Oncothyreon Nabs $10M, Pays $10M, For Array Biopharma Cancer Drug

Xconomy Seattle — 

[Updated: 6:35 am PT 5/31] Seattle-based Oncothyreon disappointed a lot of people last year who were betting that it had found a promising new immunotherapy for patients with lung cancer. But even when that drug failed in December, the company still had plenty of cash left, and it is using some of the money to obtain a new breast cancer drug candidate from Boulder, CO-based Array Biopharma.

Oncothyreon (NASDAQ: ONTY) said today it has agreed to pay $10 million upfront to Array (NASDAQ: ARRY), and agreed to pick up the tab for clinical trials to prove the concept behind an Array compound called ARRY-380, which is supposed to go after the well-known molecular target known as HER2. Under the deal, Oncothyreon has gotten the right to co-promote the drug in the U.S., and will get an equal share of the U.S. profits, plus a royalty stream outside the U.S. that amounts to a 50 percent share of the profits in those territories.

Separately, Oncothyreon announced today it has sold another 5 million shares of stock, and 5 million warrants to buy future shares, to Biotechnology Value Fund, for a net fundraising haul of $9.8 million—enough to pay the upfront fee to Array.

The Array partnership represents a shot at diversification for Oncothyreon, which lost more than half its stock value in December following the failure of Stimuvax, an immunotherapy for lung cancer. The company has a next-generation version of that immune-booster in its pipeline, plus a compound designed to work against the PI3 kinase cancer pathway—one of the hottest and most competitive arenas in cancer biology. By partnering with Array Biopharma to develop its anti-HER2 molecule, Oncothyreon is hoping it can find a niche in another crowded sector for cancer R&D, led by giants like Roche/Genentech and GlaxoSmithKline.

[Updated comments from Kirkman] “This is the only small molecule that’s a specific inhibitor of HER2, and we think it will have a tolerability profile that will distinguish it from other small molecules,” says Oncothyreon CEO Bob Kirkman.

About one out of every five women with breast cancer has a form of disease in which HER2 proteins are overexpressed, which makes them good candidates for a variety of anti-HER2 targeted cancer drugs that have emerged over the past 15 years. Genentech/Roche blazed the trail here in 1998 with an injectable antibody drug. Its first big hit was with trastuzumab (Herceptin), and it has more recently developed additional treatments that seek to build on that success—one called pertuzumab (Perjeta) and another called trastuzumab emtansine (Kadcyla). GlaxoSmithKline entered the fray in 2007 with a small molecule called lapatinib (Tykerb) that was designed to be taken as an oral pill.

Array is hoping to show that its small-molecule drug candidate against HER2 has an advantage by being more selective for the intended target, and for an ability to hunt down breast cancer cells that have spread to the brain and are especially tough to treat. The company claims its drug is superior to Glaxo’s lapatinib and Puma Biotechnology’s experimental neratinib compound, when compared in mice. About one-third of women with HER2-positive breast cancer end up with tumors that spread to the brain, Oncothyreon and Array said today in a statement.

“That’s an unsolved problem in metastatic breast cancer,” Kirkman says.

Oncothyreon is still working on its other two cancer drug programs, Kirkman says, but he sought to add another compound because, “I don’t think a company can have too many shots on goal,” he says. Oncothyreon is still awaiting results from mid-stage trials of its PI3 kinase inhibitor, and if the data are positive enough to justify further development, the company will likely seek help from a partner to move ahead in that competitive field, Kirkman says.

Investors wrote off the Stimuvax immunotherapy program last December when it failed to reach its main goal of extending lives in a pivotal clinical trial called START that enrolled 1,500 patients. Even so, Kirkman has remained insistent that all is not lost. The company has pointed to a subgroup analysis that suggests the Stimuvax immune-booster offered a survival edge for more than 800 patients who got it along with chemotherapy. Full details are scheduled to be presented next week at the American Society of Clinical Oncology annual meeting.

Most investors have scoffed at that interpretation, because the trial failed to reach its main goal, and they reasoned that Oncothyreon is merely fishing around to find something positive about a failed drug—which small biotech companies often do.

Despite the market perception, Kirkman says he believes the study showed that a protein called MUC-1 is a valid target for cancer immunotherapies. Oncothyreon has engineered a next-generation anti-MUC-1 drug, ONT-10, to have some advantages over Stimuvax, and the company retains 100 percent ownership and control of the next-generation program. “We intend to keep developing it,” he says.

Still, Oncothyreon’s next steps with ONT-10 could be influenced by what Merck Serono decides to do next with Stimuvax. That decision hasn’t been announced. [Updated info from 8-K] Oncothyreon also disclosed in a regulatory filing yesterday that its PI3 kinase inhibitor, in combination with Eli Lilly’s cetuximab (Erbitux), failed to improve tumor shrinkage rates when compared with cetuximab alone in a study of 85 patients.