Sesen Bio: Interesting Price Drop After CRL

Nov. 24, 2021 3:10 PM ETSesen Bio, Inc. (SESN)4 Comments4 Likes

Summary

  • Sesen received a CRL in August.
  • Another trial will be needed.
  • Sesen held a Type A meeting with the FDA on Oct. 29 on the CMC questions.
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Sesen Bio (NASDAQ:SESN) has had a terrible few months after the FDA declined to approve Vicineum in BCG-unresponsive non-muscle invasive bladder cancer (NMIBC). The stock dropped from a healthy $5 to below $1 at one point and is currently straggling on at $1.22.

On Aug. 13, the FDA issued a CRL to the company, and the core takeaway is that it wasn't just about manufacturing:

The FDA has determined that it cannot approve the BLA for Vicineum in its present form and has provided recommendations specific to additional clinical/statistical data and analyses in addition to Chemistry, Manufacturing and Controls issues pertaining to a recent pre-approval inspection and product quality.

Sesen Bio's CEO Thomas Cannell, M.D., targeted the FDA (this quote is from Fierce Biotech):

"At the macro level, there is an unprecedented level of scrutiny at the FDA. Maybe the most scrutiny we've seen since the early 1960s," he said, noting that more and more companies have been receiving CRLs lately. "When you're under pressure, the risk-averse or the safer strategy will always be to punt the ball down the field and ask for more data."

Meanwhile, STAT NEWS reported that Sesen Bio's pivotal trial had a number of problems:

The 130-patient study had more than 2,000 violations, 215 of which were classified as major, STAT said. Independent monitors also reported three investigators to the FDA for a "serious noncompliance" that "placed subjects at risk of harm." A patient died in 2016 of liver failure related to the drug, and two years later, the company said that there were no drug-related deaths at a urology conference.

An interesting take on this I found on Fierce Biotech:

Monday, Jefferies expressed surprise and predicted a new trial to satisfy the FDA's concerns would take about three years to complete. When Fierce Biotech followed up with Jefferies' Chris Howerton, Ph.D., who penned the note with his colleagues, he said the issues raised by Stat do not match his conversations with Sesen's management... Howerton suspects that a whistleblower submitted documents to the FDA on the trial misconduct. He doesn't know exactly what happened, because Sesen's management had said they developed the VISTA trial in close coordination with the agency throughout the process. The study was also closely aligned with a recently approved clinical package for Merck's Keytruda.

Now, I was able to find out where Sesen said there was no death in the trial:

Source (Company PR on BusinessWire)

No grade 5 events, i.e., no deaths. I can't find where there was a death in 2016 of liver failure. However, there's a grade 5 renal failure reported in this source (Targetoncodoc):

The adverse events observed with Vicineum in the study were predominantly grades 1 and 2, and the frequency of AEs was similar across the various age groups explored. There were 4 treatment-related severe AEs reported in 3 patients. The severe events included grade 4 cholestatic hepatitis, grade 5 renal failure, grade 3 acute kidney injury, and grade 2 pyrexia. There was a 3% rate of treatment discontinuation related to AEs in the study.

The first quote came before the second one. That could be the explanation. I did not find reference to a liver failure, though. I might have missed it.

Now, Sesen held a Type A meeting with the FDA on Oct. 29 on the CMC questions, and the company says it "believes it has a clear understanding of what additional information regarding CMC is required for resubmission of the BLA." The press release for this meeting is here. This meeting resolves some but not all of the issues for Vicineum. There's still the issue of the new clinical trial.

A second type A meeting will be held later this year to discuss a new clinical trial, as the company outlined in their post-CRL conference call:

First, we will discuss with the FDA its request for additional clinical and statistical data. It appears that we will need to do a clinical trial to provide the additional efficacy and safety data necessary for the FDA to assess the benefit-risk profile, which is the basis for approval.

For some reason, the CMC meeting was held first. However, this trial meeting, still to be held, is the more important one.

The company further stated:

So, in our Type A meeting, we need to confirm several things with the Agency. First, we need to confirm that the primary endpoints should be Complete Response and Duration of Response. We will confirm that to have sufficient sample size and statistical power, the trial will need to be 90-100 patients, as described in the FDA guidance. We will confirm that it needs to be a 12-month trial, and we will confirm the study population. Once we get this feedback from the FDA, we will provide you with guidance on this topic as quickly and transparently as possible.

Now, this looks like they are thinking of a 2-3-year delay to the program as a result of the CRL. If things go well, the company says a BLA in 2023 is possible, so a PDUFA in 2024.

Now, I reached out to Sesen Bio on November 12, both through their website form and by an email to IR, requesting comment, specifically on the following:

Hello... I am working on covering Sesen's Vicineum and STAT's allegations. I am wondering if I can get a comment on the allegations broadly, and this bit in particular: "A patient died in 2016 of liver failure related to the drug, and two years later, the company said that there were no drug-related deaths at a urology conference. "Reference - Sesen Bio drug trial marked by misconduct, other issues, documents show... Now, my research shows a mention of "no grade 5 events" in this press release - Phase 3 Registration Trial for Non-Muscle Invasive Bladder Cancer Achieves 42% Complete Response Rate at Three Months in Carcinoma in Situ Patients. However, in this latter source, there's mention of a grade 5 event - FDA Grants Priority Review to Vicineum for High-Risk, BCG-Unresponsive NMIBC. However, these are renal events, not liver. Can you comment on these?

I received no response to this outreach. Of course, a company receives hundreds of emails every day and nothing much can be attributed to the lack of response. It's just that my question on whether there's any truth to the allegations has not yet been answered by the company, either directly to me, or, more importantly, in any public announcement.

Financials

SESN has a market cap of $231mn and a cash reserve of $175mn as of Sept. 30. Research and development expenses for the third quarter of 2021 were $5.0mn, and SG&E were $8.7mn. The company reduced 35% of their workforce after the CRL, including, I am guessing, the salespeople they had hired in anticipation of approval. There were one-time restructuring charges, but the reduction will save them a few million dollars in salary. So they have money, but probably not enough to last them three years. Meanwhile, they also have their Head & Neck program to push through approval.

Bottom Line

Sesen has had an interesting few months, and the current low prices surely seem attractive. However, until I get more clarity from the second Type A meeting, I will not be taking a buy call.

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