With few exceptions, companies with monoclonal antibody platforms have significantly outperformed the NASDAQ Biotechnology Index® (NBI) since the end of 2008 [see Table 1].  Accordingly, the purpose of this article is to offer several key factors that help explain the above average returns for monoclonal antibody companies during this +18-month period – a trend that we believe is likely to continue.

Table 1: Select public companies with monoclonal antibody platforms

Higher rate of success

In order to determine the appropriate current value for a biotechnology company, an investor would normally consider projected future cash flows resulting from product sales, probability of success, and a discount rate to reflect the risks that the company faces.

With regard to probability of success, one of the greatest considerations for a biotechnology company is the fact that new drug candidates must receive approval from the Food and Drug Administration [FDA] before they can be marketed in the United States.  Receiving FDA approval is dependent, in part, on the drug candidate successfully passing a series of clinical trials that are generally conducted in three sequential phases.

Successfully transitioning from the early stages that establish safety [Phase I] to later phases where efficacy is demonstrated [Phase III] will improve the approval success rate [e.g., the odds that the drug will ultimately reach the market].  Interestingly, researchers from the Tufts Center for the Study of Drug Development at Tufts University recently analyzed the average approval success rates for investigational drugs first tested in humans from 1993 to 2004 [Ref 3] and found substantial differences between large molecules [32% success rate] and small molecules [13% success rate].  Monoclonal antibodies represented the largest group [47%] of the large molecules evaluated in the study.

In view of the fact that nearly one-third of large molecule product candidates entering the clinic ultimately receive FDA approval and that they are nearly 2.5-times more likely to ultimately receive approval than small molecule compounds, companies that are developing monoclonal antibodies should be awarded higher valuations due to the higher probability of success.

Reduced concerns from biosimilars

The Patient Protection and Affordable Care Act [PPACA], which was signed into law on March 23, 2010, included a provision amending the Public Health Service Act [PHSA] to permit approval of biosimilar biological products through an abbreviated biological license application [ABLA] submitted to the FDA.  Under the law, originators have a 12-year exclusivity period before a biosimilar is approved.

While many questions remain about the specifics of the ABLA process until the FDA releases its guidance, the PPACA does state that to support approval of a biosimilar, the sponsor must show that the product is “biosimilar to the reference product” based upon data derived from analytical, animal, and clinical studies.  As a result, it is unlikely that monoclonal antibody products will represent the first class of biosimilars on the market due to the fact that they have very specific binding properties and are typically larger and more complicated than other biologic drugs.

Regardless, according to a recent article by Ludwig Burger for Reuters, analysts expect price discounts of only 20 to 30 percent in markets affected by biosimilar competition, which compares with an average markdown of 90 percent for generic versions of small molecule drugs. This is likely due to the fact that development, production and marketing of a biosimilar costs more than making a generic copy of conventional chemical drugs.

Lastly, for those individuals that believe manufacturing biologic drugs is easy, a review of Genzyme Corporation’s (GENZ) recent challenges offers a different perspective.  See “Genzyme’s Manufacturing Disruption Highlights Investment Opportunities in Lysosomal Storage Disorders.”

Manufacturing processes have improved

In contrast to small molecule therapeutics that can be synthesized for $1 per gram and simple proteins like insulin that can be efficiently produced in bacterial hosts, monoclonal antibodies are normally produced in mammalian cells at a cost of $300-$5,000 per gram [Ref 4].

Fortunately, in parallel with the clinical and commercial success of monoclonal antibodies there have been major advances in cell line development, bioreactor construction and operation, purification strategies and analytics. For example, cell culture productivity has improved more than 100-fold in the last 15-years.  With these advances, global protein output using mammalian cell culture increased from under 500 kilograms in 2000 to 3,600 kilograms in 2005 and manufacturing costs have been reduced.

In addition to the aforementioned advances, new sources of inexpensive antibody production are being explored.  For example, antibodies have been expressed successfully in genetically modified plants and have been shown to retain their native functional forms.

Evolution from acute to chronic treatment

In the early 1980’s, most monoclonal antibodies were derived from mouse genes with major limitations such as inducing human anti-mouse antibody [HAMA] responses in patients, lack of effector functions and short plasma half-life [Ref 5].  Later that decade, genetic engineering techniques made chimeric and humanized versions available for study.  Until this point in time, most therapeutic monoclonal antibodies had been studied as acute treatments for cancer or immunological diseases [Ref 6].

By the late 1990’s, methods to produce human monoclonal antibodies were developed, including phage display and transgenic mice.  With the availability of human antibodies with reduced immunogenicity and increased efficacy, the biotechnology industry began studying monoclonal antibodies for the chronic treatment of non-life threatening diseases, which opened new market opportunities.

In this regard, KaloBios Pharmaceuticals, Inc. (private) is applying its proprietary Humaneering™ technology platform to produce antibodies that are close to human germ-line in sequence while retaining the specificity and improving the affinity of the reference antibody.  KaloBios is developing an anti-GM-CSF human monoclonal [KB003] for the treatment of patients with autoimmune and chronic inflammatory conditions, such as rheumatoid arthritis and asthma.  Sales of two marketed monoclonal antibodies indicated for the treatment of rheumatoid arthritis, Humira® [adalimumab] and Remicade® [infliximab], are projected to reach $15.8 billion in combined sales by 2016 according to Evaluate Pharma [Ref 2].

In January 2010, KaloBios partnered with Sanofi Pasteur, the vaccines division of sanofi-aventis Group (SNY), to develop the company’s Humaneered™ antibody fragment KB001 for the prevention and treatment of Pseudomonas aeruginosa (Pa) infections. KaloBios received an upfront payment of $35 million and is eligible for development, regulatory and commercial milestones totaling $255 million in addition to royalties on eventual product sales.

In addition, MacroGenics, Inc. (private) entered into a global strategic alliance with Eli Lilly & Co. (LLY) in October 2007 valued at approximately $500 million for teplizumab, a humanized anti-CD3 monoclonal antibody currently being studied in a global pivotal Phase II/III clinical trial for individuals with recent-onset type 1 diabetes.

Licensing, merger, and acquisition dynamics

The higher average approval success rates with large molecules compared with small molecules appears to be partially reflected in the economics of some recent licensing and M&A transactions.

For example, in June 2010 OncoMed Pharmaceuticals, Inc. (private) partnered with Bayer Schering Pharma AG (BAYRY.PK) to discover, develop and commercialize novel anti-cancer stem cell therapies including multiple antibody, protein therapeutics and small molecules targeting the Wnt signaling pathway.  For each drug candidate successfully developed through Phase III clinical trials and regulatory approval, OncoMed’s payments from Bayer could total up to $387.5 million for each biotherapeutic drug compared with $112 million for small molecule drugs.  Accordingly, potential payments for large molecules are 3.5 times greater than for the small molecules.

As another example, Eli Lilly & Co. (LLY) acquired ImClone Systems, Inc. for $6.5 billion [5x sales of $1.3 billion], while Astellas Pharma, Inc. paid $4 billion for OSI Pharmaceuticals, Inc. [3.3x sales of $1.2 billion].  Both ImClone and OSI received royalties on product sales from corporate partners.

ImClone’s marketed product Erbitux® [cetuximab] is a monoclonal antibody that inhibits the epidermal growth factor receptor [EGFR] and is indicated for the treatment of certain types of colorectal cancer and as a single agent or in combination with radiation therapy for head and neck cancer.  OSI’s comparable product Tarceva® [erlotinib] is a small molecule antagonist of EGFR and is indicated for the treatment of non-small cell lung cancer and pancreatic cancer.  While this is not an apples-to-apples comparison, it does help support the fact that premiums are being paid for monoclonal antibodies versus small molecules.

Investors are also likely placing M&A premiums on monoclonal antibody companies due to robust activity during the past five years [see Table 2].  In fact, there has been at least one deal announced each year during this period.

Table 2: Select M&A among monoclonal antibody companies

Access to capital

Despite a challenging financing climate, many public monoclonal antibody developers referenced in Table 1 have been able to raise capital through public offerings.  For example, ImmunoGen, Inc. (IMGN) raised $77.6 million at $8.00 per share in May 2010, Micromet, Inc. (MITI) raised $80.5 million at $7.00 per share in March 2010, and Seattle Genetics, Inc. (SGEN) raised $136 million at $10.75 per share in August 2009.  This demonstrates strong investor appetite for monoclonal antibody companies, which could bode well for future initial public offerings [IPOs] given the paucity of public options in the sector due to M&A activity over the past few years.

Summary

Biotechnology companies developing monoclonal antibodies have been outperforming the broader sector for the past 18-months, a trend that is likely to continue based on higher average approval success rates, reduced concerns from biosimilars, improvements in manufacturing and resulting impact on margins, broadening utility beyond treating cancer and inflammation, robust partnering and M&A activity, and access to capital.

References

1. Roche Annual Report 2009 (www.roche.com/gb09e.pdf)
2. Evaluate Pharma World Preview 2016 Report
3. DiMasi, JA. Et al. Clin Pharmacol Ther. 2010 Mar;87(3):272-7. Epub 2010 Feb 3.
4. Chen, C. Trends in Bio/Pharmaceutical Industry. 2009 5(3).
5. Chan, A. Et al. Nat Rev Immun. 2010 May;10.
6. Reichert JM. Curr Pharm Biotechnol. 2008 Dec;9(6):423-30.

What is GVHD? 

When a cancer patient with myeloma, lymphoma, or other blood-borne diseases does not respond to traditional pharmacological therapies, hematopoietic stem cell transplantation [HCT] is often used as a last line of defense.  HCT is the transplantation of blood stem cells derived from the bone marrow or peripheral blood to the patient.  There are two types of HCT:

• Autologous : stem cells come from patient’s own blood or bone marrow
• Allogeneic: stem cells come from another person

While HCT remains a risky procedure with many possible complications, technological advances have resulted in diminished transplant-related deaths.  As a result, the number of allogeneic HCTs performed continues to rise, with greater than 25,000 procedures currently performed annually and the number is expected to double within five years [ref 1].

One of the major complications associated with allogeneic HCTs is GVHD.  GVHD is an immunological disorder that affects many organ systems including the gastrointestinal [GI] tract, skin, liver, and lungs.  If it happens within 3 months, it is called acute GVHD.  If it happens after 3 months, it is called chronic GVHD and may take as long as 3 years to go away.

GVHD arises when donor immune cells attack defined proteins on the host cells resulting in an array of clinical features ranging from mild [grade 1] to very severe [grade 4].  Severe GVHD [grade 3] has poor prognosis, with 25% long-term survival and only 5% for very severe GVHD [ref 1].

Within the GI tract, GVHD usually presents as bleeding, diarrhea, vomiting, anorexia, and abdominal pain.  The clinical symptoms of GI GVHD are those of typical inflammatory mechanisms and thus can be summarized into three sequential steps: 1) activation of antigen-presenting cells, 2) immune cell proliferation, and 3) target tissue destruction.  

The primary pharmacological strategy to prevent GVHD is the use of cyclosporine and tacrolimus in combination with other immunosuppressants.  Despite these prophylactic therapies, GVHD still develops in 30%-80% of patients in the second month following HCT [ref 2].  Steroids, including prednisone, remain the gold standard therapy for GVHD treatment but only 25% to 41% of patients treated have complete GVHD remission [ref 3].  In addition, systemic treatment with prednisone or other steroids can lead to severe side effects such as opportunistic infections, electrolyte imbalances, and lymphoproliferative disease.

Currently, no therapies are approved by the United States Food and Drug Administration [FDA] for either prevention or treatment of GVHD [ref 4].  GVHD represents a growing problem due to an increasing number of HCT procedures and HCT survival with no change in the morbidity and mortality of this complication [ref 4].  As a result there is a great-unmet medical need to find therapies for this disease.

Past Failures

While several companies have brought new therapies into late-stage clinical development, no FDA approved treatments are currently available for the treatment or prevention of GVHD.  There are three primary reasons for this:

1. One of the difficulties in finding new GVHD therapies is due to a lack of understanding of the pathophysiology of the syndrome.  Many different triggers can cause immunological diseases and the best therapeutic target has not been determined.  However, the very complexity of GVHD affords the opportunity to treat it by attacking its many different levels.
2. The second reason for the high number of failures relates to the delicate balance between the harmful consequences of GVHD and the beneficial effects incurred when donor T cells attack malignant cells, a process referred to as the graft versus leukemia effect [GvL] and the underlying reason for performing HCT.  With the use of immunomodulatory agents to treat GVHD, consideration must be given to the need to control the immune response of GVHD without compromising the disease-fighting role of the donor immune cells.
3. Thirdly, there are inherent difficulties in conducting human clinical trials.  The difficulty of demonstrating clinical benefits from objective parameters, such as survival and morbidity, and the subjectivity of grading acute GVHD, emphasize the need for blinded assessments in clinical trials of GVHD treatment [ref 5]. 

Regardless of the specific cause, there have been many high-profile, late-stage clinical trial failures, several of which are summarized below in reverse chronological order:

Osiris Therapeutics, Inc. (OSIR)

In September 2009, Osiris Therapeutics announced preliminary results from its two Phase III trials evaluating Prochymal for the treatment of GVHD.  The active ingredient of Prochymal is adult mesenchymal stem cells [MSCs].  The cells are from normal healthy adult volunteer donors and are not derived from a fetus, embryo or animal.  Studies have shown that these cells are universally compatible.  Similar to Blood Type O, these MSCs may be used without tissue type matching for specific patients.  Prochymal is produced in a controlled setting and is tested for possible infectious agents [such as viruses, bacteria, etc.] before it is given by infusion into a vein.

While Prochymal showed improvements in response rates for GI GVHD, neither trial achieved its primary endpoint.  There was no statistical difference between Prochymal and placebo for the steroid-refractory (35% vs. 30%, n=260) or first-line GVHD trials (45% vs. 46%, n=192).  However, in patients with steroid-refractory liver GVHD, treatment with Prochymal significantly improved response (76% vs. 47%, p=0.026, n=61) and durable complete response (29% vs. 5%, p=0.046). Osiris plans to meet with the FDA to evaluate the trial and discuss the next steps for moving forward with Prochymal.

SangStat Medical Corporation (SANG) and Abgenix (ABGX)

In February 2003, SangStat [subsequently acquired by Genzyme Corporation (GENZ)] and Abgenix [subsequently acquired by Amgen, Inc. (AMGN)] presented data from their Phase II/III study for evaluating ABX-CBL in patients with steroid-resistant GVHD.  The data presented showed that patients treated with ABX-CBL, an anti-CD147 monoclonal antibody, were similar to the control arm [antithymocyte globulin].  The primary endpoint of this study was to demonstrate superior survival with ABX-CBL, thus the primary endpoint was not met.  Further development of ABX-CBL for GVHD is not expected.

Roche (OTCQX: RHHBY) and Protein Design Labs, Inc. (PDLI) 

In 1995, Roche and Protein Design Labs presented the results of a study using Zenapax™ [daclizumab], a humanized monoclonal antibody against the interleukin-2 [IL-2] receptor, for the prevention of GVHD following bone marrow transplantation. The 102 patient study was halted after a planned interim analysis showed a significantly worse 100-day survival in the group receiving corticosteroids plus daclizumab (77% vs. 94%; p=0.02).  Overall survival at 1 year was also inferior in the combination arm (29% vs. 60%; p=0.002).  Both relapse- and GVHD-related mortality contributed to the increased mortality in the combination group.  Roche concluded that Zenapax is not effective in reducing the incidence of GVHD in the population of patients included in this study.

XOMA Ltd. (XOMA)

In December 1994, results of a Phase III trial of Xoma’s CD5 Plus™, a CD5-specific immunotoxin, for the treatment of GVHD were presented at the annual meeting of the American Society of Hematology.  A total of 243 patients were included in the trial, all of whom developed acute GVHD after allogeneic bone marrow transplantation. The trial compared CD5 Plus and a standard steroidal immunosuppressant therapy [methylprednisolone] versus placebo and steroids as initial therapy. The primary endpoint was defined as no evidence of acute GVHD at day 43 post starting treatment.

While the percentage of patients with no evidence of GVHD was higher in the CD5 Plus group than in the placebo group during the entire 43-day period of observation, at 6 weeks the difference was not statistically significant [44% of patients assigned to the CD5 group had complete response as compared with 38% in the placebo group, p=0 .36].  Xoma discontinued development of CD5 Plus.

New Opportunities

Despite the challenges in developing GVHD therapies, several companies are continuing with both preclinical and clinical programs.  The approaches range from novel, locally acting steroids [lower risk] to more complex immunomodulatory agents and cell cycle regulators [higher risk].  Several companies with promising programs in the GVHD space along with their technology and clinical development status are as follows:

Novel, Locally Acting Steroids

Soligenix, Inc. (SNGX) is developing orBec® [oral beclomethasone dipropionate] for the treatment of acute GI GVHD.  Beclomethasone [BDP] is a corticosteroid with potent topical activity used for inflammatory disorders affecting mucosal surfaces, such as the GI tract.  BDP’s mechanism of action is similar to other corticosteroids acting as an inhibitor of inflammatory cytokine production of immune cells.  One of the clear advantages of BDP versus other steroids is that oral BDP does not enter into the circulation thus avoiding many of the side effects associated with systemic steroid uses.  Pharmacokinetic studies have shown that BDP is metabolized in the intestinal mucosa and only the inactive metabolite is found in the circulation.  Additionally, the safety profile of BDP is well studied as it is approved by the FDA for three indications:

• Becloforte®: inhalant marketed by GlaxoSmithKline plc (GSK) and used to treat asthma
• Beconase®: nasal spray marketed by GlaxoSmithKline for rhinitis
• Propaderm®: topical cream for psoriasis

Formulated for oral administration as a single product, orBec is a single product consisting of two separate pills.  One tablet is intended to release BDP in the proximal portions of the GI tract, and the other tablet is intended to release BDP in the distal portions of the GI tract.  This novel delivery system ensures that BDP is delivered to the entire GI tract.

Soligenix recently completed a 129-patient randomized, double blind, placebo-controlled, multicenter trial Phase III trial for orBec.  While the primary endpoint of this trial, time-to-treatment failure through day 50, did not reach statistical significance [p=0.1177], orBec did meet statistical significance for all of the secondary endpoints, such as the proportion of patients free of GVHD at Day 50 (p=0.05) and Day 80 (p=0.005) and the median time-to-treatment failure through Day 80 (p=0.0226).

Importantly, among all of the late-stage clinical trials for GVHD listed in Table 1, orBec is the only product to demonstrate a reduction in mortality.  In the Phase III trial, there was a 66% reduction in mortality among patients randomized to orBec at 200 days post-transplant with only 5 patient [8%] deaths in the orBec group compared to 16 patient [24%] deaths in the placebo group (p=0.0139).  At one year post-randomization in the Phase III trial, 18 patients [29%] in the orBec group and 28 patients [42%] in the placebo group died within one year of randomization [46% reduction in mortality, hazard ratio 0.54, 95% CI: 0.30, 0.99, p=0.04, stratified log-rank test]. 

Soligenix received a special protocol assessment [SPA] for a confirmatory, pivotal Phase III clinical trial cleared by the FDA.  The European Medicines Agency [EMEA] also agreed that should the new confirmatory Phase III study produce positive results, the data would be sufficient to support a marketing authorization approval in all 27 European Union [EU] member states.  Importantly, the primary endpoint for this study, treatment failure rate at day 80, was statistically significant in the prior Phase III trial [p=0.005].  The trial is enrolling patients and Soligenix has partnered with Sigma-Tau Pharmaceuticals, Inc. for commercialization of orBec.

Immunomodulatory Agents

In July 2009, results were published from a randomized, 4-arm, Phase II trial of 180 patients designed to identify the most promising agent(s) for initial therapy for acute GVHD [ref 3].  Patients were randomized to receive methylprednisolone 2 mg/kg per day plus etanercept [Enbrel® by Amgen, Inc. and Wyeth Pharmaceuticals], mycophenolate mofetil [MMF, CellCept® by Roche], denileukin diftitox [denileukin, Ontak® by Eisai Co., Ltd.], or pentostatin [Nipent® by Hospira, Inc.].  Day 28 complete response rates were etanercept 26%, MMF 60%, denileukin 53%, and pentostatin 38%.  Corresponding 9-month overall survival was 47%, 64%, 49%, and 47%, respectively.  Cumulative incidences of severe infections were as follows: etanercept 48%, MMF 44%, denileukin 62%, and pentostatin 57%.  Efficacy and toxicity data suggest the use of Roche’s MMF plus corticosteroids is the most promising regimen to compare against corticosteroids alone in a definitive Phase III trial.  The Phase II study is registered at ClinicalTrials.gov [identifier NCT00224874].

Cell Cycle Regulators

GVHD is initiated when host antigen-presenting cells are detected by donor T-cells leading a cascade of cellular signaling events resulting in the expansion of donor immune cells and release of cytokines and chemokines, resulting in physiological damage to the GI tract and presentation of GVHD clinical symptoms. 

Cyclacel Pharmaceuticals, Inc. (CYCC) is developing seliciclib [CYC202 or R- roscovitine] for the treatment of acute GVHD.  Seliciclib is an inhibitor of cyclin-dependent kinases [CDKs], such as CDK2, CDK7 and CDK9.  Although seliciclib is in preclinical development for GVHD, the product is also in Phase II trials for nasopharyngeal cancer and non-small cell lung cancer.

CDKs have been shown to be central kinases involved in the regulation and progression of the cell cycle.  Inhibition of CDK2 leads to cell cycle arrest and apoptosis and CDK7 and CDK9 to suppression of transcription in aberrantly proliferating cells.  Investigators from Harvard Medical School have recently published in vitro and in vivo evidence that CDK inhibition by seliciclib suppressed activation and expression of T cells and resulted in protection from acute GVHD [ref 6].  Seliciclib’s mechanism had three primary consequences in the context of GvHD:

1. Inhibition of CDKs resulting in blocking the cell cycle
2. Inhibition of RNA polymerase 2 resulting in apoptosis
3. Prevention of TNF alpha dependent NFkB activation, a pathway shown to be activated in GVHD

Together, seliciclib may be able to specifically target the allo-reactive T cells preventing the progression of GVHD without targeting the immune cells needed for GvL or other pathogens.

Conclusion

A number of novel agents have been investigated to target various aspects in GVHD.  The majority of previous clinical trial setbacks have been immunomodulatory agents, which may favor lower-risk, steroid-sparing approaches in the short-term given the complexity of GVHD.  Ultimately, there appears to be potential synergies between different therapies, as they all possess different mechanisms and targets.  Future results from an ongoing pivotal trial and additional clinical results could provide optimism for both patients and investors in the GVHD space.

Table 1: Late-Stage, Completed GVHD Trials

References:

1. Lancet 2009; 373: 1550–61
2. Expert Opin Investig Drugs. 2008 Sep;17(9):1389-401
3. Blood. 2009 Jul 16;114(3):511-7
4. Blood. 2005 Jun 1;105(11):4200-6
5. Biol Blood Marrow Transplant. 2009 Jul;15(7):777-84.
6. Cell Cycle 8:11, 1794-1802; 1 June 2009