Bayer's Bold New Bet Fails to Rain on Spectrum Pharma

Despite recent progress and the availability of novel therapies, radiation is still an effective tool in the war against cancer – as it has been for more than a century. The original and still predominant mode of administration is via external methods wherein a radiation source is directed at the intended target or region. Unfortunately, this “outside in” approach has the drawback of causing collateral damage to healthy organs and tissues that lie on either the path between the source and the target or beyond the intended target on the “exit” pathway.

In the 1990s, the U.S. Food and Drug Administration [FDA] cleared for marketing the first intravenously delivered, particle emitting radionuclides for the treatment of pain arising from the spread of cancer to bone. Termed Systemic Targeted Radionuclide Therapy (STaRT), this new approach offered the promise of selectively irradiating disease sites while sparing normal tissue. Metastron® [strontium-89 chloride injection] was introduced in 1993 and Quadramet® [samarium-153 EDTMP] was later introduced in 1997.

In 2003, the FDA cleared for marketing two different radioactive labeled monoclonal antibodies for the treatment of patients with relapsed or refractory, low-grade or follicular B-cell non-Hodgkin’s lymphoma [NHL]. Both of these STaRT products utilize monoclonal antibodies that target an antigen expressed by certain normal and malignant B-cell lymphocytes. However, Zevalin® [ibritumomab tiuxetan] employs yttrium-90 as its therapeutic payload, while Bexxar® [tositumomab] uses iodine-131.

Despite great promise and STaRT’s established safety and efficacy, a July 14, 2007, article in the New York Times stated that only 10% of patients who are suitable candidates for the drugs ever receive treatment. Spectrum Pharmaceuticals, Inc. (SPPI) reported that U.S. sales of Zevalin were $11.4 million in 2008; while a similar non-radioactive product Rituxan® [rituximab] is a top-selling cancer drug by Genentech and Biogen Idec, Inc. (BIIB), with reported U.S. sales of $ 2.6 billion in 2008.

The lack of commercial success for existing STaRT products may be due to a mixture of clinical and commercial factors, including the following:

• Clinical considerations
  • Half-life, or the amount of time required for a given amount of radionuclide to lose 50% of its strength or activity
    • In general, a half-life of 10 days or less is considered optimal, as longer half-lives may create waste management issues and clinically, are more likely to show toxicity problems.
  • Particle range
    • Higher particle ranges may result in greater damage to surrounding normal tissue, leading to side effects such as myelosuppression.
  • Specificity
    • Some radionuclides, such as strontium-89, have general disease-targeting properties, while others are conjugated to antibodies or other carriers to reach the intended target.
• Commercial considerations
  • Production
    • Radioisotopes utilized for STaRT are produced commercially in nuclear reactors, cyclotrons or linear accelerators, and radionuclide generators, the selection of which can impact the cost-effectiveness of manufacturing.
  • Shipment
    • Radionuclides that have very short half-lives or that require extensive shielding as a result of high-energy gamma ray emissions [eg, iodine-131] create logistical issues for shipment and handling and may even require a local production unit close to the treatment center.
  • Administration
    • Marketers often assume that oncologists’ decisions about therapy are driven purely by the scientific data. While medical oncologists are the key prescribing audience for marketed STaRT therapies, most aren’t licensed to administer radiopharmaceuticals – resulting in patient referrals to radiation oncologists and/or nuclear medicine physicians. Therefore, these physicians may not be economically incentivized to prescribe products that they are not paid to administer.
  • Reimbursement
    • Reimbursement by the Centers for Medicare and Medicaid Services [CMS] and private insurance carriers is critical to the commercial success of any product. In a letter by GlaxoSmithKline plc (GSK) to CMS regarding changes to the Hospital Outpatient Prospective Payment System [HOPPS], the company indicated that the proposed 2008 payment rate for Bexxar “results in a reimbursement rate that is approximately 50% below hospitals’ actual acquisition cost for the therapy.”

While some commercial considerations, namely administration and reimbursement, still need to be addressed, “next-generation” STaRT product candidates appear to address many historical clinical considerations and could ultimately fulfill the promise of this therapeutic class.

For example, Algeta ASA (OSE: ALGETA) is developing Alpharadin, the first in a new class of STaRT therapies based on the alpha-emitting radionuclide radium-223. Phase 2 studies in patients with hormone-refractory prostate cancer [HRPC] have already demonstrated that Alpharadin can prolong patient survival, improve quality of life and offer a benign safety profile. A Phase 3 trial is underway to confirm Alpharadin’s efficacy and safety as a targeted treatment for bone metastases in patients with HRPC.

Radium-223 appears to offer the perfect mix of clinical characteristics (see table 1 for a comparison of STaRT products). It has an 11.4 day half life, which is significantly shorter than the 50.6 day half-life for strontium-89, but not too short to create logistical issues with shipment. Further, radium-223 has an extremely short particle range of 0.04 millimeters, which is equal to approximately 2-10 cell diameters. This likely explains Alpharadin’s benign toxicity profile.

Table 1: comparison of STaRT products

Year Introduced	Product	Indication	Radioisotope	Half-life	Max Particle Range in Tissue
1993	Metastron®	Treatment of bone pain arising from cancer	Strontium-89	50.6 days	8.00mm
1997	Quadramet®		Samarium-153	1.9 days	3.00mm
2003	Bexxar®	Treatment of non-Hodgkin’s lymphoma	Iodine-131	8.0 days	2.00mm
2003	Zevalin®		Yttrium-90	2.7 days	12.00mm
Phase 3 trial underway	Alpharadin	Treatment of bone metastases in hormone-refractory prostate cancer	Radium-223	11.4 days	0.04mm

Lending credibility to the future of next-generation STaRT products, Algeta today announced an $800 million global agreement with Bayer AG (BAYRY.PK) for the development and commercialization of Alpharadin. In view of the fact that Bayer currently markets Zevalin outside of the U.S., this news could be interpreted as either good or bad news for investors betting on an acquisition of Spectrum Pharmaceuticals.

The bullish case is that Bayer is making a fresh $800 million investment in the field of STaRT, which could lend support to a consolidation of Zevalin marketing rights by Bayer. However, the bear case is that Algeta has already demonstrated in vivo the potential of linking alpha-emitting radionuclides to existing monoclonal antibodies, including rituximab, which could ultimately pose quite a competitive threat to earlier-generation STaRT products like Zevalin. In view of recent 52-week highs for Spectrum Pharmaceticals, however, it appears for now that investors are opting for the bullish thesis.

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Disclaimer: This article contains the author’s own opinions, and none of the information contained therein constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. To the extent any of the information contained in the article may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person.

Disclosure: No positions

Comments

[CJO:]

Your timing tells anyone with common sense that you are fully invested in the other company or either your family and relatives have significant interest. If you had waited until after September 7/8 2009 - then someone might have taken you as fair and balanced. Your article does not contain any relevant information that would have dictated its release today. Really trying to influence the price of stocks are we!

Sep 04 10:55 AM

[herbert hoover:]

Caution: This article contains a whole bunch of bullshit.

SA should be ashamed of themselves for publishing this kind of tripe that is merely meant to aid someone's short position

Sep 04 11:38 AM

[Michael Becker:]

I recommend reading SA's seven conditions of Gold Standard Certification at: seekingalpha.com/page/...

In particular, the fact that "authors agree to disclose the existence at the time of writing of a long or short position (including stocks, options or other instruments) in any stock mentioned in an article."

As I stated, I hold no positions...


On Sep 04 11:38 AM herbert hoover wrote:

> Caution: This article contains a whole bunch of bullshit.
>
> SA should be ashamed of themselves for publishing this kind of tripe
> that is merely meant to aid someone's short position

Sep 04 12:10 PM

[microbiolog...:]

I vote for Bayer trying to go around their partners. Witness what they did with fluoro-nexavar and Onyx.

Sep 04 01:34 PM

[Michael Becker:]

Interesting point microbiologician, and for those not familiar:

* * *
Onyx Pharmaceuticals, Inc. (ONXX) announced that it has filed a complaint in the United States District Court for the Northern District of California asserting its rights to a Phase 2 anti-cancer compound discovered during joint research between Onyx and Bayer.

In its complaint, Onyx seeks a declaration that fluoro-sorafenib is a jointly-owned collaboration compound under the Bayer/Onyx collaboration agreement, together with other remedies. The defendants in the complaint are Bayer Corporation and Bayer A.G. Onyx affirmed that it continues to collaborate with Bayer in the development and commercialization of Nexavar.

Onyx was recently advised that the compound, fluoro-sorafenib, is a variant of Nexavar(R) (sorafenib) tablets and has the same chemical structure as Nexavar, except that a single fluorine atom has been substituted for a hydrogen atom. The new molecule had been identified in 1998 during the research collaboration period by the companies' joint research teams. Discussions with Bayer regarding Onyx's rights to fluoro-sorafenib under the companies' 1994 collaboration agreement were not productive.
* * *


On Sep 04 01:34 PM microbiologician wrote:

> I vote for Bayer trying to go around their partners. Witness what
> they did with fluoro-nexavar and Onyx.

Sep 04 03:48 PM

[Penn Bioinv...:]

Mr Becker,
Your articles are always highly professional and fun to read. Don't get disturbed by those bashers. Look forward to more thoughtful articles from you. All the best.

Sep 04 11:02 PM

[herbert hoover:]

Read the other articles by this guy. He's a professional SPPI basher and has been one for months. Personally I don't care; i just wonder why he gets any pixels from Seeking Alpha for this kind of trash talk.


On Sep 04 11:02 PM Penn Bioinvestor wrote:

> Mr Becker,
> Your articles are always highly professional and fun to read. Don't
> get disturbed by those bashers. Look forward to more thoughtful articles
> from you. All the best.

Sep 05 09:05 PM

[User 482664:]

article has nothing to do with zevalin being approved for another indication ,which is what is making news
,its about bayer did not buy sppi
y you did not write about all these drawbacks of zevakin before
y did u choose the day it got approved to trash it
because u have some shorties u want to help
u should be ashamed of urself

Sep 06 05:07 PM

[Michael Becker:]

Actually, what is making news (and hence, the topic of the article) is that Bayer AG (BAYRY.PK) entered into an $800 million deal with Algeta ASA (OSE: ALGETA) for its "first-in-class" alpha-pharmaceutical, Alpharadin [eg, Bayer's bold new bet]. The deal was announced on September 3, which is when our article first published on our blog site. Certainly not as intriguing as all of the unfounded conspiracy theories being advanced in this comment thread, but factually accurate nonetheless.

On Sep 06 05:07 PM User 482664 wrote:

> article has nothing to do with zevalin being approved for another
> indication ,which is what is making news
> ,its about bayer did not buy sppi
> y you did not write about all these drawbacks of zevakin before
>
> y did u choose the day it got approved to trash it
> because u have some shorties u want to help
> u should be ashamed of urself

Sep 07 08:55 AM

[biopharmabull:]

There is really only one reason for the commercial failure of Zevalin (can't speak to Bexar).....which was eloquently described in the article.."physicians may not be economically incentivized to prescribe products that they are not paid to administer." Since oncologists primary source of revenue comes from administration of chemtherapeutic drugs (like Rituxan), the likelihood of them playing nice with radiation oncologists is a pipe dream...which Biogen realized and lead to its divestiture of the product.

Commercial elements aside.....I have been told by several Hem/Oncs over the years that if you are diagnosed with NHL, demand Zevalin over Rituxan!

Sep 08 06:10 PM