Investing in Companies Developing Promising Immunotherapy Drugs for Melanoma

Melanoma is on the rise. Yearly there are 68,000 new cases of melanoma diagnosed in the U.S. and an estimated 9,180 people will die from advanced melanoma. From 1970 to 2009, diagnoses have increased by 800%.While Melanoma accounts for less than 5% of skin cancer cases, it is responsible for more than 80% of skin cancer-related deaths. However, as the U.S. Food and Drug Administration (FDA) has approved several immunotherapies and a number of other immunotherapies are in various stages of clinical development to treat metastatic melanoma, those numbers are lowering.

Companies like Bristol-Myers Squibb BMY, Merck MRK, Amgen AMGN, and Roche RHHBY have all been developing treatments for late stage metastatic melanoma. There are also small companies, like Inovio Pharmaceuticals INO and OncoSec Medical ONCS, that are developing novel delivery systems that enable the cancer drugs to better target the tumors. 

While therapies to treat melanoma are looking like a crowded field, one must remember that, even with competition, these new drugs could be worth billions to the drug makers if successful. Below are a number of companies that are developing immunotherapies that have the potential be the next billion-dollar blockbuster drug or delivery system to treat melanoma.

BRISTOL- MYERS SQUIBB’S YERVOY EXTENDS LIVES

There can be no better headline for a drug company when its new cancer drug is said to “extend the lives of patients by as much as 10 years.” And that’s what the headlines for Bristol’s immunotherapy drug, ipilimumab (Yervoy), touted after results of the first long term study of 1,800 patients from 12 trials showed the treatment had a positive effect on long-term survival. 22% of the patients were still alive 3 years after treatment and 17% were alive after 7 years, after which there were no deaths-- and the longest recorded survival was 9.9 years.The findings showed patients reach a plateau in survival that starts at about 3 years and extends until at least 10 years. 

By targeting the CTLA-4 protein receptor on T-cells within the immune system, Yervoy is designed to fight cancer by removing molecular brakes that prevent immune system cells from destroying tumors.  While Yervoy has only been effective in shrinking tumors in just over 10% of the patients, the patients who found the drug effective did live longer due to the immune system’s ability to adapt and keep up with mutations in the tumor. In Phase III trials, melanoma patients treated with Yervoy experienced median overall survival of 10 months, compared to 6.4 months for patients in the control group. Importantly, more than 20% of patients in the trial lived more than 2 years, versus just 14% of untreated patients. And one in ten patients lived at least 4 years.

Sales of Yervoy have risen of 33% year-over-year, as 50% of the Stage IV melanoma patients are given the drug.  Sales in the last quarter were $238 million and expected to grow as Yervoy is also being tested for other indications such as for stomach, lung, ovarian, and prostate cancer. And while Yervoy did not meet the main goal in a prostate cancer trial, it did show positive results for progression-free survival, showing the treatment to be effective in less advanced prostate cancer, particularly in cases where the cancer hadn't spread to other organs. Bristol plans to have Yervoy eventually carve out market share in the treatment for prostate cancer, and additional Phase III tests are expected to produce data on patients with early stage prostate cancer in 2015. 

Another immunotherapy drug that has shown great promise for Bristol is nivolumab, an anti-PD1 monoclonal antibody. Research has shown that interactions between PD-1 and the ligands PD-L1 or PD-L2 can lead to antitumor immune suppression; and nivolumab is designed to interrupt the interaction that then allows T-cells to fight the cancer.  Nivolumab is considered a breakthrough melanoma therapy as a result of its long term results from a Phase I study, showing that the drug demonstrated durable responses among a significant group of patients with Stage IV melanoma. Close to 33% of the patients in the study experienced tumor shrinkage, compared to 10% for Yervoy. 

Nivolumab is also in trials in combination with Yervoy to treat melanoma. The study consists of 52 patients, and 82% given the combination were alive after a year, a higher percentage than patients given Yervoy alone. The study demonstrated that adding anti-PD1 drugs could double or triple the survival results. Nivolumab is in 6 late-stage studies, and has Fast-Track status in place for melanoma, lung cancer, and kidney cancer.

Bristol is an $85 billion market cap company and has seen its stock rise over 58% YTD. The stock closed on Thursday, November 14^th at $52.74, slightly below its 52-week high. On November 6^th analysts at Leerink Swann raised its price target from $49.00 to $58.00, while Credit Suisse placed a $55.00 price target on the stock earlier. Sales of Yervoy are expected to reach $1.1 billion by year’s end.  The company posted $4.1 billion in 3rd quarter revenue, up 9%. Though the company has lost patents on two of its most successful drugs, both Yervoy and nivolumab are expected to make up for the lost revenue as peak sales are estimated at $6 billion. Analysts also predict Yervoy will become Bristol’s top selling drug by 2016.

MERCK DEVELOPING A BETTER DRUG – BUT LATE OUT OF THE STARTING GATE

While it has not been the best year for Merck as the company restructures, it may have found its future billion-dollar drug in its investigational anti-PD-1, lambrolizumab (formerly known as MK-3475).  Like Bristol’s nivolumab, lambrolizumab has enjoyed positive results in its ongoing Phase IB expansion study where the drug demonstrated significant antitumor activityand good response rates as well as a tolerable toxicity profile in patients with melanoma. Lambrolizumab achieved a response rate of 38%in advanced melanoma patients, and as high as 52% with patients on the highest dose tested, higher numbers than Bristol’s drug. 

The trial focused on 135 patients with advanced and unresectable melanoma, with 48 patients having been previously treated with Yervoy. In the trial, lambrolizumab produced durable responses in 81% of patients who responded to the drug. The overall median progression-free survival among the patients enrolled in the trial was greater than 7 months. A global Phase II study of lambrolizumab is currently open for enrollment, and a Phase III study is planned comparing two different dosing regimens of lambrolizumab with Yervoy in patients who have not previously received Yervoy.  

Lambrolizumab received the FDA’s Breakthrough Therapy designation earlier this year and is currently in eight clinical trialstesting a number of different cancers including melanoma, non-small cell lung, bladder, colorectal, gastric, head and neck, and triple negative breast. Additional trials are planned as monotherapy or in combination with other cancer therapies.

Pharmaceutical analyst Tim Anderson at Bernstein Research expects  lambrolizumab to generate peak sales of $3 billion. Unfortunately, Mr. Anderson is not as excited about the near term prospects for Merck. His concerns were two fold: the first was the mounting generic competition Merck is facing or soon will face on a third of its drug franchises; the second is its lengthy process to overhaul its R&D operations. AsMr. Anderson commented, "While the company is embarking upon a series of maneuvers to 'fix' R&D, this will likely take years to accomplish."

Merck is a $138 billion market cap company. The stock is up 15% YTD, closing on Thursday, November 14^th at $47.82 per share, 5% below its 52-week high. In October the company announced 8,500 more jobs will be cut in addition to the 7,500 previously announced, making the total job cuts about 20% of the company’s workforce and shaving off $2.5 billion annually by 2015. The company announced results for the third quarter. Globally, sales were $11.0 billion, a decrease of 4% from $11.49 billion for the same period last year. EPS came in at $0.38, a drop from $0.56 from the same quarter the previous year. However, I believe that the long-term prospects for Merck are very good given the restructuring and its focus on immunotherapies for cancer. And while it could be a rocky road for the next year, Merck in one’s portfolio for the long-term should be a wise investment.

ONCOSEC DEVELOPING A DELIVERY SYSTEM FOR TODAY’S CANCER FIGHTING DRUGS

OncoSec Medical is a small company that is developing what might be a billion-dollar delivery system. Referred to as “reversible electroporation”, the OMS (stands for OncoSec Medical System, appropriately) system is utilized with medicines and therapies targeting solid tumors. The company has formally dubbed the technology as ImmunoPulse (using immunotherapy DNA IL-12 cytokine) and NeoPulse (using anti-cancer drug bleomycin). Electroporation uses an electrical pulse to create temporary openings or pores in cancer cells; then clinically proven chemotherapeutics or gene-based cytokines are injected into the open pores at doses lower than what would normally be delivered systemically. The electric pulse is removed and the pores close up, trapping the cancer fighting medicine within the tumor cells. With this targeted approach and pore-opening technique, the patient experiences less surrounding tissue damage-- and in the case of a chemotherapeutic, only 1/20th of a traditional chemotherapy dose need be administered.

In a Phase I study with melanoma patients, ImmunoPulse was found to be potentially safe and well tolerated, plus data displayed best-in-class results as 90% of the lesions treated elicited an immune reaction that resulted in a response. This immune reaction also resulted in a 53% objective response rate in patients who had other cancerous lesions that were not treated with ImmunoPulse. A Phase II safety and efficacy trial with late-stage metastatic melanoma is being conducted in collaboration with the University of California San Francisco. This open-label, multi-center Phase II trial will enroll approximately 25 patients with advanced-stage, cutaneous, in-transit malignant melanoma.

Last month the company announced positive preliminary animal data on ImmunoPulse. The study was conducted using a single tumor model where a total of forty mice were treated with either ImmunoPulse alone, or in combination with anti-CTLA4, anti-PD1 or both at varying concentrations. Results indicate that all treatment groups showed 100% regression of treated lesions in all mice, and that no mice died as a result of toxicity from treatment. The results from this initial study demonstrate that ImmunoPulse in combination with anti-CTLA4 or anti-PD1 is safe and effective. With these positive results, the company intends to continue testing combination in more aggressive melanoma models that will support further evaluation in humans.

Dr. Richard Heller, professor at Old Dominion University, where the study was conducted, commented on the results: “Results are encouraging and indicate that using gene electrotransfer to deliver plasmid IL-12 into tumors can be an effective and safe delivery tool. Additional studies are being conducted to demonstrate that the combination may lead to immune responses against distant untreated lesions in mice. We will investigate the anti-tumor response and plan to present these findings in the near future”

OncoSec is small; it has a market cap of $25.11 million. YTD the stock is up almost 25% closing on Thursday, November 14^th at $0.274. At this time OncoSec is not generating revenue, but it’s developing a delivery system that larger drug companies such as Merck and Roche are interested in testing-- Inovio Pharmaceuticals has already proved this. With small developmental companies one looks for future potential of the product as an indicator of possible future stock performance. Inovio, though having a more extensive product line, is a good example of a future indicator as its stock is up 268% YTD.  I like that OncoSec, like Inovio, is developing a delivery system and not a new drug, as the company may just be able to enhance the already proven drugs with billions of dollars already invested. 

CONCLUSION

Immunotherapies for cancer could be a real game changer for drug manufacturers, patients, and investors.  Leerink Swann issued a review from analysts Howard Liang and Seamus Fernandez, which concludes that 50% of all cancer treatment could involve immunotherapy within the next decade.  Andrew Baum, an analyst at US Bank Citigroup, sees immunotherapies having the potential of becoming the biggest drug class in history: “We believe this market will generate sales of up to $35 billion over the next 10 years and be used in some way in the management of up to 60 percent of all cancers.” 

In the short term, Merck has a rockier road ahead than Bristol as the company restructures, but I see both companies as strong long-term investments.  OncoSec carries some risk as a small cap company; however, it could also be a very rewarding investment.