The Horror Of Small-Cell Lung Cancer: CytRx Aldoxorubicin Survival Curves, Tails From The Cryptic

Dec. 14, 2016 1:56 PM ETCytRx Corporation (CYTR)87 Comments
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Summary

  • Small Cell Lung Cancer (SCLC) accounts for ~15% of lung cancers.
  • SCLC annual market predicted at 2.5 billion by 2024.
  • Current treatments for SCLC yield marginal results at best.
  • Adoxorubicin Phase 2 lack of event trigger is indicative of success.
  • The market can punish retail investors for picking winners.

Small Cell Lung Cancer, SCLC, is a rapidly progressing devastating disease that comprises approximately 15% of lung cancers. Life expectancy if untreated is approximately 3 months. Patients with SCLC who have failed prior chemotherapies have a poor prognosis with response rates (ORR) of less than 20%, and a progression-free survival (PFS) at about 3 months, with an average overall survival (OS) of about 8 months.

Epidemiology studies show a strong correlation with smoking and pollution. As these health hazards rise, so too does the incidence of SCLC, with 2016 market estimated at about 1.18 billion per year (Edison) with a noteworthy compound annual growth rate of 27.7% (GlobalData). For more on SCLC and its market estimates click here or here. The total lung cancer market is about $12 billion.

CytRx's (OTCQB:CYTR) Phase 2 SCLC study examines the efficacy and safety of aldoxorubicin in 2nd line of therapy. Patients with SCLC who have failed prior chemotherapies have a poor prognosis with response rates (ORR) of less than 20%, and a progression-free survival at about 3 months, with an average overall survival (OS) of about 8 months. 2nd line is also how CytRx examined aldoxorubicin in soft tissue sarcoma (STS) in Phase 3, and to eliminate any confusion, its Phase 2 STS study for aldoxorubicin in STS was a first line study, which can be reviewed here.

Data forthcoming from the company is in bits and pieces. There are reasons for cryptic release, including potential lawsuits if data is fully disclosed in its entirety when already contracted to be presented at a conference or symposium. What we do know is that the market responds horrifically to CytRx Corporation's aldoxorubicin data. Yet we have more than enough information to establish that aldoxorubicin is outperforming all other treatments in 2nd line STS and 2nd line SCLC.

This created nice PFS, OSS, and DCR rates in patient populations of the pivotal Phase 3 STS study, and generated nice OS "long tails" in 1st line STS Phase 2 patient bar chart analyses. Now we are seeing the same trend in the SCLC updates from the company as well. With careful analysis, partial data indicates SCLC results could well match or exceed STS for aldoxorubicin.

In spite of solid scientific data, there certainly is business side risk to investing in CytRx corporation. The company has about sixty million in cash but a lot of expenses are still in play, as drug manufacturing costs, FDA submissions, and clinical trial costs are significant. Still, the scientific risk is rapidly dissolving. Investment by big pharma in aldoxorubicin manufacturing and marketing could have a blockbuster payout for both the suitor and CytRx shareholders, given fair valuation and share structure.

We are biased and long on this stock, but that said have lost about 89% of our investment (so far) coupled to potential 120% dilution including warrants, all occurring within the past 9 months. Before we panic in the suspicion of death spiral financing deals, let's let the management make their moves and focus on the business side. We will review here the science, namely the SCLC Phase 2 study. Management has gotten CYTR a long way, and most recent dilutions seem to be designed to reward faithful institutions and get them reporting their positions as is required of positions greater than 4.99%.

So what information is available about CytRx's Phase 2 SCLC 2nd line study, the focus of this article? Taking information from company update September 7, 2016 here and more info from the ESMO poster presentation more recently here, as well as calling investor relations, David Haen, and using the scientific literature we can learn a lot.

Add to this some experience in processing scientific data, as we did with the Phase 3 STS study this summer, and we achieve reasonable predictive outcome, and to be honest, it looks really good. We also thank those who participate in public forums for valuable information provided there, despite the need for a dense information filter.

The study enrollment is 132 with a 1:1 ratio of aldoxorubicin-treated and topotecan-treated patients from 41 locations (though on the company presentation, it stated 136 patients). Like the 2nd line Phase 3 STS study, this study uses a treatment until progression regimen, potentially lengthening disease control intervals in responders. The primary endpoint is PFS, and the company has estimated in its poster that the median PFS (mPFS) will be 6.5 months for aldoxorubicin and 3.5 months for topotecan.

But let's pretend that the company didn't tell us they expected a 6.5-month mPFS. We were told the study fully enrolled Sept 7, 2016, and learned from calling investor relations that patients have had rolling enrollment and treatment since Nov 2015. When looking at paired t tests, the powering of statistical significance is much greater for comparing 40 pairs than 30 pairs. This is both because of leverage at higher N (statistical function phenomenon approaches critical mass), but also because 40 is over half of each treatment group's total (80 patients is ~60% of the total pool; approaches study population critical mass).

~60% is where you make decisions as a scientist whether you finish a study or look at something else (to save time and money). Peer review always wants at least 5 sites, or 5 batches of cells, etc., so after you've done 3 of them, it's time to analyze the data. Just add more hypothetical average data individuals in the phantom analysis to push your powering up if its close, and do more batches or sites later to meet those peer review requirements, FDA requirements, GCP compliance guidance, etc., once you are generating reliable data.

In a smoothly-timed dosing study, as are essential in PFS-weighted measures, 40 pairs would reach 60% dosing in early to mid-May, using the reasoning, simply, that 7 months into dosing is ~60% of the time interval between start and full enrollment. These patients all reach 3 months follow-up at end of July, with the potential for any long disease control in the cohorts to emerge from early treated patients.

Some topotecan non-responders were probably already evented early as well... We can guess 90% of 40 topo patients (35) progressed from literature, and less than 30 aldox (this would yield a DCR for aldox that is 2x the average DCR for topotecan in the literature, or 50% increase in the best performing topotecan study) or they would have aborted this trial.

For the purposes of processing population data, we could run paired analyses in statistical distribution programs as approximated estimates if necessary. But in contrast to the Phase 3 pivotal trial for STS, the results are so cut and dry, there is little need. This puts a few patients currently in the 14th month of follow-up at the high end, with all patients having 3 months follow-up.

This leaves us with an average of 8.5 months follow-up time. But since most clinical studies are back-loaded, and to be conservative, we would have estimated an mPFS of 7.0 to 7.5 months. So don't be surprised if the company was conservative on their 6.5-month estimate. I would also note that they conservatively over-estimated the expected mPFS for topotecan as well. This is not a strategy that reckless management would employ.

7 months average follow-up in a time-balanced study clears 2-fold the PFS of any topotecan study (between 2 and 3 months depending upon monotherapy or combination therapy, 1st or 2nd line, etc.) and the aldoxorubicin treated population has yet to have been announced as having reached PFS. For more about topotecan PFS measurements in the literature, read here, here, or here. There are some assumptions, such as maintaining balanced timing and pairing of patient groups necessary for reliable PFS measurements, a lesson the company learned when the interim Phase 3 data became unbalanced due to a compassionate use delay.

We also assume that the patients in this study that receive topotecan behave as is typical for the thousands of patients in the literature, and that there are no other confounding variables. So with this statistical subset, it's likely the investigators are favoring a positive outcome. We, however, favor an extremely favorable outcome, as PFS's statistical significance will be even higher as data matures, due to super-responder long tails.

Since SCLC is a fast-progressing disease, and topotecan does not yield a strong curative effect, it's easier to predict a positive outcome for aldoxorubicin because it's not competing head to head against strong disease control data. Topotecan has been shown to have about the same efficacy of several other marginal treatments for SCLC. It did, however, provide physicians with another option for treatment of SCLC, which indicates the landscape for SCLC approval is regarded as relaxed.

Those data would have reached greater separation of curves now in mid-December. In addition, the company indicated that it won't be until 2017 until they expect it, so it's not "on the bubble" it would seem. We could easily expect 60 of 66 total topotecan patients to have progressed at this point, so as few as 50 aldoxorubicin patients could trigger the 110 event analysis for PFS. Even 15 responders in the aldoxorubicin treatment group would exceed that expected for topotecan monotherapy by 3-fold. If previous trials are any indication for SCLC as they were in STS, super responders will really raise the statistical significance of the study over maturation, with the long survival "tail," even when early indications look pessimistic to non-scholars.

So we are learning that positive data doesn't equate to stock price, as it's never been lower. Looking more closely at this, and restating that there is a lot of business side risk here, December 13-15 is typically when each annual employee/company officer vesting occurs. We wouldn't expect the stock to appreciate until after directors are vested, which usually occurs at a relatively lower amount than the 200-day moving average. It is generally thought that vesting occurs at low values to decrease tax owed in the process, which would save the company some cash.

We certainly wouldn't expect a buyout to occur until directors were vested with the most possible options. The current landscape of biotechnology is that pharma is hungry for blockbusters, and aldoxorubicin is certainly that, with a 3 to $5 billion maximum annual market estimate for STS and SCLC, glioblastoma, Kaposi sarcoma, and off-label. As for dilution cycles, this is consistent with the buyout landscape too, as a suitor can decrease the amount paid out to retail and simply reacquire the cash paid to the seller.

Gifting existing institutional holdings in appreciation for funding the company's long road to success is yet another sign, especially when the company could probably stretch current cash reserves for 2 years with some minor adjustments. And before we get accused of "pumping," let's add that a potential merger, partnership, or buyout was discussed clearly in the most recent 10-Q.

We have no way of knowing if and when a buyout could occur, but to us it seems likely, eventually. Big pharma would want to get this production going without error. How good of an investment this will be remains to be seen, but being down 89%, and diluted over 120% just to break even, we ready ourselves to state the case of retail investors in order to respect the "America First" philosophy.

Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

This article was written by

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Strong Bio is a growth-focused analyst seeking identification of unique investment opportunities in biotechnology that arise as high probability market niche innovation or expansion based on scientific peer-reviewed evidence supportive of novel mechanism(s) of action.  By diligently screening investment candidates in multiple biotechnology sectors, initial position recommendations and reinforcing position pricing profiles can be systematically evaluated citing fundamental trends for investors to exploit.  If you would like to request that Strong Bio publish an article on a company of interest, please request by private message.  Strong Bio reminds the reader that investment in biotechnology can be considered high risk, and diversification of assets is a necessity.  Strong Bio is a personal branding of F. Thomas Crump, Ph.D., in an attempt to communicate with a biotechnology stock club that got too large to communicate with by text.  Strong Bio mobile app under construction.

Disclosure: I am/we are long CYTR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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