The month of December has always been a busy period for biotech investors, due to two important events: The annual meeting of American Society of Hematology (ASH) and the San Antonio Breast Cancer Symposium (SABCS). Every year, these events produce clinical data that can sharply move biotech stocks in both directions. This year, Immunogen (NASDAQ:IMGN) is about to get center stage attention at both events.
At ASH, the company and its partners will present phase I data for three different agents powered by Immunogen’s antibody-drug conjugate (ADC) technology. The most important of which is Sanofi-Aventis’ (NYSE:SNY) SAR3419 in Non-Hodgkin lymphoma, a common form of blood cancer. Later that month at SABCS, Roche/Genentech (OTCQX:RHHBY) is expected to present results for T-DM1, a high profile ADC for the treatment of breast cancer.
The data for SAR3419 and T-DM1 could have a strong impact on the stock, as both agents target very large indications, each representing a multi-billion dollar opportunity. With SAR3419, Sanofi is targeting the indications targeted by Rituxan, which brought over $5B in sales last year. With T-DM1, Roche is aiming at the HER2+ breast cancer market, estimated at ~$4.5B. The T-DM1 data set will probably garner most of the attention because if positive, it may lead to accelerated approval already next year.
Although Immunogen retains only a small stake in T-DM1 and SAR3419 in the form of ~5% royalties and modest milestone payments, the financial impact of these drugs will still be meaningful, as both drugs have blockbuster potential. More importantly, these agents, which are being developed by two of the largest pharmaceutical companies in the world, further validate Immunogen’s ADC technology and its broad applicability.
T-DM1 – The Good News
Roche/Genentech is expected to report data from a phase II trial of T-DM1 in HER2+ breast cancer, which account for 20-25% of breast cancer cases. The patient population in this study comprises patients who progressed on the two available HER2 treatments on the market, Roche’s Herceptin (first line) and GSK’s (NYSE:GSK) Tykerb (second line). Therefore, this study is usually referred to as the “third line study”.
There is a lot of excitement around this trial following data from another phase II study which was presented several months ago at ASCO 2009. In that study, which included both second and third line patients, T-DM1 had a response rate of 23.9% and a disease control rate (percentage of patients who achieved an objective response or disease stabilization of at least 6 months) of 35.8%.
Because there are no approved drugs for third line patients, T-DM1 could be approved based on response rate (tumor shrinkage) in the third line study. Although there is no predefined response rate, nor there is any pre-existing agreement with the FDA, if T-DM1 demonstrates a response rate of ~25% or higher, it is expected to be approved by the FDA for third line patients only. If results at SABCS conference mirror the data set from ASCO 2009, an approval for third line setting is likely.
Another reason for optimism is what seems to be a broad consensus in favor of T-DM1 among the medical establishment in the US (Also in Europe, to some extent). The attractiveness of T-DM1 is obvious: Based on the available data, T-DM1 leads to a significant benefit in about a third of patients who have no treatment options left, it has a convenient dosing schedule (given every three weeks), it is extremely tolerable and the target population is well defined and already identified.
Before making the decision whether to approve a drug, the FDA usually asks the advice of a panel which includes experts in the relevant therapeutic area. Assuming the T-DM1 data is as good as expected, a panel of key opinion leaders in breast cancer will probably be very receptive towards T-DM1.
T-DM1 - The Bad News
The data at ASCO 2009 was not entirely positive, though. While results bode well for success in the third line trial, they raise doubts about another pivotal trial for T-DM1. In parallel to the third line study, Roche/Genentech is enrolling a phase III trial where T-DM1 is evaluated as a second line treatment. In contrast to the third line study, this trial is a randomized comparative study with Tykerb+Xeloda as the control arm. The primary endpoint is progression free survival (PFS), so in order to get approved, T-DM1 has to achieve at least comparable PFS to that achieved by Tykerb+Xeloda.
Based on the ASCO data, T-DM1 led to a PFS of 4.9 months in a mix of second and third line patients, which compares unfavorably to 6.2 months Tykerb+Xeloda had achieved in Tykerb’s registration trial. Bearing in mind that larger trials typically have lower efficacy, T-DM1 may be inferior to Tykerb+Xeloda in terms of PFS. Patients in the ongoing 2nd line phase III trial must have centrally confirmed HER2+ tumors, whereas some of the patients in the concluded phase II were HER2 negative based on a central lab test. This might work in favor of T-DM1 as it increases likelihood of response. On the other hand, the PFS of 6.2 months for Tykerb+Xeloda was achieved in a trial that did not require central HER2 confirmation as well. Consequently, the control arm (Tykerb+Xeloda) in the 2nd line T-DM1 trial might even do better than that, but to a lesser extent because Xeloda’s activity is not related to HER2 status.
Market opportunity for T-DM1
Based on the available data, T-DM1 is probably efficacious enough to get approval for 3rd line treatment based on response rate, but the PFS in second line patients seems inferior to that of standard of care. There is a chance to see T-DM1 approved based on a better safety profile and comparable efficacy with that of Tykerb+Xeloda, but it will take at least 3 years to get there. In the mean time, T-DM1 will be approved only for patients who progressed on Tykerb, which currently represent a relatively modest market opportunity.
Despite accounting for only ~25% of breast cancer cases, HER2+ breast cancer represents a huge commercial opportunity, as exemplified by Herceptin’s sales last year (over $4B). Nevertheless, most of Herceptin’s sales are for early stage breast cancer, while T-DM1 (if approved) will be given only to advanced stage patients. The immediate market opportunity in advanced HER2 breast cancer is therefore limited. GSK’s Tykerb, which is approved only for late stage treatment, had sales of $73M in the third quarter of 2009.
Allegedly, T-DM1’s immediate potential in 3rd line patients is even smaller than that of Tykerb, which is approved for 2nd line patients. Nevertheless, Tykerb’s sales probably under-represent T-DM1’s market potential as it has not been well received by physicians and patients.
Tykerb’s main disadvantage is its safety profile, which includes severe gastrointestinal toxicities (nausea, vomiting), especially when given in combination with Xeloda. This has deterred patients from taking the drug and often led to treatment discontinuations. In addition, Tykerb is given as a pill, which is more convenient to take compared to injectable drugs like Herceptin and T-DM1. But from a reimbursement point of view, this makes Tykerb more problematic and less commercially attractive to physicians to prescribe.
In contrast, T-DM1 looks like the ideal drug for late stage breast cancer:
- It has an excellent safety profile.
- It involves a convenient dosing schedule.
- As an injectable, reimbursement is straightforward.
- It will be given as a single agent, which might make it more cost-effective compared to a combination of Tykerb and Xeloda.
The main hurdle for T-DM1 will be the fact that it will first be approved only for patients who were previously treated with Tykerb. In other words, in order to get T-DM1 a patient will have to go through Tykerb, which suffers from low popularity among physicians and patients. Paradoxically, T-DM1’s approval might make physicians and patients more inclined to use Tykerb at the cost of side effects, even for a short period of time, in order to make patients eligible for T-DM1. As a result, it would not be surprising to see T-DM1 selling better than Tykerb even though the latter is approved for an earlier treatment line.
The biotech portfolio as of Nov 29th, 2009