DCPH - Deciphera Pharmaceuticals: In The Middle Of A Major Comeback (Upgrade)

2023-03-25 08:00:00 ET

Summary

• Last year, Deciphera Pharmaceuticals, Inc. was almost destroyed by a trial failure.
• This year, Deciphera Pharmaceuticals has demonstrated huge benefit in a subpopulation, and also progressed the rest of its pipeline.
• The cash position is decent, and I expect some upside this year.

Since I covered Deciphera Pharmaceuticals, Inc. (DCPH) in a neutral article a year ago, the stock is up 75%. I said that after ripretinib's trial failure, it will take time for the stock to recover. DCPH is still far from those pre-failure heights, but DCPH stock has slowly gained some ground in the last twelve months.

In 2020, the FDA approved ripretinib as a fourth-line treatment for advanced gastrointestinal stromal tumor ((GIST)). The small company secured a number of achievements with this approval. This was one of the first approvals under the real time oncology review pathway, which vastly expedites approval for promising molecules. Second, on that same day, the company rejected close rival Blueprint's AVAYAKIT for the same indication, making it a resounding victory for ripretinib.

4th line GIST, however, is a relatively small market compared to higher lines. The molecule made $40mn in the first year of approval, but if it was to reach anywhere near the $1.6bn in annual revenue predicted by the company, it had to succeed in the then-ongoing phase 3 trial in second line GIST, and get approved.

This is where it failed last year. Despite promising data in an earlier trial, the phase 3 trial did not work out for Deciphera. I discussed some of the nuances here. The trial compared ripretinib to sunitinib on PFS, and there must have been a certain expectation about sunitinib's PFS from past trials. However, as an article I quoted there presciently noted:

…Current GIST disease extension and volume after imatinib failure is less bulky than it was back in 2006 when sunitinib was first tested-meaning that current sunitinib mPFS may be higher than that described in the original trial.

In the trial, mPFS was 8 and 8.3 months for ripretinib and Sutent respectively. In 2006, sunitinib's trial yielded 24.1 weeks of mPFS. It is true that a lot of water has passed down the bridge on whatever river you live near in these 15 years. So, it is futile comparing trials hoping for an exact conclusion. But that 25% PFS extension was telling on ripretinib's results. The trial failed.

In many respects, the trial did show the superiority of ripretinib - the AE profile, better tumor reduction in KIT exon 11 subtype patients than sunitinib, and so on. However, since the trial failed on efficacy, there was little chance of approval.

However, the company has fought back. In August, the company presented data that focused on the non-inferiority of repritinib over sunitinib, as well as the differentiated safety profile with fewer grade 3/4 adverse events which makes repritinib attractive.

As the company stated :

"These full Phase 3 INTRIGUE study results continue to deepen our understanding of QINLOCK and its place in the GIST treatment landscape," said Matthew L. Sherman, M.D., Chief Medical Officer of Deciphera. "Although the INTRIGUE study did not meet its primary endpoint of superiority in PFS compared to sunitinib for patients in the post-imatinib setting, the efficacy of QINLOCK was comparable to sunitinib. In addition, QINLOCK had a more favorable safety profile than sunitinib with fewer Grade 3/4 adverse events and patients in the QINLOCK arm reported less deterioration in role functioning and better outcomes on several other key patient-reported outcome measures of tolerability compared to sunitinib."

Patients with a KIT exon 11 primary mutation had a poorer mPFS from sunitinib and a well differentiated ORR between the two drugs. In January, the company presented ctDNA analysis from this study which brought out the differences much more strongly. Data showed :

Median Progression Free Survival for QINLOCK of 14.2 Months Versus Sunitinib of 1.5 Months; Hazard Ratio of 0.22, nominal p value <0.0001 -

- Objective Response Rate of 44.4% for QINLOCK Versus 0% for Sunitinib; nominal p value 0.0001 -

- Median Overall Survival for QINLOCK was Not Estimable Versus 17.5 Months for Sunitinib; Hazard Ratio of 0.34, nominal p value 0.0061 -

- Company Plans to Initiate the INSIGHT Pivotal Phase 3 Clinical Study in the Second Half of 2023 -

These are patients with mutations in KIT exon 11 and 17/18 only. The difference here between the two drugs is obvious and highly significant. Clearly, this is the subgroup Deciphera should target. This ctDNA analysis also garnered them a breakthrough therapy designation which will be useful for the INSIGHT trial. More importantly, NCCN Guidelines included ripretinib as a Preferred Regimen for Second-Line GIST Patients intolerant to Sunitinib. Thus, with the NCCN guidelines in hand, the company's battle for 2nd line GIST is already half won.

The company has progressed with its other programs as well. Last month, they completed enrollment in a pivotal phase 3 study of vimseltinib in TGCT or Tenosynovial giant cell tumor, a rare, locally advanced neoplasm with 43 people per million people getting it globally . Thus, in the US, there are some 12-1500 patients. Phase 1/2 data, published earlier, showed :

In September 2022, Deciphera presented updated results from the ongoing Phase 1/2 study of vimseltinib in TGCT at the European Society for Medical Oncology (ESMO) Congress. The results showed objective response rates of 69% in Phase 1, 53% in Phase 2 Cohort A, and 46% in Phase 2 Cohort B, with a demonstrated clinical benefit rate of 100% across all Phase 1/2 patients. Preliminary patient-reported outcome data in the Phase 2 portion demonstrated clinically meaningful improvements in pain and stiffness at week 25 compared to baseline. Treatment with vimseltinib across all Phase 1/2 patients was well-tolerated

Topline data will be published by the end of 2023 and will lead to an NDA.

Financials

DCPH has a market cap of $1.2bn and a cash reserve of $339mn as of December. In January, the company launched a $125mn public offering. Total revenue for the fourth quarter of 2022 was $36.3 million, and for the entire year it was $134mn, the bulk of which came from QINLOCK sales. Research and development expenses for the fourth quarter of 2022 were $48.1 million, COGS was $3.2mn and Selling, general, and administrative expenses for the fourth quarter of 2022 were $32.2 million. At that rate, the company has enough cash to last it 5-6 quarters.

Bottom Line

Deciphera Pharmaceuticals, Inc. has picked itself up from the ruins of the failed INTRIGUE trial quite strongly, which was why the stock is up so much since my coverage last year. There's still a long way to go, and things look good right now. The company stock is now relatively de-risked, and there are two upcoming milestones in the mid-term, in the form of pivotal data in the TGCT indication, and the launch of the new phase 3 trial in 2nd line GIST, in a subpopulation where ripretinib has already shown efficacy. The only downside is that sunitinib is now generic, so there's going to be pricing pressure for ripretinib. However, its clearly differentiated profile in certain subgroups and better safety will help it gain some traction. Considering all of this, I think Deciphera Pharmaceuticals, Inc. stock is a buy.

For further details see: