-  DSMB approval of Phase III HA-Irinotecan trial
-  Progress in marketing of fondaparinux
-  Update on plans to demerge oncology business

openbriefing.com
Alchemia Limited (ACL) yesterday announced that the independent Data Safety Monitoring Board (DSMB) for the Phase III clinical trial of its lead cancer drug, HA-Irinotecan, in second or third line metastatic colorectal cancer, has approved the continuation of the trial.  What is the significance of this for the trial and its outcome?

CEO Dr Pete Smith
This is an important milestone.  The DSMB decision was based on its review of the data on the first patients who’d completed two rounds of treatment in the trial.  While we’ve trialled HA-Irinotecan in patients before, this study involves a combination of three drugs, and the patients have been monitored closely for any toxicities due to the new drug combination.  The DSMB looks for suspected unexpected serious adverse reactions (SUSARS) and at other aspects of the trial such as overall safety.  We haven’t had any SUSARS, and the DSMB saw no problems with the study progressing.

Based on our previous experience, HA-Irinotecan has shown a similar toxicity profile to irinotecan but we’re hoping it works better in controlling the cancer for longer. The DSMB is comfortable for the trial to proceed based on the absence of unexpected toxicities; the data is still blinded and it would be too early to draw any conclusions on effectiveness. Most chemotherapy drugs are given at the maximum dose a patient can tolerate, not at the maximum dose for killing the cancer.  The value proposition of HA-Irinotecan is that we’re delivering more of the drug directly to the cancer and thereby killing more cancer cells, but not giving more of the drug to the patient and increasing the damage to the rest of the body.

We now have over 80 patients recruited into the trial.  Recruitment is slightly behind where we wanted to be as we’ve had a higher than expected screen failure rate with patients not meeting entry criteria.  While this means we’ll have to open more sites to make up for the short fall, it’s an indication that the trial is well managed: data generated from a patient who doesn’t meet the criteria may not be used.  The trial was to be conducted at 55 sites, but we’re increasing that to around 70 with additional sites in Australia and Russia to ensure we meet our recruitment milestone of 390 patients by the end of this calendar year.

After recruitment, the primary end point of the study is looking at the progression free survival period, which is how long it is before the patients’ tumours grow.  We should be getting that data around mid 2013, so it will be a relatively quick trial.

openbriefing.com
What was the rationale for focusing on irinotecan for the first clinical testing of the HyACT platform?  What are the value implications of this trial for the platform and what further processes need to be completed before HA-Irinotecan can be marketed in the US and EU?

CEO Dr Pete Smith
We believe that HyACT, which is owned by us and was invented by Tracey Brown, our Chief Scientific Officer, is capable of improving the activity of a broad range of cancer drugs and anti-cancer antibodies.  We have pre-clinical data on HyACT delivery of a range of different cancer drugs and in every case we’ve found we can increase the activity of those drugs against human cancer cells.

When irinotecan was initially put on the market, the major dose limiting problem in clinical practice was the severe diarrhoea suffered by patients within a number of days of receiving a dose.  We focused on irinotecan first because in pre-clinical models, mice receiving HA-Irinotecan didn’t lose as much weight as mice receiving unformulated irinotecan.  That suggested toxicity was a lot less with HA-Irinotecan, and when it went into Phase I testing in humans, there was a lower incidence of diarrhoea.

In Phase II studies we found there was no difference in toxicity or diarrhoea, so we missed the primary end point, but we saw a statistically significant improvement in the secondary endpoints looking at the effectiveness of the drug, with a 116 percent improvement versus irinotecan in keeping tumour growth under control. 

Irinotecan is widely used in the management of colorectal cancer and we’re hoping to make it work better.  If the Phase III trial is successful, we’ll have a new branded drug superior to the currently marketed irinotecan.  The trial is the final one needed to gain regulatory approval: the end point and structure of the trial will be acceptable to the European Medicines Agency (EMA) and the US Food and Drug Administration (FDA).  While approval will depend on the toxicity profile and data we present, if the trial yields its end point, it should be sufficient for approval in all major markets. 

In terms of potential value, Camptosar, the branded version of irinotecan was a US$1 billion pa drug used almost exclusively in treating colorectal cancer.  We’re currently conducting a formal pricing study, but based on other precedents, we expect a similar price for our drug to Camptosar based on the fact we’re making irinotecan work twice as well.  If we hit our Phase III end point, we’d expect conversion to HA-irinotecan from irinotecan of around 60 percent.  This means HA-Irinotecan is potentially a multi-hundred million dollar product.  Importantly, all drugs using the HyACT platform use the same technology, so the scalability of the technology is extremely attractive.  Assuming the Phase III results are positive, we’ll achieve proof of concept for not only one valuable drug but also for a much broader portfolio of anti-cancer agents.

openbriefing.com
Can you comment on the remainder of Alchemia’s development portfolio?  How significant are Phase II trials of HA-Irinotecan in small cell lung cancer (SCLC) to your ongoing development and commercialisation strategy?

CEO Dr Pete Smith
A tumour is not a homogenous population of cells that are identical to each other.  Cancer cells are highly mutated and there are certain cells called cancer stem cells that are capable of dividing to replicate themselves.  If they get into the blood stream, these cells are capable of regrowing the tumour at different sites in the body.

One of the markers used to define that stem cell population is marker CD44, the target we go after with our HyACT technology.  CD44 isn’t just expressed on cancer stem cells, but it’s now clear that cells that become more aggressive, more metastatic, more likely to invade local tissue and more resistant to chemotherapy, are more likely to express CD44. 

The Phase II SCLC trial will give us data on how HA-Irinotecan behaves in another cancer, and in combination with another drug, carboplatin, but the exciting thing about the trial is that we’ll get a view of what’s happening to these particularly nasty cell populations and see whether HA-Irinotecan has a different profile in killing those cells.  Normally when you treat a tumour with chemotherapy, it will shrink but if it hasn’t disappeared, there’s a population of cells that have resisted chemotherapy and are enriched with CD44.  We hope to get rid of more of these cells, or potentially get rid of them all together.

The field of cancer stem cell research is currently attracting huge interest.  Among companies focused on cancer stem cell research, we’ve seen Verastem Inc successfully IPO in the US, and Boston Biomedical be acquired for US$200 million by Dainippon Sumitomo Pharma and OncoMed, another cancer stem cell focused biotech, has just filed to IPO.  We believe our technology also targets these cells and that we’re relatively more advanced in terms of clinical development.  If our Phase III trial gives us proof of concept, we’ll have other potential products that can rapidly enter advanced clinical development.

openbriefing.com
What is your strategy to secure appropriate partners and what are your criteria for partnering arrangements?  What partnering opportunities are you current pursuing?

CEO Dr Pete Smith
As we’ve said previously, we intend to seek a partner after the Phase III trial result.  However, we’re always open for business and continue to talk to potential partners.

We want to keep our optionality on HA-Irinotecan.  If a company wanted to acquire our oncology assets, we’re in a much better position if we own them 100 percent.  If the Phase III trial is successful, the scalability of the technology will be understood by potential partners and we’re likely to have a lot of interest in the broader platform as well as HA-Irinotecan.

Once the platform is proven, we’ll have a host of different commercialisation and partnering opportunities.  We’ve focused on making generic drugs work better and creating new branded products but there are also opportunities for drug life cycle management.  For example, if a company has a drug that’s close to patent expiry, we could help it develop an improved version to maintain the franchise.  The technology could also help companies with drugs in development increase the chance of success by reducing the toxicity of the drug by enabling the use of a lower dose or maximising its efficacy.

openbriefing.com
Dr Reddy’s Laboratories, your US-based marketing partner, has made a regulatory submission seeking marketing approval for Alchemia’s generic fondaparinux in Europe. What is the potential European market for the drug?

CEO Dr Pete Smith
Our version of ffondaparinux has been on the US market since July 2011 and the exclusivity of the branded drug in Europe expired in March 2012.  We’ve already applied for approval of a generic version of the drug across all the different European countries, and approval typically takes 12 to 24 months depending on the country.  Europe will be another important market for our generic fondaparinux, supporting continued growth in sales and profit share.

The European market for prescription drugs is a larger volume market, but it’s a lower-price and lower profit jurisdiction compared with the US.  We see the US as the most important driver of profitability from fondaparinux.  In the coming months, we also expect announcements from Dr Reddy’s on marketing partnerships or launches in other countries, particularly in Asia Pacific, including China.

openbriefing.com
Dr Reddy’s had US sales of generic fondaparinux of $20 million for the March 2012 quarter, a 120 percent increase from the previous quarter. With Alchemia entitled to payment 60 days after the end of each quarter, what level of ongoing income do you expect from fondaparinux and what is the longer term potential market for the drug?

CEO Dr Pete Smith
In the US we currently have about 37 percent of the retail market and 22.5 percent of the overall market, which includes the hospital segment.  The retail segment is the largest and most profitable part of the US market and includes the big pharmacy chains and wholesalers that supply other retail pharmacies.

Dr Reddy’s strategy has been to consolidate our share in the retail segment first and then penetrate the hospital segment.  When we first launched fondaparinux we had some active pharmaceutical ingredient (API) capacity constraints.  This issue has been resolved and we’ll now see progression into the hospital market, which will underpin further sales growth.

Volumes sold to the hospital segment are expected to be equivalent to the retail segment, but at a lower value.  Pricing varies from contract to contract and Dr Reddy’s will supply only when a contract is profitable.  With the cost of goods coming down however, more contracts are likely to become more attractive over time.

Under our marketing agreement with Dr Reddy’s, we’ll receive a 50 percent share of profit on fondaparinux in the US market and after some development costs have been repaid to Dr Reddy’s, we’ll start receiving our share of profit.

openbriefing.com
At 31 March 2012, Alchemia had cash of $17.3 million and no debt.  With operating expenditure of $6.5 million over the first half of 2012, what is the outlook for cash burn for the year ending 30 June 2012?  Are you adequately funded to advance all your current programs?

CEO Dr Pete Smith
Our monthly burn over the past quarter was about $1.2m; that varies from month-to-month, depending particularly on the Phase III study but includes all our activities: the Phase II study, ongoing research, intellectual property management, facilities etc.

Obviously to complete the Phase III study, we’ll need some additional revenue, which would come from fondaparinux if we were to keep the oncology and fondaparinux assets together.  As part of the proposed spin-out of the oncology business, we’d seek to raise additional funds in the demerger process to execute our oncology development plans.

openbriefing.com
What is rationale behind the proposed demerger?  How will it potentially affect the risk-return profile of Alchemia and what are the implications for shareholders?

CEO Dr Pete Smith
We’re moving ahead with our commitment to separate our oncology assets from the rest of the business.  We’re on the cusp of seeing cash flow coming in from fondaparinux.  But the full value of that revenue stream won’t be realised if we’re spending it on R&D.  We’ve determined that the best configuration is to enable fondaparinux cash flow to be returned to shareholders.  In that way shareholders would get the full value of that cash flow.

Most of our R&D spending is on oncology and separating this from fondaparinux makes sense.  It’s most important we position the oncology asset for the future: the spin out and IPO will position the business for future growth.  The oncology business will have its own identity, name and board and enable it to access the capital required to grow a substantial speciality pharmaceutical business.

Assuming the Phase III trial works for HA-Irinotecan, we’ll potentially be able to develop a large number of products that will work much better for patients with no additional toxicity.

openbriefing.com
Over 2012, what will be the strategic focus for Alchemia and what milestones do you expect to achieve?

CEO Dr Pete Smith
We expect to achieve a number of milestones in fondaparinux.  Whilst the deal with Dr Reddy’s gives it responsibility for marketing in North America and the rest of world, we obviously have a very high level of interest in helping maximise profits from the deal.  We’re doing that by continuing to work on the chemistry to bring down the cost of goods.

Another key driver for us this year will be our clinical program.  We’ll be focused on ensuring we get full recruitment in our Phase III HA-Irinotecan trial this calendar year and that we’re progressed in recruiting patients into the Phase II SCLC trial.

However, the most important thing for us this year will be the spinning out of our oncology business and the formation of a new company.  This will be a major transaction for us and we expect it to greatly benefit our shareholders.

openbriefing.com
Thank you Pete.

For more information about Alchemia, visit www.alchemia.com.au or call Dr Pete Smith on (+61 7) 3340 0200.

DISCLAIMER: Orient Capital Pty Ltd has taken all reasonable care in publishing the information contained in this Open Briefing®; furthermore, the entirety of this Open Briefing® has been approved for release to the market by the participating company.  It is information given in a summary form and does not purport to be complete. The information contained is not intended to be used as the basis for making any investment decision and you are solely responsible for any use you choose to make of the information.  We strongly advise that you seek independent professional advice before making any investment decisions. Orient Capital Pty Ltd is not responsible for any consequences of the use you make of the information, including any loss or damage you or a third party might suffer as a result of that use.