Successful Infusion Of Cancer Treatment May Attract Infusion Of Investors In 2013

Includes: CLSN, INO, MRK, ONCS
by: A. John Hodge

While chemotherapeutic and DNA based drugs have shown to be effective in battling certain cancers, the challenge has been getting the needed medicines to the actual cancer cells without destroying surrounding healthy tissue. This has been a challenge for doctors because many of the medicines require penetrating the cell membranes to access to the cells interiors to be effective and to get enough of the drug to the cells sometimes required such high doses of the toxic medicines that it does more harm than good. Because the phospholipid bilayer of the cellular plasma membranes have hydrophilic (water loving) exteriors and a hydrophobic (water repelling) interiors, any polar molecules, including DNA and protein molecules, are unable to freely pass through the membranes. However, new techniques that are creating temporary openings in the plasma membrane are being developed so the targeted medicines can be more effectively delivered into the cancer cells. Below are companies of various sizes that are developing and testing delivery methods to create openings in the cancer cell plasma membranes or to get the agents to the tumor locations to better deliver the medicine to the cancer cells' interiors. As an investor, these companies may be worth a close look.

Celsion Corp. (NASDAQ:CLSN) an oncology drug development company based out of Lawrenceville, NJ that is developing treatments for difficult to treat cancer. This year it has seen its stock have a dream run - up 315%. The share price run up is due largely to positive results of its oncology platform, ThermoDox - which utilizes Lysolipid Thermally Sensitive Liposomes (LTSL) used to deliver doxorubicin, a proven and approved chemotherapy drug. The LSTLs are filled with doxorubicin and are delivered intravenously, then the therapy uses radio frequency ablation through probes applied directly into the tumor, heating up the cancer cells in the immediate area. The heat causes the LTSL membranes to melt -- releasing the doxorubicin directly into the targeted tumor cells. ThermoDox delivers roughly 25 times more doxorubicin than using just an IV to deliver the medicine. The reason this therapy is able to deliver the medicine efficiently is because tumors have leaky blood vessels that are penetrable to liposomes and offer areas for the LTSLs to accumulate. When heated, the blood vessels in tumors become even more permeable, increasing the amount of liposomes entering and accumulating inside the tumor before the LSTLs melt -- releasing the drug at the tumor site.

ThermoDox is being developed for treating liver cancer for patients not eligible for surgery, which can be big news for both Celsion, investors, and liver cancer sufferers considering that there are 750 thousand new cases of liver cancer diagnosed annually, and the World Health Organization expects liver cancer to be the number one cancer in the world within the next eight years. ThermoDox is in Phase III trials consisting of 700 patients with primary liver cancer. The date range investors should focus on is the end of January when the company releases its phase III trial results.

With the run up in the stock investors are expecting positive results of ThermoDox which has already been given priority status by health regulators in the United States and elsewhere, and if the data proves positive and the approval process moves along the company believes it could see ThermoDox approved by the end of 2013. Once approved, Celsion expects to look for licensing deals with companies in Europe and Asia, and perhaps in the U.S. According to the company's CEO, Michael Tardugno, there has been more than one multi-national company that has been performing due diligence on the possibilities of licensing the product.

Celsion has a market cap of $262.60 million based highly on future positive results of the ThermoDox phase III study. Yet that in itself is the caveat in the deck. If the Phase III study does not bring the expected positive results Celsion's stock could plummet sharply.

However, two of its top executives are surely expecting positive results. In November, Mr. Tardugno purchased 5,000 company shares at $5.03 per share, and Board of Director Robert Hooper purchased 11,500 shares for $5.20 per share. On November 12th, the company posted a net loss of $6.0 million, or $0.18 per share. For the first nine months of 2012, the company reported a net loss of $18.3 million, or $0.55 per share. In mid- November, Griffin Securities updated its rating on Celsion and maintained its 12 month target price at $18 per share, and in late November, analysts at Dawson James initiated coverage and set an outperform rating on the stock. By all accounts, if ThermoDox is a success, it could be the next blockbuster cancer treatment. I do like the odds of success for ThermoDox, but frankly, there is no guarantee that the results will be positive. And if the results are not positive this stock would likely plummet quicker than it rose.

Merck &CO (NYSE:MRK) the global healthcare giant based out of Whitehouse Station NJ, is developing a DNA vaccine called Plasmid V930 for fighting certain cancers. The therapy is using a delivery system called electroporation which capitalizes on the weak nature of the cancer cell membrane's phospholipid bilayers which are hydrophobic and hydrophilic in nature. It has been found that electroporation's quick voltage shock disrupts areas of the membrane temporarily creating pores to open allowing for the delivery of either chemotherapeutics or DNA-based medicines to enter past the membrane and into the interior of the tumor cells. Once the voltage is removed, the pores close -- trapping the agents in the cells. Plasmid V903 is in Phase I testing for treating breast, ovarian, non-small cell lung and colorectal cancers. The electroporation device that Merck is using to deliver the Plasmid V930 is developed by Inovio Pharmaceuticals (NYSEMKT:INO), a $70 million market cap company that develops synthetic DNA vaccines to fight cancer and infectious diseases.

This electroporation therapy is just one small item in Merck's enormous pipeline of product, but it shows that the giant healthcare companies are taking notice to new methods of delivering the much-needed medicines to fight diseases such as cancer, and that helps smaller biopharmaceutical companies who are developing new drugs or delivery systems get noticed, which in turn helps these companies find investors and funding. Merck is a $126 billion market cap company and an excellent stock to have in one's portfolio for a long-term investment, and according to the Dividend Channel its Relative Strength Index shows Merck oversold making it a buy at its Decemeber 26th close of $41.34 per share. It also offers an excellent dividend of $1.72 paid quarterly.

OncoSec Medical Inc. (NASDAQ:ONCS), a micro-cap biopharmaceutical company based in San Diego, CA has developed a proprietary gene and drug delivery platform that utilizes electroporation platform called the OncoSec Medical System (OMS). The OMS electroporation therapy allows for a more targeted and effective treatment at a significantly lower drug dose with less crippling side effects, especially when using cytokines like IL-12 and chemotherapy agents such as bleomycin, which often require toxic levels to be effective. OncoSec is testing its OMS system to open the pores of metastatic melanoma cells and deliver medicines with both its NeoPulse and ImmunoPulse systems. In October, OncoSec received authorization to CE mark its OMS electroporation device, for use in the European Economic Area. According to OncoSec President and CEO Punit Dhillon,

The approval marks an essential regulatory milestone on the road to commercialization and further approval of the OncoSec Medical System. The CE mark shows that OncoSec has the capability to manufacture and develop a device that meets commercial regulatory requirements.

NeoPulse utilizes the OMS system to destroy cancer cells using less harmful doses of bleomycin. Bleomycin has for the most part been given intravenously. This is not only an inefficient method of targeting cancer cells, but requires high doses to be used, which can cause significant side effects. However, in using NeoPulse to open the cell membranes and directly target cancerous cells, it has been found that effective results can be achieved with 1/20th of a traditional chemotherapy dose and it enhances the drug's ability to penetrate tumor cells by a factor of as much as 4,000.

NeoPulse is in phase IV trials, targeting early stage skin cancer tumors, with a goal to assess the ability to control growth or recurrence of the cancer six months following treatment with respect to primary tumors and locally recurrent tumors. Data from the trial showed a complete response of greater than 90% in basal cell carcinoma patients and 70% in squamous cell carcinoma patients at six months. According to Mr. Dhillon, the data shows that NeoPulse can target cancer cells and not destroy healthy tissue and may be used as an alternative to surgery,

The results of OncoSec's skin cancer program have so far shown a positive outcome among the class of patients who would typically be subjected to disfiguring surgery. We believe that NeoPulse offers a potentially significant new treatment for a variety of skin cancers.

OncoSec is also developing, ImmunoPulse, a DNA-based immunotherapy using the OMS electroporation therapy to treat solid tumors that have metastasized or spread. Chemotherapy and surgery have generally been the treatment for late stage skin cancers, but OncoSec believes utilizing ImmunoPulse therapy as a noninvasive approach could improve the quality of life for skin cancer sufferers. OncoSec has received almost $12 million in funding and is conducting simultaneous Phase II clinical trials for ImmunoPulse for three types of cancers, metastatic melanoma, Merkel cell carcinoma, and cutaneous T-Cell lymphoma. Though less common than other skin cancers, these cancers are more drug-resistant and aggressive.

On December 13th, OncoSec announced it has entered into definitive agreements with institutional investors to purchase approximately $7.2 million of securities in a registered public offering, and will sell to institutional investors an aggregate of 28,800,000 shares of its common stock at $0.25 per share. Along with those shares, investors will receive warrants to purchase up to 14,400,000 shares of common stock at a price of $0.26 per share for a term of four years. The proceeds, which net out at approximately $6.5 million, are intended to be used for general corporate purposes, including clinical trial and research and development expenses.

After the announcement of the public offering, OncoSec stock slid from $0.32 down to $0.21 per share on heavy volume. OncoSec has a market cap of $20.33 million, and closed Monday, December 26th at $0.22 per share. I saw the company as an undervalued stock before the public offering came out, and I still consider it undervalued. This is a development company that has a promising delivery system to target cancer tumors, and if it releases additional positive trial results I can see the stock rising significantly.

For a long-term safe investment, Merck is unquestionably the best choice. However, for those with a much higher risk/reward tolerance, the other companies mentioned might be worth a second look. Celsion has received most of the attention and investment dollars with its ThermoDox, but I see OncoSec, with its OMS system as having the same future potential. There are similarities between the two companies. Both companies are not developing new drugs but targeted systems designed to deliver already approved drugs directly into the cancer tumors. Both companies, if their products are successful, could have the next blockbuster cancer therapy to hit the market. The difference I find is that Celsion has already has had a large run up and if ThermoDox does not meet expectations the stock will most probably not just drop but crash.

OncoSec is not in that same position, though it appears to have what might be a very successful product, it has not had the run up that Celsion has and therefore may have a higher potential for percentage gains. Though I like both companies, I believe that due to the OMS therapy, OncoSec will have that run similar to Celsion sometime in the future. Caution is advised anytime one invests in small biopharmaceutical development companies - they offer huge upside potential and corresponding downside risks. Interested investors should perform additional due diligence to determine which of these companies fit their investment needs.

Disclosure: I am long MRK, ONCS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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