GS: AMGN/IMCL/ABGX: Panitumumab data in
10/05 might cause volatility
10/13/2005
We expect Phase 3 data on AMGN/ABGX? panitumumab in 3rd-line colorectal cancer
(CRC) this month. We believe most investors expect positive results. Based on the modest
potential ($300MM) and EPS contribution ($0.02 EPS per $100MM), we believe impact
on AMGN shares should be limited to 5% depending on the outcome. However, ABGX
could trade up or down around 30% with the results. Panitumumab is a direct competitor
for Erbitux (BMY/IMCL). We believe positive data have been largely discounted in IMCL
shares, therefore, downside risk might be 5-10% whereas upside could be 15-20%. We
maintain our estimates and ratings: Outperform for AMGN & IMCL and In-Line for
ABGX. Our coverage view remains neutral. Risks are lower sales, development failures
and delays, reimbursement, manufacturing constraints, patent disputes, competition, and
reliance on partners.
1. PHASE 3 DATA ON PANITUMUMAB IN REFRACTORY CRC EXPECTED TO BE
POSITIVE IN OCTOBER
Amgen and Abgenix are developing panitumumab, a human monoclonal antibody to the
EGFR receptor that is potentially a direct competitor for Erbitux. Phase 3 results from an
ex-US study in third-line metastatic CRC are expected this month. The study compares
panitumumab to best supportive care (BSC) in patients who were treated previously with
5FU/LV plus irinotecan and/or oxaliplatin. The primary endpoint is progression-free
survival (PFS). If the data are positive, FDA filing should occur in H1/06. Panitumumab
has been granted fast track status by the FDA which implies a 6 month review leading to
potential launch in H2/06.
A Phase 3 study for third-line metastatic CRC is also ongoing in the US. The primary
endpoint is response rate. Enrollment has been slow due to the launch of Avastin and
Erbitux. Amgen does not intend to wait for the data before filing the ex-US results.
Based on the similar mechanism of panitumumab to Erbitux and previous positive Phase 2
data, we believe that it is likely that the Phase 3 trial will show efficacy. However, the
magnitude of improvement in PFS may not be dramatic. In the open label Phase 2 study of
2nd/3rd-line CRC, there was a 9% response rate, PFS of 13.6 weeks and median survival
of 37.6 weeks.
In April 2005, Amgen initiated an open-label Phase 3 study (PACCE) in 1,000 patients in
first-line CRC. The study will evaluate Avastin +/- Panitumumab given every 2 weeks.
Background chemotherapy was based on oxaliplatin or irinotecan. The primary endpoint
is PFS. The secondary endpoints are response rate and overall survival. Full data from this
trial are not expected before late 2006. However, Amgen indicated that response rate from
about 150 patients should be available in late 2005.
2. LIMITED IMPACT ON AMGEN
We estimate that the sales potential of panitumumab in 3rd-line CRC to be $300MM.
Assuming 50% profit split with Abgenix, EPS contribution for Amgen is minor at about
$0.02 per $100MM in sales. Therefore, we believe Amgen shares might move 5% either way
depending on the outcome. However, sentiments on Amgen's ability to improve its pipeline will
likely be affected by the Phase 3 results.
3. POSITIVE PANITUMUMAB DATA MOSTLY DISCOUNTED IN IMCLONE SHARES
We believe the underperformance of Imclone shares in 2005 was mostly due to concerns about
competition from panitumumab. Therefore, the downside to Imclone shares should be limited to
about 5-10% if the panitumumab data are positive. On the other hand, the upside could be 15-20%
with negative data.
Relative to Erbitux, panitumumab may be associated with fewer infusion reactions and allergic
responses, thereby reducing the need to premedicate the patients. Dosing may also be more flexible
(every 1, 2, or 3 weeks versus weekly Erbitux). While we believe that the Phase 3 data on
panitumumab may be positive, negative impact on Imclone shares may be moderated as investors
start to focus on the following:
(1) While the PFS endpoint in the ex US study generally represents a higher hurdle than tumor
response, certain aspects of the Phase 3 trial design may increase the probability of a positive
outcome. Therefore, the FDA may scrutinize the data very stringently, especially if the FDA
application is based on one Phase 3 trial. In the ex US protocol, the scoring of progression (PFS) is
affected by the frequency of imaging scans which is every 8 weeks. However, unscheduled scans
can be ordered for patients who progress clinically. As the protocol also allows patients in the
control group (best supportive care) to "cross over" to receive panitumumab upon progression.
Some BSC patients may receive early, off-schedule, imaging scans to document progression so as to
switch to panitumumab. Earlier scans may shorten the PFS of the control group and increase the
"spread" between panitumumab and BSC.
(2) Assuming positive data on panitumumab in Q4/05, product launch will likely be in H2/06. We
believe the approved indication will be for third-line CRC which is a small market segment. For
first-line CRC, the largest segment, Amgen is relying on Compendium listing of the PACCE trial
which is an open label study not sufficient for FDA approval. At launch, data on PFS (primary
endpoint) may not be available. Amgen has planned interim analysis starting late 2005, including
response rate from about 150 patients in Q4/05. The interim data are unlikely to drive use of
Avastin plus panitumumab in view of the high cost of the combination therapy. In H2/06, we expect
data on PFS from the Phase 3 trial of Erbitux in first-line, and overall survival data from the Phase 3
study in second-line CRC. If the data from these randomized, controlled trials are positive, Erbitux
should be preferred by physicians and third party payors.
(3) Imclone has exclusive license on a broad patent (Schlessinger patent) covering use of EGFR
antibodies with anti-neoplastic agents, such as chemotherapy. As with Erbitux, the use of
panitumumab will likely be in combination with chemotherapy for first and second-line therapy;
and as monotherapy in third-line therapy, a small market segment. Imclone management has
indicated that it will pursue infringers of the Schlessinger patent. It is difficult to predict whether
Amgen will be able to promote panitumumab in combination with chemotherapy without paying
royalties to Imclone.
4. IMPACT ON ABGENIX, ESTIMATE UP OR DOWN AROUND 30%
While it is difficult to pinpoint exactly the upside/downside with positive or negative data, we
believe it could impact the stock around 30% in both directions. Given precedent for EGF
antibodies in this setting as well as the Phase II data on panitumumab, we think it is likely that the
trial is successful. In addition to the third line monotherapy study, several studies are underway to
support potential label expansion, including the PACCE study alluded to above, as well as studies in
the lung, renal settings, and combination studies with different agents including Amgen's VEGF
inhibitor, AMG706. While all of these studies are supportive, the third line setting will set the stage
for the development path. If the data are negative, the steps and time frame to potential approval
will be less clear. If the market then valued panitumumab as a $200-$300 million type drug, we
believe that would be reflected in a stock price around $6-$7 per share, plus $1-2 for the pipeline. If
the data are positive, and panitumumab was perceived to have the potential to address over a
$500-$700 million type opportunity in colorectal cancer, we believe that would be reflected in a
$12-$14 stock price. These ranges assume end sales multiples of 5X, 50% split with Amgen and
discount rates of 30-40%.
While panitumumab is the primary driver for Abgenix, we note that Abgenix is conducting early
clinical studies on ABX-PTH for secondary hyperparathyroidism, and has a broad though early
stage cancer collaboration with AstraZeneca. Abgenix could potentially get royalties on Amgen's
AMG162 in Phase III development for osteoporosis. Nine additional licensed antibodies that could
potentially provide royalties are in early clinical studies.
Each of the analysts named below hereby certifies that, with respect |
