The FDA's approval Thursday of T-DM1 surprised few, though the price tag, box warnings and brand name Kadcyla may have raised some eyebrows.

An antibody drug conjugate (ADC) that pairs Herceptin (trastuzumab) with ImmunoGen Inc.'s DM1 maytansinoid cell-killing agent to treat HER2-positive metastatic breast cancer will cost $9,800 per month, which means a 9.6-month course of Kadcyla therapy adds up to about $94,000.

J.P. Morgan analyst Cory Kasimov said in a research report that Waltham, Mass.-based ImmunoGen's gain from Kadcyla will be "modest," and Daniel Junius, ImmunoGen's president and CEO, said the story is "going to have to evolve when we see how it's adopted by oncologists," and indications into which the label might eventually be expanded.

"Frankly, the event itself, I have to say, transcends that for the company," Junius told BioWorld Today, since the approval represents "the first time a regulatory authority has approved our technology," and "in a cancer where the bar had already been set relatively high, with existing targeted therapies."

ImmunoGen gets a $10.5 million milestone payment, a royalty rate of 3 percent on sales up to $250 million in the U.S., European Union, Japan and others.

From $250 million to $400 million, the rate is 3.5 percent, and goes up to 4 percent on sales from $400 million to $700 million. Above $700 million, the royalty is 5 percent. Also, the rate is reset each year. "In other words, it starts at 3 percent each year before annual sales exceed $250 million in a particular region, where it then jumps to the next tier and is applied only to incremental sales," Kasimov wrote.

So, in order for the 5 percent royalty to take effect worldwide, global sales would have to surpass at least $1.4 billion. "While we assume peak worldwide sales of greater than $5 billion, about 65 percent of this is in the adjuvant setting," Kasimov noted.

Adnan Butt, analyst with RBC Capital Markets, predicted approval of Kadcyla in the European Union in the second half of this year.

The higher cost is explained by Kadcyla's greater efficacy and tolerability, Junius said. In a 991-patient trial, Kadcyla patients lived a median of 30.9 months, compared to 25. 1 months on Tykerb (lapatinib, GlaxoSmithKline) with Xeloda (capecitabine, Roche), and with fewer severe side effects: 40.8 percent vs. 57 percent. The biologics license application was submitted last August. (See BioWorld Today, Aug. 28, 2012, and Oct. 2, 2012.)

Tykerb/Xeloda therapy costs about $10,460 per month.

"If you look at it on a monthly basis, it's not priced at the premium that Tykerb-plus-Xeloda is," Junius said. "Now, it may end up over the course of therapy costing more than Tykerb plus Xeloda, because patients will stay on it longer, but there you're delivering grater benefit, so there is some rationale for that."

Herceptin alone goes for about $4,500 per month, and Perjeta (pertuzumab), Roche's other HER2-targeting antibody, sells for about $5,900 per month.

"Tolerability can be important, because what often gets lost in treating a patient is the indirect costs," Junius said. Serious nausea or diarrhea can mean more expense, and Kadcyla's profile suggests "less ongoing involvement by the physician to deal with side effects," he said.

Plenty More in the Pipeline

Kasimov speculated in a research report that a price cap for Kadcyla therapy could come later, though Roche was not commenting on the possibility. "This is something that Genentech/Roche has done before (i.e., Avastin) as this price point may not be sustainable in earlier lines of therapy," Kasimov wrote. The cancer drug Avastin (bevacizumab), an angiogenesis inhibitor, was first approved for colorectal cancer in 2004.

A first-generation ADC, Kadcyla carries a boxed warning about liver toxicity, heart toxicity and death. Other companies, such as San Diego-based Ambrx Inc. and Sutro Biopharma Inc., of San Francisco, are trying new approaches to refine ADCs. (See BioWorld Insight, Aug. 6, 2012.)

"A number of the items that were noted in the boxed warnings do mirror what you have seen for Herceptin," Junius said. "The liver warning, in and of itself, follows activity that was seen in the study. Generally, [elevated liver enzymes] were transitory, but I think it's appropriate to caution the medical community that this is something you may see, and need to keep an eye on."

The trade name Kadcyla, apparently chosen for the "ADC" letters in its middle, seems confusingly close to Kalydeco (ivacaftor), the cystic fibrosis drug from Cambridge, Mass.-based Vertex Pharmaceuticals Inc.

"You submit a number of names to the FDA," Junius said. "I don't know that I'd go so far as to call it a negotiation, but they will exclude [names] that they feel misrepresent or suggest things that they think are inappropriate. If they called it 'Herceptin Plus' or something like that, the FDA would cross it off the list."

The approval, Junius said, "reflects very well on all of the things we have going on in our pipeline." ImmunoGen is taking three candidates forward on its own, and six more are partnered.

Junius singled out CD56-targeting IMGN901 (lorvotuzumab mertansine) for first-line treatment of small-cell lung cancer. ImmunoGen retains all rights to the drug, which is undergoing a Phase II trial from which a separate cohort is being studied, in hopes of formulating a speedier approval path. "Sometime in the September or October time frame, we'll have that data [from the separate cohort] accumulated," he said.

On the partnered side, SAR3419 takes aim at CD19 and is partnered with Sanofi SA, of Paris. SAR3419 showed Phase I activity across an array of CD19 non-Hodgkin's lymphoma (NHL) histological subtypes, including disease that was refractory to rituximab (Rituxan, Biogen Idec Inc. and Roche AG) as well as rituximab-responsive NHL, and was generally well tolerated. Findings with the recommended Phase II dosing schedule were reported at the American Society of Clinical Oncology annual meeting in June 2012. "That's in three different Phase II studies," Junius said. "I'd expect we'll get data about [those] over the course of the year."

ImmunoGen's stock (NASDAQ:IMGN) closed Friday at $14.57, up 27 cents.