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Analysts: Investors wrong to dump Endocyte

October 14, 2013

Investors on Friday dumped shares of West Lafayette-based Endocyte Inc. after an independent analysis said an experimental lung cancer drug is unlikely to be declared superior to existing chemotherapy. But two analysts say, to the contrary, the analysis shows the prospects for Endocyte’s drug are as good as ever.

Endocyte is studying the drug vintafolide in patients with non-small-cell lung cancer and comparing its effects to an existing chemotherapy drug called docetaxel.

Vintafolide has already shown strong effects against late-stage ovarian cancer, and Endocyte has moved to win regulators’ approval for that disease in Europe. But Endocyte also thinks vintafolide could work against other types of cancer, such as lung and breast.

What Endocyte reported Friday were the results of a mid-stage analysis of a clinical trial by the Data Safety Monitoring Board. The board conducted a futility analysis of vintafolide and found that it’s at least good enough for doctors to continue giving it to patients.

What the board also found was that it is unlikely that vintafolide alone will show itself superior to docetaxel at extending the progression-free survival times of lung cancer patients. But as Wall Street analysts pointed out, the trial has enough patients to show superiority only if vintafolide extends patients’ progression-free survival 50 percent longer than Doxil.

“We are surprised at the stock’s negative reaction,” wrote Wedbush Securities analyst Gregory White in a Friday note to investors. Endocyte shares fell more than 14 percent on Friday and have fallen even more on Monday to below $10 per share—their lowest level since March.

Vintafolide could still prove superior to docetaxel, and yet not be able to show that superioty in this particular clinical trial. It’s also possible that vintafolide could end up being inferior to Doxil, wrote RBC Capital Markets analyst Adnan Butt in a Friday note to investors.

The same goes for another part of Endocyte’s study, which compares a combined dose of both vintafolide and docetaxel against docetaxel alone. Docetaxel was once sold under the brand name Taxotere.

“For either the combination [dose] arm or the single agent vintafolide arm to show superiority over docetaxel was a high bar especially at the interim” point in the clinical trial,” Butt wrote.

Butt and White said the key positives from the analysis are that vintafolide is safe enough and at least close enough to docetaxel in effectiveness for the trial to keep going. And, they noted, the combination of vintafolide and docetaxel could still prove to be superior to docetaxel alone.

They both reiterated their positive recommendations on Endocyte’s stock.

For its part, Endocyte said it was encouraged by the board’s analysis of vintafolide.

"We are very pleased that our combination therapy of vintafolide and docetaxel successfully passed the pre-defined interim analysis, and we look forward to announcing the top-line results of this trial early next year," said Dr. Binh Nguyen, vice president of clinical development at Endocyte, in a prepared statement.

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