Biotech portfolio update – 2013 summary and 2014 preview

Seattle Genetics (+65% in 2013)

In 2013, Seattle Genetics’ (SGEN) Adcetris reached market saturation in its approved labeling (relapsed/refractory HL), shifting market attention to label expansion. These include DLBCL, where Adcetris showed impressive efficacy in highly refractory patients (42% response rate, PFS of 5 months) and CTCL (73% response rate). Adcetris is in phase III for earlier stages of HL as well as CTCL, which are viewed as the next opportunity to grow sales. The company will outline its registration strategy for DLBCL in early 2014.

Partnered pipeline continued to mature with some programs generating promising data. The most advanced program is Celldex’s (CLDX) CDX-011 (glembatumumab vedotin), which recently started a pivotal trial in breast cancer and is not expected to generate meaningful data in 2014. Genentech reported positive results for 3 ADCs (out of a total of 8 programs). At ASH 2013, pinatuzumab vedotin (anti-CD22) and polatuzumab vedotin (anti-CD79b) had a response rate of 40%-50% in NHL at the highest dose, but this came at the price of considerable side effects. At AACR in April, Genentech presented phase I data for DMUC5754A (anti-MUC16) in ovarian cancer. There were 5 responses in the 29 patients who received the maximum tolerated dose. Although PFS was relatively modest, results are encouraging given the fact patients had platinum resistant disease.   

2014 catalysts

For Adcetris, the most important event will be preliminary phase III results from AETHERA (consolidation treatment after transplant) which are expected in 2H/2014. Other wholly owned programs are expected to read out, including updated phase I results for SGN-19A in ALL and NHL. Expectations for this program are limited given

the large amount of competing programs, including other CD19-targeting programs (Fc engineered antibodies, ADCs, CARs). 

The company is expected to report initial phase I data for SGN-33A (anti-CD33) and SGN-LIV1A (anti-LIV1) in AML and breast cancer, respectively. From an indication perspective, breast cancer appears to be more relevant for ADCs (especially ones that are using tubulin binders). AML is notoriously resistant to chemotherapy, and 2 other CD33-targeting ADCs have already failed in AML (Mylotarg and AVE9633). 

Seattle Genetics’ partnered pipeline is expected to have a busy 2014, with 16 programs in clinical development. Genentech’s pipeline is expected to generate a significant amount of data including results from a randomized study comparing its CD22 with CD79b ADCs, when added to Rituxan. Genentech may report phase I results for additional programs and advance some of the programs to phase II/III. 

Exelixis (+27% in 2013) 

Exelixis’ (EXEL) shares were range bound in 2013 but this will change in 2014, following phase III data for Cometriq (cabozantinib) in prostate cancer. In 2013, Exelixis started booking sales for Cometriq in a niche indication (Medullary thyroid cancer), with a quarterly run rate of ~$5M in the US. This represents a significant portion of the commercial opportunity reflected by the drug’s label (assuming minimal off label use).  

In terms of data release, Exelixis presented phase II results from a single arm trial for Cometriq in metastatic prostate cancer (discussed here). Results included a provocative bone scan effect (not seen to date with other drugs) coupled with improvement across several markers (pain, bone markers, circulating tumor cells). The median overall survival (10.8 months) is challenging to interpret without a control arm but it appears positive given the highly refractory patients.  

Cometriq also showed promising efficacy in RET-mutated lung cancer. Among 3 evaluable patients, 2 had an objective response and third experienced prolonged disease stabilization. 

Exelixis’ most advanced partnered program is cobimetinib, a MEK inhibitor partnered with Roche/Genentech. At ESMO 2013, Roche presented positive combination data with Zelboraf, demonstrating a response rate of 85% in 1st line melanoma patients with BRAF-mutated tumors. This is numerically superior to the 50% typically seen with single agent Zelboraf and comparable to what GSK presented for its MEK+BRAF combination. 

Exelixis initiated 2 additional pivotal trials for Cometriq in renal and liver cancer, respectively. Results are expected in 2015-2016.   

2014 catalysts

The most important event for Exelixis will be phase III   data in prostate cancer, representing a $1B opportunity in the US alone. In the absence of randomized phase II data, the market is pessimistic on the trial’s outcome. The 2nd most important readout will be from a phase III for cobimetinib in melanoma, expected in 2H/2014. Exelixis recently exercised its U.S. co-promotion option, which will enable it to commercialize the drug in the US alongside Genentech. Even when applying conservative market share assumptions, cobimetinib represents a ~$80M revenue opportunity for Exelixis. 

Additional data read-outs are expected for Cometriq across many indications (20+ open trials), the most important of which is RET-mutated lung cancer given the short time to market and high likelihood of success. Exelixis plans to start a pivotal phase II for this indication in the beginning of 2014 and may file for approval in 2015 based on response rate data. The commercial opportunity is still unclear but assuming 1000 eligible patients in the US translates to $100M in sales potential.

At its current valuation ($1.2B), Exelixis represents a good risk/reward profile. Cometriq’s opportunity in MTC and RET-mutated NSCLC coupled with the stake in cobimetinib should provide a valuation floor of $600M (excluding cash), if the prostate cancer trial fails. If the trial succeeds (30% likelihood), Exelixis will have global rights for a blockbuster with US sales potential of $1B, excluding additional indications. 

Arqule  (-26% in 2013)

As demonstrated by the stock graph, Arqule (ARQL) has been garnering little interest since the lung cancer phase III failure for tivantinib in 2012. In 2013, there were 2 important tivantinib-related events: Initiation of a phase III in liver cancer (METIV) and data publication from the failed lung cancer trial.

METIV evaluates monotherapy tivantinib in 2nd line liver cancer patients whose tumors express high levels of MET (tivantinib’s target). The trial was designed based on a positive survival signal in a randomized phase II, demonstrating a near doubling (3.8 vs. 7.2 months) in overall survival in MET+ patients. Results are expected in 2015. 

Shortly after starting METIV, Arqule reduced tivantinib’s dose by half due to safety issues (from 240mg to 120mg). It is unclear whether the lower dose will impact efficacy and to what extent, but one possible explanation is that liver cancer patients are poor metabolizers of the drug, which leads to higher exposure compared to other patients.

 

In September 2013, Arqule presented data from the failed lung cancer trial. Tivantinib did not have a survival benefit but retrospective analysis demonstrated a statistically significant survival difference (9.3 vs. 5.9 months) in patients with high MET levels. This suggests that MET inhibition is a relevant target in NSCLC and that tivantinib’s failure stems from inclusion of the wrong patients in the study. 

2013 saw the publication of several scientific papers which raise doubts about tivantinib’s mechanism of action. Some groups claim that tivantinib’s anti-cancer effect is mediated by modulation of additional targets and that MET inhibition is not necessarily the drug’s primary mechanism. Two examples can be found here and here.     

2014 catalysts 

In 2014, Arqule will present results from another phase III trial for tivantinib in 2nd/3rd line NSCLC Japanese patients (The ATTENTION trial, run by Kyowa-Hakko). A survival signal in MET-positive patients will validate the signal from Arqule’s lung cancer study and could re-open a path in lung cancer (at least in theory). 

Tivantinib’s main competitor is Roche’s onartuzumab (Metmab), an antibody targeting MET. It is already in phase III for MET-high NSCLC with data expected in 2014. This means that even if Arqule and its partner, Daiichi, start a new trial in MET+ NSCLC, patient recruitment and market penetration will be challenging.  

Another open issue is how tivatinib’s benefit compares with that of onartuzumab. A cross-trial comparison favors onartuzumab, which showed a survival benefit of almost 9 months (12.6 vs. 3.8 months). Tivantinib had a ~3.5 months benefit (9.3 vs. 5.9 months). Onartuzumab’s benefit is impressive but should be viewed cautiously as it is based on a small subset (42 events) whereas Arqule’s data set is much larger (153 events). In addition, some of the effect seen in the onartuzumab trial is due to a significant imbalance in percentage of EGFR mutated patients (20% in the onartuzumab arm vs. 7% in the control arm). Because all patients received Tarceva, an EGFR inhibitor, one would expect the Metmab arm to be superior solely based on Tarceva’s effect. Moreover, Arqule’s data set implies MET inhibitors potentiate EGFR inhibitors in EGFR mutated NSCLC, which may further explain Metmab’s dramatic difference. 

If ATTENTION shows a similar survival benefit in MET+ patients, doing a phase III in MET+ NSCLC will take at least 2 years to complete and even if the outcome is positive, it is unclear whether it will be better than Metmab’s benefit.
Arqule has 2 programs in phase I: ARQ092 (Akt inhibitor) and ARQ087 (FGFR inhibitor). It is still hard to ascribe any value to the drugs, as they are in early stage development with multiple competing programs. I am more optimistic about ARQ092 given the differentiated clinical profile that included hyperglycemia (a proof of deep Akt inhibition) without severe rash (discussed here). I am less optimistic about FGFR inhibitors that do not inhibit VEGFR2, given promising data for Clovis’ lucitanib (discussed here).

I plan on holding the stock through 2014 as a cheap (market cap of $135M, ~$90M in cash) phase III biotech supported by a positive phase II signal and potential upside from 2 additional clinical assets.

Array Biopharma (+26% in 2013)

For Array (ARRY), 2013 was packed with trial initiations and early stage deals. Although pivotal data read outs will start only in 2015, the company has a diversified pipeline of early and mid-stage programs (partnered and wholly owned), on top of multiple preclinical partnered programs (with Celgene, Genentech, Clovis).

The company’s most advanced assets remain MEK162 and selumetinib, 2 MEK inhibitors partnered with Novartis (NVS) and AstraZeneca (AZN). During 2013, each compound started 3 phase III trials in non-overlapping indications: BRAF melanoma, NRAS melanoma and ovarian cancer for MEK162, KRAS+ NSCLC, thyroid and uveal melanoma for selumetinib.

In 2013, Array presented clinical results for its lead proprietary program, ARRY-520 (Ksp inhibitor), and outlined its registration strategy in multiple myeloma. The latest clinical update at ASH showed modest single-agent activity and an acceptable safety profile in combination with approved agents. The company also showed data on AAG-1 levels as a biomarker for patient selection, where low levels appear to correlate with response to the drug. Even after breaking down efficacy per AAG-1 levels, response rate improves to 19-24%. 

In July 2013, Array released positive phase II results for ARRY-502 in mild/moderate asthma. The drug led to a modest benefit (FEV1 decrease of 3.9%) in the entire patient population. The effect was more pronounced (6.8%) in a prospectively-defined subset of patients. The effect in the overall population is lower than that of Singulair (6-8%), but it can still be viewed as clinically meaningful, especially in patients who stop responding to Singulair. There are several promising investigational treatment for asthma but they are all antibodies that require injection and target more severe stages. Given ARRY-502’s benign safety profile, the novel mechanism and the fact it is an oral drug, it may have value in milder cases.     

2013 saw 3 early stage deals with Celgene (CELG), Oncothyreon (ONTY) and Loxo. The deal with Celgene was for a discovery program around an inflammatory target and included an upfront payment of $11M. The deal with Oncothyreon was a co-development pact for ARRY-380, a clinical- stage HER2 inhibitor for breast cancer, with an upfront payment of $10M (discussed here). The deal with Loxo was for a selective inhibitor of TrkA, traditionally involved in pain and inflammation but recently implicated in cancer. 

2014 catalysts 

For the MEK pipeline, 2014 will be a transition year without pivotal data although both MEK162 and selumetinib are being evaluated in tens of clinical trials. Results from these trials may open up additional indications.

Array plans to start 2 pivotal trials for ARRY-520 in multiple myeloma. A single agent trial in low-AAG patients may serve the basis for accelerated approval (similar to Kyprolis) and a randomized phase III trial in combination with Kyprolis will be used for obtaining standard approval.      

Array is trying to outlicense 2 wholly-owned programs after demonstrating phase II proof of concept: ARRY-502 for asthma and ARRY-797 for osteoarthritis. The market is skeptic regarding Array’s ability to get meaningful deals for both agents given the relatively limited effect for ARRY-502 and cardiotoxicity concerns for ARRY-797. Any partnering news for the 2 programs is currently not priced- in  and represents potential upside.

Visibility for earlier stage partnered programs is limited but it would be reasonable to expect several data readouts during 2014. These include 4 compounds partnered with Genentech, the most advanced of which (GDC-0068, Akt inhibitor) may have phase II data in prostate cancer. The 3 other programs are 2 Chk1 inhibitors and an Erk inhibitor (GDC-0994). Combination data for ARRY-380 in breast cancer may be presented in December.

Curis (-23% in 2013)

In 2013, Roche’s Erivedge continued to grow in the US  with sales of ~$50M for the first 9 months (Curis [CRIS] has a 5+% royalty stake in Erivedge). In mid-2013, the drug was approved in Europe and Australia, which should further accelerate sales growth.  Roche also initiated a new trial for Erivedge in AML and MDS. This is the first company-sponsored trial in an indication other than basal cell carcinoma (BCC) since Erivedge’s failures in colon and ovarian cancer.   

Curis ended 2013 with a negative sentiment around its development pipeline. CUDC-427 (IAP inhibitor) was put on clinical hold following a death of a patient who participated in the drug’s clinical trial. Earlier in 2013, CUDC-427, licensed from Genentech, demonstrated preliminary signs of efficacy in phase I (2 complete responses in ovarian cancer and lymphoma patients). At ASH 2013, Phase I results for CUDC-907 showed only limited efficacy in blood cancers.

2014 catalysts 

Curis’ most significant 2014 event is data for Erivedge in operable BCC, which may significantly expand the drug’s market potential. The focus will be on whether Erivedge’s safety/efficacy ratio is sufficient for approval. Initial data in AML may also be available. Following the approval in EU and Australia, royalties are expected to increase on a quarterly basis.

Curis will also provide an update on CUDC-427’s clinical hold and initiate new studies if the hold is removed. Curis’ partner, Debiopharm may present monotherapy and combination data with Debio 0932, an oral Hsp90 inhibitor.  

Morphosys (+91% in 2013)

In 2013, Morphosys signed 2 impressive deals for MOR103 (anti-GMCSF) and MOR202 (anti-CD38) within the same month. MOR103 was licensed to GSK (GSK) for an upfront of $29M and $550 million in milestones. MOR202 was licensed to Celgene in a co-promotion deal with an upfront payment of $152M (including an equity investment) and $818M in milestones. Such remarkable economics for a phase I asset with early clinical data demonstrates the excitement around CD38 antibodies in myeloma.

Morphosys’ third proprietary program, MOR208 (anti-CD19 Fc engineered antibody from Xencor), was advanced to 2 phase II trials in ALL and NHL. Phase I results in CLL demonstrated a 30% response rate, which compares unfavorably to the 70-80% response rate seen with other new agents such as Imbruvica (ibrutinib) and ABT199.

Morphosys’ partnered pipeline continued to progress and now includes 16 antibodies in clinical development. Morphosys retains only modest economics in these programs, but the cumulative value is significant as many of them represent multi-billion dollar opportunities. The most significant event was the initiation of a pivotal trial for Novartis’ bimagrumab (anti-ActRIIb) in a rare muscle wasting disease. The antibody is being evaluated in additional more prevalent indications (COPD and cancer related  cachexia).

2014 catalysts

Going forward, Morphosys’ most significant upside potential will be in MOR202, which should have phase I data in 2014. To date, Morphosys did not publish any clinical data for the antibody although the rich deal terms imply results are positive. The data will be compared to results generated by Genmab’s daratumumab and Sanofi/Immunogen’s (IMGN) SAR650984.

Visibility is limited for other partnered programs, but some may have phase II read- outs during 2014. These include Novartis’ anti-C5 antibody for ophthalmology and J&J’s (JNJ) guselkumab, which may be Stelara’s successor in psoriasis. Stelara is threatened by Novartis’ IL-17 antibody, which demonstrated phenomenal phase III results.  It still remains to be seen whether selective inhibition of IL-23 by guselkumab is more effective or safer than Stelara’s dual IL-12/IL-23.

Incyte (+198% in 2013)    

2013 was Incyte’s (INCY) 2nd year as a commercial organization, with healthy sales growth from 2012 levels (~$225M vs. $136M) for Jakafi, the 1st ever approved drug in myelofibrosis. Jakafi sales in the US reached a quarterly run rate of $60M and royalties from Novartis were $8M in Q3. The company also emerged as a more diversified story with multiple data readouts for Jakafi as well for its maturing pipeline.  

At ASH 2013, Jakafi continued to show an impressive survival benefit. The benefit appear to diminish with longer follow up but the signal is still strong, especially given  the crossover design the small sample size. Incyte submitted a sNDA in order to add the survival benefit to Jakafi’s FDA label.

Jakafi’s competitive landscape improved following Sanofi’s decision to terminate development of its JAK1/2 inhibitor, fedratinib, due to safety concerns. Fedratinib was Jakafi’s most advanced competitor with comparable efficacy. Gilead’s momelotinib is now the most advanced JAK 1/2 in development, currently in head to head randomized phase III trial vs. Jakafi.

Jakafi’s most importat data read out was from a phase II trial in pancreatic cancer. Although Jakafi did not improve survival in the overall population, there was a strong signal in a pre-defined undisclosed subset. Incyte did not reveal how this subset was selected, but it appears not to be a molecular marker of the tumor (Might be a blood marker like LDH, CA19-9 or a clinical parameter).

Incyte presented results for its Jak1 selective inhibitor in 3 indications: Rheumatoid arthritis, myelofibrosis and psoriasis. RA is viewed as the most important indication for Jak1 inhibitors due to what appears to be a “TNF-like” efficacy but with a better safety profile compared to Pfizer’s Xeljanz (pan-JAK inhibitor approved for RA).

INCB39110’s RA trial was small and included 4 doses, all demonstrated some clinical benefit. Although the highest dose had a strong performance (ACR 20/50/70 of 91%/64%/55% vs. 33%/17%/8% for placebo), there was not a clear dose dependent efficacy at the lower doses. Importantly, INCB39110 had a clean safety profile with no myelosuppression or infections (with a limited follow up).  

INCB39110’s MF data was underwhelming relatively to Jakafi in terms of spleen reduction, which implies that JAK2 has an important role in MF (as opposed to RA). Nevertheless, the drug had an effect on symptoms with hints for a favorable effect on anemia (increase in hemoglobin levels), which might make it suitable for patients without an enlarged spleen or those who cannot tolerate Jakafi due to myelosuppression.

Incyte’s MET inhibitor (INC280, partnered with Novartis) is still an under-appreciated program despite being actively pursued by Novartis. In 2013, Novartis started a phase II in “MET-dysregulated” liver cancer (still unclear how MET dysregulation is defined), triggering a $25M milestone payment to Incyte. Novartis started 4 additional combination trials during 2013. 

2014 catalysts

Jakafi’s sales trajectory will be of high interest in 2014, as investors are hoping to see continued growth in MF as a result of increased market penetration (especially in less severe cases)  and treatment duration. An FDA decision on inclusion of the survival benefit in Jakafi’s label is expected in 1H/2014 and could be an important driver.

Incyte expects to present results from 2 phase III trials in polycythemia vera (PV), another bone marrow disease where Jakafi showed phenomenal activity in phase II. The likelihood of technical success in PV is very high but there is still a debate about market potential and the true unmet need in PV, which is more prevalent than MF but also less severe in most cases. Incyte’s management stated that the PV opportunity is as big as MF. This can be validated only in 2015 after Jakafi’s is approved in late 2014. As I previously discussed, I expect $1B in Jakafi global sales based solely on MF and PV, using fairly conservative assumptions.

Incyte is expected to start a phase III for Jakafi in pancreatic cancer and disclose the patient selection criteria. Results from the phase II are expected at ASCO in June 2014.

Also at ASCO, Incyte is expected to present combination results for its IDO inhibitor, INCB24360. Although the drug had no activity in phase I, it is garnering a lot of attention due to the excitement around cancer immunotherapy as well as comments made by Incyte’s management on an ongoing combination trial in melanoma. Although the trial is a single arm study evaluating INCB24360 in combination with Yervoy, the company stated they are seeing a high response rate compared to historical data with Yervoy.

Baricitinib, Incyte’s JAK1/2 inhibitor for inflammatory diseases, is in several phase III trials for RA. The trials, run by Incyte’s partner, Lilly (LLY), may start to read out in late 2014.

Incyte is expected to shed more light on INCB39110’s development program. The most straightforward indication is RA, following the footsteps of Galapgos’ JAK1 inhibitor (GLPG0634), partnered with Abbvie (ABBV). Incyte already disclosed its plans to evaluate the drug in solid tumors such as lung and pancreatic cancer, with trials expected to begin in 2014.

The biggest question for INCB39110 is whether Incyte decides to partner the drug or wait until it has a large phase II data set. In line with the strategy for its JAK1/2 drugs, Incyte might split indications between INCB39110 and a backup JAK1 inhibitor INCB47986. As a benchmark, Abbvie paid Galapagos $150M upfront and has an option to in-license the program after phase IIb (will trigger a $200M payment).     

Synta (-45.6% in 2013)

Synta (SNTA) had a negative 2013 due to disappointing results from a phase II study evaluating ganetespib (Hsp90 inhibitor) in lung cancer. Preliminary data from this trial (GALAXY-1 trial) were the basis for the 2013 initiation of phase III in a subset of NSCLC patients with “chemo-sensitive” disease.  As the phase II data set matured throughout 2013, the survival benefit diminished to a point where it was not statistically significant. The company blames this deterioration on “geographical differences” and shows that excluding patients from Russia and Ukraine yields a statistically significant survival benefit.

Phase II trials are often used to identify patient subgroups (even retrospectively) who will benefit from a given drug. The problem with Synta’s strategy is that it involves too much data mining, relying on 2 subset analyses in order to reach statistical significance. As a result, probability of success is lower than what I originally thought.

Synta reported updated results for ganetespib in patients with HER2+ or triple-negative breast cancer (ENCHANT study). The drug led to objective responses in 3 of 4 (75%) HER2+ patients and in 2 of 11 (18%) patients with triple negative patients. Although these results show ganetespib has clear activity in breast cancer, the small sample size and the fact patients had not been treated with anti-cancer agents in the advanced stage/metastatic setting make it hard to assess the drug’s potential. In any case, it does not appear potent enough for as monotherapy for unselected patients. 

2014 catalysts

Synta is expected to provide updates from GALAXI-1 and ENCHANT-1 studies. Of the 2, only ENCHANT-1 is expected to have meaningful updates with new patients. The company will likely increase the size of GALAXY-2 and may conduct the first interim analysis during 2014.

Synta will also outline its strategy for breast cancer although it has stated in the past it would wait for a partner to pursue a registration program. The company has been mentioning a potential geographic deal (ex. US or Asia rights) for more than 2 years, so expectations on that front are low as well.

Ganetespib is being evaluated in over 10 additional clinical studies, most of which are investigator-sponsored trials. The most intriguing are 2 trials evaluating ganetespib as a single agent or in combination with Xalkori in ALK+ NSCLC. Hsp90 inhibitors, including ganetespib, have clear activity in this patient subgroup, but they are probably not potent enough to be pursued as monotherapy. The 2 ganetespib studies were initiated in April 2012, so both should have a reasonable amount of patients in 2014. Synta’s decision not to pursue ganetespib as monotherapy in ALK+ NSCLC, implies the drug is not potent enough on its own. Nevertheless, a 15-20% response rate coupled with positive signs in combination with Xalkori should be enough to justify a combination phase III.

In summary, I still view ganetespib as a promising drug but its activity is limited to a small minority of patients. In some cases, the activity can be explained by a specific Hsp90-addicted mutation whereas in other cases the effect cannot be attributed to a specific factor. Therefore, Synta’s strategy should shift to molecularly-defined niches, where ganetespib is added to mutation-specific inhibitors. These niches include some of the rare mutations in NSCLC (ALK, ROS, RET, TrkA etc.) where there is a strong rationale for Hsp90 inhibition as well as clinical or preclinical proof of concept. Each of these mutations are rare but have a cumulative prevalence of ~10% of cases.    

Celldex (+246% in 2013)

Celldex (CLDX) concludes a successful 2013 driven predominantly by pipeline progress and increased market awareness but also by clinical data. Data readouts included results for rindopepimut in glioblastoma (GBM) and phase I results for CDX-1127 (anti-CD27).

The rindopepimut trial evaluated the cancer vaccine in combination with Avastin in EGFRvIII-positive GBM in 2 cohorts: Avastin-naïve and Avastin-refractory. In the Avastin-naïve cohort, addition of rindopepimut resulted in a 4-month overall survival benefit but the sample size was very small and therefore unreliable. Response rate and PFS were also improved but the magnitude of effect was modest (3.7 vs. 2 months). In the Avastin-refractory cohort (25 patients), there were 4 cases of tumor shrinkage but the effect was transient in 3 cases and only 1 case was validated as a response by an independent reviewer.

CDX-1127’s highly anticipated phase I results included 42 patients. There was 1 complete response in a Hodgkin’s lymphoma patient and several cases of tumor shrinkage or prolonged disease stabilization. These preliminary results are encouraging and CDX-1127 fit well into the cancer immunotherapy theme but so far CDX-1127 does not look as potent as PD-1 antibodies. Its biggest value will be in combination with other immune-modulation antibodies, which is becoming a popular theme in the industry.  

In December 2013, Celldex initiated a phase III in breast cancer for CDX- 011 (glembatumumab vedotin), an ADC targeting GPNMB. The trial is based on positive phase II results demonstrating a survival benefit as well as superior response rates in patients with high levels of GPNMB. Of note, the trial compared CDX-011 monotherapy to an active control arm (chemotherapy), representing a high bar for efficacy. The strongest signal was observed in GPNMB+ TNBC, which is the phase III population.

Celldex initiated a pilot study for CDX-1135 (soluble complement receptor 1) in a rare kidney disease (dense deposit disease). Dense deposit disease is associated with a mutation in the complement pathway that leads to uncontrolled pathway activation. There are high hopes around CDX-1135 given the fact that the drug’s mechanism of action is similar to that of Alexion’s (ALXN) Soliris.

2014 catalysts

The most important catalysts for Celldex in 2014 will be interim analyses from CDX-011’s  and rindopepimut’s phase IIIs. Given the high unmet need in TNBC, Celldex chose response rate and PFS as co-primary endpoints. This is in contrast to other breast cancer pivotal trials where overall survival is the primary endpoint. The primary endpoint for rindopepimut is overall survival. Both analyses are expected to occur in 2H/2014.      

At ASCO 2014, Celldex is expected to present updated results for CDX-1127. Updated results will include expansion cohorts in melanoma and renal cancer, which were chosen based on the sensitivity of these tumors to other immunotherapies. Celldex will also present results for CDX-1135 in a small cohort of DDD patients.

Genmab (+172.5% in 2013) 

In 2013, interest in Genmab (GEN.CO) continued to mount thanks to daratumumab, an anti-CD38 antibody for the treatment of multiple myeloma. Although Genmab and its partner ,J&J, presented very little new data, excitement within the industry around CD38 as a target translated to better market awareness and price appreciation. In parallel, investors grew more skeptical about the commercial opportunity of Genmab’s marketed product, Arzerra (anti-CD20 antibody licensed to GSK).

Key 2013 events for daratumumab were mostly regulatory or competition-related. Following the 2012 licensing deal with J&J, Genmab did not report meaningful clinical data in 2013. At ASH 2013, the company reported strong efficacy from a phase I in combination with Revlimid but it is challenging to analyze the data given Revlimid’s strong efficacy as monotherapy and the small sample size.

As the leading CD38 antibody, daratumumab enjoyed a positive sentiment around CD38 antibodies. This was demonstrated by receiving a breakthrough designation from the FDA and a huge licensing deal between Celgene and Morphosys. Sanofi, which also has a CD38 antibody (licensed from Immunogen) reported encouraging efficacy as well.

Investors became less excited about Arzerra following results for Roche’s Gazyva (anti-CD20). Cross-trial comparison of the 2 antibodies in CLL clearly favors Gazyva as a more efficacious CD20 antibody with proven superiority over Rituxan. As the CD20 field is evolving, Arzerra is not doomed but its fate is unclear.    

2014 catalysts          

In 2014 Genmab’s shares will be subject to a “clash” between the excitement around daratumumab and the negative sentiment around Arzerra. Genmab and J&J are expected to announce a broad and aggressive development program during 2014. The first pivotal trial in relapsed/refractory myeloma, evaluating 2 regimens of daratumumab monotherapy, was already launched in 2013. Combination studies with Revlimid in earlier treatment lines are expected to be announced in 2014. A phase I evaluating daratumumab with other approved backbones (see link) is expected to begin shortly.

Results for competing CD38 programs from Celgene/Morphosys and Sanofi/Immunogen are also expected in 2014. Both programs are likely to start pivotal studies in 2014.

Infinity (-62% in 2013)                  

Infinity lost 75% of its market cap from the April 2013’s 52-week high. Although the company’s lead agent, IPI-145, (isoform-selective PI3K inhibitor) demonstrated high response rates in multiple blood cancers (CLL, iNHL) Infinity could not demonstrate a differentiated profile from Gilead’s (GILD) PI3K inhibitor (idelalisib). In addition, IPI-145 is competing with highly effective agents with different mechanisms of action such as J&J’s/Pharmacyclics’ (PCYC) Imbruvica and Roche’s/Abbvie’s GDC-0199. As a result, investors are now questioning the future role of IPI-145 in CLL and NHL.         

One potential differentiation is activity in T-cell lymphomas, with a 38% response rate in 26 evaluable patients. T cell lymphomas are irrelevant indications for idelalisib and other novel NHL agents, which do not modulate T cell signaling. IPI-145’s activity in this indication is attributed to modulation of PI3K- gamma.

In 2013, Infinity initiated a phase III in CLL and a pivotal single-arm phase II in indolent-NHL. Both studies are evaluating IPI-145 as monotherapy and replicate the registration strategy for Imbruvica and idelalisib, respectively.

2014 catalysts 

In 2014, Infinity is expected to report 3 important data sets. The company will report updated results for T- cell lymphomas in January and is expected to provide guidance on its plans to pursue these indications later in 2014. Two phase II trials in asthma and RA are expected to read out in Q1/2014 and H2/2014, respectively.

2014 is expected to be a quiet year in CLL and NHL, as pivotal results are expected only in 2015. Infinity’s competitors will generate a lot of late stage data which may put more pressure on the stock.

Ambit (+30.5% since May 2013 IPO)

Ambit (AMBI) concludes 2013 as a mixed year for its lead agent, quizartinib (Flt3 inhibitor for AML). From a clinical standpoint, the company generated positive data which enabled it to identify an optimal dose range with good efficacy and a favorable safety profile. From a regulatory standpoint, Ambit experienced a setback after the FDA’s refusal to consider approval without a full-blown phase III. 

At ASH 2013, Updated results for lower doses (30/60 mg) of quizartinib demonstrated an impressive response rate in relapsed refractory AML patients with Flt3 mutations. Despite demonstrating a CR in ~50% of patients, most patients had a CRi (CR with an incomplete neutrophil recovery). In addition, responses were short- lived in the majority of cases.

Although not ideal, quizrtinib’s activity in AML is unprecedented for a single agent, let alone a targeted therapy. Refractory Flt3+ AML has such a poor prognosis (survival of 2-3 months) that even a 2-month survival benefit should be viewed as clinically meaningful. Moreover, a drug with a high CR rate can be patients’ only hope to reach stem cell transplant, the only treatment option with a favorable long-term outcome.

Despite the strong efficacy, the FDA refused to consider accelerated approval for quizartinib in last line patients based on the drug’s monotherapy data. The FDA did not view CRi as a relevant surrogate endpoint for long term clinical outcome and required Ambit to conduct a randomized phase III before approval.

At ASH 2013, Ambit also reported encouraging combination data, demonstrating a good safety profile and intriguing signs of efficacy In 1st line AML patients. The CR rate for was 65% across the different regimens, including a 100% CR rate in 7 patients with FLT3 mutations.        

2014 catalysts

Ambit’s most important event in 2013 will be initiation of a global phase III randomized study of quizartinib in relapsed FLT3+ patients. The trial, expected to start in the coming months, will compare quizartinib with chemotherapy with overall survival as the primary endpoint. Patients on the quizartinib arm who undergo a transplant will receive the drug as maintenance therapy, which may further enhance the drug’s benefit.

Ambit also expects to start phase I for its CSF1R inhibitor (AC708). CSF1R has emerged as an important target for cancer immunotherapy. In contrast to most immunotherapies in clinical development that target T cells, CSF1R inhibitors target macrophages, especially those that reside in the tumor and support its growth.  There are several CSF1R programs in development including a small molecule from Daiichi (PLX3397) and an antibody from Roche. Array’s/Celgene’s CSF1R entered phase I in 2012 but its development was subsequently discontinued.

Ambit looks like an ideal acquisition target given its low market cap (<$200M) and a wholly owned program in phase III. Quizartinib is exactly the type of product large companies are looking for:

1) A late stage product with a derisked regulatory route

2) Compelling phase II efficacy in a biomarker-defined subset

3) Data readout within 18 months

4) A large market opportunity (~10k FLT3+ AML patients in developed countries)

5) Sufficient funds to complete the trial

As a result, there is a reasonable likelihood for Ambit to get acquired during 2014. A licensing deal is also an option but less likely given Ambit’s market cap.

Esperion (-5% since June 2013 IPO)    

In 2013, Esperion (ESPR) presented positive results for its LDL-C lowering drug (ETC-1002) from multiple trials. A phase II in statin-intolerant patients demonstrated a 29% placebo adjusted reduction. Based on these results, Esperion launched a phase IIb study evaluating ETC-1002 with or without Zetia vs. Zetia alone. Another trial which evaluated ETC-1002 in combination with Lipitor, demonstrated an additional 22% reduction in LDL-C levels.   

As an oral drug with a mild safety profile to date (follow up is still limited), ETC-1002 may be used as another treatment line or as add-on to existing oral drugs before moving to injectible PCSK9 antibodies. The market for LDL lowering drugs is huge, so even a minority share in statin-intolerant patients (2 million in the US) represents a significant market.

2014 catalysts

The most important event will be phase IIb results in statin intolerant patients. If positive, the data will guide Esperion’s registration strategy in this indication. Potential strategies may include a head-to head trial vs. Zetia or a combination with Zetia. ETC-1002 may have a broad metabolic effect on glucose levels, weight and blood pressure. Any additional signal in the phase IIb beyond the LDL effect will boost the drug’s attractiveness.

Clovis (+255% in 2013)      

Clovis  (CLVS) concludes 2013 with a pipeline of 3 advanced-stage oncology programs, each characterized by a strong clinical proof of concept in molecularly defined patient populations.

CO-1686, a mutation-selective EGFR inhibitor, is the company’s lead asset which is responsible for the share price appreciation in 2013.  In a small cohort of NSCLC patients with T790M EGFR mutation (confers resistance to approved EGFR inhibitors), the drug had a response rate of 67% (6 of 9 patients). Importantly, patients reported minimal skin and GI toxicities, which are common with other EGFR inhibitors. If corroborated in larger trials, CO-1686’s clinical profile should enable Clovis to reach the market with a single arm phase II trial.

CO-1686’s main competitor is AstraZeneca’s AZD9291, which also demonstrated impressive activity in T790M+ NSCLC (58% response rate). With the caveat of cross-trial comparison, both drugs look promising although the Clovis study appear to include a more challenging population, as patients were recruited immediately after failing available EGFR inhibitors and most patients were 3rd line or beyond. In addition, EGFR-related side effects were more common with AZD9291 (but safety was still much better than Tarceva). 

Clovis recently acquired EOS pharma for its dual VEGFR/FGFR inhibitor, lucitanib. Lucitanib, which is partnered with Servier in Europe, is the only drug to date that demonstrated meaningful single agent activity in FGF-dysregulated cancer. Of 12 evaluable patients, 6 (50%) achieved a partial response (5 confirmed) and 5 achieved disease stabilization with a median progression-free survival (PFS) of 9.4 months.

As I previously discussed, lucitanib appears to have the right spectrum of activity by selectively targeting VEGFR2 and FGFR1. Other FGFR inhibitors in clinical development are either too selective (no VEGFR activity) or too promiscuous. This makes Clovis the leader in FGF-aberrant tumors, which represent a substantial untapped commercial opportunity across many tumor types (Breast, squamous NSCLC and bladder cancer)

Clovis’ PARP inhibitor, rucaparib, also demonstrated encouraging signs of efficacy in patients with BRCA-mutated tumors (Breast, ovarian and pancreatic cancer). The competitive landscape for PARP inhibitors is challenging, with multiple active compounds and limited differentiation among them. Clovis recently started a phase II biomarker study in ovarian cancer patients with the goal of identifying new biomarkers that predict sensitivity to PARP inhibitors.

2014 catalysts

2014 will be a crucial year for Clovis with updates for CO-1686 and lucitanib.

CO-1686 is expected to have multiple data updates, the first of which will occur in March. Key focus will be on whether responses are seen in additional patients and durability of response. Clovis has already decided to start a pivotal single arm phase II in 2nd line T790M+ patients in 1H/2014. A phase II in 1st line EGFR mutated NSCLC is also expected, and positive results may lead to a head to head pivotal trial vs. Tarceva. AstraZeneca is expected to follow a similar path.  

Updated results from an ongoing European trial for lucitanib are expected to be presented during 2014. In addition, Clovis and its partner Servier will start 3 phase II trials in FGFR1-amplified squamous-NSCLC and breast cancer. If lucitanib’s activity profile is corroborated in additional patients, Clovis will end 2014 with a breakthrough drug in pivotal testing with a blockbuster potential and practically no competition.

Portfolio updates

We are adding a 2nd position in Ambit as a cheap phase III hematology asset. We are selling one of our 2 positions in Synta following the disappointing GALAXY-1 results. We intend to maintain a significant cash position going into 2014 in anticipation of a correction in the biotech sector.  

 

Portfolio holdings – January 6th, 2014

biotech portfolio - Jan 6 2014 - after changes

biotech ETFs - Jan 6 2014

101 thoughts on “Biotech portfolio update – 2013 summary and 2014 preview

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