APTO EHA21: Did Market Over-React or is APTO too Late for BtK and FLT3?
The market punished APTO (lost ~32% today) on its EHA21 presentation (SEE HERE) mainly on its lead asset, Luxeptinib in certain blood cancers. We discussed the event in this forum post (SEE HERE) and bull/bear case in detail in this forum post (SEEE HERE). Now the questions for investors are as follows:
Did Market Over-React to the Luxeptinib data?
Or is APTO too Late with its BtK and FLT3 inhibitor?
Bull Case
The market over-reacted: APTO continues to demonstrate that Luxeptinib is a promising drug candidate that might be unique in its ability to effectively knock down Btk, FLT3, and SYK activity with an acceptable safety/tolerability. APTO has now demonstrated activity in a CLL patient with over 20% decrease in tumor burden and over 20% reduction in IgM in a Non-Hodgkin's Lymphoma patient (See FIG. 1).
Probably the most impactful data presented today by APTO is the chart (FIG. 1 below) showing that for several patients, there was a continued increase in the tumor burden early after dosing with Lux was initiated (red vertical lines). Then the patient's tumor load reversed course and there was a much larger decrease in tumor burden from the peak tumor burden than is evident from the percent change from baseline plot. If one uses change in tumor load since peak, there would be two other confirmed responses.
Even at these high doses, Lux has not produced a dose-limiting toxicity. Thus, it can be dosed up more, which might provide even more efficacy as other kinases that require more Lux for inhibition, are inhibited. Furthermore, for patients whose tumors continue to increase for weeks after initial dosing, it is worth continued dosing because some of these patients will likely respond with more time on drug. Even if there are quite a few Btk and FLT3 inhibitors later in development or approved, there will be room for Lux for a significant market share of patients who fail all other therapeutic options, where, as APTO has now demonstrated, Lux can help significantly reduce tumor burden.
In sum, APTO's current trials for Lux enroll heavily pretreated relapsed/refractory patients, many of whom have relapsed after prior Btk inhibitor therapy. The fact that Lux shows activity in some of these patients is impressive proof of concept data for Lux and its differentiated mechanism because of its differentiated kinase profile. With more time and even higher dosing, responses will deepen in more patients (including the 6 still currently on drug (See FIG. 2)) and the drug will eventually make its way to market and provide another option for AML and B cell cancer patients who have previously relapsed on many other options.
Bear Case
The market reacted appropriately in reducing the value of APTO by about 33%. Very few responses were observed in B cell cancers even with twice daily dosing at a very high dose (750 mg) cohort. And very few responses were observed in the AML trial, suggesting that Lux's Flt3 activity might not provide much clinical efficacy either, over existing FLT3 inhibitors.
Furthermore, the Btk and Flt3 markets are crowded, as evidenced for example, by the fact that APTO is having trouble recruiting any Btk 483 mutants with the C481S mutation because other non-covalent inhibitors are likely doing quite well with these patients. In addition to those mentioned in our main article (ARQ-531 and LOXO-305), in 2018, these non-covalent Btk inhibitors were in development: Biogen (BIIB-068), Bristol-Myers Squibb (BMS-986142), Genentech (GDC-0853), Roche (RN983) and Impetis (PNQ-154) (Source). Furthermore, current Btk and FLT3 inhibitors are providing the vast majority of the possible treatment benefits of kinase inhibition, and additional BTK, FLT3, and SYK inhibition is not adding much more therapeutic effect. Finally, although APTO keeps reporting that Lux has a good safety profile, explaining away some safety signals, there have been enough safety signals to suggest that at least one of them is significant and caused by Lux administration.
Amp's Conclusions
We said it was a close call going into this readout, of whether the Bull or Bear thesis would prevail. Our big-mover analysis continues to predict big-mover events pretty well. The challenge for all of us investors, is predicting the winners from the losers, although of course investors can play the ups, downs, or with options, big moves in either direction. At least for today the bears have won with respect to APTO. However, APTO still likely has a few chances to prove its skeptics wrong before tossing Lux into the drug candidate graveyard with vecabrutinib.
Of course it will be interesting to see the data at ASH21 with more time on drug for more effective dose patients, as APTO communicated on its call today. Furthermore, it would be helpful if APTO can find a way to treat some earlier stage patients with Lux. Then we'd have a better direct comparison of how Lux compares to the other non-covalent Btk inhibitors and FLT3 inhibitors. It will come down to whether APTO and investors see enough responses to suggest that the market opportunity justifies the cost of bringing Lux to market.
Thus, we will not throw in the towel on APTO at this point. It might be worth harvesting some losses and coming back into the stock before their quarterly call in August. However, we would let any possible rebound happen next week before we harvest any losses. For now, our positions in APTO are down about 1/3, and we still plan to own about the current amount of APTO going into its August quarterly call and ASH21 in December.
FIG. 1. Best Response data for Lux in B cell tumors presented by APTO at EHA21
FIG. 2 Lux B cell Phase 1 trial - Swimmer Lane Plot
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