PD-1 and PD-L1 inhibitors, also known as checkpoint blockers, have emerged as one of the hottest targets in oncology with Bristol-Myers Squibb (NYSE:BMS), Merck (NYSE:MRK), and Roche (OTCQX:RHHBY) in late-stage development for a class of drugs that have shown remarkable clinical activity. Drug development, as expected, has progressed towards more targeted, patient-specific therapies, contrasting the former 'one-drug-for-all' approach, e.g. chemotherapy. Edison, a healthcare investment research firm, writes [pdf]:
Results from the early studies of the anti-PD(((L)))-1 agents have been impressive, with response rates seen in the 20-50% range, which would typically compare with less than 10% for chemotherapy in the same settings.
Targeted therapies are the epitome of personalized medicine. It's the equivalent of Google or Facebook collecting data on its users to better gauge affinity for a particular product or service, in order to sell [targeted] ads. Likewise, therapies developed for a specific disease marker are expected to work better in patients with a matching genetic profile. Edison notes:
Furthermore, in patients selected for high expression of the PD-L1 biomarker, the anti-PD(((L)))-1 therapies have shown even higher rates, in the 40-80% range.
Immunotherapies Follow Suit with Genetic Profiling
Several immunotherapy or cancer vaccine developers, which have historically seen high failure rates, have followed suit in profiling patients with specific disease markers for clinical testing. The underlying logic is that if a drug has affinity for a particular target and that target is prevalent in the patient population being tested, it's far more likely to work. The other way to look at this is to equate "more likely to work" to "less likely to fail" or "de-risked". For this reason, several emerging vaccine therapies have received large valuations in mid-to-late stages of clinical development.
- CellDex's (NASDAQ:CLDX) Rindopepimut (CDX-110), which is in Phase 3 studies for the treatment of brain cancer/glioblastoma (GBM), selectively targets tumors expressing EGFRvIII, which occurs in about 30% of GBM cases. Investors valued the Company at $2.2 Billion as of the close on February 14, 2014.
- Inovio's (NYSEMKT:INO) VGX-3100 targets moderate to severe-stage cervical dysplasia (which in rare cases is a precursor to cervical cancer) associated with HPV strains 16 and 18 in an ongoing Phase 2 study slated to read out by Q2 2014. The Company was most recently valued at just under $600 Million.
- Puma Biotechnology's (NYSE:PBYI) neratinib (PB-272) is a tyrosine kinase inhibitor, or TKI, being evaluated in a Phase 3 study of patients with HER2+ breast cancer, which occurs in 25% of cases, according to breastcancer.org. The results of a phase II study published in 2010 (where 56% given neratinib alone responded versus 24% of those previously treated with Herceptin) were very impressive, and further explain why the market cap has eclipsed $3.5 Billion.
Needless to say, targeted therapies have been the focus among investors.
Multi-Billion Dollar TNF-Inhibitors Facing Safety Concerns, Patent Expiries and New Technology Threat
TNF-inhibitors once held the spotlight in inflammatory disease (ID) that checkpoint-blockers PD-1 and PD - L1 now have. Amgen paid $16 Billion to acquire Immunex and the rights to Enbrel in 2002. Two years earlier, Abbvie (NYSE:ABBV), then a part of Abbott Labs, spilled $6.9 Billion for Knoll Pharma, the pharmaceutical arm of chemical giant BASF. Along with Knoll, Abbvie acquired Humira. One year prior to that, Johnson & Johnson acquired Centocor, now known as Janssen Biotech, and ID-drug Remicade for $4.9 Billion. It's not coincidental that these inflammatory disease drugs, TNF-inhibitors, went on to become some of the world's top-selling drugs.
Sales ($ Billions)
Source: SEC Filings
AstraZeneca followed in queue forking out $1.3 Billion for Cambridge Antibody Technologies (CAT) in 2006 and $15.6 Billion for MedImmune in 2007. What's interesting is that CAT actually co-developed Humira with BASF's Knoll Pharma, yet Abbvie has reaped the rewards.
Despite the appetite, TNF-inhibitors have been criticized for their immunosuppressive effects, which can lead to life-threatening infections, blood disorders, lymphoma and solid tissue cancers, central nervous system disorders and other complications. While sales are expected to continue to ramp, patent expiries loom for the world's top 2 ID drugs, Humira and Remicade. The need for more targeted, safer, and efficacious therapies to fight inflammation-related disease is evident. Writes MLV [pdf] Analyst Vernon Bernardino:
The advent of tumor necrosis factor (TNF) antagonists was a revolution in the management of IBD and met with remarkable success, in particular, with the approval of market leader, Remicade [...]. However, approximately 25-40% of patients who initially benefit from anti-TNF-α therapy develop intolerable adverse events or loss of response during maintenance therapy. Although success is observed in 40%-60% of cases, optimization of therapy (e.g. dose escalation), or switching to another anti-TNF-α, is generally the most common strategy used.
Regulating Eosinophil Shows Promise in Treating Inflammation
An emerging target in combating inflammation related disease is the regulation of eosinophils, which are innate in the immune systems and believed to regulate biological responses, e.g. inflammation. AstraZeneca is developing a monoclonal antibody (MAB) called benralizumab to treat severe asthma in a Phase 3 study that started late last year. The company describes its mechanism:
Benralizumab is a monoclonal antibody binding to the interleukin-5 receptor (IL-5Rα) that depletes eosinophils, a type of white blood cell, which play a critical role in the cause and severity of asthma and asthma exacerbations. Emerging evidence shows that for patients with elevated eosinophil counts, treatment with an IL-5 inhibitor in addition to guideline-based strategies may improve their asthma control and decrease the frequency of asthma attacks.
Unlike TNF-inhibitors, inhibition of eosinophils is not immunosuppressive. The MLV Analysts continues:
A therapy that has potential to block an aberrant innate response, such as the eosinophilia observed prior to symptom flare up, could block the inflammation and tissue damage that ensues [...].
GlaxoSmithKline would appear to agree with their own IL-5Rα, mepolizumab, which also regulates eosinophil, currently in a Phase 3 study for severe asthma. The results of earlier studies, including a double-blinded placebo-controlled trial that read out at the end of 2011 produced remarkable results. Pavord, I.D. et al., published the study titled, 'Mepolizumab for severe eosinophilic asthma (DREAM): a multicenter, double-blind, placebo-controlled trial', where they wrote:
Mepolizumab is an effective and well tolerated treatment that reduces the risk of asthma exacerbations in patients with severe eosinophilic asthma.
This brings us full-circle from PD-1 to TNF to eosinophil-inhibition. What the published Glaxo study results indicate is that eosinophil-inhibiting drugs work best in a population expressing high levels of eosinophil. And, furthermore, eosinophil regulation is a promising inflammation target with a favorable safety profile, particularly in comparison to TNF-inhibitors, which are immunosuppressive.
Immune Pharmaceuticals (NASDAQ:IMNP) Is the Best Risk-Adjusted Play on Emerging Inflammatory Disease Technology - Regulating Eosinophil
There are 3 names investors can buy to get exposure to eosinophil regulation as a target for treating various inflammation-related disorders. The first two are large pharmaceutical firms, AstraZeneca and Glaxo, the third is an emerging biotechnology company called Immune Pharmaceuticals .
The latter is probably the best bet on what we believe will be the next big thing in inflammatory disease. The thinking is simple. Even if AZN/GSK are successful in developing their respective monoclonal antibodies, or mAb's, the success will be largely offset by loss of patents in other areas, particularly top-selling drugs. On the contrary, Immune's miniscule valuation reflects none of the upside associated with developing a next-generation monoclonal antibody and potentially being acquired for it. The top reasons to own Immune Pharmaceuticals, and the reasons why this is the best risk-adjusted play on an emerging inflammatory disease technology are as follows:
- Under-The-Radar. Lack of news flow, which is expected over the next two quarters, will put Immune on investors' radar. This lack of awareness has depleted Immune's valuation and suggests shares will spike once the news flow returns.
- Management Team with History of Successful Exits. Immune's CEO, Dr. Daniel Teper, sold Novagali to Santen for $140 Million at the end of 2011. The Company's clinical and regulatory team is also responsible for the development and launch of blockbusters drugs while working in pharmaceutical industry.
- Pathway Validated By Big Pharma. Glaxo and AstraZeneca validate Immune's approach to regulating eosinophil. Early studies have shown promise with evidence of clinical activity and unparalleled safety profile. Immune's lead product is licensed from Cambridge Antibody Technology , which was acquired for $1.3 Billion by AstraZeneca in 2006 (see discussion, above). In addition to developing Bertilimumab, CAT co-developed Humira, which is the world's best-selling inflammatory disease drug. Abbvie currently drives 50% of its sales from this TNF-inhibitor. However, patents on Humira expire beginning in 2016 through 2018, which could put eosinophil regulating drugs like Immune's Bertilimumab in the spotlight.
- Enormous Market Opportunity and the Potential To Displace TNF-inhibitors. Inflammatory bowel disease therapies, which is Immune's initial target, will be worth $15 Billion by 2019, according to analyst estimates. If Immune can deliver efficacy data in addition to a favorable safety profile for its monoclonal antibody in Ulcerative Colitis and Crohn's disease, Bertilimumab could see utility in a wide range of inflammation-related disease. Capturing a small share of any of the existing multi-billion dollar markets signal enormous upside potential at today's valuation.
- Acceptable Risk-Profile with Numerous Near-Term De-Risking Events. Immune will face the onerous task of validating a new technology. It goes without saying, there is risk involved in proving something 'works'. Perhaps the best news with regards to this is that Bertilimumab has been studied extensively and shown to be well-tolerated. This significantly de-risks the possibility that Immune's compound is not safe or well tolerated. In addition, the Company is expecting to read-out the results of a small Phase 2 study in an orphan indication called bullous pemphigoid. If successful, Immune will have indication of efficacy and de-risk further studies, namely in the Crohn's and Ulcerative Colitis indications. The Company will also need to raise capital to further development of their pipeline, but given the current valuation, the market has not factored in the possibility of successful financing, which could serve as a major catalyst for the Company.
The best news for Immune's investors is a catalyst-heavy 2014. This quarter the Company is expected to uplist to the NASDAQ, which will further bolster visibility. Furthermore, IMNP is expected to initiate two Phase 2 studies in bullous pemphigoid, an orphan indication, and Crohn's, a prevalent inflammatory bowel disorder. There's also evidence to suggest the FDA will recognize bullous pemphigoid as an orphan indication and grant the Company's Bertilimumab that designation. Of note, Immune is only enrolling patients expressing high levels of eotaxin-1, which regulates eosinophil. Again, by enrolling patients who express the target IMNP's drug has affinity for (Bertilimumab has high affinity for eotaxin-1), the chances of a successful outcome are heightened. This has been seen with the enrollment criteria used by Puma Biotech, Inovio, CellDex (see discussion, at the top) and many others gravitating towards a more targeted, personalized approach to medicine. As Glaxo and AstraZeneca validate the eosinophil pathway to treating inflammation, the question that remains is if eotaxin-1 is the next PD(((L)))-1 In Inflammatory Disease?