Rachel Williamson: 0:00
The science and the money are converging around kidney disease. But it wasn't always like this. A decade ago, these therapies were uninvestible.
I'm Rachel Williamson, and this is Phase III.
Research is being funded. Multimillion dollar deals are being made. Drugs that actually work are being approved by regulators. Nephrology, that's the technical term for all things kidneys, is having a moment.
In this four part series we are investigating why kidney disease in all of its forms is so hot right now. We will interview the heads of the four biotechs in Australia working on these illnesses, an analyst to find out why big deals are being done, and experts closest to the research.
When it comes to kidney disease, here are the first things you need to know: The new blockbuster kidney drugs have only been on the market for less than two years. The main causes of chronic kidney disease. are aging and lifestyle -- around the world demographics are skewing older and lifestyle diseases are increasing. And finally, dialysis and kidney transplants are obscenely expensive.
What this all means is the business case for new therapies is finally stacking up. Australia has a handful of biotechs working on kidneys, and the excitement globally is being felt here. And yet, it's still a condition so unsexy, so anonymous, that 90% of people who have it don't know they do.
To understand why chronic kidney disease is such a focus for biotechs and where the future therapies may go, I turned to Professor Meg Jardine. She's the director of the National Health Medical Research Council's Clinical Trials Centre in Sydney, and she's the boss of the kidney health research team there. If anyone can join the dots as to why no one is kidding around anymore about kidneys, it's her.
Meg, thank you very much for joining me.
Meg Jardine: 2:26
Pleasure to be with you.
Rachel Williamson: 2:28
Nephrology has been enjoying a clinical surge for some time due to a 2016 public private partnership in the US called the Kidney Health Initiative. But you're also putting it down to major changes in the way clinical trials were organized after 2008. Can you tell us a little bit about that?
Meg Jardine: 2:50
Look, I think you're right. It's a number of factors that have all come together at the same time. One of the really important bits was that the regulators are requiring a higher standard now, and there was a drug a while back that was approved and then it was turned out that it had adverse cardiovascular outcomes. And that then led to a requirement from the US FDA that anything released for diabetes control needed to have a large trial showing that it was safe for cardiovascular disease.
What that's meant is that we've been able to learn a whole lot more about new drugs and it just happens that the new drugs that have been developed since then have not only been safe, they've been beneficial. So that led to a huge investment in trials and a huge boom in knowledge.
Together with that, there's been interest from the Kidney Health Initiative, the new surrogate endpoint of proteinuria for IgA nephropathy, that was directly the work of the Kidney Health Initiative.
Rachel Williamson: 3:50
Okay, so let's talk a little bit about that initiative. Why did that lay the groundwork for the opportunities we see today for life sciences companies?
Meg Jardine: 4:00
In rare disease, it can be really hard to pull a trial together. So the Kidney Health Initiative looked at that problem in particular and came up with new end points that the regulators, the clinicians, the trialists, and industry all agreed were valid end points. And that then meant a whole lot of trials in rare diseases became possible and that's led to a huge investment in some of the rare forms of kidney disease. So that's really worked well. And I think another factor is kidney disease has really come to the fore. It was largely unrecognised for many years; there's much more awareness now. There are a lot of organisations that have been really working, pulling together. KHI is one, the American Society of Nephrology, the European body, the International Society of Nephrology. So, a number of different factors, but they've all had the effect of pulling us together.
Rachel Williamson: 4:55
Let's take a break here. Kidney disease is now a big deal and a lot of work has been done to make kidney health science possible for biotechs, and for investors to back them. But what kind of unmet need are we actually talking about here?
Data from the Australian Institute of Health and Welfare says about one in 10 Australians have chronic kidney disease. That almost doubles for indigenous Australians. Of these one in 10 people, about a 10th of cases are rare forms. Another 10th or so are genetic. Rare and genetic diseases are where Australian biotechs are trying to make their mark. The other 70-80% of cases are mostly caused by three things: age; lifestyle choices such as diet or smoking; and having other lifestyle diseases such as diabetes, whose medication can also harm the kidneys.
It's known as the silent killer, because 90% of people who have any form of the condition don't know before it's too late and the damage has been done. There is no cure. And treating it is expensive, coming in at $11 to$12 billion in Australia in 2020.
Meg, with that context in mind, if the raw need is sucking that much money out of health budgets in Australia, is this country keeping up when it comes to drug development as well?
Meg Jardine: 6:28
Australia is doing okay in terms of advancing the trials. We have greater representation in the Phase 2 trials, the early trials and that's for many factors. We've got a very stable health system we have government R&D incentives, so we do well for Phase 2. We participate in Phase 3 but I think the bit that's weakest is the phase after that once you've proven something is effective. At the moment there's relatively passive measures taken to get those drugs into practice. So for a country like Australia with a population that we have, less than 30 million easily, our best way forward, I think, is making sure that we continue to participate in the big trials.
Rachel Williamson: 7:17
I was looking at a chart showing the pipeline for kidney disease drugs growing rapidly from 2019 onwards. There was some really good growth before that, but it was 2019 where things started to take off. But what are your thoughts about that timeline? Because obviously for things to take off from 2019, a lot of work had to go in beforehand for many years.
Meg Jardine: 7:41
Yeah, look, that, that is so true. one of the things, I think, in the past that held kidney disease back is that there was a little bit of a fear that including people with kidney disease in your trial might jeopardise it.
People with kidney disease have lots of other health issues and the feeling was that that might make it impossible to show that your drug worked. In fact, what the last few years have shown is that if you include people with kidney disease in your trial, the trial's more likely to be successful. And that's, you know, because people with kidney disease are at higher risk of events and when you have higher event rates in trials, that's when you get the chance to show that something that truly works, works in the trial.
But the thing about kidney disease is that we've really got very good understandings now about how to measure kidney function. That's also helped give a bit of confidence to people about investing in trials for kidney disease.
I suppose the third factor, if I could list one is there has been a bit of a fortunate co timing. We've had the big trials like the SGLT2 inhibitors, the GLP 1 receptor agonists, the, um, MRAs. They've broadly helped many people with chronic kidney disease. And at the same time, we've had this appetite from regulators to look at, uh, ways to enable, uh, rare disease trials.
Rachel Williamson: 8:59
I'm going to jump in here with some explainers of those drugs that Meg just mentioned. SGLT2 inhibitors are a diabetes medication that targets the kidneys. GLP-1 receptor agonists are how Ozempic works, and MRAs are mineralocorticoid receptor agonists that block a hormone which balances salt and water in the body.
And as another aside, you will have all heard of course of Ozempic, the weight loss drug that came out of diabetes medication semaglutide. It's proving to be super useful for kidneys. One example of the type of research that's coming out about semaglutide and kidneys came through in late 2023.
Pharmaceuticals company Novo Nordisk found that semaglutide reduces the risk of kidney failure in people who have Type 2 diabetes and chronic kidney disease. The results were so convincing, it stopped the 3,500 patient trial several months early. Meg, therapeutics specifically designed for kidney disease and even others like Ozempic which aren't, are clearly getting plenty of attention. What about diagnostics?
Meg Jardine: 10:18
That's a great point, Rachel. Essentially in the last few decades, we're not getting the transformative change that we see elsewhere. There are pockets of intense investment people trying to look at things like the wearable kidney, trying to look at things that are biocompatible, look at ways to replace their kidney functioning without being reliant on transplantation. But it's hard going and it's because the incentives and the, the funding to be frank just aren't, aren't backing those endeavours.
Rachel Williamson: 10:51
Now you touched on what the new drugs have taught us about the disease, but I'm going to read you a list of drug approvals since 2021. The big ones.
2021, you had the US Federal Drug Administration or FDA approved both AstraZeneca's Farxiga and Bayer's Kerendia, both for chronic kidney disease. Then in 2022, there was Tarpeyo from Swedish biopharma Caliditis Therapeutics, currently subject to a Japanese takeover offer, which is very interesting. That's for a rare kidney condition, IgA nephropathy, and that was also interesting because it pioneered proteinuria as a surrogate end point. And then of course, last year, 2023, you had Boehringer Ingelheim's Jardiance for chronic kidney disease.
What have these drugs done to advance our knowledge of the disease and really kick other treatments forward?
Meg Jardine: 11:47
That is a great question. We've got two big groups here. We've got the things that work, the big blockbusters that work on all forms of CKD, diabetes, non diabetes, heart failure and so forth and there are three strong contenders there. And I think what they've shown is how much these conditions travel together. And why that's important is because it means we need to refashion the way we care for these people. Instead of fashioning it around the training requirements of health professionals. You see a kidney doctor for your kidney, you see a heart doctor for your heart, and so forth. We should refashion so that it's all focused around the patient, so that you have that unified care.
Rachel Williamson: 12:33
We haven't talked much about the rare diseases that still make a solid percentage of kidney disease, and which are the target of most of the Australian companies working in the space. How are those changing the progression of therapies here?
Meg Jardine: 12:51
What we're understanding is how molecules that target particular pathways in the immune system, how they work or do not work in different sorts of immune conditions. And that's helping us have a better understanding of what the actual, you know, fundamental cause of those conditions are.
Until recently, I'm probably simplifying a little bit, but the basic approach to these immune systems was just to suppress the immune system across the board and just hope that that slowed down the, the progression of the kidney disease. But it had a lot of other problems, when you dampen the whole immune system, you get a lot of infections and high risks of cancer and everything else. With these newer agents, we're getting much better, much more targeted treatments and in some conditions we're getting closer to the upstream cores. And so we're getting much more precise treatments. Yea we've got a long way to go and partly that's because we still have a lot to learn about the fundamental cause of many of these conditions.
Rachel Williamson: 13:52
That was professor Meg Jardine from the National Health and Medical Research Council explaining the science landscape for kidney disease today. We'll be back after this short break to talk about the investment side.
14:08
Hi there, I'm Charis Palmer, producer of Phase III. When Rachel and I set about building a new podcast for life science leaders, scientists, and long suffering biotech investors, we looked at what was missing in this space. We believe Phase III serves an unmet need for in-depth conversations in a world where nuance matters and AI-written investment articles simply won't cut it. If you agree, please follow us and sign up to our newsletter via LinkedIn, pledge financial support at phase3.Buzzsprout.com and rate and review the podcast on the podcast platform you use, to help bring it to the attention of others. Now, back to the show.
Rachel Williamson: 14:47
Remember how Meg described the US Kidney Health Initiative's work to set up a great end points or clinical trial outcomes that biotechs could work towards? They were critical for getting investors to back the tech being trialed because no one wanted to spend a fortune on enormous open-ended trials that lasted for years.
Today, those trials are bearing fruit, especially in Australia where one of the darlings of the ASX's biotech arena is working directly on kidney disease.
But while analysts and investors are deeply knowledgeable about these few companies in Australia, fewer are knowledgeable about the bigger picture. And given the size of the takeovers on the table around the world, the bigger picture is what is driving some of the local evaluations. And this is why we tapped biotech analyst Chris Kallos. He has been watching kidney related biotechs for a long time and he's well-placed to explain what is driving investor interest in Australia, and around the world, in kidney disease.
Chris, thank you for joining me today.
Chris Kallos: 15:58
Thank you for having me.
Rachel Williamson: 15:59
Nephrology is enjoying an investment boom in the US. Is that the case here in Australia?
Chris Kallos: 16:06
Well, yes, if we look at share prices of Dimerix and the performance over the last six months, definitely there's a lot of activity in that space given, for instance, the acquisition by CSL of Vifor, which became official at the end of '22. The short answer to that is yes, and it's growing, momentum is, is building.
Rachel Williamson: 16:30
You've also got companies like PYC Therapeutics. We will in this series be speaking with Certa Therapeutics, which is an unlisted company. There's not that much action here for investors in Australia. Is that what you're seeing? Are you seeing some companies come through that, people are keeping their eye on, or is that why Dimerix is so exciting for people right now? Because it is the only one that retail and professional investors can get into?
Chris Kallos: 17:02
Yeah, Rachel, there's quite a lot there to unpack. Uh, let's take a step back. A couple of years ago in 2020, the National Kidney Foundation in the US brought together the FDA, EMA, to specifically address the challenges around designing clinical trials for kidney disease to try and come up with surrogate endpoints that were meaningful for companies to invest and try and find early stage kidney disease therapeutics and diagnostics. That has been the turning point. And as a result of that, we're seeing a lot of, uh, a lot of activity in the US in takeovers, less so in here because we've been sort of late to the mark.
But one, one of the companies that was in that space already was Dimerix. A convergence of happy circumstances means that this is one of the few companies that has both a specific target in Phase 3, it has orphan drug designation, and it's producing good results and has secured a licensing deal. So to answer your question there is something, but it's, it's, uh, it's not as plentiful as many of the oncology drug developers on the ASX, and that's because of that reason, the ability to, create meaningful clinical designed trials has been up until recently.
Rachel Williamson: 18:35
We're going to touch on the orphan drug benefits shortly but first, in this episode we've covered the slew of drugs approved by the FDA in the last five years or so. What has that done for investor confidence in a country like Australia for kidney disease therapeutics generally?
Chris Kallos: 18:59
Look, generally, obviously when, when there's activity and acquisitions and approvals, there's a lot of excitement from the investment community, uh, and it does attract capital. I'm keep going back to Dimerix but I have to say, I'm just looking at the results over the last year, they're up 153% year to date. And if you look at the charts since the licensing deal late last year, the performance of that particular company in particular has been stellar. So when investors see that sort of performance, uh, they get excited for sure.
Rachel Williamson: 19:35
Speaking of deals, overseas things are really ramping up in this space. Novartis bought a Canadian company called Chinook Therapeutics in 2023 for US$3. 5 billion and that has two Phase 3s, two Phase 2s, and a Phase 1/2, and some others underway right now. You've mentioned CSL buying Vifor and that's pushing through a really interesting nephropathy drug through trials now, although it did have a hiccup in its Phase 3 in that It didn't meet one of the end points. Just weeks ago, Japanese company, Asahi Kasei, said it wanted to buy Caliditas for US$1. 1 billion.
What do those kind of deals say about the market for kidney drugs today? Not just in Australia, but globally.
Chris Kallos: 20:24
Well, very positive things, and not to ignore also the Vertex Pharma acquisition of, uh, Alpine Immune Sciences for$4.9 billion. These are very large numbers, and what it means is that there's a large, there's an unmet need here and, and that's borne out by the economics in the US. If you look at the spend of healthcare payers on kidney disease, I think in 2022 or thereabouts, it was around about US$88 billion. Now US$55 billion of that was in dialysis. So obviously there's a huge incentive to try and address these, these issues, problems well before they, they get to the, the, the end stage and the, and the dialysis stage of the disease.
Rachel Williamson: 21:18
Just sticking with the takeover, targets and the takeovers offers that are underway right now. How much credence should we give comparisons, for example, Novartis's takeover of Chinook Therapeutics, with local companies? And I say that because that particular deal was held up as what is possible for Dimerix, which is finishing its Phase 3 for focal segmental glomerulosclerosis or FSGS.
Chris Kallos: 21:43
It's a mouthful. In, in any particular deal, every, every deal I should say is unique to the two parties. Having said that, these are large numbers, so you can infer that depending on how they're structured, they're, the magnitude of deals that we could expect it's not, it's not unheard of.
There are just so many ways that certain Australian companies are coming to kidney, whether it's at the gene level like PYC or the diagnostic Proteomics. I think any of those will benefit from positive momentum offshore, whether it be acquisitions or approvals.
I think the beauty of biotech generally is that we operate in a global landscape, so any, anything positive could have knock on effects to not only licensing of these companies, but generally it can add to that momentum in kidney disease that we're seeing right now.
Rachel Williamson: 22:45
Let's get on to orphan drugs. I did promise that we'd get here.
Listeners, orphan status was established by the FDA, the US drug regulator, in the eighties. It is for therapies that affect fewer than 200,000 people in the US. Biotechs are incentivized to make therapies for rare diseases with perks like tax credits, reduced fees, and a longer exclusivity period for selling the drug after it's approved.
The US has been tinkering with this lately. The US inflation reduction act exempts orphan drugs that only treat one thing from negotiations designed to bring down prices. But for orphan drugs that treat multiple conditions, it's not so great and biotechs and pharma companies are crying foul that more affordable prices for end users in the US means they won't or can't invest in new research.
Chris, are you watching this? What sort of flow on effect could there be for Australian companies?
Chris Kallos: 23:49
I think to compromise what the FDA has been doing now for close to 40 years at this stage and discourage development of drugs for these small, rare diseases would be counterintuitive. The drugs in rare kidney diseases can be priced anywhere, up to and over US$120,000 per annum per patient, which in itself is not unique. Some of the immunotherapies that are, that, um, are being developed and even approved up around that price point.
Rachel Williamson: 24:25
Let's talk about diagnostics, which have been somewhat left behind in the race to treat kidney diseases, partly because the business case for early detection isn't quite there yet. Earlyish detection would be great, but early detection, there's no money in it as yet. Early detection is also wrapped into treatments around heart illnesses, diabetes, gut health, preventing those sorts of things, and a range of contributing health factors. What would make diagnostics investable and what sliver of diagnostics is, is investable right now because you've...
Chris Kallos: 25:06
Look, that's an easy one. What would make, what would light up this whole category would be, early stage treatments. I mean, it's, it's great to be able to diagnose early stage kidney disease and doctors can, and clinicians can take preventative measures and, and preempt further deterioration down the track. And as you, as you point out, there are co-morbidities that they can deal with. The basic fact is that there are, there's a real shortage of treatments at the early stage. So if those treatments were developed, they will go hand in hand with an early stage diagnostic. That's a perfect pairing.
Rachel Williamson: 25:47
Yeah. And all the drugs that are on the market and being developed right now are being developed for the disease that we see, which is the real end stage, rather than the...
Chris Kallos: 25:58
It's a bit counter counterintuitive by the, by the time we get to that end stage. Yes. We want treatments, but we really want to be addressing that well before we get there.
Rachel Williamson: 26:09
That was investment analyst, Chris Kallos.
So who is up-and-coming in kidney science? Who do investors love and why? Who has the tech that might appeal to buyers before it ticks all the boxes.
There aren't many companies working in kidneys in Australia, so we tracked down the ones which are. One is on the edge of putting its therapy into humans real humans that is, not the organoid they've already tested the drug on. And the other is on the cusp of greatness if it can pass that final phase three clinical trial hurdle.
Join us next episode, for the who's who of kidney biotech in Australia.
