Aflibercept, an anti-angiogenesis agent being developed for a variety of tumor types, was in a phase III study, which was evaluating the efficacy of the drug in combination with Eli Lilly’s (LLY) Gemzar (gemcitabine) versus placebo plus Gemzar for the first-line treatment of pancreatic cancer.

A planned interim efficacy analysis of the study, carried out by an independent data monitoring committee, showed that the addition of aflibercept to Gemzar would not lead to a statistically significant improvement in the primary endpoint of overall survival compared to the placebo plus Gemzar combination. The companies will conduct a detailed analysis of the efficacy and safety data, which will be presented at a future medical meeting.

The discontinuation of the study is a major disappointment for the companies. However, the companies noted that pancreatic cancer is among the more difficult-to-treat cancers with other experimental products failing to achieve significant benefit over existing treatments.

It is estimated that more than 42,000 people are diagnosed with pancreatic cancer every year. Eli Lilly’s Gemzar is considered the standard for the first-line treatment of metastatic pancreatic cancer. 

Sanofi-Aventis and Regeneron will continue developing aflibercept for the second-line treatment of metastatic colorectal cancer, the second-line treatment of non-small cell lung cancer (NSCLC), and the first-line treatment of hormone-refractory metastatic prostate cancer. The candidate is in phase III studies for each of these indications. Regeneron’s shares fell 6.9% in after-hours trading.

The current year seems to be quite crucial for Allos Therapeutics especially related to its most advanced pipeline candidate, pralatrexate. The company has submitted a new drug application (NDA) for pralatrexate to the FDA for the treatment of patients with relapsed or refractory peripheral T-cell lymphoma (PTCL) in March, 2009. We expect its approval by the end of 2009 or early 2010.

Pralatrexate has an orphan drug (presently no FDA approved drug for PTCL is available) status from the FDA and European Medicines Agency (EMEA) for the treatment of patients with PTCL. This status brings with it seven years of marketing exclusivity in the US and ten years of marketing exclusivity in the EU countries. Meanwhile, Allos Therapeutics seems to be confident of NDA approval as is evident from the recent launch of a website dedicated to PTCL.
 
In addition to PTCL, Allos Therapeutics is studying pralatrexate (phase IIb) for the treatment of NSCLC as well. Many pharmaceutical players have products under various stages of development for the treatment of NSCLC. However, estimates put the potential of the NSCLC market to reach about $13 billion by 2015.

Viewing the huge potential, the company initiated a trial in January this year comparing pralatrexate with erlotinib. Erlotinib (marketed in the US by Roche [RHHBY] and OSI Pharmaceuticals [OSIP] and elsewhere by Roche under the tradename Tarceva) is a drug used to treat several types of cancer like NSCLC, pancreatic cancer.
 
Though the progress made by pralatrexate is quite satisfactory, we are concerned about the company’s weak pipeline and cash position. Since its inception in 1992, Allos Therapeutics has not generated any revenue from product sales and has experienced significant net losses and negative cash flows from operations.

The company’s policy of raising funds through the issuance of shares has led to considerable dilution in the shareholder base. Should pralatrexate fail to receive FDA approval for PTCL, Allos Therapeutics has little to fall back on. We maintain our Hold rating as we do not see any major upside potential at this point.

Tarceva is promoted in the U.S. by both companies and sales force costs are split equally. The significant improvement in overall survival supports the use of Tarceva as a first-line maintenance treatment for NSCLC.

SATURN (front-line maintenance therapy in NSCLC post-chemotherapy non-progressors) is a placebo-controlled, randomized, double-blind study conducted by Roche that enrolled 889 advanced NSCLC patients at more than 150 sites worldwide.

Tarceva (erlotinib), a small molecule inhibitor of the epidermal growth factor receptor (EGFR), is currently marketed for the treatment of patients with locally advanced or metastatic non-small cell lung cancer (2nd line NSCLC) after the failure of at least one prior chemotherapy regimen and pancreatic cancer.

In the oral EGFR market, Tarceva competes with AstraZeneca’s (AZN) Iressa. However, we believe that Tarceva will receive little competition since it has already captured over 95% of the total oral EGFR market. Market share should also continue to expand as AstraZeneca is giving up on a number of Iressa-based trials.

The overall survival data from the SATURN study will be submitted to the U.S. FDA to further substantiate the supplemental New Drug Application (sNDA) submitted in March 2009 for the new indication. The filing was accepted in June 2009 and the Prescription Drug User Fee Act (PDUFA) target date is around January 18, 2010.

We expect approval of this new indication in early 2010. This will significantly expand Tarceva sales beyond 2010. Roche has also filed an application with the European Medicines Agency (EMEA) for approval in Europe.

However, we are presently concerned about flat U.S Tarceva sales in recent quarters. Tarceva sales figures in the rest of the world too recorded marginal improvement in the first quarter of 2009. Since Tarceva is the key growth driver for OSIP, any slowdown in sales will adversely affect OSI Pharma’s stock price.

Therefore, label expansion is a must to revitalize Tarceva sales in our view. The SATURN study, along with other studies, is being conducted by the two companies to expand the Tarceva label to help drive higher market penetration.

We feel OSI Pharma is one of the few fully integrated, profitable biotech companies in the U.S. and regard it as a key player in the biotech field. As such, we are neutral on the stock.

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Here are highlights from Friday's Analyst Blog:

Drug Cos to Present at ASCO

Bristol-Myers Squibb (BMY) will be presenting updated survival data of its melanoma candidate, ipilimumab, from several phase II and phase III trials, both as a monotherapy and in combination with chemotherapy. Bristol will also have several presentations on Erbitux, including phase II data in combination with cisplatin in non-small cell lung cancer.

Pfizer Inc (PFE) will be presenting phase II data on Sutent in combination with docetaxel in patients with previously untreated hormone refractory prostate cancer.

Eli Lilly (LLY) will be making more than 50 presentations at ASCO 2009 including several on Alimta in NSCLC and Gemzar in combination with cisplatin in cervical cancer.

Amgen (AMGN) plans a very busy ASCO as well. Most of these are data presentations are results from testing Vectibix (panitumumab) in various stages and combination regimens for metastatic colorectal cancer. The company plans presentations by KRAS tumor status with Vectibix as well, plus several combination studies testing Vectibix and AMG-655 in lung, colorectal, and pancreatic cancer.

Biogen (BIIB) will be presenting results from a phase II study comparing volociximab and pegylated liposomal doxorubicin vs. doxorubicin alone in recurrent ovarian or peritoneal cancer.

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