MRTX - Mirati's Krazati: A Strong Competitor In The KRAS G12C-Mutated NSCLC Market

2023-03-20 03:43:10 ET

Summary

• Mirati Therapeutics specializes in developing cancer treatments targeting genetic and immunological causes, with Krazati being their first FDA-approved product.
• Krazati is used to treat adult patients with KRAS G12C-mutated locally advanced or metastatic non-small cell lung cancer (NSCLC).
• In the KRYSTAL-1 study, Krazati demonstrated a 43% objective response rate and a median duration of response of 8.5 months.
• Krazati's ability to penetrate the blood-brain barrier is a potential differentiator, as approximately 40% of patients with KRAS G12C-mutated NSCLC have central nervous system metastases.
• Despite market pessimism, Krazati could capture a meaningful share of the 2L KRAS G12C-mutated NSCLC market, potentially achieving blockbuster status across other KRAS-related cancers.

Introduction

Mirati Therapeutics ( MRTX ) is a company that specializes in developing new treatments for cancer by targeting the genetic and immunological causes of the disease. Their first product, Krazati (adagrasib), received FDA approval in December 2022 and is used to treat adult patients with KRAS G12C-mutated locally advanced or metastatic non-small cell lung cancer who have undergone at least one prior systemic therapy. Krazati is administered orally and is currently being tested as a standalone treatment or in combination with other drugs. In addition to Krazati, Mirati has other research programs underway that focus on developing selective kinase inhibitors and targeted inhibitors of specific molecular drivers of cancer.

Financials

Before we dig in, let's review Mirati's latest financial report :

Mirati Therapeutics reported cash, cash equivalents, and short-term investments of approximately $1.1 billion as of December 31, 2022. Net product revenue for the fourth quarter and full-year 2022 was $0.7 million, driven by sales of KRAZATITM, which received FDA approval in December 2022. The company also reported license and collaboration revenue of $0.2 million for the fourth quarter and $11.7 million for the full-year 2022. Research and development expenses were $141.2 million for the fourth quarter and $531.6 million for the full-year 2022, while selling, general, and administrative expenses were $70.8 million for the fourth quarter and $239.8 million for the full-year 2022. The company reported a net loss of $202.5 million for the fourth quarter and $740.9 million for the full-year 2022.

KRAS G12C-Mutated Non-Small Cell Lung Cancer

KRAS G12C-mutated non-small cell lung cancer [NSCLC] is characterized by a specific mutation in the KRAS gene, leading to tumor growth and progression. This mutation is found in about 13% of NSCLC patients and is associated with poor prognosis and limited treatment options. Current available treatments for this patient population include platinum-based chemotherapy, immune checkpoint inhibitors, and other targeted therapies. However, these treatments are often associated with significant side effects and limited efficacy, highlighting the need for novel targeted therapies like Krazati.

Krazati Shows Promising Efficacy in KRYSTAL-1 Study for KRAS G12C-Mutated NSCLC Patients

The efficacy of adagrasib ( Krazati ) was evaluated in the KRYSTAL-1 study, a multicenter, single-arm, open-label expansion cohort study involving 112 patients with locally advanced or metastatic KRAS G12C-mutated NSCLC who had previously received platinum-based chemotherapy and immune checkpoint inhibitors. The major efficacy outcome measures were confirmed objective response rate [ORR] and duration of response [DOR] as assessed by blinded independent central review using RECIST v1.1 criteria. Krazati demonstrated an ORR of 43% and a median DOR of 8.5 months. Among the responders, 58% experienced a response lasting at least six months.

Comparing Krazati & Lumakras

Amgen's ( AMGN ) sotorasib ( Lumakras ) is another FDA-approved treatment for KRAS G12C-mutated NSCLC (May 2021). The efficacy of Lumakras was evaluated in the CodeBreaK 100 study, involving 124 patients who had received prior immune checkpoint inhibitors and/or platinum-based chemotherapy. The study reported an ORR of 36% and a median DOR of 10.0 months.

Since their regulatory reviews, the data has become more comprehensive. Although the drugs seem comparable, I believe Lumakras elicits more profound and sustained responses.

Both drugs represent promising treatment options for 2L KRAS G12C-mutated NSCLC patients who have exhausted other available therapies. Currently, UpToDate recommends "either Lumakras or Krazati" for 2L KRAS G12C-mutated NSCLC.

Importance of CNS Penetration in Treating KRAS G12C-Mutated NSCLC Brain Metastases

During the latest earnings call, management exuded confidence and emphasized the distinctive features of Krazati. They specifically highlighted the following points:

Our interactions with physicians have been positive on our key messages centered around a 44% response rate and 14.1 months of median overall survival as demonstrated in a pooled analysis of Phase 1 and Phase 2 non-small cell lung cancer patients and low treatment-related discontinuation rates are resonating well. ( ...) Additionally, data showing KRAZATI's activity in patients with central nervous system metastasis has been favorably received by physicians who recognize the importance for the approximately 40% of patients known to have CNS metastases.

Mirati Q4 Earnings Call

The safety information I summarized in the table earlier was obtained from the labels, so it's possible that Mirati management combined data from multiple trials when referencing "low treatment-related discontinuation rates." Additionally, pooling data from two different trials to determine median overall survival and response rates can create confusion when comparing two drugs. A more appropriate comparison can be made by solely analyzing the two registrational trials, which indicates that the efficacy of the two drugs is quite similar. However, Lumakras holds a slight advantage, in my view, due to the more prolonged response duration and higher percentage of complete responses. Subsequently, the most significant differentiator between the two drugs, in Mirati's perspective, should be Krazati's ability to penetrate the blood-brain barrier.

Approximately 40% of patients with KRAS G12C-mutated NSCLC are known to have central nervous system [CNS] metastases, which include brain metastases. This highlights the importance of developing treatments that can effectively target and penetrate the blood-brain barrier to manage brain metastases in this patient population.

According to The New England Journal of Medicine , Krazati, in preclinical studies, has demonstrated the ability to penetrate the CNS, partly due to its capability to cross tissue and inhibit P-glycoprotein-mediated efflux. A retrospective analysis of patients with stable CNS metastases showed that adagrasib had clinical activity, as seen by a 33.3% intracranial objective response rate and a median intracranial confirmed objective response duration of 11.2 months, with a median intracranial progression-free survival of 5.4 months. Meanwhile, sotorasib was evaluated by RANO-BM in 16 patients with KRASG12C-mutated NSCLC with stable, treated CNS metastases, resulting in an intracranial response rate of 13%.

Given the high incidence of CNS metastasis in KRAS G12C-mutated NSCLC, and the possibility of Mirati's team highlighting this aspect to physicians, I anticipate that healthcare providers will consider this factor while recommending either Krazati or Lumakras.

My Analysis & Recommendation

The market's pessimism towards Mirati's potential in KRAS G12C-mutated NSCLC appears unwarranted. While Amgen's drug initially appears to be superior, the similarities in efficacy between the two drugs make it difficult to draw any conclusions. Krazati should see considerable use, particularly in patients with brain metastases. 2023 will mark Krazati's first year on the market, with Lumakras earning $91 million in 2021 (after FDA approval in May) and $285 million in 2022. I predict that Krazati will capture at least 33% of the 2L KRAS G12C-mutated NSCLC market, which is expected to exceed $1 billion in the near future. Both Amgen and Mirati are also conducting clinical trials for first-line use, and KRAS is implicated in many other cancers.

KRAS G12C mutations are present in approximately 14% of NSCLC adenocarcinoma patients, 3-4% of colorectal cancer ("CRC") patients, 2% of pancreatic cancer patients, as well as smaller percentages of several other difficult-to-treat cancers.

Mirati

Although Lumakras and Krazati share many similarities, there are some pharmacological differences between the two drugs, such as Krazati's longer half-life of 23 hours (compared to Lumakras' 5 hours) and dose-dependent extended exposure. These subtle differences may have varying effects on different types of cancer. In my view, both Lumakras and Krazati have the potential to be blockbuster drugs.

I recommend a "Buy" on Mirati, anticipating that Krazati will capture a meaningful share of the 2L KRAS G12C-mutated NSCLC market and achieve blockbuster status across other KRAS-related cancers.

Risks to Thesis

1. Competition with Lumakras: Mirati's Krazati faces direct competition with Amgen's Lumakras, which has demonstrated a slightly better efficacy profile in terms of response duration and complete response rates. This could lead to Lumakras capturing a larger market share.
2. High R&D and operational expenses: Mirati reported research and development expenses of $531.6 million and selling, general, and administrative expenses of $239.8 million for the full-year 2022, leading to a net loss of $740.9 million. These high expenses could continue to weigh on the company's financial performance.
3. Uncertainty in capturing market share: While I predict that Krazati will capture at least 33% of the 2L KRAS G12C-mutated NSCLC market, this is speculative and dependent on various factors, including competition, physician preferences, and patient outcomes.
4. Unproven efficacy in other cancers: Although KRAS G12C mutations are found in other types of cancer, such as colorectal and pancreatic cancer, the efficacy of Krazati in these cancers has not yet been proven. The success of Krazati in these other cancer types is uncertain, which could impact the company's long-term growth potential.
5. Regulatory and clinical trial risks: Mirati is currently conducting clinical trials for the first-line use of Krazati and other cancer types. The outcomes of these trials and subsequent regulatory approvals are uncertain and could impact the market potential of Krazati.

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