Image source: AstraZeneca.
AstraZeneca (AZN +0.00%) and Clovis Oncology (CLVS +0.00%) are racing to bring to market new therapies that battle late-stage lung cancer, but a recent revelation at Clovis Oncology gives AstraZeneca's recently approved Tagrisso an important edge.
Targeting an important unmet need
Despite advances over the past decade that are leading to fewer diagnosed cases, the five-year survival rate for lung cancer remains a disappointing 20%. As a result, lung cancer continues to account for one in three cancer deaths.
About 85% of all lung cancer patients are diagnosed with the non-small cell lung cancer (NSCLC) variation and typically, treatment is determined by the stage of the cancer and whether or not the patient has specific genetic mutations, such as a mutation to the epidermal growth factor receptor (EGFR), which is found in 10% to 15% of patients.
Unfortunately, there is no cure for lung cancer and that means that lung cancer patients can see their cancer return and worsen, but in cases where the patient is EGFR positive, AstraZeneca and Clovis Oncology's new drugs may offer hope because these drugs specifically target patients who have developed resistance to other EGFR targeting drugs due to the T790M mutation.
Delaying progression
Two-thirds of patients with NSCLC who are EGFR positive and see their disease progress are found to have the T790M mutation. In clinical trials, AstraZeneca's Tagrisso and Clovis Oncology's rociletinib were shown to control the disease.
In phase 2 trials, 59% of patients responded to AstraZeneca's Tagrisso with tumor shrinkage and in phase 1 trials, the overall response rate was 51% and the median duration of response was 12.4 months.
Because of these results, the FDA approved Tagrisso for use in this patient population on Nov. 13.
Clovis Oncology's rociletinib also delivered solid overall response rates in clinical trials, however, response rates were recently and significantly lowered from earlier findings.
Previously, Clovis Oncology reported a 53% overall response rate in patients treated across all dose levels of rociletinib. However, Clovis Oncology disclosed last week that it has given updated overall response rates to the FDA, which is currently evaluating rociletinib for approval.
Those updated response rates are about 20 percentage points lower than its prior findings, with the overall response rate in rociletinib's 500 mg dose falling to 28%, and the overall response rate in the 625 mg dose falling to 34%.
Shifts favor AstraZeneca
The revelation of rociletinib's lower response rates caused Clovis Oncology shares to lose two-thirds of their value because, at best, it raises doubt that the FDA will have adequate time to review the new data prior to its scheduled decision date of March 30, 2016, and at worst, it adds uncertainty to whether the agency will give rociletinib the green light.
If rociletinib's decision date is extended, then AstraZeneca will have more time to establish itself with oncologists as the go-to medicine for these patients. If rociletinib fails to win over regulators, then AstraZeneca could end up with the market all to itself.
Both of those scenarios could mean millions of dollars in additional revenue for AstraZeneca, which has previously argued that Tagrisso has the potential to generate $3 billion in sales per year.
Looking ahead
After Clovis Oncology reported the new findings, AstraZeneca's shares rallied. However, investors might not want to count Clovis Oncology out -- at least, not yet.
That's because rociletinib's data may be worse than hoped, but it's still better than pre-Tagrisso options, and while Tagrisso will work for some, it won't work for everyone.
If the FDA is satisfied that rociletinib's response rates are compelling enough to warrant approval, then it could still carve out a substantial niche worth hundreds of millions of dollars in annual sales.
Although the safest way to invest in this news is to be long the much larger and more diversified AstraZeneca, those with a penchant for risk taking may want to consider Clovis Oncology, too.
