Immunotherapy for cancers of the central nervous system [CNS], however, continues to be met with skepticism.  Amongst the reasons for such incredulity are concerns that the nervous system may be immunologically privileged[i] and the presence of the blood-brain barrier, which only allows entry of select immune cells from the peripheral blood into the brain.  However, all of these premises have now been substantially discounted and tumors in the CNS should not be considered “off-limits” to immunotherapy[ii].

In addition, recent observations of how the CNS system behaves and interacts with the immune system have shed some light into the potential role of immunotherapy in the treatment of brain cancer.  Consider the following facts:

• People with impaired immune systems have an increased risk of developing CNS lymphomas[iii], suggesting that the immune system has a role in the manifestation of tumors in these patients.  People with compromised immune systems include organ transplantation patients taking immunosuppressive drugs, HIV patients, and cancer patients being treated with chemotherapy, which can weaken immune functionality.
• Bridget McCarthy, Ph.D. of the University of Illinois at Chicago found that patients with gliomas were significantly less likely to report having any type of allergy.  In fact, patients who had more types of allergies, such as seasonal, medication, pet, or food allergies, had up to a 64% reduction in risk of developing glioma[iv]. This suggests a relationship between immunological activity and potential protection from the development of CNS tumors.
• Neurologists and neurosurgeons provide anecdotal reports that glioma patients who experience postoperative infections near the tumor bed seem to do better than the average patient similar to the observations made over a century ago by Coley[v].  This suggests that exogenous factors, such as infections, may result in the activation of the immune system and improve the odds of combating CNS tumors.

Collectively, these observations suggest that proper activation of the immune system in patients with CNS tumors could be beneficial.  Accordingly, we sought to review select companies advancing immunotherapy approaches for brain tumors [see Table 1].

Table 1. Eight Companies with Immunotherapy Approaches for Brain Tumors

* Marketed in Russia as Oncophage® for intermediate-risk renal cell carcinoma, ** Marketed in Korea for hepatocellular carcinoma

About Glioma

Glioma is the most common form of primary brain tumors.  They are solid tumors that arise from glial cells, which help support the function of the neurons.  Glial cells include astrocytes, oligodendrocytes and ependymal cells.  The overgrowth of abnormal glial cells may begin in the brain or spinal cord tissues.

Gliomas can be divided into two categories: low-grade, which are not benign but have a better prognosis, or high-grade, which are malignant and often cause death within months, despite surgery or treatment with chemotherapy or radiation, according to the National Cancer Institute.

Glioblastoma multiforme [GBM], a high-grade glioma, is the most common and aggressive primary brain tumor.  In contrast, tumors originating from astrocytes [astrocytoma] range from Grade 1, which are very benign, to Grade 4, which is the same as a glioblastoma.

Amenable to Immunotherapy

Beyond recent observations suggesting a role for immunotherapy in treating brain tumors, several other factors make glioma an ideal indication for immunotherapy.  First, glioma rarely metastasizes beyond the brain, resulting in a low overall tumor burden within the body.  Second, while the blood-brain barrier is thought to restrict entry of immune cells from the peripheral blood into the brain of healthy individuals, glioma disrupts the blood brain barrier, allowing for the freer trafficking of T-cells.  Finally, glioma tumor tissue, especially in patients who are newly diagnosed, is amenable to surgical resection therefore lowering tumor burden at time of vaccination [minimal residual disease].  Studying cancer immunotherapy in settings with bulky or metastatic disease might help explain some of the past failures, as the immune system may not be able to thwart such extensive disease.  Accordingly, minimal disease settings are ideal for cancer immunotherapy.

Strategies for Immunotherapy in Glioma

In general, two categories of immunotherapeutic approaches for the treatment of glioma are currently being pursued: cell-free vaccines and cell-based vaccines.

Cell-free vaccines

Cell-free vaccines may contain heat-shock protein-peptide (HSP) complexes derived from the patient’s tumor following surgery [autologous] or incorporate one or more defined tumor peptides plus an adjuvant [non-autologous].  The following companies are advancing cell-free vaccines:

• Agenus, Inc.: autologous HSPs that elicit both CD4+ and CD8+ T-cell response and also innate response
• Celldex Therapeutics: a single EGFRvIII peptide
• Immatics Biotechnologies: 11 tumor associated, synthetic peptides

Cell-based vaccines

Cell-based vaccines often incorporate dendritic cells [DC] pulsed with defined tumor peptides, tumor cell lysate, brain tumor stem cell mRNA.  Alternatively, some cell-based vaccines consist of adoptive lymphocyte infusion and/or irradiated tumor cells.  The following companies are advancing cell-based vaccines:

• ImmunoCellular Therapeutics: DCs pulsed with shared HLA-A1/A2 tumor peptides
• Innocell Corp: adaptive transfer of cytokine-induced T-cells/NK cells
• Northwest Biotherapeutics: DCs pulsed with tumor lysate
• Oncovir, Inc.: a-type 1 polarized DCs pulsed with defined HLA-A2 peptides plus poly-ICLC adjuvant
• TVAX Biomedical: whole cell vaccination plus adoptive transfer of lymphocytes

To date, commercializing cell-based vaccines has been challenging.  For example, Dendreon’s (DNDN) Provenge® [sipuleucel-T] for prostate cancer is a cell-based vaccine that fell short of Wall Street analyst expectations during the first full year of commercial launch.  Provenge and other DC-based cancer vaccines require leukopherisis to acquire a patient’s dendritic cells.  This process adds to the overall cost of producing the vaccine and makes the logistics somewhat complicated.  In contrast, cell-free vaccines can be derived from synthetic peptides or from the patient’s tumor following standard surgical resection, making the treatment process more user friendly from both a physician and patient perspective.

Clinical Development of Immunotherapy for GBM

The current standard of care for GBM, based on a prospective, randomized controlled trial published in 2005, involves maximal surgical resection with adjuvant radiation therapy and temozolomide[vi].  Despite this therapeutic regimen, median overall survival is between 14.6 and 19.6 months for newly diagnosed patients and between 6 and 9 months for recurrent GBM[vii]^,[viii].

While immunotherapy approaches for GBM would be expected to perform better in the newly diagnosed setting, some companies first established proof-of-concept for their product candidates in the relapsed setting.  Due to the shorter expected survival, these Phase I/II studies may be faster and less expensive.  If hints of efficacy are observed in the relapsed disease setting, the product candidates can then be explored in the newly diagnosed setting.

In view of differences among histologies, ages, trial designs, and the small number of patients with immunotherapy studies published to date in the recurrent GBM setting, comparing and contrasting the findings is difficult [see Table 2].  For example, in the largest single study [56 patients] from the Catholic University of Leuven, the median age was the lowest [45 years] due to the inclusion of children above the age of seven.  In addition, some of the studies included patients that were not diagnosed with GBM, such as astrocytomas that can vary in grade.

In contrast to the results obtained with current standard of care, several of the studies with cancer vaccines for recurrent GBM have demonstrated a median overall survival greater than nine months.  Some of these trials where immune responses have been measured, such as the Prophage G-200 [HSPPC-96] trial, have shown impressive immunological activity post vaccination.  More impressive and certainly more relevant, these responses have also been measurable locally at the tumor site, which suggests such a response may be more meaningful from the perspective of effectively combating the disease.

Table 2. Recurrent GBM Vaccine Data

Several companies are also currently conducting immunotherapy trials in newly diagnosed GBM, with encouraging results presented to date, including Agenus [ClinicalTrials.gov: NCT00905060], Celldex Therapeutics [ClinicalTrials.gov: NCT01480479], Immatics [ClinicalTrials.gov: NCT01222221], ImmunoCellular [ClinicalTrials.gov: NCT01280552], Innocell Corporation [ClinicalTrials.gov: NCT00807027], and Northwest Biotherapeutics [ClinicalTrials.gov: NCT00045968].

An important future direction for the successful treatment of these very difficult tumors may involve the combination of immunotherapeutic agents with other synergistic treatments.  Such approaches could simultaneously address the immunosuppressive, angiogenic, invasive, and hypoxic nature of GBM.  In this regard, combination approaches with Avastin® [bevacizumab] and other potentially synergistic agents would make imminent sense to pursue.

Note: For further information on this topic, click here to view a replay of the plenary session “Advances in immunotherapy for glioma” by Andrew T. Parsa, M.D., Ph.D., University of California, San Francisco, from MD Becker Partners’ 2nd Annual “Cancer Immunotherapy: A Long-Awaited Reality” Conference held October 6, 2011.

References

On the heels of such a miserable year, it may have seemed counterintuitive to provide a positive outlook for the speculative biotechnology industry in 2009, but that’s exactly what we did.  Our bullish thesis was reiterated for both 2010 and 2011.

The AMEX Biotechnology Index (BTK) ended 2008 at 647.17 and climbed to 1,091.42 by the end of 2011 for a gain of approximately 69% during this three-year period.  Comparing this performance with the general market, the NASDAQ Composite increased 65% from 1,577.03 to 2,605.15 during the same period.

Our favorable outlook for the biotechnology industry remains intact for 2012 and is based on the following key drivers, which build upon many of the catalysts we first proposed in 2009:

• Sector’s defensive characteristics and impact on future economic growth
• Improving number of annual new product approvals since the low set in 2007
• Record number of products in clinical trials and annual industry R&D investment
• Improving access to capital
• Brisk pace of industry consolidation and licensing transactions
• Many micro, small and mid-capitalization companies remain undervalued

Defensive Sector and Economic Driver

During periods of economic uncertainty, the biotechnology sector is often portrayed as defensive given that disease is relentless in both good economic times and bad.  Despite recent medical advances, there remains a need for quality, innovative products to diagnose and treat a broad variety of diseases such as cancer, central nervous system disorders, cardiovascular diseases, diabetes, respiratory and infectious diseases.

Beyond its defensive characteristics, the sector plays a critical role in the United States [US] economy.  Innovative new medicines developed by life science companies provide better patient outcomes, improved quality of care, increased life expectancy, and lead to economic gains and job creation.

While the strengths and weaknesses of the US healthcare system remain the subject of great debate, we believe new medicines should be viewed as investments in the future, not only in patient health – but also in economic recovery and growth.  For example, as indicated in our article “Innovative New Medicines are Key to Economic Growth,” a permanent 1% reduction in mortality from cancer alone has a present value to current and future generations of Americans of nearly $500 billion and a cure would be worth about $50 trillion.

New Drug Approvals

As we highlighted in recent years, legislation passed in 2008 gave the FDA more money and resources, but hiring and training hundreds of new employees takes time.  With that process well underway, combined with increased familiarity of the risk evaluation and mitigation strategies [REMS] program, we expected the drug approval process to gradually improve.

Encouragingly, the total number of approvals for new molecular entities and biologic license applications by the US Food and Drug Administration’s [FDA] Center for Drug Evaluation and Research [CDER] in fiscal year 2011 was 35.  This is an improvement from 21 approvals in 2010 and 25 approvals in 2009.  In fact, according to a press announcement by the FDA, this is among the highest number of approvals in the past decade, surpassed only by 37 approvals in 2009.

However, an article in Nature Reviews by Asher Mullard listing the annual number of drug approvals going back to 1996 shows that 36 approvals in 2004 [not 2009] was the record for the past decade.  The same article also shows that new drug approvals peaked at a high of 56 in 1996.

Notable new drug approvals in 2011 include Johnson & Johnson’s (JNJ) Zytiga® [abiraterone] for late-stage prostate cancer, Roche’s Zelboraf® [vemurafenib] and Bristol-Myers Squibb’s (BMY) Yervoy™ [ipilimumab] both for melanoma, Human Genome Sciences’ (HGSI) Benlysta® [belimumab] – the first new drug for lupus in 50 years, and Seattle Genetics’ Adcetris™ [brentuximab vedotin] for a rare lymphoma known as systemic anaplastic large cell lymphoma [ALCL].

Record Pipeline and Investment

According to the latest report by the Pharmaceutical Research and Manufacturers of America [PhRMA], there are a record number of biotechnology product candidates currently in development.  In the US alone, there are more than 900 biotechnology products in development, including 300 monoclonal antibodies, 298 vaccines, 78 recombinant proteins, 50 gene therapy products, 64 cell therapy products, and 23 antisense products.  More than one-third of these product candidates are targeting cancer and related conditions and more than 20% are targeting infectious diseases.

Annual research and development expenditures by PhRMA member companies for 2009 was an estimated $45.8 billion, more than tripling the $15.2 billion level of investment in 1995.  However, skeptics will point to the fact that despite growing R&D expenditures, the number of new drug approvals has declined since the mid-1990s [see chart below].

Access to Capital

During the second week of January, more than 8,000 registrants gathered in San Francisco, California for the 30^th Annual J.P. Morgan Healthcare Conference [JPMHC] to hear 25-minute presentations from 395 life science companies.  For industry executives and investors, the annual event typically serves as a good barometer for the rest of the year.

Between meetings, we roamed the familiar halls of the Westin St. Francis Hotel to assess the mood among participants and also monitored social media outlets throughout the event.  In general, the plane flights and networking receptions were crowded as usual, industry observers “Tweeted” a sense of optimism, and attendees appeared more upbeat than in 2011.

The recent closing of three new funds may support increased optimism as it relates to access to capital.  First, on January 3, 2012, Vivo Ventures announced the final closing of a $375 million fund targeting later development stage pharmaceutical and medical device companies in the US and in revenue stage healthcare companies in greater China.  Second, during the JPMHC Canaan Partners announced the closing of a $600 million fund, with one-third of the fund designated to healthcare investments in biopharmaceutical, medical device and healthcare infrastructure companies.  Also during the JPMHC, Flagship Ventures announced the closing of a $270 million life sciences fund, its largest fund to date.   According to Flagship’s press release, in addition to investing in early-stage companies, a portion of the new fund will be dedicated to “later-stage value investing opportunities resulting from the current capital-constrained environment.”  Finally, Luke Timmerman of Xconomy recently reported that Frazier Healthcare is also aiming for its first biotechnology fund since 2007.

Last year wasn’t too bad either.  In 2011, venture capitalists invested $28.4 billion in 3,673 deals, an increase of 22% in dollars and a 4% rise in deals over the prior year, according to the MoneyTree™ Report by PricewaterhouseCoopers LLP and the National Venture Capital Association [NVCA], based on data from Thomson Reuters.  In fact, venture capital investing in 2011 ranks in the top three years for venture capital investing in the past decade.  Biotechnology was the second largest investment sector, with $4.7 billion going into 446 deals.  This represents a 22% increase in investment dollars, but a 9% drop in terms of the number of deals.

2012 is also off to a solid start with regard to follow-on financings.  Synageva (GEVA), Arena Pharmaceuticals (ARNA), iBio (IBIO), Talon Therapeutics (TLON), ImmunoCelluar Therapeutics (IMUC), Vical (VICL), Synta Pharmaceuticals (SNTA), Chelsea Therapeutics (CHTP), Sequenom (SQNM), ZIOPHARM Oncology (ZIOP), Neurocrine Biosciences (NBIX), and NeuroMetrix (NURO) have each announced offerings since the start of the year.

Consolidation and Licensing

Adding to the optimism among industry executives and investors during the JPMHC, Bristol-Myers Squibb announced its $2.5 billion acquisition of Inhibitex, Inc. (INHX) on January 7, 2012.  In view of the fact that US pharmaceutical companies stand to lose billions of revenue due to patent expirations from 2010 to 2012, we expect merger and acquisition [M&A] activity to remain brisk.

In other M&A news, ISTA Pharmaceuticals (ISTA) is still being pursued by Valeant Pharmaceuticals (VRX), which recently increased its previously proposed price to acquire ISTA from $6.50 to $7.50 per share in cash. Valeant also communicated to ISTA that it could achieve a price of up to $8.50 per share following confirmatory due diligence.

Licensing deal activity is also off to a strong start in 2012, as evidence by Xenon Pharmaceuticals’ strategic alliance with Genentech, a member of the Roche Group (RHHBY), to discover and develop compounds and companion diagnostics for the potential treatment of pain.

According to the deal, which was announced during JPMHC, Xenon is eligible to receive research, development and commercialization milestone payments, totaling up to $646 million for multiple products and indications.  In addition, Xenon will receive royalties on sales of products resulting from the collaboration.

In other licensing news, BioDelivery Sciences (BDSI) recently signed a worldwide license and development agreement with Endo Pharmaceuticals (ENDP) for the exclusive rights to develop and commercialize BEMA Buprenorphine for the treatment of chronic pain.

Small Versus Large

Similar to recent years, we expect that small and mid-capitalization companies with late-stage programs and/or positive fundamental catalysts will continue to outperform their larger industry peers in 2012.

For example, after being the third worst performer in the prior year, Medivation (MDVN) became the largest percentage gainer within the NASDAQ Biotech Index during 2011 based on encouraging results with MDV3100, the company’s lead product candidate in Phase 3 development for the treatment of castration-resistant prostate cancer.

In another dramatic reversal of fortune, after declining 22% in 2009 shares of Akorn, Inc. (AKRX), a niche generic pharmaceutical company, made an impressive comeback by becoming the largest percentage gainer within the NASDAQ Biotech Index during 2010 and again making the list of top ten gainers in 2011 [see Table 1].

However, the prior year’s winners may not always stay hot.  Both Human Genome Sciences (HGSI) and Dendreon Corporation (DNDN) were among the top ten gainers from the NASDAQ Biotech Index in 2009 with dizzying returns of 1,342% and 474%, respectively.  In 2011, both names appear on the list of top ten decliners [see Table 2].

Table 1. Top ten gainers from NASDAQ Biotech Index (NBI) in 2011

Table 2. Top ten decliners from NASDAQ Biotech Index (NBI) in 2011

2012 Outlook

The drivers supporting our favorable outlook for the biotechnology industry remain intact for 2012, such as the record number of products in clinical trials and annual industry R&D investment, improving access to capital, brisk pace of industry consolidation and licensing transactions, and attractive valuations among many small- and mid-capitalization companies, which should continue to outperform their larger industry peers.  In particular, 2012 represents a period with particularly robust news flow for emerging immuno-oncology companies, as indicated in our article “2012 Preview: Cancer Immunotherapy Catalysts.”

As of today, the NASDAQ Biotech Index is down more than 23% from its 52-week high of 1,143 and the stocks of many small biotechnology companies are reaching new lows.  Company executives are naturally questioning when investor sentiment will change, buyers will return, and how to adjust their corporate strategy and communication activities.  Having been through our share of market cycles, we’d like to offer some of our advice and perspectives on these issues.

First, it is important to note that investor sentiment can change quickly.  Although past performance doesn’t guarantee future results, within one year the NASDAQ Composite nearly doubled from the lows reached in early 2009.  The NASDAQ Biotech Index increased more than 58% during the same period.

No one has a crystal ball to determine when buyers will return, but it is also worth noting that many of the fundamental drivers supporting a favorable outlook for the life science industry remain intact.  These include the large number of products currently in clinical trials, number of new product approvals by the FDA, brisk pace of industry consolidation and licensing transactions, aging population, and attractive valuations among many small- and mid-capitalization companies among other factors.

It may be tempting to dramatically revise corporate strategy and communication activities to fit the current market environment.  In both good times and bad, however, we believe in clear and consistent communication with an emphasis on the long-term strategic vision and unique value proposition that your company offers current and prospective shareholders.  Speaking with confidence, emphasizing key fundamental attributes, and avoiding spin are the best ways to maintain and enhance credibility with investors and analysts.

Regardless of the market backdrop, regular communications with investors, analysts, and the media through telephone calls, electronic communications, conference presentations, hosting an analyst/investor day, and through one-on-one meetings can help a company stay visible.  In addition, make sure that fact sheets, slide presentations, and other corporate materials are up to date.  At some point, investors will put money to work again and these activities will help ensure that they remember your company.

Beyond external audiences, clear and consistent communications with employees is also important – especially during periods of volatility. Make sure that your management team speaks with the same voice and offers thoughtful answers to any questions that arise.  This can be particularly important for those employees who manage external relationships, such as physicians and nurses involved with clinical trials.  The steadfast loyalty and support of your employees can be invaluable – and they may also be current or future shareholders.

Lastly, due to greater focus on a company’s financial strength and ability to survive a downturn, distinguishing your organization from its peers can be beneficial.  Beyond current cash position, this includes highlighting assets that can potentially be monetized along with being transparent regarding the size and nature of any corporate liabilities, including conversion features and maturity dates.  Investors and analysts also benefit by understanding key metrics such as the company’s cash burn rate, years of cash on the balance sheet, and the magnitude or timing of royalty streams, milestone payments, government grants, and licensing transactions.

In closing, despite inquiries from anxious shareholders about declining stock prices and market volatility in the short term, we believe companies that clearly and consistently communicate their strategic vision and value proposition will attract interest from investors, analysts, and the media in the long run.  With deference to the credit rating agencies, the United States – in particular our life science clients working in the areas of oncology, cardiovascular disease, central nervous system disorders, and other major unmet medical needs – will always be “triple-A” in our mind.

The similarities don’t end there, as both ipilimumab and sipuleucel-T have reignited enthusiasm for the field of active immunotherapy.  Accordingly, the purpose of this article is to highlight some of the other parallels between these two innovative agents.

Both Studied in Prostate Cancer

While ipilimumab was recently approved for the treatment of melanoma, the product has also been extensively studied in prostate cancer.  In fact, there are eight clinical studies with ipilimumab in prostate cancer according to ClinicalTrials.gov, including five that are currently active or recruiting.

One particular prostate cancer study made headlines in June 2009 when investigators at the Mayo Clinic reported in the online research magazine Discovery’s Edge that the combination of a single dose of ipilimumab [3 mg/kg] with androgen ablation therapy dramatically reduced the tumor size in two patients, making surgery possible for both patients whose prostate cancer had been previously considered inoperable. The controversial results from a handful of patients were met with skepticism and the complete Phase 2 results with 108 patients with advanced prostate cancer were later reported at the American Society of Clinical Oncology [ASCO] 2010 Genitourinary Cancers Symposium [abstract #168].  According to the ASCO abstract, patients treated with androgen ablation either alone or in combination with ipilimumab demonstrated a greater than 97% decline in testosterone levels, underscoring the possibility that the tumor reductions in a few patients could have been associated with androgen ablation.  Patients treated with ipilimumab, however, were more likely to have undetectable prostate specific antigen [PSA] by three months [55% vs. 38%].

A Phase 3 trial with ipilimumab following radiation therapy in patients with CRPC that have received prior treatment with docetaxel is ongoing [ClinicalTrials.gov identifier NCT00861614].

Two is Better than One

As the first two active immunotherapies approved for the treatment of cancer, it wouldn’t be surprising to see the products studied in combination in prostate cancer – especially in view of the fact that ipilimumab has already been studied in this disease.  Sipuleucel-T may help build an effective immune response to kill tumor cells, while ipilimumab may stimulate the immune system through T-cell activation and proliferation and stop tumor cells from growing.  Accordingly, giving vaccine therapy together with ipilimumab may be an effective treatment for prostate cancer.  Interestingly, the only such combination study listed on ClinicalTrials.gov relates to a completed Phase 1 trial with ipilimumab in combination with Bavarian Nordic’s (BAVA.CO) Prostvac®, an “off-the-shelf” therapeutic cancer vaccine moving into pivotal Phase 3 clinical development [ClinicalTrials.gov identifier NCT00124670].

Pricing Controversy

Both Dendreon’s sipuleucel-T and Bristol-Myers’ ipilimumab have been criticized as overly expensive new therapies.

The cost of sipuleucel-T is approximately $93,000 for a course of treatment, which consists of three infusions at two-week intervals.  In view of the fact that the product has been demonstrated to extend median survival by 4.1 months, this translates into an average cost of $23,000 per month of added survival.

In comparison, Taxotere® [docetaxel] by Sanofi-aventis (SNY) is indicated for the treatment of CRPC and is administered every 3 weeks for 10 cycles.  Assuming an average monthly cost of $4,000 for docetaxel [source: Cancer Res 2009;69(24 Suppl):Abstract nr 1076], this is an approximate total cost of $40,000 per patient.  In the pivotal TAX 327 study, median survival for prostate cancer patients receiving docetaxel was 18.9 months versus 16.5 months in the control arm, which results in an average cost of $16,666 per month of added survival or about 28% less than sipuleucel-T.  Updated survival analysis of the TAX 327 study demonstrates a 2.9-month survival advantage, which lowers the average cost to $13,793 per month of added survival or about 40% less than sipuleucel-T.  Unlike sipuleucel-T, however, treating common adverse reactions with docetaxel, such as infections, neutropenia, anemia, nausea, diarrhea, and others, increases the total cost of therapy – and more importantly negatively impacts the patient’s quality of life.  As such, the pricing of sipuleucel-T doesn’t appear completely out of line.

According to the prescribing information, ipilimumab is administered intravenously [3 mg/kg] over 90 minutes every 3 weeks for a total of four doses.  Bristol-Myers is pricing each dose at $30,000, which translates into a total cost of $120,000 for a full course of therapy.  In the pivotal ‘020 study, median survival for melanoma patients receiving ipilimumab was 10.1 months versus 6.4 months in the control arm.  The average cost per month of added survival is approximately $32,432, which is 41% higher than the only other active immunotherapy for cancer, sipuleucel-T.

However, on March 21, 2011, Bristol-Myers announced that the ‘024 study [ClinicalTrials.gov identifier NCT00324155] met its primary endpoint of overall survival.  Minimal details were provided, but an abstract of the ‘024 data is expected to be submitted to ASCO for potential presentation at the Annual Meeting in June 2011.  The ‘024 study is in patients with untreated Stage III [unresectable] or IV melanoma receiving dacarbazine plus 10 mg/kg ipilimumab versus dacarbazine with placebo.  If the median survival for patients in the ipilimumab arm is 5.2 months or greater than the placebo arm [versus 3.7 month difference in the ‘020 study], then the pricing of ipilimumab per month of added survival would be comparable to sipuleucel-T.

Prostate and Melanoma Highly Competitive

Melanoma and prostate cancer are the two most crowded clinical development segments within the active immunotherapy field.  As such, both ipilimumab and sipuleucel-T may face competition from other active immunotherapies in the near future.  In addition, the products may soon encounter small molecule rivals.

For example, Johnson & Johnson’s (JNJ) abiraterone acetate significantly improved overall survival for patients with metastatic advanced prostate cancer.  Based on the positive Phase 3 results, the company has filed marketing applications for abiraterone acetate with regulatory authorities worldwide for the treatment of metastatic advanced prostate cancer that has developed resistance to conventional hormonal therapies. Not far behind, Medivation, Inc. (MDVN) is evaluating its MDV3100 product candidate in collaboration with Astellas Pharma, Inc. (ALPMY.PK).  The Phase 3 AFFIRM trial with MDV3100 has completed enrollment of men with advanced prostate cancer who were previously treated with docetaxel-based chemotherapy and the Phase 3 PREVAIL trial with MDV3100 is currently enrolling men who have not yet received chemotherapy

In addition, Plexxikon, Inc. [being acquired by Daiichi Sankyo Company, Limited] and co-development partner Roche Holding (ROG.VX) are advancing PLX4032, an oral drug candidate that targets the oncogenic BRAF mutation present in about half of melanoma cancers and about eight percent of all solid tumors.  Interim data from a Phase 3 controlled study of PLX4032 in previously untreated metastatic melanoma patients with the BRAF mutation met both co-primary endpoints.  Patients treated with PLX4032 had improved overall survival (OS) and improved progression-free survival (PFS) compared to patients treated with dacarbazine, the current standard of care.  A New Drug Application [NDA] for PLX4032 is expected in 2011.

Some new agents might actually be synergistic with active immunotherapies instead of representing potential competition.  This was a central theme at the recent Cancer Immunotherapy Consortium’s 2011 Scientific Colloquium titled “Schedule and Dose for Combination Therapy.”

Summary

Both ipilimumab and sipuleucel-T represent important clinical advances for the field of active immunotherapy in oncology and for patients with melanoma and prostate cancer, respectively.  Further, with nearly 50 clinical programs currently underway, including nearly a dozen that are in pivotal Phase 3 development, we expect to see five active cancer immunotherapies approved by 2015.  Beyond these clinical accomplishments, however, industry observers will be closely monitoring the commercial success of these innovative agents in view of the product pricing, supply constraints, and competitive dynamics identified to date.

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.

NEW – Click here to view this article in PDF format.

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

Adding to an already hectic schedule of one-on-one meetings during the week, the success of JPMHC has spawned numerous satellite events, such as Biotech Showcase, OneMedForum, New Paradigms Conference, and China Forum.  The latter event provides further evidence that China is emerging as an important component of the international biotechnology landscape, as 16 China-based life science companies also presented during an inaugural China Track at JPMHC.

In between offsite meetings, 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, the plane flights and networking receptions were crowded as usual, industry observers “Tweeted” a sense of optimism, and attendees appeared more upbeat than in 2010.  However, we once again sought to construct a less subjective assessment by analyzing year-over-year statistics from the conference.

Accordingly, we extensively reviewed press releases issued by biotechnology companies during JPMHC from 2009 to 2011, with a particular focus on identifying the number of merger & acquisitions [M&A], licensing & partnering transactions, and financing deals announced each year during the four-day event.

Merger and Acquisitions

Back in 2009, several large M&A transactions were announced during JPMHC.  That year, four M&A transactions with an aggregate value of $702 million were disclosed during the first two days of the event.  The largest deal went to Cephalon, Inc. (CEPH), which announced a $100 million option agreement providing the company with an opportunity to purchase all outstanding capital stock of Ception Therapeutics, Inc., a privately held biopharmaceutical company, for an additional $250 million.

Despite ongoing discussions between Sanofi-aventis (SNY) and Genzyme Corporation (GENZ), only one significant M&A transaction was announced during JPMHC in 2011, marking the second year in a row with a paucity of deals.  Finland-based Biotie Therapies Corp., a drug developer focused on central nervous system [CNS] and inflammatory diseases, announced that it is acquiring Synosia Therapeutics Holding AG in an all-share deal that values the private Swiss company at approximately $125 million.  Synosia Therapeutics Holding AG is a biopharmaceutical company focused on developing and commercializing a portfolio of CNS product candidates licensed from Roche Holding AG (RHHBY.PK), Novartis AG (NVS), and Syngenta AG (SYT).

Table 1. Select M&A Transactions Announced During JPMHC from 2009-2011 ($ in millions)

Licensing and Partnering

In 2009, ten strategic licensing and/or partnering transactions with an aggregate value exceeding $2.4 billion were announced during JPMHC. The transactions included a $1.1 billion deal between ZymoGenetics, Inc. and Bristol-Myers Squibb Company (BMY), a $500 million deal between Peptimmune, Inc. and Novartis AG (NVS), 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. Interesting to note, Bristol-Myers Squibb later acquired ZymoGenetics Inc. for $885 million in cash during September 2010.

In 2010, there were only six transactions totaling $314 million announced at JPMHC, driven primarily by a $290 million agreement between privately held KaloBios Pharmaceuticals, and Sanofi Pasteur, the vaccines division of the Sanofi-aventis, for the development and commercialization of KB001, an investigational new biologic for the treatment or prevention of Pseudomonas aeruginosa [Pa] infections.

In 2011, three major licensing and/or partnering transactions totaling more than $3 billion were announced during JPMHC, although three-quarters of the total value came from a single agreement:

• Eli Lilly and Company (LLY) and Boehringer Ingelheim announced a $2.4 billion global agreement to jointly develop and commercialize a pipeline of oral diabetes agents and basal insulin analogues.  The alliance also includes the option to co-develop and co-commercialize Eli Lilly’s anti-TGF-beta monoclonal antibody.
• Privately held Epizyme, Inc. announced a strategic alliance with GlaxoSmithKline plc (GSK) that could be worth over $650 million.  Epizyme is involved in the discovery and development of small molecule histone methyltransferase inhibitors, a new class of targeted therapeutics for the treatment of genetically-defined cancer patients, based on breakthroughs in the field of epigenetics.  Epigenetics refers to the regulation of genes with mechanisms other than changes to the underlying DNA sequence and such processes are widely believed to play a central role in the development and progression of almost all cancers.
• Takeda Pharmaceutical Company Limited and Zinfandel Pharmaceuticals, Inc. announced an exclusive, worldwide licensing agreement regarding Zinfandel’s TOMM40 assay as a biomarker for the risk of Alzheimer’s disease, including potential use of the assay in combination with pioglitazone in high-risk older adults with normal cognition.  Pioglitazone is the active ingredient currently marketed in Takeda’s ACTOS® (pioglitazone HCl). Under the terms of agreement, Zinfandel will receive an upfront payment of $9 million and subsequent payments of up to $78 million for development milestones from Takeda.

Table 2. Select Licensing and Partnering Deals Announced During JPMHC from 2009-2011 ($ in millions)

Financing

While the quantity of public and private financing transactions announced during JPMHC has remained essentially flat from 2009-2011, the aggregate dollar value increased more than 60% in 2011.  Note that we excluded the $500 million convertible senior note transaction announced by Dendreon Corporation (DNDN), as it occurred after the market closed last Thursday [the last day of JPMHC].

Table 3. Select Financing Transactions Announced During JPMHC from 2009-2011 ($ in millions)

Outlook

At the start of 2009, we provided a positive outlook for the biotechnology industry.  Most of the drivers supporting our favorable view remain intact for 2011, such as the record number of products in clinical trials and annual industry R&D investment, improving access to capital, brisk pace of industry consolidation and licensing transactions, and attractive valuations among many small- and mid-capitalization companies, which we believe should continue to outperform their larger industry peers in 2011.

The +60% year-over-year increase in the aggregate value of financing transactions announced during JPMHC in 2011 supports our improving access to capital thesis, offset in part by the fact that both the quantity and value of M&A and licensing/partnering transactions during the period were below 2009 levels [excluding a single agreement for $2.4 billion in 2011].   Using 2010 as a guide, the mixed bag of activity emanating from JPMHC is simply the pause that refreshes and activity should accelerate throughout the year.

Looking beyond JPMHC, the key risk to our positive outlook in 2011 relates to the number of U.S. Food and Drug Administration [FDA] drug approvals, which declined in 2010 and is more than 50% below the high of 56 new approvals in 1996 despite the fact that legislation passed in 2008 gave the FDA more money and resources.  There is no discounting the negative impact of clinical and regulatory setbacks on the psyche of biotechnology investors, as evidenced by the greater than 10% decline in the NASDAQ Biotech Index in late February 2009 following a spate of high profile disappointments.

• Sector’s defensive characteristics and impact on future economic growth
• Highest number of annual new product approvals since 2004
• Record number of products in clinical trials and annual industry research and development [R&D] investment
• Improving access to capital
• Brisk pace of industry consolidation and licensing transactions
• Many small- and mid-capitalization companies remain undervalued

With 2010 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 38% in 2010, while the broader NASDAQ Biotech Index (NBI) advanced 15%.  Performance of the NASDAQ Biotech Index was in line with the Dow Jones Industrial Average (INDU), S&P 500 (SPX), and NASDAQ Composite (COMP), which were up 11%, 13%, and 17%, respectively.

Why the huge discrepancy in returns between the two major biotechnology indices?  Unlike the equal-weighted NYSE Arca Biotechnology Index, the NASDAQ Biotech Index 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 capitalizations, or the greatest values, will have the highest weighting in the index.

During 2010, most of the large capitalization biotechnology companies [greater than $10 billion] underperformed the median return of 11% for the 130 companies in the NASDAQ Biotech Index.  For example, Celgene Corporation (CELG) was up 6%, Cephalon, Inc. (CEPH) was down 1%, Amgen, Inc. (AMGN) was down 3%, Teva Pharmaceutical Industries (TEVA) was down 7%, and Gilead Sciences, Inc. (GILD) declined by 16%.  Bucking the trend of underperformance among large capitalization biotechnology names were Shire plc (SHPGY), along with Genzyme Corporation (GENZ) and Biogen Idec, Inc. (BIIB), both of which were targeted by shareholder activist Carl Icahn [see our August 2009 article “Three Recent Biotechnology Activist Wins by Carl Icahn”].

Accordingly, the relative underperformance of large capitalization biotechnology companies in 2010 masked the fact that many smaller, innovative companies performed well, as evidenced by the fact that 30 of the 130 companies comprising the NASDAQ Biotech Index produced greater than 50% returns during the period.  This performance is consistent with our thesis that small and mid-capitalization companies with positive clinical or regulatory catalysts would continue to outperform their larger industry peers in 2010.  See Table 1 for a list of the top ten gainers from the NASDAQ Biotech Index in 2010.

Noticeably absent from the list of 2010 winners, however, were the staggering quadruple-digit returns witnessed in 2009 [Vanda Pharmaceuticals, Inc. (VNDA) +2,150% and Human Genome Sciences, Inc. (HGSI) +1,342%].

Table 1. Top ten gainers from NASDAQ Biotech Index (NBI) in 2010

Last Year’s Laggards Become 2010 Winners

After declining 22% in 2009, shares of Akorn, Inc. (AKRX), a niche generic pharmaceutical company, staged an impressive comeback by becoming the largest percentage gainer within the NASDAQ Biotech Index during 2010.  In November 2010, the company announced that core business revenue is projected in the range of $79.0 million to $80.0 million in 2010, a 76%-79% increase over 2009, and up from the company’s prior guidance range of $71.0-$75.0 million.

In another dramatic reversal of fortune, three of the top ten gainers from the NASDAQ Biotech Index in 2010 made the list of top ten decliners in the prior year.  Questcor Pharmaceuticals, Inc. (QCOR), Idenix Pharmaceuticals, Inc. (IDIX), and NPS Pharmaceuticals, Inc. (NPSP) rebounded sharply in 2010, each posting triple-digit returns due in part to the following:

• Questcor’s performance was largely due to strong revenue growth from its H.P. Acthar® Gel (repository corticotropin injection), which is indicated for the treatment of acute exacerbations of multiple sclerosis in adults, as monotherapy for the treatment of infantile spasms in infants and children under 2 years of age, and for the treatment of several other diseases and disorders.
• Despite news in September 2010 that the U.S. Food and Drug Administration [FDA] placed two of the company’s HCV drug candidates on clinical hold, Idenix Pharmaceuticals benefited from its drug candidate for the treatment of HIV/AIDS advancing into a Phase 2b trial by its corporate partner, ViiV Healthcare.
• Interest in NPS Pharmaceuticals can be attributed to the fact that in early 2011 the company expects to report top-line results from a Phase 3 study of teduglutide, a proprietary analog of GLP-2, in patients with short bowel syndrome who are chronically dependent on parenteral nutrition.

Losers Brought to You by the Letter “A”

Affymax, Inc. (AFFY), AMAG Pharma (AMAG), Arena Pharma (ARNA), Alexza Pharma (ALXA), and Alnylam Pharma (ALNY) were among the top ten decliners from the NASDAQ Biotech Index in 2010 [see Table 2].

Affymax, Inc. (AFFY), which hopes that its investigational anemia drug peginesatide could ultimately compete with Amgen Inc.’s Aranesp® [darbepoetin alfa], posted the largest percentage decline within the NASDAQ Biotech Index for 2010.  Top-line results from the Phase 3 clinical program released in June 2010 showed that the frequency of death, stroke, myocardial infarction, congestive heart failure, unstable angina, and arrhythmia was higher in non-dialysis patients taking peginesatide than those taking Aranesp, which sent shares of Affymax plummeting.   In November 2010, Affymax and partner Takeda confirmed their goal of submitting a new drug application [NDA] for peginesatide for the treatment of anemia in chronic renal failure patients on dialysis in the second quarter of 2011.

AMAG Pharmaceuticals, Inc. (AMAG) launched Feraheme® (ferumoxytol) to treat iron deficiency anemia in July 2009, but anemic sales earned the company a spot in the top ten decliners of 2010.  Net product revenues from Feraheme were $15.1 million in the third quarter of 2010, well below the $500 million to $1 billion in annual sales originally projected by Wall Street analysts.  See our February 2010 article “Iron Safety Hits AMAG Pharmaceuticals.”

Table 2. Top ten decliners from NASDAQ Biotech Index (NBI) in 2010

Our Top Ten Articles

In the spirit of analyzing statistics from 2010, we reviewed our website traffic to identify the top ten articles from the past year.  The list below is ranked in descending order, starting with the most popular article:

1)              Cancer vaccine therapies: failures and future opportunities (Apr ‘10)

2)              Investment opportunities with five frontline therapies for AML (Sep ‘10)

3)              Cancer immunotherapy to take center stage at ASCO (Jun ‘10)

4)              Monoclonal antibody companies command premiums (Jul ‘10)

5)              Stem cell competition heating up (Aug ‘10)

6)              Buyout buzz at ASH hematology confab preview (Dec ‘09)

7)              Cyclin dependent cancer confab preview (Apr ‘10)

8)              Drug development spotlight: the mTOR’s new clothes (Nov ‘10)

9)              Past pitfalls and potential promise for pancreatic cancer (Oct ‘10)

10)            Five key factors weighing on Dendreon (Jul ‘10)

Interesting to note that despite popularity among readers, companies focusing on cancer immunotherapy, hematological malignancies, monoclonal antibodies, or stem cells did not make the list of top ten gainers from the NASDAQ Biotech Index in 2010.

2011 Outlook

Most of the drivers supporting our favorable outlook for the biotechnology industry remain intact for 2011, such as the record number of products in clinical trials and annual industry R&D investment, improving access to capital, brisk pace of industry consolidation and licensing transactions, and attractive valuations among many small- and mid-capitalization companies, which should continue to outperform their larger industry peers in 2011.

The key exception relates to the number of FDA drug approvals, which declined in 2010 and is more than 50% below the high of 56 new approvals in 1996 despite the fact that legislation passed in 2008 gave the FDA more money and resources.  There is no discounting the negative impact of clinical and regulatory setbacks on the psyche of biotechnology investors, as evidenced by the greater than 10% decline in the NASDAQ Biotech Index in late February 2009 following a spate of high profile disappointments.

While a comprehensive preview of AACR is beyond the scope of this article, we note that two companies working in the area of cyclin-dependent kinase [CDK] inhibition made headlines in the months leading up to AACR.  Further evidence of interest in the area is demonstrated by the fact that the 2001 Nobel Prize in Physiology or Medicine was awarded for the discovery of CDKs and cyclins and the complete description of cyclin and cyclin-dependent kinase mechanisms. 

By selectively interrupting the cell cycle regulation in cancer cells, inhibition of CDKs represents a promising strategy for cancer therapy.  Accordingly, with more than 50 abstracts related to CDK inhibition scheduled for presentation at this year’s AACR annual meeting, we provide an overview of the target and highlight some of the companies and programs being discussed.

CDK overview

Each time a cell divides it undergoes a series of events collectively known as the cell cycle.  Controlled and regulated cellular division is a normal part of cell physiology. 

Cancer is characterized by uncontrolled cellular division and growth, which can be caused by mutations in DNA resulting in the overexpression of cancer-promoting oncogenes or repression of tumor suppressor genes.  There are many examples of oncogenes and tumor suppressor genes but some of the more common ones include signaling proteins [PI3K], receptors [HER2], and DNA damage and repair regulating proteins that control cell cycle check-points such as p53 and BRCA. 

CDKs are a group of signaling kinases that play a direct role in the regulation and progression of the cell cycle.  CDK activity is dependent on the availability of their regulatory subunits called cyclins, which CDKs phosphorylate in order to stop cell cycle progression in cancerous cells.  Production and destruction of cyclins are tightly regulated in coordination with cell cycle progression.  Targeting CDK/cyclin macromolecular complexes is an attractive strategy for the design of novel anticancer drugs. 

There are over a dozen known CDK/cyclin complexes.  The most extensively studied subtypes are CDK2/cyclin E, CDK2/cyclin A, CDK7/cyclin H, and CDK9/cyclin T which are key components of the p53 pathway and CDK4 and CDK6 interacting with cyclin D1, which are key components of the retinoblastoma or Rb pathway.

Many tumor mutations interfere or deregulate the tight control of cyclin-CDK interactions leading to overactive CDKs, resulting in continuous cellular proliferation or unscheduled re-entry into the cell cycle.  In addition, deregulated CDK activity can result in genomic and chromosome instability, a feature observed in many advanced or aggressive tumors.

Early Failures

First generation, pan-CDK inhibitors have not demonstrated improved clinical outcomes.  Reasons for early failures include non-specific drug targets or suboptimal dosing and scheduling.    Also, pan-CDK inhibitors may not have an acceptable pharmacological window due to high toxic side effects or limited efficacy. 

For example, CDK7, CDK8, and CDK9 play a role in DNA transcription.  While it may be advantageous to target these CDK/cyclins as part of a multikinase drug profile, strong inhibition may result in the broad disruption of transcription, which is not desirable. 

This may have been the case with BMS-387032 [subsequently known as SNS-032], a small molecule cell-cycle modulator that targets CDKs 1, 2, 4, 7, and 9.  The compound demonstrated significant safety risks in Phase I studies conducted by Bristol-Myers Squibb (BMY), including increases in certain phases of the cardiac cycle, known as the QT interval. 

In 2005, Sunesis Pharmaceuticals, Inc. (SNSS) acquired rights to BMS-387032 for an up-front payment of $8 million in Sunesis’ stock, future milestone payments totaling $78 million, and royalties on net sales.  However, in December 2008, Sunesis notified Bristol-Myers that the company was terminating the license agreement for SNS-032 after no responses demonstrating efficacy were observed in a Phase I trial.

Next generation CDK inhibitors target select CDK sub-types and have shown improved potency along with other drug-like properties.  The various CDK sub-types are active at different points within the cell cycle and discrete cancers are dependent on specific CDK sub-types.  Therefore, each CDK inhibitor sub-type may be relevant to different tumors or genetic mutations. 

For example, CDK4 is frequently deregulated in glioblastoma and CDK2 activity is commonly altered in colon cancer.  Recently published evidence implicates certain cyclins and in particular cyclin E, the partner of CDK2, as a mediator of acquired resistance in several cancers, such as lung and breast cancer.  Some of these next-generation programs are highlighted below [also refer to Table 1]:

Pfizer, Inc. (PFE)

In late March 2010, Pfizer made headlines with a preclinical study published in the journal Cancer Research.  Results from the study demonstrated that PD-0332991, a drug being developed by Pfizer, could arrest the growth of glioblastoma multiforme [GBM] in animals.  PD-0332991 is an oral agent that inhibits certain CDKs, mainly CDK4 and CDK6.  Six abstracts related to PD-0332991 are scheduled for presentation at AACR.  Pfizer is managing and funding all clinical development of PD-0332991, which the company licensed from Onyx Pharmaceuticals, Inc. (ONXX).  PD-0332991 is the subject of various clinical trials in multiple myeloma, NHL, mantle-cell lymphoma, glioblastoma and breast cancer. 

Cyclacel Pharmaceuticals, Inc. (CYCC)

Cyclacel Pharmaceuticals, which is developing a clinical stage CDK inhibitor candidate, also made headlines earlier this year.  The company’s oral compound seliciclib [CYC202 or R-roscovitine], inhibits CDK2/E, CDK2/A, CDK7/H, and to a lesser degree CDK9/T.  Seliciclib is currently in Phase IIb clinical trials for non-small cell lung cancer [NSCLC] and nasopharyngeal cancer.

Shares of Cyclacel Pharmaceuticals jumped from $1 to more than $4 in January 2010 when independent investigators published data in the peer-reviewed journal Clinical Cancer Research showing that both seliciclib and a second-generation CDK inhibitor from Cyclacel reversed resistance to lung cancer cells with K-Ras or N-Ras mutations.  Cancers with Ras-activating mutations are thought to be among the most difficult to treat and are not responsive to modern targeted drug therapy, such as EGFR inhibitors.  The data also showed that lung cancer cells are addicted to cyclin E/CDK2.  Cyclacel expects to report top line results from its APPRAISE NSCLC Phase IIb trial with seliciclib later this year. 

A different investigator group also recently published data in the peer-reviewed journal Clinical Cancer Research demonstrating that seliciclib reversed resistance to the aromatase inhibitor Femara® [letrozole].  Seliciclib killed hormone receptor-positive breast cancer cells that had become insensitive to the effects of letrozole because of over expression of low molecular weight Cyclin E. 

At AACR, Cyclacel is introducing a second-generation CDK product candidate, which is currently in investigational new drug [IND]-directed development.  The undisclosed molecule is a second generation oral CDK inhibitor with increased potency.  Three abstracts related to both seliciclib and the second-generation compound are scheduled for presentation at AACR.

Sanofi-Aventis SA (SNY)

Sanofi-Aventis is developing its lead CDK inhibitor, flavopiridol [HMR-1275, alvocidib] for the treatment of both solid and hematologic malignancies.  Flavopiridol is a pan–CDK inhibitor that blocks CDK9, -2, -4, and -6 at nanomolar concentrations.  Published data from flavopiridol clinical trials suggest that its main toxicities are induction of neutropenia and secretory diarrhea.  Phase II studies of flavopiridol as a single agent have been completed in metastatic melanoma, endometrial adenocarcinoma, and multiple myeloma demonstrating limited efficacy as a monotherapy.  However, flavopiridol has shown promise as a combination therapy, with the best responses observed in CLL patients in combination with fludarabine and cyclophosphamide.  Four abstracts related to flavopiridol are scheduled for presentation at AACR.

Merck & Co., Inc. (MRK)

Merck is developing its lead CDK inhibitor, SCH 727965 [dinaciclib], for multiple indications including solid tumors, NHL, multiple myeloma, ACL, and ALL.  SCH 727965 is an intravenously-delivered CDK1, CDK2, CDK5, and CDK9 inhibitor.  The drug is administered by a 2-hour IV infusion once every 21 days.  Merck is currently recruiting patients for a Phase II study evaluating SCH 727965 to determine the activity of SCH 727965 in patients with breast cancer and in patients with lung cancer compared to standard treatment, capecitabine and erlotinib respectively.  One abstract regarding the activity of SCH 727965 in cell lines for childhood cancers is scheduled for presentation at AACR.

Bayer (BAY.DE)

Bayer will introduce its CDK inhibitor, BAY 1000394, in an abstract scheduled for presentation at AACR.  BAY 1000394 is a nanomolar pan-CDK inhibitor targeting CDK1/Cyclin B, CDK2/Cyclin E, CDK4/Cyclin D1, and CDK9/Cyclin T1.  The maximum tolerated dose for BAY 1000394 was found to be 2.0 mg/kg on QD schedule and 2.5 mg/kg on a BID intermittent schedule.  BAY 1000394 is being tested in a broad range of histological tumor subtypes.

Tragara Pharmaceuticals (private)

Tragara Pharmaceuticals is developing TG02 [also known as SB1317], an oral multi-kinase inhibitor that targets CDK 1, 2, 7 and 9, as well as two other kinases – JAK2 and FLT3.  TG02, which was licensed from S*BIO Pte Ltd in January 2009, is being prepared for IND filing in Q2 2010 with plans to proceed in hematology and solid tumors.  Tragara recently received a $1 million grant form the Multiple Myeloma Research Foundation [MMRF] to fund the early-stage drug development TG02 in treating multiple myeloma.  One abstract regarding the activity of TG02 in leukemia cell lines is scheduled for presentation at AACR.

Conclusion

 CDKs play a pivotal role in a cell’s entry into division; de-regulated CDK activity is a well-documented player in tumor progression and represents an attractive therapeutic anti-cancer option.   However, first generation CDK inhibitors have not demonstrated improved clinical outcomes.  Next generation CDK inhibitors, such as those being discussed at AACR, are CDK sub-type specific and have shown improved potency along with other drug like properties.  In addition, next generation CDKs are demonstrating their importance in several difficult to treat cancers, such as those dependent on Ras-activating mutations.

Table 1: Abstracts for CDK Inhibitors at AACR