GS: TLRK (IL/N): Update with management, multiple 2004 milestones on track
52-Week Range US$20-5
YTD Price Change 8.00%
Market Cap US$1.2bn
We met with Tularik management yesterday for an update which confirmed that programs
in the pipeline are on track. Multiple data points are expected in 2004, including, 1)
potential partnership for diabetes candidate T131, Phase II data on T131 (Q2), interim
analysis of Phase II/III trial with T67 for primary liver cancer (mid-year). In the second
half we look for Phase II data on T487 for psoriasis (Q3) and rheumatoid arthritis (Q4),
and obesity agent T71, possibly by year end. We also look for one to two IND
submissions in 2004. We continue to believe that Tularik has made significant progress in
advancing a pipeline of novel, potential first in class oral agents. We maintain our In-Line
rating and Neutral coverage view. Tularik is a development-stage company, best suited for
long-term investors. Key risks include potential clinical failures, long development
timeframes, potential need for additional capital.
INVESTMENT OUTLOOK: Tularik is focused on developing novel oral agents to
address multiple diseases that represent large commercial opportunities. Several of these
candidates may represent first in class therapeutics, with potential application in the
cancer, inflammatory disease and metabolic disease areas. While we regard the most
advanced candidate, T67, for liver cancer as high risk/reward, we believe some of the earlier stage
oral compounds could generate significant value over time. Tularik has developed a strong,
experienced management team, a novel platform for drug discovery and solid partnerships,
including Amgen (with about a 20% equity stake), Sankyo and Japan Tobacco.
I. CLINICAL DEVELOPMENT PROGRAMS
** T67 for primary liver cancer - interim analysis mid-2004 **
An interim analysis of Tularik's Phase II/III study with T67, a beta tubulin binder, for the treatment
of primary liver cancer is expected mid- year. Over 100 patients have been enrolled. The analysis
will be conducted by a data monitoring committee (DMC). The DMC will analyze safety and
clinical endpoints including survival and response rates. While it is possible that the trial could be
stopped early if efficacy data support it, we think it is more likely that the full study is conducted. If
that is the case we would expect enrollment to be completed in the first part half of 2005.
Tularik initiated the Phase II/III study, which will involve about 750 patients, in March 2003. The
primary endpoint is survival. Patients will be treated with either T67 or the current standard of care,
doxorubicin, as first line therapy. Both agents are administered by IV infusion. The trial is being
conducted at centers in the US, Europe and Asia. If data from the full trial are positive, we believe
that potential approval could occur in 2006/2007. Given lack of strong evidence of efficacy in
Phase II studies we believe this program is risky. However, we believe that T67 would be
approvable with a modest improvement in survival. The average survival period for patients
diagnosed with primary liver cancer is estimated at 6 months. The study is designed to detect an
improvement of six weeks (roughly 25%) in survival over the doxorubicin arm. We would also
expect potential safety advantages relative to doxorubicin, particularly with respect to white blood
cell and platelet suppression, cardiovascular profile and other side effects.
** T607 for solid tumors - data expected at ASCO
Behind T67, Tularik is studying T607, an analog of T67 designed not to cross the blood brain
barrier, in cancer. Tularik has studied this compound in primary liver cancer, ovarian cancer and
gastric/esophageal cancer. We believe the most likely potential indication for further pursuit might
be in gastric and esophageal cancer. As indicated in our previous note (1-29- 04), management has
decided not to continue studies in ovarian cancer. We may see some data in the liver setting at
ASCO in early June. We think it unlikely that this indication would be pursued if it is not better
than T67. Management has been encouraged about the prospects in gastric/esophageal cancer.
However, we understand that it is not uncommon to see a response in early studies. They key test
may be duration of response in this setting. The company may also release data for esophageal and
gastric cancer around mid-year. We look for a discussion of likely next steps potentially in
mid-2004.
** T487 - Phase IIa psoriasis ongoing, RA to begin soon, data Q3 & Q4 **
Tularik is conducting studies with T487, an oral anti-inflammatory agent with potential application
in multiple inflammatory disorders including psoriasis, rheumatoid arthritis, multiple sclerosis,
inflammatory bowel disease and transplant rejection. In December 2003, Tularik announced the
initiation of a Phase IIa, double-blind, placebo-controlled study for psoriasis. The company expects
to initiate Phase IIa studies in rheumatoid arthritis in 1Q 2004. Both studies will enroll
approximately 40 patients with moderate to severe disease and will run for 28 days. The studies are
designed to test safety and to make a preliminary assessment of clinical efficacy. Patients will be
randomized to receive once daily placebo or one of multiple doses of T487.
The primary endpoint in the psoriasis trial will be measured from skin biopsies taken at days 1 and
29, and will assess immune cell infiltration of the affected areas as well as biomarkers of inflammation. Other measurements of efficacy will include PASI scores and the physician's global
assessment (PGA) of disease activity. In the rheumatoid arthritis study, primary measurements will
be made from infiltration of immune cells as well as inflammatory biomarkers from synovial
biopsies. Other measurements will include ACR scores and a disease activity score (DAS).
T-487 inhibits binding of specific chemokines to lymphocyte receptors, specifically the CXCR3
receptor, and is therefore predicted to inhibit migration of lymphocytes to sites of inflammation.
T487 has shown preclinical activity in transplant rejection. Phase I studies demonstrated that the
drug was well tolerated at all doses tested, and good oral exposure was achieved.
** T131 Type II diabetes - Phase IIa data June, potential partner soon**
Tularik has begun blinded, placebo-controlled Phase IIa studies with drug candidate T131 for the
potential treatment of Type II diabetes. The trial is designed to look at safety and to make a
preliminary measurement of efficacy with T131 monotherapy. The study will enroll approximately
60 patients of moderate severity, who have failed diet and exercise, and have fasting blood glucose
(FBG) levels of <240 and HbA1c of >7%. The primary efficacy endpoint will be a reduction in
FBG, and secondary endpoints will measure changes in markers of disease including insulin,
adiponectin, HbA1c, fructosamine and lipids. Phase I studies demonstrated that T131 was well
tolerated at all doses tested, and good oral exposure was achieved.
Because of the large clinical trials required for metabolic diseases, Tularik intends establish a
partnership for the development and potential commercialization of T131. Although it can be
difficult to estimate with precision the timing of potential partnerships, management maintains its
first quarter goal.
T131 is one of multiple leads, which have been identified with potential application in diabetes.
They target the PPAR gamma receptor, the same target as the glitizone class of diabetes drugs.
T131 is a chemically distinct compound which binds in a different manner than the glitizones.
T131 is thought to modulate rather than simply antagonize the PPAR gamma receptor. Candidates
in development may obviate the fluid retention and other side effects that have been associated
with this multi-billion dollar class.
** Phase I underway with T71, a novel oral weight loss agent **
In December 2003 Tularik filed to begin a Phase I study with T71, a potential first in class agent
for weight loss. Although the exact mechanism has not been disclosed, T71 works through the
central nervous system and is thought to lower appetite and to increase metabolic rate. The
company plans to conduct a dose escalation study with this compound with data possibly available
by year end or early 2005.
II. Oncology platform, Amgen partnership, making steady progress.
** Amgen - two milestones from significant alliance **
Tularik has a novel technology platform for discovering oncogenes, genes associated with cancer.
To date, the company has identified over 30 oncogenes (thought to represent about half of the
known oncogenes), from its discovery platform, and management believes there are more to be
discovered. The oncogenes consist of cell surface as well as intracellular proteins which can be
inhibited, respectively, with antibodies a
nd small molecules, or in some cases by either. (Tularik has a development agreement with
Medarex for the development of antibodies to three cancer targets.)
In May 2003, Tularik and Amgen entered a five-year collaborative agreement to discover, develop
and commercialize cancer therapeutics based on the oncogene platform. Under the collaborativeagreement, Amgen will gain exclusive worldwide commercialization rights to drugs related to a
certain portion of the existing and to-be-discovered oncogenes, while Tularik retains rights to
others. Tularik also retains an option to co-promote certain drugs in the US, which are developed
by Amgen. In the fourth quarter of 2003, Amgen paid milestones on the selection of two candidates
directed at two distinct targets.
Under the terms of the collaboration, Amgen will pay Tularik up to $21 million in milestone
payments per target, plus a total of $125 million in committed funding over the five year period.
Amgen will also pay royalties to Tularik on potential product sales. The committed funding
includes $50 million in research funding over five years. Amgen has purchased $35 million in
newly issued shares of Tularik at $10 per share, and will purchase an additional $40 million in
newly issued stock at market prices over the next three years.
** Eli Lilly - Phase II studies with Factor Xa inhibitor.
Phase II studies are underway with an oral Factor Xa inhibitor, in development for the potential
acute and chronic treatment of disorders resulting from blood clots. Tularik is entitled to additional
milestones if the candidate advances in the clinic and potential royalties if it is commercialized.
III. Milestones in 2004
Tularik expects to file one to two new INDs or IND equivalents on new chemical entities (NCEs)
in 2004. A number of oral compounds have been selected as advanced preclinical candidates. In
the immunological/inflammatory category, T6204, which targets the IL-1/TNF pathway, has
shown preclinical efficacy in animal models of ulcerative colitis and collagen-induced arthritis.
Two candidates target metabolic disorders, including T659, an oral agent, which increases HDL
cholesterol. Other candidates in development could address asthma.
===== 2004 Milestones =====
H1
* Initiate Phase I studies with T71 for obesity
- Potential corporate partnership for T131
- Initiate Phase IIa studies with T487 for rheumatoid arthritis (Q1)
- Interim analysis of Phase II/III trial with T67 for primary liver cancer
(mid year)
- Present Phase II results of T131 for Type II diabetes (Q2)
- Present Phase II T607 data liver & esophageal cancer, ASCO (Q2)
H2
- Q3 - Announce Phase IIa results of T487 for psoriasis
- Q4 - Announce Phase IIa results of T487 for rheumatoid arthritis
- Q4/Q1 - Possible Phase IIa data on T71 for obesity
* = Milestone attained
I, Meg Malloy, hereby certify that all of the views expressed in thi |
