Threshold Pharmaceuticals: TH-302 Phase IIb Clinical Results In First-Line Pancreatic Cancer

By Andrew McDonald, Ph.D. and Ning Yang, Ph.D.

On April 2, 2012, Dr. Mitesh J. Borad, the principal investigator of Phase IIb clinical trial for Threshold Pharmaceutical's (NASDAQ:THLD) leading drug candidate TH-302 in pancreatic cancer indication, presented the detailed results of the trial at the American Association of Cancer Research (AACR) 2012 Annual Meeting in Chicago.[1] The trial met primary endpoint of Progression Free Survival (PFS), with a 63% or 2 months PFS extension (p=0.005) in 214 previously untreated patients with locally advanced unresectable or metastatic pancreatic adenocarcinoma. Overall Survival (OS) data, which currently is immature, is expected to be released in 2H2012. We view these PFS data as encouraging, but believe that the stock should move higher should the company report positive OS data given some questions surrounding the study design and preliminary results.

TH-302

TH-302, THLD's lead candidate, is billed as tumor-selective hypoxia-activated nitroimidazole prodrug of the cytotoxin, bromoisophosphoramide mustard (Br-IPM). Threshold states that under normoxic conditions, TH-302 is essentially inactive, and relatively nontoxic in normal tissues. The compound is activated in hypoxic environments (low oxygen), such as within a tumor. Under these conditions, the nitroimidazole functionality of the drug is reduced and the Br-IPM is released. Once released, it is free to alkylate DNA, killing the cell. The idea here is that tumors, which are hypoxic, are selectively targeted and killed by TH-302. Large clinical trials are needed to prove this hypothesis, of course. The reported Phase IIb data from Threshold indicate TH-302 may be operating by this mechanism.

The Phase IIb Trial Design

The Phase IIb trial was a randomized, open-label, crossover study that was designed to evaluate the efficacy and safety of two doses of the drug candidate TH-302 in combination with gemcitabine compared to standard gemcitabine in 214 previously untreated patients with locally advanced unresectable or metastatic pancreatic adenocarcinoma. Patients were randomly assigned 1:1:1 to receive one of the three treating arms, including TH-302 (340 mg/m2) plus gemcitabine (1000 mg/m2), TH-302 (240 mg/m2) plus gemcitabine (1000 mg/m2), and gemcitabine (1000 mg/m2) alone (control arm). Both drugs were administered IV over 30 minutes on Days 1, 8, and 15 of every 28-day cycle. Patients who successfully completed six cycles of treatment without experiencing significant treatment-related toxicity and cancer progression were eligible for continuing treatment. Cross-over into one of the TH-302 plus gemcitabine cohorts was allowed for patients who experienced cancer progression on standard gemcitabine. Initial results from this trial were presented at AACR 2012 in Chicago.

Clinical Trial Data

Median PFS in the TH-302 plus gemcitabine group was 5.6 months versus 3.6 months in the control arm, with a hazard ratio (HR) of 0.61 (95% CI: 0.43-0.87) using stratified log-rank test (p=0.005) based on 144 PFS events. Patients treated with gemcitabine + TH-302 (340 mg/m2) had a median PFS of 6.0 months (N=74; HR=0.58 (95% CI: 0.39-0.87); Log-rank test: P=0.008), while patients treated with gemcitabine + TH-302 (240 mg/m2) had a median PFS of 5.5 months (N=71; HR=0.64 (95% CI: 0.43-0.96); Log-rank test: P=0.031). The overall response rates (RRs) were 12%, 17%, and 27% for patients treated with gemcitabine alone, gemcitabine + TH-302 (240 mg/m2), and gemcitabine + TH-302 (340 mg/m2), respectively. Furthermore, patients in two gemcitabine + TH-302 treating arms demonstrated a TH-302-dose-dependent reduction in CA19-9, which is an objective marker for pancreatic cancers. Twenty-five patients who initially received gemcitabine-alone treatment were crossed over to either the lower-dose (13 patients) or the higher-dose (12 patients) TH-302 treating arms, and the PFS for the higher-dose arm was higher than the one for the lower-dose arm. The difference, however, was not statistically significant. Overall, the higher TH-302 dose group showed greater efficacy when compared to the lower dose group, which supports the thesis that the drug is effective.

The data are consistent with a prior uncontrolled Phase I/II trial, in which TH-302 was combined with three different chemotherapies (gemcitabine, docetaxel, and pemetrexed) to evaluate the dose-limiting toxicity (DLT), maximum tolerated dose (MTD), and preliminary efficacy. Forty-seven subjects with previously untreated locally advanced unresectable or metastatic pancreatic adenocarcinoma were enrolled at 9 investigational sites between late 2008 to mid-2010 and treated with TH-302 (dose groups: 240 mg/m2, 340 mg/m2, 480-575 mg/m2) in combination with standard gemcitabine therapy. The median PFS for the 47 subjects was 5.95 months (95% CI: 4.83 months to not reached), and it ranged from 4.9 months to 7.5 months across the difference dose groups. The median OS was 8.5 months (95% CI: 6.9 months to 13.4 months), and it ranges from 7.3 months to 14.6 months across the different dose groups.

The safety of the TH-302 and gemcitabine combination was evaluated in both Phase I and II trials. Skin and mucosal toxicities are major adverse events (AEs), which, however, were not dose-limiting. Myelosuppression was dose dependent and dose limiting but reduction in gemcitabine dose intensity was not associated with loss of efficacy. There was no apparent TH-302 related renal or hepatic toxicity. Overall, significantly higher percentages of patients in the two TH-302 + gemcitabine treating arms experienced thrombocytopenia, neutropenia, and rash than in the gemcitabine treating arm, which supports the hypothesis that the drug was active and the dose response was real. The higher dose of TH-302 was more toxic, and led to more AEs including rash, vomiting, diarrhea, stomatitis, and myelosuppression as compared to the lower dose. The percentages of severe adverse effect (SAEs) and SAE-led study discontinuations, however, were similar among the three arms.

Comparison to Other Chemotherapies

Figure 1 summarizes the past Phase II/III trial data of other chemotherapies in pancreatic cancer indication. Gemcitabine and erlotinib + gemcitabine are the current first-line options for newly diagnosed patients with unresectable metastatic or locally advanced pancreatic cancer. FOLFIRINOX demonstrated very impressive efficacy in a randomized Phase III trial, but its usage is limited due to its high toxicity. Other drugs are currently in Phase II or III trials.

Gemcitabine Gemcitabine monotherapy is one first-line chemotherapy option for patients with metastatic pancreatic adenocarcinoma who are not suitable for tumor resection.[2] Gemcitabine, from Eli Lilly (NYSE:LLY), was approved by the FDA in 1998, based upon a randomized, single-blinded trial in 126 patients with newly diagnosed advanced pancreas cancer, half of which was randomly selected to receive 1,000 mg/m2 of gemcitabine via IV weekly x 7 followed by 1 week of rest, then weekly x 3 every 4 weeks thereafter. The other half received 600 mg/m2 of fluorouracil (5-FU) as an intravenous bolus once weekly. Significant improvement in the median OS (5.65 vs. 4.41 months, P = 0.002) was found in patients receiving gemcitabine treatment when compared to those receiving 5-FU. [3] In subsequent Phase III trials, gemcitabine monotherapy demonstrated a median OS ranging from 5.0 to 7.2 months, and a PFS ranging from 4.0 to 17.3 months.[4] Studies have suggested that a fixed-dose rate (FDR; 350 mg/m2/min) maximizes intracellular concentrations of the phosphorylated forms of gemcitabine, which, however, failed to demonstrate an improvement in OS of gemcitabine FDR regimen over the standard administration. [5],[6]

Erlotinib plus Gemcitabine In recent years, gemcitabine is combined with other chemotherapeutic agents for pancreatic cancer patients with good performance status. In November 2005, FDA approved Tarceva® (erlotinib, which is an inhibitor of EGFR tyrosine kinase) in combination with gemcitabine chemotherapy for the treatment of advanced pancreatic cancer patients who have not received previous chemotherapy. It is now sold by Roche (OTCQX:RHHBY). The FDA based its approval decision for Tarceva on results from a Phase III, double-blind, placebo-controlled trial of 569 patients with advanced or metastatic pancreatic cancer.[7] Patients were randomly assigned 1:1 to receive Tarceva plus gemcitabine or standard gemcitabine. Median OS was 6.24 months and 1-year survival was 23% in the Tarceva plus gemcitabine treatment group, as compared to 5.91 months and 17% in the control group receiving standard gemcitabine. Median PFS in patients treated with Tarceva plus gemcitabine was 3.75 months, compared to 3.55 months in the control group (P=0.004). AEs observed included rash and diarrhea, which was more prominent in the Tarceva group, but most were grade 1 or 2. It is clear that OS was only slightly improved by the Tarceva plus gemcitabine treatment over gemcitabine alone. This suggests that only a small group of patients benefited from the new treatment. This helps explain why the new therapy has not gained more widespread traction for locally advanced or metastatic pancreatic adenocarcinoma indication.

FOLFIRINOX Recently, a randomized, Phase III trial demonstrated that FOLFIRINOX [5-FU, leucovorin (Wellcovorin), irinotecan (Camptosar), and oxaliplatin] dramatically improved median PFS (6.4 months vs. 3.3 months; P < 0.001) and median OS (11.1 months vs. 6.8 months; P < 0.001) in 342 patients with metastatic pancreatic cancer and good performance status when compared to standard gemcitabine.[8] The median OS of 11.1 months has never been achieved in any prior Phase III study of this disease in the pure metastatic cohort. High level of toxicity associated with FOLFIRINOX regimen, however, remains a significant barrier for its approval as a new standard of care for the front-line treatment in patients with metastatic pancreatic cancer.

AMG479 AMG479 (ganitumab) is Amgen's (NASDAQ:AMGN) late-stage pancreatic drug candidate. The drug is a monoclonal antibody that suppresses Type I insulin-like growth factor receptor (IGF-1R) vital to the regulation of cell growth and survival. A randomized, open-label Phase II study demonstrated that addition of AMG479 to gemcitabine resulted in a median OS of 7.3 months versus 6.2 months in the gemcitabine arm [HR=0.69 (95% CI:0.38-1.25); p=0.22; n=42 subjects for each arm].[9] Patients receiving AMG 479 also experienced longer PFS of 5.1 months versus 2.1 months [HR=0.60 (95% CI: 0.36-1.01); p=0.055; n=42 subjects for each arm]. These results, however, are not considered as statistically significant. A Phase III study of AMG479 is currently on going and data collection is expected to be completed in October 2013.

Figure 1: Summary of Completed Phase II/III Trials of Chemotherapies for Pancreatic Cancers

Therapy

#Subjects

Design Control

Drug Dose and Regimen

Diagnosis Inclusion

PFS/RR/OS

Gemcitabine

126

Randomized,

Single-blinded,

Two Arms

Gemcitabine: IV push 1,000 mg/m2/wk×7, 1 wk rest, then weekly×3 every 4 wks

5-FU: IV bolus 600 mg/m2/wk

Advanced symptomatic pancreatic cancer

RR:

23.8% vs. 4.8% (P=0.0022)

Median OS: 5.65 Mo vs. 4.41 Mo (P=0.0025)

Erlotinib + Gemcitabine

569

Phase III,

Randomized,

Double-blind,

Placebo-controlled,

Two Arms

Erlotinib+Gemcitabine: Gemcitabine: standard dose (see above)

Erlotinib: orally taken at 100 or 150 mg/d

Placebo+Gemcitabine: same dose as the first arm

Unresectable, locally advanced, or metastatic pancreatic cancer

Median PFS: 3.75 Mo vs. 3.55 Mo (P=0.004)

Median OS: 6.24 Mo vs. 5.91 Mo

Objective RR: not significantly different

TH-302 + Gemcitabine

214

Phase IIb, Randomized, Open-label, Cross-over,

Three Arms

TH-302 + Gemcitabine:

TH302: IV 340 mg/m2 on days 1, 8, and 15 of every 28-day cycle

Gemcitabine: standard dose

TH-302 + Gemcitabine:

TH302: IV 240 mg/m2 on days 1, 8, and 15 of every 28-day cycle

Gemcitabine: standard dose

Gemcitabine:

Gemcitabine: standard dose

Untreated patients with locally advanced unresectable or metastatic pancreatic cancer; ECOG performance status of 0 or 1

Median PFS: 6.0/5.5/3.6 Mo

Objective RR:

20%/17%/12%

FOLFIRINOX

(5-FU+leucovorin +irinotecan+oxaliplatin)

342

Phase III,

Randomized,

Two Arms

FOLFIRINOX: 85 mg/m2 oxaliplatin+180 mg/m2 irinotecan+5-FU+400 mg/m2 leucovorin+400 mg/m2 5-FU given as a bolus followed by 2400 mg/ m2 as a 46-h continuous IV every 2 wks

Gemcitabine: standard dose

Eastern Cooperative Oncology Group (OTC:ECOG) performance status score of 0 or 1 (on a scale of 0 to 5, with higher scores indicating a greater severity of illness)

Median PFS: 6.4 Mo vs. 3.3 Mo (P<0.001)

Median OS: 11.1 Mo vs. 6.8 Mo (P<0.001)

Objective RR: 31.6% vs. 9.4% (P<0.001)

AMG479

125

Phase II,

Randomized,

Placebo-controlled,

Three Arms

AMG479+Gemcitabine (Open-label):

AMG479: IV 12 mg/kg in days 1 and 15

Gemcitabine: standard dose (see above)

Conatumumab+Gemcitabine

(Double-blinded):

Conatumumab: IV 10 mg/kg in days 1 and 15

Gemcitabine: standard dose (see above)

Placebo+ Gemcitabine (Double-blinded):

Gemcitabine: standard dose (see above)

Eligible patients had no prior therapy for pancreatic cancer; PS 0-1; no poorly controlled diabetes.

Median PFS: 5.1/3.9/2.1 Mo

Median OS: 7.3/7.5/6.2 Mo

Abraxane® + Gemcitabine

67

Phase I/II,

Open-label,

Three Arms

Abraxane+Gemcitabine:

Abraxane: IV 100 (20 pts) or 125 (44 pts) or 150 (2 pts) mg/m2 followed by 1000 mg/m2 on days 1, 8, and 15 every 28 days

Gemcitabine: standard dose

Previously untreated advanced pancreatic cancer

Median PFS at MTD (125 mg/m2):

7.9 Mo (95% CI: 5.8-11.0)

Median OS at MTD: 12.2 Mo (95% CI:8.9-17.9)

CO-101

360

Phase II, Open-label, Multicenter, Two Arms

CO-101:

IV 1250 mg/m2 weekly for 3 wks every 4 wks

Gemcitabine: standard dose

Patients with metastatic pancreatic cancer; performance status score of 0 or 1

N/A

Vismodegib

118

Phase II, multi-center, double blind, placebo-controlled, cross-over, randomized

Gemcitabine hydrochloride: standard gemcitabine dose regimen + placebo daily

Gemcitabine hydrochloride+Vismodegib:

standard gemcitabine dose regimen + vismodegib daily

Newly diagonosed, metastatic pancreatic cancer, or recurrent pancreatic cancer

N/A

80

Phase II, open-label, single arm, multi-center,

Gemcitabine+nab-Paclitaxel+Vismodegib:

gemcitabine IV 1,000 mg/m2/wk and nab-paclitaxel IV 125 mg/m2/wk for 3 wks, 1 wk rest; followed by the same cycle in combination with oral vismodegib 150 mg daily

Patients with metastatic pancreatic cancer; performance status score of 0 or 1

Click to enlarge

Source: Burris HA III et al. J. Clin. Oncol. 1997; 15:2403-2413; Moore MJ et al. J. Clin. Oncol. 2007; 25(15):1960-1966; Borad MJ et al. AACR 2012 Annual Meeting; Conroy T et al. N. Engl. J. Med. 2011; 364:1817-1825; Kindler HL et al. American Society of Clinical Oncology (OTC:ASCO) Annual Meeting 2010; Von Hoff DD et al. J. Clin. Oncol. 2011;29:4548:4554.

Abraxane® plus Gemcitabine Abraxane is an albumin-bound form of paclitaxel with a particle size of approximately 130 nm. Paclitaxel acts as a microtubule inhibitor and induces abnormal arrays or "bundles" of microtubules throughout the cell cycle and multiple asters of microtubules during mitosis. [10] Abraxane was initially approved by the FDA in 2005 for the treatment of metastatic or relapsed breast cancer and has been studied in combination with gemcitabine for the treatment of patients with advanced pancreatic cancers and good performance status. In an open-label Phase I/II trial, a total of 20, 44, and 3 patients with previously untreated advanced pancreatic cancer administered IV Abraxane at 100, 125, and 150 mg/m2, respectively, followed by 1,000 mg/m2 on days 1, 8, and 15 every 28 days with standard gemcitabine dose. At the MTD (125 mg/m2 Abraxane + 1,000 mg/m2 gemcitabine), the partial response rate was 48%, with an additional 20% of patients demonstrating stable disease for more than 16 weeks. The median overall OS at this dose was 12.2 months.[11] A randomized, open-label Phase III study is currently underway to compare Abraxane + gemcitabine therapy to gemcitabine alone with respect to OS, objective tumor RR, and PFS in patients with metastatic adenocarcinoma of the pancreas. Approximately 842 patients have been enrolled in the study and primary data collection is expected to be completed in December 2012. Abraxane was initially developed by Abraxis, who was acquired by Celgene (NASDAQ:CELG) in 2010. Abraxane has been marketed by Celgene since then.

CO-101 CO-101 is a new cytotoxic drug licensed by Clovis Oncology (NASDAQ:CLVS). The drug consists of gemcitabine coupled with a fatty acid chain, which enables gemcitabine to enter cancer cells without requiring uptake by a specific transporter molecule. Intravenous CO-101 is currently being evaluated as compared to gemcitabine alone in two Phase II trials for first-line and second-line metastatic pancreatic cancer indications. The trial for the first-line indication is a randomized, open- label, and multicenter study in 360 patients with new diagnosed advanced pancreatic cancer, and data collection is expected to be completed by 4Q2012. The second trial is an open-label, multicenter study, and enrollment is expected to be completed in mid-2013. No data is yet available.

Vismodegib Vismodegib (Erivedge®) is a first-in-class orally-administered small molecule Hedgehog pathway inhibitor, that was discovered by Genentech and jointly validated by Genentech and Curis. On January 30, 2012, the FDA approved vismodegib for the treatment of adults with advanced forms of basal cell carcinoma. Vismodegib has been used in clinical trials to treat recurrent or metastatic pancreatic cancer. There are two Phase II trials ongoing. One is a multi-center, double blind, placebo-controlled, randomized Phase II study of gemcitabine plus vismodegib in patients with metastatic pancreatic cancer. The study is sponsored by University of Chicago and the National Cancer Institute (NCI). The other is an open-label, single arm, multi-center, Phase II trial to evaluate the PFS and OS in patients with metastatic pancreatic cancer treated with vismodegib plus gemcitabine and nab-paclitaxel. The study is sponsored by Sidney Kimmel Comprehensive Cancer Center along with Stand Up to Cancer, Genentech, and Celgene Corporation. Both trials are currently recruiting participants.

Issue and Risk

Overall, we view Threshold's initial Phase IIb trial data encouraging but think OS data will be critical to assess the success of the trial. TH-302 + gemcitabine showed significant improvement in PFS and RR when compared to the current first-line therapies, gemcitabine and erlotinib + gemcitabine, which has not yet been seen in the trial data of AMG479, Abraxane, CO-101 and vismodegib. One exception is FOLFIRINOX, which showed a 3.1-month improvement in PFS, 22.2% improvement in objective RR, and 4.2-month improvement in OS as compared to gemcitabine alone in the Phase III trial. The FOLFIRINOX's PFS and RR data appear slightly better than the ones from TH-302's Phase IIb trial (6.0 month PFS, 27% RR for 340 mg/m2dose and 3.6 month PFS and 12% RR for control). FOLFIRINOX regimen showed lower rates of thrombocytopenia and neutropenia and greater rates of vomiting, diarrhea, and fatigue as compared to 340 mg/m2 TH-302 + standard gemcitabine regimen, as summarized in Figure 2. Both of these regimens, however, appear more toxic than the current first-line erlotinib + gemcitabine regimen. The more defined side effect profile of TH-302 + gemcitabine has to be established in Phase III. Likewise, the results of the FOLFIRINOX study need to be confirmed in a large U.S.-based trial.

A complete comparison of efficacy between TH-302 + gemcitabine and other chemotherapies cannot be done until OS data is released in 2H2012. The OS data is crucial to the evaluation of the overall efficacy, and risk/benefit of the drug. OS is a very objective endpoint. It is worth noting, though, that PFS tends to correlate with OS in pancreatic cancer, as suggested by other chemotherapy data summarized in Figure 1. It is likely that the Phase II PFS data will translate into improvements in OS when those data are announced. Of course, the PFS and RR data that are available today are less objective than the expected OS data and therefore need to be interpreted carefully.

There are a few reasons for caution. First, the released data were investigator-assessed and therefore, is open to bias. There have been several trials that looked very promising based on preliminary PFS data that ultimately failed on OS. These failures have been ascribed to investigator bias in assessing progression/response. Second, the trial was open-label, so it is possible that the doctors are biased in scoring progression although, according to the study protocol, progression was assessed radiologically as per RECIST criteria. This leads to more uncertainty in the outcome for this Phase II and the upcoming planned larger and potentially blinded Phase III trial. Lastly, the study had a crossover provision to TH-302. A total of 25 patients were crossed over to one of the two TH-302 + gemcitabine treating arms. Since this is a relatively small number as compared to the total patient size of 214, we believe the crossover provision should not affect OS. It should be noted that since patients had to progress first before they were eligible to cross over, cross over should have had no effect on the primary endpoint of PFS. We also believe, based on the breadth of the efficacy and toxicity profile for TH-302, including the dose response that an improvement in OS will be demonstrated when the data are released.

Figure 2. Toxicity Comparison

TH-302 + Gemcitabine (340 mg/m2) (N=74)

Erlotinib + Gemcitabine (N=282)

FOLFIRINOX (N=171)

Rash Grade 3/4

4%

2.1%

N/A

Fatigue Grade 3/4

4%

5.3%

23.6%

Vomiting Grade 3/4

8%

N/A

14.5%

Diarrhea Grade 3/4

4%

2.1%

12.7%

Sensory Neuropathy Grade 3/4

N/A

N/A

9.0%

Platelets Grade 3/4*

59%

10%

9.1%

ANC Grade 3/4*

59%

24%

45.7%

Hemoglobin Grade 3/4*

27%

N/A

N/A

% of Discontinuation Due to Toxicity

10.8%

3.5%

N/A

Click to enlarge

* Dose-limiting toxicity.

Source: Borad MJ et al. AACR 2012 Annual Meeting; Moore MJ et al. J. Clin. Oncol. 2007; 25(15):1960-1966; Conroy T et al. N. Engl. J. Med. 2011; 364:1817-1825.

Market Information

Pancreatic cancer is the fourth leading cause of cancer-related death in the US. In 2011, 44,030 patients were diagnosed with pancreatic cancer in the U.S., 37,660 of which died, according to the American Cancer Society. 80% to 90% of pancreatic cancer patients are not surgically treatable because the disease is locally advanced or metastatic when diagnosed. With an estimated cost of $8,0000 per patient, which some may consider too low, and 40% market penetration, TH-302 has potential to capture a market opportunity of >$1.2 B in the U.S.. Alternatively a higher priced product and even lower market penetration gives us a greater than one billion dollar opportunity. Given that approximately 280,000 new patients are diagnosed with pancreatic cancer worldwide every year, TH-302 faces a blockbuster opportunity in the pancreatic cancer indication alone.

Other Indications

Threshold is currently developing TH-302 in multiple cancer indications. In the absence of accelerated approval based on the Phase II data in pancreatic cancer, soft tissue sarcoma (STS) represents the fastest-to-market opportunity for TH-302. No front-line therapy has been approved in decades. TH-302 demonstrated good safety and efficacy when combined with doxorubicin in a Phase I/II trial, with a median OS of 17.5 months, a 6-month survival rate of 93% and a 12-month survival rate of 70%. Based on a 36% response rate seen in the Phase I/II trial, Threshold initiated a randomized, controlled, Phase III clinical trial in partnership with the Sarcoma Alliance for Research in September 2011, to compare the efficacy of TH-302 plus doxorubicin against single agent doxorubicin in 450 patients with metastatic or locally advanced unresectable STS. The primary endpoint of the study is OS with PFS interim, while the secondary endpoints are ORR, PFS, duration of response and PFS. Ziopharm (NASDAQ:ZIOP) is also testing its drug, palifosfamide, in STS indication. Other possible indications for TH-302 include prostate cancer, melanoma, acute myeloid leukemia (AML), lung cancer and head and neck cancer..

Financial Status

Merk KgA Partnership On February 3, 2012, Threshold Pharma licensed to Merck KGaA (OTCPK:MKGAF) worldwide rights to TH-302. In the United States, Threshold will have primary responsibility for development of TH-302 in the STS indication. Threshold and Merck will jointly develop TH-302 in all other cancer indications currently being pursued. In return, Merck will pay 70% of worldwide development costs of TH-302. Threshold received an upfront payment of $25MM, and is eligible for up to $525MM in development and commercial milestones and double-digit royalties on worldwide sales. Threshold also retains a 50/50 co-commercial option in the US. In addition, Merck paid Threshold $20MM for the positive pancreatic cancer Phase IIb data on April 11, and may pay an additional $35MM in potential near-term milestones. Threshold had $5.9MM in cash or cash equivalents and $14.4MM in marketable securities by end-2011. With an estimated burn of $6MM in cash, cash equivalent and marketable securities in 1Q2012, combined with all possible near-term payments from Merck, Threshold is expected to have approximately $80MM in cash or cash equivalent to support the ongoing and upcoming Phase III trials. With an average cash burn rate of $25MM per year, we think that Threshold will be in a strong cash position through 2014.

Milestones Threshold is expected to release full data including OS from the Phase IIb pancreatic cancer trial in 2H2012. If OS data is very strong, Threshold may file for approval of TH-302 in pancreatic cancer indication in the US and EU as early as in 2013. A randomized Phase III trial for TH-302 in the first-line pancreatic cancer indication is expected to begin in late 2012, and data collection is expected to be completed in end-2015. The data collection for the STS Phase III trial is expected to be completed in June 2014 and the study is expected to be completed in April 2015. Interim PFS futility analysis for the STS Phase III trial is expected to be released in early 2013.

Stock Valuation With total diluted shares of 53.6M and a stock price of $6.86, Threshold has a market cap of 356.7MM and an EV of approximately 316.4MM. Commercial sales of TH-302 may start as early as in 2014 if TH-302 is approved for the pancreatic cancer indication based on Phase II data. The NDA may otherwise be filed for FDA approval in the pancreatic cancer indication in 2016 or 2017, and in the soft tissue sarcoma indication in 2015, after Phase III trials. Under the current deal structure, Threshold is expected to share profits from TH-302 sales in the U.S., where the drug could reach blockbuster status.

To estimate the intrinsic EV of Threshold, we looked at four biotech companies currently trading on the Nasdaq: Alexion (NASDAQ:ALXN), Vertex (NASDAQ:VRTX), Amylin (AMLN) and BioMarin (NASDAQ:BMRN), among which the median EV/Sales multiple is 9.6. The four companies have annual sales ranging from 441.4MM to 950.9MM. With an EV/S multiple of 9.6, we estimated that the EV for Threshold should be ~$4.8B in 2020. With a beta of 2.38, the required rate of return (IRR) for THLD investors is roughly 23%. Using the IRR to discount the estimated EV in 2020 back to 2012, we estimated that the intrinsic EV of Threshold should be approximately $733MM, or 2.3x higher than its current level, which equates to a~$15 share price. Of course, the estimation heavily depends on the outcome of the Phase IIb OS data. In summary, we remain cautiously optimistic on Threshold stock outlook and believe that the stock should rise significantly should the company release positive OS data.


[1] Borad MJ et al. AACR 2012 Annual Meeting.

[2] NCCN Guidelines for Pancreatic Adenocarcinoma 2012.

[3]Burris HA III et al. J. Clin. Oncol. 1997; 15:2403-2413.

[4]Di Marco M et al. Oncol. Rep. 2010; 23:1183-1192.

[5]GruneWald R et al. Chemother. Pharmacol. 1991; 27:258-262.

[6] Poplin E et al. J. Clin. Oncol. 2009; 27(34):5859.

[7] Moore MJ et al. J. Clin. Oncol. 2007; 25(15):1960-1966.

[8] Conroy T et al. N. Engl. J. Med. 2011; 364:1817-1825.

[9] Kindler HL et al. American Society of Clinical Oncology (OTC:ASCO) Annual Meeting 2010.

[10] Abraxane® Label.

[11] Von Hoff DD et al. J. Clin. Oncol. 2011;29:4548:4554.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.