OSIP's Tarceva Expansion Needed

Label Expansion for Tarceva Under Way

In order to expand the label of Tarceva, OSI Pharmaceuticals (OSIP) and Genentech/Roche are conducting several additional clinical trials that could help drive higher market penetration.

One phase III trial is the SATURN study (front-line maintenance therapy in NSCLC post-chemotherapy non-progressors). SATURN is a placebo-controlled, randomized, double-blind, phase III study conducted by Roche that enrolled 889 patients with advanced NSCLC at approximately 160 sites worldwide. Patients were treated with at least four cycles of standard first-line platinum-based chemotherapy and were then randomized to Tarceva or placebo if their cancer did not progress. The primary endpoint of the study was progression-free survival. Secondary endpoints included overall survival, safety and an evaluation of exploratory biomarkers.

OSI and Genentech reported preliminary positive results from the above SATURN study on Nov. 7, 2008, and full data were presented on May 30 at the 45th Annual Meeting of the American Society of Clinical Oncology.

SATURN Study Solidifies Progress

The study met both of its co-primary endpoints by demonstrating a statistically significant 41% improvement in the time patients live without their disease worsening (as measured by progression free survival, or PFS) compared with placebo (Hazard Ratio = 0.71, p-value <0.00001) and a 45% increase in the time patients live without their disease worsening compared with placebo in the sub-set of patients who were determined to have tumors expressing the EGFR gene by Immunohistochemistry (IHC) (Hazard Ratio for PFS = 0.69, p-value <0.0001).

The study confirmed findings from prior studies in later stage NSCLC patients that Tarceva demonstrated benefit across a broad spectrum of NSCLC patients. Importantly, the study demonstrated a PFS benefit for Tarceva maintenance therapy in both squamous cell carcinoma patients (HR=0.76, p-value=0.0148, n=359); and non-squamous patients (HR=0.68, p-value < 0.0001, n=525).

Pre-planned biomarker analyses of tissue samples collected as part of the SATURN protocol provided important information on the potential role of EGFR mutations and K-ras mutations in predicting possible outcomes of Tarceva therapy in NSCLC patients. The subgroup analysis of patients whose tumors possessed an activating EGFR mutation and were eligible for analysis (n=49) demonstrated a statistically significant ten-fold increase in PFS for patients treated with Tarceva compared with placebo. The hazard ratio was 0.10 (p-value <0.0001).

Additional Tarceva Benefits

In the sub-population of patients tested for their EGFR mutation or wild-type status, a statistically significant PFS benefit of Tarceva therapy was also evident in patients with wild-type EGFR status after excluding those patients whose tumors had an activating EGFR mutation (HR=0.78, p-value < 0.0185, n=388).

In addition, the sub-group analysis of patients whose tumors possessed a K-ras mutation and were eligible for analysis (n=90) suggested a similar treatment benefit in terms of PFS to that seen in the overall population (HR=0.77, p-value=0.679). The EGFR IHC status of the tumor was not predictive of outcome for Tarceva therapy in the study as demonstrated by HR of 0.69 in EGFR IHC positive (n=618) and HR of 0.77 in EGFR IHC negative (n=121) patients.

Twenty-five percent of patients treated with Tarceva had not seen their disease progress after six months compared with 15% of patients treated with placebo. Measurements of median PFS in the overall population in the study were impacted by an unusual step-wise data distribution in the Kaplan-Meier analysis (12.3 weeks for the Tarceva arm versus 11.1 weeks for the placebo arm) which is not representative of the robust overall PFS benefit as evident by the Hazard Ratio of 0.71 and an associated p-value of <0.00001.

Key Data Still Expected

Overall survival data (a secondary end-point in the study) is immature and not expected to be available until later in the year. There were no new safety signals seen in the study, and using Tarceva maintenance therapy immediately following first-line chemotherapy did not appear to exacerbate any residual chemotherapy related side-effects. Fifty-five percent of patients in the Tarceva arm and 64% of patients on placebo received subsequent therapy after progressing.

FDA Accepts sNDA on Tarceva

Based on the positive data from SATURN study, in March 2009, OSIP and Genentech (now a subsidiary of Roche) submitted a supplemental New Drug Application (sNDA) to the US FDA for the use of Tarceva as a first-line maintenance therapy for people with advanced non-small cell lung cancer (NSCLC) who have not progressed following first-line treatment with platinum-based chemotherapy. The FDA accepted the filing in June 2009 and the PDUFA target date is around January 18, 2010. Additionally, Roche, the company’s international collaborator for Tarceva, filed an application in Europe with the European Medicines Agency (EMEA).

We expect approval of this new indication in early 2010. The new indication of 1st line maintenance therapy of NSCLC will significantly expand Tarceva application. We believe Tarceva sales may pick up in 2009 due to off-label use of the drug.

Sales Growth Expected to Decline

We are concerned about the growth of Tarceva sales. Total worldwide net sales of Tarceva for the first quarter of 2009 were approximately $279 million, representing a 4.5% growth in global sales compared to the same period last year. Growth of global Tarceva sales has been diminishing in 2008 with quarterly growth of 35%, 38%, 24% and 14% for Q1, Q2, Q3 and Q408, respectively.

There was no sales growth in the US for the 1Q09 with sales of $111 million. US sales of Tarceva have been flat in 2008 with quarterly sales of $111, 119, 110 and 118 million for Q1, Q2, Q3, and Q4 respectively, representing a growth of 8.8%, 16.7%, 8.9% and 5.4% respectively. Rest-of-the-world sales of Tarceva were $168 million in 1Q09, up 7.7%, dramatically lower than the 63%, 57%, 35% and 21% growth in 1Q, 2Q, 3Q, and 4Q08 respectively.

Tarceva is the key growth driver for OSIP, representing 89.5% of total revenue in 1Q09. Any slowdown in Tarceva sales will translate into lower net income and earning per share and weigh on the company’s stock price.

We expect continued sales growth decline in 2Q09. International Tarceva sales will continue to outperform US sales. Label expansion is a must to re-grow Tarceva sales in our view. We remain our Hold rating for OSIP.

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