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Phase 3 For Iomab-B Should Unlock Significant Value At Actinium Pharma

Next week, on April 26, 2016, Actinium Pharmaceuticals, Inc. (NYSEMKT: ATNM) will host a webinar to discuss the upcoming SIERRA Phase 3 clinical trial for Iomab-B. SIERRA - Study of Iomab-B in Elderly Relapsed or Refractory AML - is a randomized, controlled, multi-center trial expected to begin enrolling patients in the next few months. Target enrollment for SIERRA is 150 patients with refractory or relapsed Acute Myeloid Leukemia (AML) over the age of 55. Patients will be split equally between Iomab-B and (physician's choice) conventional care prior to allogeneic hematopoietic stem cell transplantation (HSCT). The primary endpoint of SIERRA is durable complete remission (dCR) at six months from HSCT. Secondary outcome measures include overall survival (OS) at one-year post treatment and safety. Additional data about SIERRA can is available on the website (NCT02665065).

The initiation of SIERRA should begin the process of unlocking tremendous value at Actinium Pharma, as the company will officially be in Phase 3 trials with a potential breakthrough cancer medication targeting a high unmet medical need. There are currently no effective treatments approved in the U.S. for AML in this patient population, and the U.S. FDA has granted Orphan Drug designation to Iomab-B in this indication. Additionally, there is no defined standard of care, with physician's usually picking among a host of cytotoxic agents, including azacitidine, cladribine, clofarabine, cytarabine, daunorubicin, doxorubicin, fludarabine, idarubicin, and thioguanine.

I'm looking forward to hearing more about SIERRA next week, as I believe Actinium shares are vastly undervalued relative to peers due to some misconceptions around the company's strategy. Below is a quick review of Iomab-B and an attempt to clear up some of those misconceptions.

Massively Undervalued Compared To Peers

As noted above, I believe the initiation of the Phase 3 Iomab-B program will start the process of unlocking value in Actinium shares, leading to potential significant upward revaluation. One name I think represents an interesting comparable for Actinium is Advanced Accelerator Applications (NASDAQ: AAAP). AAA is a radiopharmaceutical company that develops and commercializes innovative therapeutic and diagnostic products. The company is a leader in the production and commercialization of molecular nuclear diagnostic radiopharmaceuticals for PET and SPECT in Europe. AAA currently markets radiopharmaceuticals mainly used for diagnosis in clinical oncology, cardiology, and neurology, which is admittedly a division that Actinium does not possess, but the bulk of the valuation in my view is the company's emerging molecular nuclear medicine (MNM) pipeline for the treatment of neuroendocrine cancers.

AAA’s lead therapeutic product candidate is Lutathera®, a novel MNM compound under development for the treatment of midgut neuroendocrine tumors. Lutathera® is a Lutetium-177 (Lu-177) labeled somatostatin analog peptide. The drug has received orphan drug designation from the EMA and FDA, along with being granted Fast-Track designation for the treatment of inoperable progressive midgut neuroendocrine tumors. Phase 3 data on Lutathera® were positive, and AAA filed the New Drug Application (NDA) in March 2016. The product is currently available under an expanded access program.

AAA currently has a market capitalization of $1.35 billion. The molecular nuclear diagnostic (MND) division includes six products marketed directly in the EU along with three additional pipeline candidates. Two PET Alzheimer's products are manufactured and distributed by Eli Lilly and GE Healthcare. AAA generates sales in 19 countries, with a direct presence in eight. The company has 16 cGMP production facilities, seven with R&D capabilities, and two additional facilities are under construction. Analysts project revenues in 2015 at $88 million. Analysts project revenues from the MND division to be approximately $105 million in 2016 (1). Clearly, this company has extensive operations that Actinium does not have.

However, according to a March 2016 report by Duff & Phelps (2), diagnostic imaging companies trade on average (n=3, not including AAA) at 1.25x trailing twelve-month revenues, with a projected revenue growth rate of 10% expected in 2016. AAA is growing 3x the industry average (3), so even if we assumed that AAA's MND division is worth 4x revenues, or approximately $400 million in value, that means the market is placing a value of roughly $1.0 billion on the MNM pipeline.

Beyond Lutathera®, the company has additional MNM candidates in preclinical and Phase 1 trials. However, I believe the opportunity for Iomab-B exceeds the opportunity for Lutathera®. Specifically, midgut neuroendocrine tumors are rare, with an incidence of less than 10,000 per year between the U.S. and EU (4). Above I outlined the potential patient population for Iomab-B at approximately 20,000 per year between the U.S. and EU. Even at a price of $100,000 per year (5), the opportunity with Lutathera® is smaller than Iomab-B. So why is the market valuing Actinium shares at one-tenth the value of AAA? Completion of the Phase 3 studies and having an application under U.S. FDA review seems to be the primary reason.

Quick Background On Iomab-B

Actinium's Iomab-B (BC8-I131) was invented by researchers at the Fred Hutchinson Cancer Research Center (FHCRC). The drug is a combination monoclonal antibody that targets a common lymphocyte antigen, CD45, and radioactive iodine-131. CD45 plays a crucial role in the function of hematopoietic cell activation and differentiation. By specifically targeting CD45, a cell surface antigen widely expressed on hematopoietic (myeloid and lymphoid) cells, but not other tissues, Iomab-B can effectively offer target-specific ablation as a conditioning regimen prior to hematopoietic stem cell transplantation (HSCT) with the potential for improved efficacy and safety / tolerability. And, because expression of CD45 is found on both normal and leukemic cells, it can be used to target marrow in both remission and relapsed patients.

Iomab-B development is initially focusing on the treatment of elderly patients with refractory / relapsing AML. These are patients that have failed the "7+3" induction phase of chemotherapy and cannot tolerate intensive or even reduced conditioning myeloablation. There is no treatment option for these patients today, resulting in an inverse correlation between age and expected probability of survival. In fact, elderly patients that fall into this "poor risk" category achieve response rates to salvage chemotherapy below 20% and see long-term survival rates below 10% (6). Many are simply placed on palliative care.

The concept of Iomab-B holds significant scientific validity in my view. Myeloconditioning / myeloablation prior to HSCT is an incredibly complex and delicate balance between safety and efficacy. Failure to ablate enough cells can result in high relapse rates or increased risk of Graft vs. Host Disease (GvHD), whereas overly intense therapy causes increased risk of treatment-related mortality. Selective radiation of leukemia cells using radiolabeled monoclonal antibodies against antigens on marrow cells promise to improve results by targeting malignant cells and causing less systemic damage (7).

A Phase 1 study conducted in 59 patients with refractory / relapsing AML demonstrated impressive targeted delivery of radioactive isotope with Iomab-B. Results show that 52 (88%) patients receiving Iomab-B had higher estimated absorbed radiation in targeted locations such as bone marrow and spleen than in any other organ (8). Iomab-B biodistribution to the lungs and kidneys (i.e. off-target organs) was minimal. The estimated 3-year non-relapse mortality and disease-free survival for these patients were 21% and 61%, respectively. Importantly, the initial work with Iomab-B showed an overall incidence of GvHD similar to historical standard conditioning.

These findings are important because peer work has shown a consistent correlation between response rates and whole-body radiation dose. For example, work done by FHCRC found lower relapse rate for AML patients receiving higher doses of total body irradiation (TBI) (9). Later work by FHCRC also found a direct correlation between TBI dose and response rate in patients with chronic leukemia (10); however, in both studies, the higher TBI exposure was associated with significantly higher treatment-related mortality, such that there was no difference in long-term disease-free survival between the two randomized groups.

Data from the Phase 1/2 trial (NCT00008177) was compared to standard conditioning and chemotherapy (outcome analysis compiled by the MD Anderson Cancer Center) and published in Blood in 2009. In a subset of 18 elderly patients with poor cytogenetics, Iomab-B when added to FLU plus 2Gy TBI resulted in a 1-year overall survival of 33% compared to 3% for standard conditioning and high-intensity chemotherapy. After two years, 16% of the Iomab-B cohort was still alive compared to 0% for standard conditioning and chemotherapy (unpublished).

Iomab-B Market Opportunity

The market opportunity with Iomab-B is significant in my view. There are no currently approved treatment options for elderly patients with refractory AML, a patient population of approximately 16-20,000 individuals in the U.S. and EU each year, less than 20% of which can tolerate conditioning regimens that allow them to go onto HSCT. I see two potential pathways to meaningful revenues here. The first subset is a small group of patients where the physicians believe reduced intensity conditioning can be tolerated but that Iomab-B may be more effective (~4,000 patients) and the second in which a regimen such as Iomab-B may be more tolerable and allow a physician try to BMT without undue risk of treatment-related mortality (~15,000) patients. Market share gains in both segments seem achievable, and at approximately $75,000 for a course of treatment, Iomab-B targets a $1 billion peak opportunity.

Both Phase 1 and Phase 2 trials with Iomab-B have led to effective cures in patients with no options. Once commercialized, I believe it makes sense for Actinium to test Iomab-B earlier in the treatment paradigm for these elderly "high risk" patients, or even move Iomab-B clinical studies into new indications such as myelodysplastic syndrome, acute lymphoblastic leukemia, Hodgkin’s disease, and non-Hodgkin lymphoma. From a mechanistic standpoint, pursuing these follow-on indications holds merit and could open up potentially billions of dollars in additional revenue opportunity for the company or its commercial partner.

Actinium's Radiopharma 2.0 Strategy Reduces Risk

I still see and hear significant investor angst around Actinium's use of radioactive isotopes given the failure of some previous high-profile radiopharma drugs targeting AML. For example, the failures of Bexxar® and Zevalin® are often brought up when I discuss the market opportunity for Iomab-B with investors. I think there is still widespread misunderstanding of Actinium's approach and its "Radiopharma 2.0" strategy versus these doomed drugs. Below I explain why.

In June 2003, GlaxoSmithKline gained approval for Bexxar®, a combination of the murine IgG anti-CD20 monoclonal antibody tositumomab conjugated to radioactive Iodine-131. CD20 is an antigen found on the surface of both healthy and malignant B cells. Bexxar® was initially approved for treatment of rituximab-refractory, low-grade NHL. The label was expanded eighteen months later to include relapsed / refractory follicular lymphoma.

There were several reasons why Bexxar® failed. Firstly, the drug had to be administered by a nuclear medicine physician. This requirement meant that practicing oncologists could not deliver the drug at their local infusion center along with chemotherapy. Instead, patients had to be referred to nuclear medicine pharmacy or a radiation oncologist who could handle the drug, resulting in lost revenues and patient follow-up by the original treating oncologist. Oncologists do not like to lose patients because patients pay bills. And speaking of bills, Bexxar® was rather expensive at the time and many hospitals were finding push-back from Medicare on the price. Lack of enthusiasm for treating physicians or the hospitals they sometimes begrudgingly referred patients to played a major role in the slow uptake of the drug, as did logistical and manufacturing issues.

However, the end game for Bexxar® came in 2011 when the drug failed to demonstrate a clinical benefit over CHOP chemotherapy plus Rituxan® (rituximab) in patients with newly diagnosed follicular NHL. The failed trial was the proverbial "nail in the coffin" for Bexxar®. Not only was the drug undesirable to prescribe, but it also offered no benefit to what the oncologist could accomplish alone.

Another radiopharma drug, Zevalin®, a combination of the murine IgG anti-CD20 monoclonal antibody ibritumomab conjugated to radioactive Yttrium-90, looks equally ill-fated. Zevalin® has been bounced around over the past decade, from Biogen to Cell Therapeutics, to currently at Spectrum Pharmaceutical. The drug is used in combination with rituximab in patients with both newly diagnosed and low-grade or follicular relapsed B cell NHL. The issues that keep Zevalin® at minuscule sales levels ($3.7 million in the fourth quarter 2015) are the same issues that slowed uptake of Bexxar®.

I do not see the issues that plague first-generation radiopharma drugs like Bexxar® and Zevalin® as relevant to Actinium's Iomab-B. Actinium’s “Radiopharma 2.0” strategy is not analogous to these older generation drugs. Iomab-B is a myeloconditioning / myeloablative agent for patients preparing to undergo HSCT. With Iomab-B, Actinium will target patients that cannot be treated with alternative measures by the oncologist at an infusion center. These are patients already referred for reduced intensive conditioning, which includes TBI and potentially the use of busulfan, cyclophosphamide, and/or fludarabine. Iomab-B is designed to be a safer alternative to TBI+FLU/BU/CY in elderly patients that simply cannot handle standard myeloablation, but still effective enough to wipe-out all leukemia cells and prevent GvHD.

Instead, Actinium’s strategy is far more analogous to Algeta, a Norwegian-based radiopharma company acquired by Bayer in December 2013 for $2.9 billion. In May 2013, Algeta received approval in the U.S. for Xofigo®, a radium-223 dichloride used to treat men with advanced prostate cancer. Bayer and Algeta were previously co-promoting Xofigo®. An analyst at Geneva-based Helvea S.A. estimated at the time of the deal that Xofigo® peak sales were $1.1 billion (11). Consensus Xofigo® sales for 2020 are $938 million (12). This sales level is similar to what I believe to be the peak opportunity for Iomab-B.

Beyond Xofigo®, Algeta had a platform technology capable of linking targeted monoclonal antibodies to radioactive alpha particles (thorium-227). This targeted radiopharmaceutical strategy is exactly what Actinium is doing with Phase 1/2 asset, Actimab-A. In this regard, I find it fascinating that in February 2015, Dr. Roland Turck, former President, Global Specialty Medicine at Algeta/Bayer Healthcare, joined Actinium as an advisor to the Board of Directors. At that time, Dr. Turck stated that Iomab-B could shift the paradigm in how AML patients are prepared for bone marrow transplant.


I'm looking forward to hearing more about the Iomab-B Phase 3 SIERRA next week. As I noted above, I think getting this trial started initiates the process of unlocking significant value for Actinium shareholders. I believe the company's "Radiopharma 2.0" strategy is sound, and it is clear that the market is amendable to MNM therapeutics given the tremendous value being place on shares of AAA or analogous to what Bayer saw in Algeta. The progression here seems clear, with a post-Phase 3 drug radiopharma drug (e.g. Lutathera®) worth about $1 billion and a commercialized drug (e.g. Xofigo®) worth about $3 billion. As such, I think these companies represent an excellent roadmap for where Actinium is heading over the next few years.