On Wednesday, January 31st, Cascadian announced that it will be acquired by Seattle Genetics. The deal will see the latter pick up the former at $10 a share, valuing Cascadian at just shy of $614 million based on current share count.
This is a sharp premium to the company’s previous at-market valuation, given that Cascadian carried out a 1:6 reverse split back in November and that the company hasn’t closed above $10 a share on a split-adjusted basis since Oct. 4, 2016.
Of course, the vast majority of Cascadian shareholders are delighted with the news The company spiked to a 72% premium on the back of the announcement, closing out the session on Wednesday for $10.06 share price, putting it in line with the Seattle buyout valuation.
Seattle Genetics’ shareholders, however, don’t seem as enamored by the decision. Seattle closed out on Wednesday at a 6% discount to its pre-announcement capitalization. Pre-market on Thursday, the company has announced a public offering that will see it issue a little over 11.5 million shares of common stock, meaning we’ll probably see a continuation of the weakness as standard participation gets underway today.
So why is Seattle willing to pay a premium for a company like Cascadian?
Cascadian’s most advanced program is a drug called tucatinib, an investigational oral, small molecule tyrosine kinase inhibitor (TKI) that is highly selective for HER2. HER2 is a growth factor receptor that is overexpressed in multiple cancers, including breast, colorectal, ovarian and gastric.
The drug has already undergone some clinical testing, with the most advanced data rooted in a phase Ib trial that showed that the combination of tucatinib, capecitabine and trastuzumab was generally well-tolerated and demonstrated clinical activity in patients with and without brain metastases who are suffering from HER2-positive (HER2+) metastatic breast cancer.
Trastuzumab is the scientific name for Roche Holding AG (OTC:RHHBY) blockbuster Herceptin, a widely used and well established anti-cancer agent globally.
If the drug can get approved in the US as an adjuvant to (or as a combination with) Herceptin, it could be a real winner for Cascadian and Seattle Genetics.
So what comes next?
There’s an ongoing pivotal trial in the same indication that was investigated as part of the above mentioned phase Ib trial – patients with and without brain metastases who are suffering from HER2-positive (HER2+) metastatic breast cancer.
The outcome of this trial is going to determine whether or not markets will view the acquisition as a smart move by Seattle Genetics so, naturally, this becomes the major event to keep an eye on once the acquisition wraps up. This is expected to happen at some point during the second quarter of this year).
The clinical trial protocol is available here for anyone looking to take a deep dive into how it’s set up, but for those not wanting to click away, it’s looking at the asset in combination with the above mentioned Herceptin and another drug called capecitabine, as compares to the same latter two assets in combination with placebo.
The primary endpoint of the study is progression-free survival (PFS) per what’s called RECIST 1.1, which is an industry standard progression scale in oncology, based on independent central radiology review
The secondary endpoints look at overall survival (OS) as well as PFS in the subgroup of patients that not only have breast cancer but that also have developed baseline brain metastases.
There’s also a quality of life secondary endpoint in place but this won’t hold as much water as the other two secondaries and, of course, the primary endpoint built into the study.
The trial is set for a primary completion date of September 2020, with study completion slated four months later in January 2021.
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