Patients with ALK-positive non-small cell lung cancer [NSCLC] will soon have more targeted treatment options than they imagined possible. On Saturday June 1, The New England Medical Journal [NEJM] published two articles concerning Pfizer's (NYSE:PFE) targeted cancer drug Xalkori (crizotinib). In one study, it appears that Xalkori extended progression-free survival about twice as long as chemotherapy drugs. The second study, presents the results of a single patient. A biopsy of one of the patient's tumors contained cells with a further mutation that resulted in resistance to Xalkori.
Two steps forward and one step back
Breakthroughs followed by setbacks have been Xalkori's general theme during its short but eventful history. Last October, at the European Society of Medical Oncology meeting in Vienna, Xalkori was a big success.
Although Xalkori has been granted marketing authorization in the EU, Pfizer is still negotiating reimbursement details with government payers. The UK regulatory body charged with controlling costs, the National Institute for Health and Clinical Excellence, isn't ready to pay the estimated $77,000 per patient price tag for Xalkori treatments.
A similar situation exists in Germany. According to AOR for Pfizer Oncology, "Since local launch, Xalkori is fully reimbursed in Germany. Subject of upcoming price negotiations is not the question whether Xalkori will be reimbursed in the future in Germany. Subject is just the amount of reimbursed price."
Despite its issues in the European market, Xalkori sales are progressing well in the US, where lung cancer is the leading cause of cancer deaths. Xalkori targets about 5% of all non-small cell lung cancer patients with ALK gene mutations. Approximately 228,000 Americans will be diagnosed with lung cancer in 2013. Of those, about 9,000 will carry the ALK gene mutation targeted by Xalkori.
9,000 patients doesn't seem like a large figure, but Xalkori generated $53 million in revenue during Q1 2013, up from $17 million in Q1 2012. For a giant like Pfizer that's just a drop in a very large bucket. Xalkori sales comprised just 0.4% of Pfizers $13.5 billion Q1 2013 revenue. For a smaller pharmaceutical company with little or no revenue, 9,000 patients are plenty.
The Orphan Drug Act of 1983 created the financial incentive to create drugs aimed at less than 200,000 patients in the US. Those incentives include a 50% tax credit on R&D, grants to carry out clinical trials, and 7 years of marketing exclusivity from date of approval in the US. That's just the sort of boost that makes niches like ALK-positive Here are two scrappy little companies with their sights set on Pfizer's ALK-positive pie.
In April 2013, Ariad Pharmaceuticals (NASDAQ:ARIA) released promising pre-clinical results of an investigational ALK inhibitor. The inhibitor, for now named AP26113, was shown, among other benefits, to inhibit ALK mutants resistant to Pfizer's Xalkori. In a recent presentation, Chairman and CEO, Harvey Berger, said AP26113 was moving into Phase 2 trial in Q3 2013.
Tesaro (NASDAQ:TSRO) is a 3-year-old oncology focused biopharmaceutical company. Just over two years ago, it licensed ALK inhibitor, TSR-011, from Amgen (NASDAQ:AMGN). The agreement includes a small upfront payment followed by milestone payments and royalties in the "mid-single digits to slightly above single digits" based on cumulative sales if the drug ever reaches that stage. During the company's Q1 2013 earnings call on April 25, Tesaro President, Mary Lynne Hedley, explained that TSR-011 is currently in a Phase 1, 2 trial.
Annual revenue for Ariad Pharmaceuticals in 2011 and 2012 was $25.3 million and just $558,000 respectively. Tesaro has yet to record any sales. Even a small share of Pfizer's quarterly $53 million would be an enormous boost to both of these promising companies, and their investors' portfolios.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.