Listen Up! Akouos, Inc is a hot IPO

Imagine a life without rock music, a baby’s laugh, or the sound of waves on the beach. Millions of people suffer from hearing loss every day; much of the cause is genetic, with no effective treatment. Akouos Inc, aims to change that. Will investors hear the sweet sound of the cash register ringing?

Akouos Inc. is a biotechnology company that is developing therapies aimed to restore and preserve hearing in populations with particular sets of genetics. The company utilizes adeno-associated viral (AAV) vector-based gene therapies to treat a range of forms of hearing loss, from a single genetic mutation to ototoxic drug exposure, in addition to the aging process. Akouos hopes to facilitate the healthcare industry’s ability to treat sensorineural hearing loss efficiently. Akouos had its initial public offering (IPO) on June 29, 2020, raising $212.5 million.

Competition

Akouos, Greek for “to hear,” benefits from limited competition due to the high research and development costs associated with rare gene therapies. However, there are several competitors in this space, and many of them have a similar strategy of expanding to more common causes of hearing loss, making competition among them inevitable. The primary potential competitors include Decibel Therapeutics, Applied Genetic Technologies Corp., Sensorion SA, and Frequency Therapeutics.

Decibel Therapeutics is a private company that is in the drug discovery phase for the treatment DB-OTO, curing congenital otoferlin (OTOF) deficiency in infants. Akouous’s main treatment program under development, AK-OTOF, also treats OTOF-mediated hearing loss, but for all age groups, and is already in the preclinical phase. Akouos also presumably has more direct funding available to move along with its clinical trials and further research, since it recently had a successful IPO. However, Decibel has partnered with Regeneron Pharmaceuticals for a strategic collaboration involving one of its two potential products.

Applied Genetic Technologies Corp (AGTC) and Otonomy, Inc. (OTIC) have also reached a collaboration to co-develop and commercialize an AAV-based gene therapy that is in the preclinical development stage. The gene therapy treats non-syndromic, sensorineural hearing loss resulting from a deleterious mutation of the GJB2 gene. Akouos is also developing a gene therapy for the mutation of the GJB2 gene, and both companies are in the preclinical development stage.

Sensorion SA is a French biotechnology company developing an AAV vector-based gene therapies for the inner ear, including OTOF deficiency, Usher Syndrome, and sudden sensorineural hearing loss. The two former treatments are in preclinical development, while the latter is in phase I/II trials. Sensorion, however, has limited funding available. Its total assets are only about €38 million, and its market capitalization is $52.2 million, yet it lost a staggering €13 million in 2019. The firm also has a collaboration with Institut Pasteur to develop its gene therapies.

Lastly, Frequency Therapeutics (FREQ) is developing an AAV gene therapy for sensorineural hearing loss (SNHL), the most common form of hearing loss, that is the result of damage to hair cells in the inner ear or problems with nerve pathways. These hair cells can be damaged through chronic noise exposure, aging, viral infections, or drugs that are toxic to the ear.

The current treatment option for severe hearing loss is a CI, or a surgical hearing device, as hearing aids are not effective for severe to profound hearing loss. CIs require a two to four-hour surgery that may be incompatible with future biologic therapies. Furthermore, CIs are also not as effective as the potential restoration of normal hearing, as the auditory content they transmit are complex and often of poor quality. Furthermore, they require extensive maintenance and can result in many negative consequences from anatomical movement.

Potential Pipeline

Akouos’s lead product candidate is AK-OTOF, a gene therapy treatment for otoferlin-mediated hearing loss that is in the preclinical development stage. The company expects to have a potential market size of about 7,000 patients. Sensorion and Decibel Therapeutics are also developing a similar gene therapy for the same hearing loss, and all of them are in the preclinical development stage. Akouos plans to submit an investigational new drug application (IND) for AK-OTOF for OTOF-mediated hearing loss to the FDA in 2021, and they expect to report preliminary clinical date in 2022. Phase 1 trials are expected to also begin in 2021.

The company also has a preclinical development program for the mutation of the CLRN1 gene, which results in Usher syndrome type 3A, a disorder that results in the progressive loss of hearing and vision. Usher syndrome type 3a affects nearly 2,000 in the U.S. and Europe. Akouos believes other hereditary deaf-blind disorders will be able to be treated with the AAV vector containing the functional version of the CLRN1 gene. The company expects to identify a candidate for the program in 2020.

Akouos has a third preclinical development program targeting the treatment of monogenic deafness caused by a mutation in the gap of the GJB2 gene. This is one of the most common forms of monogenic deafness. The potential market size is estimated at 200,000 patients in Europe and the United States. Preclinical studies are currently ongoing A candidate for this program is expected to be announced in 2021.

Furthermore, the company has a preclinical AK-antiVEGF program that targets vestibular schwannomas, the most common intracranial tumor. Over 3,000 vestibular schwannoma cases are diagnosed per year in the United States. These tumors cause numerous symptoms and are currently removed through surgical removal or radiation, both of which typically cause lost hearing and may be associated with morbidity. Akouos believes that systemic anti-VEGF therapy involving the AAV vector containing a gene that encodes a secreted anti-VEGF protein potentially could reduce schwannoma volume and improve hearing. The firm recently concluded a pilot non-human primate tolerability study and will be requesting a pre-IND meeting with the FDA in the second half of 2020.

Akouos also has two programs in the discovery stage of development. One program is for autosomal dominant hearing disorder, with the program target expected to be announced in 2021. The other program focuses on the regeneration of hair cells to restore hearing. The World Health Organization estimates that recreation noise exposure puts approximately 1.1 billion children and adults ages 12 to 35 years at risk of hearing loss. This program is also expected to have a target announcement in 2021. As shown by the overlap in the programs of Akouos and its competitors’, the firms are destined to crowd the market in the long-term but Akouos may be able to receive patent protection and leverage its expertise in its main product candidate to reach first-to-market standing.

Financials

Akouos initially aimed to raise $100 million in the IPO, selling 8.33 million shares at $14, but ultimately raised $212.5 million with 12.5 million shares at $17. The firm’s cash and cash equivalents in March 2020 were $120 million, so its current cash and cash equivalents are about $300 million. The firm also had total liabilities of only $21.7 million in March 2020. The proceeds from the IPO will be used to advance the clinical development of AK-OTOF, initiate the development of additional product candidates for ANTI-VEGF, CLRN1, and GJB2, continue preclinical development of other product candidates and development programs, establish internal manufacturing capabilities, and establishing working capital.

The company’s IPO price is slightly greater than its competitors’. Frequency Therapeutics had its IPO in October of 2019 at $13.49, but it is currently trading at $23.25. Applied Genetics Technologies Corp. had its IPO in April of 2014 at $14.55.

Is Akouos a Good Investment for You?

Akouos, Inc. has noteworthy potential if it can receive FDA approval for AK-OTOF as well as a patent on the AAV gene therapy. One profitable gene therapy company has a current price of nearly $75. Akouos plans to apply for expedited regulatory pathways, such as the orphan drug designation, which would allow it to achieve faster approval and funding for its research and development. Nonetheless, Akouos’s competitors have the potential to receive FDA approval of their OTOF therapy earlier, which would limit the Akouos’s potential profits and funding. Consequently, Akouos is an excellent buy for the investor willing to take a significant amount of risk holding this stock for several years with potential for a substantial return, but it is not a stock for the risk-averse. The company’s potential will become increasingly clear as more news becomes available regarding it and its competitors’ preclinical trials.