The Immune Checkpoint Inhibitor Global 4 (or 5)

In 2013 Citi equity research analyst Andrew Baum projected cancer immunotherapies "...will generate sales of up to $35 billion (a year) over the next 10 years and be used in some way in the management of up to 60 percent of all cancers" (see Immune system cancer drugs tipped to be a $35 billion market, Ben Hirschler, Reuters, May 22, 2013). The analyst and others in the investment community refer to the next generations of immune checkpoint inhibitors, anti-PD-1 and anti-PD-L1 agents, having moved past approved anti-CTLA-4 agent ipilimumab (Yervoy).

Players (2013 ranking by oncology sales) in the checkpoint inhibitor space include:

• Bristol-Myers (#9): CTLA-4 (approved ipilimumab/Yervoy), and PD-1 (approved internationally nivolumab/Opdivo),

• Merck & Co. (#8): PD-1 (approved pembrolizumab/Keytruda),

• Roche (#1): PD-L1 (investigational MPDL3280A), and

• AstraZeneca (#7): PD-L1 (investigational MEDI4736).

Farther behind, it seems, is Novartis (#3): PD-1 (potential candidates via its CoStim acquisition). It could be late for Novartis to bring a checkpoint inhibitor to market. By the time it gets its version out, Novartis should have four competitors with similarly functioning drugs.

Even before Baum made his bold claim, it was clear the FDA, researchers and industry understood the combination of checkpoint inhibitors and other agents and therapies would be the eventual approach for treating late-stage disease. As result, companies established various combination study relationships, and continue to do so.

Checkpoint inhibitor companies do this because PD-1s and PD-L1s should work more effectively in combination depending on the setting (e.g., co-inhibitory/co-stimulatory). Companies with no checkpoint inhibitors (and no robust immune system primers) do this because a combination should provide them an advantage for their treatments that would be surpassed if they did not do these partnerships at all, and potentially permit much earlier market access for their non-checkpoint inhibitor agent.

For example:

• Pfizer (#11): Merck's PD-1 + targeted therapy (crizotinib/Xalkori),  + targeted therapy  axitinib/Inlyta), and + 4-1BB co-stimulatory agent (PF-05082566), 

• Amgen (#2): Bristol-Myers's CTLA-4 + intralesional (tamilogene laherparapvec or T-Vec), and Merck's PD-1 + intralesional (T-Vec),

• Celgene (#4): Bristol-Myers' PD-1 + targeted therapy (paclitaxel/Abraxane), and

• Novartis (#3): In addition to PD-1s and CAR (chimeric antigen receptor)-T cell therapy, Bristol-Myers' PD-1 + [separately] three targeted therapies (ceritinib/Zykadia, INC280, and EGF816).

SugarCone Biotech's Paul Rennert, in his September 2014 blog post Rational Immunotherapy Combinations: How’s That Work Again?, wrote about "...the question of how to parse the potential immunotherapy combinations that may soon become available, noting that different combinations may prove differentially useful across a wide range of oncology indications." His post is very informative. It is a not-so-simple process to understand and develop the appropriate rationale for why, what and how one combines different agents and therapies, as he clearly illustrates in a cursorily-populated table:

Click to enlarge.

Rennert goes on to write (where I look past his use of vaccines to the broader issue of how to generate many more antigens in order for PD-1s and PD-L1s to be more successful in their individual efforts towards the combination):

"There are other consequences in this new landscape. Nearly every oncology vaccine company claims that as soon as they run a combo trial with an anti-PD-1 or anti-CTLA4 antibody their particular vaccine approach will perform beautifully. There are a few problems with this, notably, very few of these companies have a chance in hell of getting an anti-PD-1 antibody via collaboration, and the rest will pay heavily for the privilege. Second we have no idea of how to rationally pair vaccines with immune checkpoint exposure in order to induce optimal responses. Third, there are not enough patients to go around, a simple fact in many indications."

As recent as the company's ESMO 2014 poster Provectus highlighted the combination study aspect of its business/corporate development strategy.

Click to enlarge.

The value proposition/rationale (but not necessarily the specific medical and scientific rationale and sequencing) for combining PV-10 with a checkpoint inhibitor seems straightforward:

• Immune checkpoint inhibitors have been and will be combined with intralesional agents. Thus far, Bristol-Myers & CTLA-4/ipilimumab/Yervoy and Amgen's T-Vec, Merck & PD-1/pembrolizumab/Keytruda and T-Vec. As expected, the combination of ipilimumab and T-Vec produced responses rates higher than the individual treatments themselves (ASCO 2014). That is, Response_A+B > Response_B > Response_A (A = ipilimumab, B = T-Vec).

• The combination produced notable immunologic signaling. This also was reported from the CTLA-4/ipilimumab and T-Vec combination study at ASCO 2014. The greater the immunologic signaling, the greater [one would imagine] the response and interaction of the immune system to fight and hopefully beat cancer. That is, perhaps, Signaling_A+B > Signaling_B > Signaling_A. The poster presented at ASCO of this work only conveyed the immunologic signaling of the combination.

• PV-10 kills tumors far better than T-Vec. PV-10 produce higher complete responses than T-Vec. The medical community has understood for a while the more antigens produced and presented as a result of tumor destruction (antigenization) the more likely the potential of a greater immune response by the body.

If T-Vec works, PV-10 should work better. But, how much better?

Dr. Agarwala noted in his October 12th presentation at the III Eurasian Melanoma and Skin Cancers Forum that intralesional therapies (PV-10 and T-Vec, since Allovectin-7 failed its metastatic melanoma Phase 3 trial) would form the backbone of combination therapies.

Click to enlarge.

The challenge for Big Pharma, perhaps for some of them more than others, is the lack of "hard data" about PV-10's strong immunologic properties. Presumably Moffitt Cancer Center's presentation on November 8th -- Coinhibition and Costimulation: Targets and Strategies session, Efficacy of Intralesional Injection with PV-10 in Combination with Co-Inhibitory Blockade in a Murine Model of Melanoma poster -- will provide it.

What makes Provectus think they can overcome Rennert's obstacles above?

First, does Provectus have a chance of collaborating with a PD-1 and/or PD-L1 owner? I think the company has a good chance, but the cost or benefit of doing so has yet to be determined (i.e., the details, considerations and concessions of a contractual relationship, and not so much the trial design itself). Obviously, the more a checkpoint inhibitor owner wants to combine with PV-10, the better for Provectus.

I think it's reasonable to believe the Global 5 are aware of PV-10's potential, and its possibilities in combination with immune checkpoint inhibitors. Due diligence begins with getting to know the compound, the available data and practitioners knowledgeable in its use, and then learning more about its combination potential. In regards to the former (i.e., getting to know PV-10), a Merck researcher purportedly attended Moffitt's Dr. Vernon Sondak's June 27th PV-10 presentation at the 4th European Post-Chicago Melanoma/Skin Cancer Meeting specifically to hear/learn more about the drug (a European-based Provectus shareholder routinely attends PV-10 data presentations at European medical conferences). Roche seems to be aware of PV-10, but questions the lack of "hard data" about the compound's immunologic signaling.

Second, how would Big Pharma and Provectus rationally pair immune checkpoint blockade with PV-10? Moffitt's upcoming SITC work presumably should begin to describe how to rationally pair, and dose and sequence PV-10 and a checkpoint inhibitor. It seems the immune system primer & activator/cancer antigen releaser should be given first, followed by the checkpoint inhibitor. In the ipilimumab + T-Vec trial noted above, the investigators sequenced the drugs in that way:

T-VEC was given intralesionally at week 1, week 4, and then every other week. Ipilimumab was given every third week starting at week 6. Treatment continued until dose limiting toxicity, intolerance, all injectable tumors disappeared or disease progression.

I think Rennert's larger question is the whys of rationally pairing drugs, before getting around to the hows. I liken it to understanding what step or steps of the cancer immunity cycle each drug partner in a combination promotes.

Third, are there enough patients to go around? According to Provectus there are sufficient patients available because investigators have asked to use PV-10 in combination with other agents in studies when they are established. This too remains to be seen.

Speaking of Dr. Agarwala, he probably will make a similar presentation to the one he made in Suzdal, Russia at the 2014 Society for Melanoma Research Congress in Zurich, Switzerland (a satellite symposium sponsored by Amgen and entitled Oncolytic immunotherapy – engaging the immune system to target melanoma).

$PVCT's Empire State of Mind

New York

Concrete jungle where dreams are made, oh

There's nothing you can’t do

Now you’re in New York

These streets will make you feel brand new

Big lights will inspire you

Let's hear it for New York

(Empire State of Mind by Jay-Z, featuring Alicia Keys)

First, now, I want to blog about Peter's week in New York (with a particular focus on Pfizer), which ends today (although I don't know if he'll return to Knoxville tonight or tomorrow morning). There are some items that should be discussed. Others require further explanation.

Second, on Saturday, perhaps, I'll blog about Craig's presentation here in town Wednesday night. I learned several interesting things.

Third, on Sunday, I'll blog about the FDA's pending regulatory decision about the SPA, accelerated approval, and breakthrough therapy designation that translates into either accelerated approval or a truncated Phase 3 trial. In my mind, it's good, better, best. The FDA's validation, at this point, is more important than the validation of a regional or worldwide deal, transforming (or nearly so, depending on the outcome) disbeliefs overnight.

There lies, or will lie, a common thread in these blogs, and the thread is "disbelief."

Since April 2010, when Provectus held an end-of-Phase 2 meeting with the FDA regarding PV-10's regulatory pathway for metastatic melanoma, the share price has lost nearly 60% of its value.

Dilution, on a fully diluted basis (i.e., preferred stock, common stock, stock options, warrants), from December 31, 2009 to December 31, 2012 [to make the math easier], totals nearly 70% (although warrant net exercises might, in due course, reduce comparable dilution to 60%).

Yet, in the intervening period, from April 2010 to June 2013, PV-10's efficacy has increased, the drug still maintains a pristine safety and adverse event profile, PV-10's mechanism of action is understood, and there now is proof of the drug's systemic properties and benefits.

I posit, that despite the above mentioned dilution, shareholders are better off in 2013 than 2010. Depending on the assumptions one uses for intrinsic value then and now, you should come up with a reasonable, objective increase in value or valuation (5-15x).

Again, to make the math easier, I used 2012 and 2009 year-end numbers from Provectus' 10-K. A $2.5B intrinsic value is, in reality, emblematic of a post-AACR PV-10.

But, for most shareholders, what matters only is the change in their share price (or market capitalization), and that's been downward, a lot (-60%).

The stock market, some/many in the Wall Street community, some/many potential investors and some/many existing shareholders do not believe in nor trust management, and thus do not believe in the data. If they did, they would buy or buy more shares. These disbeliefs, the first more problematic and resulting in the second, have led to the obscuring of value that clearly exists in Provectus and that Big Pharma very much sees and desires.

Although disbelief in or lack of trust in management mostly results from self-inflicted wounds, these wounds are far from fatal, and there should be no doubt about the immense value management has created in its innovation of PV-10.

Simple, angelic or divine regulatory clarity will transform disbelief in both management and PV-10 overnight.

Peter is in New York this week working with various parties regarding regional license transactions in India, China and Japan, as well as having follow-up meetings with shareholders, analysts and Big Pharma.

Peter has had and will have meetings with Pfizer and Pfizer-related people. Eric is NYC on Friday to join Peter in Pfizer-related, and perhaps Pfizer, meetings. It is unintelligent to think Pfizer is not interested in PV-10 and Provectus. I think more pertinent questions are when, under what circumstances and for how much Pfizer will buy, rather than why or for what reason.

Pfizer's M&A strategy [subscription to The WSJ is required to access the preceding link] is more likely to comprise "biotech bolt-ons and small tie-ups" (like acquiring Provectus) rather than "megamergers" or the ilk (like acquiring Celgene).

Pfizer's threshold for these smaller purchases is $4B. That is, it won't pay more than $4B in an upfront payment for a biotech bolt-on or small biotechnology company like Provectus.

Healthcare investment bankers suggest the acquisition premium paid for public companies in the space range mostly from 30-50%, but can be as high as 100%. "Premium" means the per share price paid for a company in excess of its then current, pre-acquisition announcement, share price.

Pfizer is not unwilling to pay a 100% premium. For example, if Company XYZ's current share price is $4, Pfizer may be willing to pay $8 per share.

Celegene bought Abraxis BioScience for a $2.9B upfront payment (net of Abraxis' cash on hand). Provectus management has the expectation of at least a Celegene-Abraxis value for its acquisition by, say, Pfizer. Should Pfizer be willing to pay a 100% premium for Pfizer, Provectus' market capitalization must reach at least $1.45B, through regulatory clarity (the greater the better) and, more than likely, regional license deals, before Pfizer might consider bidding $2.9B for the company (using the Celgene-Abraxis example).

If Provectus seeks a $4B payment from Pfizer, the market cap must reach $2B.

Peter utilizes Pfizer, when he discusses this Big Pharma, as a proxy for significantly increased Big Pharma interest in Provectus post-AACR. He also brings up Pfizer because of the recent focus on immunomodulatory agents and the company's joint patent application with Pfizer for these agents in combination with PV-10.

Pfizer is captivated by PV-10. Among a variety of other touch points and situations, Craig Eagle first engaged Provectus when he traveled to Australia for Dr. Agarwala's presentation preliminary MM Phase 2 trial data in November 2010. Pfizer and Dr. Eagle proffered a unique deal to Provectus that ultimately did not materialize. Craig joined the company's corporate advisory board in August 2011. The joint patent application worked its way through Pfizer in 2012 before being filed in October of that same year. Eric and Peter spent time with Dr. Eagle at ASCO 2013. Which brings us to this week, where topics of discussion and meetings include China.

There should be no doubt about Pfizer's interest in Provectus. Of course, there is no certainty that Pfizer will buy Provectus, or buy it at a Celgene-Abraxis-like valuation.

There also should be no doubt about other Big Pharma and Big Biotech's interest in the company as well. Of course, there is no certainty that any of these companies will buy Provectus, or buy it at a Celgene-Abraxis-like valuation.

Regulatory clarity awaits. Disbelief must be transformed.

There is, however, without a doubt, in front of your eyes, significant Big Pharma interest in Provectus.