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CKPT: Disruptive Pricing Model to Fire Up $20B+ Market



Checkpoint Therapeutics (NASDAQ:CKPT) will be releasing highly anticipated interim data from its Phase I clinical trial this quarter. The readout will be for CK-301, an anti-PD-L1 antibody, which is expected to include safety and efficacy data from approximately 40-50 patients with a variety of tumor types including non-small cell lung cancer and cutaneous squamous cell carcinoma. The company is currently enrolling patients in three endometrial and colorectal cohorts that are anticipated to qualify for accelerated approval for one or more biologic license applications (BLAs). With an accelerated approval, Checkpoint can initiate its disruptive pricing strategy on big pharmaceutical companies unwilling to lower their prices given the importance of checkpoint blockade inhibitors (CBIs) to their market values.

View Exhibit I - Checkpoint Therapeutics Logo

CBIs comprised near $18 billion in global sales in 2018 and are expected to grow almost 30% in 20191. Not only has this class distinguished itself as a monotherapy, but it is also being widely used in an ever increasing number of combination therapies, joining with vaccines, oncolytic viruses, chemotherapy and even other immuno-oncology agents. Despite there being six similar competitors available in the market, their price has remained stubbornly high, ranging from $150,000 to $165,000 per patient for an annual treatment. The economic burden has prevented broader acceptance of the therapy and hindered widespread geographic penetration, especially in global areas where incomes are insufficient to support premium prices. There is a need for a more competitive offering in this class and even the leadership of the FDA has highlighted their willingness to work with sponsors that can achieve it. One candidate that ticks off all the boxes is Checkpoint’s CK-301, which is expecting to announce interim safety and efficacy data shortly.

View Exhibit II - Sales of Approved Checkpoint Inhibitors

CK-301 Trial Design
The Phase I trial for CK-301, which began in October 2017, completed its dose escalation efforts in March 2018 and subsequently initiated several dose expansion cohorts starting with a basket of tumor types. In January 2019, Checkpoint identified three cohorts that are anticipated to support requests for accelerated approvals which include:

‣ Microsatellite instability-high (“MSI-H”) endometrial cancer that has progressed following one or two prior anti-cancer therapies;
‣ Microsatellite stable (“MSS”) endometrial cancer that has progressed following one or two prior anti-cancer therapies; and
‣ MSI-H or mismatch repair deficient (“dMMR”) colorectal cancer that has progressed on or after, or been resistant to, previous treatments, including a fluoropyrimidine- and oxaliplatin- and irinotecan-based chemotherapy.

Next steps for Checkpoint are to continue enrolling these cohorts and generate sufficient data to support accelerated approvals, thereby allowing for marketing launches.

View Exhibit III - CK-301 Phase I Clinical Study Trial Design

While there are accelerated approvals for competing checkpoints in MSI-H endometrial cancer and MSI-H/dMMR colorectal cancer, the indications do not have traditional FDA approval, allowing for competing candidates to pursue the same accelerated approval status with similar studies. Since these indications are considered unmet needs, small trials for well understood molecules such as PD-1/PD-L1 checkpoint inhibitors are considered sufficient to obtain accelerated approval. The trials can use surrogate endpoints and a trial size of 75 to 100 patients, streamlining a rapid pathway to market for this well understood class of therapy.

Price is Important
While there is no explicit guidance provided by the FDA on trial design for the indications in the expansion cohorts, peers including Merck, Bristol Myers and Tesaro (acquired by GSK) have all held pre-registration meetings with the FDA which yielded trial designs requiring 75 – 100 patients. The trials merely needed to demonstrate an objective response rate rather than progression free survival as there is no other approved treatment in these areas and less stringent endpoints are enforced. These trial designs were sufficient to obtain accelerated approval. The FDA also seems to have a soft spot for candidates that will be competitive on price, in line with Checkpoint Therapeutics’ strategy of entering the market at half the price of competing anti-PD-1/PD-L1 inhibitors. At a recent AACR session, Richard Pazdur, M.D., the director of the FDA’s Oncology Center of Excellence, urged sponsors of lower-cost PD-1/PD-L1 inhibitors to come before the agency. While the FDA does not consider price when making a decision to approve, it is likely that the FDA would provide close communications with a sponsor of a new PD-1/PD-L1 candidate that can expand the usage of this critically important cancer treatment through lower pricing. Pazdur noted that “[a sponsor] could do the studies that the major pharmaceutical companies have already done….these are very, very low-risk studies [that] could lead to full approval of these drugs.”

View Exhibit IV - Richard Pazdur, M.D., Director, Oncology Center of Excellence

The high cost has not only been recognized by the FDA, but also by other stakeholders. There have been increasingly loud voices highlighting the unsustainability of the high cost of immunotherapy. In a recent article, Dr. Leonard Saltz, the Chief of Gastrointestinal Oncology at Memorial Sloan Kettering Cancer Center estimated that the cost of cancer immunotherapy for all US patients with melanoma would be $174 billion per year in combination therapy2 if all patients who needed the drug received it. In another article published in the Journal for ImmunoTherapy of Cancer, analysis found that the cost-effectiveness of immune checkpoint inhibitors was not cost effective over chemotherapy in most cases. It did not say that immunotherapy was not better than chemotherapy, but that after evaluating the treatment in light of its costs, it did not make economic sense. This analysis used Quality-Adjusted Life Year (QALY), Incremental Cost Effectiveness Ratio (ICER) and other quantitative approaches to compare the value of alternative therapies which is a necessity for organizations with limited resources. Governments and other payors are examining the trend of immuno-oncology spending and are realizing that it is unsustainable, forcing hard choices in the absence of lower priced alternatives. This has led to checkpoint inhibitors being rationed in many European and Asian countries, and not even being available in others, such as in Poland, one of several countries where Checkpoint Therapeutics is conducting trials for CK-301.

High prices have even reached the President’s sphere of influence and the office has put forth several proposals to lower prices outlined in the “American Patients First” plan. Some of the strategies include more transparency on price, examining the rebate system and allowing pharmacists to help patients select the most affordable approach to buying their drug.

An Evolving Environment
In the early days of CBI therapy, higher prices were justified by the complexity and cost of bringing forward a new class of immuno-oncology drug. However, after numerous additional indications were added for existing CBIs and the mechanism of action and pathway to approval have been better understood, there is less justification for premium pricing. Technology’s ever improving output at a lower cost needs to be present in the life sciences, and we see new candidates coming forward in immuno-oncology potentially satisfying this rule that dominates other technology industries.

Checkpoint Therapeutics’ efforts to disrupt the existing pricing model in CBI therapy could be perceived as a threat by Big Pharma and the immuno-oncology ecosystem now in place. If the forthcoming data release demonstrates safety and efficacy similar to that published on behalf of the leading CBIs, one can be sure that the dominant players in the PD-1/PD-L1 space will take notice. This could potentially lead to an acquisition of Checkpoint Therapeutics by Big Pharma as an approach to maintain their dominance and price discipline. Deals such as the $5.1 billion purchase of Tesaro by GlaxoSmithKline and Incyte’s) acquisition of worldwide rights for MacroGenics’ anti-PD-1 MGA012 for $150 million upfront, $750 million in milestones plus royalties are examples of what may be possible.

In addition to their CBI CK-301, Checkpoint is also developing a third generation EGFR inhibitor designated CK-101 which we discuss in a previous report. This candidate, intended for first line EGFR mutation-positive non-small cell lung cancer, is currently in a Phase I/II study evaluating expansion cohorts to confirm the optimal Phase 3 dose. Interim positive clinical data was announced last September and a further readout is expected later this year. A registrational trial for CK-101 is expected to begin around year-end.

The upcoming release of clinical data by Checkpoint may be a turning point for the company, as their disruptive pricing strategy is well aligned with the desires of many stakeholders. Current pricing for CBIs, especially when used in combination with other therapies is not affordable to the system as a whole. With a disruptor such as Checkpoint Therapeutics advancing a candidate that may have essentially the same safety and efficacy as leading CBIs, the impact could extend beyond the borders of the United States. CK-301 could change treatment options dramatically in countries such as Poland, Germany, France, Australia, New Zealand and others that either have no access or endure severe rationing of CBIs. A reasonably priced anti-PD-L1 inhibitor could broadly address an unmet need not only in the United States but also in many regions throughout the globe.

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1 Estimates as collected by Evaluate Ltd.
2 This in annualized treatment using ipilimumab and nivolumab using list pricing.
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