Genmab and partner GlaxoSmithKline reported late on August 17 disappointing top-line results from a Phase II study of their anti-CD 20 antibody Arzerra in rituximab-refractory follicular non-Hodgkin's lymphoma (NHL), calling into question the biotech's future as an independent entity.
The news sent shares of the Danish biotech down 30 percent on August 18, as investors realized the negative clinical news means Genmab will not receive an expected milestone payment from GSK related to this indication. Furthermore, some analysts now suggest that risky and expensive head-to-head trials against Biogen Idec/ Genentech's Rituxan (rituximab) are now necessary for the approval of Arzerra (ofatumumab) in NHL. Since GSK and Genmab share Arzerra development costs, many predict the biotech will turn to the market for the money necessary to fund these trials.
Certainly the biotech doesn't appear to have the funds in its coffers for such work. Genmab, which reported an operating loss of $60 million for the first half of 2009 and a cash balance of $280 million as of mid-year, is now predicting a full-year loss of about DKK 650 million ($123 million)-- that's about 40 percent greater than previously forecast.
GSK paid $102 million in December 2006 in up-front cash--and made an equity investment worth over three times that--for exclusive rights to the compound, which is in trials for a variety of indications. The deal, among the most expensive licensing transactions of the time, promised milestones of over $1 billion ('GSK/Genmab: An Impressive Display of Biotech's Increased Leverage,' IN VIVO, January 2007).
According to Elsevier's Strategic Transactions database, GSK has already paid Genmab over $115 million in development-related milestones.
NHL Data May Have Wider Impact
The NHL trial in 116 refractory patients reported an overall response rate of just 10 percent in the arm receiving the highest (1000mg) dose of Arzerra. This was well below expectations. Although Genmab never formally announced its goal for this trial, analysts claim that company executives had mentioned a hoped-for response rate of 25 percent. And, according to UBS analyst Guillaume van Renterghem, the Street was expecting 40 percent.
This data may affect more than just the drug's prospects in NHL, where Piper Jaffray analyst Richard Parkes had been forecasting peak sales of up to $800 million. Parkes claims the data may taint physician perception of the drug in chronic lymphocytic leukemia (CLL), too, and says it "represents a severe blow to GSK's marketing plans," given that data from refractory CLL trials, in his view, had suggested some differentiation versus rituximab. Jefferies analysts reckon that oncologists may now be less likely to use Arzerra off-label in other diseases.
Parkes nevertheless still expects FDA approval in CLL, for which the partners submitted a BLA in January 2009 and for which a PDUFA date--extended by three months--is set for October 31, 2009. But "CLL is only a small opportunity," Parkes told "The Pink Sheet" DAILY, adding that he had predicted peak sales in that indication of just $350 million. Data in fludarabine-refractory CLL, reported late in 2008, was more promising, showing an almost 50 percent response rate in previously-treated patients.
Genmab claims that the disappointing NHL data may have been due to the fact that the patients in the trial were highly refractory. Management pointed out during a conference call announcing the news that patients in the study had a FLIPI score (Follicular Lymphoma International Prognostic Index, assessing patient severity) of 51 percent, meaning they were highly resistant to existing therapies. As a comparison, patients in trials of Cephalon's marketed NHL drug Treanda (bendamustine) had a FLIPI of just 30 percent. Setting such a high hurdle wasn't planned: according to spokeswoman Helle Husted, "it was a surprise to us that these patients were so refractory."
Arzerra strategy in NHL unclear and competition looms
UBS believes that this setback will delay Arzerra's approval and launch in NHL to 2013 in rituximab-refractory patients. By then, Roche's second-generation anti-CD 20 antibody may have caught up: the Swiss group's compound--acquired via the acquisition of GlycArt in 2005--may start pivotal Phase III studies in rituximab-refractory NHL late this year or early next.
Genmab's CEO and President Lisa Drakeman said on a conference call following the data announcement that the companies "continue to review the results" in NHL and will use it to refine the development strategy for Arzerra in that indication.
The August 17 read-out of the biotech's single arm study shows the dangers of attempting to take the fast route to market without conducting larger, randomized head-to-head trials. Indeed, a head-to-head study in NHL versus rituximab is likely the only way Arzerra will get any traction in this indication, given rituximab's established presence and safety profile, says UBS' van Renterghem.
"Rituximab has always been, and should remain, ofatumumab's clear comparator," writes van Renterghem. Since the drug has been used for over a decade in NHL and doctors will always compare any new treatment to it, "an obvious way to ease such bias is by running head to head studies," the analyst argues.
Genmab management appears to agree in principle, though it was short on details: R&D president and CSO Jan van de Winkel said on the conference call that "we are definitely going to move forward with combination therapy [ofatumumab with chemotherapy] and have also planned head-to-head studies in subsets of NHL," he said, promising updates on both "in the future."
Genmab in trouble: GSK to play white knight?
But analysts believe it's unlikely in the current financial climate that Genmab would be able to raise sufficient capital to fund its portion of such trials. Indeed, Parkes claims that even as things stand, Genmab's revised end-of-year cash position, now estimated at about $200 million, "raises concerns" and could mean the biotech requires additional cash, or will have to cut investment in critical programs. UBS's van Renterghem goes further, claiming that Genmab could by then "be an unsustainable business on its own."
In this scenario, GSK would be the most obvious white knight given its status as partner and owner of Genmab equity. For now, though, Genmab is still too expensive, according to Piper Jaffray's Parkes. "I can't see GSK justifying a $2 billion acquisition on the basis of a disappointing drug that might get approved in a niche indication," he said in an interview--even though GSK would, via royalties estimated at 20-25 percent, give away some margin when and if the drug is approved.
According to UBS valuation models, Genmab could be worth DKK142 per share to GSK--about 30 percent below the biotech's current price. Forthcoming events that may move the biotech's shares include ofatumumab's potential approval in CLL, and Phase III data from epidermal growth factor receptor targeting antibody zalutumumab in refractory head and neck cancer, expected by year-end. This, according to Parkes, is designed to attract a partner to invest in developing the drug in larger indications.
Meanwhile, ofatumumab is also in Phase III trials in rheumatoid arthritis and in Phase II for multiple sclerosis. On July 29, 2009, Genmab and GSK announced the drug, administered intravenously, had met its primary endpoint in a Phase III, 260-patient study in RA patients with an inadequate response to methotrexate. But according to Parkes, "they don't have enough data...and the focus has shifted to the subcutaneous formulation." Given the competitive RA landscape, ofatumumab will only progress in RA if the subcutaneous formulation is feasible, he says.
GSK may simply decide to cut its losses with Arzerra in NHL. Analysts point out that the drug's success is not material to the Big Pharma, which could focus instead on partner compounds such as systemic lupus treatment Benlysta , being developed in an area where "there's nothing else available and as such there's a clearer run to market." Benlysta ( belimumab), to which GSK took an option from Human Genome Sciences in 1996, reported positive Phase III data in July 2009 ('The Pink Sheet' DAILY, Jul 20, 2009).
- Melanie Senior (m.senior@elsevier.com)
This article is reprinted from "The Pink Sheet" DAILY –Aug 18, 2009
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