CKPT: Second Mover Could Have First Class Advantage

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NASDAQ:CKPT

Yesterday, Checkpoint Therapeutics (NASDAQ:CKPT) announced preliminary safety and efficacy data from their ongoing Phase I/II trial for CK-101. CK-101 is the company’s most advanced candidate intended for non-small cell lung cancer (NSCLC) and addresses some of the shortcomings of previous generation drugs. The epidermal growth factor receptor (EGFR) tyrosine kinase inhibitor (TKI) is an orally administered therapy under development for lung cancer patients whose tumors carry EGFR mutations, including the T790M resistance mutation.

Preliminary results of the trial were accepted as a late-breaking submission. They will be included in an oral presentation at the International Association for the Study of Lung Cancer (IASLC) 19th World Conference on Lung Cancer in Toronto, Canada on Monday, September 24th. The clinical work behind the presentation began in the fall of 2016 with the initiation of a dose escalation phase in all advanced solid tumors where the investigators observed no dose-limiting toxicities or treatment-related serious adverse events. This was followed by the enrollment of an expansion cohort in EGFR mutation-positive NSCLC patients where preliminary efficacy was evaluated.

As of June 25th 2018, 37 patients had contributed to the Phase I dose escalation and dose expansion phases of the trial. Dose escalation evaluated CK-101 at levels ranging from 100 mg to 1,200 mg per day and dose expansion evaluated a dose of 400 mg two times daily (equating to 800 mg per day). Participants in dose expansion had EGFR mutation-positive advanced or metastatic NSCLC without prior EGFR-TKI therapy (TKI-naïve) or T790M-positive advanced or metastatic NSCLC with disease progression on previous EGFR-TKI therapy (TKI-failure). Patients in both groups may have failed multiple other therapies prior to entering the trial.

Preliminary efficacy results for dose expansion found 100% (19/19) of patients achieved disease control, which is defined as stable disease or better response to therapy. 84% (16/19) of patients saw their tumors shrink in size versus when they entered the study. 42% (8/19) achieved a partial response, which is defined as a 30% or greater reduction in tumor size. Higher drug concentrations of CK-101 in the blood were associated with a higher objective response rate (ORR) with six of eleven patients achieving a confirmed objective response. ORR for the eight patients included in the treatment-naïve group was 75%, which compares to Tagrisso’s 77% achieved in the FLAURA study


Exhibit I – CK-101 Expansion Cohort Preliminary Data

Lung cancer is the second most common cancer in the United States after breast cancer and there are an estimated 234,000 new cases every year (Cancer Facts and Figures 2018. American Cancer Society). Globally there are approximately 14 million new cases (Cancer Research UK. 2012). NSCLC comprises the majority, representing 85% of primary lung cancers and most patients with advanced or metastatic disease. Epidermal growth factor receptor mutations are also quite common but fluctuate by geography. In North America, about 20% of NSCLC patients have the mutation, while in Asia, it is from 40 to 50% frequency. In Japan, where Checkpoint has Asian development rights, about 45% of NSCLC patients have the EGFR mutation. In Europe, the rate is about 15% (Midha, Anita; et al. EGFR mutation incidence in non-small-cell lung cancer of adenocarcinoma histology: a systematic review and global map by ethnicity. Am J Cancer Res. 2015; 5(9): 2892–2911. August 15, 2015). CK-101 plans to pursue a first-line indication for CK-101, which will represent a larger population than that initially targeted by the third generation T790M mutation focused agents. Checkpoint management has estimated the addressable annual market opportunity appropriate for therapy in the first-line setting to be 21,450 patients in the US and 150,000 patients outside the US.

EGFR-TKI Background

There have been several generations of EGFR-TKI therapies, beginning with gefitinib in 2003. Along with erlotinib, gefitinib is a first generation representative of this class which had been used as first line treatment for advanced NSCLC with EGFR mutations including exon 19 deletions and exon 21 L858R mutations. First generation EGFR inhibitors showed an improved response rate in EGFR mutation patients compared to chemotherapy, but tumors frequently generated resistance to the therapy and new mutations emerged, including the T790M resistance mutation. A second generation of EGFR TKI inhibitors were developed to address the T790M mutation, which frequently emerged after a year of treatment with the first generation group. These agents included neratinib, dacomitinib and afatinib; however, they were associated with numerous side effects due to inhibiting wild type (normal) EGFR, which causes adverse skin and gastrointestinal tract side effects.

The third generation of EGFR-TKI therapies recognized the shortcomings of previous generations, including the poor survival rate following the emergence of the T790M mutation in NSCLC and the prohibitive side effects of the second generation therapies. Multiple programs were set into motion to spare wild type cell lines, eventually producing the FDA-approved Tagrisso (osimertinib) which was first approved in November of 2015 as second line therapy after failing other EGFR treatment. Two and a half years later, it was approved for first line treatment for EGFR mutated NSCLC with specific EGFR mutations. Several other third generation candidates were also launched by peers including Clovis Oncology, Hanmi Pharmaceutical, Pfizer and Novartis, but each has since discontinued their development programs.

Market Value

As we indicated above, the population that can benefit from an improved EGFR-TKI therapy is large. Combined with strong pricing, forecast summaries from EvaluatePharma call for almost $4 billion of sales in 2020 for the top products. EvaluatePharma estimates include contributions from Tagrisso, Iressa and Tarceva. We anticipate that market share will shift from first generation products towards third generation products over time given the former’s improved efficacy and safety profile. A once promising candidate that provides an indication of value for a second to market program is Clovis’ rociletinib. Following submission of a new drug application for approval, in November 2015, Clovis released information that suggested rociletinib would not be approved by the FDA and the company lost $2.65 billion in market value. On Friday, November 13, 2015 CLVS closed at $99.43. After an announcement on Monday, November 16, the shares closed at $30.24. With a share price difference of $69.19 and 38.3 million shares outstanding at that time, change in market value was $2.65 billion. Based on the movements in the stock, the market was attributing almost $3 billion to the assumed number two third generation EGFR-TKI therapy to enter the space.

Other programs also failed to make it to the finish line. Hanmi was developing olmutinib, which was given a breakthrough therapy designation and was approved in Korea. However, there were cases of toxic epidermal necrolysis, causing a death and resulting in partner Boehringer Ingelheim to halt development, taking another competitor out of the market. Novartis was also in the race, and had advanced nazartinib to a Phase III trial. However, the study was withdrawn from clinicaltrials.gov and based on public statements no further advancement as a monotherapy is expected. This leaves an open space for a fast follower such as CK-101 to be the number two third generation player in a market that could be as large as $6 billion several years down the road ($6.050 billion estimate for Tagrisso sales in 2024 from Cowen Equity Research in AstraZeneca Note dated August 22, 2018). Based on analyst estimates polled by Evaluate Pharma, market leader Tagrisso is expected to generate global revenue of $1.7 billion in 2018, $2.4 billion in 2019 and $3.2 billion by 2020. Our own analysis based on pricing and market size estimates the following fully penetrated market size:


Exhibit II – Global Market Size

These data points suggest a very large market with one dominant player. While there is only preliminary data based on 37 patients, there is reason to believe that CK-101 may even be able to improve on the performance of the current market leader. There are a number of serious side effects associated with Tagrisso as stated in the labeling, including interstitial lung disease which affected 3.9% of the Tagrisso patients in clinical studies and resulted in the death of 0.4% of patients. CK-101 has shown no sign of this serious side effect. Additionally, 13% of patients that took Tagrisso suffered from adverse reactions that led to permanent discontinuation of the drug. Assuming peak sales are $4.7 billion (2024 analyst sales estimates based on Evaluate Pharma data), if CK-101 is only able to address this portion of the population that is not able to continue on Tagrisso, this is a $610 million addressable market for Checkpoint’s lead candidate. There is evidence that penetration and the addressable market for CK-101 could be larger.

Next Steps

The next step for CK-101 is to identify the optimal dose for Phase III. It is likely the ongoing study will wrap up in 1H:19, paving the way for a second half start to the Phase III. This registrational trial is expected to treat the same population as that enrolled in Tagrisso’s FLAURA trial that sought advanced or metastatic NSCLC patients with the exon 19 deletion or L858R mutation and is treatment naïve. Comparing to erlotinib or gefitinib, the primary endpoint is expected to be progression free survival with a trial duration of about 24 months. With this timeline, we could see results by the end of 2021 and shortly after have a number two third generation EGFR-TKI competitor on the market for patients with EGFR mutation-positive NSCLC.

Summary

Yesterday’s release provides a first look into how CK-101 is progressing. While only 37 patients have been evaluated for safety, the results are promising and show the potential for a differentiated safety profile compared to available therapy. The addressable market for EGFR mutation-positive NSCLC is substantial and will benefit from a second entry in the third generation class of therapy. Even if CK-101 is able to obtain only a minority share, this could represent near $1 billion in annual revenues, which becomes even more likely if it is able to maintain a favorable safety profile in a Phase III trial.

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