I like to think of myself as a value investor focused on investing only in situations where I'm reasonably confident I can determine the intrinsic value of the company involved. My investing approach is centered on the concept that as long as I avoid large permanent losses of capital, at worst I should do reasonably well over the long run.
However, I also like to have some fun. I have a small segregated account with which I try and find some big returns by investing in some high risk, high reward situations. These more speculative investment opportunities don't allow for precise estimates of intrinsic value. The outcomes are often binary in nature, offering either a big win or a big loss.
The biopharma sector is obviously one that offers potential for high risk / high reward investments. I've found three companies with varying market capitalizations that offer different levels of exposure to promising cancer treatments. What better place could an investor look for a big winner than in companies trying to cure cancer.
Celgene Corporation (CELG)
Celgene (CELG) is the big boy of my group with a $40 billion plus market capitalization. Success with one drug isn't going to turn Celgene into a huge investment win, but investors aren't betting their entire investment on one drug either.
Celgene's Lenalidomide is showing promising signs in the treatment of Multiple myeloma.
Multiple myeloma, also known as myeloma, is a blood cancer in which plasma cells - important components of the immune system - replicate uncontrollably and accumulate in the bone marrow. Rather than making normal antibodies, myeloma cells tend to overproduce a useless antibody known as M protein.
Multiple myeloma is the second most commonly diagnosed blood cancer after non-Hodgkin's lymphoma. Myeloma mainly affects older adults - patients' median age at diagnosis is 70 years. The five-year survival rate for patients is approximately 35%.
Lenalidomide was the first member of Celgene's group of proprietary immunomodulatory drugs known as the IMiDs. Based on clinical studies, lenalidomide reduces the growth and accelerates the death of multiple myeloma cells, preventing the cells from adhering to their surrounding support cells. Lenalidomide also stimulates the immune system's T cells, which in turn activate the natural killer cells that destroy cancer cells.
Lenalidomide has demonstrated unprecedented survival rates both in newly diagnosed and in relapsed or refractory multiple myeloma. Additionally, clinical trials with lenalidomide have led to an important new paradigm in myeloma treatment. Based on data in multiple clinical studies, Celgene is pursuing regulatory pathways in newly diagnosed myeloma and maintenance therapy.
Due to the nature of multiple myeloma, treating patients throughout the course of their disease may be necessary to achieve long-term sustained disease suppression. Three phase III studies of patients with myeloma have demonstrated that continuous therapy with lenalidomide decreased the risk of disease progression by more than half.
Lenalidomide is also the standard of care for patients with myelodysplastic syndromes (MDS) who have a 5q chromosomal deletion. Nearly 300 clinical trials are being conducted worldwide to evaluate lenalidomide for the treatment of a wide range of diseases, from blood cancer to solid tumors.
Lenalidomide is administered orally, offering patients and their families the ability to better manage the disease with minimal impact on their normal lives.
Celgene is a company with a diversified pipeline, so Lenalidomide is neither a company maker or company breaker.
Cellceutix Corp (OTCQB:CTIX)
My next candidate is the much smaller Cellceutix Corp (OTCQB:CTIX) which has a market capitalization of $170 million and a product portfolio of 8 drugs. The company isn't quite a make or break bet on one drug, but a single success could make Cellceutix shareholders very happy.
Cellceutix is a Beverly, Massachusetts,-based clinical stage biotechnology company focused on discovering small molecule drugs for hard to treat diseases, including drug-resistant cancers, psoriasis, autism and inflammatory disease.
The flagship compound for Cellceutix is Kevetrin, which is a drug that has shown promising laboratory data as a new cancer treatment. Clinical trials have started at Harvard University's Dana-Farber Cancer Institute and partner Beth Israel Deaconess Medical Center to test Kevetrin against advanced solid tumors.
In preparation for human trials, Kevetrin was tested against many different cancer lines Cellceutix believes it discovered the drug to be a potent anticancer activity against every type of cancer that was tested. That list of cancers included lung, breast, colon, prostate, squamous cell carcinoma, a leukemia tumor model and malignant glioma (brain tumor).
Kevetrin's "secret sauce" involves the activation of p53 which is the gene that plays a crucial role in controlling cell mutations. P53 activates proteins required to repair DNA and plays a major role in the life cycle of cells by inducing cell cycle arrest and apoptosis (or programmed cell death) to maintain cellular and genetic stability.
According to Cellceutix:
Currently, there are greater than 10 million people with tumors that contain inactivated p53, while a similar number have tumors in which the p53 pathway is partially abrogated by inactivation of other signaling components. This has left cancer researchers with the grand challenge of searching for therapies that could restore the protein's protective function, which Kevetrin appears to be doing the majority of the time.
There is a multi-billion dollar opportunity out there waiting for a drug that addresses p53 damage and restores the key protein to its state of being the master regulator of the cell cycle. If clinical trials show that Kevetrin restores damaged RB and p53 in humans to their normal tumor suppressing status , it could be one the greatest breakthroughs in cancer history.
That would be big news for a company with a market cap under $200 million
Senesco Technologies (SNTI.OB)
Senesco (OTCQB:SNTI) is my favorite of the bunch because of the people running the company who have both noteworthy track records and pockets deep enough to ensure that the company has staying power. However the company is also obviously very speculative (risky) place to invest dollars because this is a very early stage biopharma.
As a group, the Board of Directors of Senesco owns 33% of the company. These people are all independently wealthy and aren't involved with Senesco for a paycheck, they are there because they believe in the company's potential.
Two directors in particular stick out.
- Senesco's Chairman of the Board is Harlan Waksal who was co-founder of Imclone which developed prostate cancer drug Erbitux. Waksal owns 4.5% of Senesco.
- Director Christopher Forbes (of "the" Forbes family) owns 21% of Senesco.
These aren't the type of gentleman who join a Board of a small company simply because they need the annual retainer to supplement their retirement incomes.
Senesco's focus is also on cancer. Senesco plans to fight cancer using a gene regulation product that helps control two proteins needed to promote both cell growth and cell death. These proteins are found naturally in plants and exist in the human body in a gene called eIF5A. In healthy cells these proteins allow cells to grow and when the cells become too large or too old to benefit the body, these proteins signal the cell to die (apoptosis).
In patients with cancer, these proteins fail to signal cell growth and death correctly. Cells without proper regulation of these proteins typically continue to grow and turn cancerous. In order to modulate apoptosis Senesco has developed SNS01-T (which has been granted orphan drug status by the US FDA) which basically turns down the production of the Factor 5A pro-survival protein hypusine and allows for the cancer cells to die by promoting lysine (another protein).
Senesco's current focus is on multiple myeloma (MM) and other B-cell cancers including mantle cell lymphoma (MCL), chronic lymphocytic leukemia (CLL) and diffuse large B-cell lymphoma (DLBCL). SNS01-T has been shown to inhibit the growth and even shrink tumors in animal models of human B-cell cancers, including multiple myeloma, mantle cell lymphomia and diffuse large b-cell lymphoma.
It is early days for Senesco and SNS01-T, but so far the signs are encouraging. The nice part for Senesco shareholders is that having Forbes and Waskal on the Board ensures there is always a financing tap available, so the company will get to play out its hand with SNS01-T.
Again please be aware that like all of these early stage companies, both Senesco and Cellceutix while intriguing carry with them considerable risk for investors. Senesco currently has a market cap of just under $20 million with a 52 week share price range of $0.11 to $0.32. Cellceutix has a market cap of $175 million and a 52 week share price range of $0.45 to $2.47.