Healthcare Sector Review September 2018
NOBLE LIFE SCIENCE PARTNERS - BIOTECHNOLOGY INDUSTRY BIWEEKLY
Index Performances: NYSE Arca Biotechnology (BTK, +23.5%) and NASDAQ Biotechnology (NBI, +11.2%) indices outperformed benchmark indices S&P 500 (SP50, +8.1%) and Russell 3000 (RUA, 8.5%) YTD 2018. In the last 2 weeks, NBI and BTK indices soared, climbing +57% and +30% respectively (NBI +7% and BTK +18%, as of August 29).
Biotech financing experienced a weak year in 2017, however capital raised in 1H18 ($4.6B) has already exceeded the capital raised for the full year 2017 ($4.2B) (Exhibit 5). Since our last biweekly report, Gristone Oncology announced its plans to go public. The IPO was announced on August 23th. Licensing deals remained flat with 218 deals in 1H18 compared to 216 deals in 1H17 (Exhibit 6). 1H18 showed a strong rebound in M&A activities (Exhibit 7).
Food and Drug Administration (FDA) approved 46 drugs in 2017 reaching a 22-year high. There have been 33 drug approvals YTD-2018, including Shire (SHPG:NASDAQ)’s TakhzyroTM to treat hereditary angioedema (Exhibit 12).
Extended catalyst list of biotech companies with market caps of $50mm to $300mm can be found in the complete newsletetr on page 28-31.
BIOTECH SECTOR TRENDS
➢ Following its recent deal with bluebird bio (BLUE:NASDAQGS), Gristone Oncology filed an $80 million IPO with the SEC. Gristone and bluebird bio will collaborate to develop novel cell therapies for the treatment of cancer. bluebird bio brings to the deal deep expertise in gene and cell therapy, whereas Gristone provides its proprietary artificial intelligence technology to identify tumor-specific targets and T-cell receptors directed to these targets. (August 23, 2018)
➢ Recent scientific publication in Nature Communications (Volume 9, August 2018), sheds light into the molecular mechanism responsible for melanoma patients’ resistance to treatment with tyrosine kinase inhibitors such as Novartis’ dabrafenib (Tafinlar®) and Novartis’ trametinib (Mekinist®). Dabrafenib and trametinib are inhibitors of the enzymes B-raf and MEK, respectively. B-raf and MEK are two oncogenes known to promote cancer cell proliferation. Acquired genetic mutations of the BRAF oncogene (BRAFV600E) cause melanoma cancer cells to become resistant to these therapies. Using a method based on CRISPR–Cas9 technology, authors demonstrated that the SIRT6 gene plays a critical role in drug resistance. SIRT6 is a tumor suppressor gene, which cellular presence or expression levels are reduced in cancer cells. The reduced levels of SIRT6 renders cancer cells resistant to treatment with dabrafenib, or combination dabrafenib + trametinib. (August 24, 2018)
➢ Shire, which was acquired for $62B by Takeda in 1H18, received final FDA approval for TakhzyroTM. TakhzyroTM is a novel drug for the treatment of hereditary angioedema (HAE). Shire continues its domination of the HAE market, with its 3rd drug approval in recent years. HAE medicines, Cinryze® and Firazyr®, were previously launched by Shire. The approval of TakhzyroTM was announced on August 24, 2018.
US Drug Approvals By Indication
Following record high approval rates in 2017, 2018 started slow in the first half; however we have seen an uptick trend with 13 approvals in July and August. Infectious disease space has the highest number of approvals (147), followed by oncology (140) and autoimmune diseases (70) segments of the sector between the years of 1995 -2018.
Cancer Immunotherapy-CD47 As A Novel Target in Cancer Therapeutics
Over the last decade, cancer immunotherapy has emerged as one of the most promising class of medicines for the treatment of cancer. Deemed by experts as a potential cure, significant challenges remain for the clinical development of this drug class. The majority of current therapies focuses on adaptive immune mechanism (most evolutionary advanced part of the immune system including antibody- producing cells), whereas less attention has been given to the innate immune system (first line of defense). The innate immune system includes natural killer cells, antigen presenting cells (macrophages and dendric cells) and myeloid cells, which constitutes the first barrier of immune protection.
CD47, Phagocytosis and Killing Cancer Cells
➢ One critical functions of the innate immune system is phagocytosis. Phagocytosis is a cellular function consisting of ingestion and destruction of particles (such as microbes, parasites and cancer cells).
➢ Cells of the innate immune system such as macrophages are capable of phagocytosis, and as such, can “eat” (ingest) and destroy cancer cells.
➢ CD47 is an important regulator of myeloid cell activation, which is critical for the innate immune response. The CD47 protein functions as a “Do Not Eat Me” signal. Cancer cells express this signal on the surface to avoid and escape the innate immune response. Cancer cells express very high levels of CD47, much higher than levels found in normal cells. This feature makes the CD47 protein a potential target for the treatment of cancer.
➢ Inhibition of the CD47 protein rescues the phagocytic function of macrophages and other cells of the innate immune system, which are now able to “Eat” and destroy cancer cells.
At present, there are various therapeutic agents in clinical development targeting CD47 for the treatment of cancer including: ALX Oncology (Private), Celgene (CELG: NASDAQGS, Market Cap $64B), Forty Seven (FTSV:NASDAQGS, Market Cap $470M), Surface Oncology (SURF:NASDAQGM, Market Cap $245M) and Trillium Therapeutics (TRIL:TSX, Market Cap $82M).
Forty Seven is the front runner company in the space. Forty Seven is currently conducting a Phase 2 clinical trial on the use of Hu5F9-G4 in combination with Roche’s Rituximab (anti-CD20) for the treatment of acute myeloid leukemia (AML). Forty Seven is also developing this candidate medicine in combination with Eli Lilly’s Cetuximab (anti-EGFR) for the treatment of colorectal cancer. Forty Seven’s management plans to evaluate the drug as a monotherapy and combination with other anti-cancer medicines for the treatment of various solid tumors and hematological malignancies. Single agent clinical activity was observed in 2 out of 21 heavily pre-treated ovarian cancer patients (10% overall response rate, ORR), and 7 out of 18 refractory AML patients (38% patients with reduced leukemic blast). Combination with Cetuximab in colorectal cancer patient demonstrated 9% ORR and with Rituximab in refractory and relapsed non- Hodgkin’s lymphoma (R/R NHL) 47% ORR. Approximately 200 patients were treated with Hu5F9-G4 and showed a tolerable safety profile despite concerns of hemagglutination (clumping of red blood cells) in the preclinical setting. Like Forty Seven , ALX Oncology is another Stanford spin off. ALX is currently evaluating the use of ALX148 in combination with Merck’s Keytruda®, Roche’s Rituximab and Genentech’s Trastuzumab for the treatment of patients with advanced solid tumors and lymphoma.
Celgene is assessing CC-90002 in patients with acute myeloid leukemia (AML) and high-risk myelodysplastic syndrome (MDS), whereas Surface and Trillium are testing SRF231 and TTI-621/TTI-622, respectively, in monotherapy and combination with PD/PDL1 and anti-CD20 agents for the treatment of patients with advanced solid and hematologic cancers. Data readouts from Forty Seven’s Phase 2 clinical studies (in colorectal cancer and NHL) are anticipated in 2019.
Hereditary Angioedema (HAE)- Shire’s (SHPG:NASDAQ) Continuing Dominance
HAE is a potentially life threatening genetic disorder. This rare disease is characterized by episodes of edema (swelling) in various parts of the body including hands, feet and face. It affects 1 in 10 to 15,000 people. An estimated 25% of HAE patients carry mutations in the C1 inhibitor blood protein. The majority of candidate drugs in clinical development target the C1 inhibitor gene and the plasma kallikrein- kinin system (KKS) components. There are currently six approved treatments, three of which belong to Shire:
1. TakhzyroTM (lanadelumab, plasma kallikrein inhibitor, approved on August 23rd, 2018),
2. Cinryze® (C1 esterase inhibitor, approved in 2008) and
3. Firazyr® (Bradykinin B2 Receptor antagonist, approved in 2011). On June 21, 2018,
FDA also approved CinryzeTM (label extension) for the prevention of HAE attacks in children 6 years and older.
Shire reported F2017 annual product sales in HAE of $1,429.6 million (+9% compared to 2016), primarily driven by Firazyr®, up 15% to $663.0 million, and Cinryze® up 3% to $699.3 million. HAE product sales were reported to be up 9% and 5% in the three and six months, respectively compared to 2017 (year over year).
TakhzyroTM is an injectable monoclonal antibody targeting plasma kallikrein (Pkal), approved to prevent HAE attacks. The FDA approval was granted based on a Phase 3 pivotal study of TakhzyroTM (300 mg every 2 weeks). In the study, patients showed an 87% reduction in mean monthly attacks compared to placebo arm ((0.26 vs. 1.97, n=27 vs. n=41). Shire acquired the rights to TakhzyroTM through the acquisition of Dyax Corp in 2016.
Other approved HAE drugs include:
➢ CSL Limited’s C1 esterase inhibitors Berinert® and
➢ Haegarda and Pharming Group N. V.’s C1 esterase inhibitor Ruconest®.
Up and coming products in HAE landscape
➢ Biocryst Pharmaceuticals (BCRX:NASDAQGS) is currently in Phase 3 clinical trials assessing oral BCX7353 for the prevention of HAE. BCX7353 (125 mg) reduced HAE attacks by 73% compared to placebo, Phase 2 (APeX-1) data released in 2017. Phase 3 trial is currently underway.
➢ Ionis Pharmaceuticals (IONS:NASDAQGS) is testing RNA-based IONIS-PKKRx and IONIS-PKK-LRx antisense drugs, which are designed to reduce the production of prekallikrein, or PKK.
➢ Kalvista Pharmaceuticals (KALV:NASDAQGM) is also assessing two oral plasma kallikrein inhibitors KVD818 and KVD900 in a Phase 1 clinical setting. Company is anticipated to commence a Phase 2 study to treat acute attacks of HAE with KVD900 in 2018.
➢ Attune Pharmaceuticals (Private) is developing an oral small molecule inhibitor ATN-249 targeting plasma kallikrein.