Vectoring In On Voyager Therapeutics

"Some beautiful paths can't be discovered without getting lost."― Erol Ozan

Today, we take a deeper look at a small developmental concern with several major collaboration deals with large drug makers. The company enjoys a cash rich balance sheet at the moment as well. An analysis follows below.

Company Overview

Voyager Therapeutics, Inc. (NASDAQ:VYGR) is a Cambridge Massachusetts based preclinical biopharmaceutical concern focused on the development of adeno-associated virus (AAV) therapies for neurological disorders. The company recently inked a multiple-program out-licensing deal with Neurocrine Biosciences but still has no program in the clinic after abandoning its VY-AADC and VY-HTT01 clinical efforts for Parkinson's and Huntington's diseases (respectively) in 2021. Voyager was formed in 2013 and went public in 2015, raising net proceeds of $72.9 million at $14 per share. The stock currently trades just under eight bucks a share, translating to a market cap of approximately $335 million.

TRACER Platform History

In 2019, the company began developing a proprietary platform called Tropism Redirection of AAV by Cell Type-Specific Expression of RNA (TRACER) to facilitate the selection of AAV capsids with blood-brain barrier (BBB) crossing and cell specific transduction properties for therapeutic applications. One of the drawbacks to gene therapies targeting neurological targets - including Voyager's first-generation programs - is that they have a difficult journey across the BBB and have weak transduction within the central nervous system [CNS]. As such, large doses are required to affect its target, leading to sporadic efficacy and off-site toxicity. [For those unaware, capsids are the protein shells surrounding viruses where the genetic material is held.]

After a series of clinical holds and busted or strained collaborations with Sanofi Genzyme (SNY), AbbVie (ABBV), and Neurocrine that eventually ushered out the now former CEO and R&D Chief in May 2021, interim management opted to terminate its clinical programs to focus on its next-generation capsids spawned by TRACER. The objective of the platform is to develop gene therapies with better specificity and less toxicity, which can be accomplished with lower doses owing to their robust penetration of the BBB and stout transduction of the CNS. In murine models, results have been impressive, with certain capsid variants achieving up to 1,000-fold improvements in CNS transduction versus commonly used and BBB-crossing gene therapy vector AAV9. When the company announced its intention to pivot to TRACER-based therapies and become a preclinical concern, there was understandable skepticism, given its prior failures, and its stock traded below $3 a share (or approximately balance sheet cash) in mid-2021.

However, the first validation of this approach didn't take too long when in October 2021 Pfizer (PFE) paid Voyager $30 million upfront and (potentially) $20 million in exercise fees for two gene therapy program options with $580 million in eligible milestones. One program was for AAV capsids targeting a rare undisclosed neurologic disorder; the other for cardiovascular disease. This news propelled shares of VYGR more than 100% higher to $5.55 over the subsequent three trading sessions on volume north of 280 million shares, or more than seven times the number outstanding.

Novartis (NVS) then emerged five months later, paying $54 million upfront to kick the tires on three undisclosed CNS targets for one year. If it had elected to proceed on all three programs, it would have paid Voyager option fees of $37.5 million, which could lead to potential milestones of $1.5 billion, as well as mid-to-high single digit royalties. On March 6th, Novartis decided to go forward with two option targets for a $25 million upfront payment as well as $600 million in potential development, regulatory, and commercial milestone payments, plus royalties. Novartis chose not to license the third capsid candidate for one CNS target under the original agreement. The rights linked to that target are now returned to Voyager,

Pfizer delivered its exercise decisions in October 2022, electing to pay $10 million to take up its option on the neurological disorder indication but not the cardiovascular program. That development reduces Voyager's total potential milestone windfall to $290 million, as well as mid-to-high single digit royalties, with Pfizer responsible for the compound's development. At that time, management indicated that it had enough cash to fund operations into FY24.

Then on January 9, 2023, Voyager announced that it had significantly expanded its prior agreement with Neurocrine, a collaboration partner since 2019. The new out-licensing deal provides Neurocrine the worldwide rights to Voyager's GBA1 gene therapy program for Parkinson's disease and other GBA1-mediated diseases, as well as three new gene therapy programs for rare CNS indications. In return, Voyager received cash of $136 million and an investment from Neurocrine in the amount of $39 million (4.39 million newly issued shares at $8.88 per).

For the GBA1 program, Neurocrine will fund the Phase 1 trial. After the data readout from that study, Voyager can elect to cost- and profit-share with its collaborator in the U.S. If it punts, Voyager is still eligible to receive development milestones totaling $985 million, substantial sales milestones, and tiered royalties between low double digits and twenty percent. Ex-U.S., it is eligible to receive milestones and high single digits to mid-teens royalties. For each of the other three programs, Voyager can receive $175 million in development milestones, substantial commercial milestone payments, and royalties. In total, Voyager could receive $4.2 billion in milestones. As part of the arrangement, Neurocrine's Chief Scientific Officer Jude Onyia will join Voyager's board of directors.

This development was impressive considering the two biotechs had worked unsuccessfully on first-generation gene therapy VY-AADC, which Neurocrine walked away from in 2021, after extending total cash of $165 million ($50 million equity) to Voyager for that failed program plus three others (a Friedreich's Ataxia indication and two undisclosed targets) back in 2019. With the significant upfront cash infusion and the deal's huge upside potential, the market rallied Voyager's stock 55% in the subsequent five trading sessions to $10.78 a share on January 13, 2023. However, a good portion of that rally has now receded.

Balance Sheet & Analyst Commentary

The Neurocrine infusion provided Voyager with cash and investments of ~$275 million to ~$280 million as of March 1, 2023 and a cash runway well into 2025, not counting any option fees or development milestones over the next 18 months. The recently announced $25 million upfront payment from Novartis added to that cash balance.

Since the Novartis decision was announced, Robert W. Baird reissued their Buy and $12 price target on VYGR. Oppenheimer also initiated the share with a new Outperform rating and $14 price target while BTIG stuck with their Hold rating on the equity.

It should be noted that a beneficial owner in the stock has sold just over $7 million of their stake in 2023 while another beneficial owner disposed of just less than $7 million of his stake in Voyager as well. Company officers have also sold just over $200,000 worth of their holdings collectively so far this year.

Verdict

With Novartis' $25 million payment, Voyager is only trading at a ~$30 million to ~$35 million premium to cash with potential milestones of ~$4.5 billion from its updated Neurocrine and Pfizer collaborations. The insider selling is a bit disconcerting with the stock trading near net cash, there is enough to this story to merit a small 'watch item' investment.

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