Longboard Pharma was acquired by H. Lundbeck A/S on Oct 14, 2024 at about $60 per share. The deal valued Longboard at roughly $2.6 billion dollars, which made it one of the highest returning biopharma stocks of the year. That acquisition price, if closed on, will deliver an 800% return for shareholders YTD at time of writing. Today we will take a closer look at this clinical stage pharma company, and its primary asset, bexicaserin.
Longboard started out as Arena Pharmaceutical’s neuroscience subsidiary, Arena Neuroscience. In 2020, the division was spun out into an independent public company, through a private financing deal in partnership with various investment managers including Farallon Capital Management, Cormorant Asset Management, HBM Healthcare Investments, Highside Capital Management, and T. Rowe Price Associates. Arena Pharmaceuticals continued to own some upside in the assets of Longboard through IP licensing rights, which now are owned by Pfizer, who purchased Arena Pharmaceuticals in March 2022.
At the time of the spin off, bexicaserin, then known under program code LP352, was just beginning to enter Phase 1 clinical trials. Fast forward to today, the drug is beginning phase 3 trials, allowing Lundbeck to state that the acquisition of Longboard “represents a significant step forward in Lundbeck’s Focused Innovator strategy, adding a highly innovative and complementary product in late-stage development for Developmental and Epileptic Encephalopathies (DEEs) – an area of high unmet medical need.”
Kevin Lind, the CFO of Arena Pharma turned CEO of Longboard stated: “Lundbeck’s remarkable capabilities will accelerate our vision to provide increased equity and access for underserved DEE patients with significant unmet medical needs.”
So why was Longboard worth almost 2x its October 13th closing price of $34 a share to Lundbeck? Char van Zyl, Lundbeck’s CEO, described the transaction as transformative, and that the assets of Longboard would “become a cornerstone in Lundbeck’s neuro-rare franchise, with a potential to drive growth into the next decade.” On Bexicaserin he stated: “Bexicaserin addresses a critical unmet need for patients suffering from rare and severe epilepsies, for which there are very few good treatment options available. With this acquisition, we continue to execute on our Focused Innovator strategy, transforming the lives of patients suffering from severe brain disorders.”
As we look deeper into the deal, Lundbeck highlighted in their Q3 2024 earnings call that the FDA’s breakthrough designation was a key factor in their acquisition logic. Johan Luthman, Executive Vice President of R & D at Lundbeck, highlighted specifically that bexicaserin was given a first of its kind broad label designation for a host of epilepsy indications, increasing the value of the drug as it enters its phase III DEEp SEA trial for Dravet Syndrome and DEEp OCEAN trial for “a mixed population of developmental and epileptic encephalopathies with Lennox-Gastaut syndrome patients included.”1 Both these trials will begin in 2024.
If we look at Lundbeck’s share price after the announcement, we see that not all market participants have necessarily agreed with Lundbeck’s decision, likely stemming from the price paid for Longboard. In order for us to get sense of the deal, lets build an understanding of Bexicaserin and DEEs.
Developmental and Epileptic Encephalopathies are a broad category of severe epileptic disorders which are marked specifically by a harmful spiral in the interplay between the developmental issues present in the patient and the epileptic episodes associated with the disorder. DEEs are differentiated from static developmental disorders and general epileptic disorders, because there is usually a single cause, often genetic, attributed to both the developmental issues and the epilepsy. DEEs also are particularly nasty in their characteristic harmful cycle, as the seizures which in some cases appear after the observation of developmental issues, will often worsen the cognitive or motor development impairments that were already occurring. With population studies putting the rate of occurrence at 1 in 590 children, the disease is classified as rare.
What feels notable about DEEs is the broad variation of causes among the disorder group. While in modern academic research, there is more detailed differentiation in nomenclature beginning to enter the vernacular, through specifying between genetic deviations pinned as the cause of a DEE, its probably easiest to understand the group of disease by simply saying that a common outcome of significant issues within a neural system is the occurrence of a DEE.
The variability in cause of the disease is one of the things which seems to make DEE’s very difficult to treat. For instance, in a common variant of DEEs we mentioned, Lennox-Gastaut Syndrome, the etiology of the disorder can span both genetic and acquired problems. Because of this, we classify LGS patients based on the symptom patterns, like the disorder onset age, the class of seizures, the EEG features and so on, but we cannot point to a single specific structural or genetic cause for it.
This is in contrast to Dravet’s Syndrome, where 90% of the patients exhibit a SCN1A mutation, or the CDKL5 Deficiency Disorder, which is caused by a CDKL5 gene mutation. The good news here is that with modern gene screening tools, we are able to determine the etiology in about half of all DEE patients now.
However, even with determining a known cause, which still does not occur in 100% of DEE diagnosis, treatment of the disorder remains challenging, as the seizures themselves are described as refractory, meaning that many conventional anti-seizure medications do not alleviate the symptoms, and in some cases exacerbate the condition.
When we look at the huge number of biological systems that a SCN1A mutation for instance, would disturb, it becomes clear why DEEs are so complicated to treat. Neural channelopathies involving receptors and neural transmitters, synaptopathies involving the more than 200 proteins within our synaptome, cell signaling and metabolic abnormalities as well as epigenetic expressions, are all implicated in some way within the disorder group. It reminds me of the initial phase of the “War on Cancer” launched in the 80s, where efforts seemed to just uncover the immense complexity of the variability in the causes of cancers.
Bexicaserin aims to treat DEEs, focusing on Dravet’s and LGS as the primary indications initially, through it’s precise agonistic targeting of the 5-hydroxytryptamine 2C receptor subtype (5-HT2C). 5-HT is commonly known as seratonin, which we tend to associate with happiness and mood regulation, though the neurostramitter is involved in variety of biological functions, including sleep regulation, digestion, and wound healing just to name a few.
The drug aims to build on research ongoing since the 1950s, which investigates the role of serotonergic circuits in the development of epileptic disorders. The mechanism that tends to be focused on is serotonin’s role in modulating neuronal excitability. Bexicaserin specifically aims to promote Gamma-aminobutyric acid neurotransmissions within GABAergic system. Essentially, Bexicaserin aims to promote GABAergic transmissions, which aids in suppressing neurological hyperexcitability.
There is a lot to like about Bexicaserin and the Lundbeck deal. First, at least in Dravet’s Syndrome we have a decent understanding of the pathways impacted. We know, for instance, that SCN1A encodes the Nav1.1 sodium channel, which has a critical role in the proper firing of inhibitory interneurons (GABAergic neurons). In DS, the mutation causes a loss of function in these channels, and decreases the availability of GABA as a neurotransmitter. Knowing that serotonin receptors are also involved in GABAergic systems, the hope is that a precision agonist will be able to enhance GABA release. And the hypothesis seemed to be the validated in the Phase 1/2 trials for Bexicaserin, with Longboard reporting a 59.8% reduction in motor seizures, compared to a 17.4% reduction in the placebo group. Specifically for Dravet syndrome, a 74.6% reduction was seen, with LGS and other DEEs seeing a lower effective seizure rate.
Furthermore, there is some precedence for Bexicaserin already on the market. Fenfluramine is currently the only FDA approved 5-HT ASMR on the market, which works similarly to Bexicaserin as a seratonin agonist. It’s mechanism of action is not as well known, as it was initially developed in the 1960s as an appetite suppressant, and later discontinued due to side effects involving cardiovascular toxicity. However, after success in some small trials in Europe as a seizure medication, it was reapproved in 2020 with an indication to treat Dravet’s Syndrome. In their Jan 2023 update, fenfluramine owner UCB, who markets the drug as Fintepla, projected peak sales of the drug to reach 800 million Euros, implying a strong need in the market. So far, the global launch of Fintepla has generated 226 million Euros in sales in 2023, and about 150 million Euros through the first half of 2024.
Even closer in pathway mechanism is lorcaserin, an Eisai owned drug which like bexicaserin, specifically targets the 5-HT2C receptor, as opposed to the broad group of 5-HT receptors that fenfluramine activates. There is belief that the cardiovascular issues that are a potential risk with fenfluramine comes from its broad based targeting of serotonin receptors, and the hope is that precision molecules targeting just the 2C variant receptor will reduce side effects. Unfortunately, lorcaserin, which also was an obesity drug that was pulled from the shelf, in this case due to an increased cancer risk in patients, has recently had its DS clinical trials shut down by Eisai. Reports speculate that the success of fenfluramine, which demonstrated a 74.9% reduction in seizures in its own clinical trial involving 119 DS patients, has reduced the marketability of lorcaserin, likely given that side effect of increased cancer risks. As we see then, the precedence for bexicaserin is a mixed bag. In one sense, we can feel secure that there are proven scientific mechanisms being targeted by the drug. However, we also know that there is already quite an effective drug on the market for DEE seizure moderation, and that previous experiences with 5HT targeting has led to several adverse effects, which bexicaserin is also not free of, though the obvious objective is to demonstrate less serious potential risks then both fenfluramin or lorcaserin.
Even then, DEE research has seen a wave of innovation in potential treatments, tapping into the leading edge of medicine and pharmacology. For instance, given the genetic etiology of the majority of these disorders, gene editing feels like a natural treatment pathway. For something like Dravet, the SCN1A gene is unfortunately too large for current viral vector delivery mechanisms, but this will certainly be an avenue that continues to be explored. And complex problems present Rmany areas for remedy. We see drugs targeting cholesterol, MGluR2 targeting, potassium channel targeting and Sigma-1 protein targeting all in some level of clinical trials for the treatment of DEEs.
Overall, this deal, and the future progress of bexicaserin is worth watching. The market could certainly use more effective ASMs for DEEs, especially one which would have much less severe side effects that current leading treatments. Success would also mean further confirmation of serotonin’s role in brain excitation modulation and seizure disorders. Ultimately though, this feels still like a stepping stone of disorder management, not disorder cure, which is the ultimate objective for those in this field.