Biotech portfolio update – Clovis, Array, ImmunoGen

Clovis Oncology

Clovis (CLVS) lost 75% of its market cap last week after disclosing a disappointingly low response rate for rociletinib in T790M+ NSCLC patients. Updated response rates were 28%-34%, dramatically lower than the 54-60% response rate reported at ASCO 2015. According to the company, the dramatic difference stems from analyzing the same data set based on more stringent criteria (confirmed response rate).

When a patient achieves a response (30% reduction in tumor burden), the response has to be confirmed by a subsequent scan (~6 weeks later). If the subsequent scan shows progression then the response is not considered a confirmed response. As companies report results of early stage in parallel to recruiting new patients, it is common to see unconfirmed responses as part of the efficacy evaluation.

From a clinical perspective, unconfirmed responses are far less attractive as they represent a transient benefit that is followed by disease progression after less than two months. When a drug leads to an unconfirmed response rate of 50% but the confirmed response rate is 30%, this means that almost of half of responders could not maintain their response for 2 months. This potentially impacts the overall clinical benefit including PFS and overall survival.

As data mature (typically in the context of P2 or P3) there is enough follow up to distinguish between confirmed and unconfirmed responses, making the latter irrelevant for assessing response rate. This is particularly important when companies file for accelerated approval based on response rates. In other words, at the end of the day an unconfirmed response rate is not considered a meaningful (let alone approvable) endpoint. This is why companies and investigators often distinguish between confirmed and unconfirmed responses. Below are two examples from Array Biopharma (ARRY) and Immunogen (IMGN) (I picked them simply because I am going to discuss them below, red arrows are my addition).

Bini+ribo IMGN853

I was very surprised to learn that Clovis has been consistently using unconfirmed response rates in its data analysis without ever telling investors a significant portion of these responses were transient. While the company presents the delta between confirmed and unconfirmed responses as an unexpected new finding, looking retrospectively at the results calls into question this claim.

Clovis started presenting data for therapeutic doses of rociletinib’s new formulation at ASCO (June) 2014, starting from a cohort of 40 patients with T790M+ NSCLC and a response rate of 58%. At the time, many patients had limited follow up so technically it was impossible to confirm most responses. The spider plot  below clearly demonstrates this.

roci - ASCO 2014Five months later at the EORTC meeting (Nov 2014), Clovis presented an update which included 27 efficacy evaluable patients treated at the doses the company decided to take forward (most responses had already been reported at ASCO 2014). Response rate was 67% and although many patients had significant follow up, there was still no breakdown of confirmed and unconfirmed responses. Based on this and the fact that patient recruitment picked up significantly in H2 2014, it is safe to assume that the company started 2015 with a ~60-patient database with sufficient follow up to get a reliable confirmed response rate.  

At ASCO 2015, Clovis had a 243-patient efficacy database. Response rate was 53% and again, despite the fact many patients had significant follow up to distinguish between  confirmed and unconfirmed responses, Clovis did not disclose anything about this issue.

Before last week’s announcement, Clovis never reported efficacy based on confirmed responses even though it is a common practice and despite the fact it had plenty of opportunities to do so. In addition, AstraZeneca started to report efficacy based on confirmed responses more than one year ago (see link). Clovis presented its data, sometimes back to back with Tagrisso (AZD9291), but still used unconfirmed overall response rate.

Using a confirmed response rate, rociletinib’s response rate of ~30% is inferior to that of Tagrisso, which has a confirmed response rate of 51%-59% in T790M+ NSCLC. Rociletinib appears to have a similar PFS to Tagrisso and the difference may be explained by a different patient population pursued by the two companies but for now Tagrisso looks like the undisputed winner.

As an investor, I find the behavior of Clovis’ management disturbing because I fail to see how the issue of response confirmation could be overlooked. Not only is distinguishing between confirmed and unconfirmed responses a common practice, Clovis knew AstraZeneca used confirmed response rate and did not bother to do so as well, thereby leading investors to assume the drugs are comparable in terms of response rate. To clarify, it is OK when an initial signal is not corroborated by a larger data set. My concern is that Clovis knew that responses are not durable in many of the patients but still covered this up. Clovis did not lie to investors, but it certainly did not provide the full picture.

Array Biopharma

Array’s recently announced partnership with Pierre Fabre for binimetinib and encorafenib was not well received by the market due to the limited size and scope of the deal. The market (myself included) expected a rich global deal with a leading pharma (I actually thought an acquisition makes more sense). Instead, Array did a limited deal (covering Europe and other markets) and retained full rights in US and Japan.

Financially, the deal itself does not look that bad at second glance as Array keeps US and Japan and retains a 20+% royalty rate in Pierre Fabre’s territories while offloading 40% of global development costs. Still, the fact Array could not land a richer and broader deal is disappointing because it implies there was limited interest from large biopharmas, who could easily acquire Array for under $1B.

Admittedly, MEK inhibitors haven’t lived up to expectations and BRAF+ melanoma is the only setting in which a clear benefit has been observed. Results in other indications were either negative (uveal melanoma) or not exciting enough even as combination with BRAF inhibitors (BRAF+ colon cancer). Nevertheless, there are still plenty of settings in which MEK inhibitors are being evaluated, which could translate to a significant commercial opportunity.

Extrapolating from the melanoma experience, MEK inhibitors may be used to enhance activity of BRAF inhibitors. Beyond melanoma, BRAF inhibitors may be applicable in niche indications with BRAF mutations. Two recent publications (see link #1 and link #2) evaluated Zelboraf in BRAF+ tumors (excluding melanoma) and reported responses across various tumor types including a 42% response rate in BRAF+ NSCLC and a 96-100% response rate in a rare leukemia. Based on experience in melanoma and colon cancer, adding a MEK inhibitor may augment efficacy and prolong treatment duration.

Larger indications such as RAS-mutated tumors may be relevant for other combination regimens with MEK inhibitors. These include KRAS+ NSCLC where AstraZeneca is evaluating Array’s selumetinib with chemotherapy. Companies are also exploring this indication, which represents a multi-billion opportunity, with PD-1/PD-L1 antibodies combined with MEK inhibitors.

There are also small indications in which MEK inhibitors may have single agent activity, with neurofibromatosis as a recent example (see press release). Array will soon report P3 results for binimetinib as single agent in NRAS+ melanoma. The study was initiated by Novartis at the time based on a single arm study that demonstrated modest efficacy (~15% response rate, PFS of 3.6 months) and since the P3 trial compares binimetinib with chemotherapy, I view the readout as a high risk event. Combination with a CDK4/6 inhibitor appears more promising but toxicity is an issue.

I plan to hold Array going into data readouts in 2016. Failure in NRAS+ melanoma could present an attractive entry point ahead of the 2016 readouts (especially Astra’s SELECT-1 in KRAS+ NSCLC).

ImmunoGen

Earlier this month, ImmunoGen got a step closer to breakthrough therapy designation with updated results for IMGN853 (mirvetuximab soravtansine) in ovarian cancer. Results provided only limited additional information in terms of number of patients and follow up but provided a strong indication regarding the company’s ability to select patients more likely to respond to the drug.

In the overall population, response rate was 50% (10/20 patients) vs. 53% (9/17) reported at ASCO but stratifying patients according to FRα (mirvetuximab’s target) expression demonstrated a striking correlation between FRα expression level and responses. Of the 10 patients with high expression, 7 (70%) had a confirmed response including two ongoing complete responses. Two additional patients had an unconfirmed response, bringing the unconfirmed response rate to 90%. In contrast, patients with medium and low expression had limited and no benefit, respectively (see figure below).

mirv - EORTC

Response duration in high expressors was encouraging as of the 7 responders, 5 stayed on treatment for 6 months or longer, including 4 patients who were still ongoing at the time of presentation. One patient received mirvetuximab for a year.

If corroborated by future results, the high response rate in high expressors is a clear positive for Immunogen because it increases likelihood of accelerated approval using a small P2. Obviously, the addressable market is smaller but still represents a $1B global opportunity (conservatively assuming 15,000 eligible patients). At ASCO 2015, the company will report data for 20 additional patients, which will be crucial for corroborating activity in FRα-high tumors. A confirmed response rate of 50% with a durability of 5-6 months in these heavily-pretreated patients will validate ImmunoGen’s clinical strategy and make mirvetuximab one of the most promising agents for ovarian cancer.

Portfolio updates

We are selling Clovis following the recent update and regulatory setback as well as Ocata (OCAT) following its acquisition by Astellas.

portfolio - 22-11-2015 - after changes

biotech etfs - 22-11-2015

89 thoughts on “Biotech portfolio update – Clovis, Array, ImmunoGen

  1. sherk (BLUE) – There are always a lot of dynamics in a nascent field. There will surely be multiple “next-gen” solutions but for me the most important aspect is a broad foundation and clinical validation, which is why I feel good with BLUE long term. CRISPR has a long way to go as a technology (CLLS provided a glimpse of hope for gene editing in general though). Also, I don’t envision a single solution for all genetic diseases but a tailored approach for each indication based on therapeutic settings (cell type, organ, in vivo vs ex vivo, therapeutic area, tissue accessibility etc.).

    curiousgeorge (EXEL) – I think they need a deal urgently in order to market the drug outside of the US. At the moment I don’t attribute a lot of value to other indications although the liver cancer trial may surprise us. Not sure about drug pricing but cabo’s effect is truly impressive (compared to other approved RCC agents) and the overall cost is not that significant.
    Can’t speculate regarding the second part.

    Re: positioning vs. Opdivo, I am sure some cabo will be used in some 2nd line patients but I still expect the vast majority of patients to start with Opdivo given the survival benefit. Totally agree about lack of prolonged remissions typical of immunotherapy. PD-1 are important in RCC but they are not a slam dunk.

    Ohad

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  2. Maybe I made the wrong choice. I bought xene which is at 125m rather than trvn at 500 odd million. Is trvn that much worth than xene? Thanks Ohad.

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  3. Thanks for your thoughts, Ohad. Speaking of platforms, I was wondering if you had an opinion on ALNY. The RNAi platform has gone through its growing pains, but the company believes it has essentially solved the delivery problem for the liver, which was believed to be the big hurdle holding back the technology. Valuation is quite rich, but the company’s pipeline of liver-directed targets is quite broad and growing rapidly.

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  4. $EXEL I think the base enterprise value probably can be approximated given that VEGF inhibitors have been in use for a while. Cabo would be a best in class inhibitor with OS benefits so theoretically it should work in all indications where other VEGF inhibitors are working. The question then would be which indications are worth pursuing, and how long will it take to get to market, a big Pharma can for sure take advantage of Cabo. Avastatin has not produced OS benefits so it would even be better than Roche’s VEGF, they probably want to use Cabo and pay as little as they can while EXEL board probably wants to wait as much as they can so they can pile up indications for both Cobi and Cabo, and decide whether to sell or partner. They probably want to sell if they can get the right value. The shorts need to understand they can make more money if they stop shorting by letting EXEL fly, and get bought. The shorts are being penny wise foolish looking for interest accumulation. I hope they read your blog and get a sense of their irrationality. Live and let live should be their motto otherwise I do hope EXEL does a big surprise on them and the shorts get called.

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  5. Mike (TRVN) – Not much has changed in how I view them. They are looking at a relatively quick and cheap registration program with a relatively high likelihood of success. Post operative pain management truly needs somehting like Oliceridine (TRV130). As you know I like both TRVN and XENE but TRVN has deep clinical validation and owns global rights to its lead program.

    Sorry, don’t know FOMX or GNVC well.

    Alex (STML) – First I want to see BPDCN data at ASH.

    sherk (ALNY) – I agree, they appear to have solved liver-directed siRNA delivery. The TTR programs look very good, not sure about hemophelia as their approach may be inferior to gene therapy approaches (BIIB, QURE etc.). For me, it’s a great company but valuation is too high.

    curiousgeorge (EXEL) – Broad spectrum VEGFR inhibitors are effective primarily in renal and liver cancer. In other indications the clinical profile is not favorable so I don’t see cabo being broadly used in the general population (without a biomarker).

    Mike (XENE) – Interesting find, thanks! Perhaps, this is clearly another demonstration of biology’s inherent complexity. Perhaps they can combine NaV1.7 inhibitors with TRVN’s selective opioid agonists…

    Kenny (BMRN) – I can’t envision an approval following the brutal panel last month. Good too see the FDA still stands by basic principles of evidence-based medicine and protect the public from ineffective potentially dangerous drugs.

    Steve (BLCM) – So far so good although efficacy profile is hard to interpret vs. a historical control.

    Ohad

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  6. Any thoughts on what BLUE presented at ASH? Their SCD will likely disappoint investors but the short follow up time could have something to do with it looks like?

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  7. rick (CARA/TRVN) – I think both have drugs that work with some indication overlap but the different MOAs make them distinguished. In post-op pain, I would go with TRVN but CARA has interesting Uremic Pruritus data.

    Al (BLUE) – Yep, the 2 additional SCD patients did not respond as expected. Not sure it’s a matter of follow up, perhaps they need to do more optimization. Will wait for their ASH event.

    Ohad

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  8. Hey Ohad
    Any opinions on FATE and AFMD, both presenting at ASH. FATE is an interesting play, with very low valuation compared to cart companies.
    What do you make out of BLUE results. Seems nobody knows exactly if they are positive. Thanks!
    Dan

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  9. Hi Ohad

    Seems MOR202 results look a little better now – what do u think?

    They also claim (preclinical findings) MOR202 not killing NK cells which should benefit ADCC. Your thoughts?

    Thanks!
    Christian

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  10. Dan –

    AFMD – They may have a differentiated bsAb technology but I don’t find their CD30 program exciting and the CD19 space is so crowded. I like the CD33 program but it’s still preclinical.
    BLUE – I am still a long term believer in their technology although it certainly cannot be viewed as a broad absolute solution for all beta thal and SCD patients. They have a strong poc in non-beta0 patients so the way I see it they can expand to other populations with treatment optimization (conditioning, transduction efficiency, amount of cells they accumulate etc.).
    FATE – Don’t know them well.

    Christian (MOR) – I don’t think MOR202 can be saved, it is inferior to dara and the company should not waste resources there. I don’t buy mechanistic differentiation if it is not supported by a superior clinical effect.

    Ohad

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  11. Sam – It is still hard to find good quality biotechs with reasonable valuations (there are a lot of great companies but upside is priced to perfection). The ones I like are EXEL and ESPR, both have solid efficacy, significant market potential and fairly modest valuations. MDVN is experiencing growth pain and still quite expensive, don’t know NBIX well.

    curiousgeorge (EXEL) -It’s impossible to predict near term stock movement.

    Mick – The reaction to BLUE and AGIO is justified, they are still great companies but valuations didn’t make sense. STML’s data look pretty good based on the PR (still didn’t see actual data), now they need to work on accelerating recruitment.

    Tom (STML) – Yes I am impressed too with the caveat of not seeing the actual data.

    Ohad

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  12. Hey Ohad
    have you seen the p2 results of ONTX, combination in MDS, looks good. Market cap is still at 33M, what do you think the significance of those results might be, as well as make potential?
    Thanks
    Dan

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  13. $EXEL Cabozantinib is approved by NCCN, that is a fact. Do you think is Exelixis waiting for CaboSun results before doing the deal to get the proper valuation ? Also, would the NCI fund cabo opdivo combination trials if it were not enthusiastic about it’s prospects ? Can Exelixis get Cabo approval ahead of schedule like Opdivo, and put Not Estimatable in overall survival on the label and just get it updated later on ? How much does waiting for the OS results matter to be placed on the label versus just saying Not Estimateable and trying to get it approved asap like Opdivo ?

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  14. $EXEL They have said they want to have manufacturing up by April 1,2016 and ready. If they can get the approval before that date, and start selling it to show revenue before doing a JV would that be a good plan ?

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  15. SNTA What do you think of its potential to make a comeback given that hsp90 inhibitors might be combinable with PD1 inhibitors. Judging from your experience in this do you think Exelixis can find a partner to pursue XL888 since they have done Phase 1 testing with it already together with Moffit Foundation PIs

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  16. Dan (ONTX) – Small single arm studies are hard to interpret, let alone in MDS. I am not optimistic about this drug at all given past failures.

    curiousgeorge (EXEL) – I don’t think they are waiting for CABOSUN data, which should not impact utilization in 2nd/3rd line RCC. It’s common to file based on PFS and add OS data after approval. Having an OS benefit in the label is extremely important although the drug still has significant potential without it (Afinitor, Nexavar and Inlyta don’t have a stat sig. difference).

    They can start selling in the US but they don’t have an international sales force which is why they must get a partner soon.

    Christian (ONTY) – Still didn’t have a chance to listen to the webcast or look at the data but data in the press release were incoherent and activity certainly doesn’t look dramatically better than what would be expected with Kadcyla or Xeloda monotherapy. The CNS analysis is intriguing but I there isn’t an absolute “palpable” effect there imo.

    Richard Baker (STML) – I was initially impressed with the press release as activity is clearly there but durability is still an open question. In order to be considered a viable treatment in BPDCN, SL-401 must keep patients in responses for at least 5 months or result in a high proportion of bridges to transplant. Within 6 months we should have this type of data from the expansion 12ug cohort.

    curiousgeorge (SNTA) – I like the notion of using Hsp90 inhibitors as carriers because they were shown to accumulate in tumors in humans. Not a big fan of approved chemos (like SN-38) as a payload. I liked the Velcade conjugate much better. Don’t think XL888 has a lot of value to EXEL. Data in melanoma were not phenomenal imo.

    curiousgeorge – I am no expert there, as if biotech wasn’t hard enough…

    Ohad

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  17. Hi Ohad

    “December 14, 2015 AdCom for Vytorin/Zetia label expansion will provide additional insight into the FDA’s new take on the LDL hypothesis, which could guide its approach to future labeling of other types of LDL-lowering agents such as PCSK9s and 1002.”

    When time permits can you share your thoughts after the Ad Com ?

    Thanks for all you share

    Gene Mc

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  18. Ohad

    Here is anDavid Miller ‏@AlpineBV_Miller 3h3 hours ago
    Nothing in the briefing doc or questions sounds to me like the FDA is pushing to eliminate the LDL Hypothesis. $MRK $ESPR Panel on Monday.
    RETWEETS
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    Abby NachtomiAniu StudentKristinaKaushikandreasBen MatoneRSmithSchulzAudi
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    Joseph W. Ramelli ‏@JosephRamelli 3h3 hours ago
    @AlpineBV_Miller Didn’t forcing companies to run CVOTs already eliminate the LDL Hypothesis? Indirect, but still…
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    Schulz ‏@portefeuillefun 2h2 hours ago
    .@JosephRamelli @AlpineBV_Miller Since when does the decision to try to validate a hypothesis invalidate it? $ESPR
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    Joseph W. Ramelli ‏@JosephRamelli 2h2 hours ago
    @portefeuillefun @AlpineBV_Miller They are forcing CVOTs because they no longer believe in the hypothesis imho.
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    Joseph W. Ramelli ‏@JosephRamelli 2h2 hours ago
    @portefeuillefun @AlpineBV_Miller FDA transitioning to CVOT as the primary endpoint for approval. Current CVOT after approval interim step.
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    Joseph W. Ramelli ‏@JosephRamelli 2h2 hours ago
    @portefeuillefun @AlpineBV_Miller That is my humble opinion.
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    Reply interesting exchange re ESPR

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  19. 5 retweets 7 likes
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    Joseph W. Ramelli ‏@JosephRamelli 3h3 hours ago
    @AlpineBV_Miller Didn’t forcing companies to run CVOTs already eliminate the LDL Hypothesis? Indirect, but still…
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    David Miller ‏@AlpineBV_Miller 2h2 hours ago
    @JosephRamelli The only companies forced to run CVOTs are developing novel pathways (PCSK9s) or pathways proven to not adhere (CETPi)
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    Joseph W. Ramelli ‏@JosephRamelli 2h2 hours ago
    @AlpineBV_Miller So far. $ESPR will have to run CVOT.
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    David Miller ‏@AlpineBV_Miller 2h2 hours ago
    @JosephRamelli Of course, but not required for approval. $ESPR
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    Joseph W. Ramelli ‏@JosephRamelli 2h2 hours ago
    @AlpineBV_Miller if $ESPR hits CVOT, will not have new competition. Bios are bailing on lipid programs. Way too expensive and risky now.
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    Joseph W. Ramelli ‏@JosephRamelli 2h2 hours ago
    @AlpineBV_Miller so super bullish if they can get there….
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  20. Ohad

    When you look at valuations of large cap bios such as Celgene-biogen-regeneron-Amgen-giliad,do you feel there current mkt caps are justified,or do you see further downside after tremendous gains have been made over the last 5 years.Can you share your thoughts as you project the performance of these large cap bio stocks.Also,do you have a favorite 50+ billion biotech stock.

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  21. Ohad, I still can’t decide whether I should start buying BLUE. Would you not be concerned that haplo transplant (TCR alpha/beta and B-cell depleted) may become bigger and eat up future BLUE’s opportunities? I heard some hematologists talk enthusiastically about the haplo prospect. Thanks.

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  22. genemc (ESPR) – I expect Vytorin’s AdCom to validate the LDL hypothesis but the more important event will be CVOT data for the PCSK9 antibodies that have a much more dramatic LDL effect.

    Dave – I tend to focus on smid caps but large cap valuations also look rich to me. Here the risk is more from pricing and biosimilars because these companies have profitable franchises that are expected to sustain revenues in the coming years.

    Hiroshi (BLUE) – I am also struggling with BLUE but I am not very concerned about competition from haplo transplant as BLUE’s approach to do an autologous transplant is superior on many levels (conditioning, engraftment, GvHD etc.)

    Ohad

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  23. Arry’s trial NRAS came out positive with HR of 0.62. However with a PFS of 2.8 vs 1.5 weeks do you think its meaningful enough for approval? Will FDA wait for overall survival data before granting the approval? Thanks! I feel like ARRY is way undervalued here with a positive trial and ~200M in cash that can weather through all the important readouts next year.

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