Expert Financial Analysis and Reporting

Two Recent Cancer Vaccine Trial Failures Spurred this Report

On February 22, 2017, Argos reported that the Data Monitoring Committee for the phase 3 ADAPT trial of its cancer vaccine AGS-003 in combination with Sutent in metastatic renal cell carcinoma recommended that the trial should be discontinued. Following an interim analysis, the DMC concluded that there was almost no chance for success and it would be futile to continue. Argos has not provided further details on its plans, if any, for continuing AGS-003 development.

Also on February 22, Agenus disclosed that the Alliance for Clinical Trials in Oncology, a cooperative group of the National Cancer Institute, notified Agenus that an interim analysis on a phase 2 trial indicated that it would be futile to continue that trial. This 165 patient trial was started three years ago and combined Prophage with Avastin in treating recurrent glioblastoma. It was sponsored by the Alliance and not Agenus. The interim analysis suggested that the trial was unlikely to demonstrate that the combination would result in better survival than Avastin as a monotherapy.

Agenus said that it plans to continue development of Prophage in combination with some of its proprietary checkpoint inhibitors targeted at PD-1 and CTLA-4. This will most likely be in newly diagnosed glioblastoma rather than recurrent. This phase 2 trial discontinuation does not reduce my enthusiasm for Agenus and I continue to recommend purchase. I consider the recent stock weakness a buying opportunity.

These Trial Failures Add to Pessimism on Cancer Vaccines

There is a long, sad list of failures involving clinical trials of cancer vaccines that not surprisingly has created great skepticism about Northwest Biotherapeutics, Agenus and other companies engaged in trials involving cancer vaccines. The only notable exceptions have been the approval of Dendreon’s Provenge and Amgen’s Imlygic (neither of which have been meaningful commercial successes). This is perplexing to me because the approach makes so much sense. The technology is intended produce large numbers of T-cells specific to antigens expressed by a patient’s tumor. This is especially the case for an autologous vaccine like DCVax-L. In theory, the T-cells created by DCVax-L are against antigens specifically expressed by the tumor as opposed to antigens that are believed to appear on a tumor as is the case with most other cancer vaccine approaches.

I was recently chatting about cancer vaccine failures with a key opinion leader who summarized two widely discussed hypotheses as to these failures have been so pervasive. One theory is that the body sees a threat from the rapid creation of T-cells and downregulates them to prevent an auto-immune reaction. This is just the natural biology of the body’s regulation of the immune system at work. If this is the case, it could potentially be addressed by co-administering an agent that stimulates the immune system. Advocates of CAR-T therapy argue that producing a large number of T-cells aimed specifically at an antigen outside the body and then reinjecting them could overwhelm the auto-immune response and also be a solution.

A second hypothesis is that because the cancer vaccines are creating T-cells specific to the tumor, the tumor may already be producing PD-L1 against T-cells, a ligand that binds to and shuts down T-cells. If so, the checkpoint inhibitors like Opdivo and Keytruda would be a natural combination with cancer vaccines. They would prevent the PD-L1 expressed by the tumor from downregulating the T-cells created by the cancer vaccines. Indeed, NWBO is currently conducting a phase 2 trial in glioblastoma that combines DCVax-L and Opdivo. And as previously noted, Agenus plans to continue the development of Prophage in combination with checkpoint inhibitors.

My Thoughts on Cancer Vaccines

So what do I conclude? I have been listening to key opinion leaders for many years and have come to the conclusion that theoretical biology, unlike theoretical physics, is highly unpredictive of outcomes. I listen with respect to biological theories, but find them to be much more often incorrect than on the mark.

I would also note that there is encouraging evidence that DCVax-L as a monotherapy is effective in newly diagnosed glioblastoma. Indeed, the inventor of DCVax-L and lead investigator on the phase 3 trial has a high level of conviction that the trial will be successful. She is a distinguished investigator and has by far the most clinical experience of any person on Earth with DCVax-L. See my report DCVax-L Viewed Through the Eyes of Dr. Linda Liau, Lead Investigator on the Phase 3 Trial of DCVax-L

Moreover, a recent 8-K release by NWBO also provided encouraging data about 55 patients in the information arm and 32 pseudo-progressors who were treated in connection with the phase 3 trial, but according to proscribed enrollment criteria were not included in the trial. See my report 8-K Document Released Today Provides New and Very Interesting Data on Patients Treated with DCVax-L

Thoughts on the Stock Prices of Agenus and Northwest Biotherapeutics

So what is one to do with the stocks of NWBO and AGEN? At the current NWBO price of $0.38, it is fair to say that the market seems to be convinced that the phase 3 DCVax-L trial will fail. And yet, as can be seen from the two reports just cited, there is reason to hope the trial will succeed. This is truly an asymmetric investment opportunity as the upside in the chance of success could produce a $750 million to $1.5 billion market valuation based on looking at the market capitalizations of companies with successful phase 3 trials of cancer drugs addressing comparable cancer opportunities. This amounts to $5.00 to $10.00 per share.

So what is the downside for NWBO? This depends on the results in the phase 3 trial. I am guessing that we could see topline results at ASCO in May, 2017 or sometime thereafter. In the event the trial does not meet its primary endpoint of progression free survival or key secondary endpoint of overall survival, there are two broad possibilities. One is that the data is so discouraging that there is no hope for DCVax-L as a single agent. There would remain hope that a combination with Opdivo might succeed. Another possibility is that data in certain subsets of patients is so encouraging that under a Trump appointed FDA commissioner that this might result in approval in that subset. I hasten to add that this would be in complete contrast to long established practices of the FDA.

I conclude that for investors who can accept the risk of losing all of their investment against asymmetric upside that this is a good speculation. Even in the event that the trial results are so disastrous that they lead to the abandonment of DCVax-L as monotherapy, there might be promise for using DCVax-L in combination with Opdivo or other checkpoint modulators. However, funding development would be an enormous challenge given the weak financial status of NWBO. I own the stock, but it is a small part of my portfolio.

In regard to Agenus, my investment thesis is primarily based on the promise of the company’s checkpoint modulator technology. In my report on Agenus titled "Its Market Leading Position in Immuno-Oncology Makes it A Compelling Investment Story" I suggested that Agenus potentially could be acquired by a larger company to obtain its checkpoint modulator portfolio within the next three years at a price of as much as $25. Yes, I know the stock is now selling under $4.

Unlike NWBO, Prophage is not a major driver of my investment thinking on Agenus. However, this is not to say that I think there is no promise for the development of Prophage in combination with checkpoint modulators in newly diagnosed glioblastoma. I am intrigued with the potential. I think that the failure of Prophage in combination with Avastin in recurrent glioblastoma provides no insight as to whether Prophage might be successful in newly diagnosed glioblastoma. I am not sure if any drug can produce much of a positive outcome in recurrent glioblastoma which is an extremely aggressive type of cancer in which median overall survival is about 7 months. In newly diagnosed glioblastoma median overall survival is about 16 months.