Seattle Genetics – Positive read-through from Roche’s investor day

Roche’s investor day, held last week, gave Seattle Genetics’ (SGEN) investors reasons for optimism. Roche has 9 antibody drug conjugates (ADC) in clinical testing: T-DM1, powered by Immunogen’s (IMGN) technology and 8 additional ADCs (in phase I) that are based on Seattle-Genetics’ technology. These ADC programs are expected to have data readouts in the coming year, making them Seattle Genetics’ major near-term growth opportunity. Following last week’s event, it is now clear that at least 5 of the 8 ADCs are active in cancer patients.

5 patients, 5 programs

At the R&D day, speakers from Roche and Genentech were very excited with their ADC pipeline. Although no data was officially published for any of the ADCs, the company presented anecdotal cases that were quite encouraging. Examples included what looks like a complete response in an aggressive lymphoma patient who was treated with an anti-CD22 ADC. Another case was for an elderly lymphoma patient with another ADC for hematologic tumors (probably anti-CD79b ADC). Additional cases were 2 patients with ovarian cancer (each received a different ADC) and a patient with lung cancer.

Altogether, the presentation included 5 examples of patients who achieved objective responses following treatment with 5 different ADCs. The confirmed responses in patients with ovarian and lung cancers are particularly encouraging, as responses in solid tumors are less common than in blood cancers.

It is important to note that these are only anecdotal cases that do not necessarily reflect the overall clinical profile of the ADCs. Theoretically, the activity mentioned at the R&D day might be the exception rather than the rule, but this seems unlikely given the excitement around the programs.

Below are Roche’s ADC pipeline and scans depicting the 5 responses.

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adc1.png

 adc2-ovarian.png

adc3-nsclc.png

A new growth engine

Seattle Genetics derives most of its market cap ($3.4B) from Adcetris, which is approved for the treatment of 2 types of blood cancer. Using Adcetris as a proof of concept, Seattle Genetics was very successful at monetizing its ADC technology via lucrative licensing deals. The company was not as successful at advancing its pipeline (proprietary and partnered) and has had little to show to the market besides Adcetris. The only program to which the market ascribes value is Celldex’s  (CLDX)CDX-011, which entered the clinic in 2006.

Between 2008 to 2010 the company and its partners advanced 7 ADCs to phase I, all were subsequently discontinued or demonstrated disappointing activity in patients. 4 programs with Genentech (anti-MUC-16), Medimmune (anti-EphA2), Bayer (anti-CA-IX) and Agensys (anti-AGS16) are no longer active. 2 additional programs with Progenics (anti-PSMA)  and Agensys (anti- SLC44A4) are active, but so far results are disappointing. Seattle Genetics’ wholly owned SGN-75 started phase I in 2009 but it was not potent enough as a single agent, which led the company to start a combination trial recently.

After 2010, 10 additional partnered ADCs started clinical testing. These include 8 programs developed by Genentech, a program with Agensys and a program with Takeda. These 10 programs represent Seattle Genetics’ growth opportunity, as Adcetris’ success is already priced in.

Ideally, Seattle Genetics needs ADCs with single agent response rate of at least 20% in heavily pretreated patients and a reasonable safety profile. This clinical profile could justify accelerated approval with phase II data. Roche stated 5 ADC programs will start phase II by year-end 2013, so there is a fair chance for 1 or 2 of Roche’s ADC programs to fall into this category already next year.

Biotech portfolio update

We are adding a second position in YM Biosciences (YMI) and selling our position in Progenics (PGNX).

Portfolio holdings as of Sep 9th, 2012

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33 thoughts on “Seattle Genetics – Positive read-through from Roche’s investor day

  1. Hello Ohad
    Is there any news from ymi or the new position based on the previous data?
    (its your therd position not second)

    Thanks
    Alex

  2. Ohad great post as usual. I have been in YMI since the begging of the year, in prior presentations management has tagged phIII to start this summer. Have you heard something different? If so would you mind sharing.

    Thanks

  3. Correction, second half of the yea. “Our current focus is on confirming our Phase III clinical strategy for CYT387 with both North American and European regulators with the expectation that, subject to these regulatory discussions, we will begin enrolling patients in pivotal trials in the second half of calendar 2012.”

  4. HI Ohad,

    just read in ARRY-presentation

    “initiate ARRY-conducted registration trial” in reference to MEK162 partner with Novartis.

    I thought Novartis has taken over all costs and development activities since the deal? Or is Novartis bearing the costs and Arry doing the PIIb/PIII?

    thanks
    Christian

  5. The latest analyst report i read on ymi from earlier this month also mentioned starting p3 this year, i assume it can get pushed out to next year.

    Christian- i was not aware of this, i was also under the impression novartis would run the program.

    Ohad

  6. Hey Ohan
    what do you think is going on at INCY. Seems like teh stock is in a rut since the last earnings report… lost $1 billion market cap… does not seem it’s going to recover in the short term. Are you a buyer of INCY at this level? The only catalys I see on the horizon is be inititiation of the RA P3 (LLY)

    Any thoughts on VICL, with their license to BMY

    Seems like your views on GERN were right… they just killed two of the trials

    Thanks for you time
    Dan

  7. I am still bullish on the stock long term and think the market over-reacted to last Q. Thomas Wei’s (Jefferies)had a very optimistic note on them last week and it looks like they are working on hard on the dosing front with dose titration to mitigate side effects (decrease discontinuation) and get maximal effect.

    As I wrote about YMI, JAK inhibitor have a bright future outside of myelofibrosis.

    Ohad

  8. Arry can pick an indication and co-develop in nvs deal for much greater economics on mek162. For all others they will just accept lower royalties in exchange for nvs bearing all costs.

    On ymi, curious what bull case is here. They are way behind their jak competitors and a lot of people think their anemia benefit is a fluke I think. Also, not sure I trust them after nimo how they played up lack of rash being advantage when that turned out to be bogus. Also, have they ever had any big name partners? I’m always
    skeptical of small biotechs that have never inked any legit deals.

  9. I think with that high hazard ratio, I am not confident of p3 success. I don’t believe much that selection bias played a role

  10. mcbio – The bull case would be – CYT378 is probably as effective as Jakafi and can capture a 10-20% market share based on activity and reasonable safety profile. In case the anemia effect is real (~25% imo), then the drug can be a 300-400M drug (WW sales) easily.

    Mike – The OS difference was anything but stat significant (although at the median they seperated nicely). Need to see the data, but obviously this is a negative.

    Ohad

  11. hi Richard, hi MCbio,

    reg arry here answer from IR:

     ——-

    We are co-developing MEK162 with Novartis, so we are able to run our own trials as well.  We support development costs, up to an annual cap, as described in our 10K filings:

     

    The Novartis agreement also contains co-development rights whereby the Company can elect to pay a percentage share of the combined total development costs. During the first two years of the co-development period, Novartis will reimburse the Company for 100% of the Company’s development costs. Beginning in year three, the Company will begin paying its percentage share of the combined development costs since inception of the program, up to a maximum amount with annual caps, unless it opts out of paying its percentage share of these costs. If the Company opts out of paying its share of combined development costs with respect to one or more products, the U.S. royalty rate would then be reduced for any such product based on a specified formula, subject to a minimum that equals the royalty rate on sales outside the U.S., and the Company would no longer have the right to develop or detail such product.

    Best regards,

    —–

  12. Hi Ohad,

    Regarding TH-302, I’m not sure we should read too much into the stat sig since the company seems to imply a lot of the survival benefit for the control was due to the crossover patients. Looking back at the TH-302 phase 1 trial in pancreatic cancer, these final results were very consistent with want was reported then with the exception of the control being better than what they were expecting from historical data of 6 month.

    will be interesting to see the breakdown of the curve with the crossover separated out. I’m expecting to see a big difference btw control crossover vs non-crossover. a big positive is the company’s plan to start phase III which tells me they probably feel good about the results.

    will still need to see the full dataset, but my guess is the possibility of accelerated approval is still in play, what do you think about this?

    thanks

  13. Dawginlife: thld pushing into phase 3 trials on their own, if that’s how it plays out, should mean very little. They are a smallcap biotech w not much else in pipeline…of course they will run a p3 trial regardless of chance of success.

  14. mcbio316,

    I’m sure merck had a say in pushing th-302 into phase III b/c they will be paying 70% of the cost and i’m sure there are probably milestone payments to thld associated with this move.

    So, this shows confidence from not only thld but more importantly, from merck.

  15. Ohad,

    You haven’t written about ECYT in a long time and you don’t have them in your portfolio. Does this mean that you’re not confidant that they get Euro approval based on PFS? What do you like and not like about ECYT?

  16. Holy crap Ohad i turn on my computer today and Exel hit my stop loss!!! Wtf happened? No bad news…r these just shorts pummeling this thing?

  17. Richard- i have mixed feelings re ECYT. I originally thought their strategy to select patients based on imaging with their dx agent was brilliant. I also liked their pfs data in the ++ group. What makes me more skeptic is the inferior overall survival and the very low time their agent stays in circulation.

    Mcbio- avastin data are from a robust p3.

    Robert- i am not aware of any news.

    Ohad

  18. Ohad – chmp recommended avastin for approval in platinum sensitive ovarian pts based on pfs benefit alone and in spite of poor phase 3 OS data as I understand. Ecyt going after even more dire patient population in platinum resistant ovarian. Take that together and it would suggest that chmp would also likely recommend ecyt drug for approval.

    It’s true EU could come back and say ecyt/mrk need to run phase 3 as phase 2 data not sufficient. Biggest risk is timing of approval I think not ultimate approvability. Still willing to hold ecyt at this valuation.

  19. Again, the avastin data set was from a large p3 trial with clear pfs benefit and lack of OS benefit (due to crossover?). Ecyt’s data set is from a p2 where only a subset of patients had a pfs benefit and no OS benefit. Although the ++ subset was defined prospectively, the evidence here is much weaker imo.

  20. Ohad – ecyt been pretty clear for some time that their focus is folate++ and pfs benefit has been very clear in this patient population.

  21. Hi Ohad – thoughts on SNTA’s updated Phase 2b GALAXY data reported at ESMO today? OS HR of 0.568 in the broad adeno group for patients who have been on the drug at least 6 months. Also, mKRAS OS HR of 0.41. Looks quite encouraging to me (full disclosure: long SNTA).

  22. @mcbio I like the results. good se profile. PFS and ORR look good which is imp. I feel more optimistic about p3. HR looks good except in the smokers group. I want them to design a good p3. KM curves for OS are not very significant at this stage but the sep look good to me. I am not sure how it will trade on monday, but in for the long haul

  23. Any thoughts on THLD’s update on their results of TH-302 with gemcitabine for pancreatic cancer patients? Thanks as always. Dan

  24. Agree on ARQL Ohad, and just established a small initial position post-plunge. Shares trading around cash and tivantinib still has potential in HCC and CRC where ARQL is wisely screening based on MET levels apparently (should have done that in NSCLC). (They said in CC that NSCLC indication is pretty much out now since they wouldn’t be competitively positioned against MetMab.)

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