From SSB pt II:
* Competitive Risk
Several companies are developing EGFR inhibitors. We believe the market is
large with room for more than one drug. However, if competitors' products are
shown to be more efficacious or safer, Tarceva sales will be affected. At
this point, we still expect Tarceva to be the second or third EGFR inhibitor
to reach the market. However, if its development program is delayed,
additional products may get to the market sooner and gain a solid market
share. In addition, the availability of similar products in the market may
affect OSI's ability to complete its clinical trials.
* No current product revenues
The company currently has no marketed products and revenues are derived
solely from licenses and collaborative partnerships. We anticipate the
company to continue to incur losses in the foreseeable future with
profitability not projected until fiscal 2006 and contingent on the
successful development and approval of Tarceva.
PRODUCT PIPELINE
* TARCEVA
Tarceva is a potent selective oral inhibitor of EGFR that blocks the abnormal
EGFR-mediated signaling which drives the proliferation and survival of cancer
cells. Tarceva was discovered through OSI's research collaboration with
Pfizer. OSI gained full development and marketing rights to Tarceva in June
2000 as part of FTC's requirements to allow Pfizer's merger with Warner-
Lambert. In January 2001, OSI entered into a global co-development and
commercialization agreement for Tarceva with Genentech and Roche. Genentech
and OSI employ an essentially equal cost and profit sharing arrangement for
commercialization in the United States, while Roche will pay royalties on net
sales to OSI in markets outside of the United States. The overall costs of
the tripartite development program will be split equally among the three
parties.
We expect Tarceva to reach the U.S. market in mid-2004 with an approval as a
monotherapy for relapsed/refractory NSCLC. European approvals should follow 6
to 9 months after U.S. approvals. In addition, we believe the drug will also
be used off-label in refractory ovarian and head and neck cancers, and
possibly in other cancers as well if efficacy is shown in other indications.
From 2004 to 2007, we are projecting worldwide Tarceva sales of $61 million,
$250 million, $454 million and $689 million, respectively. OSI will receive
half of U.S. profits and royalties on ex-U.S. sales, which we estimate will
total $28 million, $99 million, $163 million and $202 million during the 2004
to 2007 timeframe. In addition, OSI could also receive up to $92 million in
milestone payments for approvals in various indications in the U.S. and
abroad. There is upside to our numbers if Tarceva is shown to work in
combination with chemotherapy in lung or pancreatic cancer.
The appeal of Tarceva lies not only in its potential applicability in various
types of cancer or in its convenient oral administration, but also in its
safety profile. Its good tolerability is in contrast with the traditional
unfavorable safety profile of chemotherapy drugs -- the mainstay of cancer
therapy. Rather than indiscriminately destroying multiplying malignant and
normal cells -- as chemotherapy drugs do - Tarceva acts by specifically
blocking the abnormal genetic signals that drive cancer cells to proliferate.
Tarceva has demonstrated anti-cancer activity as a single agent in three
phase II trials in patients with advanced and heavily pre-treated lung,
ovarian, and head and neck cancers (see table 1). The drug was also shown to
be safe and well-tolerated with manageable side-effects. The most common
toxicities associated with its use were skin rash (75% of patients) and
diarrhea (60% of patients) of mild-to-moderate severity. The skin rash seems
to be characteristic of all products in the EGFR inhibitor class, while
diarrhea seems to be associated only with the small molecules (rather than
antibodies) in the class. Based on the encouraging phase II data, OSI and
collaborators proceeded to implement a broad-based program to achieve rapid
regulatory approval internationally, to expand Tarceva's application to
additional cancer types, and to assess its utility in combination with
chemotherapy agents.
Table 1- Results from phase II trials with Tarceva
Non-Small Head and Ovarian
Cell Neck Cancer
Lung Cancer Cancer
Evaluable Patients 57 110 34
Overall Responders: Complete Reponses (CR), 48% 48% 53%
Partial Reponses (PR) and Stable Disease (SD) (1 CR, 6 PR,
20 SD)
One-year survival 40% 23% 35%
Source: Company data
Phase III Trials Underway: Four large randomized, double-blind, multicenter
controlled phase III trials with a survival endpoint are underway by the
alliance:
* A Phase III trial in refractory NSCLC (as 2nd or 3rd line therapy)
evaluating Tarceva 150 mg/d as a single agent against best supportive care
in 330 patients. The international multicenter study is designed to detect
a 50% improvement in survival with a 90% power. We expect OSI to expand
the sample size of this study to detect a 33% difference in survival with
the same degree of power. Such expansion would also enable the company to
perform subset analyses looking into the relationship between response and
rash or EGFR overexpression.
* A Phase III trial in front line NSCLC evaluating carboplatin and
paclitaxel with or without Tarceva (150 mg/day) in 1050 patients. This
trial is being conducted by Genentech in the U.S., and accrual into the
trial has recently been completed, as announced in August. Tarceva
received a Fast Track designation from FDA for this indication. We expect
results for this trial in H2 2003.
* A Phase III trial in front line NSCLC evaluating gemcitabine and cisplatin
with or without Tarceva (150 mg/day) in 1050 patients. This trial is being
conducted by Roche ex-U.S. and recruitment was recently completed. We also
expect its completion by year-end 2003.
* A Phase III trial in 800 patients with pancreatic cancer evaluating
Tarceva (100 mg/day) in combination with gemcitabine, the only approved
front-line chemotherapy treatment for pancreatic cancer. The trial is
sponsored by OSI and is being conducted in more than 200 sites in 20
countries. OSI is aggressively aiming at completing the trial by mid-2003;
an updated timeline will be available in the upcoming months.
Other ongoing trials include a phase II trial in advanced breast cancer
evaluating Tarceva as a single agent, several phase I trials evaluating
Tarceva with different chemotherapy regimens, and more than 20 exploratory
trials being conducted by the National Cancer Institute in a dozen types of
cancer.
Market Opportunity: There are about 1.25 million new cases of cancer in the
U.S. per year. Among these, about 850,000 patients will develop and 320,000
patients will die from cancers in which abnormal EGFR signaling might play a
role. If we include all the EGFR-related tumors, and assume a cost of therapy
of $10,000, then our estimates for the U.S. market opportunity for EGFR
inhibitors as monotherapy in relapsed/refractory patients could range from
$1.5 billion to $3 billion (the lower end of the range would apply if EGFR
overexpression is required for a response). If these agents show efficacy
only in a subset of the supposedly EGFR-related tumors, then the market
opportunity would be more limited. For example, considering only NSCLC,
ovarian cancer and head and neck cancer, which are the indications where
positive phase II data for Tarceva are available, our estimates for the U.S.
market opportunity for monotherapy in relapsed/refractory patients ranges
from $800 million to $1.3 billion. However, if EGFR inhibitors are also shown
to work in combination with chemotherapy, then the U.S. market opportunity
could be substantially larger, ranging from $3 to $6.5 billion. Since Europe
has a slightly higher incidence for most types of cancers than the U.S., we
assume that the worldwide market opportunity would be at least twice as large
as the U.S. opportunity.
Competitive Landscape: Several companies have EGFR inhibitors in
development. Besides Tarceva, the products furthest along in clinical trials
are AstraZeneca's Iressa, Imclone's Erbitux, Abgenix's ABX-EGF and Pfizer's
CI-1033. Imclone's and Abgenix's products are monoclonal antibodies
administered intravenously; the other three product candidates are small
molecules administered orally. Iressa could be the first to reach the U.S.
market in late 2002 or early 2003 with an approval in relapsed/refractory
NSCLC; Tarceva and Erbitux are competing for the second place, which should
occur around 18 to 24 months after Iressa. ABX-EGF is expected to reach the
market around 2005, and CI-1033 is still in early phase II testing. However,
the race to the market could change in an important way if Iressa is denied
approval from the FDA. Under that scenario, Tarceva or Imclone could be the
first EGFR inhibitor to reach the market.
The main competition for Tarceva is Iressa, since the molecules have chemical
similarities. Both offer the convenience of oral administration and both are
targeting NSCLC as one of their major indications. Although Iressa may still
have the advantage of getting to the market first, we believe the market is
large enough to accommodate more than one product. Ultimately, it is the
efficacy and safety across various cancer types that will determine the
winning product.
* OSI-211
OSI-211 was acquired from Gilead in 2001. It is a liposomal formulation of
lurtotecan, an investigational cytotoxic agent that belongs to the class of
anti-cancer agents called topoisomerase-1 inhibitors. The goal of developing
a liposomal formulation of lurtotecan is to improve the targeting of the drug
to the tumor. Two topoisomerase-1 inhibitors are already on the market:
Glaxo's topotecan (Hycamtin) approved for relapsed ovarian and small cell
lung cancer with sales of $130 million in 2001, and Pharmacia's irinotecan
(Camptosar) approved for colorectal cancer with sales of $613 million in
2001. OSI-211 is being developed as an improved version of topotecan. OSI's
goal is to demonstrate superior efficacy with a similar or better toxicity
profile, or a shorter regimen (topotecan is administered over 5 days).
A phase II trial of OSI-211 in relapsed ovarian cancer has recently been
completed. The study compared two dosing regimens of OSI-211: 1.8 mg/m2 on
days 1, 2, 3 versus 2.4 mg/m2 on days 1 and 8. The results indicate that the
drug is active and that the day 1,2,3 regimen is superior to the day 1 and 8
regimen with a response rate of 17.6% versus 5.6%, and a time-to-progression
of 4.9 months versus 2.7 months, respectively. The day 1,2,3 regimen has an
activity and safety profile similar to what has historically been obtained
with day 1 through 5 topotecan. Given the more favorable regimen relative to
topotecan, OSI is initiating another phase II trial comparing OSI-211 head-
to-head with topotecan. Results are expected in mid-2003.
Given the somewhat limited market of topotecan, it would be important to
establish activity of OSI-211 in small cell lung cancer as well (the second
indication for which topotecan is approved). Hence OSI is also initiating a
single arm phase II trial of OSI-211 in relapsed small-cell lung cancer. We
have included revenues for OSI-211 in our model as of 2006, when we expect it
will reach the market. At maturity, we believe it could do at least as well
as topotecan ($130 million).
* CP-547,632
CP-547,632 is a targeted anti-cancer therapy that inhibits the VEGF tyrosine
kinase. It is an oral small molecule discovered and developed jointly with
Pfizer. It blocks the formation of blood vessels (angiogenesis) required for
tumor development and spread. Angiogenesis inhibitors are a novel therapeutic
area and the VEGF pathway seems to be a key therapeutic target within the
field. Angiogenesis inhibitors will not replace chemotherapy, but should be
used in combination with it. Phase I trials with CP-547,632 are being
conducted by Pfizer. If the drug is approved, OSI will receive 6% royalties
on product sales from Pfizer.
* OSI-7836
OSI-7836 is a member of the nucleoside class of cytotoxic drugs. It was
acquired from Gilead in 2001 and it is being developed as an improved version
of gemcitabine (Gemzar by Eli-Lilly). Gemzar is the market leader in the
nucleoside class of chemotherapy drugs with $723 million in sales in 2001.
Two phase I trials of OSI-7836 in patients with any relapsed or refractory
solid tumor are ongoing (one in Canada and another in Europe). Results should
be presented at the EORTC/AACR meeting in November in Frankfurt. OSI will
initially target relapsed and first line non-small cell lung cancer, while
screening for activity in other solid tumor indications.
* OSI-7904L
OSI-7904 is another drug acquired from Gilead in 2001. It is a thymidylate
synthase inhibitor (TSI), a well-established class of cytotoxic
chemotherapeutic agents. OSI-7905 was also formulated into liposomes by
Gilead to improve its therapeutic index; i.e. to reduce side effects and
prolong tumor exposure to the drug. The leading TSI on the market is 5-
Fluoro-uracil (5-FU), a generically available TSI used in major types of
tumors such as colorectal and breast cancer. Another recent approval in this
class is Xeloda (Roche). OSI-7904 is currently in a phase I trial in Europe.
Data could be presented at the EORTC/AACR meeting in November in Frankfurt.
* OSI-754
OSI-754 is a targeted anti-cancer therapy that inhibits the farnesyl
transferase enzyme and blocks the H-ras signaling pathway. It is an oral
small molecule that was developed in collaboration with Pfizer. Originally,
farnesyl transferase inhibitors were thought to inhibit the K-ras oncogene,
which has been associated with major solid tumors such as colon and lung
cancer. However, studies done by competitors did not show any significant
anti-tumor activity in these major tumor populations. In addition, pre-
clinical studies demonstrated that these drugs preferentially inhibit H-ras,
rather than the K-ras oncogene. Since the market for H-ras related tumors is
much more limited than for K-ras, Pfizer's chose not to continue the
development of OSI-754 and returned its commercial rights to OSI.
OSI-754 is currently in early stages of development for bladder cancer, a
tumor type where H-ras mutations are predominant. Despite the niche market,
there are approximately 55,000 new cases of bladder cancer in the U.S. each
year and significant unmet medical needs. We have not included it in our
model, since clinical data are not yet available. However, if ultimately
approved, we estimate it could generate $75 to $100 million in sales at
maturity.
PRE-CLINICAL PIPELINE
Historically, OSI's core strength has been in drug discovery. It has
assembled the full range of drug discovery and early development activities,
from the identification of biological targets for drug discovery to the
development of drug candidates for clinical development. It has conducted its
drug discovery programs independently and through funded collaborations with
major pharmaceutical companies. It collaborated with Pfizer for 15 years on
targeted therapies for cancer, and several drug candidates arose from the
collaboration. The focus of OSI's drug discovery programs with Pfizer was on
oral drugs that inhibit key protein tyrosine kinase receptors involved in
signal transduction, apoptosis or angiogenesis. Tarceva, CP-547,632, and OSI-
754 are examples of drug candidates already in the clinic; several others are
in pre-IND stages. The funded part of the collaboration has ended, but Pfizer
continues to develop certain drug candidates that emanated from the
collaboration and for which OSI will receive royalties, if ultimately
commercialized.
In addition, OSI still has pre-clinical programs in diabetes and asthma that
arose from other pharmaceutical collaborators, but which it plans to divest,
partner or exit as a means to focus solely on cancer.
Table 2 -- Upcoming Milestones
* Results of the phase I trial with OSI-7836 Q4 2002
* Results of the phase I trial with OSI-7904L Q4 2002
* Initiation of additional phase II trials of OSI-211 in ovarian and H2 2002
lung cancer H2 2003
* Results of the phase III trial of Tarceva in relapsed refractory
NSCLC
* Results of the phase III trial of Tarceva in pancreatic cancer H2 2003
* Results of the two phase III trials of Tarceva in front-line NSCLC H2 2003
COMPANY DESCRIPTION
OSI Pharmaceuticals is a biopharmaceutical company focused on the discovery,
development and commercialization of small molecules for the treatment of
cancer. Its lead product candidate, Tarceva, belongs to a novel class of
anti-cancer agents -- the EGF receptor inhibitors. More than 850,000 patients
develop and 313,000 die of tumors in which the EGF receptor may play a role
and where drugs like Tarceva could potentially be used. Besides Tarceva, OSI
has another 5 candidates in its product pipeline in early to mid stages of
clinical development. |
