Will 2015 mark the turnaround for antibody-drug conjugates?

Back in 2010, ADCs were the hottest theme in oncology with the potential to revolutionize cancer treatment. The excitement was based on promising results for Adcetris (Seattle Genetics [SGEN]) and Kadcyla (Immunogen [IMGN]), both of which utilized new and improved ADC technologies. Adcteris and Kadcyla were perceived as the ultimate cancer drugs: They had strong single agent activity and provided meaningful benefit to patients with limited toxicity. All that was left to do was replicating their success with additional antibodies to cover every tumor type.

Five years and more than 20 ADCs later, it is clear that ADCs failed to deliver on their promise. Adcteris and Kadcyla remain the only ADCs with a truly promising clinical profile (i.e. strong efficacy in a large number of patients) and sentiment towards ADCs is at a multi-year low, evidenced by the poor stock performance of Seattle Genetics and Immunogen despite an unprecedented tide across the biotech sector.

The rise of immuno-oncology can be blamed to some extent, however, it is clear that ADCs have encountered fundamental setbacks. Although most ADCs which entered clinical testing demonstrated some activity, response rates were typically low (5-10%) and toxicity issues were common. The few cases of high response rates came with a high toxicity price (Anti-CD79b) or observed in retrospectively-defined subsets in a small number of patients (Anti-GPNMB, anti-NaPi2b).

Deep in the trough of disillusionment

From an investor perspective, it is still unclear whether ADCs are simply not attractive enough as a class or whether they are experiencing the typical innovation cycle seen with other novel technologies (siRNA, gene therapy, immuno-oncology). According to the innovation cycle template, promising technologies often generate over-optimistic expectations that fail to materialize in the short term. This leads to exaggerated pessimism (trough of disillusionment) followed by gradual fundamental advances that facilitate long-term success.

cycleSource: Wikipedia

If one believes ADCs will eventually play a role in oncology, investing in the ADC theme now after expectations have hit rock bottom may be extremely rewarding. Given the disappointing experience with ADCs to date, the only thing that can reverse the negative sentiment is meaningful and unequivocal clinical data with one or more new ADCs. This might happen in 2015 and could represent the turning point from the “trough of disillusionment” to the “slope of enlightenment”.

I am still bullish on ADCs long-term for two reasons:

1) Statistically, as more ADCs enter clinical testing, there is a higher likelihood of seeing a “Kadcyla-like” profile.

2) The industry has been developing new technologies that could serve as the basis for improved ADCs with better activity in humans. These include new payloads, new linkers and site specific conjugation.

Potential catalysts

There are three ADCs in development that may “break the curse” and deliver overwhelmingly positive results in 2015. These are SGN-33A (old target, new technologies), IMGN853 (new target, new technology) and lifastuzumab vedotin (new target, old technology).

SGN-33A (Anti-CD33) – This is Seattle Genetics’ biggest hope for 2015. CD33 has been considered an attractive target for AML for over a decade based on efficacy observed with Mylotarg, an anti-CD33 ADC based on an old technology from Wyeth. Mylotarg was withdrawn from the market in 2010 after disappointing P3 data but later studies with lower doses demonstrated a clear clinical benefit (but also more toxicity). Sanofi (SNY) and Immunogen had an anti-CD33 ADC in development, which was better tolerated but had limited efficacy (attributed to payload selection).

SGN-33A utilizes two technical improvements that may enable to optimally target CD33: A novel DNA-binding payload (higher potency relatively to currently used tubulin binders) and site-specific conjugation (better safety profile). Preliminary data presented at ASH 2014 demonstrated clear and dose-dependent activity with a relatively mild safety profile. CR rate was 27% for the top three doses, with additional 50% of patients experiencing significant reductions in tumor burden. These data are encouraging but not sufficient to understand whether SGN-33A is effective enough to merit further development as monotherapy. Future updates in 2015 will shed more light in terms of durability of responses and long-term safety profile.

IMGN853 (Anti-FRa) – IMGN853 is Immunogen’s most advanced wholly-owned ADC in development targeting folate receptor alpha (FRa). Preliminary phase I results were presented 2 years ago and demonstrated encouraging signs in gynecologic tumors (2 partial responses) but also dose limiting ocular toxicities at the higher doses. Since then, Immunogen has been working on identifying a dosing regimen that minimizes ocular toxicity by decreasing early exposure levels. In 2014, the company presented preliminary results with alternative dosing regimens that support this hypothesis, but no efficacy data were disclosed.

At the last quarterly call, Immunogen’s management was upbeat on IMGN853, indicating that efficacy seen to date may be strong enough to justify accelerated approval based on a single-arm phase II in ovarian and/or endometrial cancer. Although the company did not provide actual numbers, a 30-40% response rate was mentioned as the required efficacy to pursue accelerated approval as monotherapy for ovarian cancer. Results will be presented at ASCO 2015 (May 29-June 2) and need to demonstrate a reasonable safety profile as well as a 30%+ response rate in order to keep investors excited with IMGN853.

Lifastuzumab vedotin (Anti-NaPi2b) – Roche is evaluating lifastuzumab vedotin (based on Seattle Genetics’ technology) for ovarian cancer. Phase I results at ASCO 2014 demonstrated a 41% (7/17) response rate in ovarian cancer patients with high expression of NaPi2b and a 10% response rate in NaPi2b+ lung cancer. This led to the initiation of a randomized phase II comparing lifastuzumab vs. Doxil in ovarian cancer, with data expected later in 2015. Positive results could lead to a phase III trial with a high likelihood of success.

Early stage programs

There are many other ADCs which entered clinical testing in 2013-2014 and could generate data in 2015. Phase I data are preliminary by definition but good oncology drugs can demonstrate impressive efficacy early on.

Seattle Genetics may have phase I readouts for its proprietary LIV1 program as well as multiple partnered programs including Pfizer’s anti-5T4 and anti-NOTCH3, and anti-TF (Genmab).

Immunogen’s partnered pipeline is less advanced as it relies on Novartis’ (NVS) and Lilly’s (LLY) preclinical programs. Novartis started phase I with for LOP628 (anti-cKIT) in January 2015 but the study is listed as suspended as of March 2015. Two additional programs  targeting P-cadherin and FGFR2/4 are going to be presented at AACR.

Phase III data for Kadcyla in HER2+ gastric cancer is another important readout for Immunogen, expected to occur in the coming months.

Portfolio updates

We are initiating a position in Immunogen in anticipation of a positive outcome for Kadcyla in gastric cancer and (hopefully) a good IMGN853 dataset at ASCO. We are also initiating a position in Avalanche (AAVL) and adding a second position in Marinus (MRNS).

Portfolio holdings – March 22, 2015

portfolio holdings 22-3-15 - after changesbiotech etfs

61 thoughts on “Will 2015 mark the turnaround for antibody-drug conjugates?

  1. Imgn popped to the mid to high 7’s….can u recall what was the catalyst for this?

    I was hoping for a good dip into 7.25 area but maybe to late… I may look for an entry based on your asco comments

    I have put a modest buy into biod….low market cap, recent secondary (30mill) out of the way and 27% decrease in short interest….any comments on them?

    I have also added GNCA….huge insider buy of 5 mill. Yowza

    Like

  2. hello Ohad

    again regarding AERI, by the red eyes issue I meant the hyperemia they reported. it may just be red eyes, but it is something to watch I guess.

    here some critical points on AERI, do you have any opinion on those?

    http: // theinvestorzone.com/2014/12/12/spin-doctors-data-and-market-projections-from-aerie-pharmaceuticals-inc-are-too-optimistic/

    thanks for your comments!

    Christian

    Like

  3. @Christian,

    I recall there was a reasonably convincing rebuttal to that article on Seeking Alpha (“Aerie: A Brilliant Future, Derisking In Progress, And The Making Of A Major Ophthalmic Pharmaceutical”), but unfortunately it is available to subscribers only now.

    Would also like to hear your thoughts, Ohad.

    Like

  4. Hi Ohad,

    Heard anything new about SAR3419? Only recent news is results from a combination trial with Rituximab. Sanofi pulled the plug on ALL, but the STARLYTE trial had reasonably good results in DLBCL, but there is potential competition in the CD-19 space from the recently approved Blinatumomab and SGN-CD19A. Do you think Sanofi has any plans to bring this forward to Phase III? It seems like they’re dragging their feet but they might have been waiting for the Rituximab combo results so they give themselves the best chance at a successful PIII.

    -Biftek

    Like

  5. Ohad,

    I suggest you also look at Biotest’s BT-062, it uses IMGN’s technology and should be advancing to Phase III later this year. IMGN has Opt In provisions which will permit it to make an investment and share the U.S. Market.

    Gary

    Like

  6. Robert (IMGN) – The pop was a reaction to the positive indications provided by the company on IMGN853. If GATSBY fails (should be announced prior to ASCO) there will probably be a better entry point.

    Don’t have a concrete opinion on BIOD , GNCA.

    Christian – To date, hyperemia cases were mild in the vast majority of cases, don’t think that’s a major issue but as you said, worth tracking anyway. There is always a risk AERI won’t be able to capture a significant market share and the point about using Timolol as a control is valid. Ultimately, Rhopressa’s biggest value will be in combination with latanaprost but first they need to corroborate the monotherapy activity they saw in P2.

    Dan – In my opinion, siRNA is way past the trough with multiple clinical proof of concept at least in liver related diseases (TTR, HBV).

    Wildbiftek (IMGN) – Haven’t heard anything about SAR3419 and I currently have zero expectations for that program. Sanofi was first in the CD19 race but the program is not going anywhere. Activity is not that impressive to begin with…

    Gary (IMGN) – I am somewhat skeptic BT-062 for myeloma although I admit the combination data were impressive. The problem is attributing the overall effect to BT062 vs. Revlimid. The interesting angle in 062 is the solid tumors study.

    Ohad

    Like

  7. Manny (AAVL) – It’s a straightforward high risk/ high reward bet ahead of their p2 data in AMD. If results are overwhelmingly positive, we are looking at a huge blockbuster ($4-5B conservatively). If the trial fails, the stock will lose most of its market cap.

    Ohad

    Like

  8. Alex (AAVL) – Their P1 data showed a very good effect vs. the control arm but the trial was very small. A billion dollar market cap is not that high if you assume 50% likelihood of p2b success, at that point they will have global rights for a multi-billion dollar program and will likely be acquired by REGN, NVS or Roche. Data is expected mid-15.

    Ohad

    Like

  9. Takeda have also had access to linker tech from Redwood/Catalent since 2011 so i would speculate that this is a move to access ImmunoGen’s new potent IGN payload rather than to get linker tech.

    Chemically IGN is very similar to the successful PBDs of Spirogen (acquired by AZ). Seagen don’t have an commercial IP on payloads outside of auristatin so this would seem to be a grab at that new technology IMO. They’ve previously experimented with potent duocarymin ADCs so not a huge conceptual leap to trail other picomolar strength drugs. Is the first public deal i have seen for access to the IGN platform http://investor.immunogen.com/releasedetail.cfm?ReleaseID=902766

    Like

  10. Thanks, James. There are a lot of experimental ADC technologies that are still flying under the radar (private co’s or internally developed) that could emerge next year with first clinical data. Not sure how IMGN’s IGN is differentiated from PBD payloads from SGEN and Spirogen. If one assumes it is at least as good, them IMGN779 may become a key asset for IMGN solely based on SGN-33A data.

    Ohad

    Like

  11. hello Ohad,

    again regarding $MRNS, see e.g. this poster:

    http http://www.sagerx.com/posters/poster5.pdf

    -> ganaxolone does not seem to compare so well to the (still early) Sage compound – but sure it is preclinical data.

    from a twitter post:
    At EILATXII ‘547 showed 3x potency vs. ganaxolone, 6x improvement w/’217 (‘217 EC50=188nM; ‘547 EC50=452nM; ganax EC50=1270nM) $SAGE $MRNS

    and see also these charts/tables
    https // pbs.twimg.com/media/CApgn05XIAA9l3_.jpg
    https // pbs.twimg.com/media/CApYVIcW8AEmsEt.png

    market cap of $MRNS seems very low – but maybe for a reason. What do you think about above tables/charts?

    Thanks!
    Christian

    PS: good timing on IMGN! 🙂

    Like

  12. Ohad, good call with IMGN!

    Do you have an opinion about Aduro. They plan an IPO, Stock symbol ADRO.
    The Ph 2a data look solid, The trial met the primary efficacy endpoint of OS and was stopped earlier. They also got a breakthrough designation.
    Based on these data they should not have problems with the Ph 2b trial.
    The collaboration and investment from Janssen is a plus.
    thanks–andre

    Like

  13. Christian (MRNS) – Thanks for this info. I acknowledge the skepticism around ganaxolone and that there is a possibility that SAGE’s compounds will take all market share across the various indications (from SRSE to epilepsy). However, when I factor in all available data, MRNS represents a good risk/reward ratio based on:

    1- P2 data in epilepsy
    2- Long term safety data in hundreds of pts
    3- Oral bioavailability
    4- Head start on multiple indications (fragile X, FOS)

    With respect to preclinical data SAGE presented, I would interpret them with caution (same for what BIIB presented about why BG12 is superior to other MMF formulations). What matters eventually is activity profile in humans that is affected by a lot of factors and preclinical models are not always consistent on every front. For example, if you go to the animal model in SAGE’s poster, ganaxolone looks better than SAGE-547.

    Bottom line, I feel comfortable holding both SAGE and MRNS.

    Andre (Aduro) – Thanks re: IMGN, this wasn’t part of my assumptions but always nice to have luck on your side. I am still somewhat skeptic about cancer vaccines, especially when it comes to a disease like pancreatic cancer.

    Ohad

    Like

  14. @Dan S.

    My understanding is that orphan status has been granted but MRNS must still go through the regulatory process if ganaxalone is to be approved for this therapeutic indication – until that has been done it is “not approved”. But I’m open to correction if I have this wrong.

    Like

  15. Alex (ARRY) – Near term I would expect an ex-US licensing deal or an acquisition (my bet is on Pfizer). At ASCO there should be data for some the combination trials with binimetinib.
    Re:IMGN – I would buy now in anticipation of a positive GATSBY read out and a positive ASCO abstract mid-May.

    bj (TGTX) – Too expensive imo, their drugs work but are relatively late the party.

    Ohad

    Like

  16. Hello Ohad
    I own FMI and received an offer from
    Roche to sell for 50, I can sell and buy on the market for less (48?)
    the catch i’ll have to pay tax on the profit, but if the price rise ill pay less tax when finally sell, am I getting it right?

    what do u think of the market pull back ?
    Thanks

    Like

  17. Alex (FMI) – Sorry but I am not sufficiently familiar with technical aspects.

    The next couple of trading sessions will be very important imo. There have been days like this in the past and indices jumped back shortly after.

    Ohad

    Like

  18. JB (AUPH) – Actually I started tracking them closely a couple of months ago and think it’s a compelling opportunity based on reasonable likelihood of success in a decently powered study, potentially differentiated profile vs. cyclospronie and high unmet need (lupus nephritis).

    Ohad

    Like

  19. manish (CNAT) – The data are positive (as much as one can expect from a small short term study. The ALT reduction is an encouraging signal but it’s important to remember it’s only a surrogate and not an approvable endpoint. Bottom line, good news but still a high risk holding.

    Ohad

    Like

  20. RBC about the termination of the MOR202 collaboration:
    “Sounds to us that CELG is freeing up resources to work on new innovation in myeloma and could announced a partnership or deal with another myeloma program or technology…”

    Ohad, do you have any idea which technology maybe attractive for them – KPTI?XNCR? MGNX?.

    Do you still plan to hold Morphosys after the setback?
    thanks

    Like

  21. Hey Ohad,

    I’m doing some research on AAVL and I would like to hear your opinion on possible side effects on their lead drug.

    Thanks!

    Like

  22. HI Ohad! what do y think of the other ADC bind therepautics $bind ? i agree with you and see that in the tape that this year may be the turnaround in the stocks mentioned $igen/sgen .. they are getting accumulated heavily for weeks now.

    Like

  23. andre (MOR) – This is a major blow for the company, which lost within a short time frame its 2 most important value drivers (anti-Abeta for AD and MOR202). The good thing about Morphosys is the constant flow of new programs that might become valuable assets down the road.

    KPTI’s selinexor is the only drug that come close to impressive activity in myeloma to my knowledge (albeit with a small sample size).

    Still haven’t decided what to do with MOR, I like their diversification and early stage pipeline but not a big fan of their proprietary programs (CD19, GMCSF, CD38).

    Paul (AAVL) – Two primary concerns with gene therapy in the eye is carcinogenicity and local inflammatory responses to the virus. So far side effect profile looks good and the fact they haven’t announced discontinuation of p2b is a positive indication.

    Joe (BIND) – I don’t consider BIND as an ADC player although the concept is similar. So far their data is underwhelming imo.

    Ohad

    Like

  24. Chris (IMGN) – It has good and bad aspects.
    The good thing is getting $200M today without the need to dilute shareholders + this is not a loan they need to repay in case Kadcyla underperforms.
    The bad thing – If Kadcyla generates more than $260M, IMGN will receive only 85% of Kadcyla royalties. The fact they chose to do this deal instead of waiting for IMGN853’s results at ASCO and then do a secondary is somewhat disconcerting…

    Ohad

    Like

  25. Hi Ohad,

    It doesn’t seem all that bad, IMGN avoids some of the risk in a frothy biotech market which could drag all biotechs down. There’s also the risk that the U.S. government passes legislation that cuts pricing on drugs because of the lessons they’re learning from Solvaldi; Obama is in his last term and might launch an initiative to do this before his term is up. They’re already facing reimbursement issues with NICE. After the failure of MARIANNE, Kadcyla’s hopes for being frontline therapy in breast cancer have also dimmed making the tail of this trade seem more favorable.

    -Biftek

    Like

  26. hi Ohad,

    again regarding MRNS (you see that I like this stock):

    – do you see any risk from stiripentol (Diacomit) which is already approved in Europe and also acts on the GABA-A receptor? from what I understand, the side effects profile makes it a little problematic for chronic use. some info on en.wikipedia.org/wiki/Stiripentol

    – do you think there is risk in the countries they selected for the PIII – also Poland, Bulgaria, Russia… sometimes especially in the latter things work a little differently if you know what I mean

    thanks as always!
    Christian

    by the way I think MRNS drug was featured in a short video reg. PCDH19 epilepsy
    http://philadelphia.cbslocal.com/video/11280445-health-purple-day-to-raise-epilepsy-awareness/

    Like

  27. Biftek (IMGN) – I agree that if things take a turn for the worst having the money now is going to be crucial.

    Christian (MRNS) – Don’t know the drug well but it looks like it works by enhancing GABA signaling (different than direct binding of the receptor). Safety profile doesn’t look ideal and overall this doesn’t appear to be a successful epilepsy drug.
    I believe the case described in the video is indeed a PCDH19 patient who got ganaxolone after exhausting all other options (probably not part of the clinical trial). I am speaking with MRNS tomorrow, will ask them about it.

    Ohad

    Like

  28. Hi Ohad,
    What is your opinion on Trillium therapeutics TRIL? The company’s CMO is ex SGEN SVP of clinical development. What do you think of their CD47? In terms of competition and potential?
    Thanks as always
    Chris

    Like

  29. Hi Ohad, Any thoughts on ADC immu-132 (aka Sacituzumab govitecan) from immunomedics? They have seen some good results in P 1/2 study in TNBC ( incld 1 CR) and NSCLC

    Like

  30. Chris (TRIL) – I like CD47 as a target. From what I recall, they have an interesting angle using soluble SIRP (vs. a blocking antibody) and they claim they have differential binding to tumors vs. red blood cells.
    They are going to present some mechanistic data on why that happens at AACR.
    The problem is that they are still a preclinical company.

    Steve (BLCM) – They have a very cool and clinically proven solution for over- activation of immune cells (either transplant or CARs). Valuation is a little bit rich to me.

    Ohad

    Like

  31. Ravi (IMMU) – Have to admit I was positively surprised by their initial data (had very low expectations for their ADC technology that utilizes SN38). They challenge the dogma of using super toxic payloads and low drug/antinody ratio and clearly have activity. If they show preferential activity in TROP2+ tumors then they may have a route to market.

    Ohad

    Like

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