Upon the recent failure of Allergan and Spectrum Pharmaceuticals bladder cancer drug apaziquone to meet primary endpoint and the ensuing change of rhetoric in SPPI's filings plus the simultaneous decision of SPPI to acquire Allos Therapeutics, which has a marketed drug called Folotyn for Peripheral T-cell lymphoma or PTCL, has made a dent in SPPI's partner Topotarget's (CPH: TOPO) shareholder value. The stock has slid almost 40% since the beginning of March, and capitulation wasn't far in the last two days.
The concerns are twofold. Firstly investors are afraid that since Topotarget's SPPI-partnered lead drug Belinostat is also studied for relapsed/refractory PTCL, the decision of Spectrum to acquire a drug already approved in the same indication, this might say something we do not know about how the pivotal study is progressing. Edison Investment Research, which provides very detailed reports with a simple registration, even went so far as to speculate that SPPI might return Belinostat's rights. While SPPI is still in good financial health, those who were speculating it to acquire Topo were silenced since the Allos purchase takes a good chunk of SPPI's cash.
Folotyn, like Belinostat, was studied and approved in the USA via single-arm studies. It's European approval was recently denied because EMA wants randomized trials. This was seen as negative for the leveraging of Belinostat's PTCL trial results. It was also presumed, that FDA might be less willing to approve another drug with relatively similar efficacy from the same company. On the other hand SPPI has shown ability to push through complex regulatory filings.
SPPI also made it clear it does not want to start numerous studies with a single drug and wants to keep clinical development in-house to get a better handle on the costs. Belinostat has shown activity against numerous cancer cell lines in-vivo and in-vitro. Some company might approach a potential blockbuster in another manner: start numerous phase 1-2 studies and invest upfront, and then leverage this into phase 3 studies in most promising indications or sub-populations.
Secondly following the apaziquone failure, the wording in Spectrum's quarterly report 8-K was changed (compared to March 1 8-K) also concerning Belinostat. The filing no longer mentions an NDA filing this year (the 10-Q filed this Friday, a day after the 8-K, however still does!). Since Topotarget's current burn rate takes it at best to around mid-2013, and there is a significant milestone involved, this has raised concerns about the financing. Some have even speculated this to be with malicious intent. The theory that it is simply of lesser priority, since Folotyn sales are expected to accrue from Q4 assuming the acquisition goes through, has a little more legs to it. Finally the wording switch could simply represent a change in overall rhetoric stemming from the apaziquone failure. Overall SPPI has a poor track record in clinical trials so far. It has done better with marketed drugs in increasing their penetration and approval for additional indications.
Topotarget seems to have changed its PR-policy following a recent high profile gaffe. The company responded to market rumours in rather obscure yet elegant way. It posted two short interviews with highly respected Jean-Louis Misset, the Chairman of Topotarget's Global Oncology Advisory Board, explaining the current state and future prospect of Belinostat, onto its website. These are not that visible up-front but active investors will certainly stumble on them (SPPI for example would have certainly used a press release in a similar manner if it had a similar share price action, but it seems a bit excessive).
Mr. Misset says that data from a phase 2 Cancer of Unknown Primary or CUP study is forthcoming within a few weeks. There has been plenty of speculation about this data as it may validate the drug in solid-tumour indications. Generally his words sounded rather bullish. He also mentioned that PTCL trial will report within a few months and furthermore that a (presumably late-stage) bladder cancer trial will be started this year. This might certainly have an effect on Monday trading.
While it has looked like SPPI has changed its rhetoric, it continues to say that it actually sees potential synergies between Folotyn and Belinostat due to a different mechanism of action. Belinostat is in general differentiated by its clean safety profile, allowing combinations with various drugs.
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