Facet Biotech (FACT) is a spin-off of PDL Biopharma (PDLI) with four clinical-stage antibodies in its pipeline. We won’t go into company financials or summary here. Instead, we’ll take a look at FACT’s lead drug, Daclizumab for multiple sclerosis (MS). We should start by saying that we think Daclizumab (Dac) will fail the current SELECT trial and although Dac is the company’s lead, we feel the company’s weight lies with:

1. Dac because of its Biogen partnership, and

2. FACT’s earlier products (see end of the post)

OK, let’s get into it and build our case…

Overview

Dac is a is a humanized monoclonal antibody that binds to the alpha chain (CD25) of the interleukin-2 (IL-2) receptor on activated T cells, which are involved in several diseases/pathologies such as multiple sclerosis and cause immune-mediated responses and inflammation.

Dac is also an approved drug and sold by Roche as Zenapax for acute transplant rejection. The drug has been on the market in the U.S. since 1997, but never really caught on. In fact, Dac was in several other trials which didn’t pan out: Inflammatory Bowel Disease, Psoriasis, Asthma; Systemic Lupus Erythematosus, Uveitis, and a few more.

Through the years, Biogen (BIIB), which has been partnered with PDLI/FACT on Dac since 2005, PDLI, and individual investigators has conducted several trials in MS with encouraging results, however not without safety concerns.

Nevertheless, after seeing promising results (reduction in both the severity and number of brain lesions via MRI) in an 11-patient study using Dac + Interferon (IFN), BIIB licensed the MS rights in 2005 for $40M upfront in an $800M deal.

CHOICE Trial

BIIB and PDLI then conducted the CHOICE trial where Dac, at one of the dose cohorts, met its primary endpoint in 214 relapsing MS patients co-treated with IFN (or Avonex) for 24 weeks with a 48-week wash-out. Here was the design:

• 3 arms randomized 1:1:1

• Dac 2 mg/kg subcutaneous (SC) every (q) 2 weeks (11 doses) + Avonex

• Dac 1 mg/kg SC q 4 weeks (6 doses) + Avonex

• Alternates with placebo q 2 weeks

And, here’s the inclusion criteria:

• MS (McDonald), 18-55 years

• EDSS < 5.0

• Stable IFN-beta regimen for ≥6 months

• MRI with Gd+ lesion, or at least one relapse in past 12 months

Dac at the 2 mg/kg (+Avonex) showed a 72% reduction in new or enlarged Gd-enhancing lesions at week 24 compared to interferon beta therapy alone, p=0.004. The secondary endpoint, which was annualized relapse rate (ARR), failed with a 33% reduction and a p=0.317. The 1 mg/kg dose also failed its secondary endpoint.

BIIB and PDLI were still encouraged by this and started a monotherapy trial in 1Q08 called the SELECT trial.

SELECT Trial

This trial design was pretty simple: A Phase 2 trial with 300 treatment naïve, RRMS patients on Dac at 300 mg or 150 mg q 4 weeks or placebo. Lesions, the primary endpoint, assessed via MRI at baseline, q 4 weeks, then no more MRIs until week 48. Patients were to remain on Dac or placebo for the entire 48 weeks unless patients on placebo relapsed, in which case they could receive interferon during the second six-month period (weeks 24-48).

March 2009

In March, FACT announced the FDA had OK’ed changing the SELECT trial from a Phase 2 to a Phase 3 trial with the caveats that they up the patient number to 600 and make the primary endpoint ARR.

FACT now says we can expect a futility analysis by year end/2H09.

Assessment & Analysis

The trial looks like it has a good shot at failing, and here’s why:

1. The ARR did not show a significant reduction in the CHOICE trial. The SELECT trial’s primary endpoint is now ARR. To-date, there is no evidence that Dac has the ability to decrease ARR in MS patients. Additionally, inidividual patient data has not been revealed and it is difficult to assess if patients with more ARRs showed a reduction that less severe patients.

2. Patients only demonstrated lesion improvement on one dose (2 mg/kg) and it was on top of IFN therapy. The SELECT trial has no IFN; it’s monotherapy. In fact, this paper from Archives of Neurology published in 2009 mentions that while monotherapy might help with lesions, even that can be further assisted with IFN combo therapy to “achieve optimal therapeutic response.”

3. The dose that did show a response in the CHOICE trial had a high level of adverse events vs placebo (11 vs. 4), including 5 serious infections (think Tysabri) and a higher incidence of skin reactions.

4. Lesions have been shown to persist even after discontinuation of Dac, suggesting a higher dose might be needed. The paradox is that the MTD (maximum tolerated dose) may have already been reached, thus narrowing, if not almost closing, the therapeutic window.

Manufacturing, Futility, Competition, and Future MS Patient Management

The daclizumab formulation used in the SELECT trial is different from the CHOICE trial, but not by that much. The SELECT trial is using a fixed dose (150 mg and 300 mg) while the CHOICE trial used a body weight-adjusted dose, 1 mg/kg and 2mg/kg. One bright light is that the 300 mg fixed dose has around the same amount of drug the CHOICE 2mg/kg had. Speaking of manufacturing, FACT has emphasized its high-yield manufacturing process and a higher concentration of Dac in a new formulation. We’re still unclear as to whether the new manufacturing process is being used to make Dac for the ongoing trial or if the formulation differs, and if so by what capacity, from the older version.

The futility analysis is coming in 2H09 and it is the next big milestone for Dac. Again, we have no evidence thus far to believe the analysis will be positive.

On the competition front, Dac is far behind in an extremely crowded market. Avonex, Tysabri and Copaxone dominate the landscape and Genzyme’s Campath is showing great data. There are also several other far advanced programs with impressive results: Merck KgA’s Cladribine, Novartis’ fingolimod and Teva’s laquinimod to name a few.

Which brings us to our final point: future treatment paradigm. The current use of IFN in treating MS is almost analgous to IFN in treating hepatitis C (HCV) patients where IFN will be replaced with oral therapies. The recent data from Cladribine and fingolimod should be a clear indication that the future is trending away from IFN.

That being said, Dac has only demonstrated lesion enhancement when used in conjunction with IFN, therefore its efficacy and market potential will be limited if it does show added benefit in ARR.

Conclusion

Given the lack of evidence that Dac can reduce ARR, its narrow therapeutic window and questionable safety profile, plus its unclear clinical benefit in a competitive landscape makes us believe:

1. Dac can be of benefit to FACT financially should Biogen “see a signal”, which we doubt;

2. FACT is overvalued based on Dac; the value comes with its earlier pipeline.

Facet Biotech’s Daclizumab — Hype.

Sources: Company Presentation, PubMed, SEC filings

Image from marketwire

No positions in FACT, BIIB or competitors

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