Street Fight: Analysts diverge on Selecta Bio's gout drug data read-through

Shares of Selecta Biosciences (SELB) are under pressure after the company announced new interim data from Phase 2 trial of SEL-212, a product candidate for the treatment of chronic severe gout designed to lower SUA. Commenting on the results, Mizuho analyst Difei Yang told investors that the market reaction is "overly negative" as it is likely acceptable to the FDA to proceed into Phase 3 and remains "superior" to standalone Horizon Pharma's (HZNP) Krystexxa. More bearish on the data presented, her peer at Cowen called the results "disappointing" and said it "virtually eliminates [SEL-212] as a threat." SEL-212 DATA: Selecta Biosciences presented new interim Phase 2 data from patients receiving SEL-212, a product candidate in development for the treatment of chronic severe gout designed to lower SUA, at the 2018 American College of Rheumatology/Association for Rheumatology Health Professionals Annual Meeting in Chicago. The interim data consists of new cohorts of patients that received five monthly doses of SEL-212, at doses of 0.1 or 0.15 mg/kg of SVP-Rapamycin in combination with 0.2mg/kg of pegadricase. In the new cohorts, projections based on the rate of SUA control for patients who have completed the treatment period suggest that approximately 66% of the evaluable patients may maintain SUA level control below 6 mg/dL throughout five months of therapy with concurrent mitigation of ADAs against the pegadricase enzyme. Final data are still pending for five of these patients. The projection for these five patients is based on the observation that all other patients in these cohorts that had serum uric acid levels less than 6 mg/dL at week 12 successfully maintained control of SUA through the entire five-month period. Furthermore, the observed sustained maintenance of SUA near 0 mg/dL has led to rapid reduction in tissue urate deposits as measured by DECT imaging. DECT scans were performed as an exploratory measure to evaluate reduction of tissue urate burden in a subset of patients of the Phase 2 trial. STOCK REACTION 'OVERLY NEGATIVE': In a research note to investors following the news, Mizuho's Yang argued that the market reaction to Selecta Biosciences' Phase 2 data on SEL-212 is "overly negative." While the data was "not as good" as she had hoped for and can be perceived less convincing than the data presented mid-June, Yang believes it is likely acceptable to the Food and Drug Administration to proceed into Phase 3 and remains superior to standalone Krystexxa. A Phase 3 clinical trial and SEL-212 is expected to begin in 2018 along with a parallel head-to-head study with Krystexxa, she added. The analyst increased the Probability of Success of SEL-212 in her model to 75% from 60%, and reiterated a Buy rating and $30 price target on Selecta's shares. 'DISAPPOINTING' DATA: Meanwhile, Cowen analyst Ken Cacciatore told investors that he views Selecta Biosciences data from its potential competitive program to Horizon Pharma's Krystexxa as "disappointing." Further, the analyst believes the news "virtually eliminates [SEL-212] as a threat" and far outweighs the modestly negative potential 340(B) timing change. While the U.S. Department of Health and Human Services is proposing to change the date on which 340(B) pricing would come into effect to January 1, 2019 from July 1, 2019, Cacciatore called this news "largely irrelevant" since his model for Horizon already assumed adjustments to the program beginning in July 2019, he added. Cacciatore argued that the net of these two disclosures should be viewed "much more positively than negatively." He reiterated an Outperform rating and $25 price target on Horizon Pharma's shares. PRICE ACTION: In afternoon trading, shares of Selecta Biosciences have plunged nearly 34% to $8.82, while Horizon Pharma's stock has dropped about 4.5% to $18.36.