By Grant Zeng, CFA

NASDAQ:ADXS

The J&J Deal with Aduro

On May 29, 2014, privately held Aduro Biotech from Berkeley, California entered into an agreement with Janssen Biotech (a J&J company) granting the latter an exclusive, worldwide license to certain product candidates specifically engineered for the treatment of prostate cancer based on its novel live, attenuated, double-deleted Listeria monocytogenes (LADD) immunotherapy platform.

Both companies did not break down the dollar terms in the deal, but the whole financial package includes upfront license fees and milestone payments up to $365 million. If multiple programs advance to commercialization, Aduro will also receive tiered royalties on worldwide net sales.

Under the agreement, Janssen will assume responsibility for all research, development, manufacturing, regulatory and commercialization activities for the licensed products.

The Implication For Advaxis

Both Aduro and Advaxis (ADXS) use attenuated, live Listeria as vectors to deliver a tumor-associated antigen to fight cancer by activating a patient’s immune system. But the two technologies are quite different.

Aduro’s LADD uses live-attenuated double-deleted Listeria monocytogenes strains that have been engineered to induce an innate immune response and to express tumor-associated antigens to induce tumor-specific T cell-mediated immunity.

In addition to attenuation, Advaxis further bioengineered Listeria based on the details of Listeria’s intracellular activity. Specifically, Advaxis fuse a tumor antigen to a virulence factor listeriolysin (LLO) within the Listeria bacterium. The combination of the tumor antigen and LLO generates a strong immune response attacking the cancer. All distinctive features of Advaxis’ vaccines are derived from the fusion protein.

Advaxis’ technology seems more potent and less toxic than Aduro’s LADD. Following table lists the differentiation of the two technologies.


With increased interest in immunotherapy from big pharma, Advaxis could be the next target for licensing or even buyout by big pharma in our view.

Advaxis Presents New Survival Data at ASCO

On May 31, 2014, Advaxis presented final results from the Phase II clinical study of ADXS-HPV in women with recurrent cervical cancer at the 2014 American Society of Clinical Oncology (ASCO) Annual Meeting.

ADXS initiated the Phase II study in November 2010 in India in 110 Patients with recurrent or refractory cervical cancer. All patients randomized to the trial have been previously treated with chemotherapy, radiotherapy or both, and their cancer has progressed subsequent to treatment and has been confirmed by CT or radiologic scan.

Patients are randomized into 2 groups of 55 patients receiving: ADXS-HPV or ADXS-HPV + cisplatin (40 mg/m², weekly x5). Patients got either 3 doses of ADXS-HPV at 1 x 10⁹ CFU or 4 doses of ADXS-HPV at 1 x 10⁹ CFU with cisplatin chemotherapy. Naprosyn and oral promethazine are given as premedications and a course of ampicillin is given 72h after infusion thereby clearing any residual vector. Patients receive CT scans at baseline and Days 84, 184, 273, 365 and 545.

Of the 109 patients treated in the study, long-term survivors (LTS) not only included patients with tumor shrinkage but also included patients who experienced increased tumor burden as their best tumor response overall. 17% (19/109) of the patients in the trial had recurrence of disease after at least two prior treatments for their cervical cancer; these patients comprised 8% (2/24) of LTS. Among the LTS, 25% (3/11) of patients had an ECOG performance status of 2, a patient population that is often times excluded from clinical trials because of their poor survival.

The poster presentation provided the final audited data which showed that, 32% (35/109) of patients survived 12-months, 22% (24/109) of patients survived 18-months, and 18% (16/91) of patients were alive for more than 24 months, despite the poor prognosis of this patient population. The tumor response rate was 11% (including complete responses and partial responses) with a median duration of response of 9.5 months. A disease control rate (≥ three months) was observed in 38% (42/109) of patients. The addition of cisplatin chemotherapy did not improve either survival or tumor response over monotherapy with ADXS-HPV.

ADXS-HPV was well tolerated as 62% (68/109) of patients reported no adverse events and 38% (41/109) of patients reported mild transient adverse events (Grade 1 or 2) that occurred on the day of infusion. One patient experienced a serious adverse event which was reported as a Grade 3 fever.



These data are comparable to the results for the landmark 2004 Moore Phase III study conducted by the Gynecologic Oncology Group of cisplatin alone and cisplatin plus paclitaxel in recurrent cervical cancer patients with the same initial performance (health) status (0-2). In that study, 12 month survival was presented as 35% for cisplatin alone and 32% for the combination and 18 month survival was presented as 20% for combination therapy and 12% for cisplatin, alone.

Long-term survivors (LTS) in recurrent cervical cancer are rare. ADXS-HPV seems to be the first immunotherapy to be associated with objective tumor responses and also with long-term survival. The LTS included patients with poor performance status, those who had progressed after combination chemotherapy in the recurrent setting, and several patients whose best tumor response was progressive disease during the trial. To achieve these results from a single cycle of an immunotherapy in patients with poor prognoses is remarkable and supports further development.

ADXS Plans to Initiate Phase III Trials of ADXS-HPV for Cervical Cancer

Recently, Advaxis management provided update on the planned pivotal Phase III trial of ADXS-HPV for cervical cancer.

During the conference call, management mentioned that the Company will conduct an end of Phase II meeting with the FDA in June. With the input from the FDA, Advaxis plans to initiate the Phase III trial at the end of this year.

Currently, the Company is talking to potential principal investigators and is preparing the Phase III protocols and will submit a SPA to the FDA. Two Phase III trials will be conducted according to management.

With recent $14 million new financing, as well as data input from its Asian partners, the Company has enough cash to conduct the Phase III trials on its own. But we guess the Company still needs a commercial partner for the launch of this product considering its lack of experience and infrastructure for commercialization.

ADXS-HPV appears to be emerging as an active agent in recurrent/refractory cervical cancer with significantly less toxicity than chemotherapy.

ADXS-HPV for cervical cancer is the Company’s current focus. This program is granted Orphan Drug Designation for the treatment of Stage II-IV invasive cervical cancer.

New Clinical Program of ADXS-cHER2 for Pediatric Bone Cancer to be Initiated

On May 5, 2014, Advaxis announced that it intends to initiate a clinical program of ADXS-cHER2 for the treatment of pediatric osteosarcoma.

ADXS-cHER2 is an immunotherapy that targets the HER2 oncogene, which is overexpressed in certain solid-tumor cancers, including pediatric bone cancer and breast cancer. In an ongoing Phase I trial of veterinarian clinical study, pet dogs with naturally occurring osteosarcoma treated with ADXS-cHER2 after the standard of care showed a statistically significant prolonged overall survival benefit compared with dogs that received standard of care without ADXS-cHER2.

Advaxis has a global licensing agreement with Aratana Therapeutics, Inc. for Advaxis' ADXS-cHER2 for the treatment of osteosarcoma in dogs and three additional cancer immunotherapy products for the treatment of three other types of animal cancer.

Based on the animal data, Advaxis now intends to initiate a clinical program in pediatric patients with osteosarcoma.

Osteosarcoma is the most common type of bone cancer. In children and young adults, osteosarcoma usually develops in areas where the bone is growing quickly, such as near the ends of the long bones. Each year, about 800 new cases of osteosarcoma are diagnosed in the United States. About 400 of these are in children and teens. Most osteosarcomas occur in children and young adults between the ages of 10 and 30. Osteosarcomas account for about 3% of childhood cancers, but they make up a much smaller percentage of adult cancers, according to the American Cancer Society.

Pediatric osteosarcoma is considered a rare disease and may qualify for regulatory incentives including, but not limited to, orphan drug designation, patent term extension, market exclusivity, and development grants. Given the limited availability of new treatment options for pediatric osteosarcoma, and that it is an unmet medical need affecting a very small number of patients in the U.S. annually, the Company believes that, subject to regulatory approval, the potential to be on the market may be accelerated.

Advaxis is conducting the required pre-IND activities to support the development of ADXS-cHER2 in HER2 overexpressing cancers. Management indicated that they intend to move forward with this new program as expeditiously as possible. We estimate that a Phase I could be initiated later this year or in early 2015.

Advaxis Shares are Undervalued

We maintain our Outperform rating for ADXS and reiterate our 12-month price target of $10.00 per share.

The recent three deals are especially encouraging in our view. The deal with Aratana could get ADXS-cHER2 the first approved immunotherapy for animals. The deals with Biocon and GBP expand the usage of ADXS-HPV therapy for cervical cancer in the world two largest markets of cervical cancer in terms of patient population. The favorable terms in the deals not only strengthen Advaxis’ balance sheet in a non-dilutive way, but also validate the Company’s technology and clinical programs. Furthermore, the deals will serve as examples for future talks which are supposed to generate similar favorable terms for Advaxis.

We look forward to the announcement of initiation of the pivotal Phase III trials of ADXS-HPV for recurring cervical cancer by the end of this year.

Advaxis has developed a robust pipeline based on its proprietary platform technology. In addition to cervical cancer, ADXS-HPV has potential to target other HPV-mediated cancers, which further expand ADXS-HPV’s market. The Company already initiated clinical studies of ADXS-HPV for head & neck cancer as well as anal cancer. The Company plans to initiate two clinical programs of ADXS-cHER2 targeting breast cancer and pediatric osteosarcoma respectively.

In terms of valuation, we think Advaxis is undervalued in our view. Currently, the Company shares are trading at about $2.75 per share which values the Company at about $52 million in market cap based on 19 million outstanding shares. This is certainly a deep discount.

We predict ADXS-HPV to be approved in the US in 2017. Sales will reach $100 million in 2020 with earnings per share of $1.27. Using a relative valuation model, we come up with our new price target of $10.00 per share by using 30 x P/E multiple and discounted at 25% for 6 years.

Our price target of $10.00 per share values the Company at $190 million in market cap, which is still conservative in our view. Apparently, risk is still high for Advaxis at this stage. We will keep a close eye on cash balance and clinical program advances.

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