When it comes to biotech and health care, there are a few names everyone keeps an eye on. Joseph Edelmen of Perceptive Advisors and Annie Lamont of Oak HC/FT are just a couple. These names regularly appear on the Forbes Midas list, specifically for their involvement in life sciences.
Another one is Beth Seidenberg. She is the venture capitalist that heads up life sciences at Kleiner, Perkins, Caufield & Byers, and she has spearheaded some of the biggest initial public offerings of the last 10 years. She placed on Midas during 2015 and 2016. She has spent the last 12 months loading up on shares of the company that is today's focus, a company with which she returned a fortune for KPCB on its initial public offering, Tesaro Inc. (TSRO, Financial). Seidenberg sits on the board as an independent director and currently holds a little over 2.68 million shares of Tesaro common stock.
KPCB and Seidenberg see some run room in the company, and we think they are correct.
Tesaro has been one of the strongest big name pharma companies of the year. While the wider space dipped throughout late 2015 and early 2016, Tesaro held its value (for the most part) and then jumped back at the end of June this year on the back of data from its lead ovarian cancer asset – Niraparib. The oral, once-daily PARP inhibitor performed exceptionally in a late-stage trial (with a couple of others ongoing) and the news sparked rumors that Tesaro was primed for a takeover. These rumors persisted throughout September and October, and the company is now 243% up on its pre-gains value.
There is another asset, however, that markets seem to be overlooking. It is a reformulation of a currently available drug (one also marketed by Tesaro), but it has a large potential market and is with the Food and Drug Administration as we speak. Further, it is going to provide the next major catalyst for the company when the agency's decision hits press.
The drug’s Prescription Drug User Fee Act (PDUFA) is set for Jan. 11.
Ahead of decision day, here is a look at how the drug performed in trials and a discussion of what we expect from the FDA when it passes judgment.
The drug in question is called Rolapitant. It is already approved as of late last year as a treatment for chemotherapy-induced nausea and vomiting. The drug is a selective NK1 receptor antagonist and it is an oral drug designed for administration a couple of hours before chemotherapy starts. It is designed to combine with a few specific chemo agents, agents referred to as highly and moderately emetogenic chemotherapy (HEC and MEC). This basically means the agents in use (generally either oral or intravenous (IV) 5-hydroxytryptamine-3 (serotonin) receptor antagonists (5-HT3 RAs) and dexamethasone) have a high chance of making the patient vomit as a direct result of treatment.
The mechanism of action is pretty elegant. NK-1 receptors are highly concentrated in the area of the brain associated with vomiting and bind a neurokinin called Substance P. Activation of NK-1 receptors by Substance P plays a central role in eliciting CINV. Rolapitant works by blocking the interaction of Substance P at the NK-1 receptor. Through this inhibition, it stops the process that triggers CINV neurologically, and we know its effective.
Uptake has been good. While full-year sales figures are yet to be reported (given the late last year nature of the approval for the oral administration version), the drug looks in line to meet expectations. These expectations put forward potential sales as being $22.5 million, $142 million, $250 million, $307 million and $371 million in the first five years after the launch.
So why is Tesaro trying to develop an IV version?
Well, the oral version of the drug is in direct competition with a similar drug marketed by Merck & Co. Inc. (MRK, Financial) called Emend. Emend was first approved in 2009, but the company got a single dose injection approved earlier this year. This put Merck slightly ahead in the IV side of the space. IV versions are needed for patients who, for whatever reason, might not be able to take the oral version. The markets are estimated to be pretty similar for the single-dose oral and the single-dose IV versions of Emend. In developing an IV version (single dose) of its oral formulation, Tesaro is trying to keep up with Merck.
Now to the important part – what are the chances of the FDA giving the drug a green light?
The company investigated the drug in a trial designed to demonstrate the bioequivalence of orally- and IV-administered Rolapitant in healthy male and female subjects. The primary endpoint of the trial was AUC0-t: the area under the plasma concentration time curve from time 0 to the time of the last quantifiable concentration, between 39 to 69 days. The secondary for the study was Cmax: observed maximum plasma concentration, again on the 39 to 69 day timeframe. Participants were randomized to receive a single dose of either 185 milligrams of IV Rolapitant administered over 30 minutes (n=61) or 200 milligrams of oral Rolapitant (n=62).
Basically, with these studies, the goal is to prove within a 90% confidence interval that the two formulations are entirely included within a prespecified acceptance range. The range used here is pretty standard for the study: 80% to 125%. The study was completed in May 2015 and the company presented data at the 2016 MASCC/ISOO Annual Meeting on Supportive Care in Cancer in June.
Bottom line, it was a hit. The drug fell within the range required at a high CI, at the single dose that the company was going for. Bioequivalence, met and proved.
Based on this, there seems to be absolutely no reason why the FDA will turn down Tesaro's application come PDUFA. The active ingredient is safe, works as an oral and the oral is bioequivalent to IV. Merck's going to have some competition come January, and Tesaro is going to get a boost to its market cap based on its ability to compete with the German drug behemoth.
Disclosure: The author owns no stocks mentioned in this article and does not intend to buy shares in any companies discussed.
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