Exelixis – First partnered program enters phase III

Roche recently disclosed a decision to start phase III with GDC-0973 (formerly XL518), a MEK inhibitor licensed from Exelixis (EXEL) to Genentech 6 years ago. The trial is expected to start next month and will evaluate GDC-0973 in combination with Roche’s Zelboraf in patients with BRAF-mutated melanoma. This is an extremely positive catalyst for Exelixis, who now has a second drug in pivotal studies with a high likelihood of success and a substantial market opportunity. 

Large commercial opportunity – The commercial opportunity for GDC-0973 in advanced melanoma is ~$1.5B globally, based on pricing and sales estimates for Zelboraf. MEK inhibitors have potential for many additional cancers, including lung and ovarian cancer.

Favorable deal terms – Deal entails a profit share agreement and an option for Exelixis to co-promote the drug in the US. Exelixis is eligible for additional milestones and royalties on ex-US sales.

Short timelines – The phase III trial will start next month with progression free survival as the primary endpoint. Enrollment should be very quick given Roche’s experience in the indication (Zelboraf was the 1st approved drug for BRAF-mutated melanoma) and the fact melanoma patients are routinely screened for BRAF status and treated with Zelboraf. Top line results could be available in mid-2014 and Roche expects to submit the combination for approval in 2014.

High likelihood of success – GSK (GSK) presented phase II results for a similar combination (dabrafenib plus trametinib), which proved superior to dabrafenib alone. Roche reported encouraging results for a small phase I trial for the Zelboraf-GDC-0973 combination in 25 melanoma patients. The combination led to meaningful tumor shrinkage in every patient (see figure below).

 Zelboraf + GDC-0973

Source: Roche’s ESMO call, Oct 2012

 

Differentiated safety profile – Although safety data are limited, GDC-0973 appears to have a different safety profile compared to GSK’s trametinib. In particular, it does not lead to fever and chills, which were observed in the majority of patients in the GSK trial.    

Roche as an ideal partner 

In retrospect, Exelixis could not have chosen a better partner for GDC-0973. On top of being the world’s leader in oncology, Roche is facing a major threat to its position in the BRAF-mutated melanoma market.

As background, Roche pioneered the field of BRAF mutated melanoma with Zelboraf, the first BRAF inhibitor to get FDA approval. Although Roche dominated the market since 2011, it will face fierce competition from GSK, who recently submitted its BRAF inhibitor, dabrafenib, for approval for the treatment of BRAF mutated melanoma. GSK’s Dabrafenib is perceived as equally effective but better tolerated than Roche’s Zelboraf.

Last week at ESMO, GSK reported positive results for the combination of debrafinib and its MEK inhibitor (trametinib). The combination is already in phase III and is expected to become standard of care from 2014 onwards, pushing Roche’s Zelboraf out of the market. The Zelboraf + GDC-0973 phase III trial is Roche’s answer to that threat.

Fortunately for Exelixis, GDC-0973 represents Roche’s main effort to protect its melanoma franchise. This guarantees an aggressive and efficient development program for the drug. Roche is 6 months behind GSK, but positive results should enable it to retain its presence in melanoma from 2015 onwards. In parallel, GDC-0973 is in several early stage combination trials.   

Market ignores a major milestone – a buying opportunity

Exelixis now has a second drug in pivotal studies, in development by a strong  and committed partner. Roche’s commitment, a large commercial opportunity, favorable deal terms and a high likelihood of clinical success, make GDC-0973 an important asset for Exelixis that is still not reflected in the company’s valuation. This creates a buying opportunity, as the market will eventually acknowledge the opportunity as well as the strategic importance of GDC-0973 to Roche.


I plan to post my ESMO 2012 summary and a portfolio update next Sunday.

9 thoughts on “Exelixis – First partnered program enters phase III

  1. They were obviously negative. If they see a signal in met high, this is positive a positive indication for other trials. Bodes well for metmab as well, of course.

    Ohad

  2. Would you add to you position in ARQL here? The HCC trial, single-agent, second-line, Phase III using a diagnostic marker, could begin enrollment before the end of the year.

    The CRC Phase II (using a biomarker) trial is supposed to report out soon.

    Company says that they have cash to take them into 2015.

    If final data from the NSCLC trial shows OS in MET-high patients, is it possible NSCLC is still a viable option for ARQL, especially if Metmab were to fail?

  3. Have had an eye on EXEL for a while now, but have not bought in yet. With major dilution and debt financing, do you expect to see up a run-up to the Nov 29 PDUFA date? Do you consider this a good buy in point despite the forces of dilution? Do predict good things for cabo?

  4. Hard to predict market reaction to regulatory decisions. The market already expects FDA to approve cabo for MTC. I do think that once the GDC-0973 program start p3, its potential will be more visible to investors.
    I predict good things for cabo, but the drug is still very controversial.

    Ohad

  5. Ohad, as u know i’m long exel but the arql has me very concerned(short term)

    Arql: The interim analysis had showed a statistically significant improvement in progression-free survival in the intent-to-treat population, but this benefit did not carry over to overall survival, the company stated

    How does Cabo get a pfs primary endpoint but not arql? Though our secondary endpoint is OS and so far OS has not been seen. I think because of this senario, the FDA may kick it back until the OS data is in next year. How could they approve it without seeing the OS data which is just as if not more important.

    I may sell at any bump prior to potential approval

  6. I think ARQL has limited to no read-throug to cabo. Very different clinical settings and clinical profile. Cabo could obviously fail eventually, but I don’t think we can learn anything from tivantinib’s failure.

    Ohad

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