ZYME - Jazz Commits Long-Term To Zanidatamab For Gastroesophageal Adenocarcinoma

Summary

• Jazz Pharmaceuticals, which is known for its Oxybate drug line used to treat narcolepsy, is seeking to diversify its product portfolio beyond Oxybate in anticipation of a revenue decline.
• After encouraging preliminary data for the treatment of first-line metastatic, HER2+ gastroesophageal adenocarcinoma, Jazz paid $325 million to Zymeworks to license zanidatamab.
• The preliminary data shows favorable comparisons with current treatments, including the recent introduction of pembrolizumab immunotherapy.
• Zanidatamab has the potential to help Jazz diversify its drug offerings. As the data for zanidatamab matures and Jazz continues to expand its product offerings beyond Oxybate, the company is currently rated as a "Hold."

Introduction into Jazz Pharmaceuticals and Zanidatamab

Jazz Pharmaceuticals ( JAZZ ) is a global biopharmaceutical company that specializes in the development of innovative medicines to treat serious diseases. The company's portfolio includes products for the treatment of narcolepsy, cancer-related breakthrough pain, and other rare diseases. In recent years, Jazz Pharmaceuticals has been expanding its oncology pipeline and focusing on developing new therapies for the treatment of various cancers.

One of Jazz Pharmaceuticals' most promising drug candidates is zanidatamab, an experimental drug designed to treat gastroesophageal adenocarcinoma [GA]. Zanidatamab is a bispecific antibody, licensed from Zymeworks ( ZYME ), that targets both HER2 and HER3, two proteins that are overexpressed in many cancers, including GA. Zanidatamab is being evaluated in clinical trials as a first-line treatment for advanced GA in combination with chemotherapy.

Zymeworks and Jazz Partner for Zanidatamab Development and Commercialization

Jazz has recently signed a License and Collaboration Agreement with Zymeworks in October 2022 to develop and market zanidatamab worldwide, except in certain countries outside of the US/EU. To secure its license and other rights, Jazz paid an initial sum of $50.0 million to Zymeworks, followed by an additional $325 million after receiving encouraging data for gastroesophageal adenocarcinoma. As part of the agreement, Zymeworks is eligible to receive up to $1.76 billion in milestone payments and tiered royalties ranging from 10% to 20% on Jazz's annual net sales.

Financials

Let's first look at Jazz's latest financial report . The GAAP net loss of the company was $19.6 million or $0.31 per diluted share in 3Q22, compared to $52.8 million or $0.86 per diluted share in 3Q21. Total revenues for 3Q22 were $940.7 million, up 12% from the same period in 2021, primarily due to the increase in neuroscience net product sales, which increased 10% to $711.4 million. Additionally, the company's oncology net product sales increased 21% to $223.4 million in 3Q22.

Jazz has $5.8 billion in debt (thanks to the $7.2 billion GW Pharmaceuticals acquisition in 2021) and $899 million in cash, cash equivalents, and investments.

Gastroesophageal Adenocarcinoma: An Overview of Current Treatment Options and Market Potential

Gastroesophageal adenocarcinoma is a type of cancer that affects the stomach and lower esophagus and is relatively common. According to the American Cancer Society, there were an estimated 27,600 new cases of gastric cancer in the United States in 2021, which includes adenocarcinomas of the gastroesophageal junction. The global market for gastroesophageal adenocarcinoma is expected to surpass $3 billion, according to GlobalData . It is possible that a drug utilized in first-line therapy for this cancer could generate more than $500 million in the US and EU markets, although this would depend on various factors such as the drug's efficacy, pricing, and market competition.

A significant portion of GA cases are associated with genetic predispositions, such as HER2 gene amplification or HER3 overexpression. HER2 gene amplification occurs in approximately 20% of GA cases and is associated with a poor prognosis. In addition to HER2, other genetic predispositions, such as mutations in the KRAS, PIK3CA, and TP53 genes, have also been associated with poor outcomes in GA. There is a clear need for new treatments that can improve outcomes for patients with advanced GA, especially those with HER2 amplification or other genetic predispositions. The historical median overall survival for these patients has been poor, with approximately 12 months. Therefore, further research and development of new therapies are needed to address the unmet medical need in GA.

The standard treatment for GA often involves a combination of chemotherapy and targeted therapy, with trastuzumab being the most commonly used targeted therapy. Trastuzumab is an antibody that specifically targets the HER2 protein and has been shown to improve survival in patients with HER2-positive GA.

Other currently available treatments for GA include radiation therapy and immunotherapy. Immunotherapy (discussed more in detail later on), which works by stimulating the patient's own immune system to attack the tumor, has also shown promise in GA.

Zanidatamab: A Promising Bispecific Antibody for the Treatment of Gastric Adenocarcinoma

Zanidatamab is a bispecific antibody that targets both HER2 and HER3. This is particularly useful for gastric adenocarcinoma for several reasons. Firstly, HER2 is overexpressed in around 20% of GA cases, which makes it a good target for treatment. HER3 is another important target in GA because it plays a key role in driving tumor growth and resistance to treatment. HER3 is often co-expressed with HER2 in GA, and the two proteins interact to promote tumor growth and survival. Zanidatamab, by simultaneously targeting both HER2 and HER3, may provide a more effective way to inhibit tumor growth and overcome resistance to treatment. Trastuzumab, a monoclonal antibody that targets HER2, is currently used as a standard treatment for HER2-positive GA.

Trastuzumab and zanidatamab are both HER2-targeted monoclonal antibodies, but they differ in their structure and binding characteristics. Trastuzumab targets the subdomain IV of the HER2 receptor and blocks HER2 signaling by preventing the formation of HER2 homodimers and HER2-mediated heterodimers with other ErbB family members. In contrast, zanidatamab is a biparatopic antibody that targets two non-overlapping epitopes on the HER2 receptor, one in subdomain IV and the other in subdomain II. This dual targeting approach is thought to enhance the potency and efficacy of zanidatamab compared to trastuzumab.

Additionally, zanidatamab has been engineered to have a modified Fc region that enhances its binding to immune effector cells, such as natural killer cells and macrophages, leading to increased antibody-dependent cellular cytotoxicity. This feature is not present in trastuzumab, which may explain the superior efficacy observed with zanidatamab in the study mentioned earlier.

Zanidatamab Shows Promising Results in Combination with Chemotherapy as a First-Line Treatment for HER2-Expressing mGEA

The ongoing, open-label Phase 2 study ( NCT03929666 ) evaluating zanidatamab in combination with chemotherapy as a first-line treatment for patients with advanced HER2-expressing mGEA has demonstrated highly active treatment regimens. The study enrolled 46 patients and the data show that the combination of zanidatamab with standard chemotherapy is a promising first-line therapy for HER2-positive mGEA.

The results showed an 84% 18-month OS rate, an 88% 12-month OS rate, and a median overall survival that had not yet been reached after 26.5 months of study follow-up. These outcomes compare favorably to historical outcomes for patients with advanced GA. The confirmed objective response rate was 79%, and the disease control rate was 92%, with three patients achieving complete response among 38 response-evaluable patients. These results suggest that zanidatamab could serve as a promising first-line treatment option for HER2-positive mGEA patients, with superior efficacy data compared to other HER2-targeted treatments like trastuzumab.

However, all patients in the zanidatamab dataset experienced at least one treatment emergent adverse event, with a high percentage (72.7%) experiencing grade 3 or higher TEAEs, and all patients experiencing treatment related TEAEs (trTEAE). A majority of patients (60.6%) also experienced grade 3 or higher trTEAEs, and two patients experienced trTEAEs leading to death (6.1%). Additionally, immune-mediated AEs occurred in 27.3% of patients, with 21.2% experiencing grade 3 or higher imAEs.

Side note: trTEAEs (Treatment-Emergent Adverse Events) refer to adverse events that occur during or after treatment but may not be related to the treatment being studied, while trTAEs (Treatment-Related Adverse Events) refer to adverse events that are directly related to the treatment being studied.

Pembrolizumab Recommended as Initial Treatment with Trastuzumab Plus Platinum-Based Chemotherapy after KEYNOTE-811 Data

After exceptional data from the multicenter phase III KEYNOTE-811 trial, pembrolizumab is now recommended as the initial treatment option for patients with HER2-positive advanced gastric or EGJ adenocarcinoma. The trial involved 692 patients who had not received systemic therapy for advanced disease and had no autoimmune disease requiring systemic therapy within two years or medical condition requiring immunosuppression. Patients were randomly assigned to pembrolizumab or placebo given with trastuzumab plus platinum-containing cytotoxic chemotherapy. The trial showed that pembrolizumab, in combination with trastuzumab and platinum-containing chemotherapy, had a significantly higher objective response rate (74 percent versus 52 percent), and more patients in the pembrolizumab group had an ongoing response at ?6 months.

In terms of safety, a higher percentage of patients in the pembrolizumab group experienced any grade adverse events compared to the placebo group, but the incidence of adverse events leading to discontinuation of any drug was similar between the two groups. The percentage of patients experiencing grade 3-5 adverse events was similar between the two groups, and fewer patients in the pembrolizumab group experienced serious adverse events compared to the placebo group. However, a higher percentage of patients in the pembrolizumab group experienced immune-mediated events and infusion reactions.

Differences between Trials Evaluating Pembrolizumab and Zanidatamab as First-Line Therapy for HER2-Positive Advanced Gastric or Gastroesophageal Junction Adenocarcinoma

There are several notable differences between the trials evaluating pembrolizumab and zanidatamab as first-line therapy for HER2-positive advanced gastric or gastroesophageal junction adenocarcinoma.

Firstly, there is a vast difference in the number of patients enrolled in the trials, with 264 patients in the pembrolizumab trial and only 46 patients in the zanidatamab trial.

Secondly, the treatment regimens used in the trials differ significantly. The pembrolizumab trial utilized a combination of pembrolizumab, trastuzumab, and platinum-containing chemotherapy, while the zanidatamab trial combined zanidatamab with standard chemotherapy.

Thirdly, the primary endpoints of the trials differ, with the pembrolizumab trial measuring objective response rate, while the zanidatamab trial focused on overall survival.

Lastly, the efficacy data reported in the trials are different, with a lower objective response rate of 74% for pembrolizumab compared to the confirmed objective response rate of 79% for zanidatamab. The zanidatamab trial also reported an 18-month overall survival rate of 84% and a median overall survival not yet reached, suggesting a longer duration of response compared to the median duration of response of 10.6 months for pembrolizumab.

Regarding safety, both datasets suggest a high incidence of adverse events associated with these treatments. Pembrolizumab had a higher incidence of immune-mediated events, while zanidatamab had a high incidence of treatment-related adverse events, with a significant proportion being grade 3 or higher. However, the safety profiles of these treatments cannot be directly compared due to the different formats of the datasets and the different patient populations being studied.

Side note: It's important to note that the sample size in the zanidatamab trial is much smaller than the pembrolizumab trial, which may limit the generalizability of the findings. Furthermore, the patient characteristics and treatment histories are not directly comparable between the two trials, which makes it difficult to draw direct comparisons between the two drugs. As with any new treatment, further studies with larger sample sizes and more diverse patient populations are needed to better understand the safety and efficacy of these therapies.

Implications and Future Outlook

The data presented suggests that zanidatamab may be a promising first-line treatment option for patients with HER2-positive advanced gastric or gastroesophageal junction adenocarcinoma. The confirmed objective response rate of 79% and disease control rate of 92% with a median overall survival not yet reached and a median duration of study follow-up of 26.5 months are favorable compared to historical outcomes for advanced GA and other HER2-targeted treatments.

It is worth noting that while pembrolizumab has shown significant improvements in objective response rate compared to chemotherapy alone, the median duration of response was shorter than that of zanidatamab. Additionally, zanidatamab has shown high efficacy in patients with HER2-positive mGEA, a subtype of advanced gastric or gastroesophageal junction adenocarcinoma.

However, due to the small sample size and differences in trial design, caution should be taken in generalizing the results of the zanidatamab trial to other patient populations. Further studies and clinical trials are needed to confirm the safety and efficacy of zanidatamab in this patient population. Nonetheless, zanidatamab shows potential as a valuable addition to the treatment options available for patients with HER2-positive advanced gastric or gastroesophageal junction adenocarcinoma who have not received systemic therapy for advanced disease, particularly for those who may not be candidates for pembrolizumab or who do not respond to it.

Zymeworks is currently enrolling over 700 participants for the phase 3 HERIZON-GEA-01 trial ( NCT05152147 ) to assesses the efficacy of zanidatamab, in combination with physician's choice of chemotherapy with or without the PD-1 inhibitor tislelizumab, as a first-line treatment option for patients with advanced HER2+ metastatic GEA. The trial's estimated primary completion date is June 2024.

Jazz Pharmaceuticals Looks to Diversify Beyond Oxybate with Acquisition of Zanidatamab, but Risks Loom

Jazz Pharmaceuticals, a company known for its Oxybate drug line for treating narcolepsy, is now looking to diversify its product offerings beyond Oxybate due to the anticipated decline in revenue generated by the entry of generic drugs in the market. This decline could be significant and may pose a substantial risk to the company's revenue stream.

To address this challenge, Jazz recently acquired zanidatamab, a drug that treats second-line biliary tract cancers and first-line gastroesophageal adenocarcinomas. This acquisition may help the company accelerate its diversification efforts. However, there are risks associated with this strategy that Jazz must navigate.

Firstly, regulatory approval for zanidatamab may take at least 2-3 years to materialize. This timeline could delay Jazz's efforts to diversify its product offerings and could pose a risk to the company's revenue in the interim.

Moreover, Jazz's decision to commit to zanidatamab is based on encouraging preliminary data on the drug's combination with chemotherapy as a first-line therapy for HER2-expressing metastatic gastric or gastroesophageal junction adenocarcinoma (mGEA). While this is promising, efficacy data may have to hold up in larger populations, which may be difficult to achieve relative to the pembrolizumab combination therapy for 1L GA. This means that there is a risk that the data may not support the use of zanidatamab as a first-line therapy for HER2-expressing mGEA patients. Additionally, the possibility of significant adverse side effects from zanidatamab may emerge as the duration of treatment extends to more patients.

Despite the risks associated with Jazz's diversification efforts, the acquisition of zanidatamab may prove to be a valuable asset for the company. As such, my current recommendation for Jazz is to "Hold" as the company's prospects for product offerings beyond narcolepsy and seizures with Epidiolex continue to develop.

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