Top Biotech Picks for ASCO 2009 (Part II)

by: Ohad Hammer

Click here for Part 1

Seattle Genetics – Another step towards approval

Seattle Genetics (NASDAQ:SGEN) will present results from a phase I trial of SGN-35 in two rare blood cancers. This agent is important not only because it represents Seattle Genetics’ first opportunity for commercial revenue, but also because it serves as a proof of concept for the company’s antibody- drug conjugate (ADC) technology. The drug already generated impressive data when given every three weeks, and this year it will probably show even stronger activity in a weekly regimen. The company wanted to use a more frequent dosing in order to increase the overall amount of SGN-35 it can give and see whether it leads to higher efficacy without increasing side effects.

At the time of abstract submission, the study still did not reach the maximum tolerated dose. Nevertheless, the weekly schedule led to a spectacular response rate in the two highest dose groups. Of the 8 evaluable patients in these groups, 7 (87.5%) achieved a complete response (CR). Although the sample size is too small for definitive conclusions, it seems that the weekly schedule is more potent in comparison to the every three weeks trial, where response rate in the three highest doses was 54%, including a 32% CR rate. At ASCO, Seattle Genetics will probably present a more mature data set that will include higher doses as well as a follow up on response duration.

The company is enrolling a pivotal Phase II trial of SGN-35 in relapsed/refractory Hodgkin’s lymphoma. At the moment, the company uses the every three weeks schedule, but if updated results from the weekly trial are as promising as the abstract, Seattle Genetics could amend the schedule in order to achieve better efficacy. Given the pronounced efficacy SGN-35 had in two distinct trials, Seattle Genetics is now closer than ever to its first product launch, towards the end of 2011. A rich licensing deal is also likely by year end, although the company has set a fairly strict starting point for ongoing negotiations.

Seattle Genetics’ shareholders can also be encouraged by the apparent superiority SGN-35 has over competing antibodies that also hit CD30. Both Medarex (MEDX) and Xencor are evaluating anti-CD30 antibodies (MDX-1401 and XmAb2513, respectively) in a similar patient population. These antibodies are not conventional antibodies, as both are members of a new class of modified antibodies called “non-fucosylated" antibodies. These antibodies lack a certain component on their surface and as a consequence are believed to be more efficient in recruiting the body’s immune system against cancer cells. Although results for the two antibodies, as well as SGN-35 are from distinct fairly small trials, SGN-35’s activity is far superior over Medarex’s and Xencor’s antibodies.

This is another validation for Seattle Genetics’ ADC technology which proves once again that the strong potency observed is due to the drug payload conjugated to the antibody rather than the antibody itself. Next ASCO, there could be data for several other ADCs powered by Seattle Genetics, including agents under development by Genentech, Progenics (NASDAQ:PGNX) and Takeda.

Just two days after ASCO, Seattle Genetics will present results for another candidate, lintuzumab (SGN-33) at the EHA annual meeting in Berlin. In contrast to SGN-35, lintuzumab is a “naked” antibody which is not conjugated to a drug payload. Lintuzumab demonstrated remarkable activity as a single agent in elderly patient with a Acute myeloid leukemia (AML).It is being evaluated in an 80 patient phase I study as well as a larger registration trial with expected read out in the first half of next year.

Preliminary results from the phase I trial back in December of 2007 were so impressive that the company decided to immediately launch a registration randomized study of lintuzumab in combination with standard chemotherapy. In parallel to the registration trial, Seattle Genetics decided to expand the phase I single agent study to validate the drug’s activity. At the EHA meeting, Seattle Genetics will provide a long anticipated update from this trial.

As I discussed in a previous article, lintuzumab represents an immediate commercial opportunity of almost $1B with potential approval as early as next year. Seattle Genetics intends to license international rights for the drug, but the timing for such a deal is vague. The company could wait for results from the registration trial in order to get better deal terms , but it might choose to monetize the drug beforehand as a risk mitigation step. In this case, results from the phase I are crucial for securing a deal. It seems that results from the phase I study are positive, but less impressive than the preliminary results, so Seattle Genetics might choose not to partner lintuzumab until data from the registration trial is available.

Another company which is expected to generate important news at the EHA meeting is Micromet (NASDAQ:MITI) which will present results from two trials of its leading agent blinatumomab (MT-103). Based on preliminary data the company shared at its annual R&D day, the EHA meeting could position Micromet’s technology as one of the most promising platforms in the biotech industry. Hopefully, the results will also prove once and for all that Medimmune’s recent decision to opt out of the blinatumomab program was not data driven.

Immunogen – High expectations

Genentech/Roche (OTCQX:RHHBY) will present data from a phase II evaluating T-DM1 in breast cancer. T-DM1 is an ADC version of the blockbuster breast cancer drug, Herceptin, powered by Immunogen’s (NASDAQ:IMGN) ADC technology. Preliminary results from the study were presented 6 months ago and included strong clinical activity in patients who had progressed on Herceptin (second line patients). 60% of the patients in this trial had also progressed while on Tykerb (third line patients), which is approved for the treatment of Herceptin resistant patients.

The confirmed objective response rate for the entire trial was 27%, however, this analysis included patients who did not have sufficient follow up to achieve a confirmed response.

The confirmed response rate of 76 patients with longer term follow up, including those who discontinued treatment, was 38%, which is more in line with previous studies. At ASCO, Genentech will provide final response data for the entire trial (107 patients), which will probably be somewhere in the middle.

T-DM1 is currently being evaluated in two registration studies: A phase II single arm study in patients who progressed on Herceptin and Tykerb (third line study)) and a phase III trial that compares T-DM1 to Tykerb+Xeloda in Herceptin resistant patients (second line study). The primary endpoint for the single arm third line study is response rate, whereas the primary endpoint for the second line study is progression free survival.

As noted, the study to be presented at ASCO includes both second line and third line patients, so investors will try to get a sense with respect to T-DM1’s chances of succeeding in the two registration trials. Among the third line patients, investors will be looking at response rate, whereas among the second line patients, the important parameter will be progression free survival.

Although the third line study has no predefined threshold for response rate, the bar is usually set at 25%, so anything above that value in third line patients will be considered positive. In the second line phase III, T-DM1 will be compared against an approved regimen, with an estimated PFS of approximately 6.5 months. Since larger, randomized studies usually result in lower efficacy, compared to single arm studies, T-DM1 will have to show a higher PFS in the second line subgroup in order to be considered as a worthy opponent for Tykerb+Xeloda. Therefore, anything above 8.5 months should be seen as a good indication. Needless to say, there is no guarantee that the results at ASCO will be reproduced in the registration studies, but hopefully, they will give investors a sense regarding the likelihood of seeing T-DM1 approved in the future.

Another study that might indirectly affect Immunogen is a phase III trial of Herceptin in gastric cancer. As previously discussed here, if Herceptin is approved for gastric cancer, it could open an entirely new market for T-DM1 as well.

Additional agents

Exelixis (NASDAQ:EXEL) and its new partner, BMS (NYSE:BMY), are expected to present very strong data of XL184 in brain cancer. If actual activity is as strong as described in the abstract, this agent could find itself in a pivotal trial already this year. Exelixis will also present data for two early stage compounds XL147 and XL765. The abstracts for the two drugs include only minor signs of activity such as prolonged disease stabilization, however, based on management remarks, actual results at ASCO might include stronger efficacy data. Exelixis is in advanced stage discussions to out license the drugs to a large pharmaceutical company, and according to the company’s recent earnings call, a deal is expected to be finalized in the coming weeks.

Arqule will present updated results for its MET inhibitor as a single agent in a group of rare cancers called MiT tumors as well as a combination trial with Tarceva in NSCLC.

Roche will present results from a phase I trial of PLX4032, a RAF inhibitor it licensed from Plexxikon. The trial is intriguing because it shows a strong correlation between prolonged tumor shrinkage and a specific mutation in melanoma patients. According to Roche, the drug could enter registration trials for melanoma patients with the specific mutation already this year.

Other interesting agents are OSI Pharmaceuticals’ (OSIP) OSI-906 with single agent activity in a phase I trial and Infinity (NASDAQ:INFI) Pharmaceuticals’ IPI-504 which showed impressive preliminary results in advanced stage NSCLC patients.

Portfolio updates

We are adding another position in Curagen (CRGN) ahead of ASCO due to the initial signs of activity and the huge commercial potential of CR011. With a market cap of $61 million, the market assigns little to no value to CR011, but if the ASCO presentation shows additional signs of activity, this could change instantly.

Portfolio holdings as of May 25th, 2009