One recent example of this inherent volatility and achieving a lofty valuation prior to commercialization is Dendreon Corporation (DNDN).  On April 29, 2010, the FDA approved the very first active immunotherapy for the treatment of cancer – Dendreon’s Provenge® [sipuleucel-T] for metastatic castrate-resistant prostate cancer [CRPC].  This event reignited enthusiasm for the field of active immunotherapy for cancer and shares of Dendreon, which traded below $5 in March 2009, subsequently reached an all-time high above $57 and a market capitalization of approximately $7.8 billion.

It has been said that a rising tide raises all boats and Dendreon’s success lifted shares of other companies working in the field of active immunotherapy for the treatment of cancer.  Table 1 below depicts the stock price performance of select cancer immunotherapy companies from April 1, 2010 to April 30, 2010, the month Provenge was approved by the FDA.

Table 1: High Tide for Cancer Immunotherapy Around Approval of Provenge

On August 3, 2011, however, Dendreon withdrew its previous guidance of $350-400 million in revenue for 2011, with modest quarter over quarter revenue growth expected for the remainder of the year.  The news not only caused a dramatic decline in Dendreon’s stock, but also cast a shadow on other companies working in the emerging field of active immunotherapy for cancer.  Table 2 below depicts the stock price performance of select cancer immunotherapy companies from August 1, 2011 to August 31, 2011, the month that Dendreon withdrew its revenue guidance.  Dendreon’s stock recently traded around $7 per share, down nearly $50 from its all-time high, and the company’s market capitalization is just over $1 billion.

Table 2: Low Tide for Cancer Immunotherapy Around Dendreon’s Withdrawal of Revenue Guidance

While FDA approval of the first active immunotherapy for cancer was a watershed event for the industry, the future for companies working in this emerging area should not be judged solely by the commercial success of this product.  Growing evidence indicates that the field of cancer immunotherapy, broadly defined as including passive immunization, active immunization, and immunostimulation, is undergoing a renaissance.

Beyond the approval of Provenge in 2010, the FDA approved Yervoy™ [ipilimumab] by Bristol-Myers Squibb (BMY) for the treatment of patients with unresectable or metastatic melanoma on March 25, 2011.  With the news, ipilimumab became the eleventh monoclonal antibody [mAb] approved for the treatment of cancer since 1997.  Ipilimumab is unique among other mAbs for cancer treatment, as it represents the first immune checkpoint modulator.

In addition, positive results from several randomized studies with active immunotherapies have recently been published in peer-reviewed journals.  The first study published in the March 1, 2010, edition of the Journal of Clinical Oncology was a Phase II randomized controlled trial of Bavarian Nordic’s (BAVA) poxviral-based, PSA-targeted immunotherapy [Prostvac®] in metastatic CRPC.  Patients receiving Prostvac had an 8.5-month improvement in median overall survival versus control. These provocative data supported initiation of a pivotal Phase 3 trial that began enrolling patients in November 2011.

Another study published in the June 2, 2011, edition of the New England Journal of Medicine, demonstrated that patients with metastatic melanoma receiving high-dose interleukin-2 (IL-2) plus a gp100 peptide vaccine had a significant improvement in centrally verified overall clinical response (16% vs. 6%; P=0.03), as well as longer progression-free survival (2.2 months versus 1.6 months; P=0.008).  There was a trend toward longer overall survival in the gp100 vaccine arm (17.8 months versus 11.1 months; P=0.06), although the results were not statistically significant.

As discussed in our report published in June 2011 titled “Cancer Immunotherapy: A Roundtable Discussion,” there are more than 40 unique active cancer immunotherapies currently being tested in over 60 clinical trials, including nearly a dozen that are in pivotal Phase 3 development.  With nearly a dozen readouts from randomized Phase 2 or Phase 3 trials expected during the next 12-months, 2012 could be a breakout year for the field [see Table 3 below].  While not all programs will be positive, success with even just one of these key trials could reignite investor interest in the field and demonstrate that the clinical success with Provenge was not a fluke.

Table 3. Expected Active Immunotherapy Catalysts for 2012

* Based on company reports, analyst reports, and/or MD Becker Partners’ projection

It is worth noting that mAbs were hailed as “magic bullets” when they were developed in the 1970s.   However, clinical results with these passive immunotherapies were largely disappointing for the first 10 years of development.  It wasn’t until November 1997 that the first mAb for cancer therapy, Rituxan® [rituximab], was approved by the FDA for the treatment of non-Hodgkin’s Lymphoma [NHL].  Today, mAbs represent one of the most successful therapeutic classes and eleven such products have been approved for cancer therapy.  Three blockbuster products sold by the Roche Group (RHHBY) – Avastin® [bevacizumab], Rituxan, and Herceptin® [trastuzumab] – collectively represented nearly $17 billion in revenue for 2009.

As stated in our firm’s April 2010 report titled “Cancer Vaccine Therapies: Failures and Future Opportunities,” using the history of mAb development as a guide, we expect to see five active cancer immunotherapies approved by 2015 [5x15] that will revolutionize the treatment of cancer owing to their potential to be more targeted, more effective, and less toxic.  2012 represents a period with robust news flow for emerging immuno-oncology companies and while volatility is expected, any good news could serve as a spark to reignite investor enthusiasm for companies working in the area and raise the tide once again.  In addition to clinical progress, major licensing and/or merger & acquisition transactions could also serve as catalysts for the sector.

Visibility for the disease is on the rise following the recent deaths of Apple, Inc. (AAPL) co-founder Steve Jobs and Ralph Steinman, a cell biologist who died several days before being named one of three winners for the 2011 Nobel Prize in Medicine.  While awareness is increasing, there is an urgent need for more effective treatments and diagnostics to detect the disease earlier due to the fact that the number of new pancreatic cancer cases is projected to increase by 55% from 2010 to 2030[3].

Difficult Disease

The disease remains one of the most difficult to treat due to its extreme resistance to treatment and few early symptoms.  At the time of initial diagnosis, 50% of patients have distant metastases to the liver or peritoneal surface, and more than 80% of the remaining patients have locally advanced tumors [confined to the pancreas but unresectable][4]. The majority of pancreatic tumors [95%] are adenocarcinomas that mainly develop from exocrine cells in the tissues of the pancreas[5]. The tumors are characterized by an aggressive behavior with a fast progression rate that makes them highly metastatic. In contrast, neuroendocrine tumors of pancreatic origin [pancreatic NET, also known as islet cell tumors] are not as common [<2%] and are considered less deadly[6].

Illustrating the difference between the two, Hollywood actor Patrick Swayze was diagnosed with stage IV pancreatic exocrine cancer that had already spread to the liver in March 2008 and lost his battle with the disease in September 2009 at the age of 57.  Apple’s Steve Jobs underwent surgery for pancreatic NET in 2004 and didn’t succumb to the disease until October 2011 at the age of 56.

Treatment for Organ Confined Disease

In terms of treatment, surgical removal of the tumor represents the best option for pancreatic cancer patients without invasion into surrounding organs or distant metastasis.  Unfortunately, only 15–20% of all patients are candidates for potentially curative surgery[7].  Depending on the tumor localization, pancreaticoduodenectomy [Whipple procedure], distal, or total pancreatectomy can be performed.  However, even with an optimal curative surgery, metastases often occur.  Median survival time without evidence of recurrent disease is 21.2 months after surgical resection[8].

Treatment for Locally Advanced/Metastatic Disease

For locally advanced or metastatic disease, an effective single agent for pancreatic cancer remains elusive and treatment is still palliative rather than curative.  Since its approval in 1997, Eli Lilly’s (LLY) Gemzar® [gemcitabine] is the only single agent that improves symptoms and overall survival [OS] in patients with locally advanced or metastatic pancreatic exocrine cancer.  However, gemcitabine is associated with a modest median OS of 5.7 months and one-year probability of survival rate of 18%[9]. No confirmed objective tumor responses were observed in the pivotal study.

Beyond Single Agent Gemcitabine

At least 35 Phase II trials of gemcitabine-containing regimens and 11 randomized Phase III trials have been performed to improve the efficacy of gemcitabine alone, but the progress to date has been incremental at best[10].  In these 46 trials, overall response rates ranged from 5% to 58% in the Phase II studies and 4.4% to 38.5% in the Phase III studies.  Median OS ranged from 4 months to 13.1 months in the Phase II studies and 5.4 months to 9 months in the Phase III studies.  Inclusion of heterogeneous patient populations in many of these studies may have confounded the results, as the median survival time for patients with metastatic disease and locally advanced disease is 3–6 and 9-13 months, respectively[11].  The only successful combination approved by the FDA in 2005 is gemcitabine plus Roche/Astellas Pharma’s Tarceva® [erlotinib], which modestly increased the median OS to 6.4 months and one-year survival to 23%.

Hope on the Horizon

Despite the long list of past failures, drug developers continue to explore new options for treating pancreatic cancer and more than a dozen new treatments are currently being evaluated in clinical trials [see Table 1].  One product was recently approved and several programs have demonstrated encouraging results with data from pivotal trials due in the next 6-12 months.  While a comprehensive review of investigational pancreatic cancer therapies is beyond the scope of this article, we briefly highlight some of the more high profile pancreatic treatments below:

Amgen, Inc. (AMGN)

Amgen is developing ganitumab (also known as AMG 479), an investigational fully human monoclonal antibody that targets type 1 insulin-like growth factor receptor [IGF-1R], which plays an important role in the regulation of cell growth and survival.  At the 2010 American Society of Clinical Oncology [ASCO] Annual Meeting, Amgen announced results from a Phase 2 study demonstrating that the addition of AMG 479 to gemcitabine resulted in an OS rate at six months of 56.6% versus 50.1% with gemcitabine alone[12]. Median OS was 7.3 months versus 6.2 months in the gemcitabine arm.  Amgen initiated a Phase III trial with AMG 479 for metastatic pancreatic cancer in the second quarter of 2011 with data expected in late 2013 or 2014 [ClinicalTrials.gov identifier NCT01231347].  This trial focuses on metastatic disease and therefore should represent a homogeneous patient population where the median OS is expected to be 3–6 months in the control arm.

Celgene Corporation (CELG)

Historically known more for its franchise in treating blood cancers, Celgene moved into the realm of solid tumors through its 2010 acquisition of Abraxis BioScience, Inc. for $2.9 billion.  As a result, Celgene is now developing Abraxane® [paclitaxel protein-bound particles for injectable suspension] for the treatment of metastatic pancreatic cancer.  Abraxane is currently approved for the treatment of breast cancer after failure of combination chemotherapy for metastatic disease or relapse within 6 months of adjuvant chemotherapy[13].

In October 2011, positive Phase I/II study results with Abraxane in combination with gemcitabine in 67 patients with advanced pancreatic cancer were published in the Journal of Clinical Oncology[14].  In the Phase II component of the study, the overall response rate was 48% [21/44 patients], median OS was 12.2 months, and the one-year survival rate for patients was 48%.  This compares favorably with the median OS of 5.7 months and one-year probability of survival rate of 18% with single-agent gemcitabine.

The combination of Abraxane and gemcitabine is now the treatment arm of an ongoing, international, randomized Phase III clinical trial for patients with metastatic pancreatic cancer [ClinicalTrials.gov identifier NCT00844649].  Importantly, this study specifically excludes patients with only locally advanced disease and therefore represents a homogeneous patient population where the median OS is expected to be 3–6 months in the control arm.

Clovis Oncology, Inc. (private)

In November 2009, Clovis licensed rights from Clavis Pharma for CO-101 in the U.S., E.U., and select other countries.  CO-101 is an investigational, lipid-conjugated derivative of gemcitabine, currently in a pivotal Phase II randomized, open-label, multicenter study comparing CO-101 with gemcitabine as first-line therapy in patients with metastatic pancreatic adenocarcinoma [ClinicalTrials.gov identifier NCT01124786].  CO-101 is designed to improve upon the efficacy of gemcitabine by enabling the drug to enter cancer cells without requiring membrane expression of transporter proteins.  As a hydrophilic molecule, the entry of gemcitabine into tumor cells is dependent upon the expression of specific membrane transporter proteins, particularly human equilibrative nucleoside transporter 1 [hENT1].  Data from the pivotal Phase II trial are expected in the first half of 2012 and the inclusion criteria for only Stage IV patients [metastatic] represents a homogeneous population to study in this trial.

In April 2010, Clovis Oncology, Inc. and Ventana Medical Systems, Inc. entered into a collaboration for the development of a hENT1 immunohistochemistry [IHC] assay, which will be used in Clovis’ CO-101 clinical trials to identify patients with low level tumor expression of hENT1 protein.  Approximately 50% of pancreatic cancer patients have been shown to have low tumor expression of hENT1 and low levels of tumor hENT1 expression have been shown to correlate with poor survival outcomes after gemcitabine therapy[15].  These observations support the hypothesis that limited tumor uptake of gemcitabine in hENT1-low patients is responsible for a poor treatment effect in many patients and is an excellent example of a biomarker-driven clinical strategy.

Novartis AG (NVS)

In May 2011, the FDA approved Afinitor® (everolimus) by Novartis AG (NVS) for the treatment of progressive pancreatic NET in patients with unresectable, locally advanced or metastatic disease. Afinitor is an allosteric inhibitor of mammalian target of rapamycin [mTOR], a serine-threonine kinase, downstream of the PI3K/AKT pathway that is dysregulated in several human cancers.  Approval of Afinitor represents the first new therapy for pancreatic NET in the US in nearly 30 years[16].  The approval was based on Phase III data from the RADIANT-3 [RAD001 In Advanced Neuroendocrine Tumors] trial, showing treatment with Afinitor plus best supportive care more than doubled median progression-free survival [PFS], or time without tumor growth, from 4.6 to 11.0 months and reduced the risk of cancer progression by 65% when compared with placebo in patients with advanced pancreatic NET.

Threshold Pharmaceuticals, Inc. (THLD)

At the 2011 ASCO Gastro Intestinal Cancers Symposium, Threshold Pharmaceuticals presented results with its hypoxia-activated prodrug, TH-302, in combination with gemcitabine in 47 patients with previously untreated, locally advanced, unresectable or metastatic pancreatic adenocarcinoma[17].  Of the 43 evaluable patients, one patient [2%] demonstrated a complete response as measured by RECIST [Response Evaluation Criteria In Solid Tumors] and 8 patients [19%] had a partial response.  In the gemcitabine plus TH-302 treatment arms, median OS was 8.5 months.  While this compares favorably with the median OS of 5.7 months with single-agent gemcitabine, recall that in 35 Phase II trials of gemcitabine-containing regimens in heterogeneous patient populations the median OS ranged from 4 months to 13.1 months.

In June 2011, Threshold Pharmaceuticals completed enrollment of patients with first-line, locally advanced, unresectable or metastatic pancreatic adenocarcinoma.  The company expanded the study’s enrollment target from the original 165 patients to at least 200 patients.  As mentioned earlier, inclusion of a heterogeneous patient population may confound the study results [expected before the end of 2011], as the median OS for patients with metastatic disease and locally advanced disease is different.

Conclusion

As we approach Pancreatic Cancer Awareness Month in November, visibility for the disease is on the rise following recent high-profile deaths.  Despite numerous late-stage failures, more than a dozen products are currently in clinical trials with key data expected in the next 6-12 months.  Going forward, early detection using biomarkers, more effective treatments, and novel drug targets could provide new hope for the treatment of this deadly disease.

NOTE: For more information, please visit the Pancreatic Cancer Action Network [http://www.pancan.org], a national organization creating hope in a comprehensive way through research, patient support, community outreach and advocacy for a cure.

Table 1. Baker’s Dozen in Active Clinical Development for Pancreatic Cancer

References

Passive immunotherapy is the transfer of an exogenous therapeutic agent to a patient where the therapy has a direct pharmacological action on the desired target.  The best examples of passive immunotherapy are monoclonal antibodies (mAbs), which were hailed as “magic bullets” when they were developed in the 1970s.

However, clinical results with mAbs were largely disappointing for the first 10 years of development.  In fact, it wasn’t until November 1997 that the first mAb for cancer therapy, Rituxan® (rituximab), was approved by the U.S. Food and Drug Administration (FDA).  Developed by IDEC Pharmaceuticals, Rituxan is a chimeric monoclonal antibody against the protein CD20 that is currently approved for the treatment of chronic lymphocytic leukemia (CLL), non-Hodgkin’s Lymphoma (NHL), and rheumatoid arthritis (RA).

After reporting its first year of profitability in 1998, shares of IDEC Pharmaceuticals traded at an all-time high of $140 with a market capitalization above $3.3 billion. Worldwide net sales of Rituxan reached $1.5 billion in 2002 and the following summer IDEC Pharmaceuticals acquired Biogen, Inc. in a stock transaction valued at approximately $6.65 billion to create Biogen Idec, Inc. (BIIB).

While the success of Rituxan spurred the development of other anti-CD20 mAbs, it wasn’t until October 2009 that Arzerra® (ofatumumab) was approved by the FDA for the treatment of CLL.  Ofatumumab, which was developed by Genmab A/S (GNMSF.PK) and GlaxoSmithKline plc (GSK), is a human mAb that targets an epitope different from Rituxan and other anti-CD20 mAbs.

Today, passive immunotherapies represent one of the most successful therapeutic classes and there are currently eleven mAbs approved for cancer therapy.  Three blockbuster products sold by the Roche Group (RHHBY) – Avastin® (bevacizumab), Rituxan, and Herceptin® (trastuzumab) – collectively represented nearly $17 billion in revenue for 2009.  As useful as many of these mAbs have become in cancer therapy, they often have the greatest impact when used in combination with other therapeutic modalities, particularly cytotoxic agents.

Similar to passive immunotherapy with mAbs, the early development of active immunotherapies proved to be an enormous challenge.  In fact, nearly a dozen product candidates failed in Phase III trials.  Unlike passive immunotherapy, active immunotherapies contain a specific antigen or set of antigens that are designed to activate the patient’s own immune system to seek out and destroy cells that carry the same antigen.  They have no direct therapeutic action, but rather rely on the patient’s immune system to recognize and destroy the intended target.

Growing evidence indicates that the field of active immunotherapy for the treatment of cancer is undergoing a renaissance. On April 29, 2010, the FDA approved the very first active immunotherapy for the treatment of cancer – Dendreon Corporation’s (DNDN) Provenge® (sipuleucel-T) for metastatic castrate-resistant prostate cancer (CRPC). This event reignited enthusiasm for the field of active immunotherapy and shares of Dendreon, which traded below $5 in March 2009, subsequently reached an all-time high above $57 and a market capitalization of approximately $7.8 billion.

More recently, the FDA approved Yervoy™ (ipilimumab) by Bristol-Myers Squibb (BMY) for the treatment of patients with unresectable or metastatic melanoma on March 25, 2011. With the news, ipilimumab became the eleventh mAb approved for the treatment of cancer since 1997 (see Figure 1 below).

Figure 1.

Beyond the approvals of both Provenge and Yervoy, there are a number of additional catalysts that could ignite further interest in the field of cancer immunotherapy.

First, approximately 40 unique active cancer immunotherapies that are currently being tested in nearly 60 clinical trials, including almost a dozen that are in late-stage development (see Table 1 below).  For example, GlaxoSmithKline plc (GSK) is conducting the largest ever Phase III clinical trial in lung cancer treatment with its investigational MAGE-A3 ASCI immunotherapy.

Table 1: Late-stage active immunotherapies in development

Second, positive results from at least three randomized studies have recently been published in peer-reviewed journals. The first study published in the March 1, 2010, edition of the the Journal of Clinical Oncology was a Phase II randomized controlled trial of Bavarian Nordic’s (BAVA) poxviral-based, PSA-targeted immunotherapy (Prostvac®) in metastatic castration-resistant prostate cancer. Patients receiving Prostvac had an 8.5-month improvement in median overall survival versus control. These provocative data resulted in a pivotal Phase III trial that is planned to begin in the second half of 2011.

The next study published in the May 31, 2011, online edition of the Journal of Clinical Oncology demonstrated that vaccination with patient-specific tumor-derived antigen in first remission improves disease-free survival by 14 months in follicular lymphoma. For 117 patients who received Biovest International, Inc.’s (BVTI) autologous, active immunotherapy called BiovaxID® (n = 76) or control (n = 41), median disease-free survival after randomization was 44.2 months for the vaccine arm versus 30.6 months for control arm (P=0.047) at median follow-up of 56.6 months. Results were even more robust for patients with a specific biological marker in an unplanned subgroup analysis.

A third study published in the June 2, 2011, edition of the New England Journal of Medicine, demonstrated that patients with metastatic melanoma receiving high-dose interleukin-2 (IL-2)  plus a gp100 peptide vaccine had a significant improvement in centrally verified overall clinical response (16% vs. 6%; P=0.03), as well as longer progression-free survival (2.2 months versus 1.6 months; P=0.008). There was a trend toward longer overall survival in the gp100 vaccine arm (17.8 months versus 11.1 months; P=0.06) although the results were not statistically significant.

In addition, cancer immunotherapy was a prominent topic during the recent American Society of Clinical Oncology® (ASCO*) annual meeting. With so many interesting presentations and discussions during the meeting, however, the Cancer Research Institute and MD Becker Partners organized a cancer immunotherapy roundtable following the event to provide additional focus on the field of cancer immunotherapy.

We united key opinion leaders, analysts, and industry executives to exchange data, knowledge, and experience, facilitated by discussion and debate. In total, 17 experts participated in discussions about the current status and the future outlook for cancer immunotherapy. The roundtable started with general questions and topics about cancer immunotherapy posed by the organizers, followed by a comprehensive discussion among the various participants. The report does not cover all of the cancer immunotherapy presentations from ASCO 2011, but aims to highlight selected points of interest.

A complimentary copy of the full report can be requested by clicking here.

* This publication is not sponsored or endorsed by the American Society of Clinical Oncology® (ASCO).

Approval of ipilimumab is the second victory for the field of active immunotherapy in oncology within a year.   On April 29, 2010, the FDA approved the very first active immunotherapy for the treatment of cancer – Dendreon Corporation’s (DNDN) Provenge® [sipuleucel-T] for metastatic castrate-resistant prostate cancer [CRPC].  The fact that two active immunotherapies have demonstrated improved survival in randomized Phase 3 trials and subsequently been approved by the FDA has reignited enthusiasm for the field of active immunotherapy, which has experienced nearly a dozen failures in Phase 3 clinical trials.

A Long Time in the Making

The idea to stimulate one’s own immune system to treat cancer dates back to 1891 when William Coley, Professor of Clinical Surgery at Cornell University, noticed the curative effect of an accidental bacterial infection in a patient with inoperable sarcoma.  It would be 119 years since Dr. Coley’s discovery before the FDA approved the first active immunotherapy for the treatment of cancer.

As the scientific understanding of the immune system has significantly increased since Dr. Coley’s time, scientists and physicians developed successful immune system related strategies to fight cancer, viral infection and autoimmune diseases.  Today, mAbs are among the most successful modern immunotherapies and provide clinical benefit to a vast array of diseases – with three blockbuster mAbs generating approximately $17 billion in sales in 2009.

Melanoma Losing Streak

In addition to helping renew interest in the field of active immunotherapy, the FDA’s approval of ipilimumab provides a much-needed boost to companies developing product candidates for melanoma.  Among the eleven Phase 3 failures with active immunotherapies for the treatment of cancer, more than one-third of them have occurred in melanoma [see Table 1].

Table 1. Select Active Immunotherapy Failures in Phase 3 Trials

Crowded Market

While ipilimumab is the first new drug approved for the treatment of melanoma in 13 years, there are four competitive active immunotherapy programs in Phase 3 development [see Table 2].  In fact, melanoma is second only to prostate cancer as the most crowded clinical development segment within the active immunotherapy field.

Table 2. Select Phase 3 Active Immunotherapy Product Candidates in Melanoma

Five by 2015

As highlighted in our firm’s April 2010 report titled “Cancer Vaccine Therapies: Failures and Future Opportunities,” there are a number of additional catalysts that could ignite further interest in the field of active immunotherapy for cancer.  Nearly 50 clinical programs are currently underway, including nearly a dozen that are in pivotal Phase 3 development.

Using the history of passive immunotherapy development as a guide, it would not be surprising to see five active cancer immunotherapies approved within five years, which leads to our “5 x 2015″ projection.  With the approvals of both sipuleucel-T and ipilimumab in hand, the next three may come from the following list of Phase 3 product candidates [in alphabetical order]:

• Amgen (AMGN), OncoVEX[GM-CSF], melanoma and head & neck
• AVAX Technologies (AVXT.PK), MVAX, melanoma
• Bavarian Nordic (BAVA.CO), Prostvac®, prostate cancer
• Biovest International (OTCQB: BVTI), BiovaxID®, NHL
• Cel-Sci (CVM), multikine, head & neck
• Celldex Therapeutics (CLDX), rindopepimut/CDX-110, glioblastoma
• GlaxoSmithKline (GSK), MAGE-A3 ASCI, NSCLC and melanoma
• Novarx (private), Lucanix™/belagenpumatucel-L, NSCLC
• Oncothyreon (ONTY)/Merck KGaA, Stimuvax®/BLP25 liposome vaccine, NSCLC
• Oxford BioMedica plc (OXB.L), Trovax®, renal cell
• Transgene (TNG.PA)/Novartis (NVS), TG4010/MVA-MUC1-IL2, NSCLC
• Vical (VICL)/AnGes, Allovectin-7®, melanoma

Since the atomic bombings against the cities of Hiroshima and Nagasaki in Japan during World War II, radiation exposure to large populations has been largely limited to industrial accidents, including the April 1986 event at the Chernobyl Nuclear Power Plant in the Ukraine.  Ironically, radiation accidents involving medical uses have accounted for more acute radiation deaths than from any other source, including Chernobyl [Reference 1].

The effects of radiation exposure manifest quickly and depend on a variety of factors, including the dose absorbed by different parts of the body, the route and rate at which it is delivered, and the type of radiation [alpha, beta, gamma, or neutrons].  The effects from various levels of radiation exposure can be found in Table 1 [adapted from Reference 2].

Table 1. Effects from Various Levels of Radiation Exposure

Acute Radiation Syndrome and Treatment

Acute radiation syndrome [ARS], also known as radiation toxicity or radiation sickness, is caused by exposure to a high dose of radiation over a short period of time, usually in a manner of minutes [Reference 3].  The cells that are lost the earliest following exposure are rapidly dividing hematopoietic stem cells and progenitor cells of the bone marrow that are highly sensitive to the effects of radiation, whereas the nervous system is generally regarded as the least sensitive.  These differences in cellular sensitivity help categorize ARS into three syndromes, which occur with increasing dose exposure in the following order:

• Hematopoietic or bone marrow syndrome [HP/BM]
• Gastrointestinal syndrome [GI]
• Central nervous system or cardiovascular syndrome [CNS/CV]

Depending on the level and location of radiation exposure, the management of early-onset ARS is mainly supportive, including supportive care with fluids, antibiotics, and growth factors such as Amgen, Inc.’s (AMGN) Neupogen® [filgrastim] and Neulasta® [peg-filgrastim].  While these growth factor products have not been approved by the U.S. Food and Drug Administration [FDA] for treating radiation-induced neutropenia, they have been recommended by the Strategic National Stockpile [SNS] Radiation Working Group [Reference 4].

When patients survive HP/BM and GI syndromes, respiratory failure may become a major cause of morbidity.  Radiation can impair lung cells either directly via generation of reactive oxygen species [ROS] or indirectly via the action on parenchymal and inflammatory cells through biological mediators [Reference 5].

Protective Measures

There are no approved products to treat or prevent ARS.

Potassium iodide [KI] was approved by the FDA in 1982 to reduce the risk of thyroid cancer in radiation emergencies involving the release of radioactive iodine. For example, the Chernobyl reactor accident resulted in massive releases of I-131 [radioactive iodine] and other radioiodines. Beginning approximately 4 years after the accident, a sharp increase in the incidence of thyroid cancer among children and adolescents in areas covered by the radioactive plume was observed.

By saturating the body with a source of stable iodide prior to exposure, inhaled or ingested I-131 tends to be excreted.  Accordingly, following the Chernobyl incident approximately 10.5 million children under age 16 and 7 million adults in Poland received at least one dose of KI as a prophylactic measure against accumulation of I-131 in the thyroid gland.

However, it is important to note that KI cannot protect against any other causes of radiation poisoning, nor can it provide any degree of protection against dirty bombs that produce radionuclides other than isotopes of iodine.

Ethyol® [amifostine], a prescription drug by MedImmune, a member of AstraZeneca plc (AZN), is administered as a 15-minute i.v. infusion prior to each postoperative radiation treatment session for head and neck cancer when the radiation area includes a large part of the parotid glands.  Ethyol is used to lower the rate of moderate to severe xerostomia [dry mouth] and is not approved for use in combination with other radiation therapy.

Investigational Approaches to Treat ARS

In view of the fact that many potential chemical, biological, radiological, and nuclear [CBRN] terrorism agents lack available countermeasures, the Project BioShield Act was passed into law in July 2004.  Subsequently, Congress has passed additional measures to further encourage countermeasure development.  For example, the 109th Congress passed the Pandemic and All-Hazard Preparedness Act, which created the Biomedical Advanced Research and Development Authority [BARDA] in the Department of Health and Human Services [HHS].  This office oversees all of HHS’ Project BioShield activities, among other duties.

Project BioShield Act has three main provisions: (1) relaxing procedures for some CBRN terrorism-related spending, including hiring and awarding research grants; (2) guaranteeing a federal government market for new CBRN medical countermeasures; and (3) permitting emergency use of unapproved countermeasures [reference 6].  The HHS has used each of these authorities, including the approval of BARDA contract awards for the development of new treatments for radiation exposure and using its authority to guarantee a government market to obligate approximately $2.3 billion to acquire countermeasures against anthrax, botulism, radiation, and smallpox.

Several companies developing product candidates for the treatment and/or prevention of ARS have received government awards under the Project BioShield Act, including those referenced in Table 2.

Table 2. Select Companies with Government Contracts for ARS

Summary

What is now happening with troubled nuclear power plants in Japan could happen in the U.S., as there are nuclear power plants situated near significant seismic areas in the Midwest [reference 7].  This risk is much greater than other places, like California, because seismic energy is conveyed over 10-times more efficiently due to less fractured basement rocks.  Combined with the threat of nuclear terrorism, there is a worldwide concern about exposure to radiation.  Given the lack of prophylactic treatment options and the fact that management of ARS is mainly supportive, a large unmet need exists in this area.

References:

1. The importance and unique aspects of radiation protection in medicine. Holmberg O, Czarwinski R, Mettler F. Eur J Radiol. 2010 Oct;76(1):6-10. Epub 2010 Jul 17.
2. Medical response to a major radiologic emergency: a primer for medical and public health practitioners. Wolbarst AB, Wiley AL Jr, Nemhauser JB, Christensen DM, Hendee WR. Radiology. 2010 Mar;254(3):660-77. Review.
3. Acute radiation syndrome: assessment and management. Donnelly EH, Nemhauser JB, Smith JM, Kazzi ZN, Farfán EB, Chang AS, Naeem SF. South Med J. 2010 Jun;103(6):541-6. Review.
4. Medical management of the acute radiation syndrome: recommendations of the Strategic National Stockpile Radiation Working Group. Waselenko JK, MacVittie TJ, Blakely WF, Pesik N, Wiley AL, Dickerson WE, Tsu H, Confer DL, Coleman CN, Seed T, Lowry P, Armitage JO, Dainiak N; Strategic National Stockpile Radiation Working Group. Ann Intern Med. 2004 Jun 15;140(12):1037-51.
5. Radiation effects on the respiratory system. Hill RP. BJR Suppl. 2005;27:75-81.
6. CRS Report for Congress, Prepared for Members and Committees of Congress, dated July 6, 2009, “Project BioShield: Purposes and Authorities” by Frank Gottron, Specialist in Science and Technology Policy. http://www.fas.org/sgp/crs/terror/RS21507.pdf
7. Overview of likely consequences of a magnitude 6.5+ earthquake in the central United States. J. David Rogers, Missouri University of Science & Technology. http://web.mst.edu/~rogersda/nmsz/Rogers-Consequences%20M6.5+%20Quake%20in%20CEUS.pdf

Table 1. Old Versus New Paradigm in Biotechnology Collaborations

In addition, the negative considerations from large pharmaceutical partnerships are often overlooked, which begs the question: is it better to partner, or go alone?  To help address the topic, this article focuses on the oncology segment of the life science industry – one of the most popular therapeutic areas for partnering and merger & acquisition [M&A] activity.

Luck Vs Skill

Prior to addressing the question of whether or not a small biotechnology company should collaborate with a larger pharmaceutical organization, we solicited investor views regarding the process of corporate partnering.  Some of the feedback indicates there is a lack of transparency.

“As an investor, partnering activity is the most opaque part of our companies’ business,” said David Sable, portfolio manager, Special Situations Life Sciences Fund.  “Every small biotech CEO tries to create an image of limitless interest on the part of big pharma in each of the company’s projects, a dynamic that will inevitably result in a value-maximizing transaction.  Many management teams deliver on these promises; in retrospect, however, at least as many seem to have parked their molecule in the front yard with a ‘For Sale’ sign and hoped for the best.  While we can validate the importance of a molecular pathway, double-check market size predictions, run our own statistics and reality-check pricing assumptions, we have no way to identify talent in business development.”

Left at the Altar

One of the most important negative considerations for biotechnology companies looking to partner is that large pharmaceutical companies often shift resources and the focus of their pipeline development candidates over time, which may put their collaborators at risk.  Although sometimes done for strategic reasons rather than due to new clinical insight, the sudden departure of a large pharmaceutical partner can reflect poorly on an otherwise promising product candidate.

For example, Celldex Therapeutics, Inc. (CLDX) announced in September 2010 that the company would regain full worldwide rights to develop and commercialize rindopepimut [CDX-110] from Pfizer, Inc. (PFE).  The companies had entered into a global development and commercialization agreement in April 2008 for rindopepimut, an experimental therapeutic cancer vaccine that targets the tumor-specific molecule epidermal growth factor receptor variant III in patients with glioblastoma multiforme.  Pfizer informed Celldex that the rindopepimut program was no longer a strategic priority of Pfizer and terminated the agreement despite the fact that the product candidate met or exceeded all pre-determined safety and efficacy objectives across three clinical studies.  Shares of Celldex, which traded as high as $9.49 during 2010, reached a 52-week low of $2.91 on the news.

More recently, Transgene (TNG.PA) announced on February 22, 2011, that Roche Holding (ROG.VX) terminated their 2007 agreement under which Roche had been granted exclusive global development and commercialization rights to TG4001/RG3484, a therapeutic vaccine candidate currently in a 200 patient Phase IIb study to treat notably high grade cervical intraepithelial neoplasia [CIN] lesions [CIN2/3] caused by human papilloma virus [HPV] infection.  While Transgene stated that Roche’s decision to terminate the license agreement was based on strategic reasons and wasn’t data driven, the company’s shares reached a 52-week low on the news.

Hopes and Dreams Vs Revenue Streams

Another potential negative is that by partnering a product candidate, the “hope and dream” multiple of a potential partnership or acquisition may be replaced by the realities of a “revenue stream,” such as milestone payments and future product royalties.  By discounting the economics of a partnership deal for certain risk factors, investors can assign a net present value to the company that may be quite different than the speculative valuation in the absence of a partnership.  Representing a unique opportunity to review the effect of partnering on market capitalization, three separate deals were announced for late-stage product candidates aimed at treating prostate cancer during 2009, while two companies have remained independent [see Table 2].

As the first transaction announced that year, Johnson & Johnson’s (JNJ) acquisition of Cougar Biotechnology for nearly $1 billion in cash in May 2009 initially looked attractive.  However, following approval of Provenge® [sipuleucel-T] in April 2010, the market capitalization of Dendreon Corporation (DNDN) exceeded $7 billion, which demonstrates the potential benefit of remaining independent or retaining worldwide rights.  In contrast, more than a year after partnering their late-stage programs, the market valuations of two other companies, Medivation, Inc. (MDVN) and OncoGenex Pharmaceuticals, Inc. (OGXI), are $605 million and $150 million, respectively.

Using Dendreon’s valuation as an example, it isn’t surprising that Bavarian Nordic A/S (BAVA.CO) announced earlier today that the company is reviewing alternate options to maximize value for shareholders and fund the pivotal Phase 3 trial of its “off-the-shelf” therapeutic vaccine product candidate Prostvac® on its own.  Keeping its options open, however, Bavarian Nordic is exploring opportunities to pursue independent development in parallel with continuing partnership discussions.

Table 2. Late-stage Prostate Cancer Programs

A Means to an End

The biggest argument against partnering is the fact that some of the most successful biotechnology companies to date are those that have commercialized their own products, such as Amgen, Inc. (AMGN), Celgene Corporation (CELG), and several others.

“Celgene is a unique example of success by taking a slightly different approach,” said Charles Duncan, managing director and senior biotech analyst at JMP Securities LLC.  “The company built a pipeline and worldwide infrastructure for Revlimid® [lenalidomide] that was funded and supported through its early sales of Thalomid® [thalidomide].”

“We viewed partnering our lead product as a critical strategic decision that would shape the company and significantly impact our vision,” said Sol J. Barer, Ph.D., Executive Chairman of Celgene Corporation.  “We felt that our pursuing the development of Revlimid worldwide alone was the best option consistent with our vision a of becoming a major global biopharmaceutical company over the next few years.  We clearly recognized the short versus long term trade-offs in the decision; nevertheless, our belief in the product and in our ability to manage the product globally was important in our decision not to partner.”

Some companies have also partnered a specific program in certain geographies or disease settings and use the validation and resulting economics to help advance their own pipeline – sometimes even in competitive areas.  For example, Amgen originally developed Epogen® [epoetin alfa], which the company commercialized as a treatment for anemia in dialysis patients and partnered non-dialysis rights with Johnson & Johnson [sold as Procrit®].  Amgen later developed and commercialized Aranesp® [darbepoetin alfa], an erythropoiesis stimulating protein with a longer half-life and increased biologic activity that was not partnered.

Similarly, Oncothyreon, Inc. (ONTY) has granted a license to Merck KGaA of Darmstadt, Germany for the clinical development, manufacturing, and marketing of Stimuvax®.  Oncothyreon is eligible for cash payments based on the achievement of certain process transfer events, regulatory submissions in first and second cancer indications, regulatory approval for first and second cancer indications, and for sales milestones.  Oncothyreon will also receive a royalty based on net sales.  If successful in the clinic, Stimuvax could also help validate another Oncothyreon product candidate, ONT-10, which is a completely synthetic MUC1-based liposomal glycolipopeptide cancer vaccine that could compete with Stimuvax.  Merck KGaA has a right of first negotiation with respect to ONT-10.

Geographically Undesirable

Although selective encumbered assets can still attract buyers, partnering a product candidate in certain geographies with one large pharmaceutical company may preclude an acquisition by another that is only interested in worldwide rights or control of key markets.  On the other hand, some partnerships can later lead to an acquisition – a strategy employed by Bristol-Myers Squibb Company (BMY) on more than one occasion.

For example, Bristol-Myers Squibb and Medarex, Inc. formed a worldwide collaboration in 2004 valued at more than $530 million to develop and commercialize Yervoy® [ipilimumab, MDX-010], which was in Phase III clinical development at the time for the treatment of metastatic melanoma and multiple Phase II clinical trials in other oncology indications.  In 2009, Bristol-Myers Squibb acquired Medarex for $16.00 per share, a 90% premium over the prior day’s closing price of $8.40 per share, for an aggregate purchase price of approximately $2.4 billion.

What started as a lawsuit for infringement of its patents related to fusion protein technology in 2006, ZymoGenetics, Inc. signed a deal with Bristol-Myers Squibb in 2009 worth more than $1.1 billion for PEG-Interferon lambda, a novel type 3 interferon in Phase Ib development for the treatment of Hepatitis C, and its related development program.  The following year, Bristol-Myers Squibb acquired ZymoGenetics for $9.75 per share in cash [an 84% premium to the prior day close] in a transaction valued at approximately $885 million.

While ultimately thwarted by Eli Lilly & Co.’s (LLY) superior offer in October 2008, Bristol-Myers also attempted to acquire its partner ImClone Systems.  Back in September 2001, Bristol-Myers had entered into an agreement with ImClone to co-develop and co-promote Erbitux® [cetuximab, IMC-C225] in the United States, Canada and Japan.

All that Glitters is not Gold

Maintaining worldwide rights and commercializing a product without a partner doesn’t necessarily translate into a lofty market valuation.  Several companies have struggled to commercialize oncology products on their own.

Allos Therapeutics, Inc. (ALTH) developed Folotyn® [pralatrexate injection], a folate analogue metabolic inhibitor, and began commercializing the product in the U.S. for the treatment of patients with relapsed or refractory peripheral T-cell lymphoma [PTCL] in October 2009.  Since the product’s launch, Folotyn sales have been below Wall Street analyst’s expectations and shares of Allos recently reached a 52-week low of $2.64.

Despite an inauspicious launch in the U.S., some analysts believe that Allos may finally be executing on a regional strategy with the recent filing of a Marketing Authorisation Application for European approval and the potential for a partner in Asia as highlighted during the company’s recent quarterly teleconference with investors.

“If Allos gets traction with an ex-U.S. approval and partnership, investor sentiment will most certainly improve as this will provide some external validation on the viability of a regulatory path and market opportunity in PTCL, despite it being a rare disease and there being emerging potential competition from Celgene’s Istodax® [romidepsin],” said Charles Duncan.  “At this point, all but the most patient, value-oriented investors have extricated themselves from the Allos story due to what we believe to be a lack of confidence in senior management, and having another company to shoulder the risk ex-U.S. will provide a much-needed boost to the capabilities and capital needed to profitably market Folotyn.  Perhaps this too could be an example where a collaboration discussion turns into an acquisition, although we anticipate that should such a scenario materialize, it would likely involve contingent-value rights [CVR’s] given the uninspiring early revenue trajectory.”

Summary

Looking ahead, the trade-off between equity dilution and asset dilution represents an important crossroad that many late-stage biotechnology companies will face in the near future [see Table 3 for a select list].  While one size doesn’t fit all, the fact that Dendreon has achieved the largest market valuation of any company in the late-stage prostate cancer segment of the market by commercializing its product without a partner helps support the notion that going alone may provide the highest value to stakeholders.  Such a strategy requires that the company can access resources and capital to develop and launch its product globally.  If not, a selective or global partnership may be the next best options – provided the terms are attractive and that there is a remaining pipeline to be leveraged in the future.  In the end, whether a company proceeds alone or with a partner, there is an attractive landscape of motivated buyers for late-stage and marketed products that may ultimately lead to M&A.

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Table 3. Select Companies with Phase III Oncology Programs Not Yet Partnered

• Tier 1: market capitalization in excess of $10 billion
• Tier 2: market capitalization greater than $2 billion but less than $10 billion
• Tier 3: market capitalization of at least $1 billion but less than $2 billion

At that time, the 30 companies in these three groups had a collective market capitalization of approximately $240 billion. Assuming that investors reinvested the entire $47 billion in cash they received from the Roche/Genentech transaction into these groups, it would have represented nearly 20% of the total value.  While some of the money may have been reinvested in Roche, such an imbalance between supply and demand could have resulted in relative outperformance from members of the three groups.

Following today’s news that Sanofi-aventis (SNY) is acquiring Genzyme Corporation (GENZ) for approximately $20 billion in cash [plus a contingent value right], we reviewed the performance of our three tiers to determine which companies, if any, benefited the most from the reinvestment of $47 billion following the Roche/Genentech transaction.

From the date that the Roche/Genentech transition was announced [March 12, 2009] through February 15, 20111, the NASDAQ Composite (COMP) was up approximately +97%.  In contrast, the NBI only increased +50% during the period.  Recall that the NBI is calculated under a modified capitalization-weighted methodology, taking into account the total market value of the companies it tracks and not just their share prices.  Accordingly, companies with the largest market capitalization have the highest weighting in the index – making the NBI a good proxy for the performance of larger capitalization biotechnology companies.

Contrary to expectations, the largest biotechnology companies did not appear to benefit from a reallocation of funds from the Roche/Genentech transaction and posted the worst overall performance during the period.  In fact, all six members of the Tier 1 group underperformed the NBI, which includes Genzyme [see Table 1].  The companies in Tier 1 should have been the closest to Genentech with regard to their risk/return profile.

Table 1: Tier 1 Group

With market capitalizations greater than $2 billion but less than $10 billion around the time that the Roche/Genentech transaction was announced, Tier 2 represented the best performing group.  While Tier 2 contained both winners and losers, more than half of the Tier 2 companies outperformed the NBI, including four with triple-digit gains during the period [see Table 2].

Table 2: Tier 2 Group

* Acquired by Astellas Pharma in May 2010, price as of 3/31/2009 and the acquisition price, respectively

Tier 3 was the second best performing group.  Half of the Tier 3 companies outperformed the NBI, including four with triple-digit gains during the period [see Table 3].

Table 3: Tier 3 Group

* Acquired by Gilead in March 2009, price as of 3/31/2009 and the acquisition price, respectively

** Acquired by Dainippon Sumitomo Pharma in September 2009, price as of 3/31/2009 and the acquisition price, respectively

In conclusion, the reallocation of funds following a significant merger & acquisition [M&A] transaction for cash doesn’t appear to benefit larger biotechnology companies with similar risk/reward profiles in terms of relative stock performance [Tier 1].  While a comprehensive analysis of the data is beyond the scope of this article, this could result from the reallocation of capital into the acquiring company, sufficient liquidity from larger biotechnology companies to withstand the increased demand, and/or other factors.   However, using history as a guide, those companies with a market capitalization between $2 and $10 billion appear most likely to benefit from reinvestment following the recent Sanofi/Genzyme transaction.

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According to the American Cancer Society, pancreatic cancer is a devastating disease with the worst mortality rate and an overall 5-year survival rate lower than 5%.  Although accounting for only 3% of all cancers, this disease is the fourth leading cause of death and represents 6% of all cancer related deaths in the United States.

The disease remains one of the most difficult to treat due to late initial diagnosis and extreme resistance to treatment.  For example, about 50% of patients have locally advanced disease at the time of diagnosis, indicating that the cancer has grown beyond the confines of the pancreas to invade surrounding vital structures, and in 40% of patients the tumor has spread to distant sites, such as the liver and lungs [metastatic stage].  Case in point: Patrick Swayze was diagnosed with stage IV pancreatic cancer that had already spread to the liver in March 2008 and lost his battle with the disease in September 2009 at the age of 57.

The majority of pancreatic tumors [95%] are adenocarcinomas that mainly develop from exocrine cells in the tissues of the pancreas.  They are characterized by an aggressive behavior with a fast progression rate that makes them highly metastatic.  Neuroendocrine tumors [NET] of the pancreas [islet cell tumors] are much less common [1-2%] than exocrine pancreatic tumors and are considered less deadly.  For example, Steve Jobs, co-founder and chief executive of Apple Inc. (AAPL), was diagnosed with this rare, slow-growing pancreatic tumor in 2004.

In terms of treatment, surgical removal of the tumor represents the best option for pancreatic cancer patients without invasion into surrounding organs or distant metastasis.  Unfortunately, only 15–20% of all patients are candidates for potentially curative surgery.  Depending on the tumor localization, pancreaticoduodenectomy, distal or total pancreatectomy can be performed.  However, even with an optimal curative surgery, metastases often occur.  Median survival time without evidence of recurrent disease is 21.2 months after resection.

For locally advanced or metastatic disease, treatment is still palliative rather than curative, and chemotherapy remains the only option.  Since its approval in 1997, Eli Lilly’s (LLY) Gemzar® [gemcitabine] is the current standard first-line treatment in the U.S.  It has been shown to improve the median time to disease progression and overall survival [OS].

Just like lupus, sepsis, and several others, pancreatic cancer has been referenced as one of those challenging diseases where good drugs [and companies…] go to die.  Since 2005, nine late-stage clinical trials have been performed to improve the efficacy of gemcitabine with little success in terms of improving survival outcomes [see Table 1].  Such failures resulted in at least two companies filing for bankruptcy [both Aphton Corp and Therion Biologics in 2006].  In fact, the only combination approved by the U.S. Food and Drug Administration [FDA] is gemcitabine plus Astellas Pharma’s Tarceva® [erlotinib], which increased the median OS from 6.0 to 6.4 months.

Table 1. Prominent Late-stage Pancreatic Product Failures

Despite past failures, drug developers continue to explore new options for treating pancreatic cancer and more than a dozen new molecular entities are currently being evaluated in clinical trials [see Table 2].  Several programs have recently demonstrated impressive results in Phase 2 studies and are now enrolling patients in pivotal trials.  While a comprehensive review of investigational pancreatic cancer therapies is beyond the scope of this article, we briefly review some of the more promising pancreatic treatments currently in clinical development:

Celgene Corporation (CELG)

Historically known more for its franchise in treating blood cancers, Celgene moved into the realm of solid tumors through its recent acquisition of Abraxis BioScience, Inc.  As a result, Celgene is now developing Abraxane® [paclitaxel protein-bound particles for injectable suspension] for the treatment of pancreatic cancer.  Updated overall survival findings from a phase I/II study of Abraxane given in combination with gemcitabine demonstrated increased survival of the first-line treatment of patients with advanced pancreatic cancer.  In 44 patients treated at the recommended dose of 125 mg/m² Abraxane plus gemcitabine [1000 mg/m²], the median OS time was 12.2 months, an impressive doubling of survival compared to historical control of gemcitabine administered alone.  The findings were discussed at the 101st Annual Meeting of the American Association for Cancer Research [AACR] in 2010. The combination of Abraxane and gemcitabine is now the treatment arm of a randomized Phase 3 clinical trial that is currently enrolling patients [ClinicalTrials.gov identifier NCT00844649].

Novartis AG (NVS)

In June 2010 at the12th World Congress on Gastrointestinal Cancer, Novartis reported that its RADIANT-3 Phase 3 study of Afinitor® (everolimus), plus best supportive care met its primary endpoint, showing that the drug more than doubled median progression-free survival [PFS], or time without tumor growth, from 4.6 to 11.0 months when compared with placebo in patients with advanced pancreatic NET.  More recently, Novartis presented data from a second Phase 3 study called RADIANT-2 at the 35th European Society for Medical Oncology [ESMO] Congress.  The study, which evaluated Afinitor® in combination with Sandostatin® LAR Depot (octreotide acetate for injectable suspension), demonstrated that everolimus plus octreotide LAR provided a clinically meaningful extension in the median time without tumor growth from 11.3 to 16.4 months when compared with placebo plus octreotide LAR.  However, the study did not meet its primary endpoint of PFS based on central radiologic review of the data (p=0.026 versus p=0.024 predefined).  According to the company, results from the two RADIANT trials will form the basis for regulatory filings later in 2010.

Amgen, Inc. (AMGN)

Amgen is developing AMG 479, an investigational fully human monoclonal antibody that targets type 1 insulin-like growth factor receptor [IGF-1R], which plays an important role in the regulation of cell growth and survival.  At the 2010 American Society of Clinical Oncology [ASCO] Annual Meeting, Amgen announced results from a Phase 2 study demonstrating that the addition of AMG 479 to gemcitabine resulted in an overall survival rate at six months of 57% versus 50% with gemcitabine alone and 39% versus 23% at 12 months. Median overall survival was 8.7 months versus 5.9 months in the gemcitabine arm.  AMG 479 is moving into a Phase 3 study for metastatic pancreatic cancer.

Threshold Pharmaceuticals, Inc. (THLD)

At the 2010 ASCO Annual Meeting, Threshold Pharmaceuticals presented results with its hypoxia-activated prodrug, TH-302, in combination with gemcitabine in thirty-four patients with advanced or metastatic pancreatic cancer that had at least one evaluable post-treatment tumor assessment.  One patient [3%] demonstrated a complete response as measured by RECIST [Response Evaluation Criteria In Solid Tumors] and 8 patients [24%] had a partial response.  Of the 34 assessed patients, 28 had elevated carbohydrate antigen CA19-9 levels at baseline and 17 of 28 [61%] had a CA19-9 reduction of greater than 50%.  This is important, as a greater than 20% decrease in levels of this tumor-associated antigen has been shown to correlate with improved overall survival. The biomarker CA19-9 has been shown to be highly specific and sensitive for pancreatic cancer and approximately three-quarters of all pancreatic cancer patients have elevated baseline serum CA19-9 level at baseline.

Neogenix Oncology, Inc. (private)

Neogenix Oncology is develping ensituximab, a novel, chimeric monoclonal antibody intended for the treatment of advanced pancreatic and colorectal cancer. Pre-clinical studies have demonstrated that NPC-1C specifically targets pancreatic and colorectal cancer sparing healthy tissue.  In 2010, the company initiated a multi-center Phase 1 trial in patients with late stage pancreatic or colorectal cancer being conducted at Johns Hopkins University Hospital, Duke University Medical Center, and North Shore University Hospital.  Neogenix is also exploring the diagnostic and prognostic utility of ensituximab using a new serum ELISA test in a prospective study.  Preliminary results demonstrate that the biomarker test can differentiate between blood serum of healthy donors and that of patients with colorectal or pancreatic cancer.  In addition, the results of the biomarker test indicate superior sensitivity as compared to commercially available CEA and CA19-9 assays.

Table 2. Select Pancreatic Products in Active Clinical Development*

* Based on ClinicalTrials.gov

Conclusion

In contrast to the prominent late-stage failures over the past five years, several drugs have recently shown promise for the treatment of pancreatic cancer.  Going forward, early detection using biomarkers, more effective treatments, and novel drug targets could provide new hope for the treatment of this deadly disease.

* MD Becker Partners reporting live from the JP Morgan Healthcare Conference

This week, nearly 6,500 registrants gathered in San Francisco, California for the JP Morgan Healthcare Conference to hear 25-minute presentations from 338 life science companies.  For industry executives and investors, the annual event serves as a good barometer for the rest of the year.

We roamed the familiar halls of the Westin St. Francis Hotel to assess the mood among participants and also monitored online media commentaries throughout the event.  In general, there was a flurry of activity, the plane flights and networking receptions were crowded as usual, and several industry observers “Tweeted” a sense of optimism for 2010.  However, we sought to construct a less subjective assessment by analyzing year-over-year statistics from the conference.

Accordingly, we extensively reviewed company press releases issued during the JP Morgan Healthcare Conference in both 2009 and 2010, with a particular focus on identifying the number of merger & acquisitions, licensing & partnering transactions, and financing deals announced each year during the four day event.

Merger and Acquisitions

In contrast to the absence of any significant M&A deals announced during the JP Morgan Healthcare Conference in 2010, several large M&A transactions with an aggregate value of $702 million were disclosed during the first two days of the event in 2009 [January 12-15, 2009].  The largest deal went to Cephalon, Inc. (CEPH), which announced an agreement providing the company with an option to purchase all outstanding capital stock of Ception Therapeutics, Inc., a privately held biopharmaceutical company.  Under the terms of the option agreement, Cephalon paid Ception $100 million upfront for the option.  If Cephalon exercises its option, the company will purchase all of the outstanding capital stock of Ception for $250 million along with additional payments related to clinical and regulatory milestones.  Other transactions announced that year included:

• Medtronic, Inc.’s (MDT) acquisition of privately held Ablation Frontiers, Inc. for an initial payment of $225 million plus potential additional payments contingent upon achievement of certain clinical milestones
• The Medicines Company’s (MDCO) merger agreement with Targanta Therapeutics Corporation for $42 million in cash and additional regulatory and commercial milestone payments
• NuVasive, Inc.’s (NUVA) option to acquire Progentix Orthobiology BV, a Netherlands based company focused on developing novel orthobiologics, consisting of an upfront investment of $15 million along with the obligation to purchase the remaining equity of Progentix for $45 million upon accomplishment of certain development milestones [with additional potential payments of up to $25 million upon the achievement of additional milestones and based upon NuVasive's sales success]

Licensing and Partnering

Kicking off the JP Morgan Healthcare Conference in 2010, privately held KaloBios Pharmaceuticals, Inc. announced a $290 million agreement with Sanofi Pasteur, the vaccines division of the sanofi-aventis Group (SNY), for the development and commercialization of KB001, an investigational new biologic for the treatment or prevention of Pseudomonas aeruginosa [Pa] infections.  KaloBios, which is developing first-in-class human antibody therapeutics that offer advantages over other methods of human antibody creation in terms of immunogenicity, potency, and manufacturing yields, will receive an upfront payment of $35 million, plus development, regulatory and commercial milestones for a potential further $255 million, as well as royalties on eventual product sales.

While other licensing and partnering transactions were announced during the JP Morgan Healthcare Conference in 2010, they were substantially smaller or specific financial terms were not disclosed.  These include:

• Proteus Biomedical Inc. announced an exclusive worldwide license and collaboration agreement with Novartis AG (NVS) to develop and commercialize pharmaceutical products that incorporate Proteus’ novel sensor-based technologies in the field of organ transplantation along with certain option rights in cardiovascular and oncology product applications.  Under the terms of the agreement, Novartis will make upfront cash and equity investments in Proteus totaling $24 million and Proteus will also receive royalties on worldwide net sales of any Novartis products incorporating its sensor-based technology.
• Trillium Therapeutics, Inc., a biopharmaceutical company developing innovative immune-based biologics, announced that it has entered into a definitive license agreement with Biogen Idec, Inc. (BIIB), granting the latter exclusive worldwide rights to one of Trillium’s development programs.  Under the terms of the agreement, Trillium will receive an upfront payment and is eligible to receive milestone payments based on achievements of specified clinical, regulatory and commercial accomplishments.  Trillium will also receive royalties on global product sales.  Biogen Idec will be solely responsible for clinical development, regulatory approvals, manufacturing and commercialization.
• MedGenesis Therapeutix Inc., a biopharmaceutical company developing and commercializing innovative treatments for patients with serious central nervous system [CNS] diseases, announced an agreement with Amgen, Inc. (AMGN) that provides MedGenesis with an exclusive, worldwide license for glial cell line-derived neurotrophic factor [GDNF] protein in CNS and non-CNS indications.  As part of the license agreement, Amgen now holds a small equity stake in MedGenesis.  In parallel, Biovail Corporation (BVF) and MedGenesis concluded an agreement to collaborate on the development of GDNF in Parkinson’s disease and potentially other CNS indications.  GDNF is a naturally-occurring growth factor capable of protecting and promoting the survival of dopamine producing nerve cells.
• AstraZeneca Plc (AZN) and CrystalGenomics announced a research collaboration to discover and develop a novel anti-infective for use as a potential antibacterial agent.  Under the terms of this agreement, Korea-based CrystalGenomics will receive research funding from AstraZeneca for two years.  CrystalGenomics will also be eligible to receive future milestones and royalty payments associated with development and commercialisation of a drug candidate.
• AnaptysBio, Inc., a privately-held therapeutic antibody platform and product company, announced it has signed an agreement with Roche (RHHBY) for the development of novel antibody therapeutics.  Under the terms of the agreement, AnaptysBio will be responsible for generating novel antibodies using its proprietary somatic hypermutation platform and Roche will receive a worldwide license to develop and commercialize antibodies optimized by AnaptysBio.  In addition to a signing fee paid by Roche, AnaptysBio will be eligible to receive milestone payments and royalties upon product sales.

The six transactions announced during the JP Morgan Healthcare Conference in 2010 with reported financial terms totaling $314 million pale in comparison to the ten deals reported at the meeting during 2009 worth more than $2.4 billion in aggregate value.  These included a $1.1 billion deal between ZymoGenetics, Inc. (ZGEN) and Bristol-Myers Squibb Company (BMY), a $500 million deal between Peptimmune, Inc. and Novartis AG, a $396 million deal between Micromet, Inc. (MITI) and Bayer AG (BAYZF.PK), and a $200 million deal between FORMA Therapeutics the Novartis Option Fund to develop inhibitors for an undisclosed protein-protein interaction target in the field of oncology, among others.

Financing

The quantity and aggregate dollar value of public and private financing transactions announced during the JP Morgan Healthcare Conference were essentially flat in 2010 compared with the prior year as reflected in the table below.

Outlook

At the start of 2009, we provided a positive outlook for biotechnology, citing the sector’s defensive characteristics, favorable technical aspects, and improving fundamentals, such as the number of new product approvals, products in clinical trials and the brisk pace of industry consolidation and licensing transactions.  The latter was quickly reinforced by M&A transactions with an aggregate value of $702 million and licensing & partnering deals worth more than $2.4 billion in aggregate value announced January 12-15, 2009, during the JP Morgan Healthcare Conference. 

While we believe that a positive outlook for 2010 is once again warranted, and the first two weeks of the year don’t necessary indicate a trend, hopefully the paucity of M&A activity coupled with the decline in both the quantity and value of licensing & partnering transactions announced during the JP Morgan Healthcare Conference in 2010 is simply the pause that refreshes and the action improves throughout the year.

With 2009 officially on the books, it appears an appropriate time to review the sector’s performance along with some of the themes highlighted in our previous articles.

Big Versus Small

The twenty-member NYSE Arca Biotechnology Index (BTK) was up 46% in 2009, while the broader NASDAQ Biotech Index (NBI) was only up 16%, underperforming the Dow Jones Industrial Average (INDU), S&P 500 (SPX), and NASDAQ Composite (COMP), which were up 19%, 24%, and 44%, respectively.  Why the huge discrepancy in returns between these two major biotechnology indices?  Unlike the equal-weighted NYSE Arca Biotechnology Index, the NASDAQ Biotech Index is market value-weighted, taking into account the total market capitalization of the companies it tracks and not just their share prices.  Accordingly, companies with the largest market capitalizations, or the greatest values, will have the highest weighting in the index.

During 2009, large capitalization biotechnology companies [greater than $10 billion] dramatically underperformed their smaller peers.  For example, Celgene Corporation (CELG) was essentially flat, Amgen, Inc. (AMGN) was down 2%, Gilead Sciences, Inc. (GILD) declined by 15%, and Genzyme Corporation (GENZ) dropped 26% [earning Henri Termeer the coveted Nance Trophy for worst biotech CEO of 2009 by TheStreet.com’s Adam Feuerstein].  Some of the reasons for this poor performance include concerns over generic competition and pipeline progress – ironically some of the same issues that have plagued big pharma.

Accordingly, the relative underperformance of large capitalization biotechnology companies in 2009 masked the fact that many smaller, innovative companies performed well, with 20 of the 125 companies comprising the NASDAQ Biotech Index producing triple-digit returns during the period.  In fact, two biotechnology companies were among the largest percentage gainers in the NASDAQ Composite with their staggering quadruple-digit returns: Vanda Pharmaceuticals, Inc. (VNDA) +2,150% and Human Genome Sciences, Inc. (HGSI) +1,342%.  See Table 1 for a list of the top ten gainers from the NASDAQ Biotech Index in 2009.

Table 1. Top ten gainers from NASDAQ Biotech Index (NBI) in 2009

Oncology: Prostate Cancer Spotlight

Driven by positive Phase 3 results from Dendreon Corporation (DNDN) regarding its prostate cancer vaccine study, investors gravitated towards biotechnology companies working in the field of prostate cancer treatment as noted in our May 2009 article.  This enthusiasm only increased when Johnson & Johnson (JNJ) announced in May 2009 that it would acquire Cougar Biotechnology, Inc., a development stage company with an oral prostate cancer treatment being studied in two Phase 3 clinical trials, for approximately $1 billion. 

While not a member of either major biotechnology index, shares of Oncogenex Pharmaceuticals, Inc. (OGXI) started the year around $3.00 and ended above $22 for a 643% return.  Oncogenex is developing OGX-011, which is designed to inhibit the production of clusterin, a protein that is associated with cancer treatment resistance, and has completed Phase 2 clinical trials in prostate, lung and breast cancer.  OGX-011 received Fast Track designation from the FDA for the treatment of progressive metastatic prostate cancer in combination with docetaxel.  Shares of Oncogenex had traded higher than $42 in August 2009, but the stock price declined following a license agreement with Teva Pharmaceutical Industries (TEVA) for OGX-011 that apparently did not meet investor’s expectations.

Not all biotechnology companies working in the area of prostate cancer were as fortunate as Dendreon, Cougar, and Oncogenex.  Shares of GTx, Inc. (GTXI) were the second largest industry decliner for 2009 due to a complete response letter from the Food and Drug Administration [FDA] that cited clinical deficiencies regarding the company’s New Drug Application [NDA] for toremifene 80 mg to reduce fractures in men with prostate cancer receiving androgen deprivation therapy.  See Table 2 for a list of the top ten decliners from the NASDAQ Biotech Index in 2009.

Shareholder Activist Wins

In view of past major coups with MedImmune and ImClone, in August 2009 we reviewed Carl Icahn’s biotechnology holdings as reported in SEC filings and identified three companies that significantly underperformed the NASDAQ Biotechnology Index over the past five years, but with recent successful shareholder activist outcomes that could positively impact future performance.  In particular, we noted that Alexander Denner, who has served as Managing Director of entities affiliated with Carl Icahn and as a director of ImClone, had recently been elected as a director at each company.

During 2009, those three companies, Biogen Idec, Inc. (BIIB), Amylin Pharmaceuticals, Inc. (AMLN), and Enzon Pharmaceuticals, Inc. (ENZN) produced positive returns of 12%, 31% and 81%, respectively.  While Biogen Idec underperformed the sector, it notched the highest return among large capitalization biotechnology companies.

In other shareholder activist news, holders of Vanda Pharmaceuticals (VNDA) are likely pleased that the company’s Board of Directors spurned a request by Tang Capital Partners, LP to liquidate the company in February 2009.  Shares of Vanda were up 2,150% for the year [see Table 1] following FDA approval in May 2009 to market the company’s Fanapt™ [iloperidone], a novel antipsychotic for the acute treatment of adult patients with schizophrenia, and a subsequent marketing agreement for the product with Novartis AG (NVS).

CNS: Developments for Parkinson’s Disease

Vanda Pharmaceuticals wasn’t the only company working in the area of central nervous system [CNS] disorders to make news.  Shares of Impax Laboratories, Inc. (IPXL), which were trading around $7.50 at the time we published our August 2009 article titled “Treating Parkinson’s Disease: Investment Opportunities and Challenges,” continued to reach new 52-week highs and ended up 172% for the year [see Table 1].  Impax recently initiated the second of two Phase 3 studies designed to support marketing approval of its IPX066 product candidate for the treatment of Parkinson’s disease.  IPX066 is an investigational extended release carbidopa-levodopa product intended to rapidly achieve and then sustain effective blood concentrations of levodopa, potentially improving clinical symptom management.

Gastrointestinal Disease: 3 Hits, 3 Misses

First, the good:

Both Salix Pharmaceuticals, Inc. (SLXP) and Santarus, Inc. (SNTS) appear in the list of top ten biotechnology gainers for 2009 with triple-digit returns due to favorable regulatory progress reported during the year [see Table 1].  In September, Salix announced the successful outcome of two Phase 3 trials to evaluate the efficacy and safety of Xifaxan® [rifaximin] for the treatment of non-constipation irritable bowel syndrome.  Salix is planning an NDA submission for the first half of 2010.  In December, Santarus announced that the FDA approved the company’s New Drug Application [NDA] for its prescription tablet product for all of the indications being sought, including for the treatment of heartburn and other symptoms associated with gastroesophageal reflux disease. 

While not a member of either major biotechnology index, shares of Soligenix, Inc. (SNGX.OB) increased 317% during 2009.  In January, the company reached agreement with the FDA on the design of a confirmatory, pivotal Phase 3 clinical trial evaluating its lead product orBec® for the treatment of acute gastrointestinal Graft-versus-Host Disease [GVHD].  The following month, Soligenix announced a potential $30 million North American partnership agreement with Sigma-Tau Pharmaceuticals for orBec and in October 2009 initiated patient enrollment in the confirmatory Phase 3 trial that is expected to complete with clinical data available in the first half of 2011.

Next, the bad:

As discussed in our December 2009 article “Graft Versus Host Disease: Failures and Future Opportunities,” Osiris Therapeutics, Inc. (OSIR) recently reported preliminary results from two Phase 3 trials evaluating its Prochymal product candidate for the treatment of acute GVHD.  Unfortunately, neither trial reached its primary endpoint, sending shares from $14 to a 52-week low of $5.35 by November 2009, earning the company a spot in the top ten decliners for the year [see Table 2]. 

The other two casualties working in the area of gastrointestinal disease and appearing in the top ten decliners for 2009 are:

• Progenics Pharmaceuticals, Inc. (PGNX), which announced in October 2009 that the company regained worldwide rights to Relistor® [methylnaltrexone bromide] for the treatment of opioid-induced constipation from Wyeth Pharmaceuticals.  Global net sales of Relistor for the third quarter of 2009 were a mere $3.3 million, as compared to $3.2 million in sales for the previous quarter.
• In the absence of any negative clinical or regulatory news, NPS Pharmaceuticals, Inc. (NPSP) stated it remains on track to reach full patient enrollment before the end of the first quarter of 2010 for a confirmatory Phase 3 trial with Gattex™ (teduglutide), the company’s proprietary analog of naturally occurring human glucagon-like peptide 2 [GLP-2], for the treatment of short bowel syndrome [SBS].  NPS believes that positive results from the trial, expected to complete in October 2010 according to ClinicalTrials.gov, will enable the company to seek U.S. marketing approval for Gattex.

Table 2. Top ten decliners from NASDAQ Biotech Index (NBI) in 2009

2010 Outlook

The capital markets remain turbulent and there may be casualties along the way among undercapitalized companies, but many of the biotechnology industry’s fundamentals, such as the number of products in clinical trials, new product approvals, profitable biotech companies and industry mergers & acquisitions remain favorable for 2010. Similar to 2009, small capitalization companies with clinical or regulatory catalysts should continue to outperform their larger industry peers in the year ahead.

What is your outlook for the biotechnology industry in 2010?  Take a moment to complete our survey, which is only ten questions long and will take just minutes to complete.  The results of this important survey along with our industry outlook will be communicated in early 2010 through a future article.  Take the survey now by clicking here.