Endocyte Now A Buying Opportunity

Acceptance of EU regulatory filings for vintafolide and its companion diagnostic etarfolatide for ovarian cancer could lead to conditional approval in H213. While themuted share price reaction to this news suggests low market expectations, recent EMA decisions raise the possibility of approval on Phase II PFS data. Given Endocyte’s (ECYT) modest valuation and low investor expectations, EU conditional approval offers favourable risk/reward and could provide significant upside.

PRECEDENT for conditional EU approval…
Recent acceptance of EU regulatory filings for vintafolide and etarfolatide triggered a $5m milestone from partner Merck and raises the possibility of conditional approval for folate-receptor (FR) positive platinum-resistant ovarian cancer in H213. The filing is supported by the 149-patient Phase IIb PRECEDENT trial, which showed a significant 2.3-month increase in PFS (and 4mths in 38 pts where 100% of tumours were FR positive) but no OS benefit. Given the lack of OS advantage and limited dataset of FR (100%) patients, the outcome of the EU regulatory decision is difficult to call. However, recent conditional approval of Takeda’s Adcetris suggests the EMA will approve drugs based on Phase II PFS data, provided unmet need is high.

But PROCEED as planned
The ongoing Phase III PROCEED trial is examining vintafolide ± Doxil in FR positive, platinum-resistant ovarian cancer. While PROCEED shares a similar design toPRECEDENT, key differences could increase the likelihood of success: (1) better patient stratification, (2) an enriched population of FR (100%) patients, and (3)powering to detect a clear PFS benefit in FR (100%) patients. Given the PRECEDENT results, we are optimistic that PROCEED will show a robust PFSbenefit and acceptable safety/tolerability. Prior to this, in 2013, BioNumerik’s karenitecin (June) and Roche’s Avastin (December) could deliver Phase III data inadvanced ovarian cancer; however, both are being tested in the broader platinumresistant population. As such, positive Phase III readouts are unlikely to handicapthe market potential of vintafolide, given that c 40% of patients over-express FR.

Valuation: Buying opportunity
With an EV of only $142m, we believe the market is significantly underestimating the potential of vintafolide in ovarian cancer, other indications (lung cancer, Phase IIb data in H114), or the value of the Merck licensing deal (potential for additional indications). Moreover, given Endocyte’s modest EV and low investor expectations,EU conditional approval for vintafolide in H213 could offer significant upside.

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