Pfenex

Inc (PFNX)

Consensus

Pfenex Inc was a Dow Chemical spinout founded in 2009. The platform
technology of Pfenex is a high-throughput system (HTS)+library of various
Pseudomonas fluorescens strains capable of expressing recombinant peptides and
proteins at, as the company suggests “higher yields and efficiency”. This
technology, specifically as it centers around P. fluorescens as a host, is patented
by the original Dow developers, who have joined the spinout and many of whom
have been with it since (with the exception of the CFO and CMO who have upped
and quit the company recently and CEO who was removed in 2017 after some
board-level misconduct).

Pharmaceutical protein production relies on a variety of host strains currently.
Both eukaryotic cells (yeast, fungi, mammalian, etc) and prokaryotic systems
(bacterial - mostly E.coli) can be used to mass produce proteins with varying
degrees of efficiency and various risks of contamination. For the most part, in my
experience, E.coli is a widely used expression system that has evolved to be
efficient and clean. Since it is a gram-negative bacterium, its cell membrane is
potentially endotoxic but, unless batched by some fly-by-night third world
manufacturer, purification is no longer a complicated process. Many contract
manufacturers know how to grow and manage such systems and in fact most
medicinal proteins are produced in E. coli.

Now, this is where PFNX comes in. P. fluorescens is not a widely used host for
protein production at all. It is novel, and in fact I am not aware (but this does not
mean it does not exist) of any commercial drug manufactured in this host. It is a
higher-yield expression system in theory, but I have not been able to find any
practical proof of this. PFNX have existed, and have been partnering and out-
licensing programs, since as far back as 2009 but alas we have yet to see a single
P. fluorescens drug from PFNX reach commercial stage.

Then there are the constantly broken partnerships. On PFNX website we find an
image of their pipeline+partnerships which does not strictly represent reality.
For instance, the Lucentis/Neulasta programs are on hold after PFNX was
dumped by Pfizer in 2016, as is the BARDA one since 2019 after BARDA chose
not to continue the partnership at cGMP manufacturing stage. All the others are
either too preclinical or too early into the license. The Jazz one is the only one
that could mean anything, but really the PF708 (PDUFA on Oct 7 2019) is going
to be quite make or break for PFNX. See image (with artistic emphasis by me) for
clarification.




Of note, E.coli manufacturing process can NOT be used for P. fluorescens – that is,
one cannot substitute the cells and keep the medium/purification process the
same, at all. P. fluorescens manufacturing will require a new production system,
new medium, etc, which is not terribly different from the E.coli, but nonetheless
not at all the same.

As well as this, PFNX do NOT have or claim to have manufacturing capabilities
for P. fluorescens commercial expression and manufacturing. Their technology is
strictly the high-throughput selection of strains that, once selected, would be
passed onto a manufacturing/sales partner.

PF708

So – getting to the point: PFNX’s drug PF708 is a generic version of teriparatide
(Lilly’s Forteo approved for osteoporosis). Because this drug is a very small
peptide, its copy drugs can be classified as generics and not as biosimilars.
Because of this, PFNX opted to attempt to commercialize PF708 under the
505(b)2 pathway. PFNX ran a pivotal Phase 3 study showing pretty good
equivalent efficacy to Forteo, and this study predominantly formed the essence
of the regulatory package which was submitted to the FDA on Dec 10, 2018. The
FDA accepted the NDA in February 2019 with a PDUFA date of October 7, 2019.

For PF708, like for all other programs, PFNX have a commercial partner who will
be responsible for all manufacturing and sales, with PFNX being eligible for some
(not very high) milestones and some obscure royalties. The partner for PF708 is
the generic manufacturer Alvogen. This partnership was signed in June 2018,
just after the positive Ph3 of PF708 bioequivalence to Forteo (May 2018).
Alvogen is responsible for basically everything, including the batch
manufacturing of this drug in Pseudomonas (they do not have such facilities so
far, I believe). However - PFNX are responsible for all regulatory proceedings, so
they submitted the NDA for PF708 in December 2018.

Manufacturing of PF708

Now here is the tricky part. The small peptide PFNX were able to produce and
compare to Forteo appears to be nicely biologically equivalent, and I’m sure that
it the case. However, as is well known to everyone, the FDA attribute as much
importance to CMC, cGMP and general manufacturing practices in new drug
applications as they do to the efficacy and pharmacokinetics. This may be not so
monumental for a chemical small molecule drug with straightforward lab
synthesis procedures, but for a peptide manufactured in a brand new bacterial
system, which is potentially endotoxic and not well known to reviewers, this is of
colossal importance.

Therefore – surely, PFNX have paid great attention to the manufacturing process
which formed part of their NDA. For the record, the company must submit 3
batches of commercial ready product and a 12 month stability results as part of a
drug application. Except, as per PFNX’s latest 10Q:

1. PFNX does not actually know how to scale up their manufacturing of
PF708 at this time, and are “currently transferring” manufacturing
techniques to Alvogen:

“We do not currently have the infrastructure or capability internally to manufacture
supplies of our product candidates for use in clinical studies, and we lack the
resources and the capability to manufacture any of our product candidates on a
clinical or commercial scale. We rely on Alvogen, our collaboration partners, and
other third-party manufacturers, including with respect to PF708, to manufacture
our product candidates for preclinical and clinical studies, and potential commercial
supply. Successfully transferring complicated manufacturing techniques to
manufacturing organizations and scaling up these techniques for commercial
quantities will be time consuming and we may not be able to achieve such transfer.
For example, we are currently transferring manufacturing techniques related to
PF708 to Alvogen."

2. It seems as though PFNX do not actually have a CMO, but rather a
raw materials supplier, for the production of PF708 (unclear). To
this day I have not been able to identify the CMO manufacturing
PF708 for PFNX, having gone through most PFNX SEC filings. To the
best of my knowledge, PFNX have repeatedly evaded/avoided
revealing the identity of their contract manufacturer for this drug.

“The Company is currently in the process of transferring internally managed
manufacturing activities to Alvogen. In April 2019, the Company entered into an
 agreement with Alvogen where the Company acted as the liaison between Alvogen
and the Company’s established raw materials supplier/manufacturer."

Thus, about a year after the submission of the NDA.. PFNX seem to not really
know who or what or where will manufacture PF708..


3. PFNX does not currently have an alternate supplier (although PFNX
believes they exist in theory) who would supply drug product to
Alvogen in case current production is insufficient:

“We and Alvogen have not yet identified alternate suppliers for PF708, nor have we
identified alternate suppliers for any other product candidate, in the event the
current CMOs we utilize are unable to scale to commercial production, pass required
preapproval inspections, or if we otherwise experience any problems with them.
Although we believe alternative third-party suppliers with the necessary
manufacturing and regulatory expertise and facilities exist, it would be expensive
and take a significant amount of time to arrange for, and qualify, alternative
suppliers.”

At this point, there are several possible answers to the mystery of where PF708
is being manufactured and why they won’t tell us about it:

1. PFNX receive basic raw materials from a third party, and manufacture the
product in-house, calling this raw material provider their “CMO”
arbitrarily – clearly not sufficient for commercial production, not
approvable
2. PFNX have a CMO whose identity they are intent on keeping secret – the
obvious reason for this would be that the CMO is not a cGMP facility, is not
located in the US (PFNX’s manufacturing partner for other products is
actually located in Malaysia), or generally is not reputable – certainly
insufficient for FDA approval on the basis of CMC
3. PFNX’s secretiveness around CMO is related to manufacturing trade
secrets, etc – possible but funny & unlikely

In the absence of essential information, such as who the mystery CMO PFNX are
transferring to Alvogen is and under what terms, it is not possible to know
whether PFNX/Alvogen actually have the manufacturing capacity necessitated
by an NDA. However, all current information that PFNX made available to us
considered, the situation is looking rather bleak. If PFNX indeed have not
commercially scaled up their manufacturing process for PF708 at least by the
date of NDA filing (as appears to be the case), then it seems rather unlikely that
they were able to submit to the FDA the necessary commercial batch product for
proper assessment. IF the manufacturing process is going to be entirely or
partially new, upon process transfer to Alvogen (which was still not completed at
least by June 2019), then the FDA definitely have not been presented with the
final commercial product, and it would be impossible for the agency to approve
Pfenex’s drug application in this state. Of course, it may be that PFNX/Alvogen
have the entire manufacturing process in order in a state-of-the-art facility that
they just chose to pleasantly surprise the market with.

In the case that PFNX receive a CRL on October 7th on the basis of incomplete
CMC information, my guess is the CRL will be rather harsh and complicated, due
to the complexity of mass production in a totally novel bacterial host. Because
nearly all other meaningful partnerships of PFNX have now been broken, and
due to the fact that PFNX definitely need to raise in order to continue operations,
this should be a fugly trade-down. At $200m market cap + $212.590m deficit, in
the absence of a lead product, the low double-digit milestones PFNX have been
able to secure from Jazz will be rather meaningless.

If anyone has met with the company, know the identity of Pfenex’s mystery CMO
or have any views which challenge this thesis, they are very welcome.