By Daniel Wilhelmi
Part 1: Facts of the ONWARD Phase III-trials
Part 2: Mistakes around the data readout and how they affect the future of Adial
Part 3: The assessment of Adial by the stock market and where we go from here.
Preamble: I have been working as a financial journalist and analyst for small cap companies and growth stories for over 20 years. I also work as an investor relations-consultant for publicly traded companies. But I am not a native English-speaker. I apologize for any language mistakes.
Part 1: Facts of the ONWARD Phase III-trials
We have to analyze the ONWARD phase III trials and the situation at Adial Pharmaceuticals on four diverse levels: The facts of the topline-results of the phase III-trials. The actions of the management (including the communication of the trial results). The assessment of the trial results by the stock market. The future of Adial. There is also a new fifth level: the new management. But we will focus on this point in another article at a later point.
Here and now, we focus on AD04 and the phase III trial results. We begin with a particularly important fact investors need to know. But most of them don`t. To be fair: the old Adial-management didn`t do a great job communicating this fact. It is: in trials for medication against most forms of addiction, the placebo-groups show higher and better results than we usually see in trials of other medical indications.
The reason: the placebo-groups consist highly motivated patients, who want to conquer their addiction. They receive the same therapy-treatment as the drug-group, except for the drug. Since the psychological effects of therapy have higher positive effects in addiction treatment then in other medical indications, which are purely based on biological problems (cancer etc.), the placebo-group will show high positive improvements. However, these effects tend to fade with longer durations of the trials (as there is no medical help to support the emotional motivation, which goes down with time).
AD04: Phase III-trials show statistical significance in important Heavy Drinker-group
With this information in the back of our minds, let us dive deep into the topline data of the ONWARD trial results of AD04: The trial was conducted for six months in six European countries with 25 trial sites. Unfortunately, its start of the trials fell into the peak of the Covid 19-lockdowns of 2020/21.
The situation surrounding the trials could not have been more difficult. We have to give the old management around Bill Stilley a lot of credit for getting the trials off the ground in the historic circumstances. However, this also led to some problems we will discuss later.
If we look purely at the chart of Adial, we have to think that the trial-results were terrible. Not a failure. Then the stock would have been down -80 to -90 %. But bad to terrible. In reality an analyzes of the topline results show: these results were the quite the opposite – they were good. Not great and overall not good enough for what Adial was looking for. But good and in certain categories even excellent.
Let us dig into the numbers: AD04 achieved a statistically significant reduction in Heavy Drinking Days (HDD) compared to the baseline (no treatment) and the placebo group (similar treatment but sugar pill instead of AD04) in the group of “Heavy Drinkers”. In the last month of the trials (month six), the data showed an approximately -79 % reduction of HDD among the patients in the AD04-group. Much better than the placebo group according to management. But this number was not clearly communicated (a big mistake by the management).
Particularly important: The Heavy Drinker-group made up about 65 % of the total trial population of 302 patients. So, this is the important group. If we only get good results one group, we want it to be the main group. Not some small subgroup that is only a minority of the trial population.
In the second group of “Very Heavy Drinkers” the AD04-group also reported a significant reduction of HDD by over 50 %. But: The placebo group showed a fairly similar reduction of HDD. So, there was no statistical significance in this group. But this group only made up about 35 % of the trial population. However: the combination of the two groups led to a miss on the primary endpoint.
What the trial results really show: AD04 works!
The safety data was very good in both groups. Again. It confirmed the great safety data of the Phase 2b results. In the ONWARD phase III-trials the safety data of the AD04-group was better than the placebo group. We can put a big green checkmark behind the safety-aspect, which is always important. This drug is safe.
The trial results also showed an unexpected and great result for many participating patients: 27,4 % of the patients receiving AD04 didn`t meet criteria for AUD-patients anymore at the end of the trials (< two of six criteria’s). In the placebo group the reduction was 14,9 %. The number of patients not meeting the AUD-definition at the end of the trials was +83,9 % higher among the AD04-patients than in the placebo-group. That is a significant improvement.
These facts clearly show that AD04 works. The proof: we saw significant reduction of HDD in both groups and a sensational reduction of patients meeting AUD-criteria. This drug works and it is safe. And it showed the desired statistical significance in the larger group of the Heavy Drinkers.
Only bad piece of data in placebo-group of Very Heavy Drinkers
There was only one bad set of data: the unusually high reduction of HDDs in the placebo group in the smaller Very Heavy Drinker group (VHD). That dragged down the combined trial results. According to medical literature we reviewed, the VHD-group makes up between 15 % to 25 % of all people with AUD-illness in the real world (depending on the literature).
This leads to the main problem of the ONWARD trial: the trial construction. If the VHD-group is about 17,5 % in reality (the median of the different percentages stated in medical literature) – why was it twice the size in the ONWARD-trials (about 35 %)?
This leads to a follow up-question: would a more accurate representation of Heavy drinker and Very Heavy Drinkers in the ONWARD-trials changed the overall results of the trials? We don`t know the answer. But I think we can all agree it would have likely improved the overall results.
However, instead of blaming the management, we have to look at the situation of 2019/2020. Adial was already behind schedule to start the ONWARD-trials. The market as well as the shareholders desperately wanted to get the trials started. But an unusual number of VHD-patients signed up for the trials in the testing sites Europe.
Then Covid 19 hits the world. Let us remember the world in the first half of 2020. The world literally shut down. There was no time to recruit more patients. You had to go with what you had. I believe we have to give management a pass on this situation. This was just bad luck.
Trial construction: Mistakes and bad luck
The duration of six months of the ONWARD trials has also been critiqued. I would agree with the critics. The data indicates that a longer trial could have likely improved the statistical significance difference between AD04-patients and the placebo group in the Heavy Drinker-group and maybe even the VHD-group.
But again: we have to look at the situation not in hindsight but in the moment of time it occurred. The Phase 2b trials were four months and produced great results. So Adial management already extended the ONWARD trials by two months (50 %). All shareholders, me included, wanted to get these trials done. I do not remember any discussion about a twelve month-trial back then.
Everybody wanted the trials to finish as fast as possible to get the phase III results we had been waiting for. If Adial-management would have designed the trials to be twelve months, shareholders would have revolted back then.
Also remember: these trials are expensive. I estimate that an expansion to 12 months would have costs Adial probably an additional four to six million USD. That is a lot of money for a small biotech-company if your data in that moment in time suggests you are probably okay with six months.
Longer trials would likely have helped
However, a trial-length of eight to nine months would have been the right move to stack the deck in Adial´s advantage (as data suggests longer trial likely increases trial success). But if we are honest: Based on the Phase 2b-data, everybody signed off on a six months trial back then. I don`t hold this decision against the management. But if shareholders want to critique the company for it, I understand that side of the argument as well.
The conclusions of these facts are as followed:
- AD04 works. It is safe.
- AD04 showed statistical significance in the bigger, more important group of Heavy Drinkers. More important because if represents the overwhelmingly larger group of potential patients.
- 24,7 % of the patients from the AD04-group improved to a level that they didn`t meet the criteria for ADU-patients anymore. That is an 83,9 % increase compared to the placebo-group.
- The only bad data-point was an unusually high reduction of HDDs of the placebo-group of VHD.
- There were problems in the trial construction.
Are these results good enough to get an approval of the EMA and FDA? I put the chances for an approval of the FDA close to zero. But we knew that before the trials. The management always communicated that additional trials were planned for US-approval. These ONWARD-trials were specifically for EMA-approval for Europe. An FDA approval would have been a bonus.
Will the data be good enough for EMA-approval? Nobody knows at this point. But a conditional approval is a possibility, as the data for the HD-group was very good and the reduction of patients matching the definition of AUD-illness was excellent. However, I would not use this possibility as a reason to invest in Adial. It should be treated as a potential positive surprise.
Conclusion: My personal opinion about the trial results: The problem is not AD04. It works. The problem were mistakes in the trial designs and bad luck (Covid-lockdowns). As crazy as it sounds: That is good news under the circumstances. Mistakes and problems in the trial design can be corrected in future trials (f.e. exclusive focus on HD-group and longer trials).
Problems with the drug would be the neck breaker for Adial. But that is not the case. If we compare the data from Phase 2b and the Phase III-results from the HD-group to the VHD-group, the statistical anomaly of the unusually high HDD-reduction of the placebo-group becomes obvious. This topline data is not what everybody wanted, but it is good – and much better than the market thinks.
– Disclaimer –
All information provided is never investment advice and reflects my very own opinion. My company, W.J. Investor Strategies GmbH acts as an investor relations provider for small cap companies in the European market and, in some cases, owns shares of mentioned companies which could be a conflict of interest.
