ArQule's (ARQL) recent discontinuation of its phase III trial of tivantinib for treating non-small cell lung carcinoma (NSCLC) was a devastating blow for the company's flagship product as it did not appear to be providing results to meet its primary endpoint, overall survival. The late-stage failure sent the company's shares plummeting over 56% as the time and revenue invested in the product failed to materialize into regulatory approval and anticipated subsequent earnings. With a similar mechanism to Exelixis's (EXEL) phase III candidate, cabozantinib, many investors may assume the worst for the upcoming PDUFA decision date on November 29th. However, deeper research into the drugs' mechanisms and targeted indications are very different as we shall see below.
Like cabozantinib, ArQule's tivantinib is a c-Met (mesenchymal-epithelial transition factor) inhibitor. The dysregulation of the c-Met pathway has been implicated in many cancers in promoting tumor growth, survival, angiogenesis, invasion and metastasis. In a November, 2011 issue of Therapeutic Advances in Medical Oncology, an article described the pathway stating that "Abnormalities in c-MET signaling have been reported to correlate with poor clinical outcomes and drug resistance in patients with cancer. Significant progress has been made in advancement of c-MET pathway inhibitors through to clinical trials…" With this statement in mind, one must also consider the article's description of the two drugs' mechanisms. It describes them saying "Several strategies have been developed to inhibit the c-MET signaling pathway in cancer, each focusing on one of the serial steps that regulate MET activation….. These strategies include selective c-MET kinase inhibitors such as tivantinib (ARQ 197), JNJ-38877605 and PF04217903 which have specific selectivity for c-MET receptor tyrosine kinases; nonselective c-MET kinase inhibitors such as PF02341066, cabozantinib (XL184), GSK1363089, MK-2461, MP470 and MGCD265 which have broad activity against c-MET and other receptor tyrosine kinases…"
So, we see significant difference number one: tivantinib is a selective c-MET kinase inhibitor while cabozantinib has broad activity against c-MET and other receptor tyrosine kinases. The article goes on to describe tivantinib as a "highly selective, non-adenosine triphosphate (ATP)-competitive c-MET inhibitor" later in the article. It then describes cabozantinib as "an oral, potent tyrosine kinase inhibitor that blocks c-MET, VEGFR2, AXL. KIT, TIE2, FLT3, and RET signaling." In theory, tivantinib has the potential to specifically target the c-MET pathway, which would have be great if the assumption is made that the c-MET pathway dysfunction was the root cause of the cancer. Additionally, with the correct pathway targeted, it may have had better efficacy if there was no evolution of the cancer in which dysfunctional signaling in other pathways other than c-MET may have begun taking place to allow the cancer to continue on in an evolved state. Meanwhile, cabozantinib, with a more diverse signal-blocking pathway capability, could theoretically target either a wider range of cancers (in any of the drug's pathway inhibitions) or could more effectively treat a c-MET implicated cancer by also targeting any mutations of the cancer to continue growth using other signaling dysregulation including the noted VEGFR2, AXL. KIT, TIE2, FLT3, and RET pathways (although the company only acknowledges the MET, VEGFR2, and RET pathways).
Although tivantinib's NSCLC-fighting days have probably come to an end, ArQule's partner in development, Daiichi Sankyo (DSKYF.PK), noted in the company's disappointing press release that it would continue investigating the drug's use in other tumor types as failure in one indication does not necessarily constitute failure in another indication. Conversely, success in one indication also does not promise success in another indication. Tivantinib's life is probably not over, and cabozantinib's life is only remotely associated with tivantinib's as the two drugs have similar but still very different mechanisms. Likewise, the NSCLC group that tivantinib targeted (and failed in treating) is dramatically different than cabozantinib's metastatic medullary thyroid cancer (MTC).
While the PDUFA date for cabozantinib isn't until November 29th, six weeks away, investors were supposed to have a chance to hear an opinion from a panel of experts in the form of the FDA's Oncologic Drugs Advisory Committee meeting on November 8th and 9th. Notes from that panel, combined with the panel's opinion on whether the drug should be approved or what other actions it thought should be undertaken before approval, would have been share price catalysts on their own. They would have added to the share price volatility that would ensue from then to the PDUFA date. However, Exelixis released a statement on August 29th revealing that cabozantinib had been removed from the committee's agenda. The implications for this decision vary with positive and negative conclusions depending on how it could be construed. In the coming "bulls vs bears" arguments, the bulls won with shares increasing from the August 30th $4.33 closing price to the September 21st closing price of $5.55. Since then, share price has stabilized in the mid to upper $4 range.
Ultimately, cabozantinib's success in not only MTC, but also the other varied cancers it is being evaluated for, is not contingent upon removal from or inclusion in the FDA advisor committee agenda, failure or success in similar (but different) mechanism therapies utilized in dramatically different indications, or in stock chart technical analysis. The drug's success in the upcoming November PDUFA is predominantly contingent upon efficacy and safety profiles. While the phase III tivantinib trial was terminated due to lack of proof of improvement of overall survival in NSCLC, cabozantinib's trial continued on to completion and met its primary endpoint of improving progression-free survival (PFS), with patients in the cabozantinib arm achieving a median PFS of 11.2 months relative to 4.0 months for patients in the placebo arm. With more icing on the cake, the secondary endpoint of overall response rate (ORR) was also met with 28% in the cabozantinib arm versus a 0% in the placebo group, a sobering reminder of the need for an effective treatment for the indication. Although not guaranteeing a positive regulatory decision in November, the phase III EXAM trial, evaluating the drug's efficacy and safety in MTC, was conducted under the FDA's Special Protocol Assessment program. Under this agreement, if the EXAM trial met the primary endpoint of PFS, the company would receive full approval for U.S. marketing.
With cabozantinib's efficacy apparently meeting primary and secondary endpoints, the safety profile for the drug should also be considered. In a news release addressing the apparent success of the trial and its data as presented at ASCO 2012, the trial's safety profile was noted in stating " The most frequent adverse events (AES) of grade ≥ 3 with greater than 2% incidence in the cabozantinib arm were: diarrhea (16%), palmar-plantar erythrodysesthesia (13%), fatigue (9%), hypertension (8%), decreased weight (5%), decreased appetite (5%), and stomatitis (2%). The most frequent adverse events of grade ≥ 3 with greater than 2% incidence in the placebo arm were: diarrhea (2%) and fatigue (2%)." Based on these observations, the safety profile seems impressive if not just acceptable, considering the alternative of 4 months PFS as noted in the placebo group. However, the only concern pertaining to approval followed as the release noted deaths not directly related to MTC disease progression. Deaths occurring within 30 days of treatment cessation occurred in 5.6% of patients receiving cabozantinib versus 2.8% in the placebo arm. The company attributed a large portion of the difference to 1.9% of the treatment arm deaths being due to events commonly associated with VEGF-inhibition events.
Above we have a bullish case for cabozantinib's possible regulatory approval on or before November 29th. With the FDA recently handing out some approvals much earlier than the PDUFA date, such as the September 1st FDA approval of Astellas Pharma s Xtandi to treat metastatic CRPC three months ahead of its November 22 decision date, share price volatility in EXEL will likely continue to November 29th or earlier regulatory decision. Shares are currently trading in what appears to be a consolidation mode before the run or drop to the PDUFA date. However, as investors continue to research the company, its pipeline, cabozantinib's clinical data not only for MTC but its other ongoing trials, volatility will likely ensue and provide both day traders their desired volatility and long-term investors the dips they desire for good entry points. Short interest has also increased to over 38 million shares as of September 28th and will provide additional volatility as those traders will also be forced to make tough decisions from now to the decision date. Potential and current shareholders are advised to thoroughly research and determine if their risk assessments give a resounding "yes" or "no" for holding shares through the decision date or if they wish to simply day trade their positions while taking advantage of the likely volatility ahead.
Disclosure: I am long EXEL.