Exelixis: Still Promising, Still Controversial

| About: Exelixis, Inc. (EXEL)

It is hard to be neutral on Exelixis’ (NASDAQ:EXEL) lead drug - people either love it or hate it. The drug, cabozantinib, got investors and researchers scratching their heads after showing mind boggling activity against bone metastases. The drug led to partial or complete resolution of bone scans in a substantial portion of patients with cancer, including prostate, breast and lung cancer. To my knowledge, this extent of activity has never been observed with approved anti-cancer drugs, all of which rarely affect bone mets.

Although everybody agrees the data is intriguing, there is still an ongoing debate as to what those bone scan resolutions actually mean. The problem lies in the fact that bone scans do not visualize actual bone mets but the metabolic activity they induce. This is in contrast to CT scans, used to detect tumors in organs other than the bone, which give a direct measurement of tumors’ size and shape. In other words, bone scans provide only an indirect measure of bone mets and could potentially misrepresent what is actually taking place.

Is The Effect Real?

This has led some to suggest that Exelixis’ drug could be doing something to the bone environment without actually shrinking the metastases. Some even suspect the resolution of bone mets is a mere artifact that has to do with the imaging technique being used. Another claim is raised against the short time it takes to see an effect with cabozantinib (sometimes a matter of several weeks), which appears too good to be true given current understanding of bone metabolism. Lastly, the effect on bone mets appears independent of changes in PSA levels, an established blood marker in prostate cancer.

The only definite way to prove cabo’s utility as an anti-cancer agent is a large randomized trial with overall survival as a primary endpoint. Until then, Exelixis has other supporting pieces of evidence for proving the drug’s activity. In terms of bone metabolism and pain markers, cabo appeared as effective as available supportive care drugs such as Zometa and Prolia, but these drugs are not anti-cancer agents. At ASCO 2011, Exelixis also showed a correlation between lack of overall disease progression and bone scan resolution as well as anecdotal evidence of bone met shrinkage using MRI, which measures lesions directly.

Is The Drug Safe?

At ASCO, Exelixis came under pressure after reporting some safety issues with cabozantinib. The drug led to death in 6 (1.2%) out of 490 patients included in the data pool. Although initially alarming, this rate of mortality (assuming all cases are related to the drug) is in line with other approved regimens in comparable patient populations.

A ~1% mortality rate is acceptable in late stage disease but in earlier treatment lines safety requirements are stricter and treatment duration could be longer. In addition, such a safety profile might prevent combining cabo with other treatments, which seems desirable given the potential synergies with other drugs.

In order to tackle this issue, a trial initiated by Dr. Matthew Smith from Mass. General Hospital is evaluating lower doses of cabozantinib in prostate cancer patients. The idea is decreasing the dose to a level where the bone scan resolution is no longer observed and use the minimal dose with activity. Although no formal data was published, the company stated that after evaluating a regimen utilizing 40% of the original dose, investigators are moving to an even lower dose (20% of the original dose). This implies cabo is still active even when given at less than half of the original dose. It is too early to tell whether using lower doses will diminish the drug’s activity or whether the safety profile will improve. Nevertheless, these preliminary signs bode well for the future development of cabo across multiple treatment lines, from bone met prevention to full blown metastatic disease.

Does Targeting Bone Mets Improve Survival?

Since all approved drugs for cancer have little or no effect on bone metastases, the question above is a legitimate one. Bone metastases occur in multiple cancer types and are believed to be a major cause of mortality (directly or indirectly), but targeting bone mets has not been proven as clinically meaningful. Until Recently.

Just over 2 months ago, Norway-based Algeta announced positive topline results from a phase III trial evaluating its bone met targeting drug, Alpharadin. Alpharadin increased survival of prostate cancer patients with bone mets from 11.2 to 14 months. The drug is a radioisotope that preferentially accumulates in bone metastases making it the first ever drug to prolong survival in cancer by exclusively targeting bone lesions.

Alpharadin: Competition Or Validation?

Algeta’s positive news are viewed as negative for Exelixis, as both companies are targeting prostate cancer, where the vast majority of advanced stage patients develop metastases to the bone. On the other hand, Algeta’s success serves as a clear validation for targeting bone mets, proving it can prolong survival. Interestingly, Algeta’s Alpharadin has no visible effect on bone scans but has an effect on pain and bone markers.

The two drugs compete based on spectrum of activity and primary indication, however, cabo should be perceived as a threat to Alpharadin and not vice versa. Eventually, it will all come down to whether the bone scan resolution associated with cabo represents real tumor shrinkage. If this is merely an artifact, cabo is irrelevant in the context of bone met targeting, leaving Alpharadin as the only relevant drug. If cabo’s bone effect is real, there is a high likelihood for it to have a survival effect based on Alpharadin’s proof of concept. The two drugs have never been compared, but if cabo’s effect on bone scans is only half as profound as the scans indicate, a drug that causes bone mets to “evaporate” should have a much more dramatic effect than a drug that only prevents new mets or stabilizes existing ones.

As opposed to Alpharadin, cabo has a clear effect on non-bone lesions, so theoretically it might prove effective across various tumor types regardless of its bone activity.

Future Catalysts

The company is looking at three important catalysts in the coming six months:

  1. The first will be data from a pivotal trial for cabozantinib in thyroid cancer. Positive results should enable the company to file for approval early next year. This indication represents a fairly small market potential of ~$100M in the US. The significance of such approval would be in potential off label use in patients with bone metastases. Such usage could increase sales dramatically but it could also sabotage the company’s efforts to show cabo increases survival in a randomized phase III trial.
  2. The second event will be initiation of a pivotal trial in prostate cancer using bone scans and pain as primary endpoints. The company believes it can obtain a SPA for this study (agreement with FDA regarding the trial design and endpoints that will support approval).
  3. Lastly, the company will present updated results from ongoing clinical trials, probably at ASCO GU in February. By then the company should have sufficient follow up in order to show the durability of the bone effect and correlate bone scan resolution with clinical parameters, primarily progression-free and overall survival. This retrospective analysis cannot prove the drug has a survival effect but it is definitely an indication. The company will also present data with additional imaging techniques such as MRI and bone density imaging.

Portfolio holdings as of August 21st, 2011 (click to enlarge images):

Disclosure: I am long EXEL.