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When Harry Markopolos-the man who outed Bernard Madoff 10 years before the SEC even caught a whiff of the felon's Ponzi scheme-testified before the US Congress, one congressman asked him to name 'captured' agencies that no longer served the public interest … that is, agencies 'captured' by powerful financial and corporate interests that now served their interests. Without hesitation, Markopolos said: The FDA and the SEC…in that order.

Here is a transcript of the segment between Congressman Alan Grayson of the 8th District of Florida and Henry Markopolos.
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Congressman Alan Grayson: "You really have to start with the assumption that most of us in this industry really have our clients' interests coming first. Do you know who made that statement?"

Markopolos: "No."

Congressman Alan Grayson: "Mr. Madoff made that statement."

Congressman Alan Grayson: "Are you familiar with the concept of capture when you are talking about regulation? What is that? Do you know that concept?"

Markopolos: "Yes. It's basically when the regulator is in bed with the industry they purport to regulate and do not regulate the industry. In fact, they consider the industry the client, not the public citizens."

Congressman Alan Grayson: "And have you seen that in action?"

Markopolos: "Yes. At the Food and Drug Administration and at the SEC."

Well, we're about to have a front row seat and see just how true this may be. The venue is the forthcoming advisory committee the FDA soon will convene to review JNJ's (NYSE:JNJ) application for Zytiga (abiraterone acetate) plus prednisone, a treatment for asymptomatic or mildly symptomatic chemotherapy-naïve patients with metastatic castration-resistant prostate cancer.

As you will recall from last March, "[T]he Independent Data (Safety) Monitoring Committee-IDMC-overseeing the pivotal Phase 3 trial unanimously recommended unblinding the study based on a planned interim analysis in which differences in radiographic progression-free survival, or rPFS, overall survival, or OS, and secondary endpoints were observed that constitute evidence of clinical benefit as well as continued evidence of favorable safety in patients receiving abiraterone acetate plus prednisone as compared to those receiving placebo plus prednisone. Based on these results, the IDMC also recommended that patients in the placebo arm be offered treatment with Zytiga." In fact, Zytiga reduced the risk of prostate cancer worsening or death-the definition of progression-free survival-by 57% compared to a placebo. And the chances of the results being a chance occurrence were less than one-hundredth of 1%.

After an initial burst of giddy enthusiasm for the drug by some in the medical community and the media, some more insightful members of the press pressed JNJ for details regarding one of the two primary endpoints: OS. As it turned out, the trial had not achieved statistical significance (stat sig) for overall survival. Here are the data.

rPFS: The data demonstrate a statistically significant improvement in rPFS in the abiraterone acetate plus prednisone arm (Zytiga arm) of the study compared to the placebo plus prednisone (control) arm. The median rPFS in the control arm was 8.3 months, but a median had not yet been reached in the Zytiga arm because progression events were occurring more slowly in the Zytiga arm compared to the control arm (N=150 vs. 251, respectively). The Hazard Ratio (NYSE:HR) equaled 0.43, there was a 95% confidence interval (NYSE:CI): [0.35, 0.52], and the p-value was <0.0001.

OS: Treatment with Zytiga plus prednisone resulted in an estimated 33 percent improvement in survival (median overall survival in the Zytiga arm was not reached and was 27.2 months in the control arm; HR=0.75; 95% CI: [0.61, 0.93], p=0.0097). At the time of these interim analyses, the pre-specified p-value of 0.0008 to achieve statistical significance was not reached. With the strict requirement of achieving less than 0.04 at the final look, there is the possibility the trial still could achieve stat sig OS. (According to a Commenter on Pharmalot, the final alpha (upper bound for p-value to be considered successful) for the trial is 0.0389.) However, with patients in the placebo arm now crossing over and taking Zytiga, the ability to demonstrate stat sig OS is problematic.

Let's review the study, dubbed COU-AA-302 ('AA-302'). This was an international, randomized, double-blind, placebo controlled Phase 3 study that included 1,088 men with mCRPC who had not received prior chemotherapy, who were randomized to receive abiraterone acetate (Zytiga) 1,000 milligrams-mg-administered orally once daily plus prednisone 5 mg administered twice daily or placebo plus prednisone 5 mg administered twice daily. The co-primary endpoints of the study are rPFS and OS. One 'cycle' of dosing comprises 4 weeks of Zytiga treatment (co-administered with prednisone), and the full treatment for the patients on the treatment arm of the study was just under 14 months.

Today, as when the trial was stopped on March 8, 2012, people still wonder why it was unblinded. According to Deutsche Bank analyst Robyn Karnauskas, "JNJ may have wanted to stop the trial now instead of later because the Zytiga patent expires in two years." Wells Fargo analyst Larry Biegelsen sought to dispel speculation the trial was unblinded due to patent concerns. "Zytiga," he writes, "is protected by a new chemical entity patent that expires in 2016, suggesting generic competition is unlikely, although not impossible, until 2017. Any confusion may be traced to a composition of matter patent listed in the Orange Book, which," he writes, "will expire in 2014." There's also possibility, however, that with Medivation's (NASDAQ:MDVN) enzalutamide (aka MDV3100) coming down the pike, competitive pressures forced JNJ to take the risk of stopping the trial and accelerating the timeline for Zytiga approval in the pre-chemo indication to get the jump on a competitor.

Regardless of whether or not the trial should have been stopped, several highly respected people in the industry are calling it a failure. Among them is David Miller, writing for Minyanville, who stated: "Well, the drug certainly has a benefit for patients. But the AA-302 trial was a failure. Don't take my word for it. Look up the presentations on the American Society of Clinical Oncology-ASCO-Web site (you may have to pay) and listen to [Duke University's] Dr. Susan Halabi's discussion of the data. She called it a failure, too."

What are they talking about? If you take a look at around the 15-minute mark of the Zytiga ASCO presentation, you will see one of the strangest Kaplan-Meier analyses I have ever seen. The treatment and placebo arms of the study do NOT separate for nearly 18 months! Here's the critical graphic. (Courtesy ASCO Daily News; presentation by Dr. Charles Ryan).

One might posit the bizarre behavior of the Zytiga K-M analysis can be explained by a very long median PFS and OS for the patients in the control arm. These indicators suggest that many of the patients enrolled in the trial must have been healthy. So, it would seem plausible that the long period taken for the survival curves to separate may mean Zytiga provided no benefit to them while their health remained good.

Eventually the curves for the Zytiga Phase 3 K-M analysis did separate, but they did so beyond the point when patients were taken off the treatment (that is, at 14 months). Specifically, no survival effect was seen until month 18, or 4 months beyond the point where the patients had been taken off the drug (and prednisone).

Of concern, too, perhaps, is the fact that 69% of patients in the treatment arm (Zytiga + prednisone) discontinued treatment at the time the trail was stopped (versus 84% of patients in the placebo + prednisone arm). Some ASCO participants found these results 'surprising,' though David Miller of Biotech Stock Research (personal communication, June 4, 2012) does not believe these numbers are out of line for a trial of this nature.

Importantly, an earlier Zytiga trial ('AA-301') showed the Hazard Ratio worsened with longer observation time. JNJ undoubtedly knew that over time, the HR at 'AA-302' termination, 0.75, probably would degrade to something closer to 0.80. The trial might still achieve stat sig, but the worsening HR at the subsequent final look could raise eyebrows. This, too, might have been a factor in the decision to terminate the 'AA-302' trial.

In sum, then, there are those who believe the IDMC had good reason for recommending termination, given the study had achieved stat sig PFS and the survival data were reasonably good even if they failed statistical significance.

That said, about 50% of the patients were known to take subsequent therapies such as Taxotere or Provenge by the time the interim analysis was performed. So, there now is a question how these therapies impacted the trial. The 18-month overlap of the survival curves might have been an indication these treatments were as effective as Zytiga during that period. Then, too, even though the curves managed to open up, now that the trial has been unblinded, patients could overwhelmingly start secondary treatments, including crossing over to Zytiga. This would have the effect of causing the curves to close. Put another way, we may ask this question: can the trial achieve statistical significance for OS if many of the patients cross from the placebo arm and take Zytiga? These are but a few of the many issues upon which the debate regarding FDA approval will almost certainly be focused in the months ahead.

So…what will the FDA do? To quote an old idiom, that's the $64,000 question. Will Dr. Richard Pazdur, ODAC Chief and 'Cancer Czar' of the FDA compromise on his principles, which require strict adherence to statistical rigidity and which define overall survival as the 'gold standard' for the approval of cancer drugs? Or will he and his panel hold their noses, look the other way, and dance to JNJ's tune, giving the nod to Zytiga for pre-chemo use? To do the latter not only would raise questions regarding the FDA's willingness to regulate independently the industry it is mandated to oversee, but also, lower the bar for future drug approvals, opening the Mother of all Pandora's Boxes.

If history is a guide, the odds to not favor Zytiga approval in the pre-chemo space. As noted by Miller in his discussion of Cell Therapeutics' (NASDAQ:CTIC) filing for their drug pixantrone (Pixuvri) for non-Hodgkin's lymphoma 2 years ago "The FDA rarely approves drugs when companies deviate from the planned trial protocol." (Indeed, the application was rejected. The drug still is not approved.) What's so puzzling in the case of the Zytiga 'AA-302' trial that the next interim analysis was planned for the second quarter of 2012 (June 2012?) based on the expectation that 425 deaths (55 percent of the expected death events) would have occurred by then. Halabi told Peter Droppert of Xconomy after her presentation it was highly likely this interim analysis would have crossed the O'Brien-Fleming boundary and shown a statistically significant overall survival advantage for abiraterone in chemotherapy-naïve patients.

So, why didn't JNJ wait a little longer? Why, indeed? As Droppert also noted, "The judgment of the DMC has to be questioned. The decision to unblind the study means that the 'interim' data… is (sic) effectively the final data for the randomized trial. Unblinding a study introduces biases, which essentially turns a well-controlled randomized study into an observational one… By halting the study early, patients in the placebo group are now being switched over to Zytiga, which makes the comparison between the drug group and the placebo group less clear."

What will the FDA do? That's anybody's guess. But one thing's sure, the proceedings will be a cliffhanger!

Stay tuned!

Technical Analysis

The Daily chart, courtesy StockChart.com, shows JNJ's stock continuing to drop from its high last April. Relative Strength is weak, and MACD is negative.

On the Weekly chart, the stock has broken through the 50-week moving average, and appears headed down towards the 200-day moving average, which currently stands just below $58. The Relative Strength is falling, and the MACD is negative.

Source: Will The FDA Dance To J&J's Tune On Zytiga?

Additional disclosure: Disclosure: I do not own JNJ and do not intend to initiate a position within 72 hours of the time of publication of this article. I am not a registered investment advisor and do not provide specific investment advice. The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. It is up to investors to make the correct decision after necessary research. Investing includes risks, including loss of principal.