A month after investors shrugged off BioNTech (BNTX)’s progress toward a cancer vaccine, Wall Street offered a more favorable reaction to the cancer vaccine progress being offered by another biotech better known for its successful development of a COVID-19 vaccine.
Moderna (MRNA) shares rose 8% on Wednesday, from $120.72 to $130.72, the day it announced that Merck & Co. (MRK) had exercised its option to jointly develop and commercialize Moderna’s messenger RNA (mRNA)-based personalized cancer vaccine (PCV).
As a result, Merck will pay Moderna $250 million upfront, a payment to be expensed on Merck’s third quarter non-GAAP results, set to be released October 27. Merck investors seemed less enthusiastic about the deal, however, as its shares slid 0.7% Wednesday, from $91.05 to $90.42.
“We assume there is sufficient data to imply data are promising enough to advance to more studies and R&D investment into the platform for MRK and MRNA,” Michael Yee, an analyst with Jefferies, wrote in a Wednesday investor note. “It is our view there is sufficient information generally available to MRNA and MRK, such as immunogenicity, biomarkers, and overall immune response rates, to conclude there is promising biological activity of mRNA-4157 to make an informed decision.”
“Investors are likely to be more excited about the program given the signal Merck is willing to pay so much overall and so close to the readout,” he added.
Yee said the positive PCV news should be especially welcomed by investors, reasoning that a consensus of Wall Street experts has overstated how much Moderna generated in COVID-19 vaccine sales during the third quarter based on demand and low booster rates, with the analyst projecting between $2.5 billion and $3 billion, compared with the consensus forecast of $4.4 billion. Moderna is expected to release Q3 results next month.
The PCV—which Moderna calls mRNA-4157 and Merck, V940—is under study in combination with Merck’s cancer immunotherapy blockbuster Keytruda® (pembrolizumab) as an adjuvant treatment for patients with high-risk melanoma, in the Phase II KEYNOTE-942 trial (NCT03897881) being conducted by Moderna.
KEYNOTE-942 is an ongoing, randomized, open-label trial that is fully enrolled with 157 high-risk melanoma patients. After complete surgical resection, patients were randomized to mRNA-4157/V940 (9 doses every three weeks) and Keytruda (200 mg every three weeks) versus Keytruda alone for approximately one year until disease recurrence or unacceptable toxicity. The primary endpoint is recurrence-free survival, and secondary endpoints include distant metastasis-free survival and overall survival. Primary data is set to be released later this quarter.
“I think a key to Merck opting in today is that Moderna was smart to go earlier stage and try to prevent recurrence rather than treating late-stage metastatic disease as so many cancer vaccines have failed at doing,” Brad Loncar, CEO of Loncar Investments, tweeted on Wednesday.
“Modest Market Opportunity”
“The patient population in that study represents a quite modest market opportunity for this 50/50 collaboration,” observed Mani Foroohar, MD, senior managing director, Genetic Medicines and a senior research analyst with SVB Securities, in a Wednesday investor note.
mRNA-4157/V940 is designed to stimulate an immune response by generating T cell responses based on the mutational signature of a patient’s tumor. In November 2020, Moderna said the combination of MRNA-4157 and Keytruda had not reached median duration of response in a small Phase I trial in colorectal cancer, but achieved a 50% overall response rate (5 of 10 patients) in HPV-negative head and neck cancer with two patients achieving a complete response with no detectable disease, and the other three showing a partial response.
During Moderna’s R&D Day on September 8, Michelle Brown, Moderna’s program leader for oncology, shared with analysts that previous landmark studies had shown that about 70% to 75% of patients that were treated with standard of care remained disease free for up to 12 months.
“What this really means is that approximately 1 in 4 patients will have their cancer return in less than a year. And what we know is that can cause significant morbidity and result in death,” Brown said, according to a transcript published by Moderna. “There is still a high unmet medical need. And it’s really our hope that combinations like PCV/pembrolizumab are able to delay and prevent these relapse events and really address that unmet medical need.”
Brown added: “It’s not surprising that if our primary endpoint is positive that this will really provide a proof of concept for us for PCV, but also increase our confidence that our mRNA technology can provide benefit for oncology patients.”
The companies began collaborating on developing PCVs in 2016, by agreeing to combine Merck’s immuno-oncology expertise with Moderna’s mRNA vaccine platform and GMP manufacturing capabilities. Merck paid Moderna $200 million cash upfront as the companies agreed to develop mRNA-4157 and other individually tailored cancer vaccines that encode a patient’s specific neoantigens, eliciting an immune response intended to recognize and destroy cancer cells. Moderna agreed to lead all R&D efforts through human proof-of-concept studies.
Merck and Moderna expanded their collaboration in May 2018, with Merck investing $125 million in Moderna’s Series H equity round seven months before Moderna went public through a $604 million initial public offering. Under that expanded agreement, Merck agreed to pay Moderna $250 million for exercising its option for PCVs that included mRNA-4157/V940, while the companies agreed to partner on development and commercialization, sharing costs and profits equally.
In contrast, BioNTech saw its shares slide 6.5%, from $150.91 to $141.05, then partially bounced back 4% to $146.55, after presenting promising data during the European Society for Medical Oncology (ESMO) Congress 2022 held in Paris. Prof. Andreas Mackensen, MD, of University Hospital Erlangen, Germany, presented positive follow-up data from BioNTech’s ongoing Phase I/II trial (NCT04503278; 2019-004323-20) assessing its wholly-owned BNT211 in patients with relapsed or refractory advanced solid tumors.
BNT211’s therapeutic approach combines two of BioNTech’s platforms—an autologous novel chimeric antigen receptor T-cell (CAR-T) therapy targeting the oncofetal antigen Claudin-6 (CLDN6) with a CLDN6-encoding CAR-T cell amplifying RNA vaccine (CARVac) designed to improve persistence and functionality of the adoptively transferred cells. BNT211 is the most advanced CAR-T product candidate in BioNTech’s pipeline.
The 21 evaluable patients (of 22 patients overall) showed a best overall response rate (ORR) of 33% and a disease control rate (DCR) of 67% with one complete response, six partial responses and seven patients with stable disease, BioNTech reported. One likely reason for investor disinterest: The 33% ORR and 67% DCR reported for BNT211 marked a drop from the 43% ORR and 86% disease control rate reported for the vaccine candidate back in April, based on 14 evaluable patients.
Bio-Rad falls, Qiagen Flat on Merger Talk
Shares of Bio-Rad Laboratories (BIO) fell while those of Qiagen (QGEN) stayed relatively flat this week despite The Wall Street Journal reporting on Monday that the companies were in talks on a merger that could be worth as much as $10 billion, according to unnamed sources.
The companies were reported to have been in talks “for a while,” with “another few weeks” of talks expected according to the Journal before any decision to combine is made. The supposed value of the deal would be equal to the $10 billion market value of Qiagen, but below the $11.6 billion market value of Bio-Rad following news of the possible deal becoming public. Both companies have declined comment.
Bio-Rad shares dropped 8% on Monday, from $428.93 to $392.95, on news of the possible merger—then dipped 0.7% on Tuesday, to $390.13, and declined another 1.55% on Wednesday, to $384.07.
Dan Leonard, an analyst with Credit Suisse, opined that the stock decline reflected concerns by investors that Bio-Rad could only make the combination with Qiagen come about by raising equity or swapping stock, as well as Bio-Rad’s history of shying away from acquiring public companies like Qiagen: “Any process for Qiagen would likely be competitive, and we believe Bio-Rad is valuation sensitive,” Leonard said in a research note quoted by Investor’s Business Daily.
Leonard added that the deal made strategic sense as the companies would complement each other: Bio-Rad specializes in developing, manufacturing, and marketing life science research and clinical diagnostic tools, while Qiagen focuses on “sample to insight” testing technologies designed to isolate and process DNA, RNA, and proteins from blood, tissue, and other materials.
Brandon Couillard, an analyst with Jefferies, agreed that a Bio-Rad/Qiagen combination made sense given what he called the “sound strategic fit of QGEN’s portfolio w/ low antitrust implications.” The latter is no small concern given the ongoing opposition from U.S. and European regulators that Illumina has faced in two years of efforts to acquire cancer blood test developer Grail for $7.1 billion.
But Couillard noted that a deal with Qiagen would mark a significant change in Bio-Rad’s approach to how it approaches mergers and acquisitions (M&A)—even though the company’s leaders have in recent years publicly discussed a desire for sizeable deals ranging from between $1 billion-$2 billion, up to larger mergers of equals (MoE).
“A merger of this magnitude would be a big departure from BIO’s focus on lower-risk tuck-in deals historically, having cumulatively spent <$1B on M&A over the past decade,” Couillard wrote. “We think investors will be concerned about pot’l equity dilution at a discounted valuation, as well as its ability to execute the integration.”
The Jefferies analyst raised another concern: the effect of a Bio-Rad/Qiagen deal on Bio-Rad’s equity stake in life-sci tools developer Sartorius. As of June 30, Bio-Rad disclosed in its latest Form 10-Q quarterly filing, owned 37% of outstanding ordinary shares and 28% of the preference shares of Sartorius. Bio-Rad’s stake in Sartorius, according to Couillard, is worth ~$7.3 billion pre-tax or $5.7 billion after tax.
“While in theory that could be a source of funds, we don’t think BIO’s Chairman/CEO wants to sell a single share,” Couillard opined. “In reality, we believe BIO wants to own more of Sartorius when the trust expires in 2028—a big deal would help it close the gap” (by providing funding to buy more shares).
Qiagen is owned by a Dutch holding company but has its Europe-Middle East-Africa (EMEA) headquarters in Hilden, Germany, and its North American headquarters in Germantown, MD. Bio-Rad is based in the San Francisco suburb of Hercules, CA.
Shares of Qiagen rose 3% on Monday, from $42.51 to $43.86, before declining 2% to $43.05 on Tuesday and dipping another 1% on Wednesday, to $42.61.
Bio-Rad would be the second big-name suitor for Qiagen in the past two years. Qiagen was to have been acquired by Thermo Fisher Scientific, but the would-be buyer terminated the potentially $12.5 billion deal in August 2020 after it failed to persuade enough QIAGEN shareholders to go along, despite sweetening the deal from its original $11.5 billion price by raising the per-share offering price. terminated the potentially $12.5 billion deal in August 2020.