Eiger BioPharmaceuticals: Elucidating The Fundamentals Powering A Big Winner

Entrepreneurs are great at dealing with uncertainty and also very good at minimizing risk. That's the classic great entrepreneur. - Value Investor (Mohnish Pabrai)

Eiger BioPharmaceuticals (NASDAQ:EIGR) is experiencing a robust bull run for the day. This company is harnessing the innovative power of its team to brew an interesting drug portfolio that can deliver hopes for patients suffering from rare genetic diseases. As alluded, the stock was catapulted $4.77 higher at $16.62 for over 40% profits. The substantial profits were due to the latest partnership development with Merck (NYSE:MRK) that we��ll discuss later. In this research, we��ll elucidate pertinent corporate fundamentals and the latest partnership catalyst for the lead molecule (Lonafarnib).

Figure 1: Eiger stock chart. (Source: StockCharts).

Fundamentals Analysis

Based in Palo Alto, CA, Eiger is focusing on the innovation and commercialization of medicines to treat rare and highly difficult-to-manage conditions. Lead by a management team having the extensive clinical and commercial expertise, the company is powering an enriched portfolio of novel advanced-stage molecules as shown in figure 2.

Figure 2: Therapeutic pipeline (Source: Eiger).

Known as Hutchinson-Gilford Progeria Syndrome (��HGPS��), Progeria is a rare and fatal genetic disease that manifests itself with the signs and symptoms of accelerated aging. The underlying defect is the mutation of the lamin A gene, thus creating an overproduction of a rogue protein (progerin). Without the normal enzyme made from the expression of the lamin A gene, the cell��s nucleus becomes unstable.

Consequently, this leads to a plethora of symptoms of premature aging. As follows, patients afflicted by progeria usually died from heart disease (atherosclerosis) at the median age of 14.5 years. This is interesting because other patients dying from atherosclerosis are well into their old age. That aside, other manifestations include failure-to-thrive, thickened skin, abnormal fat distribution, hair loss, joint contractures, skeletal dysplasia, and strokes. The current treatments are geared toward symptomatic relief. Due to its lethality, the demand for better treatment is quite strong. And, Lonafarnib is likely that candidate.

Lonafarnib is an interesting molecule that works by inhibiting the enzyme (farnesyltransferase) involved in the chemical process coined farnesylation: this is imperative for the tight binding of the nuclear envelope that, in and of itself, is responsible for the nuclear instability. In-licensed from Merck, Eiger interestingly does not have to pay any binding royalties. Of note, the said drug is already designated as the orphan molecule by the FDA. And, it��s been dosed in over 80 children with Progeria in various Phase 1/2 and Phase 2 studies.

On May 16, 2018, Eiger announced the expanded-licensing agreement with Merck known as MSD for Lonafarnib. The said deal enabled Eiger to expand its development and commercialization rights outside of the US and Canada for Progeria. In addition, the company disclosed the completed collaborative agreement with the Progeria Research Foundation (��PRF��).

In this relationship, Eiger will continue to provide PRF with the free supply of Lonafarnib for ongoing clinical trials and expanded access, needed for any new drug application (��NDA��) filing based on PRF data. Moreover, the company intends to meet with the FDA for the guidance re the potential filing for approval. Commenting on the key development, the Medical Director and Co-Founder of PRF (Dr. Leslie Gordon) enthused:

Our mission at PRF is to discover treatments and the cure for Progeria, and its aging-related disorders, including heart disease. In a relatively short time, we have achieved extraordinary progress towards our mission including the Progeria gene discovery in 2003, the first clinical trial in Progeria initiated in 2007, and clinical evidence of a survival benefit for children administered Lonafarnib. We are indebted to Merck for supplying Lonafarnib free of charge to PRF-supported clinical trials, and for facilitating our new partnership with Eiger. We look forward to collaborating with Eiger as we pursue pathways for regulatory approval of Lonafarnib in Progeria.

For Q1 2018 (ended on March 31), Eiger reported the $8.8M ($0.84 per share) net losses compared to $11.2 ($1.34 per share) declines for the same period a year prior. The research and development expenses decreased to $5.5M from $7.5M. Investors should be cognizant that it is the norm for a relatively young bioscience like Eiger to incur significant losses for many years prior to banking a net profit (due to the lengthy and low success rate of the innovation process). Nonetheless, it only takes one blockbuster to make your investment worthwhile.

Pertaining to the balance sheet, there were $33.2M, thereby representing a 20% decrease from the $41.8M for the similar period. Based on these metrics, the company would need to execute a financing within the next three quarters. Given the recent share price appreciation, it would be prudent for the company to raise capital via an offering soon.

Final Remarks

Eiger BioPharmaceuticals is brewing a promising portfolio of therapeutics that can deliver strong outcomes like that for the progeria franchise that we discussed. Despite its small market potential, Lonafarnib can significantly augment the value for this small-cap bioscience. That aside, other franchises can deliver more additive value. Last but not least, it��s best to add a small pilot position while waiting for a pullback to build more shares: a stock can give up significant gains subsequent to a gargantuan bull run.

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