Endocyte (NASDAQ:ECTY)
- EU recommends Conditional Approval for Vintafolide in Ovarian Cancer
- TARGET trail meets primary endpoint
- Stock soars from $15 to as high as $41 in pre-market
- Further milestones ahead
- Sign-up for our Free webinar detailing our ECYT trade
EU Recommends Conditional Approval for Vintafolide
On Friday ECYT reported that the EU's Committee for Medicinal Products for Human use (CHMP) issued a positive opinion recommending that the EU grant conditional approval for the marketing of Vintafoldie for platinum resistant ovarian cancer patients who have 100% folate receptor positive tumors (FR100% patients).
A conditional approval must be re-authorized every year until results from a confirmatory pivotal trial are completed and full approval is granted. ECYT and partner Merck (NYSE:MRK) are conducting the phase-3 PROCEED trial in FR100% platinum resistant ovarian cancer patients to confirm the results of the phase 2 study that was used as the basis for the EU conditional approval.
According to he company, there are approximately 15,000 cases of platinum resistant ovarian cancer across the EU and about 50% - 60% of those cases woudl be FR100%, providing an addressable market of approximately 7,500 to 9,000 patients per year.
Vintafolide is the first oncology drug that has a companion diagnostic test that can be used for patient selection.
TARGET Lung Cancer trial succeeds
On Friday ECYT also reported that the phase 2 TARGET trial on vintafolide in FR100% non-small cell lung cancer patients met its primary endpoint. The combination of vintafoldie plus docetaxel showed a progression free survival hazard ratio of 0.75 with a p-value of 0.0696 using a 1-sided test.
Note, a p-value 0.0696 is greater than 0.05 - so how does ECYT consider this a success? The pre-specified significance criteria according to the trial's statistical analysis plan was p<0.1using a 1-sided test. This endpoint is a low bar compared to the typical phase 3 significance criterion of p<0.05 using a two-sided test. Indeed a p<0.05 on a 2-sided test is 4 times more difficult to acheive that the bar set for the TARGET trial.
Does this mean the trial was not set up properly. No, not really. In an exploratory phase 2 trial, having a wider significance test is fine. It jsut means that, should ECYT and MRK decide to do a pahse 3 trial, they would have to enroll many more patients in each arm in order to hit the proper p < 0.05 using a 2-sided test.
ECYT Stock Soars
Take a look at the chart of ECYT for Friday: (data from TD Ameritrade - click to enlarge)
During the premarket, ECYT traded as high as $41 before settling back down to eventually close the day at $28.17. At Friday's closing price of $28.17 ECYT has a market capitalization of $1.02 Billion. This is certainly not overvalued for a company with a targeted oncology drug about to receive EU approval, and with other indications under development. The mian gist of Friday's news is that the EU regulators believe in ECYT's approach of using folate to target cancer cells, and that the therapy potentially works in several different forms of cancer (so far ovarian and non-small cell lung cancers).
Ron Ellis' Option Move In Perspective
Recall that last week we alerted readers to a bullish options move by ECYT CEO Ron Ellis. He exercised options that had 2-years of life left in them,by paying $152,800 to buy 80,000 shares. In that article we suggested that this move was bullish and that, at the very least, Ron Ellis had some inclination about how the EU decision would go due to the oral explanation held in February. It turns out, he also knew one other key piece of information. The fact that the statistical bar for the TARGET trial was set relatively low.
But why exactly would the CEO exercise the options ahead of these critical decisions? Because he thought the stock price would be moving up - by a lot. By exercising his options when he did, Ellis established his tax basis at the then current price of slightly less than $15 per share. Since he paid $1.91 per share, Ellis owes tax on the difference between this price and the stock price at the time he exercised. Had he waited until after the good news on Friday, his tax liability would have doubled when ECYT's share price doubled. Ellis made a smart move, and following him in to the trade as we did was also a smart move.
Further Milestones Ahead
ECYT will be hearing back from the data safety monitoring board sometime in Q2 regarding whether or not to enroll the remaining 100 patients in the PROCEED trial. If the DSMB recommends enrolling the additional patients it means that, based on the interim analysis, the trial is likely to succeed. The extra patients are being enrolled for the overall survival endpoint and to add statistical power (recall the discussion above regarding the phase 2 p-values). A recommendation to enroll the additional patient would be highly positive for ECYT because it signifies that when the PROCEED trial does complete, Vintafolide is likely to receive full approval in the EU and a US filing may soon follow.
In about 2 month the EU will formally decide whether or not to grant conditional approval for marketing of vintafolide. The CHMP vote is a recommendation to the EU medicince agency, but the agency still has to make a final decision. While it is highly anticipated that the EU will grant the conditional approval, it is nevertheless a positive for the stock, though largely factored in at this point.
This fall, at ESMO, ECYT willbe presenting the full data from the TARGET trial. We will get to see further detials about the trial including how the vintafolide monotherapy arm performed, and exactly what the Kaplan-Meier curve look like for the combination therapy arm VS the Docetaxel arm.
Having successfully traded our hedge position in ECYT through this double binary event, we currently have no position in ECYT.
Webinar Coming Soon - Stay Tuned
We're putting together a free webinar to walk through our ECYT trade. We're currently compiling our notes from this trade, and we will put together a 15 - 20 minute webinar that outlines exactly what we were thinking at every step along the way. It will be a chance to peek over our shoulders and see what we saw as this trade evolved from our initial buy, to the developing news, to our final exit (our options position gained 1500+%).
Space will be strictly limited. To save your spot for this webinar sign up below - and be sure to confirm your sign-up - only confirmed signs-up will get the webinar details.
