CTI BioPharma (CTIC) – Down The Vonjo Path
CTI BioPharma (CTIC) is a clinical-stage biopharma company that is focused on developing and commercializing novel therapies that address unmet medical needs for patients suffering from blood-related cancers. Pacritinib, the company’s only clinical-stage asset, is being developed for the treatment of myelofibrosis patients. Myelofibrosis, or MF, as defined by The Mayo Clinic, is an uncommon type of bone marrow cancer that disrupts your body’s normal production of blood cells. Myelofibrosis causes extensive scarring in your bone marrow, leading to severe anemia that can cause weakness and fatigue.
Back on March 1st, shares surged higher after announcing that pacritinib obtained FDA accelerated approval for the treatment of patients with myelofibrosis and severe thrombocytopenia, defined by a platelet count below 50,000/µL. The decision was backed by data from the pivotal Phase 3 PERSIST-2 study, in which pacritinib was compared against the best available therapy. Pacritinib will be commercialized under the brand name Vonjo.
Per Stifel, the label doesn’t have any black box warnings, and they think safety is generally in-line with their expectations, though there are warnings flagging certain cardiac and hemorrhage events observed in a few patients. The most common adverse reactions noted are diarrhea, thrombocytopenia, nausea, anemia, and peripheral edema. The warnings are serious, though not entirely unexpected.
In terms of addressable market opportunity, the company said this has the potential to address a $3B MF market based on a population on 21,000 MF patients of whom around 7,000 are expected to have platelet counts of ≤50 x 109 /L and ~14,000 ≤100 x 109 /L.
JMP Securities analyst Reni Benjamin also points out that this approval triggered a $60M milestone payment from DRI Healthcare. The payment is a part of the larger deal with DRI wherein CTI Biopharma is eligible for a total of $135M ($50M received upon closing of the deal). CTIC will pay royalties to DRI on pacritinib net sales in the U.S. “As a reminder, tiered royalty rates are 9.6% for the first $125MM in annual U.S. net sales, 4.5% between $125-$175MM, 0.5% between $175MM-$400MM, and none above $400MM. CTI will be entitled to an additional $25MM in milestone payments if certain sales milestones are met.”
Following the FDA approval, management hosted a call with analysts which first offered some clarity on the pricing strategy. For Vonjo, the monthly price will be $19,500, which is at a premium to Jakafi (developed by Incyte in collaboration with Novartis) but below Inrebic (developed by Celgene).
Stifel analyst Benjamin Burnett would say, “In our view, the Inrebic launch hasn’t been overly successful. This could be partly due to the pandemic, but we also think price, and the lack of clear differentiation from Jakafi, has played a bigger role. We therefore view Vonjo’s price as a positive. In our opinion, premium pricing over Jakafi is warranted as Vonjo is suitable for a unique subset of MF patients who are largely unsuited for Jakafi, and thus we don’t expect this to be a headwind to adoption. Based on this price, and assuming a gross-to-net that’s in line with Jakafi, which we understand was initially around ~10% and then grew to mid-teens at steady state, we estimate US sales of $29M, $216M, and $368M in 2022, 2023 and 2024, respectively. On the call, mgmt. estimated that there will be 90% coverage of medicare lives in the first 6 months and 50% coverage for the commercial lives. By 12 months, CTIC estimates 90% coverage across both medicare and commercial.”
New Treatment Guidelines
On April 14th, the company announced the inclusion of Vonjo in updated National Comprehensive Cancer Network (NCCN) guidelines for myeloproliferative neoplasms. Within the new guidelines, Vonjo is now recommended as a treatment option for myelofibrosis patients with platelet counts of less than 50 x109 /L (which is equivalent to 50,000/µL) that aren’t candidates for transplant. This is a category 2A recommendation, and is in-line with Vonjo’s FDA label. Additionally, the guidelines indicate to consider Vonjo for patients with platelet counts ≥50 x109 /L after prior JAK inhibitor treatment in the second line if patients are not transplant candidates. As Stifel understands it, “the recommendation to consider Vonjo in the second-line setting above 50 x109 /L platelets expands on the approved indications in the FDA label and opens the door to a broader adoption of the drug.”
Channel Checks
Just two days ago, Stifel would reiterate their Buy rating after positive feedback from experts on Vonjo, especially as it relates to demand in the community setting. They would increase their sales forecast and their price target to $6.20/share.
The analyst said he spoke with two experts in hematologic oncology: One from MD Anderson Cancer Center and the second from a regional non-academic hospital. Both physicians indicated that the NCCN guidelines mentioned earlier were sufficient to motivate some broader use, particularly among patients who no longer respond well to Jakafi and/or are on low-dose Jakafi due to toxicity fears. “In response to this, we’ve updated our model to include Vonjo utilization in the 50,000-100,000 platelet/uL population with a 100% POS (up from 25% prior).”
In terms of initial uptake, both physicians offered positive data points on the initial uptake of Vonjo. Since FDA approval, their tertiary care physician has advised that Vonjo be used in 3 patients that he co-manages with community doctors, while their physician in a regional hospital highlighted his intent to imminently convert about a third of his patients (he says 4-5 patients are slated for Vonjo). “Commentary was overall highly positive, and so we’ve increased Vonjo sales estimates in our model to $6.3M, $15.2M, and $28.7M in Q2 – Q4 2022, respectively.”
