INCY - CTI BioPharma: Approval Is Great Now There's The Follow Through

• CTI BioPharma's Pacritinib has been conditionally approved.
• It has critical differentiations with Incyte's Jakafi.
• While the potential is huge, cash and some data points are worrying signs.

CTI BioPharma Corp. ( CTIC ) was granted accelerated approval of VONJO or pacritinib for the treatment of adults with myelofibrosis ("MF") with a platelet count below 50 times 10 to 9 per liter. This approval was based on the Phase III PERSIST-2 trial, a study that enrolled myelofibrosis patients with platelet counts less than or equal to 100 times 10 to 9 per liter, making it the only randomized controlled study specifically designed to recruit the cytopenic myelofibrosis population, that is patients with thrombocytopenia and anemia.

Announcing the approval , the company CEO said:

In the U.S., there are approximately 21,000 patients with myelofibrosis, two-thirds of which have cytopenias (thrombocytopenia or anemia), commonly resulting from the toxicity of other approved therapies. Severe thrombocytopenia, defined as a blood platelet count below 50 × 109/L, occurs in one-third of the overall myelofibrosis population, and has a particularly poor prognosis. With the approval of VONJO, we are excited to now be able to offer a new therapy that is specifically approved for patients with cytopenic myelofibrosis. We are fully funded for commercial launch, following our debt and royalty transactions with DRI, and we look forward to providing VONJO, the potential best-in-class therapy for cytopenic myelofibrosis patients, to patients within 10 days.

Incyte's (INCY) Jakafi is also approved for MF patients, though it is approved for patients with a higher platelet count compared to VONJO. Jakafi earned $2.4bn last year, and while exact figures for the MF indication are not known to me, I am guessing that VONJO is looking at a huge market, running into billions of dollars. There are 21,000 MF patients in the U.S., and about a third of them have low platelets where no other therapy is approved. VONJO is priced at $19,500 per month, or $240,000 per year. That is an effective market of nearly $2bn in the U.S. alone. Jakafi's activity against both JAK1 and JAK2 versus pacritinib's focus on JAK2 only, mostly avoiding the problematic JAK1 pathway, gives it an edge.

Like I discussed earlier, high-dose Jakafi at 20mg is effective but toxic, which is where VONJO has its advantage. As company management recently said:

The physician -- the frustration of physicians, as we've said previously, is the dissatisfaction with low-dose rux. It's very common, particularly in the community practice because dose -- the dose has to be altered based on the toxicities seen, and it's -- it can be a complicated management scenario.

What the feedback -- some of the feedback we've got from physicians has been the attractiveness of VONJO is that the drug can be given at full dose without the need for large numbers of dose modifications.

CTIC was also lucky to be able to get VONJO included in NCCN guidelines, which is the largest network of comprehensive cancer treatment centers in the US. Inclusion here means wider propagation and a guarantee of higher sales because most oncologists in the U.S. - even elsewhere - look to the NCCN guidelines for latest updates on standard practices. Although the company still has to complete the PACIFICA trial (topline in 2025) for full approval, things are going well for VONJO so far.

Last month, the company presented PERSIST 1 and 2 data at the European Hematology Association ((EHA)) 2022 Congress. According to Seeking Alpha:

The analysis indicated a similar incidence of bleeding events as well as overall and fatal adverse events for pacritinib and ruxolitinib.

Notably, the cardiac events were more common in patients who received pacritinib, CTIC said, attributing the difference mainly to higher rates of grade 1 peripheral edema on the therapy.

However, a second poster saw similar toxicity profiles for pacritinib and best available therapy, which included Jakafi.

This is something of a sign of trouble because one of pacritinib's differentiating factors is its safer cardiac profile. The full approval will probably count this as a major issue. So the company needs to keep a clean profile for pacritinib if it wants to beat the blockbuster Jakafi.

Financials

CTIC has a current market cap of $715mn and a cash reserve of $97mn, which includes the $60mn they received from DRI Healthcare Trust of Canada. The company also made $2.3mn in revenues in the first few weeks after launch. The company spent some $8mn in R&D and $18mn in G&A. Another $11mn was spent in "other operating expenses." They, thus, have a cash runway of some 3 quarters only. That is dire.

Bottom Line

CTIC has scored an important goal, and pacritinib is now highly de-risked with a solid investment thesis. I am just wondering what they intend to do about that terrible cash position, though. They don't have funds to last them a year, so how are they planning to run the business? If they can resolve the cash problem, I would be very interested in taking a closer look at CTIC stock.

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