$PVCT's PV-10 and $VICL's Allovectin-7

I know this comparison is spurious because apples are not being compared to apples. Nevertheless, it's interesting [at least to me] to consider. Both companies, Provectus and Vical, released information at conferences regarding combination therapies.

In November 2012 Vical released animal data at the 9th International Congress of the Society for Melanoma Research documenting the benefits of combining Allovectin-7 with anti-CTLA-4, anti-PD-1 and anti-PD-L1 antibodies. The poster is here.

In April 2013 Provectus released data at the American Association for Cancer Research (AACR) Annual Meeting documenting the benefits of combining PV-10 with an anti-CTLA-4 antibody. The poster is here.

Vical's methodology was:

Provectus' low dose (of the anti-CTLA4 antibody) methodology was:

Allovectin's survival graph:

PV-10' low dose (of 9H10) survival graph:

The PV-10 legend is to the left.

@PropThinker's Undervaluation of Vical’s Full Pipeline Allows A Cheap Bet on Cancer Trial (and $PVCT)

PropThink provides actionable analysis of publicly-traded, emerging growth companies in the healthcare sector to retail and institutional investors. Recently, the firm put out work on Vical (and Allovectin-7), taking (initiating, perhaps) a long position in VICL because: "The market is discounting Vical on the basis of underestimating the probability of Allovectin success and is completely overlooking a broad pipeline with shorter developmental timelines. These oversights have created what we consider a cheap call option on Allovectin data given the pipeline strength. In the context of the overall success rate of Phase III oncology studies, the existing data supporting a positive trial outcome for Allovectin is alluring."

A blog reader directed me to this. Thank you. It's an interesting article by PropThink, and very worth reading.

The investment thesis, buying Vical shares as a the "cheap call option," appears to be centered around (paraphrasing) the market significantly underestimating the probability of success of Allovectin's MM Phase 3 trial, which [in PropThink's view] creates a near-term, high-return opportunity coupled with a pipeline safety net.

I found several aspects of the author's analysis interesting (aside from the discussion of Vical's non-Allovectin pipeline):

• The market opportunity and addressable market size there still exists to treat Stage 3/4 melanoma, including "Approximately one-third of all melanoma patients will experience disease recurrence. In patients with advanced metastatic melanoma, median survival typically ranges from six to ten months."
• Further recognition of Yervoy and Zelboraf's shortcomings: "Both drugs are associated with significant side effects, and neither is considered a cure for melanoma."
• Allovectin’s novel immunotherapeutic approach to metastatic melanoma: "...cause recognition of the tumor at the local site (break tolerance) to allow a then-sensitized (boosted) immune response to recognize un-injected tumors at distant metastatic sites" and "induces an immune response to multiple melanoma associated antigens."
• Phase II data is much better than top-line data suggests, because the "...key to the Phase II data is to understand the objective response rate of 11.8% on an intent-to-treat basis. This response rate is clinically meaningful on its own, but when analyzed in the context of the Phase II study and Phase III trial design it points to potentially stellar results."
• Response rate in context: "If the response rate for Allovectin of 11.8% were extrapolated to a trial population without a 60% dropout rate, then it would be at least 22-24%."
• Reasons why the Phase 3 trial be a success: "Patients are healthy enough to receive a minimum of two treatment cycles, Patients have functional immune systems, Patients on study for more than 2 treatment cycles, Designed to capture immunotherapy advantages"

The takeaways, among several, for me include:

• The continued recognition of the growing importance and value of intralesional immunotherapies (e.g., Amgen's T-Vec, Vical's Allovectin-7),
• The continued recognition of Yervoy and Zelboraf's shortcomings, and that there still remains a clear unmet need for melanoma,
• The more frequent an immunotherapy is applied, the more likely a better outcome (i.e., more than two treatment cycles in the case of Allovectin), and
• The still only incremental benefit Allovectin and T-Vec offer. Allovectin and T-Vec receive attention, in many respects rightfully so, because the drugs are in Phase 3 testing. Nevertheless, the drugs are incremental in their benefit when compared to PV-10.

Recall Dr. Andtbacka's comparison on these therapies and PV-10 at the HemOnc conference in New York in March:

PV-10 simply is superior. The above table compares Phase 2 trial data across therapies, where treatment was limited -- limited by the number of Allovectin treatment cycles and number of PV-10 injections.

The attention paid to Allovectin-7 and T-Vec is good for PV-10; however, not including a key intralesional therapy like PV-10 of which medical practitioners and key opinion leaders are fully aware and for which they are very excited makes me wonder about the depth and thoughtfulness of PropThink's Dr. Kotak's article's research or diligence.

Was Dr. Kotak ignorant or unaware of Provectus and PV-10, or unwilling to include an OTC stock in his analysis and article? He included OncoSec Medical (ONCS.OB).

Aside
As for the author's cheap call option description, the current Vical market capitalization (per Yahoo! Finance) is about $310MM ($3.58 per share). The author suggests "The Vical pipeline, excluding Allovectin and cash (~$75M at March 31), could support a valuation in the $200-250M range, thus we believe that Vical’s pipeline provides a real backdrop to the Allovectin trial." I read this as his description of downside protection, or down to $2.31-2.89 per share.

A Vical trial success, which many are betting against, raises the share price to, what, $6-8 per share? Higher?

From a risk-reward perspective, your downside is $0.69-$1.27 a share ($3.58 minus $2.31 or $2.89), while your upside could be $2.42-$4.42 a share ($6-8 minus $3.58), for a downside-upside multiple ratio of about 2-4x:3.5-6.5x. As a former currency derivatives (read: options) trader, that risk-reward is not endemic of a "cheap call option."

The notion of buying a call option, cheap or otherwise, is the upside if the option becomes in-the-money (or volatility rises to increase the value of the option) is many multiples of the option premium you pay (and are prepared to lose in its entirety if the trade goes awry). The risk-reward has to be worth it: the potential return you expect to generate is equal to or vastly higher than return commensurate with the risk you believe you are taking.

In Dr. Kotak's example, I ultimately see the risk-reward range as 2-6x (with 3.5x in the middle), which I do not consider cheap. A call option (speculating, where you get more leverage by buying the option rather than the underlying common stock) or cheap call option is smart or cheap at a number of at least 10x (for the risk you're taking).

$PVCT.OB: Vical, Allovectin-7 and How They Matter and Relate to Provectus and PV-10

When Vical reported third quarter 2012 earnings on November 7, the company commented on its financial results and progress in key development programs. Vical management effectively guided the eventual release of results for the company's pivotal MM Phase 3 trial would be delayed (again) to mid-2013 or into 2H13.

Amgen's talimogene laherparepvec or T-Vec (formerly BioVex's OncoVEX), Vical's Allovectin-7 and Provectus' PV-10 are emerging intralesional immunotherapies the melanoma community has wanted to see more results for and now want to be combined with other immunomodulatory agents.

Dr. Robert Andtbacka profiled these therapies and compared their local-regional and systemic efficacy at the HemOnc Today conference in his presentation entitled Intralesional Therapy for Systemic Disease: Where Will It Fit In?

More potentially promising therapies and options than less are better for cancer-stricken patients. With Vical's announcement on Wednesday, however, it seems another promising therapy is going to fall by the wayside.

I previously wrote about Amgen and T-Vec here. Amgen acquired BioVex in early-2011 for $1B, more than 80% of which was an upfront payment. It later shut down OncoVEX's head & neck cancer P3 trial, and delayed the release of the drug's pivotal MM P3 trial results into 2013. Amgen makes less and less mention of T-Vec in its earnings calls. No mention on the Q3 call. 1 mention on the Q2 call. 2 mentions on the Q1 call. 2 mentions on the Q4 2011 call.  3 mentions on the Q3 2011 call. 6 mentions on the Q2 2011 call. T-Vec's shrinkage causes one to question whether the drug met either its primary or secondary endpoints.


In the same blog post, I also suggested Vical's Allovectin-7 primary endpoint, and thus the trial, was not well designed and wondered if the primary or secondary endpoints were met. Like with Amgen's T-Vec, it appears Allovectin-7 did not meet it primary endpoint -- objective response rate at ≥24 wks. The historical response rate for comparator DTIC at ≥24 weeks is <4%. Allovectin-7's Phase 2 response rate at ≥24 weeks was 11.8% and its Phase 2 response rate for the Phase 3 target population was 17%. The Phase 3 trial was 90% powered to detect a ≥10% difference in response rate.
Vical appears to be hoping it can eke out a survival advantage to meet their secondary endpoint -- overall survival: the historical median OS for DTIC is ~9 months. The median OS for Allovectin-7 in Phase 2 was 18.8 months and the median OS for the Phase 3 target population was 22.5 months. The Phase 3 trial was 90% powered to detect a survival difference; hence, the focus now on the number of events, where the goal is to have is to have sufficient deaths or events to read out the secondary endpoint. This is complicated because Vical would have needed to modify the trial design because they presumably did not meet the primary endpoint and are, therefore, relying on the secondary endpoint. Then, there has to be a delta on the Kaplan-Meier survival curves that is statistically significant to therefore meet the modified secondary endpoint.

Which brings me back to the focus on the trial design for PV-10 and Provectus management's strategy. The pivotal MM Phase 3 trial paves the way for the drug to be approved for a focused label and just reinforces what is already known: PV-10's tremendous local-regional benefit. The company selected Progression Free Survival (PFS) as the trial's primary endpoint PFS, carefully and thoughtfully designed certain others aspects of the trial, and understands the failure of DTIC/TMZ in the comparator arm should occur within 2 to 3 months because the comparator cannot prevent the progression of the disease. By virtue of the pivotal trial designed to focus on loco-regional demonstration, management ensures (through past experience in trials and from the compassionate use program) the near certainty of how and when the trial would end.

There is a belief Allovectin-7's benefit is marginal when compared to DTIC. As a result, that is why a statistical advantage in terms of the number of events has not been reached. Adam Feuerstein summed it up this way: "The latest delay tells you the melanoma assumptions upon which Vical designed the phase III study are worthless. The study is a mess. If allovectin manages to demonstrate a survival benefit (miracles happen occasionally) it will be small and clinically meaningless."


Nevertheless, OncoVEX (T-Vec) and Allovectin-7 historically were important to beginning the conversation of local-regional treatments having systemic benefits. While their MM Phase 2 trial results were good enough locally, their systemic potential captivated the melanoma community. The local benefit is not key for either T-Vec or Allovectin-7, it is their systemic potential.

Provectus leaves to Moffitt and historical trial data to explore and demonstrate the systemic benefit.


A important preparatory observation for when the trial commences, and one I will return to at the appropriate time, is the the number of patients that ultimately are needed to be enrolled and treated before the trial is stopped. The number of patients is driven more from the hazard ratio and powering. Patients will have events, which is bad. Since PV-10 works so well, it has much less events as a result, and events in the Phase 3 trial's PV-10 arm should come much less quickly. More events should occur in the DTIC/TMZ arm, which will enroll and treat 1 patient for every two that are enrolled and treated in the PV-10 arm.

How many patients ultimately would be required to be enrolled and treated, out of the contemplated 180 patient study size, before the study could be be terminated on the basis of an interim read-out concluding the unquestioned superiority of PV-10? 20, 40, 90, etc.?

Intralesionally-Delivered Local Agents with Potential Systemic Benefits: PV-10, Allovectin-7 and T-Vec (formerly OncoVEX)

As you will recall, Vical's Allovectin-7 and BioVex's OncoVEX, now Amgen's T-Vec (or talimogene laherparepvec), were profiled by Dr. Merrick Ross in his Update on Intralesional Ablative Therapies presentation at The HemOnc Today Melanoma and Cutaneous Malignancies meeting in April.

Dr. Robert, Andtbacka, in his Intralesional Therapy for Systemic Disease: Where Will it Fit in? presentation at the same conference, presented the critical comparison table for these three emerging therapies (PV-10, Allovectin-7 and T-Vec):

Clearly, each of the companies with a dog in this hunt -- Provectus, Vical and Amgen -- are pursuing local agents they believe to have systemic benefits.

Vical & Allovectin-7. One month ago, Theodore Cohen wrote an article at SeekingAlpha about Vical's pivotal MM Phase 3 trial for Allovectin-7. The author has written a few articles on Vical, including a more recent interview with this company's CEO. I encourage you to read them. Author Cohen wrote about the delay in Vical releasing data from its MM P3 trial. This trial began enrolling patients in January 2007 and completed enrollment by February 2010 (a total of 390 patients). Final treatments were completed in February 2012.Trial results are slated for late-2012, although timing may see a 2013 release of information depending on the trial reaching the target number of event deaths.

Mr. Cohen theorizes the delay is due to the trial using healthier patients. An historical review of dacarbazine (DTIC) or temozolomide (TMZ) use shows patients given this treatment have a median overall survival in the range 6 to 11 months. It is possible the median overall survival in the control arm could be greater than 11 months.

It also makes you wonder why the trial has not been stopped by now. According to Mr. Cohen, the trial's safety board only had access to safety data, not efficacy data: "Put another way, the board did not have the ability to halt the trial except for serious safety issues."

In reading and re-reading Mr. Cohen's articles and Vical's CEO's explanations, as well as asking the author about the design of the trial's primary endpoint, I come away more skeptical.

Most studies have large patient numbers because their effect size is lower, which means very incremental improvement. Vical probably did not design an interim analysis or efficacy read into their design (and, thus, did not provide patients in the control arm with a cross-over benefit) because it probably would have put a greater burden on the trial's efficacy outcome. If Vical were supremely confident about the fundamental improvement and significance of the drug's results (vis a vis the primary endpoint), management would have included an interim look. Ultimately, for Allovectin-7, it probably will boil down to [median] overall survival, the original assumption for which was 18 months.

I cannot help but think the primary endpoint was not well designed and wonder if the endpoint was indeed met. As the analyst from Cowen & Company asked on yesterday's Q2 earning's call, paraphrasing: If overall survival (the secondary endpoint) is good, isn't this a drug you would expect to be approved regardless of the success on the primary endpoint. Vice versa, if the overall survival is poor, does primary endpoint data have any chance of rescuing Vical?

Amgen & T-Vec. Similar to The Curious Case of Benjamin Button, T-Vec gets smaller and smaller. Amgen acquired BioVex for $1B, more than 80% of which was an upfront payment. It later shut down OncoVEX's head & neck cancer P3 trial, and delayed the release of the drug's pivotal MM P3 trial results into 2013. Amgen, it would seem, makes less and less mention of T-Vec in its earnings calls. 1 mention on the Q2 call. 2 mentions on the Q1 call. 2 mentions on the Q4 2011 call.  3 mentions on the Q3 2011 call. 6 mentions on the Q2 2011 call.

While one might question whether Allovectin-7 met its primary endpoint (it's possible the company met it's secondary endpoint), T-Vec's shrinking causes one to question whether the drug met either its primary or secondary endpoints.

Nevertheless, all things being equal from when Amgen acquired BioVex in January 2011 to now, nearly 18 months later, I think Amgen would have paid a higher price for the local agent it believed would have systemic benefits.

Which brings us back to Provectus and PV-10. The comparison of the Company's contemplated pivotal MM Phase 3 trial to Allovectin-7 and T-Vec's is stark. A primary endpoint of progression free survival. 180 patients; a higher effect size drives a lower study size, meaning a fundamentally large improvement. A response assessment after 12 weeks, which allows patient cross-over from the comparator arm to the PV-10 treatment arm. An historical review of DTIC/TMZ use shows progression free survival in the range 2 to 3 months.

Given the apparent challenges facing Allovectin-7 and T-Vec, it seems clear PV-10 is pulling ahead because it is swimming faster and the others are falling behind because they are swimming slower.