/article/3117996


Competitors To Sunshine Heart C-Pulse In NYHA Class III: Two Down, One To Go

Apr. 30, 2015 7:16 AM ET  |  About: Sunshine Heart, Inc. (SSH), Includes: CLDN, HTWR, NVS, THOR
Disclosure: The author is long SSH. (More...)

Summary

• Many have considered the Revive-IT trial, Celladon’s gene therapy, Mydicar, and Novartis drug, LCZ696, as potential threats to Sunshine Heart’s C-Pulse in the NYHA Class III heart failure market.
• As predicted likely by SA Author, Blair O’Neill, Celladon has reported negative results for CUPID2 Trial of MYDICAR(R) in Advanced Heart Failure. LCZ696 could suffer a similar fate.
• Sometime back, Blair also wrote an article titled, “Sunshine Heart Inc.: A Sleeping Giant”. In my opinion, Blair’s views expressed in that article will also be vindicated.
• Could Mydicar’s failure trigger market participants to seek the facts and ignore the hype, leading to a reversal of last week’s market caps for CLDN and SSH?
• And is there a future for Celladon’s Mydicar as a novel form of inotrope safe enough for extended use?

I was about ready to publish an article on Celladon but Blair O'Neill beat me to the punch (kudos to Blair).
As one of my followers could attest, as far back as April 4, I was in the throes of writing an article on the concerns I had with respect to the success or otherwise of Celladon's (NASDAQ:CLDN) Mydicar high dose in its CUPID2 trial.
I prepared a table comparing characteristics of patients at baseline for Mydicar high dose and placebo control.
Based on level of comorbidities, medications, medical devices, functional status etc., the table showed Mydicar high dose patients were better at baseline than placebo control HF patients on 22 measures and worse on only 2 measures, and then only marginally worse.
Blair has already presented such a comparison, so I will not repeat my table here.
But it is worth mentioning one of the findings of this study, "NT-proBNP testing for diagnosis and short-term prognosis in acute destabilized heart failure: an international pooled analysis of 1256 patients" -
Among those with acute HF, a presenting NT-proBNP concentration >5180 pg/mL was strongly predictive of death by 76 days [odds ratio=5.2, 95% confidence interval (NYSE:CI)=2.2-8.1, P<0.001].
The Cupid Placebo Control group had NT-proBNP concentration mean±SD 4,072±3,096 so a number of these would be likely >5180 pg/mL, and presumably with a very short life expectancy. In contrast, the Mydicar high dose patients readings were mean±SD 2141±1997.
Similarly to Blair, I concluded it was obvious any comparisons to the placebo control were invalid.
What I then struggled with was whether the Mydicar high dose patients, showing very low hospitalization percentages in CUPID, were at baseline, a representative sample likely to be repeated in a larger trial. If that were the case then efficacy in CUPID 2 was fairly well assured.
Or were those high dose patients, by pure chance, a less sick sample of NYHA Class III HF patients unlikely to be repeated in CUPID 2. If so CUPID 2 was doomed to failure.
To facilitate this assessment, I prepared Table 1 below to compare Mydicar high dose baseline statistics to the baseline statistics for the Novartis' LCZ696 versus Enalapril trial .
Why Celladon's Mydicar CUPID 2 (Phase 2b) high dose patients did not live up to the promise shown in CUPID (Phase 2a)

Table 1

(click to enlarge)
The HF patients receiving LCZ696 totaled 4,187 randomly assigned out of a total of over 8,000 enrollees. It is reasonable to expect the median baseline statistics for this large group would be fairly representative of the average attributes of the NYHA Classes enrolled.
And the NYHA Classes enrolled in the LCZ696 trial included 71.6% for NYHA Class II and only 23.1% for NYHA Class III.
On this basis, it could be expected that CUPID Mydicar high dose group, with 100% NYHA Class III HF patients would on average be much sicker than the LCZ696 HF patients.
But Table 1 shows this was not the case.
Mydicar high dose patients were better at baseline than LCZ696 HFpatients on 12 measures and worse on only 4 measures.
Considering 100% of Mydicar high dose patients were the sicker NYHA Class III, while the LCZ696 patients were over 75% comprised of less sick NYHA Class II and I patients, it seems the characteristics of the Mydicar high dose patients in CUPID were not representative of what might be expected in a larger trial.
It follows that CUPID 2 was doomed to fail because patients randomized in a larger trial would almost certainly result in much sicker patients in the high dose cohort than for CUPID (It is noted that CUPID 2 allowed for enrollment of NYHA Class II patients but that would affect both arms of the trial).
CUPID failed at 12 months

Another indicator of potential failure, was the fact that CUPID Mydicar high dose success was judged at six months on results in a number of efficacy domains. Similar assessment at 12 months would have resulted in failure. CUPID 2 was always intended to be judged at 12 months.
A further concern for Mydicar infusion

A further aberration is the high proportion of placebo patients in CUPID who suffered serious treatment emergent adverse events (TEAE's) from the infusion of the agent used as a placebo. Data on TEAE's sourced from published results for CUPID on the Government Clinical Trials website are shown in Table 2 below.
Table 2

(click to enlarge)
I find it just staggering that a total of 57.1% of the Placebo group suffered TEAE's related to the agent used as a placebo and its administration, compared to just 11.1% for those patients receiving high dose Mydicar .
Overall, 64.3% of the Placebo group suffered serious TEAE's compared to 33.3% for Mydicar high dose. The difference appears to arise mainly from the administration of the agent used for the infusion of the Placebo group.
To convey an understanding of the gravity of this, hereunder is an extract defining a "serious adverse event" -
"An adverse event or suspected adverse reaction is considered ―serious‖ if, in the view of either the investigator or sponsor, it results in any of the following outcomes: Death, a life threatening adverse event, inpatient hospitalization or prolongation of existing hospitalization, a persistent or significant incapacity or substantial disruption of the ability to conduct normal life functions"
Use of a placebo is supposed to ensure any "placebo effect" is similar for both the group receiving the experimental product and the control group receiving the placebo.
I hypothesize there could be at least a couple of possibilities why the Placebo Group reacted so badly to the infusion of the placebo agent, compared to the patients receiving the infusion of Mydicar, as follows -

1. The particular agent or product used for the placebo infusion caused harmful effects to the patients, whereas the Mydicar product was relatively benign;
2. The Placebo Group included sicker HF patients who were more prone to an adverse reaction due to comorbidities or from infusion of any foreign product into their failing heart .

I believe 2. above is the more likely.
All of the patients in the trial were classed as NYHA Class III HF patients, an indication that all were very sick persons and the placebo patients had a high rate of comorbidities.
A serious treatment emergent adverse event, as defined above, could conceivably push such patients over the edge.
If similar high rates of TEAE's did in fact occur in the CUPID 2 trial for patients who are sicker at baseline, then a predicted sicker Mydicar high dose group in CUPID 2 might well have suffered high rates of TEAE's similar to the placebo group.
Revive-IT Is Dead

The first Sunshine Heart (NASDAQ:SSH) C-Pulse competitor to fail was the Revive-IT trial, addressing less sick heart failure patients than those currently approved for Left Ventricular Devices.
The patient population targeted by the Revive-IT trial was just a part of the huge market targeted by C-Pulse, but nonetheless it was considered a serious threat to C-Pulse, up until the time it was stopped in January this year. When HeartWare (NASDAQ:HTWR) failed to obtain destination therapy approval for its HVAD, Thoratec (NASDAQ:THOR) took over the Revive-IT trial with its HeartMate II on January 8, 2013 (see here).
As far back as May 1, 2014, I wrote of the extreme difficulties faced by Thoratec in enrolling patients and in obtaining approval for HeartMate II in the Revive-IT trial (see here, here and here).
I also wrote an article (see here) on February 4 this year alerting SA readers that the Thoratec Revive-IT trial had been suspended.
On February 13, 2015, I wrote an article (see here) confirming, "Revive-IT is Dead" and, "The Revive-IT trial for NYHA Class III HF patients enrolled only one patient out of ~2,800 screenings. That leaves Sunshine Heart's C-Pulse the only device addressing this very large market".
Novartis drug LCZ696 might have an uphill battle for approval

Novartis (NYSE:NVS) drug LCZ696 is the "one to go" referred to in the title to this article.
Without going into too much detail here, I have already comprehensively covered my reservations regarding the Novartis trial of LCZ696 in my article, "Novartis LCZ696: 'New Wonder Drug' OR 'Old Paradigm With Reduced Side Effects'".
Of particular concern, Novartis' Serelaxin , like LCZ5696, was hailed as a new wonder drug, but was subsequently rejected by the FDA.
The reasons for that rejection could easily apply to the LCZ696 trial as explained in the article.
Could last week's market caps and share prices for Celladon and Sunshine Heart be reversed this week

Back in August 2013, when Sunshine Heart share price was ~$11, Blair O'Neill projected fair value PPS for Sunshine Heart ranging from $20 to $60 in the period 2014 to 2016. On Friday April 24, 2015, the market valued SSH at $4.33 per share, with a market cap of ~$79M.
Back in January 2014, Celladon floated at ~$8 per share and by early 2015 was trading close to $26 per share. On Friday April 24, 2015, the market valued Celladon at $13.68 per share, giving a market cap over $300M.
After market close on Friday April 24, 2015, Blair O'Neill projected that Celladon's CUPID 2 trial would fail, and on April 26, 2015, Celladon confirmed that CUPID 2 had indeed failed.
Celladon is currently trading under $3.00 per share, but not too far short of Sunshine Heart's Friday close.
The market obviously does not have the perspicacity of Blair O'Neill. But undoubtedly the market will, in time, wake up to the obvious, follow the evidence and forget the hype, and value Sunshine Heart accordingly.
For those interested in this approach, the evidence is set out below.
Sunshine Heart C-Pulse versus Celladon's Mydicar high dose

Firstly, I will compare Celladon's Mydicar high dose group from CUPID 1 with C-Pulse Feasibility trial patients at baseline as per Table 3 below.
Table 3

(click to enlarge)
From Table 3 above, it can be seen that the C-Pulse patients were more advanced in heart failure classification and a generally sicker group based on the level of comorbidities, medications, medical devices, functional status etcetera.
But while CUPID Mydicar high dose patients failed to improve across various efficacy domains, the C-Pulse patients showed great improvement in the 20 patient Feasibility trial (for published trial results see here, here and here).
Comparative efficacy at 6 and 12 months are shown in Table 4 below.
Table 4

(click to enlarge)
It is reasonably clear from the above that the Celladon Cupid trial failed at the 12 month mark while C-Pulse showed good efficacy at both the 6 months and 12 month marks.
What is more, 25% of the Feasibility trial patients have become asymptomatic for heart failure and have been weaned off the device.
And while CUPID 2 has now also failed, C-Pulse has continued to show efficacy in the EU Options HF trial
Summary of ISHLT presentation by Dr. Holger Hotz on 6 patients -
• Clinical response to date is greater than the U.S. pilot trial results
• Reduction in HF medications among majority of patients
• All patients have experienced a reduction in HF class
• Clinically significant improvement in ejection fraction - avg. improvement 33%
• One patient weaned at 6.5 months with EF of 55%
• No instances of: Re‐hospitalization due to worsening HF, Exit site (or other) infections, Neurologic dysfunction, Major bleeding , or Renal dysfunction.
How "Mr Market" can possibly attribute such a low market cap to Sunshine Heart and its efficacious C-Pulse, when he recently valued Celladon and its non performing Mydicar in the hundreds of millions of dollars is a mystery to me.
Is there any remaining hope for Mydicar?

I have never thought Mydicar would challenge Sunshine Heart's C-Pulse. Unlike C-Pulse, Mydicar has never shown any indication it could halt or reverse heart failure.
Nevertheless, I saw Mydicar as a potentially useful adjunct therapy for both C-Pulse and LVADs, as per my article, "Sunshine Heart C-Pulse: A Paradigm Shift In Heart Failure Therapy".
As mentioned above, Mydicar showed positive results at six months, but not at twelve months, in several efficacy domains, as per Table 4.
Based on Table 4, I do not see Mydicar stopping the progression of heart failure, but it did show some measures of efficacy at six months, after which all measures worsened, except for LVEF showing a minimal increase.
I hypothesize that Mydicar might have had an inotropic effect, but as with other forms of inotropes, it has not halted the worsening of heart failure.
I say another form of inotrope, because like digoxin and milrinone, Mydicar is designed to improve the pumping ability of the heart through up regulation of calcium.
If further studies show higher doses of Mydicar can be safely tolerated, then Mydicar might well become a useful form of inotrope suitable for longer term use, and for safe use in all NYHA classes of HF where there is reduced ejection fraction.
I will look forward to seeing if results for CUPID 2 Mydicar high dose are reported at six months as well as twelve months, and whether the signs of efficacy at six months in CUPID are repeated in CUPID 2.
Summary and Conclusions

Celladon's CUPID 2 failure, despite strong market support, should be a salient lesson to early stage biotech investors that doing their own research is far more important than following that crazy "Mr. Market."
And individual research is made so much more accessible by the information posted by SA Authors and commenters providing in depth analysis, for and against, with supporting reference material.
From Blair O'Neill's article, and the further information I have provided above, the evidence was there in published studies that Mydicar high dose CUPID 2 trial was unlikely to succeed.
It was a randomized double blinded trial, so no one knew any results when the share price soared in March this year. It was one market fool following the other, with no heed of the published facts.
A similar thing has happened with Sunshine Heart, with the market going in the wrong direction to where the facts should take it.
If last Friday, the market had Celladon shares priced at $4.33 and Sunshine Heart shares priced at $13.68, instead of vice versa, it would have been a far more appropriate reflection of value, and for Sunshine Heart, within Analyst's target price range.
Brett Jensen, in his recent article on the biotech sector, says about Celladon,
These sort of debacles are nothing new in the small biotech space and why I always advocate a philosophy I have dubbed "Shotgun Investing," which involves taking many small stakes in a myriad of promising small concerns. This helps mitigate risk as frequent blowups will always be a part of investing in this volatile area of the market. The occasional five or ten bagger will make this strategy profitable over time.
That is probably a very sensible approach if one is drawn to investing in the biotech sector. Particularly with drug candidates, all the research in the world will not protect against the emergence of previously unidentified factors, such as emerging serious side effects, as trial numbers increase.
Compared to drugs (and maybe gene therapy), medical devices, such as C-Pulse, do not have the issue of producing differing side effects in large populations with differing genomic and phenomic attributes.
Understanding this is key to understanding that expanding numbers of C-Pulse implants in the wider population does not pose the same risks as for a new investigational drug or gene therapy. It follows that the usual risk of failure percentages applied to various stages of drug development are not applicable to C-Pulse.
Adopting the "shotgun approach" to investing in the small biotech space, as advocated by Brett Jensen, is no excuse for not carrying out the due diligence, such as that reflected in the article by Blair O'Neill.
That, together with my research outlined above, was all in the public domain and indicated a high likelihood of failure for CUPID 2.
So why did Analysts and Professional Investors, and the market in general, apparently not understand that danger existed when the market cap for Celladon was being pushed up over $500M just a month or so ago?
I do not know the answer to that.
Nor do I have the answer to why Sunshine Heart is currently valued at not much more than Celladon, even after Celladon's failed CUPID 2 trial.
After all, Sunshine Heart's C-Pulse device is the only therapy for NYHA Class III HF that has shown in an FDA approved trial it has the capability of not only halting the progression of heart failure, but 25% of the Feasibility trial patients have become asymptomatic for HF and weaned off the device.
Even better clinical results have been reported for the EU post market trial. C-Pulse is also currently in an FDA approved Pivotal trial (equivalent to a Phase 3 trial), while Celladon's Mydicar has failed to pass its Phase 2 trial, and Revive-IT failed at the pilot stage.
In conclusion, I am not attracted to investing in Sunshine Heart because I have any special interest in investing in early stage biotechs.
I am invested in Sunshine Heart due to my belief, based on due diligence using information available in the public domain. it is a rare and extreme alpha opportunity.
Just as Celladon's CUPID 2 trial could be determined from due diligence based on public domain information, to have a high likelihood of failure, Sunshine Heart's C-Pulse can be determined by the same means to have a very high likelihood of success.
And at present, shares of Sunshine Heart, with all of its real promise, and addressing a much larger target market than Celladon's Mydicar, can be bought for around the price (and market cap) of Celladon, with its confirmed failed technology.
Now that is what I call "extreme alpha", with very low risk and very high potential reward.
The range of valuations for Sunshine Heart, in Blair O'Neill's article referred to above, are as valid today as they were back then.
And for those concerned about the current "Active, not recruiting" status for the C-Pulse Pivotal trial, the appointment of a "Physician Subject Selection Committee" is just one more step in a "steady, steady" approach that will contribute to early success for this trial leading to PMA. I will write more on this in a further article.
Caution: The information above is not intended to replace the advice of a doctor. I disclaim any liability for any decisions you might make based on this information.
Disclaimer: The various data and calculations in Tables and in the text above are based on third party information and I am not responsible for the accuracy, completeness or timeliness of the information. The results are for illustrative purposes only and should not be relied on for investment purposes.​