Endocyte (ECYT) and Merrimack (MACK) Not Good Enough for Big Pharma but Good Enough for You

June 20, 2014 • Top News • Tags: ,

Merck Backs Out of Development Deal with Endocyte

Endocyte was down 15% earlier this week as Merck dropped vintafolide development, meaning that Endocyte must face clinical trial risks alone. Earlier in May, both partners stopped a clinical trial that was targeting ovarian cancer with a combination including vintafolide. The combination of vintafolide and chemotherapy drug doxorubicin failed to slow progress of ovarian cancer. Endocyte’s stock fell 60% as a result.

After the failed trial, it was expected that Merck would act, one way or another. Though Merck did not give an exact reason for ditching vintafolide development, the big pharma hinted at a portfolio assessment. In simpler terms, there were no immediate rewards for Merck. Rather, Merck had to continue testing vintafolide for other cancer indications. With their own non-small cell lung cancer drug candidate (MK-3475), Merck did not want to throw additional funds at developing vintafolide. This does not mean the drug doesn’t work for other cancer indications though.

The good news from the trial was that failure was due to efficacy not safety, indicating that vintafolide may work on other cancer indications. As a result, Endocyte plans to evaluate future development of vintafolide based on additional Phase 2 data targeting non-small cell lung cancer.

Endocyte managed to raise a ton of cash when the stock was trading at higher levels. The company has roughly $220M (or $5.30/share) and trades at $6.50 levels. Trading at such close levels to cash shows investor optimism has vanished. Endocyte has plenty of cash to provide safety and a diverse pipeline that could regain investor confidence once again.

Sanofi Drops Merrimack Collaboration for MM-121

Merrimack is down nearly 10% in the morning session after news was announced yesterday that Sanofi would not continue the collaboration for MM-121 compound. The candidate’s promise in breast, ovarian and lung cancer were not shared by partner Sanofi when Phase II trials failed to meet endpoint of progression-free survival back in November, causing shares to drop nearly 40%. Though the negative news of MM-121 has already been reflected in Merrimack’s price, the loss of a large commercial partner leaves the development costs solely to Merrimack. The company expects to continue to pursue registration for MM-121 and will seek partnership opportunities to share the risk and costs of the candidate.

Merrimack’s lead candidate, MM-398, holds most of the pharma’s value. MM-398 is the first drug to show a survival benefit in the second-line setting, where no drugs are formally approved. The chemotherapy showed strong initial results last month in a Phase III combo trial that extended the lives of pancreatic cancer patients. Additional data results will be presented next week at the 2014 ESMO World Congress on Gastrointestinal Cancer. With these upcoming results, Merrimack expects to submit an FDA application later this year. With the ESMO catalyst in sight, this Sanofi ditch could prove to be an opportunity to get MACK shares at a discount.

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