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Alder BioPharmaceuticals, Inc. - Initiation Note

Alder BioPharmaceuticals, Inc.

BUY (ALDR, $29.57)

A Real Contender In A Competitive Migraine Space – Potentially To Have The Most Convenient Dosing: Initiating BUY/$47 TP

November 17, 2016

Jonathan Aschoff, Ph.D.

212.417.8277

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  • We are initiating coverage of Alder BioPharmaceuticals, Inc. with a Buy rating and a 12-month target price of $47. Intravenous ALD403 is Alder’s lead product candidate, a novel anti-CGRP antibody for migraine. Positive Phase 2b results for ALD403 showed rapid onset of action and sustained efficacy with a convenient quarterly infusion frequency. ALD403 is in Phase 3 in frequent episodic migraine (FEM) with top-line data expected in 1H17, and a Phase 3 trial in chronic migraine (CM) will start in 4Q16, allowing for results in 1H18. SQ and IM ALD403 successfully completed Phase 1, and Phase 2 in FEM should begin in 2017 with either the SQ or IM formulation, also conveniently administered quarterly. We project a 2H18 BLA filing, US approval and launch of intravenous ALD403 for CM and FEM in late 2019, and EU approval and launch in 2020.
  • Migraine treatments address a large multi-billion dollar market. Alder faces competition from large entrenched players, but their dominant position could change as more effective and convenient treatments become available. US migraine prevalence is about 13% (14% in the EU), meaning that 33 million US adults suffer from migraines, of which about 3 million suffer CM. We adopt a clinical diagnosis rate of 62% (21 million) in the US (50% in the EU). Among diagnosed patients, about 56% are candidates for migraine preventative therapy. For the indications of CM and FEM, a combined annual global market opportunity of up to $8-10 billion, we estimate the addressable patient population to be approximately 1 million and 4 million in the US, respectively. Alder intends to sell ALD403 in the US itself and plans to seek one or more partners for ex-US development and commercialization of ALD403. Even with our conservative modeling of a low single digit penetration rate in the migraine market, we are able to support a far higher valuation than the current valuation.
  • There are no approved CGRP inhibitors for migraines to date, and we believe that ALD403's clear efficacy and convenient quarterly dosing may differentiate the drug from other CGRP inhibitors in development. There are several classes of migraine drugs on the market but the most relevant competition are the other CGRP targeted therapies in late stage clinical development, including drug candidates from Amgen (erenumab), Eli Lilly (galcanezumab), Teva (TEV-48125), and Allergan (MK-1602). While this amount of competition clearly validates targeting this pathway, ALD403 will most likely need to be differentiated to succeed. We believe that ALD403 can set itself apart on efficacy and low dosing frequency, especially if the SQ or IM formulations are effective when dosed quarterly, and we believe that the subset of migraine patients severe enough for treatment with anti-CGRPs is still large enough to accommodate several directly competing players.

ALDR


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