Seeking Alpha
Profile| Send Message|
( followers)  

After months of muted progress JAK inhibitors and myelofibrosis are hotting up again just in time for next month's American Society of Hematology meeting, although the days when the space was the subject of frenetic deal activity are probably behind it.

On Friday Cell Therapeutics (NASDAQ:CTIC) managed to license its much-maligned JAK2/FLT3 inhibitor pacritinib to Baxter International (NYSE:BAX), though excitement was dampened by this morning's news that Sanofi (NYSE:SNY) had ditched the industry's furthest-advanced JAK2 project, fedratinib. Still, with ASH set to highlight further progress in myelofibrosis it seems that this area is not dead yet.

Sanofi said it would discontinue fedratinib (SAR302503) after seeing recent cases of Wernicke's encephalopathy, a rare but severe neurological condition, in study patients. There was no mention of this side effect when results of the phase III Jakarta trial were unveiled in May, and all eyes were on a filing in myelofibrosis by the end of 2013.

Especially surprising

Analysts at Bryan, Garnier & Co wrote that the sudden discontinuation was especially surprising since the project was "not first in class, and appeared as a fast-follower with relatively limited low risk of development."

Indeed, Sanofi had made much of its ability to move fedratinib from phase I into phase III in just three years. Consensus forecasts for 2018 revenue stood at $264m.

Nevertheless, Baxter's decision to buy into Cell Therapeutics' pacritinib - never the most promising of JAK inhibitors - shows continued interest in this class and this indication (ASH preview - The industry's next test of a post-Jakafi world, November 8, 2013).

This is at least partly due to the realization that, with Incyte's first-to-launch drug Jakafi missing expectations, there is still a market to play for. Elimination of the next-furthest advanced project could boost interest further - unless of course the rare side effect arises elsewhere in the class.

Baxter's move was itself surprising because pacritinib had already been passed from pillar to post, having been licensed by its originator, S*Bio, to Onyx Pharmaceuticals for $25 up front in early 2009. However, Onyx canned the deal two years later after seeing less than stellar phase II data, only for the project to be picked up by Cell Therapeutics in June 2012.

$15m begets $30m

On the face of it the Baxter deal looks great for the US biotech company, which had only paid $15m in cash and $15m in stock to get pacritinib from S*Bio, though it will have paid to start its phase III Persist-1 study. Baxter in turn has handed over $30m in cash plus a $30m equity investment, for which it gets joint US and full ex-US rights.

Still, Cell Therapeutics is not yet out of the woods, and has had to commit to funding some phase II costs. But its share of spending will amount to only 25% of US-focused studies, while Baxter will pick up the tab for any concerning its sole territories.

Milestone payments total $112m, of which $40m could be achieved next year and $27, in 2015, and a further $190m could be due if sales targets are met, in addition to a tiered royalty that starts in the high single digits.

The immediate clinical milestones likely relate to pacritinib's pivotal program: the Persist-2 study in patients with low platelet counts could begin by the end of the year, while Persist-1 should complete enrollment in the first half of 2014 and generate topline data in the second.

Seeing as Cell Therapeutics had run its cash down to $27m at the end of the third quarter, the deal will give its coffers a welcome boost. And, despite the understandable doubts that many had had about pacritinib, the group claims that licensing was a "very competitive process."

Baxter is no big pharma group, but Cell Therapeutics had said it would sign a deal by the year end, and this is precisely what it has done.

Source: One JAK Erases Another, But Space Is Not Dead Yet