The Endocyte Bear Thesis: Why March Will be a Bad Month

Editor's note: March is shaping up to be an important month for Endocyte and its experimental cancer drug vintafolide. Sometime during the month, Endocyte will be announcing top-line results from a phase II study of vintafolide in non-small cell lung cancer. From March 17-20, European regulators will be meeting and are expected to issue an opinion on whether or not to approve vintafolide for the treatment of advanced ovarian cancer.

The following column was written by a healthcare fund investment manager who is short Endocyte. His firm doesn't allow him to be identified by name in the media.

NEW YORK (TheStreet) -- I believe Endocyte (ECYT) is a short for two primary reasons. 1) European regulators are unlikely to grant conditional marketing approval to the company's experimental cancer drug vintafolide for the treatment of ovarian cancer; and 2) an ongoing phase II study of vintafolide in non-small cell lung cancer is likely to fail.

Every stock has a bull and bear thesis. Smart investors weigh the potential benefits and risks of a stock before reaching a conclusion. In this article, I'm going to explain the risks associated with Endocyte and its lead compound vintafolide because I believe it's a more compelling argument. I trust you'll seek out an opposing bullish view on the stock elsewhere before reaching your own conclusion. [Editor's note: TheStreet contributor David Sobek is bullish on Endocyte's chance for European approval. Read his take here.]

Endocyte refers to its technology platform as small molecule drug conjugates (SMDCs), which link a chemotherapy drug payload to a targeting ligand. The ligand is designed to bind to a specific receptor found on cancer cells and then release the chemotherapy payload to kill those cells.

The company's lead SMDC is vintafolide, which consists of folate (vitamin B9) linked to the chemotherapy drug vinblastine. Ovarian and lung cancer cells have an over-abundance of folate receptors on the surface of their cells, so Endocyte believes vintafolide binds to these folate receptors and delivers its chemotherapy payload while leaving normal cells intact. [Endocyte uses a companion diagnostic test to identify patients with tumors that over-express folate receptor.]

Endocyte conducted a phase II study of vintafolide in patients with platinum refractory ovarian cancer. Results from this study were submitted to European regulators seeking conditional approval. European drug reviewers and Endocyte participated in an oral explanation (hearing) for vintafolide last week, which should lead to an opinion being announced as early as March 17-20.

As I said above, I predict European regulators won't recommend the approval of vintafolide for ovarian cancer.

The phase II "Precedent" study enrolled 149 patients with platinum-resistant ovarian cancer. The patients were randomized 2:1 to receive vintafolide plus PLD (Doxil) or PLD (Doxil) alone.

In the intent-to--treat patient population, vintafolide+PLD delayed the median time to tumor growth or death (progression-free survival, or PFS) by 5 months compared to 2.7 months for PLD alone. The result was statistically significant.

Endocyte also looked retrospectively at a subset of 38 patients from the study with ovarian cancer that had 100% expression of the folate receptor. In these patients, vintafolide+PLD demonstrated a median PFS of 5.5 months compared to 1.5 months for PLD alone -- a four-month benefit that was also statistically significant. Overall, treatment with vintafolide reduced the risk of tumor progression by 62% in these 100% folate-receptor ovarian cancer patients.

All the data reported by Endocyte are based on assessments made by investigators who participate in the phase II study. When the results were analyzed independently, vintafolide's PFS benefit narrowed and in some cases lost statistically significant. This is important because regulators usually give more weight to independent analysis of study data.

European regulators are being asked to approve vintafolide based on this PFS benefit, but what really matters is overall survival. In the phase II study, vintafolide trended toward worsening overall survival. The hazard ratio was 1.1 meaning vintafolide patients had a 10% greater risk of dying compared to patients treated with PLD -- although this trend was not statistically significant.

In fact, the entire vintafolide benefit Endocyte observed in the phase II Precedent study is readily explained by the fact that vintafolide-treated patients in this unblinded study received significantly more PLD than the control patients (162.5mg vs. 100mg.) The baseline characteristics of the control patients were also better than patients in the vintafolide arm.

The question faced by European regulators is whether to approve today vintafolide for the treatment of platinum refractory ovarian cancer based on data from a 38-patient, post-hoc sub-group in which a four-month PFS benefit was coupled with a trend towards worse overall survival. Moreover, increased Doxil exposure -- a drug known to be effective in this population -- explains the PFS benefit observed more than any effect of vintafolide.

Endocyte is running a larger phase III study of vintafolide in ovarian cancer right now, aiming to replicate and confirm the results seen in the phase II study. My bet is European regulators decide the phase II data aren't sufficient to approve vintafolide right now and will instead wait for results from the phase III study.

Let's move on to the second part of the bear thesis: Vintafolide's lung cancer study. Endocyte's partner Merck (MRK) is expected to announce results from this study in March.

The phase II study enrolled patients with non-small cell lung cancer with 100% expression of the folate receptor. Patients were randomized to one of three treatment arms: 1) docetaxel (the control arm), 2) docetaxel and vintafolide (combination therapy) or 3) vintafolide monotherapy. The study's primary endpoint is PFS, secondary efficacy endpoints are response rate and overall survival. The study is powered to show a 50% improvement in PFS for vintafolide compared to the control arm. That's a high efficacy bar, difficult to achieve.

Last October, independent data monitors determined that patients treated with vintafolide monotherapy were unlikely to benefit relative to the docetaxel control arm. [Even so, patients were allowed to continue vintafolide monotherapy based on doctor's discretion.] The same monitors recommended the continuation of the combination and docetaxel control arms of the study.

What appears to be "futility" of vintafolide monotherapy in the lung cancer study -- even though that term was not used by independent monitors -- raises significant concerns about the drug's anti-cancer activity and portends equally negative results from the vintafolide-docetaxel combination therapy arm.

I suspect vintafolide is showing poor activity in lung cancer because the vinblastine dose is too low.

The vinca alkaloid class of drugs -- of which vinblastine is a member -- have been shown in much larger clinical trials to be equivalent to taxanes. Krazkowsi et al compared vinflunine (another vina alkaloid) to docetaxel in 551 second-line lung cancer patients. Docetaxel dosing and schedule was the same as used in the Endocyte study. The result: No difference in response rate, PFS or overall survival between vinflunine and docetaxel. 

Why is this bad for Endocyte? Because the vinflunine dose in the Krazkowski study was significantly higher than the vintafolide dose by Endocyte in its lung cancer study. Total vintafolide exposure for the first three weeks of dosing is 10mg, or more than 30-fold (on a mg-to-mg basis) lower than total vinflunine exposure. When looking at the molecular weight of each drug, the vinflunine dose was 60 times higher than vintafolide.

A single-arm study of vinorelbine (another vinca alkaloid) in combination with docetaxel failed to show superiority versus historical controls. Studies conducted in the U.S. and France reached the same conclusion.

Lastly, a large meta-analysis of more than 2,000 second-line lung cancer patients concluded that adding a second chemotherapy to docetaxel may improve PFS but does not increase overall survival and comes at the cost of increased toxicity. The lesson from the meta-analysis is significant but small differences in efficacy can be observed in any clinical trial which enrolls large numbers of patients. Endocyte doesn't have that luxury with the phase II lung cancer study.

In conclusion: 1) Vintafolide monotherapy was found to be ineffective, 2) There exists substantial historical data demonstrating the futility of docetaxel-doublet chemotherapy in lung cancer; and 3) vinflunine at a higher dose than vintafolide (both are vinca akaloids) failed to beat docetaxel.

All of these factors raise significant concerns about vintafolide's activity in lung cancer and make it likely that Endocyte's ongoing lung cancer study will fail.

Disclosure: This column was written by a healthcare fund investment manager who is short Endocyte.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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