#xbiotech

At the end of May, we published this piece discussing a then-upcoming data presentation from Texas based biotech, XBiotech Inc (NASDAQ:XBIT). We noted that the data had the potential to inject some real upside momentum into the company’s market capitalization, and outlined some key data points to look out for. Well, the data has now hit, and as expected, XBiotech is up low double digits on its release. The company gained 19% on Friday to close out just shy of $25 a share at a $958 million valuation – the highest price seen since April last year. So, as part of our ongoing coverage of this drug, the question now becomes, what’s next?

Let’s take a look at the data and compare it to our previous analysis, in an attempt to put together an answer.

First, a quick recap on the drug. It’s called Xilonix, and it’s targeting advanced colorectal cancer. It’s designed to inhibit the activity a specific group of cytokines called interleukins. Even more specifically, it targets a particular interleukin called IL-1a. IL-1a is known to kickstart an inflammatory response in cancer patients; one that directly correlates to (and is believed to be the causal root of) the proliferation associated with cancer cells. Xilonix stops these IL-1a cytokines from working, and in theory, should in turn stop cancer proliferation.

This trial was particularly interesting, as it was going after a novel endpoint called clinical response rate (CRR). Normally, an oncology phase III will attempt to show an extension of overall survival, and/or some level of tumor size reduction, when compared to a placebo arm. In what is essentially an unprecedented move, Xbiotech got together with the European Medicines Agency (EMA) and came up with CRR. It’s an aggregate measurement composed of a bunch of different endpoints, including pain, fatigue, appetite loss and muscle loss. The trial sought to prove two things – first, that there was a higher CRR in patients that took the drug, when compared to placebo. Second, that CRR correlated with ORR. The first was essential, the second, a real bonus.

So what did the data show – did it perform against these two criteria? In a word, yes. CRR came in at 33% for the active arm, versus 19% for placebo – a circa 74% relative increase in response. That checked box one. Just as interestingly, however, across all responders (with responders here defined as patients in both the active and control arms having stat-sig CRR) ORR was 11.5 months, versus 4.2 months in non-responders.

This correlation has implications beyond those in this trial. It offers up precedent for a trial targeting endpoints associated with overall survival, but not overall survival itself, and using the correlation between the tested endpoints and the prognosis as the basis for a successful evaluation.

Getting back to this data, however, Xilonix also demonstrated a far superior toxicity profile when compared to current SOC in this sort of advanced indication. There’s a huge unmet need for treatments that are less toxic in pretty much every area of oncology, but in colorectal cancer this need is particularly large.

The takeaway here is that Xilonix has proven effective and safe, and XBiotech could very soon have an approval in Europe and – close behind – the US. The drug has accelerated approval status in Europe and while we don’t have an exact data on which the agency is set to report its decision (unlike the FDA, the EMA rarely issues a comparable to the US’s PDUFA) the company expects a decision to come as soon as the final quarter of 2016. There are around 500,000 new colorectal cancer diagnoses annually in the EU, and it won’t take too high a price tag to put Xilonix in the blockbuster ($1 billion plus) sales bracket.

Markets have recognized this, of course, and that’s why the company is up 140% on its annual open. With an EMA green light, however, and a successful campaign in the US, there’s plenty more upside to be had going forward. All eyes on the fourth quarter and the EMA as a dictator of medium term bias.