Is This New Lung Cancer Treatment a Game Changer?
Leo is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Eli Lilly (NYSE: LLY) rallied on Aug. 13 after the pharmaceutical giant announced that its Phase III trial for a lung cancer treatment had succeeded in increasing the overall survival rate of patients. Analysts immediately speculated that this new treatment could become a blockbuster drug, possibly softening the blow from the upcoming patent expiration of Lilly’s best-selling product, Cymbalta.
Is this unexpected victory reason to pick up shares of Eli Lilly, which is already up 26% over the past twelve months, or would it be more prudent to wait?
A surprising turn of events
Eli Lilly’s new drug, necitumumab, blocks the EGFR (epidermal growth factor receptors) found on certain cancer cells, eventually causing them to starve and die. That same mechanism can also be found in Eli Lilly’s older oncology treatment, Erbitux (cetuximab), which is approved to treat colorectal cancer and head and neck cancer.
Both Erbitux and necitumumab became part of Eli Lilly’s drug portfolio after its $6.5 billion purchase of U.S. biotech ImClone in 2008. Bristol-Myers Squibb, through its ownership stake in ImClone, retained shared rights to necitumumab. However, after a late-stage trial of necitumumab was halted in 2011 due to concerns about its potential to cause blood clots (thromboembolisms), Bristol-Myers backed out of the collaboration, handing over the full rights to Eli Lilly.
The blood clot problem
80% of lung cancer cases are small-cell lung cancers, separated into two subtypes: squamous and non-squamous. Squamous patients comprise 30% of these cases, while the others are non-squamous.
In Eli Lilly’s 2011 trial, blood clots were found to occur more frequently in non-squamous patients -- the largest group of small-cell lung cancer cases, although studies on squamous patients were allowed to continue. The loss of that large group of potential patients was Bristol-Myers’ primary reason for walking away.
During Lilly’s recently concluded SQUIRE Phase III trials, necitumumab was tested on nearly 1,100 squamous patients, with one group only receiving the cancer drugs Gemzar and Cisplatin, while the other group received both treatments in addition to necitumumab. Eli Lilly stated that the risk of blood clots still remains a primary adverse effect of the drug, although they occurred less frequently than other side effects, such as rashes and lowered levels of magnesia in the blood.
Eli Lilly stated that the group receiving necitumumab experienced a higher survival rate, although the company has not disclosed the full results, which it intends to release next year. Lilly plans to submit a marketing application to the FDA by the end of 2014. The company explained that the long time frame was due to the changes in the manufacturing process of the drug, which require new regulatory clearance.
But it won’t save Lilly from the Cymbalta cliff
Some analysts believe that necitumumab could become Lilly’s next blockbuster drug. JPMorgan analyst Chris Schott estimates that necitumumab could generate over $1 billion in peak revenue if it is approved by the FDA.
However, $1 billion in annual sales is unlikely to offset upcoming losses from its antidepressant Cymbalta, which will lose U.S. patent protection in December. Last quarter, sales of Cymbalta rose 22% year-on-year to $1.5 billion. The drug generated nearly $5 billion in sales last year, and currently accounts for a fourth of Lilly’s top line.
Lilly shareholders have been bracing for Cymbalta’s looming expiration, which has already caused pay freezes for workers and executives. $1 billion in “possible” annual sales after 2015 is not a viable replacement for Cymbalta, although it could help boost the company’s long-term revenue growth.
A look at other lung cancer treatments
In the meantime, investors looking for more current lung cancer treatments should look at two other pharma giants instead: Roche (NASDAQOTH: RHHBY) and Pfizer (NYSE: PFE).
Roche manufactures Avastin (bevacizumab) and Tarceva (erlotinib hydrochloride), two frequently used treatments in lung cancer. Avastin, discussed earlier in an article about DME patients, is an angiogenesis inhibitor which slows the growth of new blood vessels. It is approved to treat a wide variety of cancers, including colorectal, lung, breast, kidney, brain, and ovarian cancer. Avastin was approved in 2004 by the FDA, and is one of the most established cancer treatments on the market.
Tarceva, a newer treatment that was approved by the FDA in May, is a reversible tyrosine kinase inhibitor, which specifically targets mutations on the EGFR. Tarceva can be used to treat non-small cell lung cancer, pancreatic cancer and other types of cancer. It extends the average lifespan of a lung cancer patient by roughly three months.
Pfizer, on the other hand, developed Xalkori (crizotinib), a more expensive treatment that shrinks tumors in non-small cell lung cancer -- which only accounts for 20% of diagnosed cases. Xalkori was found to shrink the tumors in 60% of patients studied, and stabilized the tumors in another 30%.
Xalkori was approved by the FDA in 2011, but it has been harshly criticized in overseas markets as being too expensive, at $9,600 per month per patient. The treatment generated $71.5 million in sales for Pfizer in 2012 -- a small drop in the pond for a company that had $59 billion in annual revenue last year, but represents a promising foothold in lung cancer treatments nonetheless.
The Foolish bottom line
Although Eli Lilly’s recent announcement is a positive surprise for investors, an FDA approval for necitumumab is still very far away. In addition, questions regarding the treatment’s blood clot problem will remain unanswered until 2014. Necitumumab also isn’t the drug that will offset the dreaded Cymbalta expiration which threatens to sink its top line next year.
Therefore, biotech investors who want some exposure to lung cancer treatments should stick with established companies like Roche. The market still has an unmet need for viable treatments for lung cancer, which claims 160,000 lives annually in the United States. Therefore, demand for better treatments than traditional chemotherapy, which only has a 10% success rate, will remain high for the foreseeable future.
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