Below is my traditional end of the year summary and a recap of catalysts for 2015. As always, I did my best to cover the most important events, let me know if I missed anything… I would like to use this opportunity and wish the readers of this blog a happy and prosperous new year.
Incyte (+42.5% in 2014)
Jakafi continues to grow – Incyte (INCY) had a strong 2014 thanks to continued growth for Jakafi in myelofibrosis (MF), label expansion to another blood disorder (PV), and positive data readouts from several pipeline programs. The company’s most important growth driver remains Jakafi, which is continuing to grow sequentially and is expected to generate $120M in Q4 2014 (US sales+ royalties from Novartis).
Last month’s approval for in PV should help Incyte to accelerate growth although there is still a debate regarding commercial opportunity. PV is much more prevalent but also less severe than MF, so the number of patients who need new drugs like Jakafi is difficult to assess. Incyte believes the US opportunity is 25,000 whereas some claim there is a very small therapeutic void in PV. With annual cost of almost ~$90k, even a 10% market share translates to $225M in annual sales in the US.
Incyte initiated a broad campaign for Jakafi in solid tumors based on a subset analysis from a randomized phase II in pancreatic cancer. I found the data somewhat underwhelming but there appears to be a great deal of excitement around this direction.
First P3 success for baricitinib in RA – Also in December, Incyte and Lilly (LLY) announced positive phase III results for baricitinib (Jak1/2 inhibitor) in rheumatoid arthritis (RA). This was the first phase III readout of 4 pivotal trials for baricitinib in RA (the other three are expected to read out in 2015). The drug is now significantly de-risked but its commercial potential is unclear given the disappointing experience with Pfizer’s (PFE) Jak inhibtor , Xeljanz.
Incyte and Lilly will have to differentiate baricitinib in order to turn it into a blockbuster, as one would expect from an oral agent for RA. It is still unclear how different the clinical profiles of the two drugs are but given the different selectivity profile, baricitinib may have a distinguished safety profile.
Selective Jak1 inhibitor in P2 – Incyte has a selective Jak1 INCB047986 in development for RA. In theory, Jak1 inhibitors may have a better safety profile compared to baricitinib and Xeljanz. Galapagos is leading this segment with GLPG0634, which generated positive results in a small phase II trial.
IDO program takes center stage – Incyte’s IDO inhibitor (INCB24360) generated a lot of interest based on preliminary results in melanoma in combination with Yervoy. Despite the preliminary nature of the data, the market is very excited with INCB24360, with some analysts assigning $2-3B in sales for the compound. IDO was further validated as a target after Genentech in-licensed NewLink’s (NLNK) IDO program in a deal that included a $150M upfront payment. INCB24360 is being evaluated in combination with four (!) different PD-1/PD-L1 antibodies.
Major catalysts for 2015 – In 2015, investors will focus on Jakafi’s sales trajectory with a particular focus on market penetration in PV. The most important event for Jakafi will actually be phase III readout from a competing program in MF. CTI’s (CTIC) pacritinib (Jak2/Flt3 inhibitor) may be Jakafi’s first competitor to reach the market. The drug demonstrated activity in MF with lower incidence of thrombocytopenia compared to what is seen with Jakafi. CTI and its partner, Baxter, plan on using this as a distinguishing feauture and gain market share in patients with low-platelet counts. Safety profile beyond thrombocytopenia is going to be a critical hurdle for pacritinib due to Flt3 inhibition. In 2013, Sanofi terminated its Jak program despite positive phase III results due to rare neurologic toxicities.
The IDO combination studies with Yervoy or PD-1 antibodies could also have data in 2015 although with the exception of the Yervoy study, results will probably include suboptimal doses in a limited number of patients.
Two additional programs that could emerge in 2015 as important value drivers are INCB047986 (Jak1 inhibitor) and INC280 (MET inhibitor).
INCB047986 may advance to phase III pending positive phase data II in RA. The phase II is small (60 paients) but should be enough for generating an efficacy signal. It mirrors the proof of concept trial for Galapagos’ Jak1 selective compound that led to the lucrative option agreement with Abbvie (ABBV). Galapagos should have phase IIb data in H1 2015, which should indicative of INCB047986’s potential.
INC280 is in multiple phase II studies that could read out during 2015. It is being evaluated as monotherapy in “MET dependent” tumors and in combination with Iressa in MET+ lung cancer. After years of setbacks, MET inhibitors are regaining momentum thanks to optimal patient selection. To date, three different MET inhibitors from Pfizer, Amgen (AMGN) and Abbvie have demonstrated promising activity in biomarker-selected tumors. As a highly selective MET inhibitor that is being evaluated in various MET+ tumor types, INC280 may have multiple routes for accelerated approval announced in 2015.
Seattle Genetics (-20% in 2014)
The AETHERA debate – The major event in 2014 was the AETHERA data that evaluated Adcteris as maintenance treatment following stem cell transplant in HL. The maintenance setting represents a modest commercial opportunity (~100M) but the trial was important for supporting Adcteris’ growth in 2015-2016 before the next label expansion (Pivotal data in CD30+ CTCL expected in 2015).
The AETHERA study demonstrated an overwhelming benefit in PFS (43 vs. 24 months!), however, there was no survival benefit. The lack of survival benefit, which may be explained by cross-over (patients on the control arm had access to Adcteris) and limited follow up, was disconcerting to many investors. The main concern was around physicians’ willingness to treat every patient immediately after transplant, which is potentially curative in HL. Without a proven survival benefit, physicians may prefer not to expose every patient to Adcteris and treat only those who relapse.
Although it will take years to validate this, the PFS curves suggest that maintenance Adcteris has a reasonable chance to improve cure rates based on a 20% absolute difference at 2 years (65% vs. 45%). If this benefit is maintained over time (as the graph implies), it should translate to a dramatic survival benefit at the tail of the OS curve. Therefore, I believe the potential to increase cure rates should make maintenance Adcteris widely used as the risks (16 three week cycles with a relatively mild safety profile) are outweighed by the potential benefit.
Competition from PD-1 antibodies– Adcetris’ undisputed leadership in HL was called intoquestion after two PD-1 antibodies (BMS’ Opdivo and Merck’s Keytruda) reported impressive activity (including in patients who progressed on Adcteris). The two antibodies had response rates of 87% and 66% respectively, similar to what Adcteris generated in its pivotal study (73%). Responses appeared durable, and based on experience in other diseases, some of these responses will hopefully lead to long term remissions.
It is easy to see why the market is concerned about PD-1 antibodies taking market share from Adcetris, that was heralded as a revolution in the treatment of HL after decades of stagnation. Until now there was only one “wonder drug” in HL, now there is another highly effective class of drugs. The risk of displacing Adcetris clearly exists, but is still low in my opinion given the early nature of data (small single-arm trials tend to over-represent real efficacy), the established role of Adcetris for HL and the possibility to pursue combination regimens.
Going forward, combining Adcetris with a PD-1 antibody represents a promising approach given the high single-agent activities and the non-overlapping toxicities. Adcteris+PD-1 has the potential to become the most effective regimen in HL history and may even replace chemotherapy and stem-cell transplant in many cases. Cost may be an issue (depending on treatment line) but can be justified by increased cure rates.
2015 – Looking for the next value drivers –Adcetris remains Seattle genetics’ primary asset and is expected to generate ~$210M ($175 in sales + $35M in royalties on Ex-US sales) for the company in 2014. As this run rate represents most of Adcetris’ commercial potential based on the current label, focus is on expanding Adcetris’ use as well as developing additional products. Unless one or both occur, it will be hard for the market to justify the current $4B valuation.
Seattle Genetics has 4 internal ADC (antibody drug conjugate) programs in development (SGN-CD19, SGN-CD33A, SGN-LIV1 and SGN-CD70A) and a large partnered pipeline including multiple programs with Roche, Pfizer, Abbvie and Celldex’s (CLDX) glembatumumab vedotin (In a pivotal trial).
To date, despite the multiple shots on goal the company could not identify its “next Adcteris”. This experience represents the general experience with ADCs, where early enthusiasm based on Adcetris and Kadcyla was followed by disappointing results for other ADCs. This is also mirrored by the experience Immunogen (IMGN) had with its internal and partnered pipeline.
As a result, ADCs are not as hot as they were few years ago, but Adcetris clearly prove that the right target and ADC technology can generate clinical breakthroughs. Therefore, based on the amount of projects in the clinic and technological advances, 2015 could see an improvement in the sentiment towards ADCs.
SGN-33A is Seattle Genetics’ most visible program based on initial data at ASH and the fact CD33 is considered a validated target (based on Mylotarg). Phase I data at ASH demonstrated clear efficacy at the dose escalation portion with a CR rate of 27% (6/22) for the top three doses. Anti-leukemia activity that did not qualify as a CR was seen in the majority of patients (see figure below).
30-day mortality of 2% implies a very good safety profile although there were some safety signals. Durability of responses is another open question given the short follow-up. If responses are maintained for several months (median of ~5 months or above), SGN-33A could become Seattle Genetics’ next value driver.
The company’s partnered pipeline has more than 15 programs, the most advanced of which is Celldex’s glembatumumab vedotin (ongoing pivotal study had to be modified due to low enrollment rate). Roche may start pivotal studies with polatuzumab vedotin (anti-CD79b) in NHL, although recent combination data wit Rituxan demonstrated tolerability issues. Another Roche ADC, lifastuzumab vedotin (Anti-NaPi2b), may have randomized phase II data in ovarian cancer. Lifastuzumab demonstrated a 40-50% response rate in ovarian cancer with high NaPi2b expression, which bode well for chances of a positive outcome.
Data readout is expected from many additional wholly-owned and partnered programs currently phase I. These include Seattle Genetics’ LIV1 program and programs from Pfizer (Anti-5T4), Bayer (Anti-C4.4a) and Genmab (Anti-TF).
Genmab (+62% in 2014)
All about daratumumab – Genmab’s (GEN.CO) primary asset continues to be daratumumab (Anti-CD38), which is in a broad and aggressive development program led by J&J (JNJ). During 2014, daratumumab continued to generate positive results in multiple myeloma, especially in combination with approved regimens. In contrast, Genmab’s marketed CD2 antibody, Arzerra, had a disappointing year after phase III failure in DLBCL and what appears to be an inferior profile compared to Roche’s Gazyva in CLL.
Pivotal data in myeloma in Q2 2015 – The biggest event in 2015 will be phase II data in double refractory multiple myeloma patients, a setting for which daratumumab has breakthrough therapy designation. Based on precedents with Velcade and Kyprolis, a response rate of 25% with a 6-month duration of response should be sufficient for accelerated approval. The most recent update for daratumumab monotherapy at ASCO demonstrated a 35% response rate at the highest dose tested (16 mg/kg, 20 patients). Activity in the lower dose (8 mg/kg, 29 patients) was a disappointing 10%, much lower than I had expected based on the original phase I response rate (30-40%). Assuming activity at the 16 mg/kg cohort corroborated in the ongoing phase II, daratumumab could be filed already in 2015.
Early stage programs gaining visibility – Earlier stage programs may start to generate interest and position Genmab as an antibody powerhouse. The anti-TF ADC is the most advanced program (in collaboration with Seattle Genetics), which is expected to have first clinical data in 2015. Genmab recently unveiled a second ADC with Seattle Genetics (Anti-Axl) and has another program (Anti-CD25) with ADC Therapeutics in preclinical development.
Genmab’s bispecific antibody platform (DuoBody) is also expected to have considerable newsflow in 2015. Its primary partner is J&J, which has a broad collaboration covering 20 bispecific programs. The first program of this collaboration (Anti-MET/EGFR) is expected to enter the clinic in 2015.
Morphosys (+34% in 2014)
Still one of the broadest antibody pipeline in the industry – Morphosys (MOR.DE) continues to have one of the broadest antibody pipelines in the industry with three internal programs in clinical development. The market ascribes significant value to the company’s massive partnered pipeline (19 antibodies), three of which are in pivotal trials run by Novartis (NVS), J&J and Roche.
Morphosys’ shares came under pressure recently after the failure of Roche’s gantenerumab in a pivotal trial in Alzheimer’s Disease. Although other trials with the antibody are ongoing, this failure creates a lot of uncertainty around the program and the amyloid-beta theory in general. It should also curb investors’ excitement around the recent announcement by Biogen (BIIB) regarding positive phase II data for BIIB-037 in Alzheimer’s Disease.
Paradoxically, Morphosys’ most important proprietary asset is MOR202 (Anti-CD38), (partnered with Celgene [CELG]), has been in the clinic for over three years without publishing any data. The excitement around MOR202 is based on promising efficacy with other CD38 antibodies from Genmab and Sanofi (SNY). MOR202 is 2 years behind Genmab and its partner J&J but the significant commercial opportunity coupled with a partnership with the world’s leader in multiple myeloma are enough to keep investors excited.
MOR208 (Anti-CD19), licensed from Xencor (XNCR) is in phase II for CD19+ blood cancers. Despite clear efficacy, I view this product is undifferentiated and in many cases inferior to other CD19-targeting therapies (including bispecific antibodies and CARs). In addition, the competitive landscape in most of the pursued indication has become very challenging.
Potential readouts in 2015 – In 2015, MOR202 will continue to garner a lot of interest , with expected data in multiple myeloma and potential initiation of pivotal studies. 2015 should see a significant amount of data readouts for Morphosys’ partnered programs, the most important of which will be from randomized trials. These include Bimagrumab (Novartis, Anti-ActRIIb) for muscle wasting, LFG316 (Novartis, Anti-C5) for dry AMD/ geographic atrophy and tarextumab (Oncomed [OMED], Anti- Notch 2/3) for pancreatic cancer.
Clovis Oncology (-5.5% in 2014)
Safety concerns still overshadow rociletinib’s potential – 2014 was a rollercoaster year for Clovis (CLVS), as investors struggled to assess rociletinib’s (CO-1686) true value. The focus in 2014 was on comparing rociletinib to AstraZeneca’s (AZN) AZD9291 as both drugs have similar efficacy (cross-trial comparison) in patients with T790M+ lung cancer but differ in their safety profiles. As I previously discussed, I still believe the market is ignoring the significant near term potential Clovis represents.
Clovis came under pressure at ASCO due to concerns around hyperglycemia, which was not seen with AZD9291. Later in 2014, these concerns turned out to be overblown as the hyperglycemia was easily manageable with a commonly used oral drug (metformin). Rociletinib’s advantage is the lack of skin toxicities which were observed in a significant portion of patients on AZD9291 although most cases were not severe.
Pipeline advancing with two promising programs – Clovis has two additional programs that garnered little interest during 2014, despite preliminary positive data.
Rucaparib (PARP inhibitor) had promising results in ovarian cancer patients whose tumors had a BRCAness signature based on a proprietary panel Clovis is co-developing with Foundation Medicine (FMI). This was the first time a PARP inhibitor demonstrates meaningful activity in a subgroup of ovarian cancer beyond BRCA+ patients. Results validate Clovis’ approach and could differentiate rucaparib from other PARP inhibitors, including Astra’s Lynparza that just got approved for BRCA+ ovarian cancer.
Lucitanib (VEGFR/FGFR inhibitor) did not have new data in 2014 but phase I results from a European study demonstrated remarkable efficacy in a subset of breast cancer patients. Ongoing studies in lung and breast cancer are currently enrolling patients with the purpose of validating or disproving the initial signal. The most intriguing aspect of the lucitanib story is the dramatically better efficacy in patients who appear to derive limited benefit from selective FGFR inhibitors (from J&J, Astra, Novartis). This can theoretically be explained by the drug’s broader selectivity profile, and if validated, could challenge the widespread perception that high selectivity is always better.
Regulatory submission expected in 2015 – The major event for 2015 will be filing for accelerated approval based the ongoing single-arm phase II. Everybody agrees that given the robust efficacy observed to date (~65% response rate), filing and approval are extremely likely. The debate is how well rociletinib will be able to compete with AZD9291, which is also expected to be filed in 2015. Bulls argue rociletinib’s safety profile will enable it to capture a meaningful market share whereas bears argue that patients will prefer AZD9291 given the comparable efficacy and lack of hyperglycemia.
Debate to stay alive until 2017 – The market share question will remain unanswered until 2017, after both drugs have sufficient time on the market. Until then, investors will carefully track how Clovis and AstraZeneca build the basis for label expansion through combination regimens (where Astra has a clear advantage) and opportunities beyond T790M+ NSCLC (1st line strategy, T790M- NSCLC). Clovis expects to have preliminary data from a head-to-head phase II trial vs. Tarceva in 1st line patients. If results are positive, the trial will be expanded to a pivotal study. AstraZeneca already started phase III in the same setting.
SAGE Therapeutics (+21.6% in 2014)
In November 2014, SAGE (SAGE) reported phenomenal data for its lead program (SAGE-547) in Super-Refractory Status Epilepticus (SRSE). SRSE is a condition in which patients experience persistent uncontrolled seizures and are usually placed into a medically induced coma to halt seizures. Treatment with SAGE-547 led to a positive outcome in 8 of 11 (73%) patients who were successfully weaned off anesthesia. The trial did not have a control arm but success rate with available treatments is ~25%. A similar response rate (71%) was observed in seven patients who received the drug under emergency-use IND Applications.
Looking for regulatory clarity – In 2015, SAGE’s main mission will be to get regulatory clarity from the FDA regarding the path to registration and start pivotal studies. A breakthrough Therapy Designation is also likely based on the robust efficacy reported to date.
Marinus as a potential competitor – SAGE Investors should also track Marinus (MRNS), which is developing ganaxolone, an almost identical drug to SAGE-547 with the same mechanism of action (GABAA positive modulator). In contrast to SAGE-547, ganaxolone is given orally with epilepsy as the primary indication. Marinus disclosed it is working on an IV formulation following the SAGE-547 data but it is unclear whether it intends to pursue SRSE or other indications with this formulation. Marinus is evaluating ganaxolone in two orphan indications (PCDH19 female pediatric epilepsy and fragile X syndrome) and is traded at a significant discount relatively to SAGE (market cap of $161M and $998M, respectively).
Aerie Pharmaceuticals (+69% in 2014)
In 2014, Aerie (AERI) continued to advance its lead glaucoma drug, Rhopressa, as single agent or co-formulated with latanoprost (Roclatan). The major event in 2014 was positive data for Roclatan, demonstrating superior and consistent reduction in IOP (intraocular pressure) throughout the evaluation period.
2015 will be a make or break year for Aerie, with phase III readouts for both Rhopressa and Roclatan (mid-2015). Based on the robust phase II data generated to date, likelihood of positive outcomes is very high, and given the significant market opportunity ($1B+) may lead to an acquisition by year-end.
Foundation Medicine (-3% in 2014)
Foundation Medicine (FMI) continued to prove the utility and robustness of its platform in identifying actionable mutations, which was done either in collaboration with clinicians or biotech companies (Agios, Clovis) that used FoundationOne for patient selection in their clinical studies. From a commercial perspective, the company is expected to finish the year with $60M in revenues (implies a P/S of x11).
The bull/bear debate for Foundation Medicine does not focus on its approach (using multi-gene panels based on NGS) but more on the company’s ability to cope with future competition.
The bear thesis for FMI is based on the fact that anybody can do tumor profiling using NGS. This is exemplified by countless NGS initiatives at academic centers as well as recent announcements from diagnostics and pharma companies that intend to enter this field (see examples here and here). This may turn tumor profiling into a very competitive and price sensitive market, favoring either very large companies or non-profit organizations. Lack of reimbursement is another major concern, as it is unclear if and when broad reimbursement will be obtained.
The bull thesis for FMI relies on the company’s early mover advantage and market experience as the only company with meaningful commercial track record. Bulls (myself included) claim that due to the critical nature of tumor profiling (guiding treatment decisions), the bar for widespread adoption is very high. This includes technical parameters (accuracy, reproducibility, number of genes per test, user interface etc.) but also regulatory and clinical parameters (clinical outcomes, cost effectiveness) that require significant time and resources. There is also the issue of market awareness and branding, where FMI has a clear advantage. Therefore, while the NGS market will probably be commoditized, tumor profiling application could stay a highly regulated segment with high entry barriers.
Effort to grow sales and expand coverage in 2015 – 2015 will be an important year for assessing Foundation Medicine’s position in the tumor profiling market. As personalized medicine is gaining popularity, demand for the company’s panels should increase (analysts expect a near doubling in revenues to ~110M in 2015) but investors should also track commercial performance for competitors such as Labcorp and Quest Diagnostics. On the reimbursement front, it will be interesting to see if Foundation can expand coverage beyond the recent win with Priority Health.
Progress with Agios’ (AGIO) IDH inhibitors and Clovis’ PARP inhibitor should be viewed as positive as Foundation Medicine will sell companion diagnostics for these drugs (if approved). As I previously discussed, these programs represent significant commercial opportunities.
Esperion Therapeutics (+191% in 2014)
Positive P2 outcome – The main 2014 event for Esperion (ESPR) was a positive outcome from a large phase II trial for its cholesterol drug, ETC-1002. The data set was a home run, demonstrating a 27-30% reduction in LDL-C vs. 21% for commonly used Zetia. Combining ETC-1002 with Zetia led to a 43-48% reduction, which bodes well for co-formulation of the two drugs. In contrast to Zetia, ETC-1002 had a meaningful effect also on CRP levels (marker associated with inflammation), which might enhance the benefit of classic LDL reduction. Lastly, the safety profile was favorable but this will have to be corroborated in larger and longer trials.
LDL hypothesis corroborated by IMPROVE-IT – Another important event for Esperion (and other lipid lowering drugs) was positive results from IMPROVE-IT. The trial showed that Merck’s Vytorin (combination of Zetia and a statin) decreased the incidence of major cardiovascular events compared to statin monotherapy. The magnitude of effect was modest (6%) but it reaffirms the direct link between LDL reductions and long term outcomes as well as LDL as an approvable endpoint. This removed a major overhang for Esperion, which will probably not be required to have long term outcome data prior to approval (same goes for PCSK9 antibodies).
Pivotal roadmap to be defined in 2015 – Catalysts for 2015 include data readouts for two additional studies, evaluating ETC-1002 in patients with hypertension as well as in combination with statins. The company should also have long term toxicology data in animals that should enable it to start pivotal trials. As the only oral drug with a clear LDL-lowering effect and a new mode of action, ETC-1002 has become very attractive to any company with a CV franchise. Therefore, Esperion is an obvious acquisition target with a market cap of $637M and a potentially $2B drug.
Array Biopharma (-4% in 2014)
Getting rights for binimetinib was the major event in 2014 – For Array (ARRY), 2014 was characterized by uncertainty around the fate of binimetinib (MEK inhibitor), originally licensed by Novartis. Novartis had to return binimetinib back to Array following the acquisition of GSK’s oncology portfolio which includes another MEK inhibitor (Mekinist). The uncertainty around binimetinib was not only about whether Array will get the drug but also regarding commercial terms and access to Novartis’ investigational drugs that are tested in combination with binimetinib.
In December 2014 Array announced an agreement with Novartis that included extremely favorable terms for Array (discussed last month). The agreement resolves all the major issues by providing Array with $85M in cash, continued support for ongoing P3 trials as well as access to Novartis’ investigational programs for future studies.
2015 will be transformational – In 2015 Array is expected to officially get binimetinib rights back and take control of its global development program. This event will be transformational for Array, which will have global rights for a phase III compound with tens of active clinical trials (including three pivotal studies). Although Novartis agreed to pay Array $85M upfront and continue to fund the pivotal studies, Array will have to invest aggressively in additional clinical trials in order to stay competitive with other MEK programs. Therefore, a major fundraising and a new partnership are likely during 2015.
Data readouts expected for 2015 – In terms of data readout, binimetinib should have results from a pivotal study in NRAS+ melanoma as well as multiple early stage combination trials. Array’s second most advanced program is filanesib (KSP inhibitor) for multiple myeloma, with phase II data expected during 2015. The most important readout will be for selecting patients based on AAG levels. Without patient enrichment, filanesib’s value proposition is low given the modest single-agent activity and side effect profile.
Array’s partnered pipeline is also expected to generate clinical data, including pivotal data for AstraZeneca’s selumetinib (MEK inhibitor) in uveal melanoma. Array’s partnered pipeline remains undervalued with multiple programs that could reach clinical proof of concept. These include two programs with Genentech (Akt and Erk inhibitors ), Oncothyreon’s ONT-380 (HER2 inhibitor) and VentiRx’s VTX-2337 (TLR8 agonist).
Stemline Therapeutics (-16% in 2014)
The major event for Stemline (STML) in 2014 was initiating a pivotal phase II for SL-401 in BPDCN, a rare and fatal blood cancer. This was based on good efficacy observed in a small trial following a single treatment cycle. Because SL-401 contains a bacterial toxin that is highly immunogenic, the major concern with SL-401 is the generation of neutralizing antibodies in patients that will limit the number of cycles each patient can get. Stemline reported durable responses after 1-2 cycles, implying that short-term treatment is effective at least in some cases.
The ongoing phase II trial will have a run-in phase in which multiple cycles will be assessed (this portion is enrolling patients with BPDCN or AML). The optimal regimen will be used in an expansion cohort of 40 BPDCN patients that can potentially serve as the basis for accelerated approval. Data from the run-in and expansion stages are expected in H1 and H2 2015, respectively.
Even if SL-401 continues to demonstrate good activity, investors should also track Macrogenics’ (MGNX) MGD006, a bispecific antibody against CD123 in phase I for AML. The program should have initial data in 2015 and may compete directly with SL-401 (both target CD123). MGD006 should not have immunogenicity issues and is therefore more suitable for chronic use but its clinical profile is difficult to predict.
Conatus Pharmaceuticals (+12% in 2014)
Conatus (CNAT) is developing emricasan (pan-caspase inhibitor) for the treatment of chronic liver diseases. The rationale behind caspase inhibitors relies on their ability to decrease cell death and tissue damage (and consequently inflammation). Therefore, emricasan has potential utility in every disease characterized by progressive tissue destruction, regardless of the underlying cause.
High risk program in chronic liver diseases – Emricasan is being tested in five indications representing various degrees of liver damage, from NASH, which represents a milder degree of hepatic impairment , to ACLF (acute on chronic liver failure). To date the drug has been surprisingly safe (although long term safety is still an open question) and demonstrated a clear effect on cCK18, a marker of caspase activity and possibly damage severity. As there are no effective treatments for most of the conditions pursued by Conatus, it is unclear whether these biomarker changes will translate to clinical changes. The regulatory path for approval in these indications is also unclear.
Conatus is clearly the riskiest stock in my portfolio but its low market cap creates a good risk/reward ratio. Emricasan’s mode of action of inhibiting caspase makes sense and results to date are encouraging relatively to the stage of development.
In 2015, the company expects to have phase II data in four indications. The trials are designed to assess cCK18 changes as well as disease scores that may be indicative of response to treatment. Given the small number of patients in each trial, they will likely provide only a trend of efficacy.
ArQule (-20.5% in 2014)
ArQule (ARQL) concludes 2014 as a more diversified story but the stock is still heavily penalized due to skepticism around tivantinib’s MOA (phase III in liver cancer). In 2014 ArQule brought forward ARQ092 (Akt inhibitor) which gained more visibility as a treatment for cancer and rare diseases. ArQule reported phase I results demonstrating minimal efficacy (as would be expected with Akt inhibitors in unselected patients) and a safety profile characteristic of Akt inhibitors (hyperglycemia, rash).
New opportunity in Proteus syndrome and related diseases – On the rare disease front, ArQule and collaborators from NIH presented strong preclinical results in Proteus syndrome and related diseases. Proteus syndrome is an ultra-rare disease (<200 known patients) caused by a mutation in Akt that leads to uncontrolled tissue growth. The disease is treated with surgeries and other supportive care measures and there are currently no available disease modifying drugs.
The preclinical data set demonstrated rapid and strong shutdown of Akt signaling with ARQ092, which was significantly more effective than an mTOR inhibitor (Afinitor). The most impressive experiment was done with biopsies taken from a patient with Proteus Syndrome (see figure below). This experiments bodes well for ARQ092’s ability to be truly disease modifying for this debilitating condition.
No internal catalysts until H2 2015 – ARQ092 is expected to enter phase I in Proteus Syndrome in H1 2015 in parallel to an ongoing oncology study which is enrolling patients with relevant mutations (PI3K, Akt). Results from both trials may be available only towards year-end 2015 and since phase III for tivantinib should have an interim analysis late in 2015, no major internal catalysts are expected in the near future.
Therefore, the most important drivers for ArQule are results from competing Akt programs from Roche and AstraZeneca, which are in multiple randomized phase II studies. Positive results in any of these trials should significantly increase the value proposition of Akt inhibitors, including ARQ092.
We are adding a new position in Marinus based on a positive data set for ganaxolone in epilepsy and the inevitable comparison to SAGE (discussed above).
Portfolio holdings – January 4th, 2015