On the verge of two critical Food & Drug Administration decisions on expanding the label for its cancer immunotherapy drug Keytruda, Merck & Co. Inc. (MRK, Financial) just announced another move to expand the drug’s addressable market. Merck is now collabrating with biotech company OncoSec Medical Inc. (ONCS, Financial) on a phase II registrational trial on melanoma patients. Since the trial is registration-directed, if successful, conditional approval is possible before phase III even begins.
The protocol calls for combining Keytruda with OncoSec’s ImmunoPulse IL-12 in hopes of unlocking a patient population that is not responding to the blockbuster immune checkpoint inhibitor.
Checkpoint inhibitors like Keytruda have been optimistically coined by researchers as the beginning of the end of cancer. It is estimated that in less than a decade, immunotherapies like Keytruda are expected to form the backbone for 60% of cancer treatments, taking in $35 billion annually.
Keytruda sold $1.4 billion last year, coming in fifth for the pharma giant in 2016. It works by inhibiting the PD-1 checkpoint, which under normal circumstances stops T-cells from overreacting. About 50% of melanomas carry the PD-1 protein on them, effectively masking the tumor from the immune system. Turn the PD-1 checkpoint off and you can unmask the tumor, triggering the immune system to attack.
So why the deal with OncoSec? Because checkpoint inhibitors have one large drawback, which is most patients do not respond to them. This is because between 60% and 80% of melanomas are “cold” tumors, which means there is not enough immune activity within them to start an immune reaction in the first place. Anti PD-1 therapies like Keytruda cannot do much under those circumstances. Checkpoint inhibitors cannot work if the immune system has not even reached the checkpoint to begin with.
OncoSec’s ImmunoPulse IL-12 is an electroporation therapy, which basically means the administration of an electrical current directly into a tumor that briefly makes the cells of the tumor porous, hence the term electroporation. ImmunoPulse then delivers the DNA code by plasmid for IL-12, an immune jumpstarting protein. The electroporated cells of the tumor then absorb the code and start producing IL-12, signaling the immune system to attack the tumor, converting “cold” tumors to “hot.” It is at this point when the tumor can become sensitive to immune checkpoint therapies.
Initially, ImmunoPulse was developed as a standalone therapy by OncoSec. By combining it with Keytruda, however, the theory is that once the tumor is converted to hot, Keytruda can then increase the immune response even more. The effect being patients who do not respond to the treatment should have a greater chance of now responding.
Positive efficacy so far
Will the collaboration with OncoSec succeed for Merck? One phase II trial for the combination was already completed successfully and results were announced in February. Patients in the trial were filtered according to biomarkers called CTLA4 PD-1 TIL, which are T-cells that are predictive of anti-PD-1 therapy response. Patients with greater than 30% of these TILs have a 100% response rate to anti-PD-1 therapies like Keytruda, and those with less than 20% have a 0% response rate. The trial accepted patients with less than 25%, meaning most were predicted not to respond to Keytruda alone.
Study results showed an overall response rate of 43% after 24 weeks in nine out of 21 patients. Five out of 21 had a complete response, meaning their cancer became undetectable. Four patients were partial and two had stable disease, meaning overall control was 52%, a very impressive number for a group of patients predicted not to respond at all.
On the back of these results is the announcement of the registrational phase II trial, which, if it can reproduce the success of the first, will be enough for conditional approval of the drug combination. Keep in mind Keytruda was approved based on an objective response rate of only 24%. Opdivo and Yervoy from Bristol-Myers Squibb Co. (BMY, Financial) were both approved based on similar numbers.
The trial of 48 patients is set to begin enrolling next month and is scheduled to complete enrollment in one year, with approval assuming positive results by 2019. The only difference between this registrational trial and the previous phase II is the patients enrolled in this one will only be those who have failed anti-PD-1 therapies previously, rather than patients merely predicted to fail based on CTLA-4 biomarkers. OncoSec believes a 30% objective response rate will clinch approval for the ImmunoPulse IL-12 / Keytruda combination.
Market value
There are about 15,700 patients receiving anti-PD-1 therapy for melanoma, of which about 10,200 of them are nonresponders. If ImmunoPulse IL-12 can show a 30% response rate for nonresponders, that would increase the addressable market by about 3,060 patients. At a cost of $150,000 per year, that translates to revenues of about $460 million annually. Considering that, the fact OncoSec has a market cap of only $24 million means if the registrational phase II succeeds, shares could be quickly revalued higher.
Beyond that, if successful with melanoma, OncoSec and Merck may expand the combination therapy to other cancers Keytruda is already approved to treat. These include head and neck cancer and lung cancer, with the same regulatory pathway of conditional approval after a registrational phase II trial. Success with Keytruda could also open the door to Opdivo and collaborating with Bristol-Myers.
Safety bonus
There is one aspect of ImmunoPulse IL-12 that is often overlooked, and that is the safety of the plasmid DNA approach. Introducing immune proteins directly into the body can sometimes trigger immune overreactions because they are administered systemically. ImmunoPulse does not introduce the immune system proteins per se, but only the DNA plasmids that encode for them. That way, the immune system can decide how it wants to respond to the specific cells secreting the protein, rather than being flooded with the direct protein that can cause dangerous side effects.
In other words, the safety profile of ImmunoPulse is expected to be solid.
The upcoming registrational trial is open-label, so investors will be able to track results as they are reported and could get a decent idea of whether the trial will succeed or not based on interim results, which could start coming in by the beginning of 2018.
Disclosure: Long MRK, ONCS.
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