Strike two for overheated South Korean biotech

Pexa-Vec fails earlier than expected, dealing exuberant South Korean biotech investors and the oncolytic virus field another blow.

South Korean biotech stocks don’t come much more overinflated than Sillajen, and today the group’s exuberant backers got a nasty surprise. The oncolytic virus Pexa-Vec, the company’s only meaningful asset, crashed as an interim futility analysis yielded a recommendation to halt its pivotal liver cancer trial.

As Vantage spelled out in April there were numerous red flags about this study that investors appeared happy to ignore at the time (Sillajen and Transgene bid to revive the oncolytic virus craze, April 4, 2019). That said, Pexa-Vec’s failure at interim analysis is an even worse outcome than it was logical to expect.

The pivotal trial in question, Phocus, tested first-line Pexa-Vec on top of Nexavar on the strength of a survival result in a small phase II test. That benefit looked underwhelming relative to the changing standard of care, not to mention Pexa-Vec's having failed an earlier liver cancer trial.

Even if you ignore this, along with local rumours that Phocus was going badly and the fact that Sillajen is in dispute with its partner Transgene, Phocus could have passed interim analysis and not failed until next year’s final overall survival readout. The fact it has shown futility at interim, as Sillajen disclosed to the markets today, is particularly damning.

Selected trials of Pexa-Vec in liver cancer
Study Setting Design Notes
NCT03071094 1st-line +Opdivo (single-arm) Interim data delayed from mid-2019 to H2 2019
Phocus (NCT02562755) 1st-line +Nexavar vs Nexavar Study failed futility analysis
Traverse (NCT01387555) 2nd-line (post-Nexavar) Monotherapy vs best supportive care Study failed
NCT00554372 Unspecified Monotherapy (2 dose levels) mOS 6.7mth for low dose, 14.1mth for high dose

Sillajen had picked up Pexa-Vec along with the oncolytic virus’s originator, Jennerex, for just $100m in 2014. Yet such is the appetite for biotech in South Korea that on the back of little additional backing the group’s market cap was pumped up to an incredible $7bn last year.

Today the stock lost 30%, leaving Sillajen valued at a still overheated $1.8bn. This gave South Korean investors 2019’s second lesson in the dangers of over-exuberance: last month HLB Company Ltd lost 30% on the pivotal failure of the small molecule rivoceranib.

Transgene, meanwhile, lost 15% today. With the group in arbitration proceedings against Sillajen the failure of Pexa-Vec might matter little beyond marking yet another embarrassment for a French company that in four decades of existence has yet to develop a marketed product.

Transgene’s pipeline includes an in-house oncolytic virus candidate, TG6002. However, TG6002’s chances are unclear; the failure of Pexa-Vec marks another blow to a field that has seen deal activity, but which has yet to score a resounding clinical success, and whose only US-marketed product, Amgen’s Imlygic, is a commercial flop.

The next furthest advanced oncolytic virus, Oncolytics' pelareorep, has stalled in the clinic, and is currently being pursued in combinations.

Beyond Pexa-Vec Sillajen has nothing in the clinic. Two other Jennerex-originated oncolytic viruses, JX-970 and JX-900, derived from a different strain than that in Pexa-Vec, are in preclinical development.

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