Investors are excited and terrified of humanity's emerging ability to edit our own genomes. That helps to frame why shares of Verve Therapeutics lost over one-third of their value when the development-stage biopharma paused a clinical trial after serious side effects were observed.

Although not all gene, base, and prime editors will make permanent changes to our genes, almost all current tools being evaluated in clinical trials make changes that cannot be reversed. That includes VERVE-101 from Verve Therapeutics.

Ruh roh.

However, the specific side effects observed and the nerdy details of the gene being silenced strongly suggest the adverse events weren't related to mucking around with genes. Instead, the adverse events were almost certainly related to the type of lipid nanoparticle (LNP) used to deliver the base editing payload to liver cells and the body's initial reaction to silencing the gene itself.

What's more, Verve Therapeutics always knew it could develop a more efficient version of VERVE-101. That's why it made the strategic decision to pursue a "fast follower" approach with VERVE-102, which uses the same base editing payload, but makes significant improvements to the LNP delivery vehicle. It's expected to begin a phase 1 clinical trial before the end of June 2024.

Why Was the HEART-1 Study Paused?

A patient treated in a clinical trial developed two Grade 3 adverse events related to VERVE-101. A Grade 3 adverse event is defined as severe, but not immediately life-threatening, and usually requires hospitalization for medical observation and stabilization.

• First, the patient had a transient increase in serum alanine aminotransferase (ALT). If you've ever had bloodwork done, then this is a type of liver enzyme. An increase is typically a sign of infection (or an immune response), inflammation, or liver injury. The word "transient" means the increase was temporary.
• Second, the patient had thrombocytopenia. This is defined as a reduction in blood platelets, which results in a reduced ability to form blood clots. It can risk severe bleeding, internally and externally.
• Both side effects fully resolved within a few days.

Patient safety is paramount. These side effects are not a good sign for VERVE-101, especially due to the specific dosing cohort in which they were observed.

A total of 13 patients had been treated in the HEART-1 study, which is a dose-escalation study. This is common for an experimental drug candidate that's never been administered to human patients. Doctors treat a few patients with a low dose, observe them, treat a few more patients with a slightly higher dose, observe them, and continue to a predetermined dosing level predicted to have a clinically-meaningful effect. There can always be unknown, rare, or oh-shit-we-thought-that-was-possible-shit-fuck-shit side effects.

The individual who developed the two Grade 3 events was the sixth patient treated in the 0.45 mg/kg cohort. This means the patient received 0.45 mg of the drug candidate for every 1 kg of their bodyweight. On conference calls or YouTube videos you may hear this pronounced by nerds in lab coats (or hacky analysts) as "migs per kig."

Unfortunately, the 0.45 mg/kg dose was the lowest being evaluated in the HEART-1 study. Verve Therapeutics had also dosed patients at 0.60 mg/kg and planned to go as high as 1.0 mg/kg. In other words, observing two Grade 3 adverse events, albeit in the same patient, in the lowest dose likely signifies the end of VERVE-101.

Were the Adverse Events Related to Base Editing?

It's very unlikely.

There Are Natural Mutations in the Targeted Gene

VERVE-101 is a CRISPR base editing candidate designed to silence the PCSK9 gene, which plays a role in regulating LDL cholesterol (LDL-C).

Inhibiting the PCSK9 enzyme (with small molecules or antibodies) or silencing the PCSK9 gene (with RNAi, RNA editing, gene editors, or base editors) can allow an individual to maintain healthy levels of cholesterol regardless of their diet.

There are FDA-approved drug products that inhibit the PCSK9 enzyme, including an RNAi drug product called Leqvio. They're effective and safe, so we know this is a clinically-validated target – even with genetic medicines.

The discovery of the PCSK9 gene's role in regulating LDL-C was also aided by observing rare mutations in the human population. People from various ethnicities have naturally-occurring mutations that offer protection from high cholesterol. They can eat whatever they want and are never at risk of high LDL-C. Lucky bastards.

Intriguingly, the mutation is almost non-existent in people of European ancestry, but more common in African, Indian, and Middle Eastern populations. It's a good reminder of the blind spots lurking in global genetic databases, which typically only include samples from individuals of European descent.

Base Editing is More Precise (but Not Perfect)

Unlike CRISPR gene editing, base editing doesn't make double-stranded breaks to the genome, which could pose long-term safety risks like an increase in cancer incidence or, if the edits were sloppy ("off target"), editing the wrong part of a patient's genome.

Instead, CRISPR base editing changes specific letters in a genetic sequence – A, T, C, and G – to a different letter. This can cause a very small, very specific mutation in a gene that disables its function.

Verve Therapeutics uses an adenine base editor in VERVE-101, which changes A to T and changes G to C. In this specific drug candidate, only a single base pair in the PCSK9 gene is changed. That's sufficient to silence its expression, which can permanently lower an individual's LDL-C levels.

Off-target editing risks are still present in base editing (these are called bystander edits in this context), but this is less likely in the PCSK9 gene. VERVE-101 targets a certain sequence in the gene that's conserved across the entire human population, which almost eliminates off-target editing risks.

PCSK9 Plays a Role in Blood Clotting

The PCSK9 gene plays a role in platelet function. Therefore, inhibiting this enzyme or gene can initially cause thrombocytopenia, especially in patients with heterozygous familial hypercholesterolemia (HeFH) – the indication being treated by VERVE-101.

The inherited disease results in very high levels of LDL cholesterol regardless of an individual's diet. Individuals with this condition are also likely to rely on LDL-C for blood clotting functions – not quite nature's intended route, but it gets the job done. Suddenly disabling the PCSK9 gene after a lifetime can cause molecular mayhem initially before the body reroutes blood clotting function to "proper" pathways.

In other words, thrombocytopenia is an on-target side effect caused by suddenly disabling the PCSK9 gene. It's a manageable side effect that might require observation or the administration of an additional drug for a week after treatment. Nevertheless, it still could be problematic for CRISPR base editors, especially if the long-term goal is to move beyond HeFH and into much larger cardiometabolic indications, like heart disease.

What's Likely Behind the Adverse Events of VERVE-101?

Whereas suddenly silencing the PCSK9 gene is the likely cause of transient thrombocytopenia, the delivery vehicle is almost certainly the cause of the elevated liver enzymes observed in HEART-1.

A CRISPR base editing payload comprises a guide RNA (for finding the proper genetic sequence to edit) and a base editor enzyme (for making the specific edits). However, because there are two independent components of the drug payload, they must be encapsulated to ensure they get delivered to the same place, at the same time, in the right amounts.

Verve Therapeutics encapsulated the base editing drug payload of VERVE-101 inside a lipid nanoparticle (LNP). LNPs are made of fatty acids or lipids. This allows systemic administration, like intravenously into the bloodstream, to primarily end up in a patient's liver – exactly where the PCSK9 gene needs to be edited. Perfect!

However, LNPs can also cause side effects due to their charge (molecular-level electrical charges) and how they're gobbled up by liver cells.

• The LNP used in VERVE-101 naturally binds to low-density lipoprotein receptors (LDLR) on the surface of liver cells. This works well enough, but drug products absorbed into cells this way can accumulate in the wrong places and cause liver inflammation.

During the Dark Ages of RNAi, when nothing worked and side effects derailed every clinical trial attempted, it was because the drug payloads were encapsulated in first-generation LNPs that used LDL receptors for uptake into liver cells. Alnylam Pharmaceuticals solved that challenge by created GalNAc, which is simply a sugar molecule attached to the end of the drug payload. This allowed RNAi drug candidates to ditch the use of LNPs and encapsulation altogether, but GalNAc can also be combined with LNPs to allow more targeted delivery.

• The LNP used in VERVE-102 has GalNAc attached to its surface, which means it binds to asialoglycoprotein receptors (ASGPR) on the surface of liver cells. In plain English, this is a more efficient way to delivery drug payloads to the liver. It can allow greater efficacy at lower doses, which can reduce or eliminate certain side effects, like elevated liver enzymes.
• The LNP used in VERVE-102 also uses a different lipid structure, which should make it more stable and less damaging to liver cells as it enters the liver. This should also help to reduce increases in liver enzymes.
• VERVE-102 uses the exact same base editing payload as VERVE-101.

Verve Therapeutics intends to begin a phase 1 clinical trial of VERVE-102 in HeFH in the second quarter of 2024. This trial will be called HEART-2.

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Forecast & Modeling Insights

(No change.)

The pause and likely termination of VERVE-101 is a setback measured in time. VERVE-102 has a higher probability of success than its predecessor, but it's also a year or so behind.

Generally speaking, a time delay impacts when investors can expect a payoff or durable price appreciation. It could also change the dynamics of the competitive landscape, as competing and already-approved drug products will have an additional year to make inroads.

However, the impact on the competitive dynamics is almost meaningless in this specific case. The competitive landscape of PCSK9 treatments was already robust with multiple approved treatments, including a pretty effective RNAi treatment. Verve Therapeutics can still claw its way into the discussion with favorable results for VERVE-102, especially since a one-time treatment in this specific context does make a significant impact on patient convenience.

My modeled fair valuation hasn't changed – it's still $1.2 billion. This reflects expectations for a positive phase 1 clinical trial for the PCSK9 drug candidate, which is now VERVE-102.

My price target has changed, but only because I never updated the share count in the model. It jumped from 77.9 million shares outstanding in October 2023 to 96.2 million shares outstanding. Both took the last reported share count and tacked on 15% dilution.

Margin of Safety & Allocation

Verve Therapeutics is considered a Growth (Speculative) position. The current modeled fair valuation for the company based on our 2024 model is below:

• Market close April 2: $8.32 per share
• Modeled Fair Valuation: $12.48 per share
• Allocation Range: Up to 2.5%

Verve Therapeutics reported 83.619 million shares outstanding as of February 20, 2024. The modeled fair valuation above assumes 96.162 million shares outstanding, which is equivalent to 15% dilution.

Further Reading

• April 2024 press release announcing update for VERVE-101
• May 2023 study in Nature discussing the nerdy technical details for designing LNP-GalNAc delivery tools for CRISPR base editors

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