Archive

Please reload

Please reload

Tags

Rise of PARP Inhibitors: Clovis Oncology vs Tesaro

July 7, 2017

PARP inhibitors are a new class of drugs found to suppress the progression of certain cancers such as ovarian, in recurrent platinum-sensitive patients. Due to their initial success in treatment, research and development in the field has taken off and several new drugs have entered the market this year. Given their implications in the field of oncology, PARP inhibitors pose an unique investment opportunity.

 

Understanding PARP Inhibitors

 

Cells in the body are constantly damaged by external and internal sources. Genetic material that make up the cells are the most vital to the cell because they contain information to keep the cell alive. Chemicals in the cells, radiation outside the cells, errors in replication, and countless other sources constantly damage the genetic material.  Damage can be classified as a double or single strand break. Double strand breaks, which are less frequent but more severe, are processed by major tumor suppressor genes such as BRCA. On the other hand, single strand breaks are much less severe and can be repaired by proteins such as PARP(poly-ADP-ribose polymerase). When a single-stranded nick is detected, the PARP proteins correct the damaged nick , preventing these errors from aggregating.

 

Drugs known as PARP inhibitors work by disrupting the function of the PARP proteins. This prevents the cell from repairing itself from the single strand nicks. This would seem counter intuitive, as accumulating errors in the genetic material is detrimental to the cell and causes cancer but a deeper understanding on the mechanisms of cancer shed light on the success of this class of drugs. Many patients who develop cancer have errors in the genes coding proper homologous recombination such as the BRCA gene. This prevents the cell from correcting double strand breaks, leading to formation of errors in the genetic material, deregulating the cells internal mechanics and increasing the chance of the formation of cancerous cells. Once a cancerous cell is formed, it undergoes uncontrolled cell division, continues to accumulate more errors and becomes progressively more aggressive. This cycle repeats till the cancer eventually leads to the death of the patient.

 

Cancer cells replicate extremely quickly. Each time they replicate their genetic material undergoes severe amount of stress and damage and needs to be repaired so that the cell can continue to replicate. PARP aids in the correction of single strand breaks. When PARP is inhibited, the rapidly dividing, error prone, cancerous cells cannot correct these single strand nicks. Since single strand nicks occur so rapidly that the cancerous cell cannot survive the sheer amount of errors they accumulate. Since there is a remarkably higher rate of division in cancerous cells, they are extremely sensitive to PARP inhibition in comparison to normal somatic cells.

 

 

Competitive PARP inhibitor Space

 

Due to the remarkable results seen with PARP inhibitors in the space of ovarian cancer and the promise seen with breast, pancreatic and prostate cancer, investors are extremely excited and companies are aggressively pursuing this field. In 2016, Pfizer acquired Medivation for $14B in part to acquire the rights to the PARP inhibitor, talazoparib. Currently there are three companies with approved drugs for second-line defense against ovarian cancer: Clovis Oncology’s Rucaparib, Tesaro’s Niraparib (Zeluja™), and AstraZeneca’s Olaparib (Lynparza™). All three of these drugs have been shown to improve the progression free survival (PFS) in ovarian cancer and are also in trials for their indication in breast, pancreatic and prostate cancers. Currently Tesaro is the only drug also approved for maintenance therapy of ovarian cancer. AZN and CLVS’s drugs have not yet been approved for maintenance. AZN and CLVS intend to submit an application for maintenance therapy label expansion this year.

 

Effectiveness of the Drug in Maintenance Studies

 

To evaluate each drug’s progression free survival (PFS) in ovarian cancer maintenance therapy, the results of Clovis’s ARIEL 3 trial, Tesaro’s NOVA trial and AstraZeneca’s SOLO-2 trial can all be compared.

 

Results are shown with patients classified into three groups: BRCA-mutant, Homologous Recombination Deficiency (HRD), and BRCA wild type.

 

BRCA Mutant Group: TSRO PFS of 21.0 mo vs CLVS PFS of 16.6 mo vs. AZN PFS of 19.1 vs placebo 5.4-5.5 mo.

HRD Group: TSRO PFS of 12.9 mo vs CLVS PFS 13.6 mo vs placebo PFS 3.8-5.4 (AZN did not provide data in this group)

BRCA wt Group: TSRO PFS 9.3 mo vs CLVS PFS 10.8 mo vs placebo PFS 5.4 mo (AZN did not provide data in this group)

 

All three approved PARP inhibitors delay the progression of ovarian cancer by almost two years in the BRCA mutant groups which is remarkable, but failed to distinguish themselves from each other. All three drugs are almost on equal footing in respect to the BRCA mutant group with TSRO maintaining a slight advantage over CLVS and AZN. In the remaining 2 groups CLVS maintains a slight advantage over TSRO, while AZN has not yet provided data in these groups yet. Given the positive results from Clovis and from AstraZeneca, I am confident both their labels will be expanded to include maintenance by this time next year. Clovis is expected to be approved for all genotypes while AstraZeneca will only be approved for the BRCA mutant group. There have not been any remarkably unusual negative effects from any of these trials. A major issue with Clovis in regards to Tesaro is its dose frequency. While Tesaro’s Zeluja only needs to be taken once a day, Clovis’s Rubarcarib needs to be taken twice a day, which could make it less appealing to patients.

 

Due to the inability of one drug to differentiate itself from the others, factors such as price, ongoing trials and valuation play a significantly greater impact in distinguishing the company's success.

 

Price

 

Tesaro’s Niraparib is priced as $177,000/ yr.

Clovis’s Rucaparib is priced as $165,000/ yr.

AstraZeneca’s Olaparib is priced as $134,400/ yr.

 

Tesaro is currently set at the highest price of the three. Tesaro’s hefty price tag implies an administration of 200mg/day. Management does not think the annual price will be this high as patients are initially given lower doses. Even when considering down-dosing, Tesaro would still be the most expensive option and could lose some sales to CLVS and AZN based on the similar results but favorable pricing.

 

Market Capitalization

 

TSRO: $7.3B

CLVS: $4.6B

AZN: $88B

 

 

AstraZeneca is a large biotechnology company relying on several different areas of revenue. Tesaro and Clovis on the other hand rely heavily on the success of their respective PARP inhibitor as it is the only major drug in their pipeline. Clovis is little more than half the size of Tesaro due to a later release of their maintenance trial results, putting them almost ten month behind Tesaro in 

administering maintenance treatments. In 2017 Tesaro see sales estimates of $111m and 2018 sales estimates of $420m. Clovis sees 2017 sales estimates of $67m and 2018 sales estimates of $261m. This puts Clovis at loss of approximately $200m in potential revenue in this period and approximately $100m in revenue over the next two years as Clovis catches up.

 

Implications on other Cancers

 

PARP inhibitors have been seen showing improvements in other cancers as well. AstraZeneca’s OlympiAD study tested the effectiveness of Lynpraza on Metastatic Breast Cancer outcomes. It was seen that there was a 7mo PFS vs a 4.2 mo PFS under placebo. Although there was an improval in metastatic breast cancer progression seen, the most fascinating outcome was the low rates of side effects and toxicity under this treatment in comparison to chemotherapy. AstaZeneca also looked at the results of Lynparza on prostate cancer. Of 10 patients tested, 8 saw an improvement through a reduction in PSA level. These results of AZN’s PARP inhibitor, Lynparza, show very positive implications of this class of drugs on other cancers. Clovis is ahead of Tesaro in testing its drug in other cancers. Clovis is currently undergoing a phase 2 (TRITON 2) and a phase 3 (TRITON 3) in Rucaparib’s implications in Prostate Cancer and a phase 2 (RUBY) for the implication in Breast Cancer.

 

Conclusion

 

Tesaro and Clovis Oncology stand to greatly benefit from their strong lines of PARP inhibitors. Given the similarity in the results of the ovarian cancer maintenance studies, Tesaro is a safer investment, but Clovis stands the most to gain in this space. With the release of the ARIEL 3 study on June 19th, by mid 2018 I expect the FDA to expand CLVS’s label to include maintenance for all three groups of patients. Although this initially puts Clovis behind Tesaro, as Clovis’ label is expanded, I expect Clovis’ valuation to match that of Tesaro’s (almost 75% upside). Due to their relatively low market capitalizations and clear path towards market both Tesaro and Clovis are looking like very enticing takeover targets. I expect Clovis to be the more favorable target as it is much cheaper than Tesaro. Companies looking to aggressively enter oncology such as Sanofi and Gilead Sciences look like potential suitors for either of these companies.

 

In the past 11 years, there have only been 4 drug approvals for the treatment of ovarian cancer. PARP inhibitors have revolutionized this space and have vastly improved patient outcomes. PARP inhibitors are projected to see sales of $7B - $12B by 2020. Given the positive and optimistic early results in breast and prostate cancer, I expect the actual sales to be on the higher side of this figure by that time implying a very high upside from current valuation.

 

Disclosure: I/we are long CLVS, GILD and SNY.

 

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

 

*Disclaimer: Always invest with caution, any misstep in early biotech companies such as CLVS have huge downside effects to their stock price. We always try to provide you with companies with extremely favorably upside and minimal downside risk.

 

Analyst: Teja Pathakota

 

Please reload

Please reload

Our Recent Posts

©2017 by Path Investments.

  • twitter
  • facebook
  • linkedin