12:00 AM
Jan 12, 2015
 |  BioCentury  |  Finance

Buyside view XXIII: Milestones galore

2015 sees investors focus on big launches, cancer combos, NASH and gene therapy

Buyside view XXIII

The maturation of the biotech sector over the past few years finds fund managers focusing on a slew of clinical milestones and commercial launches in 2015, but only a handful of approvals.

Buysiders told BioCentury that 2014 was almost an ideal year for investing in biotech, as new drugs were approved at a phenomenal rate, drug launches were setting records and there were only a handful of notable clinical failures.

Indeed, FDA approved 41 new drugs last year, with a first cycle approval rate of 78% -- tied with 2013 for the all-time high in first-cycle approvals. The influx of new drugs will have investors watching the launches of potential sector growth drivers closely, such as the first two mAbs against PD-1, Opdivo nivolumab from Bristol-Myers Squibb Co. and Ono Pharmaceutical Co. Ltd., and Keytruda pembrolizumab from Merck & Co. Inc.

They'll also be watching HCV launches as AbbVie Inc. and Gilead Sciences Inc. engage in a price war sparked by pharmacy benefits managers looking to cut costs. Next up for investors are the anticipated summer launches of PCSK9 inhibitors from Amgen Inc. and partners Regeneron Pharmaceuticals Inc. and Sanofi.

But while the new commercial drivers are important for maintaining sector momentum, investors said 2015 is mostly about clinical execution. "It is a data-driven year," OrbiMed's Sven Borho told BioCentury.

One of the more anticipated clinical milestones of the year has already occurred, as Biogen Idec Inc. last week disclosed mixed top-line Phase II data in optic neuritis for its BIIB033 antibody against LINGO-1.

Cancer immunotherapy remains the hottest therapeutic area headed into 2015. But unlike 2014, which was more focused on the PD-1s, the story in 2015 will be the beginnings of a shakeout around which cancer immunotherapy combinations work best as clinical data are reported.

Non-alcoholic steatohepatitis (NASH) and rare diseases will continue as areas of interest for investors in 2015.

In addition, buysiders said two other areas will be garnering more investor attention this year: antibiotics and gene therapy. While investors don't expect to see major commercial or regulatory news in gene therapy in 2015, multiple clinical proof-of-concept (POC) milestones could fuel a growing momentum in the space.

Launch pad

With the high number of 2014 drug approvals, investors are hoping the newly marketed therapies can continue to drive sector performance like Gilead's Sovaldi sofosbuvir and Biogen Idec's multiple sclerosis drug Tecfidera dimethyl fumarate did in 2014.

Sovaldi set a record for a drug launch with nine-month sales of $8.5 billion, while Tecfidera had $2 billion in sales over the same period.

Borho said the Opdivo launch "has all the chances of being bigger than Tecfidera. It is obviously not going to beat Sovaldi/Harvoni, but it has better longevity." apo Asset Management's Kai Brüning agreed, saying the PD-1 launches should drive generalist interest in the sector.

Keytruda numbers are expected in Merck's 4Q14 earnings on Feb. 4. The mAb was launched in September, and analysts have not yet weighed in with sales estimates.

Opdivo was approved for advanced melanoma in late December, so Bristol-Myers isn't likely to report sales figures until its 1Q15 earnings in April. Analysts have not provided estimates for Opdivo sales yet, either.

Investors will also continue to follow the HCV pricing wars in which pharmacy benefit managers (PBMs) are using their considerable purchasing power to negotiate discounts for the two approved interferon-free combination therapies: AbbVie's Viekira Pak ombitasvir/paritaprevir/ritonavir/dasabuvir and Gilead's Harvoni ledipasvir/sofosbuvir.

In December, AbbVie agreed to an exclusive deal with Express Scripts Holding Co. for Viekira Pak that essentially cut out Gilead's HCV drugs Sovaldi and Harvoni. Last week, Gilead added two deals of its own. On Jan. 5, Gilead announced an exclusive deal for Harvoni and Sovaldi with the second-largest U.S. PBM, CVS Health Corp. Then on Jan. 8, Anthem Inc. agreed to make Harvoni its preferred drug to treat HCV across its employer-based plans.

A few investors worried that the tack taken by PBMs in HCV could also be applied to the PCSK9s. Investors felt Amgen's evolocumab and alirocumab from Regeneron and Sanofi had shown little differentiation in Phase III testing, and so could potentially be played against each other.

Clearbridge's Marshall Gordon said while the PBMs got caught flat-footed in HCV, the PCSK9s "are on their radar screen."

Evolocumab has an Aug. 27 PDUFA date. Sanofi's submission of a BLA for alirocumab is expected early this year, and the partners have said they will use a Priority Review voucher for the alirocumab BLA.

Immunotherapy combo shakeout

In cancer immunotherapy, buysiders expect to see the start of a shakeout in terms of which combination therapies work best in the space.

Keytruda is being tested in combination trials with at least 12 other targeted agents; Bristol-Myers is testing at least 10 different agents with Opdivo across 16 different trials; and Genentech Inc. and AstraZeneca plc's MedImmune LLC unit are testing their respective PD-L1 mAbs in combination with at least eight different targeted therapies.

"It is going to be exciting because we'll see a lot of the combination data coming through for cancer immunotherapy," LSP's Joep Muijrers told BioCentury.

Polar Capital's David Pinniger added 2015 also will show which particular diseases "represent the first wave of opportunities" for combinations.

Investors said one of the more anticipated sets of data will be for Opdivo plus Yervoy ipilimumab. At least one trial, the Phase II CheckMate 069 trial in metastatic melanoma, is expected to read out in 2015.

Pinniger and other investors were quick to add that cancer immunotherapy was still in the relatively early stages of development, with years left to run. Although the PD-1/PD-L1 assets are held by pharma, biotech specialist investors are interested in the products in part because combinations will create partnering and acquisition opportunities for biotechs that can contribute molecules to the cocktails.

Beyond the mAbs against PD-1 or PD-L1, the most popular pick among specialist investors was Innate Pharma S.A. The French biotech's lead program is lirilumab, a human mAb against killer cell immunoglobulin-like receptors (KIRs) that is partnered with BMS. Investors expect Phase II data for monotherapy in acute myelogenous leukemia (AML) by year end. The mAb is also being studied in multiple Phase I trials in combination with either Opdivo or Yervoy to treat various cancers.

Incyte Corp. is another name investors will be watching in cancer immunotherapy. The company has deals to test its INCB24360 in combination trials with mAbs against PD-1 or PD-L1 from Genentech, Merck, MedImmune and Bristol-Myers. INCB24360 is an indoleamine 2,3-dioxygenase 1 (IDO1) inhibitor that is in Phase II testing for ovarian cancer and in Phase I/II testing to treat metastatic melanoma.

Incyte added to its cancer immunotherapy stable on Jan. 9 when it announced a deal with Agenus Inc. to develop preclinical mAbs against four immune checkpoint targets. Agenus received $60 million up front in cash and an equity investment and is eligible for up to $350 million in milestones, plus royalties.

While Incyte was a popular pick, Pinniger said he was slightly wary of the stock because of the high valuation and uncertainty about how much of the value is attributed to the IDO1 program. Incyte was up 44% in 2014 and finished the year with a market cap of $12.3 billion. The company has 2015 milestones for non-cancer programs including baricitinib, where additional Phase III data in rheumatoid arthritis (RA) and Phase II data in diabetic nephropathy are expected this year. The JAK-1 and JAK-2 inhibitor is partnered with Eli Lilly and Co.

Medical Strategy's Harald Schwarz picked Celldex Therapeutics Inc. In November the biotech jumped nearly 30% after it reported an overall survival benefit for rindopepimut in a Phase II trial of EGFRvIII-positive glioblastoma. Additional Phase II data for the vaccine targeting EGFR variant III are expected this year. Additionally, Celldex is conducting various Phase I/II trials of varlilumab, a mAb targeting CD27, in combination with Opdivo, Yervoy and other cancer immunotherapies.

CAR crazy

Investors also said they'd be closely following chimeric antigen receptor (CAR) T cell therapies.

Deerfield's Bill Slattery said Juno Therapeutics Inc. and Kite Pharma Inc. "are names we should all be watching and paying close attention to, as they have truly transformational potential."

On the back of data showing complete responses of 70% or more in hematological malignancies for their respective CAR T programs, both companies were strong performers in 2014. Juno raised $304.2 million in an IPO the week before Christmas for a postmoney valuation of $1.9 billion and finished the year...

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