Bavarian Nordic misses out on Provenge effect

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The success of the first therapeutic cancer vaccine has not exactly translated into a gold rush for companies working on follow-ons. Ask Bavarian Nordic, whose shares plummeted 40% on news yesterday that the company had failed to secure a partner for its prostate cancer vaccine and may have to raise up to $150m to finance late-stage trials.

As the Danish group could not even reveal a heavily back end-loaded option deal to validate its vaccine, as Transgene secured for TG4010, investors expressed an unwillingness to pony up additional funds for the clinical work (Transgene deal disappoints but were expectations too high?,March 10, 2010). Anyone hoping that Dendreon's success in getting Provenge on the market and Amgen's takeout of BioVex would trigger greater interest in cancer vaccines from big pharma will be disappointed by this news.

Cash position

The fallout at Bavarian continued today, the stock dropping another 10% to DKK141 in afternoon trading. Industry observers noted that the damage could have been contained somewhat if Bavarian had first obtained some share-purchase commitments from some of its largest investors; the failure to do so likely led to an even greater loss of market confidence.

Bavarian said proposed licensing terms were insufficient given the product’s potential and that raising funds is the best way to maintain momentum for Prostvac, a bioengineered vaccine targeting prostate specific antigen.

The company raised nearly $100m from selling new shares last year, investors are clearly unhappy at the prospect of further cash calls. 

Executives told investors they would need up to $150m to run the trial – it is planned to enrol 1,200 patients in three arms to test Prostvac alone or Prostvac in addition to granulocyte macrophage colony-stimulating factor against placebo.

The company reported Thursday that it ended 2010 with $66m in cash and cited a “cash preparedness” figure of $85m that includes another $19m in credit lines. But even with revenue of $58m in 2010 from its US government contracts on smallpox vaccine Imvamune, the company lost nearly $73m, necessitating some fundraising to pay for Prostvac’s trial.

Executives said they would be presenting their fundraising plans at the annual meeting April 26.

The Provenge effect

Provenge’s historic approval last year was widely viewed as having paved the way for cancer vaccines – indeed, maker Dendreon announced Thursday it had gotten FDA’s OK for three new production lines at its New Jersey factory, quadrupling its capacity.

However, in the view of big pharma, Provenge remains a unique product, different from the typical image of vaccines. To create Provenge, Dendreon draws patients’ own immune tissues from their bodies, mixes them with cancer antigens and then reinfuses the mixture to attack prostate cancer cells.

Many of the next wave of cancer vaccines – such as Prostvac, TG4010, and GlaxoSmithKline’s MAGE-A3 – are non-autologous, off-the-shelf products that have yet to be validated with an approval (Data from late-stage cancer vaccine pipeline on distant horizon, May 12, 2010).

“I don’t think pharma is convinced by (Provenge) because it’s a bespoke product,” says Gary Waanders, an analyst with NomuraCode in London. “Until we see a more standardised version of a cancer vaccine, it may be a while before the pharma industry gets behind this approach.”

Regulatory standards

What Provenge has done is set a regulatory framework for cancer immunotherapies. Its path to approval was not an easy one – despite a positive FDA advisory committee vote in 2007, a complete response letter followed and approval was affirmed by the agency last year.

FDA and Bavarian Nordic have agreed to a special protocol assessment for the phase III trial in which Prostvac patients must show an 18% improvement in survival to achieve statistical significance, lower than the 22% asked of Provenge – Prostvac is planned for the same indication. Thus, Provenge’s successors have an idea of how effective they must be.

“It’s a process that’s been started with Provenge, in that it’s set the stage in terms of the efficacy standards that have to be met,” Mr Waanders said.

But first, Bavarian Nordic must figure out how to pay for the pivotal trial. As its investor base has shown itself to be restless, executives must tread carefully in developing those plans.

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