Physicians Financial News: June 8, 2010

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Leaner, Refocused PDL BioPharma Poised to Make Oncology Play

After months of major reorganizations, upper-tier executive level shake-ups, and shareholder dissatisfaction, PDL Biopharma Inc., according to many analysts, is beginning to emerge from all the turmoil and change as a stronger, more streamlined and focused organization that has the potential to make an impact in the oncology sector. The once oversized and over-extended company had developed a reputation for enticing shareholders with all sorts of promise and potential, only to fall consistently short of expectations. A number of major moves over the past several months, however, have changed the face of the company and may change its fortunes.

Frustrated stakeholders have long lobbied for the company to sell off parts or put itself on the auction block in its entirety. Bowing both to shareholder pressure and the view of key company executives who believed the decision to be sound strategy, the company acquiesced, announcing last Fall that it would deal away or spin-off many of its more cumbersome, profit-draining divisions. It was not long before market watchers realized that PDL intended to be true to its word.

The fire sale began in earnest with the sale of PDL’s manufacturing facilities in late 2007. At the same time, the company began a sell-off of all of its commercialized products with the deal to cede its Busulfex IV franchise to Otsuka Pharmaceutical Co. for $200 million. The process was completed in early 2008. The 2008 transaction was conducted with EKR Therapeutics. The latter company purchased PDL’s cardiovascular product line for $85 million up front and $85 million in potential milestones. The deal includes the hypertension drug Cardene (nicardipine), heart attack drug Retavase (reteplase) and also ularitide, which is being developed for acute decompensated heart failure. In all, the sale of PDL’s commercial portfolio yielded roughly $357 million.

Next, PDL announced its intention to effectively split what was left of the company into two parts, spinning off its biotechnology assets into a separate publicly traded entity apart from its antibody humanization royalty assets and to capitalize the new biotechnology spin-off company with about $375 million in cash. The company said the initial infusion of money, along with potential milestone payments, royalties, and the sale of the company’s cardiovascular products will fund the biotech spinoff for about three years.

After the spinoff, the company said it will continue to hold rights to royalty revenue on all licensed products. It said it would distribute future revenue to stockholders and does not plan to make any acquisitions. PDL expects that revenue to range from $240 million to $260 million in 2008. This move is expected to be completed by the end of the year, at which point there will be a nimble, small-scale, responsive PDL research and development (R&D)—centered entity narrowly focused on lucrative markets such as oncology and a stand-alone company established for the purpose of accruing PDLs royalty-generating assets. According to a PDL spokesperson, the corporate restructuring is designed “to sharpen the Company’s focus on oncology clinical development efforts and to further reduce costs to extend its cash reserves.”

According to analysts, the entity that will exist to process royalties and other assets represents a distillation of what is generally acknowledged to be the most valuable piece of the company: the technology and underlying patents for creating humanized monoclonal antibodies. It forms the basis for many successful biotech drugs currently on the market, including Genentech’s cancer drugs Avastin (bevacizumab) and Herceptin (trastuzumab), and is behind Medimmune’s Synagis (palivizumab) and Biogen Idec’s Tysabri (natalizumab). Opting to license the technology to other companies instead of exclusively developing in-house products has provided PDL with a steady, stable revenue stream (from licenses and royalty revenue), that according to financial news website TheStreet.com, has the potential to reach $500 million annually within the next five years.

The stand-alone entity may exceed revenue-generation expectations: All of the existing royalty-producing drugs for PDL, developed by other companies but based on its patent for humanized monoclonal antibodies, are growing nicely—as seen with Genentech’s Avastin. Furthermore, new royalty-producing compounds could be on the market as early as this year: AstraZeneca just filed a marketing application with the Food and Drug Administration for respiratory tract infection treatment motavizumab. Finally, other royalty-producing drugs that just came to market, like Tysabri, should bring the new entity years of revenue growth.

Investor’s Business Daily

In the words of one Wall Street analyst (quoted in a recent issue of ) impressed with PDL’s recent maneuverings, “it’s hard to argue that PDL BioPharma isn’t trading at an incredible value right now.” According to a commentator on the website Motley Fool, “The most interesting upcoming event for Fools (potential investors) considering a stake in PDL is the breakup of the company. Investors should carefully monitor how the market chooses to value its royalty stream and R&D assets once they are divided. In asset-breakup cases like these, the market often incorrectly values at least one of the resulting spinoffs. In the confusion following a move like PDL’s, shrewd investors can make lots of money on the long or short side. Fools should track PDL closely once more news of the proposed spinoff is announced.”

Indeed, much of even the most boisterous shareholder grumblings have been quieted of late. It did not hurt that in May of this year, PDL delivered a $4.25-a-share special dividend payment to investors as part of the company’s plan to break apart and return cash to shareholders. (Much of the funding for this dividend came from PDL’s sale of the rights to its marketed drugs and biopharma manufacturing facilities.)

Newly stripped down and devoid of diversifications and distractions, PDLs future performance will depend on the progress of its pipeline (Figure). Its lead product candidate is satraplatin, a platinum-based compound intended for use as a chemotherapy treatment. Unlike other platinum-based drugs, satraplatin is administered orally. The ongoing phase I trial evaluating satraplatin in combination with radiation therapy in non—small-lung cancer is being conducted by the company. The remaining company is also developing a number of antibodies, currently in various stages of clinical trials, including aclizumab, which is being tested as a treatment for multiple sclerosis, volociximab, being studied for use against solid tumors, and multiple myeloma treatment candidate HuLuc63.The Company also has two kinase inhibitor compounds, RGB-344064 and RGB-286638 in pre-clinical development. Preclinical agent RGB-286638 is expected to enter clinical trials within the next few months.

The turbulence, difficulties, and challenges faced by PDL have been reflected in its stock price. Flying high at over $30 per share as recently as a year ago, the equity has been beaten down to the point where it is now hovering below $4 per share. A rally may be overdue, however, as numerous analysts and investment experts have deemed the stock to be undervalued and a good bargain.

Monoclonal Antibody Market Poised to Continue Remarkable Expansion

According to numerous analysts, the oncology marketplace is likely to be increasingly dominated over the next decade by monoclonal antibody (MAB) therapies. The remarkable rise of the therapeutic category, which only several short years ago was looked upon as experimental and whose business prospects were far from certain, is being attributed to rapidly evolving development advances, applicability across multiple tumor types, and the proven, established success (both in terms of sales and efficacy) of the MABs that are currently on the market.

According to ‘Antibody Therapies in Oncology,’ a market report recently released by Pittsburgh-based Decision Resources, a research and advisory firm for pharmaceutical and health care issues, the MAB drug market will more than double to $16.7 billion in 2016. This dramatic rate of growth, states the report, will be fueled by the increasing use of currently available therapies and supplemented by the emergence of new MAB products currently in various stages of development.

Leaders among currently established MABs that, according to Decision Resources and a variety of other industry watchers, are likely to capture increasing marketshare in the years ahead include Genentech’s Avastin, ImClone’s Erbitux (cetuximab), and Genentech’s Rituxan (also marketed as Roche’s MabThera outside the U.S.) (rituximab).

The new Decision Resources report finds that another major driving force behind market growth of the MAB drug class through 2016 will be the label expansion of currently approved MABs into other patient populations as well as approvals in new indications in the United States, France, Germany, Italy, Spain, United Kingdom and Japan.

In 2006, Avastin held approvals in non—smallcell lung cancer and colorectal cancer. Since that time, of the cancers covered in the report, it has gained approval for breast cancer and renal cell carcinoma and is expected to be approved for prostate cancer and ovarian cancer. As is the case with other MABs’ mechanism of action, and applicability across multiple tumor types, even if and when only limited patient share is seen in some indications, it will likely be key to Avastin’s continued and sustained success.

While not as lucrative as Avastin in terms of revenue generation or as diverse in terms of its use across as many tumor types, Erbitux generates significant sales in colorectal cancer and squamous cell carcinoma of the head and neck. Also, Erbitux is expected to be approved for the treatment of non—smallcell lung cancer, which will dramatically boost its sales. Lastly, although the use of Rituxan/MabThera in non-Hodgkin’s lymphoma has reached saturation in many of the subtypes of the disease, this agent is forecasted to gain approval for chronic lymphocytic leukemia, allowing for increased prescribing in Europe where the cost-constrained environment limits off-label use.

Market sales will also be driven by the introduction of four new MABs by 2016: Genmab and GlaxoSmithKline’s ofatumumab for non- Hodgkin’s lymphoma and chronic lymphocytic leukemia, Medarex and Bristol-Myers Squibb’s ipilimumab for malignant myeloma, Genmab’s zanolimumab for T-cell lymphoma, and Genentech’s pertuzumab for breast cancer.

“These emerging MABs will contribute significant sales by 2016,” said Clair Gricks, PhD, analyst at Decision Resources, “They will provide new therapeutic options for patients with currently limited choices or will improve the efficacy of established agents when used in combination. The majority of market growth, however, will be driven by label expansions and increased uptake of currently marketed MABs.”

FDA-approved Monoclonal Antibodies

Antibody

Brand Name

Approval Date

Type

Target

Approved Treatment(s)

Abciximab

ReoPro

1994

chimeric

inhibition of glycoprotein IIb/IIIa

Cardiovascular disease

Adalimumab

Humira

2002

human

inhibition of TNF-a signalling

Inflammatory diseases

(mostly auto-immune disorders)

Alemtuzumab

Campath

2001

humanized

CD52

Chronic lymphocytic leukemia

Basiliximab

Simulect

1998

chimeric

IL-2 receptor a

Transplant rejection

Bevacizumab

Avastin

2004

humanized

vascular endothelial growth factor

Colorectal cancer

Cetuximab

Erbitux

2004

chimeric

epidermal growth factor receptor

Colorectal cancer

Daclizumab

Zenapax

1997

humanized

IL-2 receptor a

Transplant rejection

Eculizumab

Soliris

2007

humanized

complement system protein C5

Inflammatory diseases including

paroxysmal nocturnal hemoglobinuria

Efalizumab

Raptiva

2002

humanized

CD11a

Inflammatory diseases (psoriasis)

Ibritumomab

tiuxetan

Zevalin

2002

murine

CD20

Non-Hodgkin lymphoma

(with yttrium-90 or indium-111)

Infliximab

Remicade

1998

chimeric

inhibition of TNF-a signalling

Inflammatory diseases

(mostly auto-immune disorders)

Muromonab-CD3

Orthoclone OKT3

1986

murine

T cell CD3 receptor

Transplant rejection

Natalizumab

Tysabri

2006

humanized

T cell VLA4 receptor

Inflammatory diseases

(mainly autoimmune-related multiple

sclerosis therapy)

Omalizumab

Xolair

2004

humanized

immunoglobulin E (IgE)

Inflammatory diseases (mainly

allergy-related asthma therapy)

Palivizumab

Synagis

1998

humanized

an epitope of the F protein of

respiratory syncytial virus (RSV)

Viral infection (especially RSV)

Panitumumab

Vectibix

2006

human

epidermal growth factor receptor

Colorectal cancer

Ranibizumab

Lucentis

2006

humanized

vascular endothelial growth factor

Macular degeneration

Gemtuzumab

ozogamicin

Mylotarg

2000

humanized

CD33

Acute myelogenous leukemia

(with calicheamicin)

Rituximab

Rituxan, Mabthera

1997

chimeric

CD20

Non-Hodgkin lymphoma

Tositumomab

Bexxar

2003

murine

CD20

Non-Hodgkin lymphoma

Trastuzumab

Herceptin

1998

humanized

ErbB2

Breast cancer

Source: Waldmann, TA: Immunotherapy: past, present and future. Nature Medicine 2003;9:269—277.

Delcath CEO Touts New Drug Delivery Technology

Oncology Biotech News

Delcath Systems, Inc., New York City, recently announced the expansion of an ongoing phase III multi-center clinical trial for the treatment of inoperable metastatic melanoma in the liver using the Company’s Percutaneous Hepatic Perfusion (PHP) System for the isolated, high-dose delivery of the anticancer agent melphalan. With the addition of the University of Texas Medical Branch at Galveston, there are now six centers participating in the study testing the Delcath System. Over the past two months, Delcath Systems has added five cancer centers to this phase III trial, which needs fewer than sixty additional patients to reach full enrollment. The trial expansion comes on the heels of successful phase II results (both in terms of enhanced tolerability and efficacy) of the Delcath system in neuroendocrine cancer. In an effort to gain more insight into the system itself and its implications for advancing oncology treatment, sat down with Richard Taney, President and CEO of the company.

Mr. Taney explained, “What we are is a platform technology that isolates regions of organs enabling the delivery of extremely high doses (of chemotherapy) to the targeted region while sparing the surrounding tissue. The dosages (being administered in the current phase III trial) if administered (without the Delcath system) would be lethal. We can increase the therapeutic index of any drug without effecting toxicity profile.” The Delcath System is designed to deliver significantly higher doses of anticancer drugs to a patient’s liver while preventing entry of the drugs to the rest of the patient’s circulation. This isolation limits toxicities that result from systemic chemotherapy treatments.

In the ongoing phase III trial, the system is enabling increases in maximum tolerated dosages by more than seven-fold. “The system,” stated Mr. Taney, “is being used in conjunction with melphalan (Alkeran), which usually can only be administered at .4 milligrams per kilo of body weight. (Utilizing the Delcath delivery system,) patients are being dosed with 3 milligrams per kilogram of body weight with no more toxicity than the conventional dose.”

Although Delcath’s current efforts are focused on metastatic melanoma of the liver (a disease that has no known effective treatment and is characterized by a rapid progression of between 2—7 mo), according to Mr. Taney, the system has potential applicability across a wide range of cancers. As an example, Mr. Taney cited results from a recent phase II trial of patients with neuroendocrine tumors in which 79% of the subjects studied showed either partial or complete responses and only one showed disease progression.

“With higher doses, higher efficacy and enhanced tumor responses have been demonstrated. If you can get the dosages high enough, you can kill anything. Dosing, as it relates to safety and toxicity, is everything. What we are doing is trying to take drugs that have value and get the doses high enough more effective without touching the toxicity profile,” explained Mr. Taney.

Mr. Taney expects the system to be approved at some point in 2009. “We have already tested three drugs in humans and are experimenting with a couple more,” he reported, “the trial has been fast tracked by the FDA (allowing the phase III trial to proceed based on phase I results and foregoing phase II testing) and is expected to be completed in early 2009. Promptly thereafter, we will be submitting the Delcath delivery system for FDA approval.”

Bispecific Antibody Combo Touted as Diagnostic Advance in Colorectal Cancer

Immunomedics, Inc., disclosed that the company’s efforts to facilitate early detection by pretargeting tumors with a bispecific antibody and a peptide labeled with gallium-68 (a positron emission tomography sensitive radiotope) produced excellent images in a human colorectal cancer model.

The bsMAb used in this study was TF2, an antibody constructed using the Company’s proprietary protein engineering platform technology that the company has dubbed ‘Dock-and-Lock.’ TF2 specifically targets the carcinoembryonic antigen expressed in many human cancers, and the histamine- succinyl-glycine (HSG) peptide, which in this study was labeled with Ga-68 for PET imaging.

Mice bearing human colorectal cancer transplants were pretargeted with 0.1—10 nmol of the DNL-construct and 16 hours later injected intravenously with 10–100 pmol of the HSG peptide. Four bsMAb to peptide ratios, 10:1, 25:1, 50:1 and 100:1, were studied. High specific uptake of TF2 in the tumor was obtained at doses up to 2.5 nmol, while blood levels were sufficiently low. At a molar TF2 to HSG ratio of 25:1, maximal accumulation of the labeled peptide in the tumor was observed. Under these optimal conditions, the ratios of radioisotope uptake for tumor-to-blood and tumorto- kidney were 590 and 6, respectively. The very high ratios produced excellent PET images of the tumor within 1 hour of Ga-68 injection.

“We are pleased with these preclinical results, which demonstrated that pretargeting with bispecific antibodies can be successfully applied to the imaging of cancer. In collaboration with collaborating investigators, we are now planning to test this new technology in patients,” stated Cynthia L. Sullivan, President and CEO, Immunomedics. The ultimate goal of the research, explained an Immunomedics spokesperson, is to offer patients with cancer a more individualized treatment by combining improved molecular imaging with targeted therapy.

Amgen Updates Romiplostim Study Results

Amgen Inc. provided an update of results from an ongoing, open-label extension study on the long-term safety and efficacy of romiplostim in adult patients with chronic immune thrombocytopenic purpura (ITP). The updated results continue to show that romiplostim increases and sustains platelet counts with extended treatment, and reduces the need for concurrent and rescue ITP medications.

The updated results from the long-term study show that overall 87% of patients achieved a platelet response defined as a platelet count of 50,000 platelets per microliter or doubling of the baseline platelet count (124/142). A platelet response was achieved by 30% (42/138) of patients after the first dose and by 51% (71/138) of patients after the third dose. The overall median baseline platelet count was 17,000 platelets per microliter. The average treatment period was 65 weeks, and the longest duration of treatment was 156 weeks.

Ad hoc

Platelet counts of romiplostim-treated patients were increased from baseline by 20,000 platelets per microliter more than one-half of the time in 86% of patients and more than four-fifths of the time in 57% of patients. analysis showed response durability, defined as platelet counts greater than 50,000 platelets per microliter, was maintained for greater than or equal to 10 consecutive weeks in 78% of patients (102/131), greater than or equal to 25 weeks in 54% of patients (66/122), and greater than or equal to 52 consecutive weeks in 35% of patients (29/84).

Of patients receiving concurrent ITP medications (such as corticosteroids) at baseline, 84% of patients (27/32) discontinued or reduced their dose by greater than 25%. Patients using rescue medications (defined as any additional ITP medicines needed to increase platelet counts) decreased from 23% (33/142) during weeks 1—12 to 15% during weeks 24–36, and remaining between 12% to 18% during weeks 130–132.

Adverse events did not increase in frequency during the course of the trial.

The ongoing, open-label study is assessing the safety and efficacy of long-term administration of romiplostim in both splenectomized and non-splenectomized adult patients with chronic ITP. As of July 2007, 143 patients had enrolled and 142 were treated with romiplostim. Sixty-seven percent of patients were female, and of the enrolled patients, 60% had undergone a splenectomy.

“Currently, romiplostim is the only thrombopoietic treatment for adult chronic ITP for which there is three years of follow-up data,” said lead investigator Professor Adrian Newland, Department of Haematology, The Royal London Hospital, Whitechapel, London, UK, “This is the longest ITP study and the findings demonstrate the potential of romiplostim as a long-term treatment option for a patient population with limited treatment options.”

Amgen has filed for regulatory approval of romiplostim for use in the treatment of thrombocytopenia in adults with chronic ITP in the United States, European Union, Australia and Canada. Regulatory authorities in all but the European Union have granted priority review of Amgen’s application.

Potential Breast Cancer Product Yields Positive Phase II Data

Kosan Biosciences Incorporated (recently acquired by Bristol-Myers Squibb) announced that its lead heart shock protein (Hsp90) inhibitor, tanespimycin, has demonstrated a high level of antitumor activity in a phase II trial when administered in combination with trastuzumab (Herceptin) to patients with HER2-positive metastatic breast cancer whose disease had either progressed after, or did not respond to, treatment with trastuzumab immediately prior to entering the trial. Tanespimycin has demonstrated the potential to disrupt the activity of multiple oncogenes and cell signaling pathways implicated in tumor growth, including HER2, a key pathway in breast cancer.

The objective of the phase II trial was to determine the objective response rate by RECIST in patients with HER2-positive metastatic breast cancer. To be eligible for the trial, patients must have had either progressive disease within three months following last dose of adjuvant treatment with trastuzumab or have progressive disease following initial therapy for metastatic disease with trastuzumab (trastuzumab may have been administered with cytotoxic chemotherapy or as a single agent). Tanespimycin was administered at a dose of 450 mg/m² following administration of the standard dose of trastuzumab.

Of 27 evaluable patients, 17 patients showed clinical benefit including seven patients with partial response (PR), five patients with tumor regression (minor response or MR) and five patients with extended stable disease (SD, greater than 4 cycles), yielding an overall clinical benefit incidence of 63%. Common toxicities were mainly mild to moderate and included fatigue and gastrointestinal symptoms. Antitumor activity and toxicity were similar between the injection and injectable suspension products.

“The response data from this phase II trial of tanespimycin plus trastuzumab have grown stronger as more patients have been treated, underscoring our observation that tanespimycin is a highly active and tolerable agent in patients whose disease is refractory to trastuzumab,” said Clifford A. Hudis, MD, Chief, Breast Cancer Medicine Service, Memorial Sloan-Kettering Cancer Center, and senior author of the poster which presented the data. Dr. Hudis added, “We look forward to seeing tanespimycin advance into its next set of clinical trials with the goal of elucidating its potential role in the metastatic breast cancer treatment paradigm.”

“Tanespimycin is the most advanced Hsp90 inhibitor in development for HER2-positive breast cancer and has generated what we believe is highly promising data in this indication,” said Pamela Cohen, MD, Kosan’s Chief Medical Officer. “We believe that Hsp90 inhibition is among the most novel and broadly applicable anticancer targets being explored today, and that it may have broad applicability in breast cancer and other cancer indications.”

Kosan anticipates conducting additional studies with tanespimycin with the goal of further characterizing the drug candidate’s safety and efficacy profile and potentially paving the way to a registration program.

The eventual benefits of the drug, if approved, will be realized by Bristol-Myers Squibb. At press time, the firm announced that it had completed its $235 million acquisition of Kosan. Excluding Kosan’s cash balance, Bristol is paying about $190 million in cash for the company. Bristol previously said it is financing the deal with cash on hand. Bristol completed its tender offer for all outstanding Kosan stock at $5.50 per share.

Cougar Biotech Reports Positive Results in Prostate Trials

Cougar Biotechnology, Inc. announced positive results from ongoing phase I and phase II clinical trials of Cougar’s investigational drug, CB7630 (abiraterone acetate) in patients with prostate cancer. Data from five separate trials (two phase I, two phase II and one combined phase I/II trial) were disclosed. Highlights from the trials included the following:

In the COU-AA-BMA clinical trial, CB7630 in combination with low-dose prednisone was administered orally, once daily, to patients with castration-resistant prostate cancer (CRPC), who had progressive disease despite treatment with luteinizing hormone-releasing hormone (LHRH) analogues and multiple other therapies. Of the 23 evaluable patients from the trial, 11 patients (48%) experienced a confirmed decline in prostate specific antigen (PSA) levels of greater than 50% and four patients (17%) experienced PSA declines of greater than 90%.

In the phase I dose ranging trial (COU-AA-002) CB7630 was administered once daily to chemotherapy- naïve patients with CRPC, who had progressive disease despite treatment with LHRH analogues and multiple other hormonal therapies. Of the 30 evaluable patients in this phase I trial, 27 patients (90%) experienced a decline in PSA levels while receiving CB7630, with 16 of 30 patients (53%) experiencing a greater than 50% decline in PSA levels.

According to data from the ongoing phase II trial of CB7630 in combination with prednisone in patients with advanced prostate cancer who have failed androgen deprivation and docetaxel-based chemotherapy (COU-AA-004), CB7630 was well tolerated with only minimal toxicity in this post-docetaxel population. Seventeen of the 38 evaluable patients (45%) experienced a confirmed decline in PSA levels of greater than 50%. After 12 weeks of treatment, of the 24 patients with lesions that were evaluable by bone scan, 14 patients had lesions that were stable.

According to an update of an ongoing phase II trial (COU-AA-003) of CB7630 in patients with advanced prostate cancer who have failed docetaxel-based chemotherapy, CB7630 was well tolerated with only minimal toxicity in this post-docetaxel population. Of the 34 patients treated, 24 patients (71%) experienced a decline in PSA, with 16 patients (47%) demonstrating a decline in PSA levels of greater than 50%.

Of the 54 evaluable patients from a phase I/II trial of CB7630 in patients with hormone refractory, chemotherapy- naïve prostate cancer (COU-AA-001), 38 patients (70%) experienced a confirmed decline in PSA levels of greater than 50% while receiving CB7630 as a monotherapy.

Alan H. Auerbach, Chief Executive Officer and President of Cougar Biotechnology, said, “The data from our phase I and II trials of CB7630 continue to support the potential role of the drug in the treatment of CRPC. We continue to be pleased with the strong evidence of antitumor activity in patients who were both chemotherapy naïve and chemotherapy refractory, both of which represent significant unmet medical needs in prostate cancer. We have strong confidence in the potential of CB7630 in both of these patient populations.”

The Los Angeles—based biopharmaceutical company said it plans to initiate its second phase III trial in the chemotherapy-naïve CRPC population during the second half of this year.