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If immunotherapy is the "Holy Grail" of cancer-drug development, then the quest for effective vaccines has been nothing short of a crusade.

Driven by the lofty goal of harnessing the native immune system to fight cancer, many attempts to develop vaccines have ended in disappointment. Although the approvals of Provenge in 2010 and Yervoy in 2012 reignited faith in immunotherapy, the failure of Stimuvax late last year demonstrated that the field as a whole has not yet reached the Promised Land.

Some might say that immunotherapy's tumultuous history does not bode well for its future, a sentiment that may account for the recent slump in this space. However, past failures could also predict future success for second-generation vaccine developers, which have had the advantage of learning from their predecessors.

As it happens, a number of these companies now have products in late-stage development, making them alluring potential targets for pharma companies eager to beef up their oncology pipelines. Below are some of my top picks in this category for 2013 - along with the lessons they have learned along the way:

NewLink Genetics (NASDAQ:NLNK)

One of the reasons many first-generation immunotherapies failed is that scientists did not yet understand how cancer evades immune detection through the secretion of various proteins that effectively create a "cloak of invisibility" for tumor cells.

Lesson learned: Outsmart tumor defense mechanisms.

A number of second-generation immunotherapy technologies have been rationally designed to overcome this problem, including NewLink's HyperAcute platform, which is based on tumor antigens that have been genetically modified to express a protein known as alpha-Gal, which is actively targeted by the immune system.

Lesson learned: Evaluate patient response, not just tumor response.

NewLink is currently conducting a Phase 3 study of HyperAcute Pancreas in pancreatic cancer, an aggressive disease with dismal survival rates of only 14% following tumor resection. The primary endpoint is overall survival [OS], with disease-free survival [DFS] and tumor growth serving as secondary endpoints.

The choice of OS as a primary endpoint rather than DFS or tumor response reflects another lesson that Dendreon and other immunotherapy players had to learn the hard way: disease progression does not necessarily predict overall survival benefit, especially in advanced cancers. This is because there is often a lag of several months between vaccine administration and immune response, which could mean that particularly aggressive cancers will have already recurred by the time the vaccine kicks in.

This phenomenon has some interesting potential implications in the near future when NewLink is expected to report interim Phase 3 data. Strong results would obviously be welcome news, but a less-than-stellar interim report would not necessarily predict failure. The ultimate proof will not arrive until January next year, when final data are expected.

Bavarian Nordic (BAVA.CO)

In mid 2013, Bavarian Nordic is expected to complete enrollment in a Phase 3 study of its PROSTVAC vaccine for metastatic prostate cancer. PROSTVAC targets PSA, a well-established prostate cancer biomarker, with a viral vector that has been loaded with tumor antigens. Similar to NewLink's vaccine, PROSTVAC is based on tumor antigens that have been altered to elicit a stronger immune response.

PROSTVAC demonstrated a significant survival benefit in the Phase 2 trial, which - unlike many Phase 2 immunotherapy studies - was randomized, blinded and controlled. The strength of the Phase 2 data, combined with robust interim results, contribute to a favorable forecast for the Phase 3 results. But even if the data are positive, should the fatigue surrounding Dendreon's prostate cancer vaccine give investors cause for hesitation?

Lesson learned: Cost counts.

The answer to this question is no. PROSTVAC is an "off-the-shelf" vaccine that can be manufactured with significantly less cost and hassle than Provenge, which is custom-made per patient by harvesting and culturing their own dendritic cells. In the event of approval, this benefit is likely to make a significant difference in the vaccine's commercial potential.

Galena Biopharma (NASDAQ:GALE)

Galena initiated a Phase 3 trial of its adjuvant breast cancer vaccine, NeuVax, in January 2012, following the FDA's issuance of a special protocol assessment [SPA]. The SPA was based on 36-month Phase 2 data showing the vaccine contributed to significantly higher disease-free survival rates in patients with HER2-negative breast cancer- a benefit that the 60-month data confirmed.

History teaches us that Phase 2 success does not always translate in Phase 3, but the ongoing PRESENT study offers several other reasons to believe the vaccine will continue performing well:

Lesson learned: Define an appropriate target population.

The Phase 3 study is being conducted in patients with node-positive, low-to-intermediate HER2 (HER2-negative) breast cancer. Previous studies have indicated that this subset, which is ineligible for Herceptin and represents 50% of the breast cancer population (National Cancer Institute), responds particularly well to NeuVax.

Lesson learned: Target disease stage where immunotherapy works best.

NeuVax is administered post-surgery when patients are in remission. With low disease burden and relatively healthy immune systems, patients are more likely to respond to the vaccine.

Lesson learned: Sustained cancer immunity requires a boost.

NeuVax is administered via intradermal injection once per month for 6 months, followed by booster shots once every 6 months. This schedule, which was carefully determined in earlier studies, is supported by significant evidence that boosters help maintain cancer immunity over time.

While overall survival is becoming a preferred metric for immunotherapy trials in more advanced cancers - an endpoint that can take many years to achieve - the PRESENT study's primary endpoint of DFS is appropriate to a patient population that currently has no adjuvant treatment options to prevent recurrence. Thus, the interim DFS data expected late this year is likely to garner considerable attention, as it is likely to be more predictive of final trial results than studies measuring survival overall.

In the meantime, Galena has obtained FDA clearance to begin a randomized Phase 2 NeuVax/Avastin combination study in breast cancer and expects to report top-line data from a Phase 1/2 study of another novel vaccine in gynecological cancer. With strong a strong balance sheet and the validation of two partnerships for its NeuVax program (one with Teva for commercialization in Israel; the other with Leica Biosystems for the development of a companion diagnostic), Galena will definitely be an immunotherapy company to watch in 2013.

Source: 3 Immunotherapy Companies That Have Learned Their Lessons Well