Today we are elucidating an emerging oncology play in Endocyte Pharmaceuticals (ECYT). The company has roughly a $262 million market cap and is listed on the Nasdaq GS. In order to gain more insight on this opportunity, we commenced an interview with Mike Sherman, Chief Financial Officer of Endocyte. 

The Interview

In layman’s terms, what is ECYT all about?

Endocyte develops small molecule drug conjugates (SMDCs) and companion imaging agents for the treatment of cancer and other serious diseases. The company’s proprietary technology platform technology is based on Philip Low’s, Ph.D., and Chris Leamon’s, Ph.D., research. Endocyte initially focused on folate receptors expressed on cancer cells, and today the company develops a pipeline of drug candidates targeting a variety of receptors found on diseased cells and co-develops these with companion imaging agents with the goal to provide precision medicines to patients for better outcomes.

Could you provide a brief technical explanation?

The company’s SMDCs are highly targeted yet potent therapeutics that are delivered directly to the diseased cells. Importantly, through the SMDC technology, negative effects on healthy cells are minimized. Endocyte designs its SMDCs to target receptors that are expressed or overexpressed on diseased cells.

SMDC are comprised of three modules: a high-affinity targeting small molecule as the targeting ligand, a spacer/linker that is stable in the bloodstream and releases the active drug from the targeting ligand when the SMDC is taken up by the diseased cell through endocytosis, and a drug payload. The targeting ligand binds specifically to receptors that are expressed or overexpressed on diseased cells. Upon binding, the SMDC is subsequently internalized by a natural endocytosis process. 

Once inside the cell, the serum-stable linker selectively releases the potent drug which is now active. Endocyte’s companion imaging agents employ the same targeting ligand as the SMDCs, replacing the drug payload with an imaging agent. The imaging agents are used for the  non-invasive identification of patients who express or overexpress the receptor targeted by the SMDC, so only patients that are likely to respond to treatment will receive the drug. 

Due to their modular character, SMDCs use a variety of different targeting ligands, linker systems, and drug payloads with different mechanism-of-action, to create a pipeline of novel SMDC candidates.  

What’s your overview on the future of your specialization or niche in the cancer industry?

Precision medicines, such as SMDCs, will inevitably permeate many disease areas (both cancer and non-cancer), but oncology indications remain a very important target. Due to the modular character of Endocyte’s technology platform, established and new targeting ligands that carry different drug payloads are being developed. For example, our EC1456 uses a very potent tubulysin as a drug payload which is more potent than vintafolide’s vinblastine. This has shown in pre-clinical experiments to be very active against folate receptor-positive tumors resistant to vintafolide, paclitaxel and cisplatin.

Endocyte remains confident in its SMDC platform and is fortunate to have several SMDCs with highly potent warheads in development. Furthermore, the company is in a strong financial position to continue to advance our promising clinical programs.

Does the company have proprietary intellectual property in the form of patents, trademarks, copyrights, etc.?

Endocyte wholly owns a platform with the potential for treating a wide range of diseases — from cancers to inflammation-based diseases like arthritis and kidney disease.

ECYT recently presented preclinical data at the AACR. Is management encouraged/discouraged by the findings?

Endocyte continues to advance the pipeline of wholly-owned candidates based on our SDMC technology platform, and was excited to discuss these exciting new findings at the AACR Annual Meeting. For the first time, Endocyte disclosed the preclinical data for the folate-targeted tubulysin SMDC, named EC1456, which is specifically targeted to folate receptor-expressing tumors and produces curative activity in 100 percent of animals treated under conditions that do not cause appreciable toxicity. EC1456 was further confirmed to be highly active against folate receptor-positive tumors resistant to vintafolide, paclitaxel and cisplatin. 

What part of the business do you think is being ignored that has more upside potential than Wall Street is giving it?

The initiation of the Phase 1 trial of our proprietary SMDC targeting prostate-specific membrane antigen (PSMA), EC1169, will allow us to explore a new target with our potent tubulysin cytotoxic warhead. In addition, our Phase 1 trial of EC1456, which continues to progress well, provides an additional opportunity to target the folate receptor, which is expressed on many different cancer types. EC1456's drug payload tubulysin, has demonstrated curative activity in preclinical models that were resistant to paclitaxel, cisplatin as well as vintafolide (with its drug payload vinblastine). The lead drug, vintafolide, which is partnered with Merck, is also being evaluated in combination with docetaxel in patients with non small cell lung cancer.  It was announced in March that the phase 2b TARGET trial met its primary endpoint. Detailed results are expected to be presented at ESMO in late September.

Why would someone be compelled to purchase your product or service? What specific needs does it address?

Endocyte is a biopharmaceutical company and leader in developing targeted therapies for the treatment of cancer and other serious diseases.  Endocyte uses its proprietary technology to create novel SMDCs and companion imaging agents for precision targeted therapies.  The company’s SMDCs actively target receptors that are over-expressed on diseased cells, relative to healthy cells.  This targeted approach is designed to enable the treatment of patients with highly active drugs at greater doses, delivered more frequently and over longer periods of time than would be possible with the untargeted drug alone.  The companion imaging agents are designed to identify patients who are therefore more likely to benefit from treatment.

On March 21, Merck and ECYT announced that they received CHMP positive opinions for VYNFINIT and FOLCEPRI and NEOCEPRI in patients with platinum-resistant ovarian cancer. Can you please explain what this could mean for the company?

Endocyte has since withdrawn the marketing authorization application for these drugs as a result of the results of the phase 3 trial which was recently terminated.

At this point, what is management’s pipeline priority?

We are in a strong financial position to continue to advance our promising clinical programs. The initiation of the Phase 1 trial of our proprietary SMDC targeting prostate-specific membrane antigen (PSMA), EC1169, will allow us to explore a new target with our potent tubulysin cytotoxic warhead. In addition, our Phase 1 trial of EC1456, which continues to progress well, provides an additional opportunity to target the folate receptor, which is expressed on many different cancer types. EC1456's drug payload tubulysin, has demonstrated curative activity in preclinical models that were resistant to paclitaxel, cisplatin as well as vintafolide (with its drug payload vinblastine).

What potential value-driving catalysts can investors generally expect in both the short and long term?

• Full results of Phase 2b TARGET trial, including latest overall survival data, to be presented at an upcoming medical conference in 2014.
• Updates on Phase 1 progress for proprietary pipeline agents, EC1456, a folate-targeted tubulysin agent, and EC1169, a PSMA-targeted tubulysin agent.

Is statistical significance in Overall Survival critical to the future of Vintafolide?

The FDA had confirmed that PFS would be an appropriate endpoint for accelerated approval in platinum resistant ovarian cancer and that final approval would require an overall survival (OS) endpoint. In non small cell lung cancer, overall survival would be the primary endpoint required for FDA approval.

What’s your market cap, cash burn and current cash and debt position?

Market Cap is approx. $270M (5/23/14). Net cash outflow from operations for the first quarter of 2014 was $17.4 million compared to $10.3 million in the fourth quarter of 2013 and $15.5 million in the first quarter of 2013. Current Cash was $131.5M as of March 31, 2014. On a pro forma basis, including cash received on April 2^nd as part of a secondary stock offering, cash and cash equivalents were $233 million. The company has no debt.

Is there anything else that you would like our readers to know about ECYT?

The Endocyte vision is to make precision medicines available to physicians and patients for the treatment of cancers and other difficult-to-treat diseases. 

Endocyte recently stopped the clinical trial for Vintafolide citing a lack of improvement in PFS, and the stock price subsequently dropped 60%. Do you believe that the investment/analyst community is overreacting to this event?

Endocyte was surprised and disappointed to learn of the independent Data Safety Monitoring Board (DSMB) recommendation to stop the Phase 3 PROCEED trial in platinum-resistant ovarian cancer (PROC).  Updated overall survival results from the TARGET trial in NSCLC will be important in determining the development path for vintafolide. Future development of vintafolide is in Merck’s control.

We remain confident in our SMDC platform and are fortunate to have several SMDCs with highly potent warheads in development. Furthermore, we are in a strong financial position to continue to advance our promising clinical programs. The initiation of the Phase 1 trial of our proprietary SMDC targeting prostate-specific membrane antigen (PSMA), EC1169, will allow us to explore a new target with our potent tubulysin cytotoxic warhead. In addition, our Phase 1 trial of EC1456, which continues to progress well, provides an additional opportunity to target the folate receptor, which is expressed on many different cancer types. EC1456's drug payload tubulysin, has demonstrated curative activity in preclinical models that were resistant to paclitaxel, cisplatin as well as vintafolide (with its drug payload vinblastine).