Extending Lives Through Nuclear Medicine May Also Extend Investors' Profits

by: The Swiss Trader

On January 19th US News and World Report posted an article in its health section about a small colon cancer study that demonstrated "radioactive beads" implanted near liver tumors appeared to extend survival nearly a year longer than patients who were on chemotherapy agents alone. The study consisted of 39 patients with advanced colon cancer in which the cancer had spread to the liver. The patients underwent an FDA-approved nonsurgical procedure where tiny radioactive beads of the isotope yttrium-90 (Y-90) microspheres were implanted near inoperable liver tumors. A catheter was inserted into a small incision near the groin and threaded through arteries until it reached the hepatic artery in the liver. Once in place, millions of microbeads were released that emitted high-dose radiation directly to cancerous cells, sparing damage to nearby healthy cells.

Though this form of targeted nuclear therapy is relatively new, there are a number of companies, large and small, that are developing radiotherapies using isotopes, including Y-90, and are finding success in early trials in battling cancers. Last July the Swiss healthcare giant, Roche (OTCQX:RHHBY), announced it entered into a strategic collaboration with Areva Med, the medical development subsidiary of the French energy giant Areva (OTCPK:ARVCY), to develop an advanced alpha radio-immunotherapy platform ((NYSE:RIT)) which uses the isotope lead-212 (Pb-212) to target and kill malignant cancer cells.

Combining Roche's expertise in engineered antibodies with Areva Med's proficiency in developing radioactive isotopes, the two companies plan on developing RIT to specifically pinpoint and destroy cancer cells while limiting toxicity to healthy cells during preclinical studies. RIT has an advantage over conventional radiotherapy in that alpha radiation travels only short distances in human tissue; therefore its energy is absorbed in a more targeted area and minimizes damage to surrounding healthy tissue. By targeting cancer cells with highly specific antibodies combined with the isotope lead-212, there is an opportunity to more precisely irradiate and kill cancerous cells.

Areva Med has developed the high-purity isotope, lead-212, from recycled uranium fuel as part of its nuclear operations and uses it in nuclear medicine for treating some of the most aggressive forms of cancer. Areva Med is currently constructing a facility at its Bessines site in Limousin, France that will produce medical-grade lead-212 on a large scale for anticancer treatments. The company has obtained authorization from the FDA to begin human clinical trials of lead-212 alpha RIT.

Even though the targeted isotope therapy is one of many development products in either company's pipeline, I find it encouraging for the entire medical isotope community when giant companies like Roche and Areva work together and invest both time and money on developing an isotope therapy to fight cancer. Patrick Bourdet, President and CEO of Areva Med, commented on the agreement between his company and Roche,

"This major agreement with Roche is a remarkable milestone for nuclear medicine and radio-immunotherapy. Joining the core competencies of two global leaders in their respective fields will allow for the accelerated development of personalized, powerful and targeted treatments using lead-212."

If the partnership with Roche and Areva Med proves successful, it could help to bring other healthcare companies with various expertise together to develop new treatments and delivery systems using medical isotopes. There are also examples of very small companies working with large biopharmaceuticals or health care companies to develop radiotherapy drugs to battle cancers. One example is the global health care giant, Merck (NYSE:MRK), and the small biopharmaceutical company, Endocyte (NASDAQ:ECYT), that banded together to develop the isotope-based targeted therapy, vinafolide (EC145), the company's targeted treatment for patients with folate-receptor positive platinum-resistant late-stage ovarian cancer. Endocyte's flagship proprietary technology develops novel small molecule drug conjugates (SMDCs) that actively target receptors that are over-expressed on diseased cells relative to healthy cells. In doing so SMDC technology attaches a targeting agent-a vitamin folate together with a therapeutic agent- as a targeted therapy. The folate then carries the drug to the folate receptor on the surface of the cancer cell. Such receptors are found only on rapidly dividing cells such as developing fetuses or cancer cells. Being able to identify patients with folate receptors and the locations of those receptors is crucial to prescribing the treatment patients who are likely to respond. Folate is vital for cell division, and cancer cells grow much quicker than normal cells and need to fuel their growth and division; so to fill that need for folate, some cancers, like ovarian cancers, have a high concentrations of folate receptors on their surface.

Vintafolide is designed to target the folate receptor and deliver the anti-cancer agent DAVLBH to the tumor's cells. The trick is being able to identify those patients with folate receptors and the locations, which is where isotopes come in. The same folate that carried the drug to the cell can also carry an imaging agent to the receptors-in this case the radioactive isotope technetium. Endocyte's president and CEO, Ron Ellis, commented, "We just take off the drug and add an imaging agent, but leave the targeting ligand. We can look at all the cancer or target lesions and understand the presence of the receptor throughout the body."

Endocyte has had a dream run over the past year-up over 178% thanks to its mid-August announcement of its agreement with Merck. Endocyte received a $120 million payment upfront and could receive of up to $880 million for vintafolide, which is currently in Phase III clinical trial for ovarian cancer and a phase II trial for non-small cell lung cancer. The company will also receive an equal share of U.S. profits if the drug achieves FDA approval and a double-digit percentage on worldwide royalties. Endocyte has a number of other drugs in early stages of testing along with various companion imaging diagnostics. Endocyte is a $344 million market cap company, selling at $9.43 per share, just shy of $1.50 off its 52-week high.

Credit Suisse initiated coverage with an outperform rating and a target price of $16.00 citing such positives as Endocyte having sufficient amounts of cash along with the deep-pockets-partnership with Merck. Plus it anticipates, "… significant stock appreciation ahead of key events in early 2014, including a potential EU approval, pivotal Phase III data in ovarian cancer, and robust Phase II data in lung cancer." I like the technology that this company is developing, and though its cancer therapies have the ability to treat over a million people worldwide, Endocyte sees a much larger potential with SMDC and is researching its products to target rheumatoid arthritis, osteoarthritis, atherosclerosis, viral infections, and other diseases. Though the company has had quite a run up, I think that there's a lot more in its tank and I can see the company's stock continue to rise in the foreseeable future.

The article began discussing medical advances using isotope Y-90 to battle advanced colon cancer. Interestingly, there is a small isotope company out of Kennewick, WA, Advanced Medical Isotope (OTCPK:ADMD) -that has also been working on a cancer therapy that utilizes Y-90…but with a twist. Its isotope therapy, radiogel, does not require surgery or a catheter to administer the treatment. Radiogel, which ADMD acquired in a licensing agreement with Battelle, is an injectable radiotherapy that targets cancer tumors utilizing Y-90 microspheres in a water-based polymer that, unlike other radiotherapy treatments, is then injected directly into the tumor using a needle, not surgically or with a catheter. Once the polymer mix is injected into the tumor it transforms into a thicker gel as it reaches the body's temperature, encapsulating the Y-90 isotopes in or at the targeted tumor. High-energy beta particles then irradiate the cancer cells within a certain region, preventing radiation from the trapped Y-90 to escape deep into the healthy tissue. 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 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 sees annual sales that could reach $75 million to $100 million.

ADMD is nanocap company with a market cap of $16 million, but I like the potential of this little company. Not only is it developing Radiogel, but ADMD is one of the few companies in the U.S. engaged in manufacturing and selling medical isotopes, a much needed product that has been in short supply due to the war on terrorism 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. The company stock is up 137% year-over-year and sells for just over $0.20 per share, which I believe is an excellent entry point. Even with ADMD's growing isotope manufacturing business and the revolutionary Radiogel, the company is a radiopharmaceutical company in the development phase, with plenty of room for growth. However, one should perform due diligence when investing in any developing nanocap company as the potential for risk-and for profits-can be very high.

I don't see Merck or Roche's stocks rising significantly due to their involvement in radiotherapies; they are just too big and too diversified. I think radiotherapy should help smaller companies that are developing products in the nuclear medical field, like ADMD and Endocyte. The problem with investing in Areva is that it trades mainly on the Paris Stock Exchange, though it does trade in the US and has had an impressive six-month run, up over 44%. However, the daily volume is too low for my comfort level, sometimes as low as 500 shares traded per day. I do, however, like both Roche and Merck as companies to own long term due to both being stable, having large pipelines of products on the market and in development stages, plus they both offer an excellent dividend. However, for the most "bang for the buck", I would look at a more speculative investment with either Endocyte or ADMD. Of the two (though it may entail higher risk), I think ADMD, due to its isotope manufacturing business and the potential of Radiogel, may be the better investment from current levels moving forward.

Disclosure: I am long OTCPK:ADMD, OTCQX:RHHBY. 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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