Expert Financial Analysis and Reporting

Report Overview

This is the third part of the series of reports that I have written on Kite Pharmaceuticals. I have chosen to publish smaller, more digestible parts of an extensive research analysis on Kite instead of one huge report. I hope this will make it easier for subscribers to work their way through what is frankly a massive amount of information. This report is only for background and does not have an investment opinion.

Kite has strongly indicated to investors that its ZUMA-1 trial could lead to regulatory approval of its lead product KTE-C19 by mid-2017. Kite is a young company and the ZUMA-1 trial is the first that it has conducted in humans. Kite filed an IND for KTE-C19 in December 2014. It began the trial in May 2015 and completed enrollment in the phase 2 component on July 7, 2016.

According to ClinTrials.gov the trial is scheduled to complete in March 2017. However, Kite states that it is highly likely that the trial will reach its primary endpoint following an interim efficacy look that should occur any day now. Kite believes it can then file a BLA by yearend 2016 and thinks that approval could be obtained in mid-2017. In this and upcoming notes, I will lay out for you why this is the most optimistic of possible scenarios.

If you are unfamiliar with some of the terms and acronyms you come across in this note, please refer to the glossary that I recently published.

ZUMA-1 Trial Design Has Two Components

ZUMA-1 has a phase 1 and a phase 2 component. Phase 1 was designed to enroll six or more patients with r/r DLBCL. The primary objective was to determine how side effects compared to an earlier trial conducted by NCI with a CAR-T product comparable to KTE-C19. The data from the NCI trial was critical inb the design of ZUMA-1. Side effects associated with both the KTE-C19 cell infusion and the chemotherapy pre-conditioning regimen it is used with can be life threatening. FDA apparently wanted to gain some confidence from phase 1 that the side effect profile was understood so that it could be dealt with. This was the gating factor to begin the more extensive phase 2 part of the trial. This hurdle was passed and the phase 2 trial began enrollment on November 2, 2015 and completed enrollment on July 7, 2016.

Why Chemotherapy Pre-Conditioning is Necessary

In speaking with investors, I have found some who thought that ZUMA-1 is a trial in which just the KTE-C19 cells are infused, but it is more than this. Investigators at NCI found that before infusing CAR-T cells that it was necessary to use a chemotherapy pre-conditioning regimen to destroy much of the natural T-cell population. This allowed the CAR-T cells to expand much more rapidly after they are infused. The chemotherapy regimen used in ZUMA-1 for this purpose is a combination of the chemotherapy drugs fludarabine and cyclophosphamide which are highly toxic to T-cells. In order to manage the life threatening side effects resulting from both chemotherapy and KTE-C19 cell infusion, patients are hospitalized after the chemotherapy and before cell infusion for about a week in the trial.

NCI found that increasing the pre-conditioning chemotherapy dosage correlates with clinical responses to subsequent CAR-T cell infusion.  There was a clear link between depletion of the natural T-cell population and CAR- T cell expansion in pre-clinical models.  The depth and duration of the depletion in preclinical models also correlated with anti-tumor activity of the CAR-T cells. This T-cell depletion may work by eradicating cytokine sinks for the transferred cells, eliminating T regulatory cells, and enhancing antigen presenting cell activation.

Cyclophosphamide and fludarabine are very potent drugs for reducing T-cell populations. Patient treatment starts with a chemotherapy pre-conditioning program in which 30 mg/m² of fludaribine and 500 mg/m² of cyclophosphamide are given daily for three consecutive days. The patient is then given two days of rest, hospitalized and given a single infusion of KTE-C19 with a target dose of 2 x 10⁶ cells/kg. The period of hospitalization is around one week

Phase 2 Details

Phase 2 is an open label trial without a control arm. It will enroll about 112 patients in two separate cohorts. Cohort 1 will enroll 72 adults with r/r DLBCL. Cohort 2 will enroll up to 40 adults with r/r PMBCL and TFL

Interpreting Phase 2 Results of ZUMA-1

The Primary Endpoint is Complete Response

The primary endpoint will be complete response (CR) rate which measures the degree of tumor shrinkage. These B-cell tumors are metastasized throughout the body. In order to assess tumor shrinkage, investigators measure the size of a few of the largest tumor masses before treatment and then re-measure as treatment progresses. A complete response (CR) is defined as the absence of any sign of the tumor at these locations with the exception of scar tissue. A partial response (PR) is defined as shrinkage of >50% of the tumor mass. The sum of CRs and PRs is called the objective response rate (ORR). A CR does not necessarily mean that the tumor has been eradicated as there may remain small metastases. However, CRs and PRs confer therapeutic benefit and most physicians believe that just keeping the tumor mass stable (SD) is important therapeutically.

The study is designed based on the assumption that the CR for the treated patient group will be 40% or more. Because this is an open label study with no control group the CR for standard of care is based on historical studies. Kite believes that for current treatment options that CR is less than 20% and median overall survival is 4 to 5 months. Kite states that if CR is 40+% and median overall survival is 6+ months that KTE-C19 could be approved on this interim analysis. Kite would then expect to file a BLA by yearend 2016 and would expect approval in mid-2017.

Will the FDA Approve KTE-C19 on the Basis of Complete Response at an Interim Look?

It is important to understand that the outcomes measures have been set up by Kite, not the FDA. While this was certainly done in consultation with KOLs and the FDA, it does not guarantee that the drug will be approved if this primary endpoint is reached. The FDA will have the ultimate say on whether the drug should be approved and will want to look at the breadth of data created in the trial and in particular duration of response, the side effect profile and median overall survival (if available). It is quite reasonable to think that they may want the trial to run through the scheduled March 2017 ending date and not be stopped at an interim point.

Note that the primary endpoint of CR is a measure of tumor shrinkage. It is a surrogate marker that is not as solid as median overall survival or median progression free survival. The phase 2 ZUMA-1 trial design is more often used to gather data to inform the design of a phase 3 trial. However, the FDA has approved the checkpoint modulators Opdivo and Keytruda for certain cancer indications based on similar trials. Secondary endpoints include duration of response, progression free survival, overall survival and incidence of adverse events and clinically significant changes in safety lab values. However, it may be that the data at the interim look in 50 r/r DLBCL patients may not be mature enough to assess some of these endpoints.

SCHOLAR-1 Provides More Insight on Expected Complete Responses for Patients Treated with Standard of Care

In order to get a better insight on the CR rate that can be expected with standard of care, Kite performed a meta-analysis. This was based on outcomes in various, completed trials in chemorefractory DLBCL; this meta-analysis was called SCHOLAR-1. It was a systematic, multi-institutional analysis of outcomes from 635 patients who had been treated with standard of care for chemorefractory DLBCL. Data was obtained from phase 3 studies of the Canadian Cancer Trials Group (CCTG LY.12 Study) and LYSARC (CORAL Study) and also large retrospective databases from the MD Anderson Cancer Center, Mayo Clinic and University of Iowa Specialized Programs of Research Excellence (SPORE). Chemorefractory disease was defined as disease that does not respond to treatment with a chemotherapy based regimen or has relapsed less than 12 months after autologous stem cell transplant (ASCT). This corresponds to the entry criteria for patients enrolled in ZUMA-1.

The study found that median overall survival was 6.6 months and consistent across subgroups including refractory status, stage of disease and line of therapy. Overall response rate was 26% with only 8% achieving a complete response. Remember that the phase 2 component of ZUMA-1 is designed to show a treatment difference based on the assumption that standard of care results in a CR of 20%. SCHOLAR-1 suggests that CR is more likely a lesser 8%. This data is quite supportive of ZUMA-1 and will be carefully considered by the FDA as it assesses the outcomes in the single arm ZUMA-1 trial.

The Role of the DSMB 

An independent Data Safety Monitoring Board (DSMB) will meet two times during the phase 2 portion of the study. They can meet at any time, but an interim review was scheduled to occur three months after 20 patients enrolled in the r/r DLBCL cohort received an infusion. The second interim review will occur after 50 r/r DLBCL patients have gone 3 months since the infusion. The DSMB will obviously assess safety and will also calculate whether the trial at this second interim look has met the primary endpoint of a 40+% CR. If this is achieved, the DSMB will notify Kite and management has said that it will file a BLA by yearend 2016.

The primary analysis of the r/r DLBCL cohort for the full trial will occur after all subjects have been assessed for response 6 months after their KTE-C19 cell infusion. According to ClinTrials.gov, this will be in March 2017. It seems to me that the FDA would want to see the full results on the 112 patients before granting approval because duration of response will be so critical to judging the value of this treatment. Kite has said that duration of response should be 6+ months. I wonder if the data on duration of response will be convincing after looking at just 50 patients.

KTE-C19 ZUMA-1 Phase 1 Experience Based on Non-Kite Source as of August 14, 2015

Kite completed the phase 1 portion of ZUMA-1 in 2015. I was able to obtain information on the results from a source knowledgeable about the trial who was not associated with Kite as of August 14, 2015. They provided much more detail about phase 1 than Kite and so I will start there. At that time, there were 10 subjects screened, 8 were enrolled, of whom 6 were treated with KTE-C19. The 6 subjects enrolled and treated with KTE-C19 had r/r DLBCL that was either refractory to their last line of treatment or who had relapsed within 12 months of autologous stem cell transplant. Remember that the primary objective of the phase 1 component was to assess safety issues.

One of the six patients died. They were included in the safety analysis, but obviously not efficacy. The median follow-up time was 9.5 weeks after infusion. Treatment-emergent adverse events were defined as any adverse event that began on or after the start date of conditioning chemotherapy. There are different side effects associated with chemotherapy pre-conditioning and cell infusion. Some can be grade 4 life threatening side effects.

Prominent side effects associated with chemotherapy are suppression of white blood cells (lymphopenia, leukopenia and neutropenia) and suppression of platelets (thrombocytopenia). Cytokine release syndrome is specifically related to cell infusion. Among CRS related side effects are hypotension, cardiac failure, hypoxia, metabolic acidosis and acute kidney injury. Neurotoxicity is also related to cell infusion. Among neurotoxicity side effects are encephalopathy (swelling of the brain), aphasia (speech and communication impairment), tremor, somnolence, agitation, delirium and restlessness.

Including the pre-conditioning chemotherapy regimen and cell infusion, all 6 patients (100%) experienced side effects of grade 3 or higher. There were four grade 4 toxicities and 26 grade 3 toxicities in these 6 patients. The four grade 4 toxicities included one case of febrile neutropenia and one of thrombocytopenia that were almost certainly due to the chemotherapy pre-conditioning regimen. There was one grade 4 toxicity of encephalopathy (due to neurotoxicity) and one kidney injury (due to CRS) that were attributable to the cell infusion. In terms of grade 3 there were three cases of febrile neutropenia, two encephalopathy, two hypoxia and two somnolence. In addition, there were 17 other single occurring grade 3 side effects.

On an individual patient basis, the incidence of side effects ranged on the low end from one patient who had only grade 3 fatigue. The most severely affected patient had multiple side effects; these included grade 4 encephalopathy that lasted 16 days and required intubation, grade 4 acute kidney injury that lasted 11 days, grade 3 hypotension that lasted 17 days, grade 3 metabolic acidosis that lasted 16 days and grade 3 acute systolic heart failure that lasted 15 days.

One patient was included in the safety analysis set who died on study day 16 following KTE-C19 infusion due to an intracranial hemorrhage. This patient also had sepsis resulting from a pseudomonas infection which may have been caused or exacerbated by the chemotherapy. From a layman’s standpoint, I would be curious to know why the investigator dismissed any link between encephalopathy and intracranial hemorrhage.

All 6 subjects treated in the Phase 1 portion of ZUMA-1 received medications to ameliorate their CRS and/or neurotoxicity events.  Four subjects received both tocilizumab and steroids, and two received tocilizumab only.

KTE-C19 ZUMA-1 Phase 1 Experience Described By Kite as of June 6, 2016

Kite presented data on June 6, 2016 that updated results from ZUMA-1. In this section, I compare results as described by Kite with those provided by my non-Kite source. Kite said that a total of 7 patients were treated in phase 1. This compares to my source stating that as of August 14, 2014 there were 8 patients enrolled and six had been treated.  What happened to the other patient enrolled in phase 1? I suspect that the patient who died 16 days after cell infusion was dropped, but I have not yet been able to confirm this.

Kite said that four patients had complete responses and that three had ongoing responses at nine months. It did not say how long the response was for the fourth patient. This would be important information for investors. Kite calculated the CR rate as 57% or 4 out of 7. If it had only counted the 3 with nine months duration of response the CR rate would be 43%. I don’t have the information to determine if the patient who died was dropped from the analysis, which would be inappropriate, but somehow one patient from the eight enrolled as of August 14, 2014 was dropped from the analysis. Using 8 in the dominator of the CR calculation the rate would have been 50% four CRs and using 3 it would be 38%

Kite said that KTE-C19 related adverse events consisted predominantly of cytokine release syndrome and neurotoxicity, which were generally reversible. Grade 3 or higher CRS were observed in 14% of patients and neurotoxicity in 57%; all were reversible except in one patient with dose-limiting toxicity. The latter patient died. Even though the study design assesses side effects in both the chemotherapy pre-conditioning and cell infusion, Kite only discusses side effects attributable to cell infusion which is misleading. It also only talks about grade 3 or higher side effects. It does not specifically break our life threatening grade 4 side effects. Again, this is misleading because we know from my independent source that there were two grade 4 side effects related to chemotherapy and two from cell infusion.

In later sections of this series of reports on Kite, I go through several Kite statements on results from the NCI trial which was the basis for the ZUMA-1 trial. In those situations as in this case, Kite has not been transparent with investors and has massaged and spun the results to present them in the most positive way. This trouble me.

Disease Background and Treatment for Patients Enrolled in ZUMA-1

Patients enrolled in ZUMA-1 had CD 19 related B-cell tumors. CD19 is a protein expressed in certain cells of the B cell lineage.  It is expressed in all normal B cells starting at the pre-B cell stage until the final differentiation stage. However, it is not expressed in pluripotent hematopoietic stem cells or most plasma cells that are the last cell y type in the lineage and which actually produce an antibody.  This pattern of CD19 expression is maintained in B cell malignancies including all subtypes of B cell NHL, chronic lymphocytic leukemia (CLL), and non-T cell acute lymphoblastic leukemia (ALL). It is not expressed in multiple myeloma.

Non-Hodgkin’s lymphoma encompasses a large number of distinct hematological cancers. About 85% of these cancers originate in B lymphocytes. The US incidence is about 70,000 which makes it the seventh leading cancer and they are responsible for around 19,000 deaths annually

Diffuse large B cell lymphoma (DLBCL) is aggressive and is the most common subtype of NHL, accounting for 30% or 22,000 newly diagnosed cases each year. This cancer responds reasonable well to a combination of Rituxan and a four drug chemotherapy regimen called CHOP and effectively cures about 60% of patients. However, patients who fail this regimen have no effective therapy. They are given a variety of different chemotherapy regimens. While there are no definitive studies, key opinion leaders estimate that median overall survival is about 6 months.

Another type of aggressive NHL is primary mediastinal B cell lymphoma PMBCL. It has distinct clinical, pathological and molecular characteristics from DLBCL. The incidence is about 670 patients per year. Initial therapy includes a combination of Rituxan and a slightly different chemotherapy regimen.

The second most common form of NHL is follicular lymphoma which affects about 18,000 people per year. It is a slow growing form of NHL which is sometimes referred to as indolent. However, some patients transform to the more aggressive DLBCL. Over a 15 year period, about 3% of patients transform each year. Treatment is similar to that for PMBCL.

Treatment options for relapsed/refractory PMBCL and TFL are similar to those in DLBCL.  Given the low prevalence of these diseases, no large prospective randomized studies in these patient populations have been conducted.  Patients with chemotherapy refractory disease have a similar or worse prognosis to those with refractory DLBCL

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