Endocyte – And now for something completely different

Last week’s approval of Alnylam’s (ALNY) Onpattro, the first FDA-approved siRNA drug, serves as a reminder for the bumpy road new technologies go through on their way to the market. From an investor perspective, siRNA has gone in and out of fashion over the years with dramatic shifts in market sentiment. It started with unrealistically high expectations, deteriorated to deep pessimism due to clinical setbacks, followed by gradual sentiment improvement in recent years (with some hiccups along the way).

This pattern is typical for many fields in biotech (recent examples are gene therapy, immuno-oncology, genomics), which sometimes took decades to realize their potential. The good news is that once a depressed field “rises from the ashes” it is usually for a good reason, i.e. it is backed by real progress. This appears to be the case in targeted radiotherapy (TRT), a neglected field until recently that may become the next big thing in oncology.

Targeted radiotherapy’s checkered past…  

In contrast to siRNA, targeted radiotherapy (TRT) has never been very popular with investors. It had a brief wave of activity in the early 2000’s, culminating in the approval of Bexxar and Zevalin in lymphoma. Despite good clinical efficacy, the two agents (both targeting CD20) were commercial failures because they couldn’t compete with Rituxan-based regimens that were more straightforward to use. TRT agents come with a host of logistic issues: They have a short shelf-life, require special shipping and handling, necessitate special training and carry radiation exposure risks. It isn’t surprising physicians preferred the simpler alternative…

More importantly, antibody-based TRT (also called radio-immunoconjugates) like Bexxar and Zevalin have a long circulation time in the body, leading to significant bone-marrow toxicity as well as damage to highly perfused organs (liver, lungs). This profile may be sufficient for efficacy in lymphomas (cancer of the bone marrow) but not in solid tumors where higher exposure is required.

…but recent data point to a revival

Data from three different TRT programs are behind resurgence in investor interest: Bayer’s Xofigo for prostate cancer with bone mets, Novartis’ (NVS) Lutathera for neuroendocrine tumors (NET) and Endocyte’s (ECYT) Lu-PSMA-617 for prostate cancer.

A key feature of all three is the use of small targeting moieties (In Xofigo the radioisotope is also the targeting moiety), which leads to a short exposure and quick clearance via the kidneys. This exposure profile enables the administration of higher radiation doses, leading to better tumor accumulation with limited toxicity (kidneys are relatively radio-resistant and can be further protected pharmacologically).

First demonstration of efficacy was with Bayer’s Xofigo, approved for prostate cancer based on a modest survival benefit. Xofigo does not have a targeting moiety and it accumulates in bones based on a structural similarity of Radium-223 to calcium. In 2014, Bayer bought Algeta, Xofigo’s original developer, for $2.9B. Xofigo is considered a disappointment with $400M in annual sales (partly attributed to its narrow label) but it still serves as a proof of concept for a radiopharmaceutical. It also clinically validates alpha emitters as a therapeutic class.

The next validation came from Novartis’  Lutathera(via the $3.9B acquisition of Advanced Accelerator Applications), approved for NET. Lutathera is comprised of a peptide targeting somatostatin receptors linked to Lutetium-177. In a P3 study vs. an active control, Lutathera led to an impressive PFS benefit (HR = 0.21) and a strong OS trend.

Lutathera P3

Source: Strosberg J. N Engl J Med. 2017 Jan 12;376(2):125-135.

It is still early to assess Lutathera’s commercial performance (approved by the FDA in Jan 2018) but launch trajectory looks good with sales of $24M in Q2/2018.


Endocyte – Transformational deal, strong P2 data

Endocyte is a newcomer to the TRT field following the in-licensing of Lu-PSMA-617 from ABX. This small transaction transformed Endocyte (and its market cap), which now has the most prominent TRT program in development. Lu-PSMA-617 consists of a small molecule targeting PSMA linked to Lutetium-177. The company recently started P3 based on strong P2 data that were published earlier this year. Lu-PSMA-617 led to a PSA response in ~60% of patients, and more importantly generated an objective response in 82% in 17 response-evaluable patients with soft tissue lesions.


These results compare favorably to other approved agents and may under-represent Lu-PSMA-617’s effect as the ongoing P3 is evaluating a longer treatment regimen. Importantly, the drug was active in patients who failed Zytiga or Xtandi, the leading prostate cancer drugs and the effect was consistent irrespective of prior treatments. Lu-PSMA-617 is being evaluated as monoterapy but it can potentially be combined with other agents in the future given the different MOA and relatively mild safety profile.

Significant commercial opportunity

There are four prostate cancer drugs on the market that can be used to gage Lu-PSMA-617’s commercial opportunity: Zytiga, Xtandi, Xofigo, and Jevtana. Their respective commercial performance varies widely, as Zytiga and Xtandi generate $3.5B and $2.5B, respectively, whereas Jevtana and Xofigo are niche products with ~$400M in global annual sales. Lu-PSMA-617 should be somewhere in the middle as it appears more efficacious and better tolerated than Xofigo/Jevtana. Despite its potential broad applicability (85% of prostate cancer patients should be treatment-eligible based on PSMA expression), logistics issues may prevent it from becoming a multi-billion franchise like Zytiga and Xtandi, but peak sales of ~$1.5B appear achievable.

Endocyte just strated a P3 study which will take 12-18 months to readout (interim analysis, depending on regulatory feedback expected this year regarding approvable endpoints). The only important near-term catalyst could be data from an investigator sponsored study comparing Lu-PSMA-617 to Jevtana that started in January.

Despite the lack of catalysts and potential for negative ones (technical , safety issues), Endocyte may become an attractive acquisition target given the strong efficacy, favorable safety profile, novel MOA in a highly competitive and lucrative market (Zytiga will become generic soon). Many companies are not (yet?) interested in radiopharmaceuticals but an obvious acquirer is J&J given on their franchise in prostate cancer and involvement in another TRT company (Fusion Pharmaceuticals).

Portfolio updates

I am selling Foundation Medicine (FMI) at a 510% profit following acquisition by Roche, announced in June.

biotech portfolio - 13-8-2018 after changes biotech etfs - 13-8-2018

195 thoughts on “Endocyte – And now for something completely different

  1. Christian (SAGE) – Agree, not cheap but the potential for a new depression drug with the clinical features that emerged from their P2s is so explosive I prefer to hold.

    Garry Xo/ DJ Chudasama/ Xavi (ECYT) – Thanks! Surprised it was NVS who acquired them eventually, premium isn’t huge but still a decent valuation.

    don (STML) – Thanks. Yes I still think there is upside, not huge but the potential is there.



  2. Hey Ohad!
    Great job with ECYT! This. Has to be one of your quickest (portfolio purchase to acquisition). What do you think of valuation? NVS seems to be making a lot of innovative tech deals. Leading the way!
    Are you holding until closure? Do you think another company could outbid NVS?



  3. Ohad what is your opinion of $ODT who is is addressing breast cancer via novel low toxicity taxane. They ipo’d at $24 and have recent significant insider purchase at $19.55 of 90,000 shares by Kevin Tang


  4. Thanks Ohad for your great analysis. First buyout experience for me.
    Since it is all money does that mean i just have to wait for the money!?!


  5. Hi Ohad,

    Terrific call on ECYT. Thanks for sharing your exceptional insights and knowledge.

    Do you think JnJ or Pfizer could come up with a higher bid, considering that (1) the prostate cancer franchise is already in place and (2) the $1-2 billion market potential you had mentioned at one point? Also NVS paid $3.9 billion for the previous radio ligand deal, with inferior efficacy. Maybe it’s the poor market conditions?

    Curious about your current take on NERV also. Thanks!



  6. Hey Ohad,
    AMRN – what do you think will happen? Do you think AMRN is on the radar for an acquisition? Market cap is already $6 billion. Some people on the twittersphere think it can double or triple? Is there any merit to those views?
    Thanks a lot for your insight and perspective,



  7. Ohad….. I know you can not comment on Arqule…..but is there a website or a blog that you could refer me too? Would welcome any comments from this EXCELLENT BLOG !!!


  8. A few editions back you were positive about CNS-companies.
    What’s your take today and more specifically, do you have an
    opinion on ACIU (AC Immune) and AXSM (Axsome)


  9. Hi Ohad,

    Any thoughts on Immunogen’s updated Mirv+Pembro results from an expanded cohort?


    It looks like out of 54 patients, they achieved 16 confirmed PRs and 9 unconfirmed PRs. (If they wanted to pull a “Clovis,” they would have said 46% ORR and been done w/ that.) Given that they presented the initial cohort at SGO in February, enrollment would only have finished in the middle of the year, so it’s likely some of those 9 with unconfirmed PRs didn’t achieve confirmation due to immature data rather than progression.

    Initial PFS is 4.2 months for the whole population but DOR was 6.2 months for the whole group and 8.1 months for the med/high FR-alpha expressers; so this is likely to improve as data matures as for the med/high group:

    “At the time of analysis, the data were immature with 16 patients still on study (all with medium or high FRα expression) and a median follow-up of 8.3 months.”


  10. Any insights into dementia/alzheimers drugs? This is a very green field area that hasn’t seen much break through. Any companies you are looking at for this? Any thoughts in general about dementia/alzheimers?


  11. Hello Ohad. I asked you in the past about ARRY (Array) trial results; however, would you consider owning it as part of your portfolio?
    They seem to have a large pipeline (at least 9 in ph3) with multiple trial partners and I believe a healthy cash balance. They also now have their first commercial drugs.
    I hope that you can shed some light on where they might be heading. Thanks again for your insights. You are the best analyst that I have ever encountered- definitely when it comes to Biotech.


  12. Ohad,
    What do you think about DCPH data?
    Nice durability but weak 4L data
    Is the sell off bc the market writes off their current Ph3 in L4?

    Great call on ECYT. Excpeciall “attractive acquisition target” was confirmed in about 2 months.


  13. Hi Ohad,

    KURA’s results were underwhelming – only 6 of the 20 (and 3 maore maybe) seemed to respond – report indicated that patients with allele frequency >20% (13 of the 20, of which only 6 responded) which responded to the treatment is only 5% of the patient population. Got out of KURA at breakeven :-(. Sad day for Biotechs today with IMGN & ADRO being badly beaten down.

    Any idea why VKTX is being draged down so badly?


  14. Les–Like you, I am very interested in Ohad’s take. I didnt think the data were that disappointing…looked like 17 pts on trial, 11 evaluable, and 9/11 with PR or SD. Only one patient progressed primarily on therapy. The 12th pt, evaluable after the study cufoff, is a near PR.
    We knew that this was a drug for only 5% of the HNSCC population–when I asked that question (November 13, 2017 on this blog) Ohad estimated that represented a 3000 pt subset.
    Appreciate as always the insight of this group and of course Ohad….best blog on biotech that I have ever seen!


  15. Ohad
    how big of a concern is that VKTX has composition of matter protection only until 2024. Some method of use patents are much longer though
    Do you know the patent situation with MDGL?


  16. Ohad

    The market had a negative reaction to the data from NTGN. Does that change your positive outlook you have for cell therapies for antigens, or was that specific to NTGN. Are there others in the field you think are worth following?


  17. Ohad
    ORTX IPO Oct 31. According to F-1A the market cap will be 1.4B at $15.
    You said that you expect the “valuation to be a barrier”
    Is 1.4B too high, considering they have an approved drug in EU (extremely rare disease), plus 5 drugs in clinic, incl 3 pivotal trails with potential 3 x BLA in 2020?


  18. ECYT – Thanks, everybody, for the kind words.

    Alex (SAGE) – The MDD P3 is expected to start shortly so we are talking about early 2020.

    Dan (ECYT) – Thanks. Agree about NVS, investing in emerging technologies with unclear business models so clearly deserve credit for taking the risk. I don’t know about another bidder but I plan on holding after DMTX…

    Paul Gathua (ODT) – Don’t kow them well but not a big fan of the approach.

    Georges Robitaille (ECYT) – Yes, or you can sell beforehand.

    Richard Baker (NERV) – I still think it’s attractive, a basket of de-risked CNS assets with readouts next year.

    Anna (ECYT) – I also thought JNJ is a more relevant buyer given its interest in radiopharmaceuticals and franchise in prostate cancer. I think the gap in valuation represents the fact that AAA was on the verge of commercialization and its platform capabilities.

    NERV – See above.

    Dan (AMRN) – Don’t know the field well so hard to say. Sounds like a lot of people are going to use it.

    Bouschka (ARQL) – Sorry, can’t think of a relevant website.

    rodolfo –
    ACIU – Not a fan of their clinincal pipeline, especially not with a 1B+ valuation.
    AXSM – Don’t know them well.

    wildbiftek@gmail.com (IMGN) – I think market reaction was justified, data weren’t exciting. Yes, some of the responses might get confirmed but still teh totlity of the data isn’t very encouraging given monotherapy data for both agents.

    Kay Lee – Unfortunately nothing I can think of.

    Lawrence (ARRY) – Thanks. Their BRAF+MEK combo looks differentiated so it could capture a significant market in BRAF+ melanoma and they are eligible for royalties from LOXO but at a 3B valuation I prefer to sit on the sidelines.

    andre (DCPH) – Agree data are disappointing and selloff was warranted. My feeling is that BPMC has a better drug but hard to compare across trials.

    Christian (KURA) – I find the data disappointing, there is still a clear efficacy signal but not as strong. Enriching patient population may take the ORR back up but with a cost of losing a portion of the market.

    Les (KURA) – Agree results are disappointing but I still think the drug is viable.
    No idea about VKTX.

    Gary (KURA) – Thanks. I agree the drug is active but stock reaction is justified given the drop in ORR. Yes, they could go for a narrower patient population but that means going down to ~2000 eligible patients in SCCHN.

    andre (VKTX/MDGL) – Not familiar with their IP status but obviously composition of matter is much stronger than other patents.

    Dave (NTGN) – I think the stock’s behavior represents market’s skepticism around vaccines for neoepitopes. The jury is still out on cell therapies targeting neoepitopes but I am still optimistic. There is obviously GRTS who recently went public as well as other private companies.

    andre (ORTX) – Yes, I think 1.4B is too high but I still like the company so will wait for a better entry price.



  19. Hi Ohad, fellwo bloggers,

    Any idea when in November XENE will provide an update on the trial results? With their earniongs conference call on November 5th?


  20. SNSS taking a big hit today (lately), i have not seen any recent statements or news leading to it. The price is now at a big discount to your original buy, is it a good entry


  21. Bubble or not, sad day for Biotech’s. Hopefully a boince tomorrow. MDGL is being decimated. Anybody know why? Folks who bought shares at $300 have gor badly burnt. Not sure why they are not stepping in and buying.


  22. Ohad…. Just realized that my post aboutMeiraGTx was on the Zenon Thread. You have viewed them in a favorable light… but they are not in your portfolio. Is the valuation too high or are you considering adding them to your “gene basket”???


  23. Ohad have you given a look at this morning infos coming from Eisai/Biogen on BAN2401 for Alzheimer (CTAD Barcelona)? The market reaction is negative on a upward day when the new data seems to me quite positive since it relatively clears up the questions around E4 unbalance in the study groups. They say they identified an even better response for E4 carriers (15% of the population but overrepresented in Alzheimer population) that they write was 68% (compared to their positive announcement at 30%) better than placebo!!! (slowing of cognitive loss). Since this is a subset very highly at risk already this group would be major…


  24. Just to add a few numbers. E4 is present in about 15% of humans but is present in 40% of Alzheimer`s patients. If you have E4/E4 you are about 90+% sure to develop it. Around 108.7 millions americans are over 50 years old which would be the time to start the treatment to prevent the disease to bring cognitive impacts. How many of these people (E4/E4: 2,8 millions, E4: 16,3 milions…) would want the treatment at 50 or 55?
    If it can show a 10-15 year delay it could make this disease almost disappear for the late onset group. There is a possibility for non-carriers that being less rapid decliners that it is going to be tougher to demonstrate it with the actual trial design. My two-three cents…


  25. Ohad…u mentioned u were interested in CRSP but valuation was too high….r u now inclined to add? ….also do u prefer it to NTLA or EDIT?

    Excited to say I added some ABEO ….i really like this gene therapy company since they have a strong focus on juvenile disease.
    They seem reasonably priced.
    R u adding more on this dip?


  26. Ohad

    Are you familiar with the ADXS neoantigen program that is partnered with AMGN. Do you see any value there?The stock appears to be trading at discount to its cash value.


  27. rodolfo (ACIU) – Right, my mistake, still doesn’t change my view on them.

    Les (XENE) – Not sure but they could provide an update as part of their earnings call.

    Roy (SNSS) – Not sure what’s going on there…

    Les (MDGL) – Not aware of a particular reason, looks like part of the overall market movement.

    Harold (BIS) – Yep… and I am adding more today in my next update, I think this is just the beginning…

    bouschka (MGTX) – I think they have a broad pipeline which is still quite early, definitely on my watchlist, waiting to see clinical data.

    Alex (ESPR) – Perhaps, can also be nervousness before Study 2 data next week.

    Georges Robitaille (BIIB) – Not an expert here but the analyses they have done looks fishy to me, I don’t believe Abeta antibodies work in AD.

    Robert goulet (CRSP/NTLA/EDIT) – I still prefer to wait until they have data or price goes down significantly. Usually, such technologies take a lot of time to mature and to me it still feels like we in the hype stage of the innovation cycle.

    ABEO – If they continue to decline, would definitely add more.

    qualio (RGNX) – Data look positive, at least in terms of protein expression as they have clinically relevant levels after 6 months.

    Dave (ADXS) – I don’t believe in cancer vaccines even in the context of neoAgs so I don’t see a lot of value there, hope I am wrong…



  28. ONCE / SGEN

    do you these stocks are reasonable priced or cheap after current correction?


    Do you like the data which was presented at ESMO? It looks like that the masking technology is working and stable. Responses were low due to the tumor profile but that is ok. the side effect profile looks good, esp. in combination with ipi and at higher doses. whats your take? also price came down a lot…


    seems to be really undervalued . they have already presented good data and have a nice pipeline / good partnerships which will produce new value soon. do you plan to add more?

    Thanks for your work !


  29. BIS

    i agree with you that the correction will go on and NBI / XBI will decline. no one can predict how far the correction goes, because imo many stocks are already undervalued in biotech and not too expensive. also the biotech field will have possibly many growth driver with gen / cell therapy / RNAi etc. in the future.

    So how much BIS will you add in % of your portfolio? Thanks


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