It's been a depressing year for drugmakers, and clinical trial failures made 2016 particularly upsetting. Neurology has always been a difficult field, but this one was unusually nerve-wracking for Eli LIlly & Co. (NYSE: LLY), and Biogen (NASDAQ: BIIB).
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In their own special ways, Bristol-Myers Squibb (NYSE: BMY), Juno Therapeutics (NASDAQ: JUNO), Celldex Therapeutics (NASDAQ: CLDX), and Clovis Oncology (NASDAQ: CLVS) reminded us that cancer is hard. Before you get the impression this year's pipeline disasters were limited to two troublesome fields, let's not forget that Novavax (NASDAQ: NVAX) provided an expensive lesson about vaccine development.
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Compared with biotech start-ups with nothing to sell but their own shares, bigger players with profitable operations tend to emerge from clinical trial failures relatively unscathed. With this in mind, these seven unfortunate companies are loosely arranged according to the degree their pipeline meltdowns affected their forward outlooks.
Eli Lilly: Solanezumab for Alzheimer's disease
Alzheimer's disease might be the single largest source of frustration in biopharma. Many have tried and failed to develop the first effective treatment, and the price tag of these efforts has been enormous. Sadly, Eli Lilly has spent more than perhaps any other drugmaker to date, with nothing to show for its efforts outside of clinical failure list mentions.
Lilly's ill-fated solanezumab chalked up its third failure to outperform a placebo in a big phase 3 trial. Previous flops hinted there might be a chance it could significantly slow the rate of cognitive decline in patients just beginning to show symptoms of dementia.
Around $9 billion of the stock's market capitalization evaporated practically overnight, but it already appears on the mend. A 0% success rate for candidates that aim to change the pace of disease progression and two previous phase 3 blowups suggested that solanezumab's odds of success were so low that knee-jerk market response seemed largely overblown.
Bristol-Myers Squibb: Opdivo for lung cancer
Opdivo is the most successful new cancer therapy in recent memory, but after its phase 3 flop this summer, Icarus might be a more appropriate brand name. Opdivo prevents PD-L1, a protein often found on the surface of tumor cells, from triggering a shut-off switch on immune cells. Bristol-Myers Squibb's tale of hubris took a dark turn because it measured Opdivo against standard chemotherapy in newly diagnosed lung cancer patients expressing PD-L1 on just 5% or more of their tumor cells.
In August, Bristol informed the public that Opdivo failed, and the market immediately erased about $20 billion from the company's market capitalization. The stock dipped sharply again in Octoberwhen we learned that not only did it fail to significantly increase progression-free survival, but also the majority of patients receiving standard chemo survived 40% longer without evidence of increased disease activity than those treated with Opdivo.
Unfortunately, it seems Opdivo's main rival Keytruda from Merck will earn a first-line approval in certain lung cancer patients (albeit those with 50% or greater PD-L1 expression), and Opdivo won't. The loss is expected to lower Opdivo's peak annual sales by about $4 billion. The stock somewhat recovered following another expansion of Opdivo's label to include a form of head and neck cancer. There's also a chance it could eventually become part of a front-line lung cancer therapy in combination with Yervoy.
Biogen: Opicinumab (anti-lingo-1) for multiple sclerosis
This candidate was supposed to repair damaged myelin sheaths vital to basic nerve cell function. It thrilled investigators with hints it could be the first to actually heal multiple sclerosis patients, rather than simply slow the rate their immune system attacks their own nervous system. A phase 2 trial with a retinal disease suggested it significantly improved signal transmission speed between patients' eyeballs and the back of their brains, but there wasn't much evidence it actually repaired damaged myelin.
Repeating the success with multiple sclerosis patients would have upended the multiple sclerosis treatment paradigm. Unfortunately, opicinumab failed to show a significant benefit in regards to physical function, cognitive function, or disability.
Luckily for Biogen, the drug flopped in a relatively small phase 2 trial instead of a larger, more costly late-stage study. Nevertheless, the market knocked off about $9 billion of Biogen's market capitalization overnight, although it's since recovered those losses.
Celldex Therapeutics: Rintega for brain cancer
This clinical-stage biotech gave investors little to be happy about after New Year's Day. Before 2016's first quarter wrapped up, Celldex Therapeutics stock had fallen 74.8%, mostly because of a surprising phase 3 failure with its glioblastoma candidate, Rintega.
Difficult-to-treat patients receiving the oncolytic vaccine in phase 2 studies showed a terrific long-term survival benefit as compared with the historical data of patients treated with the decades-old standard treatment. Sadly for this underserved population, and Celldex investors, the patients in the phase 3 trial control group fared far better than historical data suggested was possible.
Luckily, the Celldex pipeline has another candidate entirely unrelated to Rintega in a pivotal trial at the moment, and several more winding their way toward the finish line. The stock remains depressed, but if any of its clinical-stage candidates succeed, it could become the single best value pick in biotech.
Juno Therapeutics: JCAR015 for leukemia
Engineering immune cells to recognize and attack cancer has proved more effective than anyone could have hoped. Unfortunately for Juno Therapeutics its lead candidate, JCAR015, might be too effective for patients with acute lymphoblastic leukemia (ALL) who have exhausted existing treatment options.
Any form of leukemia is bad, but ALL is particularly difficult to treat. Juno began 2016 on pace to submit an application for JCAR015 in ALL to the FDA in 2017. It pushed the timeline back in July, when the FDA put its pivotal trial in on hold following two patient deaths. Juno pegged a specific chemo pretreatment as the culprit, and the agency allowed the trial to continue with an alternative.
In November, Juno announced that it halted the trial again after brain swelling led to two more patients' deaths. The side effect is widely believed to be due to an overly effective immune response to the patients' disease. Whatever the reason, though, it now seems unlikely regulators will accept the candidate's risk-to-benefit profile.
A lesser start-up might have buckled following a lead-candidate blowup, but Juno Therapeutics has no shortage of impressive candidates in clinical-stage development. The market has erased about one-third of the biotech's market cap since the mishap, or around $1 billion. A win with JCAR017 in patients with the most common form of leukemia that relapsed following treatment with Imbruvica, to name just one of several pipeline hopefuls, could help it recover these losses and more.
Clovis Oncology: Rociletinib for lung cancer
Clovis Oncology earns a spot on this year's worst failure list because of shareholder value-sapping decisions surrounding its former lead candidate. Investors lost a bundle in 2015, when the company had to revise the percentage of patients exhibiting tumor reductions following rociletinib treatment from about 59% to between 28% and 34%, depending on the dosage.
With Tagrisso from AstraZeneca barreling toward an approval in the same genetically defined lung cancer population with much better tumor reduction data, Clovis should have shuttered its rociletinib lung cancer program immediately to divert existing resources toward its next candidate in line, rucaparib. Instead, it wasted a great deal of time and capital submitting applications to U.S. and EU regulators based on interim data from ongoing studies.
In April, the FDA refused to approve rociletinib without more data, as expected. This probably worked in investors' favor, as its launch probably would have flopped, with Tagrisso already available.
Although still far below 2015 highs, the stock has rebounded this year on the strength of its ovarian cancer candidate, rucaparib. Given management's inefficient use of available capital in the recent past, though, I wouldn't touch this biotech stock with a 10-foot pole.
Novavax: RSV F Vaccine
The most severe clinical-stage meltdown of 2016 occurred in a field slightly less treacherous than oncology: infectious-disease vaccination. Enthusiastic investors drove Novavax's market capitalization up around $2.25 billion in anticipation of results from an 11,856-patient phase 3 trial with its RSV F vaccine that were a huge disappointment.
The market was fizzing ahead of the phase 3 readout, because phase 2 results suggested the candidate was the first experimental vaccine to significantly decrease respiratory syncytial virus infection rates versus a placebo, albeit by a very slim margin. Although relatively benign for most of us, the virus is a leading cause of hospitalization for infants and older adults in the U.S., and if successful might generate over $6 billion in annual sales.
The phase 3 results quickly dashed hopes of a multibillion-dollar blockbuster. A slightly higher percentage of older adults in the vaccine group became infected than in the placebo group, and about $1.9 billion of Novavax's market capitalization evaporated.
There's a shred of hope an ongoing phase 3 study to test for maternal immunization of infants might allow investors to recover some losses. Another failure, though, would be catastrophic. A lack of middle to late clinical-stage candidates means it would take years of large expensive trials to approach the finish line again.
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