Pfizer's Xalkori: The Story Can Only Get Better

| About: Pfizer Inc. (PFE)

As far as personalized medicine goes, it doesn’t get any sweeter than Pfizer’s (NYSE:PFE) Xalkori. As the industry is moving away from a “one size fits all” model to personalized medicine, this drug sets an enviable example of how to get fast approval for a lucrative niche indication by selecting the right patients. Hailed as the poster child of personalized medicine, Xalkori is currently approved for lung cancer patients whose tumors have rare mutations in the protein ALK, which occurs in ~4% of non-small cell lung cancer cases.

Although the ALK mutation is rare, Xalkori is expected generate $1.5B in sales based on its current label alone due to several reasons. First, as lung cancer is the most common cancer in developed countries, even a tiny fraction of the market translates to large numbers (40-50 thousand patients per year globally). In addition, as a drug for a niche indication, Xalkori enjoys very good pricing – $9,600 per month. Most importantly, the drug has overwhelming and durable activity in ALK mutated patients which means every patient diagnosed with the mutation will probably get the drug and will stay on it for a long time (8-9 months).

But Xalkori’s story could get even better, as the drug inhibits a host of additional targets besides ALK, some of which are relevant cancer targets.

Although nothing formal has been published, there appears to be another group of patients who might be candidates for Xalkori. The drug inhibits a target called ROS, which is similar to ALK in its structure. Interestingly, a similar type of rare mutations (translocation) was found with ROS in lung cancer as well as other tumors. There is very limited data on the prevalence of ROS mutations but they appear to constitute 1-2% of NSCLC cases and an unknown portion of other malignancies such as GBM and bile duct cancer (probably in the mid single digit range).

In lab experiments, cancer cells with ROS mutation were shown to be highly sensitive to Xalkori. There are no reports on the drug in actual patients but there are persistent rumors about dramatic responses in patients with mutated ROS. Recently, Dr. Jack West from The Swedish Cancer Institute in Seattle, discussed this experience and wrote in his post that a publication on the matter is imminent (by the way, his site is one of the best online sources on lung cancer and is highly recommended for anyone interested in keeping track of the field). Another sign that something is going on is Pfizer’s decision to expand the original phase I trial for Xalkori to 400 patients and the addition of ROS mutated patients to the inclusion criteria.

Another target Xalkori hits is MET, which is being explored by many companies including Genentech and Arqule (NASDAQ:ARQL). Although Xalkori is not perceived as a MET inhibitor (even though it was initially developed as one), anecdotal cases of activity in MET amplified patients start to emerge in lung and esophageal cancer. Unlike the case with ROS, the correlation between the genetic abnormality and response is not as straightforward.

Although ROS and MET mutations are quite rare, their cumulative incidence could represent an additional patient population of ~25 thousand patients per year. If Xalkori’s is half as effective in these patients compared to the activity in ALK mutated patients, the financial implications could be substantial. If a prevalence of 4% of NSCLC translates to annual sales of $1.5B, 1-2% of NSCLC combined with the additional smaller indications could add another $750M annually.

Disclosure: I am long ARQL.