Despite Buzz, J&J Is Taking A Big Risk on Cougar

It looks like full-steam ahead for Johnson & Johnson's proposed $970 million acquisition of Cougar Biotechnology, but the big pharma's bid to buy an oncology pipeline carries big risk.

Although Cougar has some preclinical and Phase I assets, the J&J deal hinges on Phase III prostate cancer drug abiraterone acetate. Fans were crowing about the drug at ASCO: in a Reuters article, an investigator in the latest study called abiraterone's 70 percent response rate "brilliant," while FierceBiotech reported that 28 of 42 patients in a study reduced their PSA levels by at least half.

But as Rodman & Renshaw analyst Simos Simeonidis points out in a research note:

Despite the impressive efficacy and safety results thus far, the remaining development and regulatory risk is not insignificant. -- We remind investors that all the Abiraterone data we have seen thus far are from small, open-label, single-arm, uncontrolled trials that would have to be confirmed in randomized Phase III trials, and that the PSA responses that have been observed thus far in these trials, will have to translate to an overall survival and PFS benefit for the compound to be approved.

Well, according to David Miller, CEO of independent research firm Biotech Stock Research, it matters a lot. Miller wrote an article for Minyanville in 2004 that rings just as true today as it did then:

It is important to understand not all Phase II trials are equal. With cancer drugs particularly, too many companies avoid randomized, controlled trials. -- Some companies like to argue comparisons to previous trials of the chemotherapy drug alone (so-called historical controls) are sufficient, but historical comparisons are fraught with potential error.

And what about the fact that abiraterone's benefit has been based on PSA responses rather than survival? Here's what Miller has to say about PSA:

If you see a press release saying a drug dropped PSA levels, don't get excited. You see, PSA is not a linear scale. If you drop a man's PSA from 500 to 100, you may think you are making progress. In fact, you made no real progress at all as a man with a 500 PSA and a man with a 100 PSA have the same poor prognosis. If, however, you drop a man's PSA from 5 to 1, then you are likely providing him a significant treatment benefit.

Clearly J&J was willing to bet on Cougar -- but with two large ongoing Phase III trials and no survival data from randomized Phase II trials to back it up, it's a risky bet.

I Love Cougars image courtesy of CafePress.