Mirati: Can Adagrasib Beat Amgen's Lumakras?

Summary

  • Mirati has a PDUFA on December 14.
  • Lumakras is already approved conditionally, with confirmatory data this year.
  • While adagrasib is marginally better in NSCLC, the real fight is in CRC and pancreatic cancer.
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inscription DISRUPTIVE INNOVATION on a notepad next to a calculator, pen and charts

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Mirati Therapeutics, Inc. (NASDAQ:MRTX), once a multibagger-quality stock, has stagnated because of a number of factors. The most important of these is that Amgen (AMGN) got its own KRAS drug, Lumakras (Sotorasib), approved way ahead of Mirati's adagrasib for adult patients with KRAS G12C-mutated locally advanced or metastatic non-small cell lung cancer (NSCLC) who have received at least one prior systemic therapy.

This is sad, because we have always known that adagrasib is at least marginally more efficacious than Lumakras in NSCLC, and more so in other indications. This is also ironic because now that Lumakras is not selling too well - Amgen even reduced the target population from 13,000 to 7000 - it should have had a positive effect on Mirati, but it is not. It is pulling MRTX stock down. So that's the first reason.

Then, last year, there was a C-suite reshuffle at Mirati. It was a benign thing. A new CEO came in in anticipation of commercialization, and he replaced a few people with others he thought were more suitable for a commercial company. This happens all the time; but this, too, took the stock down.

Then, thirdly, the FDA did its bit. Given its superior profile, Mirati was expecting a priority review with a 6-month review period along with an accelerated approval. The FDA did not agree and gave them the standard 10-month review period with a December 14 PDUFA. Amgen will release its confirmatory trial data at around the same time, so that may pose regulatory problems for Mirati.

Lastly, adagarsib's safety profile is a small but persistent concern. Despite having a low nanomolar potency, which enables lower dosage, the drug has a relatively poor safety profile compared to Amgen's. For example, there's "QT prolongation, which carries a risk of sudden cardiac death; this occurred in 14% of adagrasib-treated patients, but was not seen at all with sotorasib."

Here's some more adverse events data from phase 1/1b and phase 2 clinical trials:

Two patients in the 110-subject safety analysis died of treatment-related adverse events, one of pneumonitis and another of cardiac failure. Almost 5% of treatment-related adverse events led to the discontinuation of treatment. Around one-third of participants experienced grade 3 or 4 treatment-related adverse events, most commonly fatigue or increased levels of liver enzymes.

There was also a higher rate of nausea at 51% compared to Amgen's 10%, and diarrhea at 54% versus 25%. However, the company claims that these are manageable, and that the QT prolongation does not lead to arrhythmia, and also that there are successful drugs like Tagrisso and Xalkori which also have QT prolongation issues.

This is the bear story for Mirati. If you ask me, both drugs are running neck to neck in NSCLC. However, the key indications right now are Colorectal cancer as well as pancreatic and GI tumors, where Amgen's data either isn't as good as Mirati's.

Now we come to the bull case for Mirati. There are a number of reasons we are bullish on MRTX stock. First, Amgen's Lumakras is predicted to become a blockbuster drug, with sales estimates of $57mn for the fourth quarter (actual sales came to $45mn) and estimates of $350mn in 2022. If Lumakras can do so well, adagrasib, with its better and broader profile, one also can expect should do very well.

In terms of the profile, adagrasib has consistently outdone lumakras in tumor response rates in NSCLC. I have discussed this data before. Even with the latest long-term data we have for lumakras from the AACR22 (which adagrasib doesn't have, so this isn't a level playing field), adagrasib has been a few steps ahead of lumakras in response rates, 40.7% versus 43%. Now, cross-trial comparison is a problem, but, if you compare two molecules across multiple trials, and one molecule comes up ahead of the other every time, that tells us something.

Also, adagrasib has a half-life of over 24 hours, while lumakras is 5.5 hours. As I noted before, Sotorasib received accelerated approval last year based on data that showed that Sotorasib administered orally, at a dose of 960 mg once daily, reduced tumor size in 37.1% of participants, with a median duration of response of 11.1 months. 600 mg adagrasib twice a day has shown a 45% partial response.

Moreover, adagrasib has shown signs of response in a patient with an SK111 co-mutation, as well as another with a brain metastasis. The first one has a poor prognosis, so this is a solid achievement. As for the second one, crossing into the brain is always a big deal for a drug asset. Mirati is assessing NSCLC patients with secondary brain tumors in order to explore this opportunity.

Another opportunity for adagrasib is in combination therapies. Amgen's lumakras does not seem to have done too many combo therapy trials. Mirati, on the other hand, saw a 60% reduction in the tumor volume of a heavily pre-treated NSCLC patient who received MRTX849 and Novartis' experimental SHP-2 inhibitor TNO-155. It has also been tested with keytruda and erbitux, so we have data that the drug combines safely with other cancer drugs. This could also lead to approvals in earlier line indications.

Unlike lumakras, adagrasib also has superior data in CRC. CRC patients with a KRAS mutation have low historical OS and PFS. Adagrasib monotherapy has shown a median PFS of 5.6 months in the third-line setting, compared to only 2 months in historical data of standard of care regorafenib and LONSURE. In combination with cetuximab, adagrasib has shown an even stronger 43% response rate whereas lumakras has only achieved a 7% response rate, versus a 2% response rate for adagrasib monotherapy. In heavily pretreated patients with pancreatic ductal adenocarcinoma, as well, adagrasib has a 50% response rate.

Let me compare Amgen's position in advanced pancreatic cancer with the following quote from Cowen's Yaron Werber:

Comparing across studies, the populations appear equally advanced. The main difference is that Amgen's study had blinded independent central review (BICR). Given the 50% vs 21% cPR rate and mPFS 6.6 vs 4 mos for adagrasib vs Lumakras, it is unlikely that adding BICR to adagrasib's future studies will meaningfully bridge the gap. We envision both companies will advance into more formal Phase 2 studies this year.

Money matters

MRTX has a market cap of $4.6bn right now. Last year, when I covered it, it was nearly $9bn. The company has a cash balance of $1.5bn. Research and development expenses for the fourth quarter of 2021 were $153.8 million, and G&A stood at $43.5mn. At that rate, they have money for about 6-7 quarters; which is good, but not a lot, given that they will need funds for 3-4 years at the least before they became profitable - probably more. I think their spend is a little too much given they have mostly that one asset in late-stage pipeline.

There are analyst estimates I have come across which see adagrasib making $1.6bn in 5 years. As Mirati's CEO said at J.P. Morgan recently, adagrasib is going to be a big drug for a long time. I have outlined some of the risks to that thesis here. However, I tend to stay on the optimistic side.

Summary opinion

Mirati does not have an advantage over Amgen at present in NSCLC. Amgen is already approved, and while its sales are disappointing, the efficacy margin between the two molecules is small. In safety, Amgen may have a small advantage. That means, there may not be a major upside this year for MRTX, assuming the market acts logically.

Also note that Amgen has conditional approval, and it will release confirmatory data in late 2022. If that gets its full approval before December 14, I am not sure what the FDA will do with adagrasib's conditional approval.

However, adagrasib has CNS penetration and SK111 advantages, as discussed here, which will take another 2 years to pan out. Amgen doesn't have anything here.

Moreover, adagrasib has very good data in CRC and pancreatic cancers; Amgen doesn't, so far. These indications will take another 3-4 years to get to the market.

Bottom line

If I am optimistic about MRTX, I will say that the market will consider the future potential advantages while putting a value to MRTX stock - if it gets NSCLC approval. The market will not just consider NSCLC market potential, but will look at the whole thing together, considering NSCLC just a gateway to the broader indications market. If that happens, I see a strong upside from the current lows. MRTX's 52-week high is nearly $200. I think that's the benchmark price here if there's approval.

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Disclosure: I/we have a beneficial long position in the shares of MRTX either through stock ownership, options, or other derivatives. 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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