Cougar Biotech Research Note

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CGRB: Price: $28.46; Market Cap (MM): $590.1

Market Outperform; Target Price: $36.00

Simos Simeonidis, Ph.D. - Senior Biotech Analyst, Rodman & Renshaw

Cougar reports '08 earnings: Abiraterone soon in second large Phase III trial

CGRB reports 4Q and full year 2008 results. Cougar Biotechnology reported Q408 and FY08 financial results last night, reporting a 4Q08 net loss of $21.5M, or ($1.04) per share, as compared to our estimate and the consensus estimate of ($1.28) and ($0.81), respectively. The company reported a FY08 loss of ($2.90) per share vs our estimate of ($2.84) and consensus of ($2.67). After a net cash burn of $44.7M for operations in '08, Cougar ended the year with $91M in cash.

Focusing on enrollment of the post-chemo trial and starting the second Phase III in pre-chemo patients: Cougar is conducting two large Phase III trials with Abiraterone, both under an SPA with the FDA, one is in the post-chemo setting and one in the pre-chemotherapy/post-androgen deprivation therapy (ADT) population. The post-chemo trial is an 1,160 patient study, randomized 2:1 with an overall survival (OS) primary endpoint, while the pre-chemo trial, which will begin enrolling soon, will be a 1,000-patient study, randomized (1:1), double blind, placebo-controlled Phase III trial of Abiraterone plus prednisone in chemotherapy naive patients with metastatic castration resistant prostate cancer. The co-primary endpoints will be progression free survival and overall survival. The trial will take place in approximately 150 centers across North America, Europe, and Australia and will enroll 1,000 patients (see table in page 3 for a complete list of all the Abiraterone trials).

Cougar goes after post-chemo first. The post-chemo trial started in Q208, while the pre-chemo trial will begin in the upcoming months. While the market opportunity in post-chemo patients is significantly smaller than the pre-chemo population, we believe the strategy will lead to an earlier path to registration due to the shorter survival rate in that population. Data from the post-chemo trial could be available by YE09 or early 2010 and would allow the drug to enter the market significantly ahead of the availability of pre-chemo data. In our view, this is the right strategy as it will accelerate the acceptance of Abiraterone to the clinical community sooner and create an early revenue stream for the company, as we anticipate that many physicians will use the drug off-label in earlier-stage prostate cancer patients.

Two caveats: We remain very positive on Abiraterone’s chances for success based on the molecule's efficacy and safety profile thus far ; the two caveats we alert investors to are that 1) all the data that have been presented thus far are from open-label trials, and 2) reduction in PSA alone will not be sufficient for approval and Abiraterone would need to translate the efficacy it has shown thus far in the Phase II to a survival benefit to gain approval.

What’s Next: We expect enrollment in the second Phase III trial to start soon. The next piece of important news will be another look at the data at ASCO and then top line data from the post-chemo trial in late ’09 or early ’10. A couple of other data points should be arriving in 1H09, including interim Phase I/II data for Abiraterone in advanced breast cancer as well as Phase I data for CB3304 in patients with multiple myeloma, with the company likely to begin the Phase II portion of the trial after that.

We reiterate our Market Outperform rating and $36 price target. We reach our 12-month target price of $36 by applying a 30X P/E multiple to our 2013 fully diluted EPS of $3.23 (second year of profitability) and using a 30% discount rate.