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Prohost Biotech - Wednesday, August 15, 2012

If the selloff of the best of the best small oncology biotech stocks was not a concerted, multiparty effort by influential groups, then what else could have caused it? The stocks devastated after the quarterly financial announcements are Incyte (INCY), ImmunoGen (IMGN) and Aveo (AVEO), Exelixis (EXEL) and to a lesser extent Seattle Genetics (SGEN). These firms received five-star ratings from top analysts, as they have programs and products that promise colossal growth. Their technologies and targeted products are perfect fits as essential building blocks of the strategy of future cancer management, i.e., the large-scale practice of personalized medicine. Some of them are also developing drugs that circumvent cancer resistance and increase the efficacy of other oncology drugs.  

During the announcement of the second quarter 2012 financial results, computer programmed selling exceeded the limit investors have forcibly accepted as a fait accompli. Concerted computer programming is an easy way for influential manipulators to get richer without sweating. Pushing buttons does not require an extra-effort, and computers do not sweat. The only ones sweating are investors who have carefully done their due diligence, selected the best of the best firms to invest in, and woke up one morning to find that their money has disappeared into mysterious pockets.    


The most devastated stock in the group is that of Incyte (INCY). Recently, when the stock was selling at $21, Goldman Sacks upgraded INCY from Neutral to Buy with a price target of $29. Goldman Sacks suggested a 26% premium, as Incyte has developed small molecule drugs, has put a drug on the market and developed a drug, INCB024360, the only IDO1 inhibitor, which can be used as an adjuvant to increase the potency of cytotoxic cancer drugs. All these facts make Incyte a typical candidate for acquisition.

As a matter of fact, Incyte’s approved drug Jakafi (ruxolitinib) and its pipeline of targeted drugs are believed to enrich the general database of molecules that bestow rationality to the expected near-future practice of personalized medicine in cancer management. The future trend towards routine sequencing of cancer cells’ DNA and analyzing patients’ RNA to accurately pinpoint the pathways of individual malignancies would make sense if treatments that inhibit the perpetrators of cancer growth and division are made available. Indeed, Incyte’s oncology pipeline is rich with therapeutic molecules for metastatic prostate cancer, hematological malignancies, primary myelofibrosis (MF), multiple myeloma, ovarian cancer, breast cancer, and solid tumors, in addition to oral drugs for psoriasis, rheumatoid arthritis, lupus nephritis, and type 2 diabetes.

INCB024360 is the only drug that inhibits IDO1, which promotes T cell and natural killer (NK) cell growth and increases IFN-γ production. In preclinical animal studies, INCB024360 demonstrated that it significantly inhibited tumor growth in a lymphocyte-dependent manner. Further laboratory analysis in patients with cancer affirmed that the IDO pathway is activated in multiple tumor types. Added together, the data suggest that selective inhibition of IDO1 may represent an attractive cancer therapeutic strategy through up-regulation of cellular immunity.

The firm is also working towards expanding the use of its approved drug Jakafi beyond its indications, which means much larger markets.   

With regard to the quarterly results announcement, analysts, especially the pessimists, were anxiously waiting to hear about Jakafi’s sales. The results disappointed them, as the drug’s sales exceeded analysts’ expectations, including exaggerated projections of the negative analysts. The pace of the drug launch has gone as the firm predicted, which led Incyte to provide revenue guidance for 2012 net product sales in the range of $120 million to $135 million. Incyte expressed its conviction that the growth will be steady and gradual, as physicians move from prescribing Jakafi for more severely ill MF patients to less severely ill patients, specifically patients with splenomegaly.

In addition to the spectacular spleen reduction effects and improvement in patients’ symptoms, further analysis of COMFORT 1 study published in The New England Journal of Medicine suggested a survival advantage for Jakafi over placebo. More recently, an article in the journal Blood analyzing results of 107 MF patients from Phase 1/2 study on patients taking Jakafi who were followed for 32 months demonstrated a survival advantage when compared to historic controls who had similar entry criteria. The data also suggested a survival benefit independent of any comparison with a historical control group. Survival in the high-risk patients treated with Jakafi was consistent with that of intermediate II risk1 patients, which would suggest a very meaningful improvement in survival.

1.Published data stated that the normal life expectancy for high-risk patients is approximately two years compared to four years for intermediate II risk patients.

Do we see negatives that would support an INCY selloff?   


ImmunoGen’s superior scientific, technological, and pipeline products are yet to be recognized by Wall Street. More importantly, the firm’s success in creating a monoclonal antibody guided missile conjugated with a targeted drug capable of unloading its highly powerful ammunition only inside the cancer cells has never been celebrated by the stock market. That’s why IMGN has never been valued fairly, and that’s why we predict many investors will miss the train or get off before it reaches its destination. This train is the lead HER2 breast cancer product T-DM1 (trastuzumab emtansine), and its next destination is the multibillion-dollar market it is expected to reach by early 2013. 

Candidate products developed through ImmunoGen’s TAP technology demonstrate greater efficacy and better tolerability than standard of care treatments. The benefits have been validated in successful clinical trials, which have enhanced oncologists’ appreciation of this breast cancer drug and increased informed investors’ optimism about the value of ImmunoGen’s pipeline, including partnered products and ImmunoGen’s wholly-owned products. The most benefit has been clearly demonstrated in solid tumors, and the expected huge revenues will probably come also from solid tumors, which constitute ninety percent of cancers where few antibody-based therapies currently exist.

Trastuzumab emtansine has demonstrated positive results in all clinical trials. Important to remember, Roche is trying to move the drug from second-line treatment to first-line treatment. Roche expects to apply for this labeling in the US and Europe in 2014. The firm is also trying to get approval in the US and other countries for the treatment of early-stage HER2-positive breast cancer. It also initiated three more trastuzumab emtansine registration trials for 2013, evaluating the compound for neoadjuvant use for the treatment of residual invasive disease following surgery. It anticipates having pathological complete response (pCR) data from the neoadjuvant trial during 2015.

At the same time, visible progress is obvious in ImmunoGen’s pipeline drugs toward pivotal testing, including the firm’s partnered products and wholly-owned products. The firm’s wholly-owned products comprise:  IMGN901 for first-line treatment of small-cell lung cancer (SCLC); IMGN853, a folate receptor-α (FOLR)-targeting TAP compound for specific types of FOLR-overexpressing cancers; MGN529 a TAP compound targeting CD37-positive hematologic malignancies for non-Hodgkin’s lymphoma; and SAR3419, a CD19-targeting TAP compound in Phase 2 for acute lymphoblastic leukemia.

The slashing of this stock during the second quarter results is irrational. It motivated us to do the only right thing, i.e., accumulate IMGN.  


Tivozanib, the firm’s drug developed for advanced renal cell carcinoma (RCC) has already demonstrated advantages in areas of importance with regard to RCC and its current treatments. The drug, which is an oral VEGF receptor tyrosine kinase inhibitor designed to inhibit all three VEGF receptors for the treatment of advanced RCC and other cancers demonstrated the following compared to sorafenib:

- A statistically significant improvement in PFS with a median PFS of 11.9 months vs. a median PFS of 9.1 months for sorafenib in the overall (Intent To Treat) study population.

- Objective response rate (ORR) for tivozanib was 33% compared to 23% for sorafenib. The efficacy advantage of tivozanib over sorafenib was consistent across subgroups in the study.

- A statistically significant improvement in PFS In patients who were treatment naïve for advanced RCC (70% of total study population). A median PFS of 12.7 months for tivosanib  vs.  PFS of 9.1 months for sorafenib.   

- An improvement in PFS in the subpopulation of patients who were pretreated with systemic therapy including cytokines (30% of total study population). A median PFS of 11.9 months improvement for tivozanib vs. PFS of 9.1 months for sorafenib.

Study results demonstrated tivozanib has favorable tolerability over sorafenib as evidenced by a distinctively low rate of dose interruptions and reductions. The rate of dose interruptions due to adverse events was 18% for tivozanib compared to 35% for sorafenib and the rate of dose reductions due to adverse events was 12% for tivozanib compared to 43% for sorafenib.  

This is good news. What frightened investors, though, making them rush to sell the stock is that in previous trials Tivozantib has outperformed sorafenib in overall survival (OS). In the recent TIVO-1 study, however, results insinuated that Sorafenib outperformed Aveo’s drug in OS by 81% to 77%. Investors linked this data to the FDA expressing concern regarding the OS trend in the TIVO-1 trial, stating that it will review these findings at the time of the NDA filing as well as during the review of the NDA.

If fear is King, common sense is Emperor. Logic implies that before we make judgments we have to listen to what Aveo and its partner Astella have said and reiterated and done towards the unfavorable-looking statistics. First of all the firm stated that these results were not yet mature and that it is conducting additional analysis to be included in the NDA submission. The analysis demonstrate that the OS data from TIVO-1 are consistent with improved clinical outcomes in RCC patients receiving more than one line of therapy. Aveo believes these analyses will directly address this issue. AVEO is continuing to work toward submitting the NDA by end of the third quarter; however, there is a chance that the additional OS analyses may cause the submission to move into the fourth quarter.

Aveo has also hinted to the fact that 53% of patients randomized to the sorafenib arm of the trial went on to receive subsequent therapy, nearly all of whom received tivozanib after sorafenib. In comparison, only 17% of patients randomized to tivozanib went on to receive a subsequent therapy. It is possible the preliminary survival data could be misleading, as patients on sorafenib control may be ending up living longer at least partly because of Aveo drug.

It makes sense. But adding fuel to fire, some negative analysts volunteered suggestions that PFS is of no value to patients or to the FDA with regard to drug approvals, which is totally irrelevant. History shows that many drugs have been approved based on PFS. If PFS had no value, it wouldn’t have been accepted as a legitimate endpoints in clinical trials. As somebody stated, PFS endpoint makes it possible comparison between cancer drugs. It also reflects the degree of patients wellbeing during treatment.  

With regard to Aveo’s argument, many researchers will tell you that its explanation makes sense. There is no doubt that crossover could have an impact on overall survival. Survival extension in these cases cannot be attributed solely to the effect of one specific drug.

There are ample reasons for approving tivozanib. As the trials show, the drug is safer than the available drugs. Adding a safe and effective weapon to the arsenal against advanced kidney cancer increases the treatment options these patients who are in dire need for more treatment options. This is especially true in advanced RCC where the patients are underserved with the available treatments. Tivozanib has the longest PFS (12.7 months) of any novel agent studied in the first-line RCC setting. This means that this drug is providing patients’ wellbeing longer than all other marketed or investigational drugs. The drug is taken orally, which is much easier than intravenously administered drugs with better adverse effect profile than most available drugs. Theoretically, the drug suppresses all three VEGF, which could also be translated in many patients into more effective drug than other drugs. 

With regard to the firm’s fundamentals, Aveo has a solid management, excellent technology and a promising product pipeline. It has high-caliber collaborations, including Astellas, Biogen IDEC, and Johnson & Johnson. It has $230M in cash. 

This is all we can say now. Tomorrow is another day. 

As for Exelixis and Seattle Genetics, we will feature them in a near future posting.

We Long these firms

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