Investors who chose to open positions in development-phase pharmaceuticals are typically willing to accept more risk than traditional investors. The latter often utilizes the traditional P/E (Price/Earning) algorithms, revenue generation, profit generation, dividend payout, technical analyses and other means to determine stock quality. It is for these reasons that traditional investors would run from virtually all development-phase pharma. However, for those willing to expose themselves to the risks, these small gems can score the lucky and wise investors huge returns on their investments. Throwing conventional wisdom out the window, small pharma investors rather base their investment decisions on potential targeted patient group size, odds of the companies successfully completing the many steps in the regulatory process, propensity of dilutive financing, possibilities of partnerships and likelihood of company buyout. Wise decisions can yield returns of many multiples on their initial investment.
Alternately, for each success story in the sector, there are many failures. Small market cap companies have more associated risks that are inherent to most development stage entities. The additional risks are what often keep the share prices depressed until the associated companies begin proving themselves via clinical data and solid press releases. It is then that share prices often begin their upward progression as more investors take note. With an unbelievable number of development-phase pharmaceuticals publicly traded, the required research to find solid, investment quality candidates can be a formidable task. Over the last year or so, I have come across a few such possibilities that I believe can offer large returns on initial investments with smaller downside risks than their peers as these companies are beginning to prove themselves through clinical trials with solid and real results.
OncoSec Medical (ONCS.OB) is a young company just beginning to come into its own this year. Its platform is based on technology it licensed from Inovio Pharmaceuticals (INO) in March of 2011. The license involves "certain non-DNA vaccine technology and intellectual property relating to electroporation technology useful for electrochemical and cytokine based immune therapies for treating solid tumors." Electroporation involves applying an electrical current across targeted cancer tissue, which causes a large increase (up to 10,000-fold) in the cell membranes' porosity. This allows a much higher level of previously injected agents (chemotherapy or immunotherapy-based) to enter the cells' interiors where they are trapped, once the electrical current is removed, and the cell membranes return to their initial state.
OncoSec has made the most of its investment as it has begun presenting its findings for Phase II trials of the electroporation-based ImmunoPulse therapies for skin cancers. The ImmunoPulse treatment incorporates DNA IL-12, a plasmid DNA construct with instructions for the treated cells to produce the IL-12 cytokine. Once inside the cells, the agent causes them to produce the IL-12 cytokine, a trigger for the immune system to attack the cells with this type of protein expression. On October 23 the company announced interim results of its Phase II trial for using ImmunoPulse to treat patients with Merkel cell carcinoma (MCC). The overall response rate (ORR) for the small, five patient trial was 20% with the procedure being described as safe and well tolerated. There was no indicated systemic or residual toxicity. Of the three patients completing the trial, each had elevated levels of interleukin-12 (IL-12) in biopsied tissue three weeks after treatment, demonstrating the effectiveness of the procedure to induce the interleukin's expression by the targeted cancer tissue. This expression is used to cause an immune response by killer CD8+ T-cells against the IL-12 expressed cells. Additional data will be available in 2013 and will provide investors with more catalysts in the coming months. Following up the October news, the company presented data at a melanoma conference on November 15th where it presented Phase II interim data of its ImmunoPulse platform in treating the larger indication metastatic melanoma. With thirteen patients enrolled at the time of data analysis, only certain patients were evaluable at three defined time frames. At day 39, thirteen patients were available for analysis with 5% having progressive disease (PD), 14% with stable disease (SD), 42% having partial response (PR) and 39% having complete response (CR). At day 90, nine patients were available for analysis with 5% having (PD), 50% with (PR) and 45% having complete response . At day 180, two patients were eligible for evaluation of the primary endpoint of objective overall response. One patient had a stable disease designation and the other patient had complete response of all treated and untreated lesions. Investors should understand that the untreated lesions were being attacked by the patient's immune system as it had learned from the directly-treated tumors that the tissue type was foreign and should be attacked according. This sort of immune response is critical as if much of the patient set demonstrates such a systemic immune response; the platform could very well be construed as a safe and effective therapy for treating metastatic melanoma and provide for much possible upside for the company's shares from current levels.
Interested investors should perform much research into the company's potential and watch for upcoming updates in both the Phase II metastatic melanoma and the Merkel cell carcinoma trials, which could both be possible share price drivers in the coming months. More immediately they should also be looking for updates on the company's newly given permission to market its electroporation platform (also termed OncoSec Medical System, or OMS) via CE mark allowance announced on October 17th. This allows for the marketing of the device in the 30 nations of the European Economic Area (EEA) and Switzerland. The company hasn't yet announced plans on how it might market the device, but a partnership or licensing agreement seems to be the most obvious options for this microcap, development-phase company with a current market capitalization of $27 million. Additional catalysts include possible licensing or other type of partnership of the company's NeoPulse platform. In an October 1st interview, OncoSec CEO Punit Dhillon, indicated that the company is focusing its resources on the ImmunoPulse platform and meanwhile looking for partners for its NeoPulse (electroporation platform using the chemotherapy agent, bleomycin as it treatment agent). For more information on the NeoPulse platform, please see the Phase III data presented in July of this year and Phase IV data presented in mid November. Any of these latter catalysts can represent solid upside potential for this company. Investors should always consider the risks associated with OTCBB-listed companies and perform considerable research into the trial data, company financials (still considered a development-phase company despite its mark CE allowance in the EEA) and targeted indications before opening any sort of position in this company.
Celsion Corporation's (CLSN) platform is based also on targeted delivery of cancer fighting agents to the tumor site. Termed its ThermoDox technology, the premise behind the treatment is the encapsulation of cancer-fighting agents in Lysolipid Thermally Sensitive Liposomes (LTSLs). These are oily molecules (lipids) that contain cancer-fighting agents in their interior. The molecules naturally accumulate at cancer tumors which have leaky vascular (vessels) and are more prone to permeation via liposomes. The liposomes are delivered into the patient's body where they are allowed to accumulate at the tumor sites for a predetermined period of time. The targeted tissue is then heated to 42C over a period of 40 minutes via external devices such as radiofrequency thermal ablation (RFA), microwave hyperthermia or high intensity focused ultrasound (HIFU). Current trials utilize RFA as their heat source. The elevated temperature serves two purposes. First, it increases the "leakiness" or permeability of the vessels in and around the tumor allowing additional LTSLs to accumulate. Primarily, however, the temperature changes the structure of the liposomes allowing its payload to be released at the tumor site. This increases the effectiveness of the therapy and also improves the safety profile of the treatment as it reduces systemic exposure to the drug. Current trials each use the chemotherapy agent, doxorubicin.
Although the company has two Phase II trials underway evaluating ThermoDox to treat breast cancer recurrences at the chest wall (the DIGNITY study) and colorectal liver metastases (the ABLATE study), it is the Phase III trial evaluating the therapy in treating primary liver cancer (the HEAT study) that has been the predominant share price driver in 2012. The company's shares are up an astounding 340+% YTD with the company's shares recently becoming increasingly bullish with shares up over 72% in November alone. Early in the month the company announced that it had reached 380 events of progression which now allow for unblinding of the placebo-controlled, double-blind trial's data, collection of the final data and then subsequent data analysis. The company plans on releasing topline results in January of 2013 with huge ramifications if data are indeed positive. The Phase III trial has Fast Track Designation from the FDA and has received Orphan Drug Designation in both the U.S. and Europe, protecting the company's platform for primary liver disease from competition and increasing its profitability for up to 7 years after the approval date. Additionally, positive data would also serve to validate the company's platform and give evidence of use for other indications.
2013 could very well be an exciting year for Celsion shareholders with Phase III topline results release for ThermoDox schedule for January, the FDA's PDUFA regulatory decision date pending and updates on its two Phase II trials. Even at the current elevated levels, the company's market capitalization is still only $265 million, offering much upside potential if events unfold positively for the company in the coming weeks. However, investors are advised to consider the downside possibilities as failure to meet primary endpoints would be a devastating blow to the company with lost money, lost time and possible invalidated pipeline in a worst case scenario.
AEterna Zentaris (AEZS) long-time shareholders have had a miserable 2012 relative to the other two presented companies in this piece. The company's share price is down on a reverse-split adjusted basis of over 75% YTD with a year of devastating news behind it. On April 2nd the company and its development partner, Keryx Biopharmaceuticals (KERX), announced topline results for the Phase III trial of Perifosine for refractory advanced colorectal cancer. The trial did not meet its primary endpoint of improving overall survival versus capecitabine + placebo. At the opening bell, AEterna shares traded at $4.38, down over 65% from the previous day's close. However, shares would continue trending down over the next few months necessitating a 6:1 reverse split on October 3rd in order to remain in compliance with NASDAQ's listing requirements. A subsequent offering announced October 11th for $16.5 million at $2.50 per share, a 20% discount to the previous day's close, pushed shares down again from the closing price of $3.12 on the 11th to close at $2.43 on the 12th. Shares trended down from there even to breach the $2.00 psychological support level before returning above $2.00 where they now trade.
AEterna Zentaris' value and upside potential for 2013 may not be significant for the long-term shareholders of AEterna. However, I believe upside potential is there for new shareholders taking advantage of the recent dips and even entry at the current share price. Although Perifosine failed to meet its goal in the advanced colorectal cancer trial, the company is continuing the development of the drug in an ongoing Phase III trial for treating multiple myeloma. The company took over the Phase III trial from Keryx, and is planning on releasing interim data on 1Q 2013 according to the company's Q2, 2012 filing per the statement "Company took over the ongoing Phase III trial in multiple myeloma from Keryx, with a pre-planned interim analysis expected in Q1 2013." The recent Q3, 2012 filing gave a bit more information on the Phase III trial noting, "Pre-planned interim analysis by an independent Data Safety Monitoring Board ("DSMB") expected upon reaching approximately 80 events (disease progression or death)."
Another catalyst for 2013 includes the Q1, 2013 initiation of a Phase III trial of AEZS-108 for treating endometrial cancer. The company expects to hear back in Q4 of this year on the FDA's decision of whether to grant the trial its Special Protocol Assessment (SPA) guidance for the trial. If given, this would provide the company a more clear-cut path through the regulatory process by giving goals via primary and secondary endpoints that, if met, would allow for marketing approval in the U.S. AEterna also intends to file for a New Drug Application (NDA) in Q1, 2013 for AEZA-130. The product candidate is not being evaluated as a drug for this NDA but rather an oral diagnostic tool to test for adult growth hormone deficiency ("AGHD"), a condition that affects 35,000 adult Americans, with 6,000 additional adults diagnosed each year.
With the recent offering minimizing the need for additional offerings, the company ended Q3 with about $33.2 million in cash and equivalents. The reverse split keeps the company in compliance with NASDAQ's listing requirements where it will likely remain, pending unforeseen negative catalysts in 2013. The company appears to have a lot going for it currently with an exciting, catalyst-filled 2013 ahead. Interested investors should perform much research into this company's financials. It does have one marketed product in Cetrotide the first luteinizing hormone-releasing hormone (LHRH) antagonist treatment approved for in-vitro fertilization, however the company is still operating at a loss. Recent share price dips, and even the current levels just over $2.2 offer new investors good entry into what could be exciting times ahead yet again for this currently downtrodden and forgotten company.