Last week’s approval of Alnylam’s (ALNY) Onpattro, the first FDA-approved siRNA drug, serves as a reminder for the bumpy road new technologies go through on their way to the market. From an investor perspective, siRNA has gone in and out of fashion over the years with dramatic shifts in market sentiment. It started with unrealistically high expectations, deteriorated to deep pessimism due to clinical setbacks, followed by gradual sentiment improvement in recent years (with some hiccups along the way).
This pattern is typical for many fields in biotech (recent examples are gene therapy, immuno-oncology, genomics), which sometimes took decades to realize their potential. The good news is that once a depressed field “rises from the ashes” it is usually for a good reason, i.e. it is backed by real progress. This appears to be the case in targeted radiotherapy (TRT), a neglected field until recently that may become the next big thing in oncology.
Targeted radiotherapy’s checkered past…
In contrast to siRNA, targeted radiotherapy (TRT) has never been very popular with investors. It had a brief wave of activity in the early 2000’s, culminating in the approval of Bexxar and Zevalin in lymphoma. Despite good clinical efficacy, the two agents (both targeting CD20) were commercial failures because they couldn’t compete with Rituxan-based regimens that were more straightforward to use. TRT agents come with a host of logistic issues: They have a short shelf-life, require special shipping and handling, necessitate special training and carry radiation exposure risks. It isn’t surprising physicians preferred the simpler alternative…
More importantly, antibody-based TRT (also called radio-immunoconjugates) like Bexxar and Zevalin have a long circulation time in the body, leading to significant bone-marrow toxicity as well as damage to highly perfused organs (liver, lungs). This profile may be sufficient for efficacy in lymphomas (cancer of the bone marrow) but not in solid tumors where higher exposure is required.
…but recent data point to a revival
Data from three different TRT programs are behind resurgence in investor interest: Bayer’s Xofigo for prostate cancer with bone mets, Novartis’ (NVS) Lutathera for neuroendocrine tumors (NET) and Endocyte’s (ECYT) Lu-PSMA-617 for prostate cancer.
A key feature of all three is the use of small targeting moieties (In Xofigo the radioisotope is also the targeting moiety), which leads to a short exposure and quick clearance via the kidneys. This exposure profile enables the administration of higher radiation doses, leading to better tumor accumulation with limited toxicity (kidneys are relatively radio-resistant and can be further protected pharmacologically).
First demonstration of efficacy was with Bayer’s Xofigo, approved for prostate cancer based on a modest survival benefit. Xofigo does not have a targeting moiety and it accumulates in bones based on a structural similarity of Radium-223 to calcium. In 2014, Bayer bought Algeta, Xofigo’s original developer, for $2.9B. Xofigo is considered a disappointment with $400M in annual sales (partly attributed to its narrow label) but it still serves as a proof of concept for a radiopharmaceutical. It also clinically validates alpha emitters as a therapeutic class.
The next validation came from Novartis’ Lutathera(via the $3.9B acquisition of Advanced Accelerator Applications), approved for NET. Lutathera is comprised of a peptide targeting somatostatin receptors linked to Lutetium-177. In a P3 study vs. an active control, Lutathera led to an impressive PFS benefit (HR = 0.21) and a strong OS trend.
Source: Strosberg J. N Engl J Med. 2017 Jan 12;376(2):125-135.
It is still early to assess Lutathera’s commercial performance (approved by the FDA in Jan 2018) but launch trajectory looks good with sales of $24M in Q2/2018.
Endocyte – Transformational deal, strong P2 data
Endocyte is a newcomer to the TRT field following the in-licensing of Lu-PSMA-617 from ABX. This small transaction transformed Endocyte (and its market cap), which now has the most prominent TRT program in development. Lu-PSMA-617 consists of a small molecule targeting PSMA linked to Lutetium-177. The company recently started P3 based on strong P2 data that were published earlier this year. Lu-PSMA-617 led to a PSA response in ~60% of patients, and more importantly generated an objective response in 82% in 17 response-evaluable patients with soft tissue lesions.
These results compare favorably to other approved agents and may under-represent Lu-PSMA-617’s effect as the ongoing P3 is evaluating a longer treatment regimen. Importantly, the drug was active in patients who failed Zytiga or Xtandi, the leading prostate cancer drugs and the effect was consistent irrespective of prior treatments. Lu-PSMA-617 is being evaluated as monoterapy but it can potentially be combined with other agents in the future given the different MOA and relatively mild safety profile.
Significant commercial opportunity
There are four prostate cancer drugs on the market that can be used to gage Lu-PSMA-617’s commercial opportunity: Zytiga, Xtandi, Xofigo, and Jevtana. Their respective commercial performance varies widely, as Zytiga and Xtandi generate $3.5B and $2.5B, respectively, whereas Jevtana and Xofigo are niche products with ~$400M in global annual sales. Lu-PSMA-617 should be somewhere in the middle as it appears more efficacious and better tolerated than Xofigo/Jevtana. Despite its potential broad applicability (85% of prostate cancer patients should be treatment-eligible based on PSMA expression), logistics issues may prevent it from becoming a multi-billion franchise like Zytiga and Xtandi, but peak sales of ~$1.5B appear achievable.
Endocyte just strated a P3 study which will take 12-18 months to readout (interim analysis, depending on regulatory feedback expected this year regarding approvable endpoints). The only important near-term catalyst could be data from an investigator sponsored study comparing Lu-PSMA-617 to Jevtana that started in January.
Despite the lack of catalysts and potential for negative ones (technical , safety issues), Endocyte may become an attractive acquisition target given the strong efficacy, favorable safety profile, novel MOA in a highly competitive and lucrative market (Zytiga will become generic soon). Many companies are not (yet?) interested in radiopharmaceuticals but an obvious acquirer is J&J given on their franchise in prostate cancer and involvement in another TRT company (Fusion Pharmaceuticals).
I am selling Foundation Medicine (FMI) at a 510% profit following acquisition by Roche, announced in June.