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

Shares of SuperGen, Inc. (SUPG), which climbed as high as $2.89 on expectations for positive trial results, reached a new 52-week low of $1.71 in July 2010 following the negative top-line news.  SuperGen receives a 20-30% royalty on worldwide sales of Dacogen from its development and commercialization partners – Eisai in North America and Johnson & Johnson (JNJ) outside of North America.

Despite the negative top-line results, shares of SuperGen have since rebounded and reached a new 52-week high in April 2011.  Optimism may stem from the fact that both Eisai and Johnson & Johnson are continuing to analyze the data and planning to move forward with North America and European regulatory filings in 2011 based on the primary analysis and secondary endpoints.  Accordingly, investors will anxiously await the detailed Phase 3 results being presented on Monday, June 6, 2011 at ASCO to better gauge the likelihood of FDA approval in AML [Abstract #6504 “Results from a randomized phase III trial of decitabine versus supportive care or low-dose cytarabine for the treatment of older patients with newly diagnosed AML”].

Results from the Dacogen study may also be of interest to investors in Cyclacel Pharmaceuticals, Inc. (CYCC), which recently launched a multicenter, randomized, pivotal Phase 3 trial for the company’s sapacitabine oral capsules as a front-line treatment of elderly patients aged 70 years or older with newly diagnosed AML who are not candidates for intensive induction chemotherapy.  Unique among drugs available to treat AML patients, sapacitabine is the only oral agent in late-stage clinical development.  It is also the only candidate to progress into a pivotal study on the basis of survival data from a randomized Phase 2 study.  Historically, sponsors advanced molecules to pivotal development in AML based on Phase 2 studies with primary endpoints of complete remission [CR].

The pivotal Phase 3 study is being conducted under a Special Protocol Assessment [SPA] agreement that Cyclacel reached with the FDA.  The primary efficacy endpoint for the study is an improvement in overall survival from either of the two pairwise comparisons [Arm A versus Arm C, or Arm B versus Arm C] in the following three arms consisting of approximately 150 patients per arm:

• Arm A: sapacitabine administered in alternating cycles with Dacogen
• Arm B: sapacitabine administered alone
• Arm C: Dacogen administered alone

Cyclacel is testing the treatment regimen of sapacitabine administered in alternating cycles with Dacogen [Arm A] in an on-going pilot study, with data expected at ASCO 2011 [Abstract #6587 “Phase I/II study of sapacitabine and decitabine administered sequentially in elderly patients with newly diagnosed acute myeloid leukemia”].  Thirty-day and sixty-day mortality outcomes from this pilot study may be helpful in determining the odds of success in the Phase 3 pivotal study.  To put this in perspective, thirty-day mortality in AML patients aged 70 years or older ranged from 17% to 21% in a recently published Phase 3 study [Harousseau JL, et al, Blood, 2009:114:1166].  Accordingly, results from the pilot study that demonstrate thirty-day mortality with sapacitabine is equal or less than 21% could be encouraging for Cyclacel.

The Phase 3 study builds on promising 1-year survival observed in elderly patients aged 70 years or older with newly diagnosed AML or AML in first relapse enrolled in a Phase 2 study of single agent sapacitabine.  In a disease setting where patients are typically treated with chemotherapy agents like cytarabine for an average of 1 to 2 cycles, patients in Cyclacel’s Phase 2 study achieved a median of 12 cycles of treatment with sapacitabine.

In addition, approximately 45% of patients in the Phase 2 study had transformed into AML after being diagnosed with myelodysplastic syndromes [MDS] and were previously treated with Dacogen or Celgene Corporation’s (CELG) Vidaza® [azacitidine].  Only newly diagnosed AML patients are expected to be enrolled in the ongoing Phase 3 trial, none of whom had been previously treated with Dacogen or Vidaza and none of whom had relapsed, potentially increasing the odds for a successful trial.

Finally, Sunesis Pharmaceuticals, Inc. (SNSS) will also be presenting at ASCO [Abstract #TPS201, “Adaptive design of VALOR, a phase III trial of vosaroxin or placebo in combination with cytarabine for patients with first relapsed or refractory acute myeloid leukemia”].  Unlike the aforementioned frontline trials being conducted under SPA’s, Sunesis is studying vosaroxin in relapsed/refractory AML in an ongoing Phase 3 trial.  Approximately 450 patients will be randomized to receive either vosaroxin or placebo in combination with cytarabine.

Cytarabine, a generic chemotherapy drug introduced several decades ago, is already a critical part of the treatment for younger patients with AML who are fit to withstand its toxicity.  Unfortunately, several companies that make cytarabine have recently experienced production difficulties and others cannot make the drug fast enough to keep up with demand.  This has resulted in a severe shortage of cytarabine that has reportedly affected leukemia clinical trials being run by the Cancer and Leukemia Group B [CALGB].  Accordingly, investors will be looking to Sunesis for an update on enrollment in the VALOR Phase 3 trial to determine whether or not the cytarabine shortage has been a factor.

Beyond the aforementioned investigational therapies, a researcher in the field of oncology noted that newer, targeted agents will be required to advance the treatment of AML: “My personal opinion on AML affecting the elderly population is that the field is in need of a total revamp whereby certain chemotherapy agents need to be combined with targeted therapies to overcome drug resistance and provide meaningful survival data,” said Daruka Mahadevan, M.D. Ph.D., Director, Phase I Program, Arizona Cancer Center.  “If you can increase the survival of a 70-year old patient by ten years, that would be a real achievement.  Sapacitabine is interesting as it is an oral agent, while vosaroxin in combination of cytarabine may provide short term control – but is unlikely to provide a survival benefit.”

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

• 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.

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

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.

Standard frontline therapy for AML patients under the age of 60 consists of cytarabine  [AraC] combined with an anthracycline [such as daunorubicin or idarubicin] in what is commonly referred to as the 7+3 regimen.  While 45% of elderly patients with AML [70+ years old] achieved a complete response [CR] using this regimen, there was no improvement in overall survival and more than a third of patients died within the first eight weeks of treatment according to a recent study published in the journal Blood[i].  This is consistent with the CR rates of 40%–60% with conventional chemotherapy and disease-free survival of less than 20% at three years referenced in the literature[ii].

Since more than half of AML cases occur in patients over 60 years old, there is a need to develop better frontline therapies in this setting.  With five agents being investigated as frontline therapy for elderly AML patients in late-stage trials, the purpose of this article is to compare and contrast these programs – several of which have near-term catalysts for investors.

Hypomethylating Agents

SuperGen, Inc. (SUPG), Eisai Co. Ltd. (ESALF), and Johnson & Johnson (JNJ)

On June 30, 2010, preliminary results from a Phase III trial of Dacogen® [decitabine] as a frontline treatment for elderly patients [65+ years old] with AML were released.  While Dacogen did not meet the primary endpoint of overall survival, a trend was reported to be evident.  However, the failure to demonstrate an improvement in overall survival was surprising given the favorable Phase II results and the fact that the comparator arm received low dose AraC instead of the aforementioned 7+3 regimen.  Low dose AraC predominantly works in patients with favorable cytogenetics, so it should have been relatively easy for Dacogen to demonstrate a survival benefit.

Shares of SuperGen, which climbed as high as $2.89 on expectations for positive trial results, reached a new 52-week low of $1.71 in July.  Supergen receives a 20-30% royalty on worldwide sales of Dacogen from its development and commercialization partners – Eisai in North America and Johnson & Johnson outside of North America.

While investors appear to be discounting approval of Dacogen as a frontline therapy for elderly AML, there may be reasons for optimism.  For example, both Eisai and Johnson & Johnson are continuing to analyze the data and planning to move forward with North America and European regulatory filings in 2011 based on the primary analysis and secondary endpoints.  In addition, the Phase III study was conducted under a special protocol assessment [SPA] with the U.S. Food and Drug Administration [FDA].

Celgene Corporation (CELG)

In view of Dacogen’s negative Phase III trial results, investors may be skeptical about Vidaza® [azacitidine], another hypomethylating agent currently approved for the treatment of myelodysplastic syndromes [MDS], a pre-cancerous condition that can often progress to AML.  According to ClinicalTrials.gov [Identifier NCT01074047], Celgene is currently enrolling patients in a Phase III, multicenter, randomized, open-label, study of Vidaza versus conventional care regimens for the frontline treatment of elderly patients [65+ years old] with AML.

In December 2008, the European Commission granted marketing authorization for Vidaza as a treatment for patients with higher-risk MDS, chronic myelomonocytic leukemia [CMML], and MDS that transforms into AML with a blast percentage of 20-30% in the peripheral blood or bone marrow.  While Vidaza demonstrated a clinically relevant increase in median survival of 9.4 months [24.4 vs. 15 months] in these settings[iii], it is unclear how the drug will work in AML de novo patients with a higher blast percentage [greater than 50%] that represent half of the elderly patient population.  In view of the fact that Dacogen is more myelosuppressive than Vidaza [see Table 1], and for this reason may be preferred over Vidaza for off-label use in AML, the recent failure of Dacogen only adds to this uncertainty.

Table 1. Percentage of Patients with Myelosuppression from Prescribing Information

Monoclonal Antibodies

Seattle Genetics, Inc. (SGEN)

Seattle Genetics is developing SGN-33 [lintuzumab], an unconjugated IgG1 antibody for the treatment of AML.  Lintuzumab has been shown to induce cell death by both complement and/or antibody-directed cellular cytotoxicity, or as a direct effect of the engagement of the CD33 receptor, which is expressed in most leukemic blast cells but also in normal hematopoietic cells.

In a Phase II study in relapsed/refractory AML patients, single agent lintuzumab demonstrated efficacy in patients with advanced AML; however, the positive effects were confined to patients with low disease burden [blast percentage 5% to 30%].  This suggested that additional development of this agent would be best achieved by combining lintuzumab with chemotherapy.  However, while the addition of lintuzumab to salvage induction chemotherapy was safe, it did not result in a statistically significant improvement in response rate or survival in patients with refractory/relapsed AML in a subsequent Phase III trial[iv].

Seattle Genetics is now conducting a 210 patient Phase IIb study in frontline treatment of elderly patients [60+ years old] with AML with results expected in the August to October 2010 timeframe.  See ClinicalTrials.gov [Identifier NCT00528333] for more information.

While lintuzumab relies on a different mechanism of action, investor’s are understandably skeptical about the success of another anti-CD33 monoclonal antibody in AML.  In June 2010, Pfizer, Inc. (PFE) agreed to withdraw Mylotarg® [gemtuzumab ozogamicin] from the U.S. market, effective October 15.  Mylotarg is an IgG4 monoclonal antibody to CD33 linked to a cytotoxic agent from the class of calicheamicins.  Developed by Wyeth, the drug was fast-tracked to treat patients ages 60 and older with recurrent AML who were not candidates for other chemotherapy.  The FDA approved Mylotarg in May 2000 based upon a surrogate endpoint due to the fact it treated relapsed disease with no other viable therapy.

Four years later, a confirmatory trial was begun to confirm the results of the 142 patients who participated in the three previous clinical trials.  The 2004 trial showed that adding Mylotarg to existing chemotherapy for the treatment of AML provided no benefit and even showed a higher death rate.

Nucleoside Analogs

Genzyme Corporation (GENZ)

In September 2009, the FDA’s Oncologic Drugs Advisory Committee [ODAC] voted 9 to 3 that a randomized, controlled trial is needed to support the proposed label expansion for Clolar® (clofarabine) as a frontline treatment for elderly [60+ years old] patients with AML.  Consistent with the decisions for both Johnson & Johnson’s Zarnestra® [tipifarnib] and Vion Pharmaceuticals’ Onrigin® [laromustine], the committee determined that single-arm clinical study results were not sufficient for approval.

Despite the setback, Genzyme stated in a press release that the company remains committed to the clinical development of clofarabine in this patient population and that the drug is being investigated in clinical trials by most of the leading AML experts and major cooperative leukemia investigation groups in the United States and Europe.

Beyond the frontline setting, Genzyme is also conducting a randomized Phase III trial comparing clofarabine in combination with AraC to AraC alone in relapsed and refractory adult AML patients 55 years old or older [ClinicalTrials.gov Identifier NCT00317642]. Results are expected in 2011.

Note: At the time of writing, Sanofi-Aventis (SNY) has offered to acquire Genzyme for $69 per share.

Cyclacel Pharmaceuticals, Inc. (CYCC)

Cyclacel is developing sapacitabine for the treatment of AML, MDS and non-small cell lung cancer [NSCLC].  Sapacitabine is unique among the frontline, elderly AML landscape as it represents the only oral agent in late-stage clinical development and the only product candidate to demonstrate a survival benefit in a randomized study.

In December 2009, Cyclacel reported interim results from an ongoing Phase II study involving 60 patients aged 70 or older with either untreated AML [80%] or AML in first relapse [20%] randomized across three dosing schedules of sapacitabine [ClinicalTrials.gov Identifier NCT00590187].  The three-day dosing schedule in Arm C was selected for further clinical development in elderly patients with de novo AML based on a 1-year survival rate of 30% and an overall response rate of 35%.

In the first quarter of 2010, Cyclacel submitted a SPA request for a randomized, registration-directed, Phase III study of sapacitabine in elderly patients with AML and, pending the response, expects to initiate a pivotal Phase III study in 2010.

Summary

While many companies are developing therapies for AML [see Table 2], there is a need to focus on better frontline therapies for elderly patients given the lack of efficacy and significant toxicity associated with the current 7+3 treatment regimen.  Investors will be watching the following catalysts to help handicap which of the five product candidates [decitabine, azacitidine, clofarabine, sapacitabine, or lintuzumab] will win the race and become the first agent approved by the FDA in this setting:

• Phase IIb results for lintuzumab expected in the August to October 2010 timeframe
• FDA response to SPA request for Phase III study of sapacitabine; initiation of pivotal Phase III study in 2010
• Supplemental new drug application [sNDA] for decitabine by March 31, 2011 and subsequent response from FDA
• Results from frontline clofarabine clinical trials by AML experts and major cooperative leukemia investigation groups in the United States and Europe; relapsed/refractory AML Phase III results in 2011
• Phase III results for azacitidine expected around 2013

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

Table 2. Late-stage Therapeutic Landscape for AML

References

[i] Kantarjian H, Ravandi F, O’Brien S, Cortes J, Faderl S, Garcia-Manero G, Jabbour E, Wierda W, Kadia T, Pierce S, Shan J, Keating M, Freireich EJ.  Intensive chemotherapy does not benefit most older patients (age 70 years or older) with acute myeloid leukemia. Blood. 2010 Jul 28. [Epub ahead of print]

[ii] Amadori S, Suciu S, Willemze R, Mandelli F, Selleslag D, Stauder R, Ho A, Denzlinger C, Leone G, Fabris P, Muus P, Vignetti M, Hagemeijer A, Beeldens F, Anak O, De Witte T; EORTC leukemia group; GIMEMA leukemia group.  Sequential administration of gemtuzumab ozogamicin and conventional chemotherapy as first line therapy in elderly patients with acute myeloid leukemia: a phase II study (AML-15) of the EORTC and GIMEMA leukemia groups.  Haematologica. 2004 Aug;89(8):950-6.

[iii] Edlin R, Connock M, Tubeuf S, Round J, Fry-Smith A, Hyde C, Greenheld W.  Azacitidine for the treatment of myelodysplastic syndrome, chronic myelomonocytic leukaemia and acute myeloid leukaemia. Health Technol Assess. 2010 May;14 Suppl 1:69-74.

[iv] Eric J. Feldman, Joseph Brandwein, Richard Stone, Matt Kalaycio, Joseph Moore, Julie O’Connor, Nancy Wedel, Gail J. Roboz, Carole Miller, Raj Chopra, Joseph C. Jurcic, Randy Brown, W. Christopher Ehmann, Philip Schulman, Stanley R. Frankel, Daniel De Angelo, David Scheinberg.  Phase III Randomized Multicenter Study of a Humanized Anti-CD33 Monoclonal Antibody, Lintuzumab, in Combination With Chemotherapy, Versus Chemotherapy Alone in Patients With Refractory or First-Relapsed Acute Myeloid Leukemia. Journal of Clinical Oncology, Vol 23, No 18 (June 20), 2005: pp. 4110-4116.

For an industry segment known for both hope and hype, it is no surprise that stem cell therapies are once again making headlines.  On July 30, 2010, the U.S. Food and Drug Administration [FDA] lifted the clinical hold on Geron Corporation’s (GERN) Phase I trial using its embryonic stem cell-based therapy for the treatment of patients with acute spinal cord injury.  Within days of the news, shares of Geron increased more than 30%, going from $4.80 to $6.39.

More recently, StemCells, Inc. (STEM) announced the publication of preclinical data demonstrating that its non-embryonic stem cell therapy was able to restore lost motor function in mice with chronic spinal cord injury.  The August 19, 2010, news sent shares of StemCells as high as $1.19 compared to the prior day closing price of $0.87 with volume greater than 17 million shares.

While Geron is already in human trials for the acute phase and StemCells plans to initiate its clinical trial in the chronic setting next year, two competitors vying for the treatment of spinal cord injury using allogeneic approaches [“off-the-shelf,” like a traditional pharmaceutical product] highlights yet another risk for investors in the already complex stem cell sector: competition.

In fact, of the mere 15 publicly traded biotechnology companies currently developing stem cell therapies [see Table 1], more than half of them have competing programs in three major disease areas:

• Cardiovascular
• Gastrointestinal
• Central nervous system [CNS]

Accordingly, the purpose of this article is to review the key players in each of these segments and contrast their different approaches.

Cardiovascular – critical limb ischemia

Critical limb ischemia [CLI] is a severe obstruction of the arteries that seriously decreases blood flow to the extremities [hands, feet and legs] and is manifested by pain at rest, non-healing wounds, and tissue necrosis [gangrene].

Three stem cell developers are currently conducting clinical trials with competing approaches for the treatment of CLI:

Aastrom Biosciences, Inc. (ASTM)

Aastrom represents the most advanced clinical stage company that is developing a stem cell therapy for the treatment of CLI.  The company is completing a Phase IIb clinical trial in patients with CLI and interim data were presented at the Society for Vascular Surgery annual meeting.  Similar to Dendreon Corporation’s (DNDN) personalized vaccine for prostate cancer, Aastrom’s procedure is autologous – meaning that a small amount of bone marrow cells are taken from the patient and processed to expand the number of early stem and progenitor cells before being administered to the patient to promote healing of the affected tissues.  In July 2010, Aastrom announced plans to pursue a Phase III clinical program for CLI through the FDA’s special protocol assessment [SPA] process.

Aldagen, Inc. (private, S-1 filed)

Similar to Aastrom, Aldagen is also developing an autologous product [ALD-301] derived from a patient’s bone marrow for the treatment of CLI.  In a 21-patient Phase I/II clinical trial, ALD-301 was well tolerated – although four of the 11 patients in the ALD-301 treatment group and two of the 10 patients in the unsorted bone marrow treatment group experienced serious adverse events that investigators determined were related to the underlying disease [CLI].  Accordingly, the company expects to commence enrollment in a Phase II clinical trial in 2010.

Pluristem Therapeutics, Inc. (PSTI)

In contrast to the autologous approaches by both Aastrom and Aldagen, Pluristem is conducting a Phase I trial of an allogeneic stem cell therapy for the treatment of CLI.  Similar to Celgene Corporation (CELG), Pluristem obtains stem cells for its product from human placenta.  In April 2010, Pluristem reported interim top-line results from Phase I clinical trials of PLX-PAD that demonstrated the cell therapy is potentially safe, well tolerated and effective in patients with CLI.  The company is currently planning two Phase IIb trials in CLI.

Cardiovascular – myocardial infarction

Myocardial infarction [MI] or acute myocardial infarction [AMI], commonly known as a heart attack, is the interruption of blood supply to part of the heart, causing heart cells to die.  Cardiac muscle cells do not have the ability to regenerate, so if enough dead tissue forms, patients suffer heart failure and may eventually die.

Three stem cell developers are conducting clinical trials with competing approaches for the treatment of AMI:

Osiris Therapeutics, Inc. (OSIR)

Osiris is developing Prochymal, one of the most advanced stem cell therapeutic product candidates for the treatment of AMI.  Prochymal is an allogeneic stem cell product derived from bone marrow that is currently being studied in a Phase II clinical trial for the treatment of AMI [ClinicalTrials.gov identifier NCT00877903].  Results from the two-year follow-up of the Phase I clinical trial demonstrated that a single dose of Prochymal administered within 10 days after the patient’s first AMI was safe and well tolerated.  Prochymal also showed significant improvements, including a reduction in chest pain events and cardiac arrhythmias and improvement in cardiac and lung function compared to placebo.  Osiris has partnered with Genzyme Corporation (GENZ) for the development and commercialization of Prochymal.

Athersys, Inc. (ATHX)

Similar to Osiris, Athersys is developing its allogeneic stem cell therapy product, MultiSem®, in collaboration with Angiotech Pharmaceuticals for the treatment of AMI.  MultiStem consists of a special class of stem cells obtained from adult bone marrow or other non-embryonic tissue sources.  In July 2010, Athersys announced positive results from an ongoing Phase I study of Multistem [ClinicalTrials.gov identifier NCT00677222] demonstrating that the product candidate was well-tolerated at all three dose levels studied and also suggested improvement in heart function in treated patients.  Athersys and Angiotech are working on plans for a Phase II trial.

Cytori Therapeutics (CYTX)

In May 2010, Cytori reported results from a European clinical study using its medical device, called the Celution® System, as an autologous treatment for AMI.  As part of the company’s procedure, small amounts of fat tissue are removed from a patient’s abdomen.  Stem and regenerative cells are then separated at the point-of-care and subsequently injected into the patient’s coronary artery.  The six-month results from the fourteen patient, double-blind, placebo controlled trial demonstrated an improvement in the infarct size, the amount of blood supply to the heart muscle, and functional improvement in the amount of blood supply to the heart muscle.  Cytori expects to initiate a 150-250 patient pivotal study for European approval in late 2010 or early 2011.

Gastrointestinal

Crohn’s disease is an inflammatory disease of the intestines that may affect any part of the gastrointestinal tract, mainly causing abdominal pain, diarrhea, vomiting, and weight loss.   There is no known pharmaceutical or surgical cure for Crohn’s disease and treatment options are restricted to controlling symptoms, maintaining remission, and preventing relapse.

Two stem cell developers are conducting clinical trials with competing approaches for the treatment of Crohn’s disease:

Celgene Corporation (CELG)

In April 2010, Celgene Corporation (CELG) reported positive results from a Phase I study of patients with Crohn’s disease receiving PDA-001, an allogeneic stem cell product candidate derived from human placental tissue.  The Phase I trial consisted of 12 patients with active moderate-to-severe Crohn’s who were unresponsive to at least one prior therapy.  Patients received two infusions of PDA-001, with six patients receiving a lower dose of the cells and the remaining six patients receiving a higher concentration.  According to the company, the study met its primary safety goal and demonstrated encouraging signs of clinical benefit, including clinical remission among four patients in the low dose group.  ClinicalTrials.gov currently lists a Phase IIa study with PDA-001 for the treatment of adults with moderate-to-severe Crohn’s disease that is not yet open for patient recruitment [identifier NCT01155362].

Osiris Therapeutics, Inc. (OSIR)

In May 2010, Osiris Therapeutics resumed enrollment in its Phase III trial of Prochymal for treatment-resistant Crohn’s disease [ClinicalTrials.gov identifier NCT00482092].  Enrollment was suspended in 2009 over concerns the trial design would make it difficult to detect a treatment effect with its allogeneic stem cell product derived from bone marrow.  According to the company, an interim analysis of 207 patients enrolled in the study revealed that the difference between the Prochymal and placebo response rates was consistent with the original statistical assumptions of the protocol in one active arm and is significantly outperforming placebo, although it is not clear whether this active arm is the low or high dose Prochymal group.  It is also worth noting that Prochymal previously failed to meet the primary endpoints of two Phase III studies for the treatment of graft-versus-host disease [GVHD].

Central nervous system

Beyond the aforementioned competition between Geron and StemCells in the area of spinal cord injury, two stem cell companies are pursuing treatments for amyotrophic lateral sclerosis [ALS], often referred to as “Lou Gehrig’s Disease.”  ALS is a progressive neurodegenerative disease that affects nerve cells in the brain and the spinal cord, resulting in the loss of muscle control and paralysis.

Neuralstem, Inc. (CUR)

In September 2009, Neuralstem received FDA approval to commence a Phase I trial to treat patients with ALS using its allogeneic stem cell therapy derived from human spinal cord stem cells.  The trial is designed to study the safety of Neuralstem’s cells and the surgical procedures and devices required for multiple injections directly into the grey matter of the spinal cord.

The FDA has approved the first stage of the trial, which consists of 12 patients who will receive five-to-ten stem cell injections in the lumbar area of the spinal cord.  The patients will be examined at regular intervals post-surgery, with final review of the data to come about 24 months later.

Preclinical work has shown that Neuralstem’s cells extended the life of rats with ALS and also reversed paralysis in rats with ischemic spastic paraplegia.

BrainStorm Cell Therapeutics, Inc. (BCLI.OB)

In February 2010, BrainStorm entered into a collaborative agreement with the Hadassah Medical Center to conduct a Phase I/II clinical trial in ALS patients at the Hadassah Ein Kerem Hospital.  BrainStorm’s NurOwn™ technology uses stem cells obtained from adult bone marrow and the company’s research team is among the first to have successfully achieved the in vitro differentiation of adult bone marrow cells into characteristic neuron-like cells capable of releasing dopamine as well as into astrocyte-like cells capable of releasing several neurotrophic factors, including glial-derived neurotrophic factor [GDNF].

Unlike the injections in the lumbar area of the spinal cord, BrainStorm expects that early ALS subjects will receive intramuscular injections into clinically unaffected [or only mildly affected] upper arm biceps and triceps muscles.  Progressive ALS subjects will receive intrathecal cell transplantation via a standard lumbar puncture.

According to the company, BrainStorm initiated manufacturing runs using its proprietary cell growth process in preparation of producing clinical trial materials under good manufacturing practice [GMP] standards at the Hadassah Medical Center GMP facility.  Upon completion of this process, the Phase I/II trial for patients with ALS is expected to begin pending approval from the Israeli Ministry of Health, which BrainStorm expects during the second half of 2010.

Summary

Given their unique regenerative abilities, stem cells offer new hope for treating cardiovascular, gastrointestinal, CNS, and other diseases.  However, with more than half of the 15 publicly traded biotechnology companies currently developing stem cell therapies in three major disease areas, competitive positioning will be an important additional consideration for prospective investors.

Table 1. Stem cell companies

With more than 200 abstracts being presented on the topic, the meeting provided an opportunity to validate some of the conclusions from our recent “Graft Versus Host Disease: Failures and Future Opportunities” article.  In particular, we reviewed data presented during the meeting and interviewed several experts in the area of Graft-versus-Host disease [GvHD] to reconfirm our three key findings:

1. Treatment of GvHD remains a large, unmet medical need
2. Low-risk, steroid-sparing approaches are favored in the short-term
3. High-risk strategies with immunomodulatory agents have been prone to failure

Unmet Medical Need

According to the National Marrow Donor Program, approximately 20,000 allogeneic hematopoietic cell transplants [bone marrow, peripheral blood hematopoietic cells, or cord blood transplants] are performed annually worldwide.  Despite the use of prophylactic therapies, GvHD still develops in 30%-80% of patients in the second month following transplant. 

 “A typical complication of patients who have a transplant with a related or an unrelated donor is GvHD of the mouth, esophagus, etc.,” said bone marrow transplant survivor Susan Stewart with BMT InfoNet, a not-for-profit organization that provides information and support services to patients that are going through transplant or have survived a transplant as well as their family members and their donors.  “It’s a serious complication – very hard to manage, very painful – so any topical or enteric medication that becomes available to help reduce it or the pain or the actual incidence of the complication is very welcome.”

While steroids, including prednisone, remain the gold standard therapy for GvHD treatment, only 25% to 41% of patients treated have complete GvHD remission.  In addition, systemic treatment with prednisone or other steroids can lead to severe side effects and mortality.

“The root cause of the biology of GvHD still is a work in progress so that unless and until we can find a particular pathway to knock out, then what we’ll be doing is probably knocking out more immune system pathways then is needed to control GvHD,” said Keith M. Sullivan, M.D., James B. Wyngaarden Professor of Medicine, Division of Cellular Therapy at Duke University Medical Center.  “Steroids for example, just knock about everything in its path down and thus the likelihood for increased infections and complications.”

While the use of prednisone is designed to suppress the T-cell mediated immune onslaught on the host tissues, it can raise the risk of infections and cancer relapse.  For example, systemic treatment with steroids is associated with increased opportunistic infections, which are caused by bacteria, fungi or viruses that do not normally cause infections in people with healthy immune systems.  Systemic steroid use may also reduce the graft-versus-tumor effect and increase the risk of cancer relapse.

“Some people will definitely relapse from their original disease and die, but many people will die from GvHD because their immune system is compromised in order to control the GvHD,” said Ms. Stewart.  “In order to control the GvHD you have to put them on immunosuppressive drugs.  That makes them susceptible to opportunistic infections and they die.”

Currently, no therapies are approved by the United States Food and Drug Administration [FDA] for either prevention or treatment of GvHD.  GvHD represents a growing problem due to an increasing number of allogeneic hematopoietic cell transplants procedures.  As a result there is an urgent need to find therapies for this disease.

“Is this an important area of continued investigation of new therapies for control and prevention of GvHD, the answer is yes,” added Dr. Sullivan.

Low Risk Approaches

Soligenix, Inc. (SNGX)

In view of how little is known about the biology of GvHD, lower-risk, steroid-sparing approaches have a higher likelihood of success in the short-term given the complexity of the disease based on our recent discussions with key opinion leaders.

In this regard, Soligenix, Inc. (SNGX), which sponsored a GvHD working committee in connection with the 2010 BMT Tandem Meetings, is developing orBec® [oral beclomethasone dipropionate] for the treatment of acute  gastrointestinal [GI] GvHD.  Beclomethasone [BDP] is a corticosteroid with potent topical activity used for inflammatory disorders affecting mucosal surfaces, such as the GI tract.  While oral BDP’s mechanism of action is similar to other corticosteroids, it does not enter into the circulation thus avoiding many of the aforementioned negatives associated with systemic steroid uses.

“In 30 years worth of controlled trials for acute GvHD treatment, there is only one agent in two publications, two different trials, that has shown an advantage of controlling GvHD and an advantage of improving survival, and that agent is oral beclomethasone,” said Dr. Sullivan.

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

“There are two phenotypes of the disease, there’s what I call the upper gut phenotype, which is 60-70% of all GvHD – people just lose their appetites, can’t eat, start getting nauseated and in the severe case have a lot of vomiting,” said George B. McDonald, MD, Professor of Medicine, University of Washington School of Medicine and Head, Gastroenterology/Hepatology Section, Fred Hutchinson Cancer Research Center.  “Then there’s the mid gut phenotype, with lots of diarrhea and intestinal ulceration and bleeding.  These two phenotypes appear to me as different sorts of diseases.  The upper gut phenotype is what the orBec is being aimed at, which is the dominant phenotype in gut GvHD.”

In a prior Phase III trial with orBec, the primary endpoint was the “time to GvHD treatment failure through study day 50,” which included a 10-day induction period of high-dose prednisone, noted David M. Hockenbery, M.D., Member, Division of Clinical Research, Fred Hutchinson Cancer Research Center, and Professor, Department of Medicine, University of Washington.  Unfortunately, twice as many prednisone “failures” during the initial 10 days of the trial counted against orBec and the primary endpoint was not achieved [p=0.1177].  By designating the first 10 days of treatment as a guarantee period, the risk of GvHD treatment failure by study day 50 was statistically significantly reduced for the orBec group relative to placebo (p=.009).  For the entire 80-day study period in the prior Phase III trial, the risk of treatment failure was statistically significantly reduced for patients in the orBec group relative to placebo (p=.02) and even further strengthened in an analysis using the 10-day guarantee period (p=.001).

“You have data suggesting that this is very effective, it’s very safe, and our mortality data from two different randomized trials showed that this approach, which spares prednisone, reduces mortality by 45%,” said Dr. McDonald.  “Two different randomized trials with the identical mortality result.  So, if you use less prednisone, you have less cytomeglaovirus, less mold infections, less bacteremia, and for some reason that still escapes me the FDA didn’t view that as a hard enough endpoint.”

In October 2009, Soligenix began enrolling patients in a confirmatory, pivotal Phase III trial under a special protocol assessment [SPA] cleared by the FDA.  The European Medicines Agency also agreed that should the new confirmatory Phase III study produce positive results, the data would be sufficient to support a marketing authorization approval in all 27 European Union member states.  The primary endpoint for this new study, treatment failure rate at day 80, is more clinically relevant and was statistically significant in the prior Phase III trial [p=0.005]. 

Soligenix has partnered with Sigma-Tau Pharmaceuticals, Inc. for commercialization of orBec, which is now the only product candidate for the treatment of acute GvHD in active Phase III development.

High Risk Approaches

Osiris Therapeutics, Inc. (OSIR)

During the 2010 BMT Tandem Meetings, Osiris Therapeutics, Inc. (OSIR) presented results from its Phase III trial evaluating Prochymal, a preparation of adult mesenchymal stem cells, for the treatment of steroid-refractory acute GvHD [abstract #41].  In September 2009, Osiris Therapeutics announced that neither of its two Phase III trials evaluating Prochymal for the treatment of GvHD achieved its primary endpoint.  There was no statistical difference between Prochymal and placebo for the steroid-refractory (35% vs. 30%, n=260) or first-line GVHD trials (45% vs. 46%, n=192), which did not come as a surprise to some researchers. 

“We participated in the mesenchymal stem cell trials, which were negative, and the dog mesenchymal stem cell studies done here were totally negative, so I don’t think we’re particularly surprised that the human studies were negative,” said Dr. McDonald.  “The model that best mimics human GvHD is the dog model, whereas the mouse models have given lots of false leads.  Mouse GvHD, in the intestine in particular, is not the same as human GvHD and things that look marvelous in the mouse, for example keratinocyte growth factor, failed miserably in human trials.  So I think there is a word of caution there about transposing animal species results to human beings.”

However, in patients with steroid-refractory liver GVHD, treatment with Prochymal significantly improved response [76% vs. 47%, p=0.03, n=61] and patients treated with Prochymal had significantly less progression of liver GvHD compared to placebo [37% vs. 65%, p=0.05].  While Osiris Therapeutics previously disclosed plans to file an amendment with the FDA to its current expanded access program, broadening the entry criteria to include patients with severe GvHD of the liver, some physicians expressed skepticism about the significance of liver GvHD.

“For GvHD, the three primary target organs are the skin, the liver, and the gastrointestinal tract,” said Dr. McDonald.  “Severe liver GvHD has become a thing of the past and that’s largely because of a drug called ursodeoxycholic acid [ursodiol], which is a bile acid that hepatologists use for cholestatic liver disease.  It’s almost completely wiped out liver GvHD.”

Indeed, previously published results [Blood. 2002 Sep 15;100(6):1977-83] demonstrated that treatment with ursodiol reduced hepatic problems and severe acute GvHD and improved survival.  Among the patients given ursodiol, the survival at one year was significantly better, 71% versus 55% (P =.02), and the non-relapse mortality rate was lower, 19% versus 34% (P =.01), than in the control group.

“There was a highly statistically significant lowering of mortality in the Nordic Study Group’s ursodiol trial,” said Dr. McDonald.  “So, if you’re not using that therapy and you’re doing trials aimed at liver GvHD I think there’s some ethical issues there, I mean there’s a way of preventing it that’s way simpler than mesenchymal stem cells.”

Celgene Corporation (CELG)

These same alloreactive donor T cells that cause GvHD can provide a beneficial graft-versus-tumor effect.  Because regulatory T cells [Tregs] have been shown to suppress GvHD while preserving the graft-versus-tumor effect, their use in the allogeneic transplant setting may represent a promising strategy to treat GvHD.   

“Back in the day, 30 years ago, it was assumed that the reason people got cured of end stage leukemia with a hematopoietic stem cell transplant was because of the massive doses of chemotherapy and sometimes radiation that is given upfront,” said Dr. McDonald.  “We’ve now discovered that is only half of it.  Most of the leukemia killing comes from what’s called a graft-versus-tumor effect.  That is, the donor cells that are causing GvHD are also seeking out leukemia and leukemia stem cells and immunologically curing the leukemia.”

During the 2010 BMT Tandem Meetings, Celgene Corporation (CELG) presented data [abstract #383] demonstrating that administration of the company’s DNA methyltransferase inhibitor azacitidine [Vidaza®] after allogeneic stem cell transplant dramatically reduced GvHD while maintaining both donor engraftment and a potent graft-versus-tumor effect in a murine bone marrow transplant model.  While the results provide a foundation for future human clinical trials, recall Dr. McDonald’s caution that the model that best mimics human GvHD is the dog model, whereas the mouse models have given lots of false leads.

Conclusion

Based on a review of data presented at the 2010 BMT Tandem Meetings and our discussions with several experts in the area of GvHD, we believe that the disease remains a large, unmet medical need.  Among the novel agents currently in clinical development, low-risk, steroid-sparing approaches are favored in the short-term as opposed to high-risk strategies with immunomodulatory agents that have been prone to failure.  Future results from Soligenix’s ongoing pivotal trial could provide optimism for both patients and investors in the GvHD space.

Disclosures:

Keith M. Sullivan, M.D., is a scientific advisor to Soligenix, Inc. and investigator in the pivotal Phase III trial.

George B. McDonald, M.D., is the inventor of orBec, Chair of Soligenix’s North American Medical Advisory Board, and maintains an equity position in Soligenix.

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.