Seeking Alpha
Long/short equity, growth
Profile| Send Message|
( followers)  

The market for radiopharmaceuticals - drugs that contain radioactive materials called radioisotopes - continues to expand. It is estimated that by 2015 the radiopharmaceuticals market in the U.S. is expected reach $6.6 billion, driven mostly by an aging population, cardiovascular, oncological, and neurological disorders. The majority of radiopharmaceuticals are used in nuclear imaging as it offers a non-invasive, static and dynamic image of the body's organs, and has become indispensable, due to its ability to identify various disease processes much earlier than other diagnostic tests. More than 10,000 hospitals worldwide utilize radioisotopes for the in-vivo diagnosis or treatment of approximately 35 million patients every year.

However, the use for radiopharmaceuticals has been attracting attention from a number of biopharmaceutical development-stage companies testing medical isotope therapies for difficult-to-treat cancers. Late last year at the 61st International Innovation, Research and New Technology Fair held in Brussels, Belgium, researchers at the National Center For Nuclear Research located in Swierk, Poland, were awarded by the international community with a silver medal for the development of innovative technological solutions to produce medical isotopes, yttrium-90 (Y-90) and lutetium-177 (Lu-177). The scientists also demonstrated that both isotopes combined with certain biologically active substances like peptides and monoclonal antibodies might be extremely effective therapies in the fight against certain cancers. They were able to demonstrate radioisotopes such as Y-90 could be the base in producing new and innovative radiopharmaceuticals able to effectively and safely treat cancers where current treatments have not been successful. Interestingly there are small biopharmaceutical companies that have been testing medical isotopes, like Y-90, and in early testing have shown positive results in fighting difficult-to-treat cancers. Below are three companies who are on the forefront of testing various therapies using radioisotopes like Y-90, to battle difficult cancers.

Immunomedics, Inc. (NASDAQ:IMMU), based out of Morris Plains, NJ, is a biopharmaceutical company primarily focused on the development of monoclonal antibody-based products for the targeted treatment of cancer, autoimmune, and other serious diseases. IMMU is testing various therapies that use Y-90 in battling cancer. Clivatuzumab, a humanized monoclonal antibody targeting a mucin antigen expressed in most pancreatic cancers, labeled with Y-90, is being evaluated as a frontline therapy for patients with advanced, inoperable pancreatic cancer and has already received Orphan Drug status in both the U.S. and the European Union, along with fast track status in the U.S. for the treatment of pancreatic cancer. The goal of the therapy is to target the cancer cells that contain the antigen and then deliver the radiation via Y-90 to kill the cancer cells. The phase IB/II study found the median overall survival for the 38 treated patients was 7.7 months, which compared favorably with other regimens for advanced pancreatic cancer.

The company is also in a phase II trial utilizing Y-90 with epratuzumab, a humanized monoclonal antibody targeting CD22 receptors on B lymphocytes in its therapy for non-Hodgkin's Lymphoma (NHL). The company reported that small, repeated doses of epratuzumab labeled with Y-90 demonstrated therapeutic activity in 2 clinical trials in patients with aggressive NHL. In clinical trials, epratuzumab was found to be active as an unlabeled antibody in patients with NHL or lupus, and earlier clinical studies demonstrated that repeated small doses of Y-90 and epratuzumab were tolerable in NHL patients and produced high rates of durable responses. Diffuse large B-cell lymphoma (DLCBL) is the most common type of aggressive NHL in the U.S.; approximately 20,000 new cases are diagnosed annually. The standard-of-care for DLBCL is combining the anti-CD20 antibody, rituximab, with the CHOP chemotherapy regimen, or R-CHOP. However, elderly patients or those with certain medical conditions who fail to respond with R-CHOP may not be eligible for high dose therapies or stem cell transplants, and need a therapy that is more tolerable. That is where IMMU sees its isotope therapy can fill the need and is currently in phase II trials as a second-line therapy after R-CHOP in previously untreated elderly patients with advanced DLBCL. The primary end-point of the study is 2-year event-free survival.

IMMU is also investigating, in a phase I open-label study, a combination of Y- 90 and epratuzumab and its second-generation, humanized anti-CD20 antibody, veltuzumab, for patients with relapsed aggressive NHL. 18 patients were evaluated who had failed 1 or more prior standard before being given the isotope therapy. The overall response rate among 17 patients who have had treatment response assessments was 53%, including one DLBCL patient (6%) with a complete response at 12 months. Cynthia L. Sullivan, President and Chief Executive Officer of IMMU commented on the results, "We are pleased with these encouraging early efficacy results. We will continue to develop this combination of Y-90 epratuzumab and anti-CD20 antibody therapy to hopefully become a new treatment regimen for NHL."

IMMU has a market cap of $233.5 million and the stock looks to be on the rebound up over 5% YTD after a disappointing 2012 where the stock dropped almost 10%, after reaching a 52-week high of $4.00 per share. Late in the year the stock slid downward and reestablished its 52-week low of $2.80 in the last day of trading in 2012. The company currently has two products already on the market, ImmuSTRIPE and LeukoScan, along with four products in clinical trials. IMMU's revenue for 2012 was $1.44 million with an EPS of -$0.067. I think with IMMU it is the future of its Isotope products it has in clinical trials that will determine the success or failure of the company. I think the company is on the forefront of using medical isotopes, namely Y-90 in conjunction with various antigens to target and kill cancer cells. Because of this I think the company has a strong potential to grow and develop new radiopharmaceuticals; but its most promising therapies are still in clinical trials, so there is great risk along with the possible great rewards. Caution is advised when investing in what is still, in my opinion, a development-stage company.

Advanced Medical Isotope Corp (OTCPK:ADMD), based out of Kennewick, WA, is one of the few manufacturers and suppliers of medical isotopes in the U.S, and has been developing its own cancer therapy using Y-90. In a licensing agreement with Battelle, ADMD acquired radiogel, an injectable radiotherapy that targets certain cancer cells. The therapy uses Y-90 microspheres in a water-based polymer. And unlike other radiotherapy treatments, the solution is then injected directly into the tumor using a needle, not surgically. Once the polymer is injected into the tumor it quickly begins to warm to the body temperature, the liquid transforms into a gel lattice, trapping the Y-90 in the targeted tumor as high-energy beta particles irradiate the cancer cells within the targeted mass, allowing little radiation from the trapped Y-90 to escape. This innovative process allows for a maximized dose of cancer-killing radiation while minimizing the side effects to nearby healthy tissues. Radiogel can be injected through the skin or during a surgical procedure and when a cancer tumor cannot be surgically removed. Radiogel technology is in its early stages of development, but has the potential to be a blockbuster therapy - the company estimates that annual sales could reach between $75 million to $100 million.

ADMD is nanocap company with a market cap of $12.89 million, but I like the potential of this little company as it is also engaged in manufacturing and selling isotopes - a much needed product that has been in short supply due to the political climate and aging nuclear reactors that are used to produce medical isotopes. Its isotope business should continue to increase as there are 18 million nuclear medical procedures in the U.S. each year that require medical isotopes. In early December, ADMD tested its 52-week high, rising to $0.28 per share when it announced it entered into a strategic alliance with Safety by Design, PC, of Colorado, in collaboration with Colorado State University to develop medical isotope products in the Rocky Mountain region using the megawatt TRIGA Reactor at the Denver Federal Center, before pulling back to roughly where it is today, in the $0.16 to $0.18 range. I see this as a pure development-phase company with plenty of room for growth in 2013, and that its upside potential gives ADMD an excellent entry price. But caution is advised anytime one invests in any developmental nanocap company: There can be great rewards if you dare face the great risks.

Spectrum Pharmaceuticals (NASDAQ:SPPI), a biotechnology company based out of Henderson, NV, has a fully integrated commercial and drug development operation that focuses on hematology and oncology. The company rolled the dice last year when it acquired the worldwide rights from Bayer Healthcare to Zevalin, a CD20-directed radiotherapeutic antibody administered as part of the Zevalin therapeutic regimen for the treatment of patients with relapsed or refractory, low-grade or follicular B-cell non-Hodgkin's lymphoma, and also for previously untreated follicular NHL who achieve a partial or complete response to first-line chemotherapy. Zevalin therapy is a combination of two drugs: Rituximab, which is administered first in two treatments designed to reduce the amount of B-cells in the blood, and then Zevalin, which has the isotope Y-90, administered to treat follicular non-Hodgkin's lymphoma. Last month Spectrum announced clinical data that showed promising results in diverse settings and multiple potential indications for Zevalin, including first-line consolidation in patients with diffuse large B-cell lymphoma (DLBCL), treatment of elderly patients with NHL, and new drug combinations to treat follicular non-Hodgkin's lymphoma. Zevalin is in two phase III studies - the first called ZEST, which is being studied for first-line consolidation in patients with newly diagnosed DLBCL, and the other phase III study is called SPINOZA, for patients with aggressive lymphoma who received autologous stem cell transplantation.

Spectrum has a market cap of $774 million. In the last month, the stock has climbed over 21% to close on Thursday, January 10th at $13.01 per share, and looks as though it may be on its way back up after falling from its 52-week high of $17.48 in July. Last September the company announced its completion of its acquisition of Allos Therapeutics, Inc., which gave Spectrum another drug with great potential to develop -Folotyn, which is used for treatment of patients with relapsed or refractory peripheral T-cell lymphoma. Spectrum is a profitable company with a strong pipeline of potential drugs in development and late stages of testing; yet the stock does not seem to reflect its potential-and, according to "The Street", it is still is a highly shorted stock. The company seems to believe that the stock is undervalued - in mid-August the board of directors upped its repurchase program from $25 million to $100 million of the company's stock. I like the company, and I think with its pipeline of drugs in testing it has good potential for growth. But until this stock begins to perform like a solid growth and development stock, I'd sit on the sidelines and wait to see if any positive momentum builds before stepping in and buying.

I like the potential that isotope therapies have in targeting various cancers, and I think that the companies in this article are on the forefront of developing what might be the next big cancer-fighting drug or therapy. I think the company with the biggest bang for the buck would be ADMD because of the potential of radiogel and its isotope manufacturing business, which I believe will continue to expand. Caution is advised for those considering investing in ADMD and IMMU as these both are operating at losses with little revenue, typical of the small pharmaceutical sector. These are both small capitalization companies with stock volatility that makes it an investment that may not be suited for everyone. SPPI is still heavily shorted which can work for or against shareholders with a long position in its common shares. Each of the three companies summarized above has much potential and is deserving of additional due diligence for investors who understand the risks and rewards as relating to these promising radiopharmaceutical companies.

Disclosure: I am long OTCPK:ADMD. 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.

Source: Growing Use Of Radiopharmaceuticals For Fighting Cancer Shows Promise