I tried to send out this newsletter last night but there was a problem with the server. The reason for stating this is that for once I did make a great call (just dumb luck) about recommending CCXI at yesterday’s price—it has moved up a lot today. Just trying to get some credit in an otherwise tough year.
This will be the last alert of the year. I will be away through early January but plan to attend the JP Morgan health care conference second week of January. The small-cap biotechs have been under pressure after the last Trump Tweet about drug prices being too high. I think there will be tremendous pressure to reduce the price of generics mainly by stimulating competition. This will be a slow process. Given the new appointments I do not think that Medicare (CMS) will be negotiating with drug companies directly for price discounts. I also don’t think we will see reimportation but both of these will be pushed by the left. There is also a lot of pressure to bring cancer drug prices down and this is one of the areas I invest in. What I am looking for in cancer companies are products that can potentially change the paradigm of treatment and/or niche drugs that target specific mutations. In the category of paradigm changing technologies would be CAR-T cell and TCR altered T-Cell therapies These have garnered lots of attention and at the moment some trial deaths have cast a pall over the space (Juno and Kite are down). However, they have also had some early striking successes in hematologic cancers in patients that otherwise would have died. I also like the possibility of an oral check point inhibitor (PD1, Vista inhibitor in Phase I by Curis—no early data yet). Gene delivery whether for Hemophilia IX or spinal muscular atrophy are in the category of potential game changers.
I generally avoid neurology focused companies especially for chronic diseases such as Alzheimer’s, Parkinson’s, schizophrenia etc. My feeling is we still don’t know enough about the basic biology of any of these entities to truly design a rational trial. For example some new interesting data implicates the complement system in schizophrenia –so perhaps an entirely new approach in the prevention or early treatment is indicated. It would appear that very early diagnosis even before symptoms become apparent may be needed to effectively treat any of these diseases and so far we don’t have the diagnostics. It is also possible that some of these conditions are related to prions spreading throughout the brain—there is some minimal evidence for this. So my point is we know so little that I tend to stay away from all companies that are in trials with potential disease modifying agents. These are more science experiments than investible entities at this point.
The question is when does a company cross the line from a science experiment to an investible possibility. I tend to get in early knowing that most will fail. Usually I wait for Phase I data that shows some efficacy and then make a judgement about how believable the data is and whether efficacy in the Phase I will translate to later trials.
CAR-T therapy (KITE, JUNO, BLUE)
These are a few of the names that I have brought up before. Studies presented at ASH were compelling. My favorite was the early myeloma data from Bluebird (partnered with Celgene). The CAR-T cells in this study are transduced with a lentiviral vector expressing an antibody fragment that binds BCMA, an antigen on almost all plasma cells. The bb2121 study reported on the first 3 cohorts. In the lowest dose there were no responses, the middle dose showed 3 CRs (complete response) and 2 of those patients fulfilled the criteria for a stringent complete response (no clonal plasma cells in the marrow using IHC) which bodes very well for durable responses, the highest dosed cohort had 3 PRs but patients were not followed long enough to see if they will enter CR. All these patients were very heavily pretreated and all were post autologous transplant and failed. Bluebird is furthest ahead in CAR-T myeloma studies but all the other companies will start trials in this space. The other thing I really liked about the BLUE data was they treated patients who had failed everything and the toxicity profile so far looks very good. They didn’t have any serious cytokine release events and they didn’t report any neurologic problems such as brain edema which seems very common in other CAR-T therapies and unrelated to any antigen presentation in the CNS. If this profile continues to look safe BLUE should expand into the CAR-T CD19 targeting space. It is very possible that some of the neurologic adverse events are related to manufacturing issues which somehow BLUE avoided—that is my bet. Also at ASH BLUE presented data on vector copy number using their new transduction regimen which is in line with preclinical data and much better than the prior generation—hopefully this translates into better hemoglobin responses in the more difficult beta thalassemia (0/0) and sickle cell patients—we will have the first data in 2017 using the new techniques and preconditioning protocol. BLUE just reported the first severe thalassemia patient treated with the new methodology and the vector copy number was 2.9/cell and 77% of the cells had been successfully transduced—this is a much better result than they got using the old protocol. Now we have to see if this can translate into a meaningful result in this beta 0 beta0 patient. Lastly, BLUE just did another financing so they are cash rich. I bought BLUE in the 40s and think it is still a buy at this level.
Juno (JUNO) has just had too many deaths in the leukemia trial which may carry over to other trials although they are not reporting deaths in the DLBCL trial yet. This is despite modifying the conditioning regimen. The cerebral edema is particular worrisome and would seem to be generic to at least CAR-T CD-19 cells but it is interesting that Bluebird is not seeing this problem so far with the BCMA targeted CAR-T. Kite is ahead of June in the bigger space of DLBCL. I do not own Juno. I do own some Kite leaps.
Kite (KITE) will have 6-month data on the DLBCL trial in early 2017—they need to show durability of responses in the mid 30% range—keeping it where it was with the 3-month data. If they get that without too many more serious adverse events (one of the three deaths was from infection which may be related to the preconditioning regimen or the underlying disease—the other two seem more clearly related to the CAR-T therapy itself) I think the FDA should approve—all these patients are going to die without treatment. Kite has licensed T-cell receptor technology from the NCI regarding the most common activating RAS mutation found in colon cancer and pancreatic cancers. These TCRs are currently restricted to a specific HLA-C type that is found in about 10% of patients. The NEJM had a very interesting case report with a deep dive into the technology and an accompanying editorial in the 12/8 issue. This is early technology and the clinical result reported was using enriched autologous T-cells. The next step would be to genetically modify a patients T-cells to express the same TCR receptor chains in the context of the correct HLA type. This is a quickly evolving landscape. I own KITE but the caveat is they face a critical inflexion point with the 6-month data and FDA review—a setback will take the price down in half so this is a risky bet but in the long-run this type of technology will prevail.
Cascadian (CASC)
CASC released updated data from the triplet study in heavily pretreated patients and it continues to look good. I won’t rehash the study results. They did the reverse stock split and as I predicted the price came under pressure. There is also the pressure of a financing overhang since the company announced That the Phase II trial is being expanded to make it a Phase III pivotal trial. The number of patients increase substantially to almost 500 patients. There is also the pressure of year-end tax selling to harvest loses. The company cannot do the bigger trial with current funds and they have been reluctant to partner in Europe since it would dilute their return if successful. I do think the triplet combination will show a statistically significant P value and the side effect profile especially diarrhea doesn’t look any worse than Xeloda alone. This is going to be a long-term hold. I sold some to harvest a tax lose to offset other gains but will probably by back in as soon the financing aspect becomes clear. The only possible short-cut would be if the DSMB halts the trial early for efficacy and that could certainly be possible since PFS is relatively short in these very heavily pretreated patients—events should pile up quickly. However there has been no clarity from management about what the DSMB is charged with doing and how many looks there will be. I like the drug but the company is still struggling with financing and a long timeline. I continue to hold the rest of my position.
ChemoCentryx (CCXI), Array (ARRY), Curis (CRIS)
I still like all the above companies and in fact have been buying more CCXI at around the current price ($7.80 earlier yesterday). Please see the alert archives for more information. CCXI is a play on the same space that Alexion operates in however they have a small molecule complement inhibitor vs an expensive to make antibody. I also like the niche medical indications.
Array is a play on what is probably the best BRAF/MEK inhibitor combination—nothing has changed in that story in the last month. The stock has held up well compared to other small-cap biotechs.
Curis is a play on an oral PD1 inhibitor—in early stage dose-escalation trials. If we see activity as good as the antibodies and no SAEs this becomes a big deal. Specificity may be a problem with a small oral molecule—it already targets two receptors—are there others we don’t know about? I remain long CRIS. They have a more advance program (Phase II) in the lymphoma space.
Tesaro (TSRO)
TSRO will get bought out but may have to wait for approval and for the label—a broad indication in platinum sensitive ovarian patients (all patients) which the data argues for would be a big win. I bet they get it. The Phase III trial was just published in the NEJM 12/1/16 with an accompanying editorial. PARP inhibitors may be useful in other large cancer indications and the fact that niraparib worked in patients who did not have BRCA mutations or other mutations that made them HRD (homologous recombination deficient) in the ovarian setting bodes well for possible wide spread effectiveness in other platinum sensitive tumors. The stock has sold off recently but I am holding for the buyout.
As a matter of disclosure I want all readers to know that I own many of the stocks I write about in my personal account and always maintain a long position. I am not a stock broker or a registered investment adviser.
Biotech Insight is a web-based newsletter published and archived at www.biotechinsight.com. Alerts and newsletters are sent electronically to subscribers. The information in this column under no circumstances serves as a recommendation to buy or sell stocks.
Ron Garren MD
garren@redshift.com