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November 17th, 2016

This could be the year for XBiotech.

Or not.

The Austin-based drugmaker is poised to learn as soon as next month whether European regulatory officials will allow its lead cancer drug to be sold commercially.

XBiotech says its mission is to revolutionize how diseases are treated by identifying antibodies found in people, and then cloning those antibodies for mass production. The company’s lead drug, Xilonix, is aimed at treating colorectal cancer by attacking inflammation, which can be both a response to and cause of tumor growth.

But the company has battled significant criticism this year over its clinical trial results, with critics raising questions about how the company reported on the effectiveness of its lead drug, Xilonix.

Pharmaceutical startups often face uphill battles to drug approval. Fewer than one in 10 drug development efforts makes it to the market, according to BIO, an industry association for biotechnology companies.

XBiotech’s drugs, marketed under the branding “True Human,” have the potential to treat many diseases, from diabetes and bacterial infections to Ebola. Company officials recently invested about $30 million in a new 40,000-square-foot facility in Southeast Austin to manufacture Xilonix.

If XBiotech gets a green light to start manufacture Xilonix commercially, it could be a breakthrough for the local biotechnology industry, and could add dozens of new jobs to the company. 

“It would be great for Austin,” said John Burns, head of Bio Austin, a nonprofit that advocates for Austin biotech companies. There are only a handful of publicly traded drug development companies in Austin, including Mirna Therapeutics and Aeglea Biotherapuetics. None are as far along with drug development as XBiotech.

“People talk a lot about the medical school, but what will really put Austin on the map in terms of industry is a successful launch of a major cancer product here, and a manufacturing operation,” said XBiotech CEO John Simard.

RALPH BARRERA/AMERICAN-STATESMAN STAFFChairman and CEO John Simard of Austin-based XBiotech, reads in his office.

Finding drugs inside people

Xbiotech was founded in Canada in 2005 by Simard, 55. This isn’t Simard’s first time starting a biotech company. He previously founded CTL ImmunoTherapies Corp., which focused on creating vaccines for cancer and chronic infectious diseases, and AlleCure Corp., which developed allergy treatments and other immune-modulating therapies.

In 2001, AlleCure and CTL ImmunoTherapies merged to form MannKind Corp. Simard left MannKind in 2002.

Simard moved XBiotech’s headquarters to Austin in 2008. He said his vision was to create a “new generation” of drugs based on the idea of using naturally occurring disease-killing antibodies in people.

Antobidies are large Y-shaped proteins produced by white blood cells that circulate throughout the body as a response to an infection. Simard calls them a “primary immune mechanism.”

Synthetic antibodies, not pulled directly from people, are already in use. But there are adverse side effects that Simard says comes from being a “foreign substance.” Side effects can range from fevers and nausea to severe life-threatening allergic reactions.

So Simard had the idea of finding naturally occurring antibodies in people by combing through blood donated to local blood banks, then cloning the antibodies for mass production.

“It seemed really obvious to me that if you are going to make antibodies you should only use those that are naturally occurring,” Simard said.

XBiotech is not without competitors. A 2012 study published in the Annals of Medicine and Surgery notes that there are 30 antibody-based therapies that have “been approved for use in clinical practice.” And XBiotech references a 2010 study in the National Review of Drug Discovery that reports more than 140 “fully human” antibodies entering clinical studies. XBiotech lists 10 cancer drugs approved by the FDA in its annual filing with the SEC that it considers competitors to Xilonix.

But Simard distinguishes XBiotech’s approach verses other antibody-based drugs on the market, saying they are “truly unique” in developing antibody-based drugs that come directly from people. Even therapies that label themselves “fully human,” he said, can still be engineered.

RALPH BARRERA/AMERICAN-STATESMAN STAFFChairman and CEO John Simard, left, talks with Kevin Sunley, Principal Scientist for Research and Development, in the company lab.

Does it work?

The company has put a lot of eggs in the basket of Xilonix. It has gone through Phase III clinical trials in Europe and a final approval application was submitted in March.

On July 2, the European Society of Medical Oncology hosted a meeting in Barcelona. There, XBiotech shared some of the results from its European clinical trial for Xilonix.

The company said cancer patients who received its drug for eight weeks showed a “response” of 33 percent, versus only 19 percent in a placebo group — a statistically significant, but moderate, difference. Then XBiotech grouped together the people who showed a “response,” regardless of whether they actually received the drug, and said that group saw an increase in overall survival of 11.5 months versus 4.2 months to “non-responders.”

XBiotech was criticized in news media articles and by a handful of clinical trial experts. The company faced headlines like “XBiotech Cancer Drug Survival Claim Falls Apart Under Scrutiny,” with writer Adam Feuerstein of TheStreet.com calling the company’s data “nonsensical” and “borderline crazy.” Its stock plummeted more than 40 percent in one week.

“I was shocked,” Simard said. “I thought I was coming back to a ticker-tape parade and a hero’s welcome and we were under attack.”

He also noted a huge “short position” in his company, which he said he believes helped drive some of the negative attention. Short-sellers essentially bet that a company’s stock price will go down. According to Nasdaq, about 20 percent of XBiotech’s shares are held by short-sellers.

The criticism focused on how the company measured the efficacy of its drug and the fact that it grouped together placebo patients and drug-taking patients when showing overall survival rates.

XBiotech measured symptoms associated with disease progression, such as pain, fatigue and muscle loss — whether the patients were administered Xilonix or not. This is called an “endpoint” in clinical drug research, and the approach XBiotech took was unconventional. It’s more common to focus on tumor growth.

The company disputes much of the criticism. Simard says the study was designed to focus on these endpoints with approval from the European Medicines Agency. He also stressed that Xilonix is not your typical cancer drug. Its goal isn’t to shrink tumor growth. Simard said the goal is simply to extend how long someone with cancer can live.

“What we’re implying with this treatment is that cancer can be controlled without eradication,” Simard said.

Simard says some people will just get better on their own, without using their drug. “Isn’t that important?” Simard asks. “Nineteen percent actually start recovering if you leave them alone.”

RALPH BARRERA/AMERICAN-STATESMAN STAFFWorkers at XBiotech's manufacturing lab.

Fighting cancer

Drug development is an expensive endeavor. An oft-cited, but controversial, report from the Tufts Center for the Study of Drug Development pegged the cost of developing a new drug at $2.6 billion, though a Federal Trade Commission study done earlier found that drug development costs vary depending on the type of therapy.

So far, XBiotech’s pharmaceutical development expenses have totaled about $167 million, Simard says.

One factor: XBiotech is using less expensive manufacturing equipment that costs about $100,000 to build versus more traditional stainless steel bioreactors used in drug development that are more costly, Simard said.

The company is in the midst of recruiting patients for its Phase III clinical trials with the U.S. Food and Drug Administration. The company was granted “fast track” status in 2012. Simard said the company now has to recruit globally to find the 500 people needed for the trial.

Although these trials have focused on XBiotech’s ability to block inflammation, XBiotech is also examining how the drug can be used to treat diabetes, cardiovascular disease and acne.

The company hasn’t earned a dime in revenue, and Simard said he had initially raised money from “private” investors who own stock in the company. “We didn’t bring any venture capital in,” Simard said, a move that has given him more flexibility and control but some downsides.

A recent investor, Monish Bahl, spoke with the American-Statesman. He said he invested in the company because of its seasoned management and board of directors, which includes the former CEO of pharmaceutical company Novartis AG. “Their approach is interesting because it limits toxicity and side effects,” Bahl said.

He said he wasn’t concerned over the clinical trial data controversy, viewing the data as just taking a “different approach.”

Much of XBiotech’s financing recently came from its initial public offering in April 2015, which raised $76 million. Its latest quarterly reports indicate that it spent about $12 million in the third quarter, and has about $47 million in cash on hand. But the company has found a way to extend its runway by reaching an agreement in September with H.C. Wainwright & Co. to sell 7 million shares in a future public offering.

Whether Xilonix gets approved is important, Simard said, but it wouldn’t be a catastrophe for XBiotech if it wasn’t approved, he said. The company has another drug to treat staph infections in a Phase II clinical trial and the company could seek approval for Xilonix in combination with other therapies or to treat other diseases besides colorectal cancer — even other types of cancer.

“The company is built around a platform and built around some pretty deep product pipeline,” he said.

RALPH BARRERA/AMERICAN-STATESMAN STAFFChairman and CEO John Simard of Austin-based XBiotech stands near a wall in his office,  surrounded by patents the company holds.

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