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Actionable news in CNCE: CONCERT PHARMACEUTICALS Inc,

A Look At Concert Pharmaceuticals

Summary

Concert Pharmaceuticals has several candidates that are deuterated versions of approved drugs, which has de-risked its platform.

These deuterated versions of approved drugs have the potential for greater efficacy than the non-deuterated versions.

Collaborations with big pharma companies provide platform validation.

Cash represents half of current market cap and should be enough to fund the pipeline through 2018.

Significant upside potential and lower than average risks (for a biotech) make Concert a speculative buy.

Concert Pharmaceuticals (NASDAQ:CNCE) was brought to my attention by one of the Growth Stock Forum subscribers and a quick glance over the company's pipeline and financials was enough to trigger my interest. Concert is not your usual biotech. The company has developed a deuterated chemical entity (or DCE) platform, which has the potential to provide better pharmacokinetic or metabolic properties, leading to better safety, tolerability and/or efficacy. Concert takes approved drugs or advanced clinical candidates and then tries to improve them with deuterium substitution. There are several promising candidates in the pipeline with the potential to unlock significant shareholder value in the following years. The development risks are lower than average for a biotech stock since the company is taking already approved drugs and making them more efficacious and/or safer. The upside potential is significant, and I think that getting just one product candidate approved could drive Concert's valuation north of $1 billion in the next few years.

DCE platform overview

According to Concert, the "average human body contains approximately two grams of deuterium." Deuterium is actually identical to hydrogen in shape and size, but it contains an additional neutron, which causes a more stable chemical bond with carbon. This deuterium-carbon bond is six to nine times more stable than the hydrogen-carbon bond. Concert states that "because deuterium forms more stable bonds with carbon, deuterium substitution can in some cases alter drug metabolism, including through improved metabolic stability, reduced formation of toxic metabolites, increased formation of desired active metabolites, or a combination of these effects." These deuterated compounds are also expected to "retain biochemical potency and selectivity similar to their hydrogen analogs."

Concert's development strategy is to take an already approved drug or an advanced clinical candidate and to apply its deuterium technology to potentially make the drug safer, more tolerable or to improve its efficacy. The benefits of such a strategy are lower than average risk of development. In addition to developing product candidates to compete directly with non-deuterated products, the company is also looking for new indications for which there is no direct non-deuterated competition. The development process is also faster and less expensive than average and candidates go quickly through proof-of-concept trials, and then the company decides whether to go ahead independently or to find a partner. These products also do not require a large sales force, which also lowers the commercialization costs and risks.

A look at the pipeline

Concert's entire pipeline is based on its DCE platform.

I will go over the two candidates for which the company owns the worldwide rights.

CTP-656, or '656 for convenience, is being developed for the treatment of cystic fibrosis in patients who have gating mutations. '656 was developed by adding the DCE technology to ivacaftor - Vertex's (NASDAQ:VRTX) Kalydeco, which is the current standard of care. The company believes that '656's benefits include improved efficacy related to its dosing (once a day versus twice for Kalydeco), greater exposure to parent drug versus less active metabolites with Kalydeco and fewer drug-drug interactions. In addition to '656 as monotherapy, the company also thinks that it can be used in combination therapies.

In early June, Concert presented the results from a Phase 1 study of '656. The trial included a single-dose tablet crossover comparison with Kalydeco, and the results showed that '656 provided substantially superior key exposure parameters. The first part of the study showed that the key exposure parameters of C24 and AUC were roughly 3x greater with '656 compared to Kalydeco and that the half-life of 150mg '656 was approximately 40% longer than 150mg of Kalydeco. The second part of the study showed that '656 "maintained its superior pharmacokinetic profile with greater exposure to the more potent parent drug than to less active metabolites." The results also showed that '656's safety profile was comparable to that of Kalydeco with no serious adverse events.

Source: Concert investor presentation

The company also recently completed a...


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