By Carolyn Da Wang, Ph.D. and Andrew I. McDonald, Ph.D.
Table 1. Summary of key events in November
Sources: LifeSci Advisors
Dynavax Technologies (DVAX) - advisory committee meeting on lead vaccine HEPLISAV
The FDA advisory committee meeting to discuss the Biologics License Application (BLA) for Dynavax's lead candidate HEPLISAV as an adult hepatitis B vaccine will be held on November 15th. The PDUFA date for HEPLISAV's is set on February 24th, 2013. HEPLISAV induces faster, higher and more durable responses in the Phase III trial, and stands to become standard of care. Some analysts are predicting sales of $500M by 2018. The key discussion will be around the risk/benefit profile of HEPLISAV, which we don't have a strong view on. Given the stock price at $4.25, shares outstanding of 178.7MM, cash of $148MM, debt of $14.4MM, this correlates to an EV of $626M (as of November 6th), we believe the market is pricing in a positive vote. In the unlikely event if the vote is negative, the shares of DVAX could trade down to as low of near cash, or ~$1.
HEPLISAV is a novel adjuvant vaccine against hepatitis B in adults. It combines the traditional hepatitis B vaccine antigen with Dynavax's first generation immunostimulatory sequence (1088 ISS), which can activate the innate immunity and enhance the adaptive immune response. In clinical trials, it has demonstrated a higher protection rate (95% vs. 81%) with fewer doses (two doses in one month vs. three doses in six months) compared to the current standard of care Engerix-B. HEPLISAV has also been shown to be more effective in difficult-to-immunize patients. Most importantly, HEPLISAV should significantly increase the compliance rate as only 50% and 30% of patients return for the 2nd and 3rd shots for the current vaccine. It appears to have a safety profile comparable to that of Engerix-B.
The global market for the hepatitis B vaccine is estimated at $700M. HEPLISAV's target market is adults at risk for hepatitis B infections, including populations with chronic kidney disease (CKD), chronic liver disease, HIV and diabetes. Dynavax is planning to target the CKD, HIV/Liver disease and difficult-to-immunize patient population first. The diabetes patients market represents a much larger opportunity, with 25M patients in the U.S.
On the flip side, the FDA was concerned about the elicitation of autoimmune response as a potential serious side effect of this novel adjuvant vaccine. The Phase III trial was put on hold in 2008 after a reported case of Wegner's granulomatosis (inflammation of blood vessels) and resumed in 2009 after the FDA reviewed this case. Pending the outcome of the November 15th meeting, the agency may be comfortable with the risk/benefit profile of this class of vaccines and approval appears likely.
Exelixis (EXEL) - FDA decision on lead thyroid cancer drug cabozantinib
The FDA will decide on Exelixis's lead compound cabozantinib for treatment of metastatic medullary thyroid cancer (MTC) on November 29th. It was granted priority review by the agency in July. The drug is largely de-risked in the sense that we have seen Phase III data, the commercial potential for this indication may be limited due to the small patient population.
Cabozantinib is a dual inhibitor of c-Met and VEGFR2, drug targets that are involved in various types of metastatic cancers. In the Phase III pivotal trial EXAM, cabozantinib met the primary endpoint of significant improvement in progression free survival (PFS 11.2 months vs. 4.0 months of the placebo group, HR = 0.35). The overall response rate was 28%. The efficacy was somewhat comparable to its major competitor, AstraZeneca's (AZN) Caprelsa (PFS 22.6 months vs. 16.4 months in placebo-treated group, HR = 0.28). Cabozantinib has a better safety profile than Caprelsa, which carries a warning for Torsades de pointes (a ventricular tachycardia) and sudden death.
A concern for the FDA may be the higher death rate within 30 days after cessation of the drug compared to the placebo group (5.6% vs. 2.8%); the difference was largely attributable to events commonly associated with VEGF-pathway inhibition according to the company. Medullary thyroid cancer (MTC) is a relatively modest market with only 1,000 - 1,500 patients in the U.S., and some analysts estimate global sales of cabozantinib for MTC at only ~$80M. Cabozantinib was granted orphan drug designation by the FDA in 2011.
Much of cabozantinib's expected value - and EXEL's stock price- lies in the treatment for metastatic castration-resistant prostate cancer (mCRPC), which is currently in Phase III trial and expected to conclude in 2014. Though mCRPC represents a much larger opportunity than MTC, it is also a more competitive space with significantly higher regulatory hurdles. Other drugs (Provenge by Dendreon (DNDN), Zytiga by Johnson & Johnson (JNJ), and recently launched Xtandi by Medivation (MDVN)/Astellas) have demonstrated overall survival benefit in clinical trials, increasing the risks associated with regulatory approval and commercialization.
ACADIA Therapeutics (ACAD) - Phase III data of lead drug for Parkinson's disease psychosis
ACADIA is expected to release the top line results for the Phase III pivotal trial of its lead compound pimavanserin for treating Parkinson's disease psychosis (PDP) by the end of November 2012. Investors have low expectations for the success of this trial, as ACADIA failed a previous attempt on the same indication. However, the trial may have a chance to produce statistically significant results based on the revised protocol this time, and it could be the first approved drug for this particular indication if the results are positive. The company is also planning to conduct a confirmatory trial pending the success of this trial. Commercial launch could be expected in 2014-2015 if successful. Pimavanserin is also in Phase II clinical trial for Alzheimer's disease psychosis (ADP) and schizophrenia. At ACAD's current price level of $2.42, cash of $23MM, shares outstanding of 56MM, and an EV of $114M, investors are largely discounting the possibility of positive results. Therefore there will be substantial upside if the trial achieves statistical significance. With the estimated $200M global sales for PDP alone, the stock can easily triple on positive news.
Pimavanserin is an inverse agonist of the 5-HT2A receptor, a major target for many antipsychotic drugs. It failed to produce statistically significant results due to larger than expected placebo response and high variability in the previous Phase III trial in 2009. In the current trial, ACADIA recruited patients with more severe symptoms, who should have a lower placebo response rate, and implemented centralized data review process to lower the variability. The 198-patient, randomized, multi-center, double blinded, placebo-controlled study is 90% powered with p = 0.05. The bullish view is that if subgroup analysis from the previously trial, which achieved p = 0.025, replicates in the current trial, then the study will be a success. Pimavanserin has so far demonstrated a satisfactory safety profile, with adverse event rates similar to that of placebo during the 6 week treatment.
The number of U.S. and EU patients for PDP and ADP is estimated at about 3M. Common antipsychotic drugs (such as risperidone and olanzapine) interfere with the treatment for the motor symptoms associated with Parkinson's disease antagonists to the major therapeutics target dorsal striatal dopamine D2 receptor. Pimavanserin selectively targets 5-HT2A without interfering with the D2 inhibitor, therefore it is uniquely suitable for application in this patient population. There are estimated about 400K PDP and 1M ADP patients seeking medication each year in the U.S. and EU, representing $240M and $600M sales opportunities for each indication for ACADIA.
AVEO Pharmaceuticals (AVEO) - update on FDA acceptance of NDA
AVEO Pharmaceuticals and its partner Astellas are anticipating an FDA decision on acceptance of the NDA for their lead compound tivozanib for the treatment of advanced renal cell carcinoma (MRCC) in November or December. There has been a fair amount of uncertainty around this regulatory move as FDA expressed concerns about the overall survival rate of those undergoing tivozanib treatment, which was numerically inferior to the active control arm with Onyx's Nexavar based on the interim data released. The current stock price of $7 and EV of $163M reflects pessimistic sentiment among investors about the regulatory prospects and market potential of tivozanib. However, AVEO does appear to be undervalued as tivozanib demonstrated the best numerical PFS as the first-line therapy for mRCC and a superior safety profile with good tolerability, which makes it very marketable to physicians. Also, the stock has a fairly solid support with $4 cash value and two other Phase II clinical programs targeting colorectal cancer and breast cancer.
Tivozanib is the 8th entrants into the $2.4B global mRCC market, which is currently dominated by Pfizer's (PFE) Sutent, with more than half of the market share. Tivozanib's Phase III TIVO-1 trial involved comparison to Nexavar, the first drug approved for mRCC. The median PFS was 11.9 months in the tivozanib treatment arm compared to 9.1 (HR = 0.797, p = 0.042) in the Nexavar arm. The PFS was 12.7 months in a prospectively defined sub-population of patients who were treatment-naive, which made up 70% of the study population, and represents the major target market for tivozanib. It is numerically superior to Sutent in this same population (11.0 months in the pivotal trial, 9.5 months in the recent COMPARZ trial) and Votrient (11.1 months in the pivotal trial, 8.4 months in COMPARZ). Tivozanib also had a superior safety profile, with only 12% dose reductions compared with 52% for Sutent and 36% for Votrient, and 18% dose interruptions compared with 38% for Sutent and 42% for Votrient, in the respective pivotal trials.
The key concern is the overall survival data, as interim analysis showed one-year survival rates of 77% in the tivozanib arm compared with 81% in the Nexavar control arm. However, it is worth noting that these data are not statistically significant and that they were likely impacted by a one-way crossover element in the design of the trial, in which all patients randomized to the Nexavar arm were eligible, upon confirmed disease progression, to cross over and receive tivozanib as the second line treatment. There has been a high use of this cross-over. As of earlier in 2012, 60% of patients randomized to the Nexavar arm went on to receive an active second line therapy, of which 96% received tivozanib, while only 12% of the patients randomized to the tivozanib arm received an active second line therapy. Considering the high cross-over rate, the compelling PFS data and a clean safety profile, tivozanib stands a good chance to get FDA clearance as long as the final overall survival data is reasonable. Nevertheless, the NDA acceptance may be a meaningful catalyst for the stock as investors will then be focused on a potential advisory committee meeting.
AVEO and Astellas have launched a Phase II trial called TAURUS, a head to head study against Sutent with a focus on patient preference to emphasize tivozanib's superior safety profile. Tivozanib is also in Phase II clinical trials as part of a combination therapy for breast cancer and colorectal cancers.
Table 2. Market and financial data of the companies (as of Nov 1st, 2012)
Sources: Bloomberg, LifeSci Advisors