Merck walks away from KalVista, who turns their sights on HAE
Two months after KalVista announced its diabetic macular edema drug failed a Phase II trial, its big-name partner, Merck, has ended their up-to-$760 million deal.
Signed in 2017, that deal didn’t make KalVista – they had already landed $33 million from marquee venture firms, including Novo A/S and SV Life Sciences – but it turned the biotech from a microcap that had reverse-merged its way onto public markets into a name investors knew. Lead drug KVD001 was about to go into Phase II. Merck paid $37 million upfront, more than KalVista’s valuation at the time, to back the drug’s development and for the option to pick up or walk away from it once Phase II data was in.
Now, with both dosing arms of the drug failing to improve best-visual acuity in DME patients, Merck is out. The move comes as no surprise to analysts, many of whom saw the writing on the trial readout wall.
“We think investors buying the stock today should largely assume that this program won’t move forward,” Stifel’s Paul Matties wrote in a note on the day of the trial readout.
The question is what comes next for the biotech, now unfettered from prior Big Pharma engagements.
After the December readout, Matties speculated it was possible they could search for a new partner. And in the press release announcing Merck’s departure, KalVista said their data showed a clear “efficacy signal” and a “clear market opportunity” for their class of drugs – known as oral plasma kallikrein inhibitors – in diabetic macular edema.
“Our focus in DME has always been to develop products that help patients protect their vision, and we will continue in this pursuit,” they wrote.
KalVista and analysts, though, appeared to have largely moved on to their other plasma kallikrein inhibitor program: hereditary angioedema (HAE). SVB Leerink’s Dae Gon Ha wrote KalVista still has value but the Merck divorce renders it “a pure-play in the hereditary angioedema (HAE) [market].”
“We believe that most investors have removed the asset from their respective models,” Gon Ha wrote. “Yet we were pleasantly surprised by a high degree of investor interest when we recently hosted KALV [management].”
Matteis offered similar sentiments in December. KalVista indicated they would prioritize that route, writing they would “aggressively pursue” oral plasma kallikrein inhibitor for HAE.
HAE, which can cause swelling across the body, is a rare genetic disorder. That means trials and commercialization for the indication will be cheaper for a small biotech to run than diabetic macular edema, a condition that affects over 500,000 Americans.
Data from a Phase II proof-of-concept study on KVD900 as a treatment for HAE are due out in the second quarter of 2020. Phase II study for KVD824 as a prophylactic is slated to begin in the second half of 2020.