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Expert Financial Analysis and Reporting

Initial Report (CRIS, $1.92)

Summary and Overview

Curis has demonstrated impressive drug development capability in the oncology space. However, it has followed a policy of licensing drugs early in development and passing development costs and risks on to the licensor. This de-risked the drug development for Curis, but at the cost of giving up significant economics. For example, its lead drug in development, GDC-0449, was licensed to Genentech and Curis will receive nominal royalties of perhaps 5+% on sales if the drug is successfully commercialized.

The stock was recently pummeled with a 70% loss when Genentech announced equivocal results with GDC-0449 in an ovarian cancer study. This was an over reaction. Results from a much more meaningful pivotal phase II trial in inoperable basal cell carcinoma should be released in 1H, 2011. This deadly cancer has no effective therapy and if the phase II results are as good as those of an earlier phase I study, it could lead to an NDA filing in late 2011 and approval in 2012. The worldwide addressable market for this indication is estimated as $1 billion to $1.5 billion. Expressed in Curis royalties, the addressable market is $50+ to $75+ million. Success in this trial could trigger a dramatic move in the stock. Genentech is also doing a small 50 patient trial in operable basal cell carcinoma to assess the potential roll of GDC-0449 as an adjunct to surgery. The use of GDC-0449 in inoperable basal cell carcinoma targets perhaps 10,000 to 15,000 patients in the US. Its use in operable basal cell carcinoma could address a population of 600,000.


The company’s internal effort is now focused on the new drug CUCD-101. This is an elegant molecule that targets three cancer targets at the same time, HDAC, EGFR and Her2. Drugs that individually address one of these targets include Tarceva, Erbitux, Herceptin, Tykerb and SAHA and collectively record around $2 to $ 3 billion of sales. There is considerable elegance in the design of this molecule which is in phase I development. This drug should be closely watched as it represents a meaningfully differentiated and potentially more effective class of drugs. Perhaps, there will be some evidence of efficacy in 2011 and much more in 2012.


The company has cash on hand of $44 million which it believes can carry it into 2H, 2012. The quarterly burn rate is about $6 to $7 million. Curis currently has a reasonable cash buffer and at this price they are not contemplating financing for some time. However, they plan to fund development of CUCC-101 much further into development than has been the case with their earlier drugs. I think that they will need to build a war chest and there is the potential for a financing following the results from the inoperable basal cell carcinoma study in 1H, 2011, assuming that they are positive.


GDC-0449; Awaiting Results in Inoperable Basal Cell Carcinoma

Investor focus on Curis has been on the development of GDC-0449. This is Curis’ most advanced drug that targets inhibition of the “hedgehog” pathway, a promising target for oncology drug developers. It was licensed to Genentech several years ago and Genentech has done a very broad development program, far beyond any that Curis might have been capable of financing.


The first cancer indication that Genentech reported results for was in ovarian cancer. GDC-0449 showed a signal of efficacy in treating this cancer as the median time to disease progression in the ovarian cancer trial was 7.5 months versus 5.8 months in the control group. While acknowledging that there was a signal of activity, Genentech felt that it was not sufficient to warrant further study at this time. Curis’s stock dropped nearly 70% on this news.


The stock reaction was overdone. The most important trial of GDC-0449 is one that is now underway in basal cell carcinoma patients whose disease is inoperable because of the size or location of the tumor or because the tumor has metastasized. The hedgehog pathway is believed to be the most important mechanism for growth of this tumor. A phase I trial in this setting was very encouraging. Of the 33 patients in the trial, 2 (6.1%) achieved complete response, 16 (48.5%) achieved a partial response, 11 (35.5%) achieved stable disease. Only 4 (13.1%) patients had no response. These were highly impressive results as few drugs show even minimal efficacy, say 10% to 15% response, in this disease. In addition, the two complete responses were dramatic.


Based on this very promising phase I data, Genentech began a phase II trial in 1Q, 2009 that enrolled the same type of patients as the phase I trial and which completed enrollment in 1Q, 2010. This is an open label, 100 patient trial with GDC-0449 used as a single agent. The primary endpoint of overall response rate is the same as in the phase I trial. Secondary endpoints are overall survival, progression free survival and adverse event tracking. Communication with the FDA has led Genentech to indicate that if this trial is successful, it could be the basis of an NDA submission as there is no therapy for this type of cancer. Results are expected in 1H, 2011 and a regulatory submission could be made in 2H, 2011 if the results are reasonably close to those of the phase I trial.


The commercial opportunity for this indication is meaningful. It is estimated that of the 1,000,000 new cases of basal cell carcinoma each year, about 10,000 to 15,000 fall into the category of being inoperable because they are too advanced (even though they may not have metastasized) or have metastasized. GDC-0449 would be quickly adopted by physicians because there is no other therapy. The product would probably be priced at $50,000 per year in line with many new cancer therapies, but not at the $93,000 price tag of Provenge. At $50,000 per year, the addressable market in the US would be $500 to $750 million. The rest of world market would be about the same size. Each $100 million of revenues recorded by Genentech would translate into $5 million of royalties for Curis. Hence the worldwide addressable market for Curis’ share of the economic return would be $50 to $75 million.


In 4Q, 2010, Genentech began a phase II trial in 50 patients with operable basal cell carcinoma. This is an open label trial that that will involve two cohorts, in each of which patients will be given 150 mg of GDC-0449 daily for 12 weeks. The primary endpoint for cohort 1 is the rate of histological clearance of the target BCC lesions at the time of tumor excision. The primary endpoint for cohort 2 is the rate of durable complete clearance of target BCC lesions at the time of excision. This phase II trial addresses a much more significant patient population of perhaps 600,000 patients in the opinion of Genentech. There is no guidance for the timing of release of top line data, but it could be 1H, 2012.


The NIH is also conducting 14 different trials involving GDC-0449 in a broad number of indications. The NIH holds information on clinical results very close to the vest until they are disclosed in a medical conference so that there is little information on when data from some of these trials might be forthcoming, let alone what the results might be. There could be data on phase I trial in pediatric medulloblastoma, pancreatic cancer and small cell lung cancer in 1Q, 2011.


CUDC-101 Could Open Investors Eyes

Investor focus as not yet shifted to this drug due to its early stage of development. However, if the hypothesis underlying the development of this agent is substantiated in clinical trials, it has the potential of capturing the imagination of Wall Street.


CUDC-101 targets the proven cancer targets, HDAC, EGFR and Her2 with one molecule. It is specifically designed to optimize the potency and synergy of the individual targets as it is a potent inhibitor of each. In vitro, it about 5-10 times more potent than SAHA in inhibiting HDAC; 10 – 20 times more potent than erlotinib (Tarceva) in terms of EGFR inhibition; and 10-times more potent than erlotinib and similar to lapatinib (Tykerb) in terms of HER2 inhibition.


There is initial skepticism to this approach because past drug development efforts have also touted efficacy of a single molecule against multiple targets. However, experience showed that kinase inhibitors tend to be promiscuous and generally affect multiple targets. The problem was that the drug effects were not uniform against the targets so that the drug in reality was optimized for only one target as the pharmacokinetics were only effective for one target. CUCD-101 is optimized for HDAC, EGFR and to a lesser extent Her2. The literature has suggested that inhibition of one of these important pathways is overcome in time by a cancer cell through using another pathway to proliferate. This "three molecule in one" approach has interesting hypothetical appeal. Investors could be intrigued if this molecule show promising clinical data.


A phase I dose escalation study in 25 patients was completed in Q2, 2010. This showed that pharmacokinetics were dose proportional and that the maximum tolerated does was 275 mg/mm2. The therapeutic window was 150 mg/mm2 to 275 mg/mm2.


These studies are performed in gravely ill patients who have exhausted their therapeutic options and trial with an unproven experimental drug is their last hope. The studies are done to determine safety and dose and any indications of biological activity are only suggestive of activity. For CUDC-101, the signals of biological activity were:

  1. A conformed partial response of approximately a 55% reduction in lesion size for a gastric cancer patients dosed at 275 mg/ mm2 given 7 cycles of therapy over 14 weeks,
  2. A 20% regression in a head and neck cancer patient dosed at 275 mg/mm2 for 2 cycles of treatment,
  3. A mixed response in which there was a reduction in size of one lesion in head and neck cancer patient dosed at 150mg/mm2, and
  4. Stable disease of almost three months in a breast cancer patient dosed at 150 mg/mm2.


The dose-limiting toxicity was transient grade 2 elevated creatinine levels that were observed at 300mg/mm2. Doses up 275 mg/mm2 were well tolerated. The most frequent biomarkers of activity were:

  1. Dry skin indicative of EGFR inhibition at dose levels below 275 mg/mm2
  2. Grade 1-2 rash reported in patients dosed at 275 mg/mm2
  3. Hemoglobin changes and hyperglycemia indicative of HDAC inhibition
  4. Trend for reduced EGFR phosphorylation in skin biopsies
  5. One patient with decrease in Her2 protein in tumor biopsy (75 mg/mm2)


A phase Ib expansion study was initiated in August of 2010. About 19 patients of a targeted 50 have been enrolled. The intention is to have 10 patients each with gastric, head and neck, breast, liver and non small cell lung cancer tumor types. The primary objective is to compare the safety and tolerability of CUDC-101 at one of two dosing types: (1) 5x week with one week off or (2) 3x week for three weeks with one week off.


The secondary objectives include:

  1. Evaluating the efficacy of CUDC-101 in subjects with advanced and refractory solid tumors,
  2. Assessing the pharmacokinetics of CUDC-101 in this patient population, and
  3. Evaluating the pharmacodynamic biomarkers of CUDC-101 activity.


The company is also planning a phase I head and neck clinical trial which would be a combination trial involving escalating doses of CUCD-101 with concurrent fixed doses of radiation and cisplatin, The primary endpoint is to establish the maximum tolerated dose of CUCD-101 and to assess safety and tolerability of CUDC-101 in combination with radiation and cisplatin. The secondary endpoints are to evaluate the efficacy of the combination, assess the pharmacokinetics of CUCC-101 and evaluate tumor markers associated with the combination.


Debio 0932 Out-licensed to Debiopharm

Curis licensed worldwide rights to its Hsp 90 inhibitor in August of 2009 to Debiopharm Group in August of 2009; Debiopharm renamed the compound Debio 0932. The rationale for the licensing was that the Hsp 90 field is crowded with drug candidates. Curis felt that it was better to transfer development and oversight to another company and focus its attention on the more differentiated CUCD-101. Early payments from the licensing agreement will help fund CUDC-101 development. Total potential milestone payments are $90 million and Curis will receive an undisclosed royalty on commercial sales, probably 5+%. Debiopharm enrolled the first patient in April of 2010.


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