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Physician's Financial News

OBTN, June 2008, Volume 2, Issue 6

Seattle Genetics, Inc., Up and Coming Research-Based Concern, Developing Focused Pipeline of Targeted Therapies

Seattle Genetics, Inc., is a clinical stage biotechnology company focused on the development and commercialization of monoclonal antibody—based therapies, primarily for the treatment of cancer but also, in select instances, autoimmune disease. The company has no products on the market as of yet. What they do have is a concentrated research and development operation that is yielding results and progress across a rich but narrowly focused pipeline of six agents (three in preclinical development, three in clinical trials, all with oncology care applications) from only two select drug classes of targeted therapies that all have the potential to become breakaway drugs.

Seattle Genetics: The Basics

Seattle Genetics, Inc., was founded in 1997, held its initial public offering in March of 2001, and in January of 2008, completed a $103.5 million follow-on public offering.

Seattle Genetics currently employs more than 200 people. The headquarters of the company, perhaps sending a message about the depth of their research-oriented commitment, eschews the traditional corporate atmosphere. Indeed, there are offices, but the overall feel of the high-technology campus in Bothell, Washington, the Seattle suburb where Seattle Genetics makes its home, is less buttoned down and formal, more lab coats and activity. While most company executive headquarters project an image of business being done, the resource-laden Bothell campus, with its sprawling, state-of-the-art facilities, reflects a company going about the business of drug discovery.

Clinical Development

All of the Seattle Genetics product candidates belong to one of two monoclonal antibody classes. In addition to developing very targeted and specific forms of drugs, the company can also be said to have significantly contributed to the development and advancement of the two drug classes discussed herein. In fact, one of the classes, or sub-classes, covered in this section, antibody-drug conjugates, is a proprietary discovery and creation of Seattle Genetics. That is, the company is solely responsible for its existence and evolution. Seattle Genetics is focused on the following two key antibody-based technologies:

  • Engineered Monoclonal Antibodies. Some monoclonal antibodies have intrinsic antitumor activity. Once the antibody binds to a target cell, it can result in direct cancer cell death and/or activate the body’s anticancer immune response. Seattle Genetics’ lead monoclonal antibody product candidates are SGN-40, SGN-33 and SGN-70.
  • Antibody-Drug Conjugates (ADCs). While some antibodies are capable of killing cells on their own, many are not potent enough but can effectively target cancer and deliver cell-killing payloads. Utilizing proprietary ADC technology, internalizing monoclonal antibodies are linked to cell-killing drugs, resulting in highly-potent agents. The linkers are stable in the bloodstream but release drug payloads inside target cells. The novel drug-linker systems that Seattle Genetics has developed are fully synthetic and therefore readily produced in large quantity. SGN-35, SGN-75, and anti-CD19 ADC employ this proprietary technology.

Currently, Seattle Genetics is developing the following drugs in various phases of clinical trials:

  • SGN-40 is a humanized antibody targeted to the CD40 antigen. Seattle Genetics is developing SGN-40 under a worldwide collaboration agreement with Genentech that was established in January 2007. Ongoing clinical trials under the collaboration include a phase II single-agent clinical trial in diffuse large B-cell lymphoma (DLBCL), a phase IIb combination trial of Rituxan (rituximab) -ICE /- SGN-40 in DLBCL, a phase Ib study of SGN-40 plus Rituxan and Gemzar (gemcitabine) in DLBCL, a phase Ib trial of SGN-40 in combination with Rituxan for indolent non-Hodgkin’s lymphoma and a phase Ib combination trial of SGN-40 plus Revlimid (lenalidomide) for multiple myeloma. Seattle Genetics and Genentech recently initiated a sixth clinical trial of SGN-40 in combination with Velcade (bortezomib) for multiple myeloma.
  • SGN-33 (lintuzumab) is a humanized antibody targeted to the CD33 antigen, which is highly expressed in acute myeloid leukemia (AML), myelodysplastic syndrome (MDS) and several myeloproliferative disorders. The company is currently conducting a phase Ib single-agent clinical trial for patients with AML or MDS, a phase IIb trial of low-dose cytarabine (Cytosar) /- SGN-33 in AML and a phase I trial of SGN-33 plus Revlimid (lenalidomide) for patients with advanced MDS.
  • SGN-35 is an antibody-drug conjugate (ADC) composed of a monoclonal antibody linked to a derivative of the highly potent class of drugs called Auristatins using proprietary ADC technology. SGN-35 is in two phase I clinical trials for CD30-positive hematologic malignancies, including Hodgkin’s lymphoma.

Seattle Genetics Oncology Pipeline

Drug

Cancer Type

Preclinical

SGN-70

Kidney cancer, various cancer-related autoimmune disorders

SGN-75

CD 70 malignancies

Anti-CD19 ADC

CD 19 malignancies

Phase I

SGN-40

Multiple myeloma

SGN-40

Indolent non-Hodgkin lymphoma

SGN-40

Diffuse large B-cell lymphoma

SGN-33 (lintuzumab)

Myelodysplastic syndrome (MDS)

SGN-33

Acute myeloid leukemia (AML) and MDS

SGN-35

Hodgkin’s lymphoma and other CD30-positive hematologic malignancies

Phase II

SGN-40

Diffuse large B-cell lymphoma

SGN-33

AML

Seattle Genetics recently presented promising phase I clinical data on SGN-35, during a poster discussion session at the recent American Society of Clinical Oncology (ASCO) Annual Meeting, held in Chicago. At the time the abstract, entitled “Objective responses in a phase I dose-escalation study of SGN-35, a novel antibody-drug conjugate targeting CD30, in patients with relapsed or refractory Hodgkin lymphoma,” was submitted, 29 patients had been enrolled in the study, including 26 with Hodgkin’s lymphoma and three with other CD30-positive hematologic malignancies. SGN-35 dose levels ranged from 0.1 to 2.7 mg/kg. Of 28 patients evaluable for response, nine had partial remissions. Stable disease was observed in 11 patients and eight patients had progressive disease. At dose levels of greater than or equal to 1.2 mg/kg, seven of 13 patients (54%) achieved partial remissions. SGN-35 was generally well tolerated. The most common related adverse events were minor (no higher than grade two), including fatigue and cough.

Preclinical Programs

In addition to the trio of agents that have moved into clinical trials, Seattle Genetics has three compounds that are in the preclinical phase of development, listed as follows:

  1. SGN-70, a humanized antibody targeting the CD70 antigen, which possesses potent effector function and direct cell-killing ability. The CD70 antigen is expressed on renal cancer, nasopharyngeal carcinoma and certain hematologic malignancies.
  2. SGN-75, an ADC comprising the SGN-70 antibody linked to an auristatin derivative using proprietary ADC technology. This product candidate may have application in solid tumors, including renal cell cancer, and CD70-positive hematologic malignancies.
  3. Anti-CD19 ADC, which targets the CD19 antigen, a cell marker expressed on many hematologic malignancies, including non-Hodgkin lymphoma, chronic lymphocytic leukemia and acute lymphoblastic leukemia. This ADC has demonstrated durable tumor regressions at low doses in multiple cancer models.

Corporate Collaborations

In addition to developing drugs, Seattle Genetics works through numerous partnerships and alliances to expand its potential portfolio and best leverage its existing one. The company has an exclusive worldwide collaboration agreement with Genentech to develop and commercialize SGN-40. In addition, they have licensed their ADC technology to Genentech, CuraGen, Progenics, Bayer, and MedImmune, and have an agreement with Agensys, a subsidiary of Astellas Pharma, to jointly develop up to two ADC products. Since 2001, Seattle Genetics has received more than $65 million from ADC technology collaboration activities.

Foreign Companies Accelerate Investment in American Biotech: Millennium Deal Seen as Part of Larger Trend

When Takeda, Japan’s biggest drug company, recently announced its acquisition of Cambridge, Massachusetts—based Millennium Pharmaceuticals, many industry commentators did not confine their observations to the terms and value of the deal. Instead, they were busy discussing the implications of the news as part of a larger trend toward foreign ownership of homegrown drug concerns. According to numerous experts, the transaction is broadly reflective of current economic conditions in America.

The transaction, in which Millennium was purchased for a price of $8.8 billion, or $25 per share (representing a 53% premium over Millennium’s per-share price at the time of the acquisition’s announcement), was significant in its own right. Analysts, however, are asserting that the financial context in which the agreement took place is even more notable. In a recent issue of Forbes, for example, financial writer Matthew Herper wrote that “the deal signals a new reality for U.S. biotech companies.”

This “new reality” largely consists of an industry-wide shift from homegrown capitalization to overseas investment. As the omnipresent specter of recession continues to linger, both large- and small-scale investors from the United States have become more risk-averse. The biotech industry, of course, while offering tremendous potential upside, is not a good place for risk-averse investors looking for safe, predictable returns. In the meantime, the slack is being taken up by foreign firms, eager to gain a foothold in the American market and able to capitalize on hugely advantageous exchange rates as a result of the weak dollar.

In a research note made available to the media, Geoff Porges, analyst, Sanford C. Bernstein, wrote, “New York’s Fifth Avenue is now awash with foreign shoppers convinced that the prices of goods in U.S. dollars are a bargain. While the situation is not identical, U.S.-based biotechs and their shareholders are benefiting from the discounted value of the U.S. dollar compared to other currencies.”

Takeda, the world’s 17th largest pharmaceutical company, said the deal could create a “powerful new drug development engine.” The acquisition gives Takeda the rights to Millennium’s fast-growing cancer drug, Velcade (which generated roughly $800 million in 2007 sales, and, owing to its attainment of expanded and/or new indications, is expected to surpass that performance in 2008), and access to a rich pipeline of oncology drugs in development. Analysts believe that if Velcade is able to attain FDA approval for all—or even most—of the cancer types it is currently undergoing clinical trials to treat, the drug has the potential to deliver billions of dollars in annual sales, making it a legitimate ‘blockbuster’ drug. Millennium shares skyrocketed 48.9% to a four-year high on the day following the acquisition announcement.

The deal, which is expected to be finalized in June, marks the second major U.S. biotech acquisition by a Japanese drug maker in the last few months. In December of 2007, Eisai Co. bought MGI Pharma for $3.9 billion.

Industry watchers expect to see more Japanese expansion into the U.S. oncology marketplace. Additionally, the global economic situation has created a similarly attractive dynamic for European companies interested in U.S. biotechs. If the recent purchase of U.S.-based companies Chiron and MedImmune by European concerns Novartis and AstraZeneca, respectively, are any indication, U.S. biotech companies can expect to be entertaining suitors from across both the Atlantic and Pacific oceans. This trend is likely to last for as long as current economic conditions persist.

Antisoma Acquires Xanthus

In a move that will significantly boost its pipeline and strengthen its position in the oncology sector, London- based Antisoma has announced the purchase of Boston-based Xanthus Pharmaceutical in an all-share deal. With the acquisition, which bears a reported price tag of $52.2 million, Antisoma will add several promising drug candidates to its portfolio, including:

  • Xanafide, a treatment indicated for secondary acute myeloid leukemia that is currently in phase III clinical trial stage of development;
  • Oral fludarabine, currently awaiting FDA approval for the second-line treatment of chronic lymphocytic leukemia;
  • The Flt3 program, currently in preclinical testing for a number of nononcology indications. Since that the development of Flt3 does not fit in with Antisoma’s oncology-focused market strategy, analysts expect Antisoma to out-license the drug. An Antisoma spokesperson confirmed that the out-licensing of the Flt3 program was under consideration.

Details of the transaction were disclosed in an Antisoma press release. To acquire the entire issued share capital of Xanthus, Antisoma will issue to Xanthus’s shareholders an aggregate of 97.3 million new ordinary shares in the share capital of Antisoma if the closing date is on or before June 16, 2008 or an aggregate of 99.3 million new ordinary shares in the share capital of Antisoma if the closing date is on or after June 17, 2008, representing approximately 22% of the issued share capital of Antis.

Industry watchers generally applauded the move, affirming the value of Antisoma’s purchase and pointing out that the deal will decrease Antisoma’s dependence on ASA404, a non—small cell lung cancer treatment currently in latestage development. Before the Xanthus agreement, the prospects of Antisoma were directly linked to the prospects of ASA404. With the diversification attained through the Antisoma– Xanthus merger, this is no longer the case. Although the performance of ASA404 remains vital to Antisoma’s future, the company no longer faces an ‘all-or-nothing’ scenario, in which company fortunes will be determined by the corresponding fortunes of a single product candidate.

Glyn Edwards, CEO, Antisoma, stated, “This is a transforming deal. Combining Antisoma and Xanthus produces a company with the critical mass and mature pipeline needed to become a major player in oncology.”

The Xanthus acquisition may prove to be a component of a larger spending strategy by cash-rich Antisoma as part of an effort to leverage the purchasing power of its strong Euro (especially against the weak U.S. dollar) in order to strengthen and expand its presence in the global oncology marketplace. Just a few weeks before the announcement of the Xanthus deal, Antisoma bought the rights to develop a new oncology drug from Betagenon, a Swedish biotech concern.

The company said it would make an undisclosed upfront payment to privately-owned Betagenon for the rights to develop and commercialize its AMPK activators for use in cancer treatments. As part of the agreement, Antisoma has made a commitment to fund further research into cancer treatment at Betagenon.

Commenting on the deal, Mr. Edwards said that while many companies were finding it difficult to raise funds in the global credit crisis, Antisoma was fortunate to be in a strong cash position. “We just happen by great luck to be entering this really difficult economic climate with a really strong balance sheet. Right now, the market for in-licensing is less competitive than it has been for a very long time, and although we do compete with the pharma and big biotechs... competition from smaller biotech companies has just about evaporated,” stated Mr. Edwards.

Despite its recent shopping spree, Antisoma, according to a spokesperson, still has the cash to make further acquisitions of both companies and drugs, if it so chooses. Mr. Edwards stated that Antisoma hopes to complete at least one more licensing deal this year and did not rule out the purchase of other cancer drug developers (many of whom are struggling for funding due to the ongoing current credit crisis).

Progress Toward Potential Cancer Vaccines Advance to Multiple Fronts

Imagine a world in which cancer is completely preventable. At a certain age, children enter their pediatrician’s office and are given a series of antimalignancy vaccines as part of their larger regimen of inoculation against disease. It is a scenario in which one of the most dreaded categories of illness is reduced to a historical footnote, conquered in the same manner as other once fearsome, life-shattering maladies such as polio and smallpox.

Of course, the reality of such radical scientific advancement is currently as far away as space travel to other galaxies. However, researchers are taking the first tentative steps toward the most ambitious oncology treatment goals imaginable, as pioneering vaccine-based therapies become more and more viable with each passing day.

Recently, news of significant vaccine-related progress has been emanating from several sources (Sidebar). Investors in Oxford BioMedica Plc, a biotechnology company based in the United Kingdom, saw their shares surge after the company’s TroVax vaccine was shown to be effective and well-tolerated in a trial of prostate cancer patients (who had a type of prostate cancer that had spread to other parts of their bodies).

According to a statement that Oxford BioMedica released to the media, all 24 evaluable patients had “robust” responses to the vaccine. “We continue to be encouraged by the clinical data from ongoing trials of TroVax,” stated Mike McDonald, chief medical officer, Oxford BioMedica. Results of the mid-stage study of TroVax in prostate cancer, presented at the 6th International Symposium on Targeted Anticancer Therapies in Bethesda, Maryland, demonstrated disease stabilization in 20 of the patients. The time period of the disease stabilization experienced by study subjects ranged from two months to more than 10 months.

TroVax belongs to a new class of cancer drugs—known as therapeutic vaccines—that are designed to coax the body's immune system to kill tumor cells. Although the preliminary data released by the company lacks a great deal of detail, it was sufficient to impress a cross-Channel competitor: In 2007, Paris-based pharma giant Sanofi- Aventis SA agreed to pay Oxford BioMedica as much as $807 million for the rights to the product candidate, which is also being tested in other types of cancer.

In other promising vaccine news, GlaxoSmithKline Plc disclosed that its cervical cancer vaccine Cervarix provided significant protection for women against the four most common cancer-causing human papillomavirus (HPV) types for 6.4 years, the longest duration of protection reported to date.

According to data presented at the Society of Gynecologic Oncologists annual meeting in Tampa, Florida, the vaccine was shown to be 100% effective in preventing precancerous lesions caused by virus types 16 and 18. It also provided substantial protection against infection caused by types 31 and 45. In the coming months, GlaxoSmithKline plans to release additional data focusing on neutralizing antibodies, which are viewed as critical for protecting women against cancer-causing virus types over time. Cervarix, which is marketed in Europe but is still awaiting U.S. approval, is a competitor to Merck & Co Inc.'s successful product Gardasil. Both vaccines are designed to be given to girls and young women to protect against cancer-causing strains of HPV.

Speaking of Gardasil, a combined analysis of three phase II/III clinical studies which enrolled more than 18,000 young women confirmed that the vaccine was effective against early cervical lesions, genital warts, and early and precancerous vulvar and vaginal lesions. Results were presented at the 20th European Congress of Obstetrics and Gynecology in Lisbon, Portugal.

Finally, in a recent phase III trial of New York City—based Antigenics' cancer vaccine Oncophage (which is also being tested in brain cancer), metastatic melanoma patients receiving a minimum of 10 injections experienced an improved median survival of 3.7 months (versus patients who received their physician's choice of treatment, including interleukin 2 (IL-2) and/or dacarbazinebased therapy—with or without temozolomide—and/or complete tumor resection, and/or any other licensed treatments for cancer). The study, which was initially unveiled at a recent American Society of Clinical Oncology’s meeting, also demonstrated that patients with less advanced disease who received at least 10 doses of Oncophage had improved median survival of approximately 18.4 months. “The results demonstrate that Oncophage may provide certain melanoma patients additional survival time,” commented Alessandro Testori, MD, Istituto Europeo di Oncologia, Milan, Italy, in an Antigenics press release.

%u25BAThe Great Cancer Vaccine Quest

For more than 20 years, biotech companies have struggled to develop therapeutic cancer vaccines designed to treat the disease by stimulating the immune system to attack cancer cells without harming normal cells. This approach would be a major step forward for cancer treatment. However, so far, the FDA has yet to approve a single therapeutic cancer vaccine.

The stakes in terms of profit, marketshare and scientific prestige are too high for industry players to be long dissuaded by the daunting regulatory hurdles involved. Currently, cancer treatment is an estimated $50 billion annual market. According to research firm Arrowhead Publishers, Minneapolis, cancer vaccines, if approved, could win as much as a 12% slice of the oncology product sales pie (or, roughly $6 billion) by 2010. Analysts speculate that the cancer vaccine market has the potential to soar to $8 billion by 2012. Many of the late-stage drug candidates that could revolutionize the cancer treatment field are detailed in the accompanying article. Others include:

  • GlaxoSmithKline is in the process of recruiting 2,000 patients for a phase III trial of its lung-cancer vaccine MAGEA3, making it the largest cancer vaccine study ever.
  • Merck KGaA is recruiting patients for a phase III study of Stimuvax (purchased from Canada’s Biomira in January of this year). In the phase II trial, patients taking Stimuvax lived an average of 30.6 months compared with an average of 13.3 months for patients receiving supportive care alone.
  • Genitope is continuing its efforts to develop MyVax for an incurable form of non-Hodgkin's lymphoma. The company plans to wrap up a trial of the vaccine by the end of this year.

Pfizer Makes Major Cancer Commitment

Coca-Cola, Xerox, Federal Express, McDonalds, Pfizer… what do these corporations have in common? They are part of an elite group of organizations that have transcended their respective industries to gain an instantly identifiable form of popular recognition. For decades, Pfizer has been more than the single biggest of the big pharma companies; it has become a household name. Just because everyone knows who you are, however, does not automatically mean they will always buy the products you are selling. With the impending loss of patent protection for its market-leading blockbuster drug, Lipitor, Pfizer executives have had to face a sobering reality: in today’s hypercompetitive marketplace, a storied past does not necessarily guarantee a prosperous future.

In order to maintain its position as a top-tier drug company in the post-Lipitor era (analysts have estimated that Pfizer is likely to lose roughly 25% of its current revenue to generic versions of Lipitor), Pfizer has decided to bet heavily on an oncology-centered strategy. In an effort to implement this strategy, Pfizer has announced a major organizational reconfiguration and assembled an expert team of executives with decades of oncology-related experience to spearhead the new initiative and staff a new sector of the company that will devote itself exclusively to cancer therapy research, development, and marketing.

According to a recent company announcement, the leader of the cancer care franchise, a stand-alone division which will be officially known as Pfizer’s ‘oncology business unit,’ will be Garry Nicholson, a 30-year veteran of rival big pharma concern Eli Lilly.

Mr. Nicholson will be responsible for overseeing and coordinating every aspect of Pfizer’s new oncology programs, from the first clinical trial all the way through to eventual sales and marketing decisions. In addition to the leadership role he is expected to assume in clinical development and sales and marketing, other responsibilities include medical affairs and commercial development. Mr. Nicholson’s actual title will be senior vice president, general manager, oncology business unit.

Neil Gibson, who formerly served as the chief scientific officer at OSI Pharmaceuticals, an oncology-focused biotech company, has been recruited to direct all oncology research. Briggs Morrison, an executive who attracted industry-wide notice when he was able to successfully speed up the clinical trial process at Merck, has been brought in to do trial design.

Pfizer’s novel oncology business unit will focus solely on the cancer disease state (a market expected to double in size over the next decade). The unit, organizationally situated within Pfizer’s worldwide pharmaceutical group, will have the resources to seize growth opportunities to strengthen Pfizer’s research investment in oncology, enable the company to expedite launches of newly developed oncology agents, and focus research efforts geographically, so that personnel who are stationed in a given region are able to prioritize their efforts to address the most common cancers in that area. For example, owing to prevalence demographics, oncology business unit researchers based in Asia will devote more time to cancer of the liver, esophagus and nasopharynx than their counterparts in North America.

“It’s an exceptional situation,” says Mr. Nicholson, “And for someone like me, who is in the business to get as many cancer drugs that extend survival to patients as possible, it is the best situation that I know of.”

“This is a very exciting time to join Pfizer’s leadership as they seek to seize promising opportunities in the growing global oncology market,” Mr. Nicholson said. “I believe Pfizer has the most promising and extensive oncology pipeline in the industry and look forward to leading this important new business.”

Forbes

The boldness of the move was put into perspective in “Can Cancer Cure Pfizer?,” in a June 2 article devoted to the subject. According to article author Matthew Herper, “This is an immense job. The recovery of Pfizer, the world’s biggest pharmaceutical company, rests largely on how well Nicholson, 53, can get cancer-fighting drugs out of its research labs and into doctors’ offices.”

Although analysts, journalists, and industry watchers have been quick to take notice of Pfizer cancer care gambit, they have been almost as quick to demonstrate profound amounts of skepticism. Indeed, it is an understatement to say that Pfizer faces an uphill battle. The company must convince investors it can withstand the upcoming loss of the U.S. patent of cholesterol-fighter Lipitor, the bestselling drug in the world, in as little as two years (not to mention the fact that Pfizer must also absorb the sales setbacks that will result from patent expirations of two other high-revenue drugs— Viagra and Geodon—slated to occur in 2014). Over the past few years, the company has trimmed 10,000 jobs and seen its stock price plummet to a 10-year low.

Although Pfizer’s newfound interest in oncology may be laudable, any cancer-centric effort will be forced to play catch-up as a result of years of underinvestment in the disease state. Cancer drugs account for only $2.5 billion, or 5% of Pfizer’s annual sales, compared with 15% for Novartis and 70% for Genentech. That said, Pfizer has boosted antitumor research 60% since 2005 to $1.6 billion and the company pipeline is beginning to bulge with evidence of the company’s renewed commitment to cancer: Pfizer’s labs currently boast the industry’s biggest batch of experimental cancer drugs, 18 potential medicines targeted against pancreatic, breast, lung, and other cancers.

However, despite all the warm and fuzzy doses of potential in the Pfizer pipeline, there is no assurance that drugs in development will make it to market. Looking forward, competition will be fierce and timing will be key. AstraZeneca, GlaxoSmithKline, and Novartis are testing more than a dozen antitumor drugs each, many of which are further along than Pfizer’s. Like Pfizer, other companies are desperate to replace expiring patents. All of this is occurring in an environment in which the overall sales of the drug industry could soon shrink for the first time ever.

For Pfizer, the important tests will come next year as its most advanced drugs take on Avastin. Results are due for Sutent in breast cancer, where Avastin slowed disease but did not prolong survival. Avastin failed in pancreatic cancer, but Pfizer hopes its Avastin-like pill, axitinib, will work. If one or both of those bets pay off, investors might return to Pfizer’s beaten-down shares.