Since I covered Sesen Bio (SESN) in May, it has gone up 50%, and one of its major problems - lack of cash - has been resolved. It has now $63mn as of the June quarter, up from a meager $20mn or so it had earlier, which, with an approximate annual burn of $18mn, is quite good. Moreover, there have been fresh changes at management - notably, a new CEO has arrived. Overall, things are looking good for this rare nanocap with a drug in late phase 3 for a serious cancer indication.
Sesen Bio develops fusion proteins, a payload incorporating an anti-tumor antibody and a cytotoxin into a single protein molecule. Lead product candidate Vicinium "is a novel fusion protein currently in Phase 3 development for the treatment of patients with non-muscle invasive bladder cancer who have been previously treated with bacillus Calmette-Guérin (BCG)." BCG is the standard of care in this form of NMIBC for decades.
The need for this new treatment is that while BCG is very effective, many patients do not tolerate it, and the disease recurs. In that case, only a radical cystectomy or complete bladder removal surgery can save the patient. However, this leads to immensely difficult lifestyle changes, surgical trauma etc.
Also, traditional ADCs, Sesen Bio claims, have a problem in that often their payload and antibody separate before the molecule reaches the tumor, which creates off-target toxicity and lowers efficacy. The company claims that the Vicinium molecule is constructed of a more stable peptide linker that reduces the chances of this sort of separation, making it better than traditional ADCs.
Our interest in SESN is mainly because this is a small company that has been able to push a drug through a phase 3; which, as we know from the annals of biopharma, is a rare achievement. So, we ran SESN through the IOMachine couple months ago, and we found good reasons for its investability. Here's the upshot.
Catalyst:
The nearest major catalyst is 12-month data from a phase 3 trial of Fast Track designated Vicinium in Non-muscle invasive bladder cancer (NMIBC) in mid-2019. Preliminary data was released May 21, 2018.
Trial Data:
In an earlier phase 2 trial, the drug showed an approximately 40% CR rate. The data is as follows -
"A complete response to oportuzumab monatox was seen in 9 of 22 patients (41%) in cohort 1 and 9 of 23 (39%) in cohort 2 at the 3-month evaluation. A total of 20 patients (44%) achieved a complete response… Median time to recurrence in patients who achieved a complete response was 274 and 408 days in cohorts 1 and 2, respectively. Overall, 7 patients (16%) remained disease-free. Post-study assessment demonstrated that these patients were still disease-free at last followup (18 to 25 months). The most common adverse events were mild to moderate reversible bladder symptoms."
So, not only was there a decent percentage of CRs, but the CR was durable during a long follow-up period in a decent percentage of patients.
Similar data was seen in the interim data released in May, a runup to which, incidentally, saw the stock climb to 52-week highs. Phase 2 was 46 patients, phase 3 111 reported data in May, so a repeat of the data is a very good indication. There were three different cohorts here, two for carcinoma in situ (CIS) patients with two different recurrence periods after BCG, and one cohort with papillary disease. The data showed that 42%, 80% and 68% of patients from the 3 cohorts respectively had a CR at 3 months.
I said the data was similar because this sort of cohort breakdown data appears not to have been available in phase 2, so we are taking just the first cohort data here for comparison. This also reflects the FDA's new guidance for NMIBC trials which came after almost a year after SESN started the trial. A discussion is available here during the conference call.
Risks
As for risks, what I wrote earlier still stands - "the only caveat is adverse events. The serious ones, although few in numbers, are troublesome given their nature- "4% were serious or life-threatening. These included acute kidney injury or renal failure and cholestatic hepatitis." These are all kidney-related toxicities, and while this is not unusual in drugs of this kind, this is usually what troubles the FDA the most."
Now, another risk that has now become apparent is the new guidance from the FDA and how the trial is going to cope with it. The FDA has defined the trial eligible demographic as "recurrence CIS alone or with recurrent high-grade Ta or any T1 disease that is within 12 months of completion of adequate BCG therapy." So, while all three cohorts are eligible, more clarity is needed from the company on compliance with this guidance and CR goals set by the FDA with them, which we should get eventually. That means, we need to have more clarity on the CR threshold and whether the 42% range cuts it for the FDA.
The third risk, dilution, is resolved for now.
Competition:
Current SoC BCG is a live immunotherapy, and a few other immunotherapies like Atezolizumab (tecentriq) also work for the disease. A number of PD-1 inhibitors like nivolumab, pembrolizumab, durvalumab, and avelumab are in various phases of trial targeting the disease. Intravesical chemo with mitomycin C etc. are also given, often after BCG. Finally, there's surgery. However, Vicinium's novel approach, coupled with the strong data, will help it create a niche in the market.
In the US, bladder cancer has an annual incidence rate of about 80,000 and is the 6th most common cancer. Around 60,000 of these are NMIBC patients, and around 30,000 are BCG refractory or nonresponsive. Many of these patients are senior adults and need a non-surgical option. So, the market potential is huge.
Opinion:
When I covered SESN, I wrote:
"A definite buy at $1.8-ish with strong trading opportunities before you stock up for the upcoming catalyst and eventual PDUFA next year."
The stock is now trading at $2.2 but is still quite a way from its 52-week high. So, the opportunity still remains, as long as you consider the risk I discussed earlier, that of the nephrotoxicity issues, which, although minor, were clearly present.
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