This weekend, the annual American Society of Clinical Oncology (ASCO) kicked off in Chicago. The theme this year? Immunotherapy. The conference is traditionally littered with news from biotech companies revealing results from clinical studies, but this year’s event also included some news from big phama companies that haven’t been bursting with pipeline breakthroughs in years. Let’s take a look at some of the news out of the event.
Firms Highlighted: Bristol-Myers Squibb, Merck, GlaxoSmithKline, Amgen, Galena Biopharma, BioMarin, Celgene.
Bristol-Myers Squibb
Source: BMY ASOC 2013 Presentation
Bristol-Myers Squibb (click ticker for report: ) isn’t exactly what we’d call an under-appreciated company. Over the past year, shares are up 43%. However, this year’s ASCO only further ignited the fire. The company revealed very positive results from a few of its immunotherapy drugs.
One study showed that the experimental nivolumab help melanoma patients live an average of 17 months while receiving treatment. Admittedly, there isn’t much frame of reference, and the drug is still in Phase I, but it looks like a potentially promising treatment. The drug helps the human body block cancer from using PD-1 to attack the immune system, giving the body a better chance of doing battle with the cancer.
Another drug, Yervoy, showed life extension benefits, particularly when coupled with Sanofi’s (SNY) Leukine. Yervoy targets CTLA-4 and can cause the body to boost antigen production, which creates immunoglobulin production to fight foreign (cancer/bacteria/etc.) invaders. One-year melanoma survival rates for patients on Yervoy alone totaled 53%. Throwing Leukine in the mix boosted survival rates to 69%, as it stimulates Granulocyte macrophage colony-stimulating factor which unleashes white blood cell production.
The broader impact for the success of these melanoma drugs could mean additional applications to different forms of cancer. The melanoma market alone is relatively large, but obviously expanding the addressable market could be a game changer for companies engaged in immunotherapy drugs. Competitors Merck (click ticker for report: ) and Roche are also engaged in creating immunotherapy drugs. Of course, we think it is likely that the combined impact of Yervoy/Leukine reveals that the future of immunotherapy treatments could be in creating drugs with synergistic effects.
Merck
Merck also made headlines, not surprisingly, for an immunotherapy treatment for melanoma. Lambrolizumab has shown an increase in anti-tumor activity in patients with advanced melanoma, with a response rate (tumors shrunk) of 38%. The FDA clearly agrees, as it previously designated the drug as a Breakthrough Therapy in order to quicken the approval process. Like nivolumab, lambrolizumab targets PD-1, preventing cancer from invading the immune system and Merck announced that is already in the process of investigating the treatment for different types of cancer.
Without question, the Breakthrough Therapy status could help Merck gain a first-mover advantage in the space. Further, if clinical trials reflect positively on the uses for other forms of cancer, lambrolizumab could become a blockbuster success.
GlaxoSmithKline
GlaxoSmithKline (GSK) received approval for two melanoma drugs ahead of ASCO. These drugs target genetic mutations, so the market potential is lower than immunotherapy treatments. However, we think both drugs could produce revenues in the hundreds of millions annually.
As for the weekend at ASCO, GSK revealed that its Votrient drug appears to delay ovarian cancer from getting worse. Essentially, the drug prevents tumor growth and blocks angiogenesis, a key process to speed cancer growth. In the study, those taking Votrient stalled cancer growth for 17.9 months compared to 12.3 months for the placebo group. The biggest known side effect thus far might lead to liver damage, but the firm believes such is manageable. Ovarian cancer is an enormous market with over 230,000 cases diagnosed annually, so Votrient could become a real hit. The drug is already approved for the treatment of kidney cancer.
Amgen
The reaction to Amgen’s (click ticker for report: ) ASCO update was a bit underwhelming, even though its melanoma drug T-Vec showed promising results. Not surprisingly, the market remains enamored with PD-1 immunotherapy treatments.
Source: Amgen IR at ASCO 2013
Interestingly, T-Vec’s therapy comes for HSV-1 (herpes simplex 1), so the drug focuses on treating cancer that has spread to the skin. Not only does the drug work on breaking up existing tumors, but it also focuses on creating anti-tumor responses. The drug is directly injected into tumors to and essentially ruptures the cancer cells (shown above), while releasing our old friend GM-CSF to stimulate white blood cell growth. Since the drug works a bit differently than the PD-1 drugs, we think the market potential for the drug is likely underrated. Still, we think shares of the drug maker look fairly valued at this time.
Galena Biopharma
Oregon-based Galena Biopharma (GALE) remains mostly a speculative name at this point, in our view, but the company reported some results on its breast cancer drug, NeuVax. What is NeuVax? From the press release:
“NeuVax™ (nelipepimut-S) is the immmunodominant nonapeptide derived from the extracellular domain of the HER2 protein, a well-established target for therapeutic intervention in breast carcinoma. The nelipepimut sequence stimulates specific CD8+ cytotoxic T lymphocytes (CTLs) following binding to HLA-A2/A3 molecules on antigen presenting cells (APC). These activated specific CTLs recognize, neutralize and destroy, through cell lysis, HER2 expressing cancer cells, including occult cancer cells and micrometastatic foci.”
Source: Galena Company Presentation, April 2013
In simpler language, NeuVax works to destroy HER-2, which can be a catalyst for aggressive breast cancer growth. The critical finding of the study is that the drug reduced the recurrence rate to 11.1% from 27.3% in the control group—a meaningful reduction, in our view. Studies have shown that recurrence drops even further when used in combination with Genentech’s Herceptin.
One of the themes of ASCO has been combined immunotherapies, and NeuVax could leave Galena well positioned if the drug receives FDA approval. While recent price action may suggest the market is confident in NeuVax approval, it’s also important to remember that FDA approval is no walk in the park, and the company will receive tremendous scrutiny of its data. The firm now owns Abstral, a cancer pain reliever, which it hopes to commercialize in the US in the fourth quarter of 2013. Still, rolling the dice on FDA approvals is not how we like to invest, so we’ll sit on the sidelines for now.
BioMarin
BioMarin (click ticker for report: ) announced an update on its ongoing Phase 1/2 study for its poly ADP-ribose polymerase (PARP) inhibitor BMN 673 for the treatment of solid tumors. BMN 673 showed anti-tumor activity in deleterious germline BRCA ovarian and breast cancers in the trial:
In the 28 gBRCA ovarian cancer patients, the RECIST response rate was 44% or 11 of 25 evaluable patients, the CA-125 response rate was 70% or 19 of 27 evaluable patients and the clinical benefit response rate was 82% or 23 of 28 patients.
In the 18 gBRCA breast cancer patients, the RECIST response rate was 39% or 7 of 18 patients and the clinical benefit rate was 67% or 12 of 18 patients. Of the 18 gBRCA breast cancer patients, there were six partial responses (three yet to be confirmed) and one complete response. Four ongoing patients have had stable disease for less than 12 weeks. Treatment is ongoing in 12 of the 18 breast cancer patients in the study.
BMN 673 will compete directly with Tesaro’s (TSRO)’s Niraparib, an oral polymerase inhibitor for the treatment of breast cancer. We’re optimistic about both drugs, but view BioMarin as a bit pricey at current levels. The firm is among the ‘Top 25 Most Overvalued Stocks in Our Coverage Universe.”
Celgene
At the ASCO, Celgene (click ticker for report: ) revealed a study evaluating REVLIMID combination compared to autologous stem cell transplant with or without REVLIMID maintenance in newly-diagnosed multiple myeloma. Though high-dose chemotherapy and tandem autologous stem cell transplant demonstrated a longer progression-free survival and overall survival rate than the REVLIMID combination, REVLIMID maintenance therapy reduced the risk of disease progression and overall survival regardless of previous treatment.
Though REVLIMID is not approved for the treatment of patients with newly-diagnosed multiple myeloma, it is approved in combination with dexamethasone for the treatment of patients with multiple myeloma that have received at least one prior therapy. We’re expecting continued strong sales of the drug, which advanced 16% during the firm’s first-quarter 2013.
Valuentum’s Take
Valuentum members have profited tremendously from the position in the portfolio of our Best Ideas Newsletter in the Health Care Select SPDR (click ticker for report: ), which boasts Johnson & Johnson (click ticker for report: ), Pfizer (click ticker for report: ), Merck, Gilead (click ticker for report: ), and Amgen as its top 5 holdings (at the time of this writing). We intend to keep this exposure in our Best Ideas portfolio, though we note that the ETF is starting to get a bit pricey. However, the prospects of blockbuster drugs coming out of the pipelines of the largest firms in this ETF offer optimism that the high end of our fair value range for this ETF is feasible. We continue to like diversified exposure to the group.