Struggling Endocyte spending millions for rights to prostate-cancer drug

After struggling for more than 20 years to develop cancer drugs while burning through tens of millions of dollars, West Lafayette-based biotech company Endocyte Inc. is taking a pause from trying to build its own pipeline and is making a multimillion-dollar bet on a German company’s experimental cancer drug.

Endocyte said Monday morning that it has acquired worldwide licensing rights to a late-stage prostate cancer drug called PSMA-617 from chemical company ABX GmbH.

Endocyte plans to begin Phase 3 clinical trials on the drug next year, and hopes to get results as soon as 2020, CEO Mike Sherman said.

Endocyte will give ABX an upfront payment of $12 million, along with 2 million shares of Endocyte stock, and warrants for an addition 4 million shares. Shares of Endocyte closed Friday at $1.41 each.

The German company is also eligible for up to $160 million, along with sales royalties, if the drug meets certain regulatory and commercial milestones.

For Endocyte, the move represents a big step away from its own research and development. The company, founded in 1996, has suffered numerous research setbacks in recent years and has yet to launch a product. Endocyte lost $44.7 million last year and brought in revenue of just $70,000.

In June, Endocyte shed about 40 percent of its workforce, leaving it with about 40 employees. The goal, Sherman said, was to stop hemorrhaging money and find quicker ways to get a commercial success.

“Our intention was to maximize our flexibility and financially cut our burn rate,” he said.

Endocyte had worked for 13 years on one drug, vintafolide, to treat ovarian cancer. But, in 2014, clinical trials showed it didn’t improve on existing therapies, and the drug was scrapped.

Last year, the company’s founding CEO, Ron Ellis, resigned, and the company named Sherman to replace him. Sherman had previously been the chief financial officer and chief operating officer.

In the meantime, Endocyte is pausing development of two early-stage cancer drugs and is looking for partners willing to license them. It will also continue work on a preclinical cancer drug and hopes to begin trials next year.

But much of Endocyte’s attention in coming months will focus on the German company’s drug, which holds huge promise, Sherman said. In early-stage clinical trials on dozens of patients, the drug showed significant results in up to 60 percent of patients who had previously been treated with conventional drug therapies.

The early trials were conducted independently by physicians, primarily in Europe, Sherman said. ABX, a chemical company, is not in the drug development business and was seeking a partner to develop and commercialize the drug.

The drug originally was developed at the German Cancer Research Center and University Hospital Heidelberg and was licensed to ABX for early clinical development.

“This is a drug that we have had our eyes on for a while,” Sherman said. “It’s the most compelling activity I’ve seen in this patient population. It also happens to fit really well with what we do.”

He estimated the annual worldwide market for the drug, if successful, at about $1 billion. Prostate cancer, once metastasized, is nearly always lethal, leading to 300,000 deaths a year.

Despite Endocyte’s setbacks, Sherman said the company has sufficient funds to develop the drug and to make payments to the German company. As of June 30, Endocyte had cash and equivalents of about $65 million.

When asked if Endocyte was betting the farm to acquire the experimental prostate drug, Sherman responded: “I don’t know if I would use the phrase 'bet the farm.' I would say this is absolutely the right bet and the smart bet to make.”