In Focus
BB Biotech
June 19, 2014
Bellevue Investments
ASCO Conference 2014: New promising treatment modalities for cancer
Felicia Flanigan
Portfolio Manager
BB Biotech
Immunotherapies attracted plenty of attention at this
year’s meeting of the American Society for Clinical Oncology (ASCO). Several of the companies BB Biotech is invested in presented strong data on their immunotherapy
research projects at the conference.
ASCO’s annual meeting in June is the preeminent cancer
research conference for scientists, medical practitioners
and investors alike. Pharmaceutical and biotech companies present the
latest data on ongoing clinical studies to an expert audience and invite
discussion on novel methods of treatment. Sometimes data is published
up to two weeks before the conference begins. These announcements
can bring some movement into the share prices of the participating
firms before and during the conference. As in past years, BB Biotech’s
Management Team diligently followed the major topics at the 2014
ASCO meeting. A commentary on the clinical data presented by firms in
its investment portfolio is provided below.
Immunotherapies: A cancer killer
The main topic of discussion at the ASCO 2014 was the progress being
made in the field of immunotherapy, a treatment method in which the
body’s own defenses are activated to detect and destroy tumor cells. Immune cells called T-cells play a key role in this research. One goal of immunotherapy is to block specific molecules that allow cancer cells to
escape detection by the body’s immune system. Checkpoint inhibitors
stop this interaction by blocking certain mechanisms of immune suppression.
Target structures for a new class of drugs used in immunotherapy are
the T-cell receptor PD-1 and its associated ligands PD-L1 and PD-L2. PD-1
is expressed directly in tumor cells while PD-L1 and PD-L2 are expressed
on the surface of tumor cells. Immuno-therapeutic agents are also being
tested in late-stage clinical trials in patients with black mole cancer (melanoma) and lung cancer, i.e., in cancers with low cure rates to date. The
principal movers here are the pharma companies. Merck & Co and Bristol-Myers Squibb are focusing their efforts on PD-1 while Roche and its
subsidiary Genentech are targeting its associated PD-L1 ligand. Estimates of the future market potential of immunotherapies range in high
double-digit billions. The most likely scenario, according to the current
mainstream forecast, is that immunotherapies that provoke an immune
response will be administered in combination with classic chemicalbased treatment methods.
Gilead Sciences on the verge of a breakthrough
Gilead Sciences, a long-standing core position in our investment portfolio, is about to receive marketing approval for its first cancer drug. Idelalisib is a PI3K delta inhibitor that should soon be approved as a treatment for chronic lymphatic leukemia (CLL), the most common form of
blood cancer in the Western world, and non-Hodgkin lymphoma. Trial
results announced earlier this year demonstrated that Idelalisib achieved extraordinarily high response rates in patients. The efficacy was so
impressive that Gilead submitted an application for regulatory approval
even before all the data from the Phase III study had been collected.
Gilead presented new interim data from a Phase II study at the ASCO
2014. In this study Idelalisib administered in combination with already
approved Rituxan showed a significant improvement in progressionfree survival in relapsed CLL patients as well as higher overall response
rates compared to the Rituxan/placebo arm.
Idelalisib has already qualified for the FDA’s accelerated approval
process in this indication. A decision on this filing should be issued by
August 6 and a decision for the non-Hodgkin lymphoma indication is
expected to follow in September. The outcome of these two regulatory decisions will have an impact on Gilead’s share price. Assuming
the FDA approves the drug, Gilead will have proven that it is also capable of breakthrough research results in oncology, in addition to its
already market-leading position in HIV medicines and hepatitis C
treatments. Three other anti-cancer agents are in clinical development. It is also feasible that Gilead could strengthen its footing in
oncology by making more acquisitions.
Pharmacyclics: Expanding its application spectrum
Regulatory approval of Imbruvica for patients with mantle cell lymphoma and chronic lymphatic leukemia gave a big boost to Pharmacyclics’ share price last year. Pharmacyclics splits the drug’s sales revenues with Jansen, a subsidiary of Johnson & Johnson. Its shares fell
sharply in the wake of the general market correction in March. This
sell-off was accompanied by some initial critical comments by analysts who questioned whether the billion dollar sales potential that
had been projected for the drug would still be realistic if competing
products such as Idelalisib entered the market.
Pharmacyclics intends to broaden the spectrum of application for its
lead product to counter this risk. At the ASCO 2014 it presented Phase
III data that demonstrated a longer survival rate and longer progression-free survival compared to standard therapy. This new data on
Imbruvica’s efficacy could persuade doctors who have so far been
reluctant to prescribe the drug based on the previous efficacy data to
change their minds. Moreover, Pharmacyclics is seeking to have Imbruvica approved as a first-line treatment for CLL and for newly diagnosed patients. The next publication date for clinical results is scheduled for 2015.
Incyte and Ariad on an uptrend
Incyte made a splash with its JAK inhibitor Jakafi, which has already
been approved as a treatment for myelofibrosis, a bone marrow disorder. At the ASCO 2014 meeting Incyte presented convincing efficacy data for Jakafi in the treatment of the bone marrow disorder polycythemia vera. This data has obviously increased the likelihood that
Incyte will also receive marketing authorization for this indication
early in 2015. We estimate global peak sales in these two areas combined could amount to as much as USD 2 billion a year. Furthermore,
Jakafi has produced promising efficacy data in a combination therapy trial with Xeloda in pancreatic cancer. This drug prevents the enzyme IDO-1 from blocking the body’s immune system cells. A clinical
breakthrough in solid tumors would further increase Jakafi’s sales
potential. We anticipate sustained high growth potential for Incyte.
We also note that the firm is widely considered to be a takeover candidate.
Reports of side effects in patients taking Ariad Pharma’s approved
leukemia drug Iclusig caused the company’s shares to plunge at the
end of 2013. At ASCO, though, Ariad Pharma reported some positive
clinical data. Half of the patients enrolled in a trial of Iclusig in gastrointestinal stromal tumors showed an improvement. The picture for
Clovis Oncology, on the other hand, was mixed. Its shares came under pressure during the ASCO meeting after strong data on a competing product from AstraZeneca was released. The drug produced be-
In Focus
BB Biotech
June 19, 2014
Bellevue Investments
nefits in 65% of all patients, which was even better than the 58%
clinical benefit rate Clovis achieved with its drug candidate. Clovis’
drug also led to increased blood glucose levels in some of the patients, which caused some opinions to shift in favor of AstraZeneca’s
pipeline candidate. We believe it is still too early to make a final call
and that both candidates are still neck and neck in the race to achieve a better efficacy profile.
BB Biotech’s portfolio strategy
After the sharp sell-offs in the months of March and April most biotech stocks have started to trend up again. Advancing stocks included companies that are active in oncology and that have recently
reported positive newsflow on this front. BB Biotech’s investment
strategy is designed to benefit from these developments. Accounting for 34% of portfolio investments as of March 31, 2014, oncology is
by far the largest single therapeutic area in the portfolio, followed by
rare diseases (orphan diseases) and infectious diseases. In all, there
are twelve companies in the portfolio with cancer drugs at different
stages of development. Three of the five core shareholdings – Celgene, Gilead Sciences and Incyte – are active in oncology. With our balanced portfolio of companies, consisting of a mix of profitable industry leaders as core investments and mid-sized companies with
late-stage product candidates, BB Biotech’s investment portfolio has
an optimal risk/reward profile and is well positioned to deliver above- average returns driven by the innovation skills and growth potential of the best players in the biotech sector.
SHARE FACTS
Board of Directors
r. Erich Hunziker (Chairman)
D
Dr. Clive A. Meanwell
Prof. Dr. Dr. Klaus Strein
Management
Bellevue Asset Management
Legal structure
Incorporated company
Foundation
November 9, 1993
Share type
Registered shares
Nominal value
CHF 1
Share structure
11.85 mn shares
Listing
Swiss Stock Exchange
German Stock Exchange
Italian Stock Exchange
ISIN number
CH0038389992
Security number (CH)
3 838 999
WKN (D/I)
A0NFN3
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Phone +41 44 267 72 66
E-Mail ssc@bellevue.ch
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Phone +41 44 267 67 26
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Phone +41 44 267 67 14
E-Mail mga@bellevue.ch
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DISCLAIMER
This material is not intended as an offer or solicitation for the purchase or sale of shares of BB Biotech.
Opinions and estimates constitute the judgement of Bellevue Asset Management and BB Biotech and are
subject to change without notice. Past performance is not indicative of future results. This material may
not be distributed within the United States or any other country where it may violate applicable law. Information herein is believed to be reliable, but Bellevue Asset Management and BB Biotech do not guarantee
its completeness or accuracy.
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