Deciphera Presses Forward Towards NDA Filing After Positive Data And Large Cash Raise

Aug. 20, 2019 6:55 PM ETDeciphera Pharmaceuticals, Inc. (DCPH)

Summary

  • Deciphera announced positive data from the phase 3 study using ripretinib to treat patients with fourth-line and fifth-line plus gastrointestinal stromal tumors.
  • With the positive phase 3 data on hand for ripretinib, the biotech will be able to file a NDA to the FDA by Q1 of 2020.
  • The next most advanced clinical product in the pipeline involves rebastinib, which is being explored in combination with paclitaxel and cisplatin in separate studies to treat patients with solid tumors.
  • Deciphera had $225.4 million in cash as of June 30, 2019, but decided that it would take advantage of the instant rise in the stock price; enacted a public offering to raise $400 million to fund its pipeline.
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Deciphera Pharmaceuticals (NASDAQ:DCPH) announced that it had achieved positive results in a phase 3 study, using its drug ripretinib to treat patients with fourth-line and fifth-line plus gastrointestinal stromal tumors (GIST). With these latest results, the biotech holds the potential to file its very first NDA in this patient population in Q1 of 2020. The company reported that it had met on the primary endpoint of progression-free survival, which should be good enough for FDA approval. Additional detailed results from this late-stage study will be revealed at an upcoming medical meeting.

Phase 3 Study Looks Good Enough To Move Towards FDA Approval

The phase 3 study was known as INVICTUS. The study recruited patients with gastrointestinal stromal tumors. GIST occurs when abnormal cells are formed on the tissue of the gastrointestinal tract. Some symptoms associated with this type of cancer is blood in the stool or vomit. There are three organs that are part of the gastrointestinal tract: Stomach, large intestine (colon), and small intestine. A big problem with GIST is that they have mutations of tyrosine-protein kinase KIT (KIT) or platelet-derived growth factor alpha (PDGFRa) kinase. These genetic mutations are responsible for the tumors progressing in disease and being able to create a type of resistance against certain therapies. The ideal option would be to use surgery first and foremost. Although, sometimes the tumor can't be removed by surgery. Then, it falls upon tyrosine kinase inhibitors (TKIs). Such TKIs include:

  • Sunitinib
  • Imatinib
  • Regorafenib

These are typically good therapies if they actually work in treating the patient. As I highlighted above, GIST is driven by genetic mutations of KIT and PDGFRa. The problem is that these genetic mutations drive resistance against therapies. The patients recruited into the phase 3 INVICTUS study were patients who had already failed on 3 prior therapies. In essence, these are fourth-line and fifth-line patients with GIST. Patients were randomized into the study 2:1 to receive either 150 mg of ripretinib or placebo once-daily dosing. The primary endpoint was progression-free survival (PFS). Those who were treated with ripretinib achieved a median PFS of 6.3 months, which is really good compared to placebo with only a median PFS of 1 month. This amounts to a reduction in the risk of disease progression or death by 85%. This PFS finding was statistically significant with a p-value of p<0.0001. The secondary endpoint of objective response rate was not achieved with statistical significance. That means the company didn't even need to evaluate overall survival. Still, in my opinion, gaining the primary endpoint of PFS will at least help these patients who have no alternatives. They have already exhausted through 3 other prior therapies without any success. Being able to at least see a sharp reduction in disease progression for this population is somewhat ideal. With all these results on hand, Deciphera will be able to file an NDA to the FDA in Q1 of 2020.

Backup Product Reduces Investor Risk

Deciphera has several other drugs in its pipeline. However, besides the phase 3 study, the next most advanced drug in the pipeline is rebastinib. This is an oral drug that inhibits TIE2 immunokinase. What is TIE2? It is a receptor for angiopoietins, which are an important family of vascular and macrophage growth factors. In essence, angiopoietins drive angiogenesis which causes the growth of new veins and arteries from preexisting blood vessels for a tumor. In turn, TIE2 is believed to be the root cause of tumor growth. Rebastinib is responsible for inhibiting this activity. This drug is being developed to treat patients with solid tumors. Matter of fact, there are a few shots on goal laid out for this cancer drug. The first of which provides investors with a catalyst to look forward to in the latter part of this year. At least, Part 1 of the phase 1b/2 combination study using rebastinib in combination with paclitaxel to treat solid tumors had already been completed. Part 2 of this study was initiated already and is enrolling patients. It is expected that this portion of the study will report results in the second half of 2019. This will be another major catalyst opportunity for investors to look forward to in the near term. A second phase 1b/2 study had been initiated as well. However, this study is looking at combining rebastinib with a chemotherapeutic agent known as carboplatin. The goal here is to see if rebastinib has synergistic effects with these chemotherapies.

Financials

According to the 10-Q SEC Filing, Deciphera Pharmaceuticals had cash, cash equivalents, and marketable securities of $225.4 million as of June 30, 2019. The biotech did get some upfront cash from a deal it made back in June of 2019. It had formed a partnership with Zai Lab Ltd. to develop and commercialize ripretinib in the Greater China region. This allowed Deciphera to obtain an upfront payment of $20 million. It would only be eligible for an additional $185 million upon milestones being reached and royalties in place. Being that this would not be enough cash, it quickly moved to enact a cash raise just the other day. In my opinion, the stock had a massive climb higher and it was an opportunistic time to raise cash. It closed a public offering by selling 10.8 million shares at $37 per share, along with underwriters' over-allotment option for another 1.6 million shares. In total, Deciphera was able to raise $400 million to fund its ongoing clinical studies.

Conclusion

Deciphera obtaining positive results from its phase 3 study using its drug ripretinib for fourth-line and fifth-line plus GIST is good news for the biotech. That's because it can move on to file a NDA to the FDA for approval. Matter of fact, the filing is set to occur in Q1 of 2020. The risk is that there is no guarantee that the FDA will approve ripretinib for this indication. The company is expected to release full detailed results from this phase 3 study at an upcoming medical meeting, which would provide further upside for the stock. There is another catalyst opportunity as well. This involves part 2 data from the phase 1b/2 study using rebastinib in combination with paclitaxel to treat patients with solid tumors. This data is expected to be released any day now in the second half of 2019. It is still risky because the data may not be positive. In which case, that may cause the stock to trade lower. Having said that, this biotech has a pipeline full of different clinical products. Its most recent phase 3 data has de-risked its ripretinib drug. I believe this biotech will be in good shape for the long term.

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