Kazia Therapeutics — GDC-0084 gets a fifth collaboration

Kazia Therapeutics is an Australian biotechnology company focused on oncology drug development, listed on both the ASX (KZA) and Nasdaq (KZIA). It has two products in development: GDC-0084 for brain tumours and Cantrixil for refractory ovarian cancer.

GDC-0084 is an inhibitor of the membrane-bound signalling enzyme PI3K (phosphoinositide 3 kinase). GDC-0084 now has a provisionally assigned official name, paxalisib, subject to final confirmation. On activation (phosphorylation) by cell surface receptors, PI3K creates a chemical signal to activate both a cell growth pathway and, importantly, the cell survival pathway that blocks cell suicide: apoptosis (Yu and Cui 2016). GDC-0084 is also a moderately potent inhibitor of mammalian target of rapamycin (mTOR) kinase, one of the downstream targets of PI3K signalling.

The PI3K pathway is interesting, compared to other growth signalling systems like MEK-ERK (as activated by the HER2 receptor (blocked by Herceptin) as it responds to changes in the levels of external growth hormones and does not have any signal amplification stage. PI3K is ‘switched on’ when growth hormone, is detected (for example, by HER 2) and deactivated by an ‘off switch’: PTEN (phosphatase and tensin homolog).1

Blocking PI3K therefore potentially slows cell growth and might encourage cancer cells damaged by radiotherapy or chemotherapy to die. Direct PI3K inhibition is not cytotoxic. Kazia notes that PI3K inhibition in preclinical studies and early clinical data can cause tumour shrinkage. Nonetheless, in our view, it is probably clinically optimal to combine PI3K inhibition with other therapies, such as chemotherapy or radiation. PI3K is found as multiple isoforms and mutations, which makes pharmaceutical targeting more complex (Thorpe et al, 2015).

GDC-0084 was licensed from Genentech in 2016 after a monotherapy Phase I safety and tolerability study showed a good profile at a 45mg dose and indicated retardation of late-stage glioblastoma (GBM) growth with possible shrinkage in some cases; the trial was not an efficacy study, see our June 2019 Note, page 3 for a detailed discussion. Kazia’s development focus, Exhibit 1, is on brain cancers as GDC-0084 crosses the blood-brain barrier. Also, brain cancers are very hard to treat and are a frequent complication in up to 30% of metastatic cancer patients.

In primary brain and metastatic brain cancers, there are big needs for new treatments. Glioblastoma remains an active development area with 286 trials of various type ongoing. The best current option is if neurosurgery can debulk the tumour. It is, however, very difficult to surgically remove the entire tumour without causing massive brain injury. Some tumours are inaccessible or too widespread. Radiation therapy is frequently used, but damages surrounding neural tissues. Proton beam therapy is accurate but expensive and places are very limited. Hence, brain tumours invariably reoccur.

The standard chemotherapy is the alkylating agent temozolomide (TMZ). TMZ has excellent brain penetration and will directly damage DNA. However, about 61% of GBM patients produce the enzyme O6-methylguanine-DNA methyltransferase (MGMT) as they have an unmethylated MGMT gene promoter. MGMT repairs the DNA damage done by TMZ making patients resistant and most gain only minimal benefit (Jiapaer et al, 2018). If GDC-0084 can retard brain tumour growth in TMZ refractory patients, it could find a widespread, standard role.

Current Phase II

In the ongoing Phase II (NCT03522298) a higher GDC-0084 dose (60mg) than Genentech determined (45mg) has been set as the new maximum tolerated dose (MTD). The patients have been predicted to be TMZ resistant as they produce MGMT. All patients undergo prior surgical tumour debulking and combined radiation and TMZ therapy using the Stupp regimen (Stupp et al 2005). 2 There was an initial GDC-0084 dose escalation Phase IIa stage, now complete.

The trial is now in a Phase IIb cohort-expansion efficacy stage with 20 patients at a 60mg dose. Patients receive GDC-0084 until disease progression or an unacceptable toxicity, whichever occurs first. The outcome might be announced by December 2019. As this is a small, open-label, safety study with no comparator arm, the outcome is indicative, but not confirmatory, of potential efficacy.

If tolerability and signs of efficacy are seen in the current Phase IIb expansion cohort, Kazia aims to run a randomised, comparative Phase IIb/III study in 228 patients with recently diagnosed GBM. This study will compare maintenance therapy with GDC-0084 vs standard-of-care TMZ. Patients will first undergo surgery to remove the bulk of the tumour followed by a radiation therapy combined with TMZ (Stupp regimen). Patients will be then randomised to receive maintenance therapy with either GDC-0084 or TMZ.

The aim is to delay recurrence of the cancer so the trial will measure progression free survival (PFS) or overall survival (OS). The average of five literature median PFS and OS values in GBM patients with an unmethylated MGMT promoter is PFS of 5.2 months and an OS of 13.8 months (June 2019 Note). This Phase IIb/III might be sufficient for regulatory approval by 2024, although this can be better judged when the outcome of the current cohort expansion data is known.

Kazia is also evaluating, using a series of alliances, the use of GDC-0084 in metastatic brain cancer and childhood disease. This spreads the clinical and financial risks, but such third-party studies can become prolonged. Some of these are structured as initially dose ranging with an ‘expansion’ cohort. One study (NCT03765983) is in breast cancer metastases combined with Herceptin but at a lower 45mg dose than currently used by Kazia.

The latest MSK-sponsored study, Exhibit 1, is a combination with radiotherapy; the St Jude paediatric trial (NCT03696355) uses GDC-0084 two to three months after radiotherapy. Radiotherapy is standard in brain tumour surgery either post-surgery or if surgical intervention is not feasible. However, 30–50% of patients still progress. A mutation associated with progression is PI3KCA (Samuels and Waldman 2010). This makes the PI3K protein permanently active so sending a constant growth and survival signal. The incidence of this mutation is still not well defined and the literature on this is very limited and based on primary tumour types. The percentage of mutated brain cases will vary depending on the primary cancer type that has metastasized.

Outside brain cancers, other companies are developing PI3K inhibitors (Zhao et al 2017); for example, Aliqopa (copanlisib, Bayer) is approved as an iv infusion for the treatment of adult relapsed follicular lymphoma and Zydelig (idelalisib, Gilead) is approved as an oral treatment for chronic lymphocytic leukaemia (CLL) and follicular lymphoma. Copiktra (duvelisib, Verastem) was approved in October 2018 again for leukaemia (CLL) and some lymphomas.

In 2019, the FDA approved Piqray (alpelisib, Novartis) as an oral combination therapy with fulvestrant for metastatic breast cancer therapy for patients with the PI3KCA mutation. This is the same mutation as in the MSK trial discussed above. Use requires a genetic test, which is commercially available. The approval was based on a progression-free survival of 11 months vs 5.7 months on fulvestrant alone; this shows that any effect of GDC-0084 is likely to be disease control not as a cell killing chemotherapy agent. The overall response rate, a secondary endpoint, improved from 16.2% to 37.5%. These other products show that PI3K inhibitors work and can gain regulatory approval.

In glioblastoma, Roche/Genentech has a Phase I PI3K pathway inhibitor (Ipatasertib3) in a combination dose and safety trial (NCT03673787, data, if released, Q121). No other PI3K inhibitor brain cancer studies have progressed.

Cantrixil is a novel chemotherapy agent: TRX-E-002-1. It was discovered by Novogen working with Yale. Its mechanism of action has been recently investigated. TRX-E-002-1 is claimed to be cytotoxic to undifferentiated stem-like cancer cells and also to differentiated (more ‘mature’) cancer cells. Although various targets are proposed there is no definitive evidence of the mode of action (Stevenson et al 2018). Lack of a clear biochemical mode of action is not a clinical drawback – if it works – and a generalised, multi-target effect might help prevent cancer resistance developing.

TRX-E-002-1 is combined with cyclodextrin polymer (Dexolve) to give Cantrixil,4 presumably as its solubility is limited and this provides a standard way to solubilise and stabilise the product. Cantrixil is given as a weekly intra-peritoneal5 administration so in effect a depot dose. It will slowly dissolve and create a therapeutic reservoir in the abdominal cavity. As an intraperitoneal formulation, it will, if approved, mostly be a specialist hospital product.

A Phase I trial of Cantrixil in ovarian cancer, Exhibit 2, is expected to report preliminary efficacy data from a 12-patient expansion cohort in H219. These patients receive monotherapy at the maximum tolerated dose of 5mg/kg determined in April 2019.

Ovarian cancer accounts for 22,400 new cases and 14,100 deaths in the US each year, with a five-year survival rate of 47%. The majority of those diagnosed already have distant metastases, which is associated with a 28.9% five-year survival rate. The expansion cohort data will enable the potential role of Cantrixil in ovarian cancer to be better assessed. Initial data was presented in April.

The likely role for Cantrixil on current data is as a therapy for patients who are platinum refractory or who become platinum resistant over time. On current third-line therapy, such patients have a PFS of approximately 3.5 months and OS of 12 months so there is a major unmet medical need.

If Cantrixil shows signs of having good cytostatic or cytotoxic activity when the trial reports, it could be a relatively easy niche product to develop further given the large medical unmet need in refractory ovarian cancer. It is possible that a robust case could be made for investing in further internal development. However, refractory ovarian cancer is a notoriously difficult cancer to treat with typical response rates to topotecan and paclitaxel in the 10–15% range with overall survival of approximately 12 months and no breakthroughs apparent.

The value, last revised in June 2019, varies depending on the approval, pathway and launch date of GDC-0084. Our assigned clinical probability of success for GDC-0084 is 25% (or 20% depending on the indication). Other trials have a 20% probability. We assume Kazia pays a royalty of 10% of net sales to Genentech.

Our base case valuation of A$137m (updated from A$135m to include actual year-end cash) models a GDC-0084 market launch in 2024 following a single Phase IIb pivotal study. This scenario assumes that GDC-0084 is out-licensed to a marketing partner in 2023 in a deal that includes US$40m upfront and US$120m in clinical and regulatory milestone payments. In this scenario, global sales for GBM reach US$1,050m in 2030.

This scenario is equivalent to A$2.20/share and A$2.11/share after diluting for options and convertible notes. Kazia is also listed on Nasdaq under the code KZIA, with each Nasdaq-listed ADR representing 10 ordinary shares. Our undiluted base case valuation equals US$16.50 per ADR at current exchange rates.

An alternative scenario for GDC-0084 assumes a market launch in 2026 because a Phase III study is needed for FDA approval. Although partnering in 2023 is still assumed, Kazia receives a lower 15% royalty rate and a smaller US$20m upfront payment due to the risk and cost of the Phase III; other deal terms remain as before. On these revised assumptions, the valuation becomes A$86m (adjusted for actual year-end cash) or A$1.38/share (undiluted).

Currently, we assign Cantrixil a 10% probability of overall clinical success and assume a $600m market in refractory ovarian cancer. These estimates will be revised once the current trial data is available. A 5% royalty to Yale is assumed.

Kazia had A$5.4m cash on 30 June 2019. The operational FY19 cash use was A$6.8m after R&D tax rebates of A$1.4m. This was funded by the sale of a shareholding in Noxopharm for A$2.4m and by raising A$3.8m net (A$4.1m gross less A$0.3m costs) in new equity. In addition, A$1.25m of equity was issued (non-cash) as a milestone connected with the purchase of Glioblast (acquisition of GDC-0084). This led to a net cash outflow of A$0.5m for the year.

Although Kazia reported income of A$1.5m (vs A$13m in FY18) this was mostly a tax rebate. In FY18 there was a large legal settlement (A$8.4m) with Noxopharm and a further (A$2.2m) tax rebate plus non-cash items and grants. Currently, Kazia does not have partnering income. We have now treated the FY18 Noxopharm settlement as an exceptional item to give a clearer picture of true costs. Fewer non-cash items were charged in FY19 vs FY18 but a fair value change of A$1.8m was made (A$1.1m in FY18). On this analysis, management carefully controlled cash costs in FY19. We still project higher cash costs in FY20 and FY21 as larger clinical trials need to be funded. The projected loss appears to reduce because no non-cash adjustments are included in the forecast.

We expect year-end cash to be sufficient to support operations through H2 CY19 but some further funding will be needed by Q4 CY19 as any partnering deals are probably not before H2 CY20. We estimate Kazia will need additional funds of A$15–20m from mid-CY20 to finance the GDC-0084 Phase IIb GBM study planned to start probably in mid CY20. We have not assumed funding for a Phase II Cantrixil study. To cover this, we have assumed additional long-term debt of A$5m in FY20 and a further A$11m in FY21 in our forecasts, but this could be from equity or partnering.