Synergy Pharmaceuticals (NASDAQ:SGYP) recently announced that at it's annual meeting, shareholders approved the merger with their related company Callisto Pharmaceuticals (OTC:CLSP). Callisto also held a special meeting of shareholders where the merger was approved. The company also recently announced top-line results from their phase IIb/III trial of plecanatide in chronic idiopathic constipation (CIC), and made some rather interesting changes to the descriptions of that trial on the clinicaltrials.gov website. We discuss herein, the recent company news, and provide some explanation for a tweet we sent out on January 14th that seems to have given SGYP longs some consternation.
SGYP Announces Positive Data
On Januray 2nd, Synergy Pharmaceuticals (NASDAQ:SGYP) released top-line data for the phase IIb/III clinical trial of pelcanatide for treatment of chronic idiopathic constipation (CIC). The press release for the data announcement indicated that the company was announcing positive results for their drug candidate. The data released was only top-line results, with further details on the full data-set to be announced at an appropriate scientific conference later this year (most likely this will be at digestive disease week 2013).
The released data showed 1) A dose-response relationship for plecanatide efficacy. 2) 19% responders at the 3mg dose vs 10.7% responders for placebo (p=0.009) 3) a mean change in complete spontaneous bowel movements (CSBM) of 2.13 (p<0.001), and 4) diarrhea incidence of 9.7% for the 3mg dose vs 1.3% for the placebo arm.
On the surface these data look great. The proper comparison would be to look at linaclotide (Linzess) from Ironwood Pharmaceuticals (NASDAQ:IRWD) in the chronic constipation indication. From the Linzess Label, we see that, in their chronic constipation trials, Linzess had 20.3% responders vs 3.3% placebo in one trial and had 15.5% responders vs 5.6% responders in a second trial. The 3mg dose of plecanatide shows comparable efficacy to Linzess; however, the high placebo response seen in the trials is an unexpected result.
As far as change in CSBM frequency, Linzess showed a mean increase of 2.0 and 1.9 in CSBMs in their 2 chronic constipation trials. (Note, the Linzess label gives the net change over placebo, to get the original numbers, check the original press release for the clinical trials).
In the pooled CIC trials, 16% of Linzess treated patients experienced diarrhea vs. 5% of placebo patients. On a placebo adjusted basis plecanatide appears to have a slight edge over Linzess in the incidence of diarrhea.
Looking Below the Surface (and Explaining a Tweet)
On January 14th, we sent out a tweet that became a point of discussion for some folks in the biotech twittersphere. When the plecanatide data first came out one thing that caught our attention, was that the difference in responder rates between placebo and drug arm was less than 10%. Before the data were announced, the company was clearly hoping to see a better than 10% treatment difference. Up until January 9th, the clinicaltrials.gov page for this trial described the primary endpoint as:
Complete Spontaneous Bowel Movement (CSBM)
To detect at least a 10% difference in Overall Complete Spontaneous Bowel Movement (CSBM) responders between each dose of plecanatide and placebo. A complete spontaneous bowel movement occurs 24 hours away from laxative use and the patient reports a feeling of complete evacuation. A weekly responder will have 3 or more CSBMs and an increase of at least one CSBM from baseline. A monthly responder achieves this for 3 of the 4 weeks in a month. An overall responder must achieve this in 2 of the 3 months of treatment with one of those months being the latest treatment period.
On January 9th, the clinicaltrials.gov page was edited such that the primary outcome measure now reads:
Complete Spontaneous Bowel Movement (CSBM)
A complete spontaneous bowel movement occurs 24 hours away from laxative use and the patient reports a feeling of complete evacuation. A weekly responder will have 3 or more CSBMs and an increase of at least one CSBM from baseline. A monthly responder achieves this for 3 of the 4 weeks in a month. An overall responder must achieve this in 2 of the 3 months of treatment with one of those months being the latest treatment period.
What's interesting is that the updated page, with the 10% treatment difference removed, actually makes no sense. The primary outcome now mentions CSBM and then offers a definition of responders with no indication of what analysis is actually being done. This appears to be a hastily made edit. Here is a link to the archival clinicaltrials.gov site to see the changes for yourself. You'll also be able to note that the clinicaltrials.gov page for this trial was edited 22 times, which means, if the 10% treatment difference was simply an oversight, there were plenty of opportunities to make the change.
Back in November, when Synergy was kicking off it's phase IIb clinical trial of plecanatide in irritable bowel syndrome with constipation (IBS-C), Dr. Laura Barrow, the company's Senior Vice President of Clinical Operations gave a presentation wherein she reviewed the history of plecanatide's clinical development. If one skips over to the 15 minute mark and listens for about 90 seconds, Dr. Barrow explains the clinical trial endpoint for the (recently completed) clinical trial. Here is the transcript:
What we're looking at for the primary endpoint in this study is the percentage of overall responders. This is a responder that's defined by the FDA. To be a weekly responder you have to have three or more complete spontaneous bowel movements. Complete meaning that the patient says they feel that sense of completeness as well as 24 hours away from a laxative. That's what spontaneous is. It's not spontaneous if you've had a laxative in the last 24 hours. So they have to have 3 or more of those to be a responder and they have to have less than 3 of those to get into the study on their baseline. And a few other little things that they put in there. You have to have more than one increase per week. The FDA is really clear that your have to be responding in the last 3 of the 4 weeks of the study. But basically you have to have 3 or more CSBMs for 9 out of 12 weeks of the study. And then you're labeled a responder. And what we're looking at is a comparison of the percentage of responders on a given dose of your drug compared to the percentage of responders on placebo. And what the FDA is looking for is a 10% difference in response rate. Which doesn't sound like a lot but it is a complicated endpoint. So they are looking for a lot to even be a responder.
Dr. Barrow's statement is consistent with the original wording of the primary efficacy endpoint on clinicaltrials.gov - a 10% treatment difference.
We had a chance to discuss these matters with Synergy CEO Gary Jacob last week during JPM13. First of all, everyone in Synergy management is very excited about the clinical trial results. While SGYP was not presenting at JPM13, they had back to back meetings throughout the week as the who's-who of biotech investing were all gathered in San Francisco. During our meeting Dr. Jacob told us that the 10% treatment difference was "just a guideline from FDA to help us power the trials". He reiterated that plecanatide is an approvable drug and that they had demonstrated a statistically significant difference betwen the drug and the placebo arms.
While the explanation offered by Synergy's CEO is certainly within the realm of possibility, we find it odd that the description of the trial's endpoint on cliniclatrials.gov was stated inaccurately for so long, and that the company's SVP of clinical operations repeated this same endpoint description in November. During the Piper Jaffary conference from November, Dr. Jacob describes the goal of the trial as demonstrating a statistically significant difference in responders between the drug arm and the placebo arm, without making explicit reference to any specific treatment difference.
Our view is that prior to the unblinding of the data, the company was expecting to demonstrate a 10% or greater treatment difference. The drug arm showed efficacy comparable to Linzess; however, the placebo arm showed an unexpectedly high responder rate (see the quoted text above of the definition of responders). We asked Gary Jacob about the high placebo responder rate. He suggested that while we may never know the exact cause of the high rate, one contributing factor may be that if patients were aware that the study drug was in the same class as Linzess (which conducted successful clinical trials several years prior), and if patients saw that they had a 75% chance of being on one of the drug arms of the study, this may have elevated the placebo response rate.
What's Next for Synergy
Synergy held it's annual meeting of shareholders on January 14th, and shareholders voted to approve the merger with Callisto Pharmaceuticals. On the same day, Callisto held a special meeting of shareholders and voted to approved the marger as well. The merger will likely be completed by the end of January. As we've explained in the past, this merger was primarily an internal housekeeping issue. Callisto was a major holder of SGYP stock, and the company had to spend money to maintain CLSP's public company status for no good reason. With the merger approved and with the plecanatide data in, institutional investors should feel more comfortable accumulating SGYP stock.
In late Q1 or early Q2, Synergy will have their end of phase 2 meeting with the FDA for the chronic constipation indication. According to Dr. Jacob, the regulatory path forward will depend upon the results of that meeting. Synergy will do one or two more clinical trials of plecanatide in chronic constipation depending upon whether or not FDA thinks the recently completed study will count as one of the registration trials.
Later this month, SGYP will be announcing the start of a multiple dose trial of SP-333, the company's second generation GC-C agonist which is being developed for ulcerative colitis. This phase I trial will be completed sometime in late 2013.
Synergy's Phase IIb trial of plecanatide in IBS-C is now underway and the data from this trial should be available around this time next year.
We believe that, given the high placebo response rate in the recently completed trial, the company will conduct a thorough review of their trial protocols and procedures to ensure that the placebo response rate in future trials is more in-line with those seen from the Linzess trials. Plecanatide is an approvable drug but whether or not the recently completed trial will count as a registration trial remains an open question until the FDA provides input.
Investors who seek a long term investment in SGYP should look to the company to provide further details on plecanatide's regulatory pathway once the company receives minutes from their end of phase 2 review meeting. There has been much speculation that the company is being groomed for acquisition. Given the company's $420 million market capitalization, and given that plecanatide is potentially a blockbuster drug and SP-333, once further developed, is potentially a novel treatment for ulcerative colitis, it is likely that the company will continue developing these drugs on it's own until the stock price more fully reflects the market potential of its pipeline. In other words a deal in the near term is, in our view, unlikely because the company is undervalued and management knows it.
