Analyzing BMS' Acquisition of Mirati

Breaking News:?BMS agrees to purchase Mirati Therapeutics for $4.8 billion at $58/share, $2 less than Mirati’s closing price.

Let's analyze this in a way only we can.

Mirati has 3 assets:?

1)???Adagrasib (MRTX849), a KRAS G12C inhibitor

2)???MRTX1133, a KRAS G12D inhibitor

3)???MRTX1719, a PRMT5 inhibitor

Adagrasib is FDA approved for the 15-25% of patients with non-small cell lung cancer (NSCLC) with a KRAS G12C mutation.

?

Effective targeting of KRAS G12C was the Holy Grail in oncology for 20-plus years until Amgen’s sotorasib became the VERY FIRST KRAS G12C inhibitor approved for any indication on 5/28/21.

This approval was initially based on an overall response rate of 36% and median duration of response of 10 months.

However, sotorasib, which received accelerated approval in 2021 recently came under fire by the FDA when full approval was requested by Amgen.?Specifically, Amgen’s confirmatory CodeBreak 200 trial of sotorasib versus docetaxel in 2nd-line NSCLC was intrinsically flawed and the corresponding data was underwhelming.?Accordingly, on 10/5/23, in a 10-2 vote FDA’s Oncologic Drugs Advisory Committee (ODAC) voted data from the CodeBreak 200 trial could not be reliably interpreted due to “issues in trial conduct”. This lack of confidence in sotorasib effectively made adagrasib a more valuable asset to potential Mirati buyers.

This is the predominant reason Sanofi and BMS were linked with Mirati recently, and BMS pulled the trigger on this purchase.?

Yet, adagrasib may not only face the same fate as sotorasib, but it will be heavily under fire from numerous drugs in trial that target the KRAS G12C mutant protein, including Genentech/Roche’s divarasib (GDC 6036), Johnson and Johnson’s ARS-3248, Novartis’ JDQ443, InventisBio’s D-1553, etc.

Indeed, Divarasib had an overall response rate of 53.4% and progression-free survival of 13.1 months in 137 patients with KRAS G12C mutated NSCLC (Sacher et. al, 8/24/23 NEJM).?This data is better than anything we’ve seen with adagrasib (ORR 43%) and sotorasib (ORR 36%) to date.

With all of that said adagrasib is unique in that it has been shown to be effective in patients with brain metastases (sotorasib data is immature in this regard), and unlike sotorasib, appears to be potentially safe to administer with immunotherapy.?Sotorasib caused marked liver function abnormalities when given with Keytruda.?

Collectively, although adagrasib was second to market it now has a leg up on its primary competitor, sotorasib, and is ahead of other competitors with KRAS G12C inhibitors in trial.?Moreover, BMS has a SHP2 inhibitor they may want to use in combination with adagrasib in the future.

?

If Adagrasib is the present, Mirati’s MRTX1133 may represent the future.?

To understand why you need to know that we see many different types of mutations in KRAS that promote cancer formation.?The three predominant ones are KRAS G12C, KRAS G12D, and Q61H.?

Adagrasib and the other selective KRAS G12C inhibitors do not impact KRAS G12D, KRAS Q61H, etc.?

The predominant KRAS mutation in NSCLC is G12C, whereas the primary KRAS mutation seen in stage 4 colorectal cancer and stage 4 pancreatic cancer is G12D.

MRTX1133 selectively targets KRAS G12D and is being tested in patients with KRAS G12D mutations. Thus, MRTX1133 could be a major coup for BMS as no drugs that target KRAS G12D are currently FDA-approved.

MRTX1719 is the last asset BMS is acquiring in this deal.?It is a PRMT5 inhibitor for MTAP-deleted tumors.?Approximately 10-15% of NSCLC has loss of MTAP, a key enzyme in the methionine salvage pathway and polyamine metabolism; loss of which has been implicated in cancer formation.?Using a PRMT5 inhibitor can potentially impede MTAP-deleted tumors as they are hyper-dependent on the enzyme.?

I would be shocked if MRTX1719 is effective, but it’s a decent throw-in in the Mirati deal I guess.

The price BMS is paying for Mirati does constitute a significant premium even though it's $2 less than Mirati's current share price. As you can see in the lower graph Mirati's stock price increased from 30 to nearly 60 the last month as rumors Mirati might get acquired circulated. Interestingly, you can see that Mirati was inexplicably over $200/share at one point.

The purchase of Mirati by BMS makes sense and seems reasonable. $4.8 billion feels like a substantial overpay to me as adagrasib's value is already reflected in the share price, and there is significant risk with MRTX1719 and MRTX1133. Nonetheless, BMS can certainly use KRAS G12C and KRAS G12D inhibitors and I can't fault them for this acquisition.

Mirati is really lucky here because the company was having its own issues and their CEO, David Meek, recently resigned.

Please note we have given the best primers on the planet on KRAS G12C and a nice expose on MTAP-deleted tumors you can see at rcimtb.com (see below).