Adamas Pharmaceuticals: two interesting programs for Alzheimer and Parkinsons Diseases

Adamas Pharmaceuticals, Inc. (ADMS) Nasdaq

Adamas (ADMS) is a company focused on CNS diseases, specifically Parkinson’s (PD) and Alzheimer’s Diseases (AD). It has a low market cap (~$300M), plenty of cash ($158M), low float with most of the shares (64.2%) held by insiders and institutions (link), two FDA approved products partnered with Forest/Actavis (for one of these products ADMS owns ex-USA rights), a Phase 3 (based on a Phase 2/3 trial that his its primary endpoint) with a readout not too far in the future (2H15), and a validated extended release platform.

While somewhat incremental relative to other more innovative approaches, modifying the pharmacokinetic properties of approved compounds can lead to significant improvements in the efficacy of the drug and to a reduction of adverse effects. Reformulating approved CNS drugs has represented a rather successful (both clinical and investment-wise) strategy over the past years. Just to cite the latest cases: Auspex (ASPX), Neurocrine (NBIX), Cynapsus (CYNAF) and Civitas (recently acquired by Acorda – ACOR) are all developing reformulations of drugs for movement disorders.

Adamas’ pipeline focuses on the modification of two FDA approved compounds: memantine and amantadine. Memantine is an NMDA antagonist approved for moderate to severe AD. Amantadine is also an NMDA antagonist. It is a generic drug currently used to treat levo-dopa induced dyskinesia in Parkinson’s Disease. Adamas has developed an approach to modify these two compounds that enhances their pharmacokinetic profile (i.e. extended release). The goal is to improve efficacy and/or reduce adverse effects.

The memantine program is entirely partnered with Forest/Actavis; there are two FDA approved products: Namenda XR (i.e. memantine extended-release) and Namzaric (memantine extended-release/donepezil). Namenda XR was developed by Forest as a reformulation of Namenda immediate release (a ~1.5 billion dollar/year franchise with patent ending this year) and is partnered with Adamas. Adamas will receive royalties in the low-mid single digits on sales of Namenda XR from June 2018. Namzaric is a Namenda XR/donepezil fixed-dose combination developed by Adamas in collaboration with Forest. Donezepil is an acetylcholinesterase inhibitor used in association with memantine in 60% of AD patients taking Namenda. Essentially Namenda XR aims at taking 60% of memantine market. Actavis expect to launch Namzaric in 2Q15; five years after launch (i.e. potentially 2020), Adamas will receive low-mid double digits royalties on sales of Namzaric. In addition, Adamas has ex-USA rights for Namzaric (under the name of ADS-8704), which is essentially available for partnering.

The amantadine program (i.e. amantadine extended release, ADS-5102) is currently unpartnered and wholly owned by ADMS. Regarding ADS-5102 the company states “The novel pharmacokinetic profile of ADS-5102 is expected to achieve i) maximal concentrations in the early morning through mid-day, when LID can be troublesome, and ii) lower concentrations in the evening, potentially reducing the negative impact of amantadine on sleep. This pharmacokinetic profile could enable higher doses to be tolerated with a once-nightly ER formulation than can be tolerated with an immediate-release formulation. The once-nightly dosing regimen may also provide enhanced convenience and compliance.”
The results from a positive Phase 2/3 study were recently published. The trial showed that ADS-5102 has a significant effect in reducing levodopa-induced dyskinesia, as measured using the UDysRS total score over eight weeks versus placebo. In addition, ADS-5102 induced a significant increase in time without dyskinesia. Adamas’ extended release formulation did not lead to the sleep disturbances typically observed with regular amantadine. However, similarly to the generic version, amantadine extended release resulted in a high incidence of other adverse effects. The Phase 3 (EASE LID) trial is currently under enrollment and is expected to finish enrollment by mid 2015 and read out by the end of 2015. Adamas is planning to begin testing a second indication for ADS-5102 in the first half of 2015. While the second indication has not been disclosed yet, the areas indicated are all extremely relevant (the company cites: hypokinetic movement disorders; hyperkinetic movement disorders such as Huntington’s chorea, tardive dyskinesia, and Tourette’s Syndrome; and neuropsychiatric disorders, such as depression, Alzheimer’s disease and traumatic brain injury)

In summary, I think Adamas is an interesting opportunity: strong financial situation, small market cap, focus on reformulations in an area of CNS disorders that has been very profitable in the past year (see ASPX, NBIX, CYNAF, and Civitas/ACOR), FDA-approved and partnered programs, and a late phase wholly owned clinical program with positive Phase 2/3 data. 2015 might provide some interesting catalysts, like the commercialization of Namzaric, potential partnering for ADS-8704, second indication for ADS-5102 and results of the Phase 3 trial for ADS-5102.

Of course, there are some issues that should be considered carefully. Above all, ADS-5102 needs to show advantages over generic amantadine and the Phase 2/3 trial, while positive, was not very informative in this sense. Indeed, ADS-5102 was not directly compared to amantadine immediate release. The design of Phase 3, comparing ADS-5102 with placebo, will not allow this direct comparison either. In addition, royalties from the memantine programs are not supposed to flow until 2018 and it might get delayed by a lawsuit to Actavis.

After weighing all the pros and cons, I decided to start a long position. As it is always the case with my reports, this is not an advice or a solicitation to buy, but an encouragement to do your own due diligence on this stock, evaluate the pros and cons and decide independently.

For technical standpoint visit Adamas Pharmaceuticals – Volatility Squeeze Action
Disclosure – The author is long ADMS

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