3 Clear Winners of ESMO 2010

by: Ohad Hammer

The ESMO meeting is the most important oncology conference in Europe. This year in particular, it included very interesting data that affected the sentiment towards many biotech companies. Here, I intend to focus on what I view as three clear winners from the conference: Seattle Genetics (NASDAQ:SGEN), Arqule (NASDAQ:ARQL) and Dendreon (NASDAQ:DNDN).

Seattle Genetics

Seattle Genetics is about to conclude the best year in its history, since it was incorporated 13 years ago. The company’s lead agent, SGN-35 (aka Brentuximab Vedotin), generated astonishing results in two types of blood cancers earlier this year. Based on the results in Hodkin’s Lymphoma, SGN-35’s approval seems inevitable, even though results are not from large randomized studies. Unlike T-DM1’s case, Seattle Genetics negotiated a special protocol assessment (SPA) with the FDA, implying that the trial design and endpoints are acceptable by the FDA.

Although initial market potential is limited ($250-$300M), this amount is still substantial for a company with a market cap of ~$1.7B, assuming a substantial portion of revenues will come from the US, where Seattle Genetics has exclusive rights. The approval will also serve as a final validation for Seattle Genetics’ technology and will position it as the leading antibody drug conjugate (ADC) company with the only approved ADC in the market (Mylotarg, the first ADC to get approved, was recently withdrawn due to failed post-approval studies).

At ESMO, Seattle Genetics gave investors another reason for optimism, this time following positive data for another wholly owned agent, SGN-75. SGN-75 is an ADC for the treatment of NHL and renal cancer, two indications that represent a multi-billion dollar opportunity. Data at ESMO included preliminary findings implying that SGN-75 is active in both indications. The trial included only patients whose tumors express CD70, SGN-75’s target.

Seattle Genetics reported a complete response in one patient with NHL (out of 7 patients) and one partial response in a renal cancer patient (out of ~10 patients). As of data presentation the maximal dose was not reached, so the drug’s real activity could be substantially better. This is particularly relevant for solid cancers such as renal cancer, which typically require higher exposure compared to blood cancers. So far, SGN-75’s exposure was significantly lower than that achieved by other ADCs for solid tumors such as T-DM1, so the main challenge now is increasing the dose without causing too many side effects.

Although NHL is a larger market than renal cancer, the latter should be viewed as more attractive for SGN-75 since it represents a higher unmet need with less competition, especially for antibodies. Until now, the market for renal cancer has been dominated by kinase inhibitors such as Pfizer’s (NYSE:PFE) Sutent, Onyx’s (NASDAQ:ONXX) Nexavar and Novartis’ (NYSE:NVS) Afinitor. While these agents disrupt signals, ADCs such as SGN-75 deliver a toxic payload to tumor cells and can therefore be viewed as complimentary.

As with any early stage drug candidate, more patients are needed in order to better assess SGN-75’s potential. It remains to be seen whether higher doses lead to a better response rate. Another important issue is the ability to identify tumors which are more sensitive to SGN-75 based on the amount and pattern of CD70 expression. Preclinical data published by Seattle Genetics show good correlation between expression levels of CD70 and sensitivity to SGN-75. As CD70 is found in many other cancers but with less prevalence than in kidney cancer, there is potential opportunity for label expansion in lung, ovarian and pancreatic cancer, as shown by the elegant paper.

In summary, SGN-75 could become the next big ADC, as it contains all the right ingredients: New target, unmet need, potential utility in several solid tumor indications, good safety profile and clear efficacy. Based on the rapid recruitment, investors should have a sense of where this agent stands by next ASCO in June 2011.

Most importantly, SGN-75 is still unpartnered so positive results next year should have a huge impact on the compamy’s valuation. The antibody moiety in SGN-75 was part of a 2001 licensing deal with a research institute in the Netherlands. This implies that Seattle Genetics will probably pay low royalties on sales of SGN-75, but this should not prevent it from getting a lucrative licensing deal down the road.

Seattle Genetics is not the only one with a CD70 program. Medarex (MEDX) also has a CD70 ADC (MDX-1203) in clinical testing, based on its proprietary ADC technology, which is not as validated as that of Seattle Genetics. The two companies were running neck-to-neck with their CD70 programs during the past several years. Medarex beat Seattle Genetics in starting a phase I, probably due to the fact Seattle Genetics was developing a method for selecting patients based on CD70 expression. In contrast, Medarex is not selecting patients based on molecular markers but simply limit accrual to renal cancer and NHL. It will be intriguing to see first data for MDX-1203, which should give investors more perspective on its ADC technology compared to that of Seattle Genetics.

It is also very likely to see a CD70 ADC powered by Immunogen’s (IMGN) technology. Even if Immunogen or its partners are not working on the target, the recent data for SGN-75 clearly marks CD70 as the next hot target. Extrapolating from published work by Genentech (Private:DNA), one can assume that Immunogen can use exactly the same non-cleavable linker currently used with T-DM1, which is much more validated than the rest of its linkers. With the exception of T-DM1, all of Immunogen’s compounds in the clinic are based on cleaveable linkers, which are viewed by some as less effective (even though some targets are not suitable for uncleaveable linker).


Arqule and its partners presented results from several studies for the company’s lead agent, ARQ-197. The most important presentation was obviously final results from the randomized phase II in lung cancer, which laid the foundation for an upcoming phase III trial. The other trials included earlier data in additional indications that continued to show ARQ-197’s excellent safety profile even though the drug’s efficacy in these settings should be determined in more advanced studies.

The phase II lung cancer trial evaluated the addition of ARQ-197 to Tarceva vs. Tarceva alone in 2nd/3rd NSCLC patients. Technically, the trial did not meet the primary endpoint, which was showing a statistically significant improvement in progression-free survival (PFS, the time patients live without disease progression). However, as I previously discussed, the study generated a clear efficacy signal using two predefined and acceptable subset analyses.

The first analysis took into consideration imbalances in the genetic profile of patients between the two arms. Although usually such retrospective analyses should be approached with skepticism, the two markers used for stratifying patients (EGFR and KRAS mutation) are well validated for predicting response to Tarceva. Therefore, the imbalances created a built-in bias in favor of the control arm. The second analysis, which was planned in advance, distinguished between two subtypes of NSCLC and found that in patients with non-squamous tumors the combination led to a statistically significant difference. This stratification is also widely acceptable, as the two subtypes are already known to differ in terms of response to certain agents, particularly Alimta.

The updated results included some interesting points that further establish ARQ-197 as one of the most promising agents for lung cancer. There was a clear trend towards better overall survival in non-squamous patients, although the trial was not powered to show a statistically significant difference. In addition, investigators presented interesting findings on the drug’s ability to delay the formation of new metastases. This property could be a huge advantage in earlier treatment lines, but it will have to be proven prospectively in larger studies. Last, in patients from the Tarceva arm who switched to the combination arm after progressing on Tarceva alone, there was a clear signal including 2 partial responses and several cases of prolonged disease stabilization. Interestingly, the two partial responses were in patients with high MET expression. All the findings above are retrospective or anecdotal, and by themselves cannot justify moving into phase III, but they provide supportive evidence that is in line with the known biologic function of MET.

The efficacy signal, coupled with the excellent safety profile led by Arqule’s partner, Daiichi Sankyo (OTC:DSKYY), resulted in the launch of a pivotal phase III trial in lung cancer. The study was designed based on the efficacy signal from the phase II, as it will enroll only non-squamous patients. The primary endpoint for the study is overall survival, which is harder to achieve but it is still considered the most relevant endpoint. In order to avoid the imbalances of the phase II, the mutation status of patients must be known at the point of randomization. The trial will be conducted under SPA, which significantly increases chances of approval if the trial meets the primary endpoint.

Metmab as a competitor

The session in which ARQ-197 was presented at ESMO included also results for Roche (OTCQX:RHHBY)/Genentech’s Metmab in a very similar patient population but with many differences in terms of trial design and subset analysis. Like ARQ-197, MetMab targets MET but in a totally different approach. It is a monoclonal antibody that binds the external side of the receptor on cells, as opposed to ARQ-197 that inhibits signaling in the internal side of the target.

In the overall population, there was no difference between the two arms, which were balanced with respect to EGFR and KRAS mutations. This is in contrast to the signal ARQ-197 generated adjusting mutation imbalances (though retrospectively). Nevertheless, MetMab generated a clear efficacy signal in a subset of patients whose tumors expressed high levels of MET, even though this signal was just almost statistically significant. This is also in contrast to Arqule’s subset analysis which managed to achieve statistical significance based on a totally different stratification.

Patients with high MET expression had a PFS of 12.4 weeks vs. 6.4 weeks in the Tarceva arm. In terms of overall survival, the addition of MetMab in these patients led to a marginal improvement from 7.4 months to 7.7 months. Looking at the data, it seems that this number does not do justice to MetMab, as the curves look fairly separated. This kind of inconsistency might be explained by the relatively low sample size (65 MET positive patients in total). The most striking observation was that patients with low MET expression seemed to do worse on the MeMab+ Tarceva combination both in terms of PFS and overall survival.

MetMab’s data set further reinforces MET as a viable target, even though there are many open questions that arise from both studies. It is also very hard to compare ARQ-197 and MetMab, due to the substantial differences between the two trials. To begin with, investigators in each study used a totally different approach for distinguishing between MET positive and negative tumors. Roche/Genentech conducted its subset analysis based on MET expression, whereas Arqule used plain histology for identifying the right patients. Unlike ARQ-197, MetMab did not have superior activity in non-squamous patients, whereas ARQ-197 activity seemed to correlate with very high MET expression (although the data in the presentation is limited). In addition, the MetMab study did not include crossover, and therefore could not generate the anecdotal signs of activity like in the ARQ-197 study.

Due to all those differences and the fact that ARQ-197 and MetMab have never been compared directly, it is very hard to compare the two. MetMab’s results are more positive than negative for ARQ-197 since they provide another validation for MET, without showing clear superiority over ARQ-197. The apparent differences in activity could be eventually explained by the distinct modes of action the two compounds have.

The only troubling sign for Arqule is MetMab’s potential deleterious effect on MET negative/low tumors. The ARQ-197 presentation does not include this analysis, unfortunately, but one can assume that had such a signal been obtained, patients with MET negative tumors would have been excluded from the current ARQ-197 phase III trial. There is always the risk that Roche’s approach for quantifying MET expression is more reliable than that used with ARQ-197.

Another interesting trial that could shed more light on MET as a target for lung cancer is that of Aveo’s AV-299 (NASDAQ:AVEO), currently in phase II. AV-299 targets the MET pathway using a third approach as it targets the ligand that activates MET as opposed to the receptor itself. Until recently, AV-299 was partnered with Merck (NYSE:MRK), which gave back rights for the products to Aveo last month. The news sent Aveo’s shares higher, which is very rare in cases of termination by a large partner. Arqule’s and Roche’s data could explain the market’s paradoxical reaction.


Although no meaningful data was presented for Provenge, Dendreon’s investors could release a sigh of relief following data with Cougar’s (now part of J&J (NYSE:JNJ)) abiraterone. It was clear the data would be very positive, based on the decision to stop the phase III trial due to overwhelming efficacy, but the extent of survival benefit was unclear.

Dendreon’s Provenge is approved for chemo naive prostate cancer patients, while J&J’s drug was evaluated in patients who have undergone treatment with Sanofi’s (NYSE:SNY) Taxotere. Allegedly, the two drugs should not be direct competitors but had abiretarone achieved better results that Provenge, it could have been used off label in 1st line patients. Luckily for Dendreon, abiraterone extended overall survival by almost 4 months, which is impressive but slightly lower than Provenge’s benefit. The big loser here will probably be Sanofi-Aventis, which recently announced positive data for cabazitaxel in post-chemo prostate cancer. Sanofi’s drug, which will compete head to head against abiraterone led to a survival increase of “just” 2.5 months. Therefore, it will probably be harder for Sanofi to capture sufficient market share in order to offset patent expiry for Taxotere.

Sanofi, under the leadership of Chris Viehbacher, managed to build an impressive oncology pipeline in just over a year almost from scratch. It did so by bringing in new drugs through acquisitions and partnerships. Recent additions include Bipar’s Iniparib, Exelixis’ (NASDAQ:EXEL) PI3K inhibitors and Merrimack ErbB3 antibody. Updated phase II data for Iniparib that was presented at ESMO continues to look promising with results from a phase III study expected in the coming months.

Portfolio updates

Since inception two years ago, the biotech portfolio, managed by Ran Nussbaum and myself, achieved a return of 73.5%, which compares favorably to most broad and life sciences oriented indices (see table below). As I discussed in the last post, we are buying more Array (ARRY), which is extremely undervalued in our opinion.

Portfolio holdings as of October 24th, 2010 [click to enlarge]

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Disclosure: See portfolio