Adial: Promising Relief for Addiction

PRIME SERIES

References to abuse and dependence on alcohol trace back to the earliest Egyptian and Babylonian writings.  Yet the idea that excessive alcohol use causes problems had mixed acceptance.  The adverse effects of habitual alcohol abuse did not gain widespread recognition until the mid-19^th century when ‘alcoholism’ finally appeared in the lexicon. 

It has not been until the last few decades that any significant progress has been made in understanding the effects of alcohol on the human body.  It warrants a new name  -  alcohol use disorder (AUD)  -  to fully encompass the many paths to dependence on alcohol and the understanding of it as a chronic relapsing brain disease. 

Even as scientists have gained insight into alcohol’s ravages on mind and body, effective treatments for alcohol use disorder (AUD) have remained limited.  Early stage biotech Adial Pharmaceuticals, Inc. (ADIL:  Nasdaq) is trying to change that with development of a therapeutic compound based on ondansetron, a well known selective antagonist of the serotonin.  Adial is building on earlier work using ondansetron as a treatment of severe nausea and vomiting.  The company is about to begin a clinical trial targeting binge drinkers  -  the only Phase III clinical trial in the world set to begin in 2019  -  that could bring relief to a disorder that causes pain and loss to millions.

An Underserved Market

According to the National Survey on Drug Use and Health (NSDUH) completed in 2015, an estimated 15.1 million people in the United States over the age of 18 years suffered from AUD.  The survey found the group is tilted toward men  -  9.8 million men versus 5.3 million women.  

Adial management believes the situation is even more dire than suggested by the NSDUH.  They point to the National Epidemiologic Survey on Alcohol Related Conditions (NESARC) published in the Journal of the American Medical Association (JAMA) in 2015, that used a more recent, broader definition of the disease.  This survey found 30 million people over the age of 18 years had AUD in 2013.  For perspective that was 13.9% of the U.S. population in 2015  -  17.6% of adult men and 10.4% of adult women.  

Tragically, at the time those surveys were completed, only about 7% of the adults who were thought to have AUD received treatment.  

With so many people going without help, it is no surprise that the disease is costly.  The associated social and health effects of AUD are serious  -  accidents, violence, domestic abuse, chronic heart and liver disease, fetal alcohol syndrome, loss of employment. The U.S. Centers for Disease Control and Prevention (CDC) estimates the economic cost of alcohol abuse and dependence is as much as $249 billion each year in the U.S.  The CDC researchers determined the costs are primarily associated with loss in workplace productivity from absenteeism as well as workers’ compensation, unemployment and disability payments. 

What is even more compelling for developers like Adial is that those that do seek treatment are often limited to detoxification and abstinence programs that may not work.  A 2013 study found that about 20% of those receiving treatment for AUD returned to pre-treatment levels of alcohol use within a year.  Success rates for well-known twelve-step programs may be as low as 5%, while the American Society of Addiction Medicine (ASAM) pegs the Alcoholism Anonymous success rate at 10%. 

Limited Options, Large Obstacles

There are AUD treatment options that have been on the market for some years.  Beside motivational enhancement therapy and cognitive-behavioral treatment there are three prescription medications approved for use in the U.S.  -  disulfiram, naltrexone and acamprosate.  Nalmefene has also been approved in Europe.  The main goals of these treatments are to either help patients avoid alcohol entirely or to reduce alcohol use, both of which have been shown to deliver improvement in health, safety and quality of life.  Yet, all four are dependent upon full abstinence or an ongoing detoxification effort.

ALCOHOL ABUSE MEDICATIONS
Compound	Brand Name	Developer/Producer	Action	Side Effects
Disulfiram	Antabuse	Teva Pharmaceuticals	Inhibits acetaldehyde dehydogenase enzyme in liver that breaks down alcohol	Violent reactions to alcohol,  confusion, seizures
Naltrexone	Vivitrol, Depade, ReVia	Alkermes, Plc. Mallinckrodt Pharma. Teva Pharmaceuticals	Opioid-blocking drug operating through risk-reward feedback in brain	Stomach cramping, anxiety, headache, nausea, sleep loss
Acamprosate	Campral	Allergan, Inc. (Forest) Mylan Pharmaceuticals	Mimics neurotransmitters, stabilizes signaling during alcohol withdrawal	Diarrhea, nausea, loss of appetite, vision problems, memory loss
Nalmefene	Selincro	H. Lundbeck AS	Prevents alcohol-induced release of dopamine	Nausea, headache, dizziness, insomnia
Source:  Corporate presentations

Unfortunately, these approved treatments are often contraindicated by a patient’s unique physiology.  What is more the sometimes brutal side effects of these drugs can give pause even to the most desperate AUD suffer.  Disulfiram causes such violent reactions to alcohol it not only serves as a deterrent to consumption of even the smallest toddy, it can lead to vision changes, extreme confusion and seizures. All four drugs have reputations for stomach pain and nausea.

As a consequence only about 6% of people who say they have AUD are prescribed any medication to help with stopping and avoiding alcohol abuse.  This leave wide open an opportunity to serve AUD suffers with an effective and tolerable therapeutic alternative.

There is building knowledge of the brain and how alcohol affects it, making possible improvements on these therapies.  One of the revelations is that genetic influences may predispose certain individuals to develop AUD.  Adial’s Chairman, Dr. Bankole Johnson, has been one of the leading researchers in capturing the genetic profile of AUD and paving the way to more effective therapies.

New Research Focus

Adial’s lead investigational compound, AD04, is a selective serotonin-3 antagonist that the company wants to target at certain patients with a particular genetic make-up.  Serotonin is a neurotransmitter in the human body that is believed to help regulate mood, social behavior and the risk-reward mechanism.  The serotonin antagonist is believed to interrupt the reinforcing effects of alcohol in the brain that drives the urge to drink.

The active ingredient in AD04 is ondansetron, the first serotonin-3 antagonist to receive FDA approval.  Its developer, GlaxoSmith Kline (GSK:  NYSE) first established efficiency in the late 1980s in animal models and continued with extensive studies that resulted in a treatment for severe nausea and vomiting that is now marketed as Zofran.  

AD04 Trial Results Summary

Adial has an exclusive license to AD04 from the University of Virginia Patent Foundation, which holds three separate patents on the technology. Under the direction of Dr. Johnson, then an addiction researcher and chairman of the University of Virginia (UVA) Department of Psychiatry, a Phase 2b clinical trial was completed involving 238 patients with AUD that were given ondansetron.   Adial has access to all the data from this early trial that showed a statistically significant difference between ondansetron and placebo doses.  The endpoints of the trial were reduction in severity of drinking as measured by drinks per day and reduction in the frequency of drinking as measured in days of abstinence. 

Adial also benefits from the original safety clinical trials for ondansetron.  Studies of the compound leading up to FDA approval of Zofran for nausea, involved does as to almost 100 times the dosage anticipated for AD04.  Even at high doses ondansetron was well-tolerated and resulted in few adverse effects.  However, in the Phase 2B trial at UVA, participants were actually given low doses of ondansetron.

Phase 3 Clinical Trial

Serotonin Receptor Structure

Adial is moving forward with a Phase 3 clinical trial using its AD04 candidate with 294 patients who engage in heavy drinking.  Participants will also be screened for certain target genetics.  The reinforcing effects of alcohol on the human brain are thought to be accentuated in patients with mutated genes that control the serotonin function.  Adial researchers believe their AD04 compound will be effective for patients with that particular genetic marker.  The company will be using a well established diagnostic biomarker testing technology to find study participants with these genetics.      

Ultimately, the biomarker test will be a requirement posted on its label before prescribing an approved AD04 compound.  Adial will seek regulatory approval of the test, simultaneously with approval of the AD04 compound.   

Opening Door to Change in AUD Diagnosis and Treatment

The biomarker test, which is expected to be low-cost, fast and accurate, could be used by physicians as pre-treatment screening step.  The marriage of the test with the treatment may increase the likelihood of success for the patient who could receive a treatment most suited to his or her genetic make-up and resulting pathway to alcohol abuse. 

Although Adial management believes psychiatrists and addiction specialists will be among the first to begin using AD04, the biomarker test and then the drug could be administered by primary care physicians as well.  Frontline medical professionals often see patients who exhibit signs of problem drinking but are resistant to a conversation about AUD.  The biomarker test could be an opening to an effective care program that might not otherwise be undertaken. Use of an objective test is expected to remove some of the social stigma associated with the disease that may discourage patients who fear the label ‘alcoholic.’ 

The linkage of the biomarker test as a pre-treatment screen in the physician’s office may represent fundamental change in AUD treatment.  The change in the exam room could broadly expand number of people who seek AUD treatment.   

Ahead of the Pack

There are other compounds under investigation for use in treating AUD, but none appear poised to have a significant impact on the AUD treatment. 

Baclofen, a selective agonist for the GABA-B receptor, is sold under the name Lioresal and other generic names for the treatment of muscle spasm.  Three large clinical trials for baclofen involving over 600 patients with AUD were completed in 2016, but produced mixed results.  Only one of the three found any difference in alcohol consumption and abstention between baclofen and placebo groups. 

Gabapentin, a calcium channel blocker, also impacts GABA-B production.  Xenoport, Inc., now owned by Arbor Pharmaceuticals LLC (privately held), orchestrated a clinical trial in 2014, involving 150 alcohol-dependent participants found that gabapentin was effective in treating relapse symptoms. 

Financing Secured

Adial management estimates it will require an investment of approximately $6.5 million to complete the initial Phase 3 clinical trial for AD04.  Approximately, $2.5 million of capital raise in the company’s initial public offering in July 2018, has been earmarked for the trial budget.  Management believes its work will qualify for existing grant programs, which could be used as part of the other $4.0 million in required to complete the initial Phase 3 trial.  

A second, larger Phase 3 trial is planned with as many as 580 participants.  The company will set up the second trial with the same screening approach as in the first trial.  However, the desired end point will be simpler -  no heavy drinking days in last two months of the trial.  The larger trial will require additional capital, but by then Adial management expects to have data from the first trial to help gain interest from investors. 

Valuing Sober Patients

Adial management is confident on future valuation for its contribution to AUD treatment.  The team looks to the successful trajectory of the buprenorphine and naloxone compound developed and marketed as Suboxone by Reckitt Benckizer Pharmaceuticals and now Indivior, Plc (INDV: L).  Suboxone has been called the ‘gold standard’ of medication-assisted treatment of opioid dependence.  Before patent protection ended and generic alternatives came on the market, Suboxone accounted for 85% of spending on medicated-assisted opioid dependence treatment.  The Adial team, which includes as Adial director and former Indivior business development officer Tony Goodman, aspires to duplicate the Suboxone market success.  Adial hopes to earn similar respect from biotech investors that tripled Indivior shares within three years of its IPO.  Even after a recent sell-off the Indivior addiction dependence play still gives early investors a 72% gain since the going public action in 2015.  

Part II of this two part series on Adial Pharmaceutical will look at the company’s financial profile and its promising technology to treat alcohol abuse disorder.

PUBLIC COMPANIES MENTIONED IN THIS ARTICLE
Company	SYM	Price	Mkt Cap	Sales	EPS	PE
Teva Pharmaceuticals	TEVA	$22.85	$23,270	$20,780	-$10.09	Neg
Alkermes, Plc	ALKS	$39.66	$6,160	$1,020	-$0.92	Neg
Mallinckrodt Pharmaceutical	MNK	$30.50	$2,540	$3,270	$18.59	1.64
Allergan, Inc.	AGN	$188.22	$63,890	$16,160	-$5.32	Neg
Mylan Pharmaceuticals	MYL	$37.48	$19,320	$11,720	$0.87	43.23
H. Lundbeck AS	LUN.CO	$60.65	$1,903	$2,847	$2.89	21.01
GlaxoSmithKline	GSK	$39.01	$94,880	$39,680	$0.88	44.13
Indivior Plc	INDV.L	$352.49	$2,561	$1,407	$12.34	28.56
Pfizer Pharmaceuticals	PFE	$42.96	$251,840	$53,240	$3.74	11.47
Adial Pharmaceutical, Inc.	ADIL	$2.75	$18	$0	-$0.41	Neg
*All figures in USD; Market cap and sales in millions

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

Underwriters of the Prime series may have a beneficial interest in, serve as agents of, or act as advisers to the companies mentioned herein.