Revisiting a predictor of failure in the post-Celator world

Celator’s success in beating the notorious Feuerstein-Ratain rule, as well as bettering one of the longest-established standards of care in oncology, raises the question of whether this shortcut for predicting the outcome of phase III cancer trials still holds after the recent collapse in biotech share prices.

Perhaps the fact that a company has a sub-$300m market cap ahead of a pivotal readout now no longer guarantees a failed study. Maybe investors are losing their ability predict oncology clinical outcomes and price shares accordingly (see table below). Alternatively, the $300m threshold might be too high given the extent of the recent biotech sell-off.

Celator’s stunning trial result is also not the only one that calls into question this otherwise trusty rule of thumb. Celldex had a market cap of over $2bn six months before its now-halted Act IV phase III trial of Rintega in glioblastoma multiforme, showing that having a significantly higher market cap is no guarantee of success (No good reaction to Celldex's Act IV, March 7, 2016).

The rule

The rule, named after the TheStreet.com’s biotech commentator Adam Feuerstein and University of Chicago oncologist Mark Ratain, forecasts the outcome of cancer drug phase III studies based on the sponsor companies’ market capitalisation six months before the data due date.

Based on an exhaustive examination of phase III cancer readouts over the past 20 years or more, it has until this week had a 100% success record in predicting failure for companies whose market cap is below $300m. If a company's market value was above this figure success was not guaranteed but was at least possible.

Of course a few factors have come into play over the recent biotech stock market cycle. With three or four years of good access to capital markets, many more companies have been able fund pivotal trials alone and build up significant cash piles on their balance sheets. On the other hand, the sharp correction in share price since the middle of last year might have brought otherwise promising companies’ valuations into the failure zone.

These changes notwithstanding, in recent weeks the Feuerstein-Ratain rule correctly predicted the interim futility stop for Peregrine Pharmaceuticals’ phase III study of bavituximab in second-line non-squamous non-small cell lung cancer (NSCLC). Similarly, it certainly forecast Threshold Pharmaceuticals’ simultaneous double phase III failure of evofosfamide in pancreatic cancer and soft tissue sarcoma in December.

Last year, the rule accurately predicted futility stops for Synta with ganetespib in NSCLC and for Verastem’s defactinib in mesothelioma, among others. EP Vantage has screened the public company universe for sub-$300m market cap groups with phase III cancer trials.

First up to test the rule in this new environment is CytRx, whose 433-patient study of aldoxorubicin in soft-tissue sarcoma reads out in the second quarter. Aldoxorubicin is an albumin-linked prodrug designed to release doxorubicin in the acidic conditions inside the tumour.

This study could succeed since doxorubicin has long been used in the disease, but its dose is limited by cumulative toxicity. CytRx’s project might overcome this and a positive result here would add further strain on the Feuerstein-Ratain rule's validity.

Nine other companies are scheduled to report data in 2016, most towards the end of the year. If they report on time, the six-month pre-data timing of the Feuerstein-Ratain rule will be coming up soon.

Double showing

Interestingly, two companies appear twice in the table thanks to a second phase III readout in later years. Perhaps a positive result in the first study will project them out of the sub-$300m zone – as was the case with Celator – and improve the odds for a second positive result.

The first is OncoGenex, which has two phase III trials under way with custirsen, in prostate and lung cancers, both of which have had their designs changed to reduce recruitment or focus on poor-prognosis patients after custirsen's earlier phase III failure in castrate-resistant prostate cancer.

And Immunomedics has two phase III studies under way, this time with different antibody-drug conjugates. The first is 90Y-clivatuzumab tetraxetan in metastatic pancreatic cancer, and the other sacituzumab govitecan in triple negative breast cancer.

Companies with the smallest market valuations are either poorly financed or have already endured some major setback. Cyclacel’s phase III study has, for example, already failed its interim analysis, but in its case the data safety monitoring board requested that the study continue to completion. Other companies might effectively be repeating a previously failed study with some minor changes, as is the case with Celsion.

One thing is certain: these companies will enjoy huge stock market gains if they deliver unambiguously positive phase III results.

To contact the writer of this story email Robin Davison in London at [email protected] or follow @RobinDavison2 on Twitter