Sesen Bio shares crater after report of trial misconduct for bladder cancer drug

It’s been a tough week for Sesen Bio. The company had been preparing to welcome a drug approval for the bladder cancer drug Vicineum, but instead, the FDA rejected it.

Sesen executives and analysts expressed surprise over the complete response letter (CRL), which arrived Friday. Everything up to that point had been proceeding well, and a green light was expected, they said.

The company faced investors in a conference call Monday, with CEO Thomas Cannell, M.D., suggesting the FDA may be trying to double down after all the criticism from approving the controversial Alzheimer's disease drug Aduhelm. 

“At the macro level, there is an unprecedented level of scrutiny at the FDA. Maybe the most scrutiny we’ve seen since the early 1960s,” he said, noting that more and more companies have been receiving CRLs lately. "When you’re under pressure, the risk-averse or the safer strategy will always be to punt the ball down the field and ask for more data."

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But then on Wednesday, a bombshell report from Stat, based on unreleased internal documents the media outlet obtained, suggested that the rejection should not have come as a surprise.

Stat reported that Vicineum treatment had led to dangerous elevations in liver enzymes for some patients—a development that the company had not disclosed. The study underpinning the FDA filing had more than 2,000 trial protocol violations—215 of them major. And three trial investigators were reported to the FDA for serious misconduct, the news outlet reported.

The story also said that a patient died from liver failure in 2016 and that Sesen did not disclose the incident at a medical conference two years later.

Whistleblower report

So, what happened with Vicineum? Analysts are still confused.

Sesen was so sure the approval would come, it already staffed up for the Viceneum launch. In the week leading up to the rejection, the company had been finalizing label wording with the FDA. 

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Monday, Jefferies expressed surprise and predicted a new trial to satisfy the FDA's concerns would take about three years to complete. When Fierce Biotech followed up with Jefferies’ Chris Howerton, Ph.D., who penned the note with his colleagues, he said the issues raised by Stat do not match his conversations with Sesen’s management.

As far as investors knew, discussions with the FDA seemed to be proceeding smoothly right up until the CRL landed like a brick in Sesen’s boardroom. When reporting second-quarter earnings Aug. 9, Sesen was upbeat about the "global progress" and launch preparations underway. 

Howerton suspects that a whistleblower submitted documents to the FDA on the trial misconduct. He doesn't know exactly what happened, because Sesen's management had said they developed the VISTA trial in close coordination with the agency throughout the process. The study was also closely aligned with a recently approved clinical package for Merck's Keytruda. 

Back in July, Canaccord Genuity analyst John Newman even predicted that Viceneum had a better safety and clinical profile than blockbuster cancer med Keytruda. Newman fully expected an approval for Sesen's therapy, but had modeled a 52% share decline and $2 price in the event of a CRL. 

For now, we’ll have to wait for Sesen to respond. The company has been tight-lipped since the Stat article published and did not return requests for comment by press time. Howerton is “hopeful” we’ll get some clarity once Sesen has its next dialogue with the FDA. The company said Monday they planned to seek those conversations “soon"—and they expected to have a lot to talk about. 

The FDA, for its part, declined to comment on a rejected drug, which is standard procedure. The agency prohibits the release of CRLs for unapproved applications. Once an application is approved, however, CRLs are released. So if Sesen manages to overcome this barricade, we could learn more down the road.

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In the meantime, securities fraud law firms are circling the issue like sharks. We counted eight “investigations” circulating as of Thursday morning. To be clear, these investigations happen all the time and do not suggest a company has engaged in any illegal activity. Many never make it past this information-gathering stage. But if any shareholders bite, Sesen may have to defend its actions in a class-action suit.

One suit from Block & Leviton notes that Sesen’s shares were riding a 50% high Aug. 9, a week before the FDA decision, when the company issued second-quarter earnings. The stock fell 75% when the CRL news broke.

The fall has continued each day since. Friday, Sesen was trading around $5.94. The company closed out Monday at $1.31. When the markets opened Thursday, the shares were in the red another 7.5% at $1.21.