It is estimated that by 2020 there will be 17 million new cases of cancer diagnosed around the world, up from 12 million in 2007. The global market for cancer drugs was expected to exceed $78 billion at the end of 2012, and to reach over $110.6 billion by 2013. Targeted cancer therapies are expected to reach $69.1 billion in 2013, followed by chemotherapeutics expected to reach $24.3 billion. With so much revenue at stake it is no wonder that many new cancer treatments are focused therapies that attack targeted cells and limit the damage to healthy tissues. If a company can develop a targeted cancer treatment to market there is a good chance of that company having the next blockbuster drug.
ROCHE - TARGETING BREAST CANCER WITH A NEW DRUG
Roche Holdings (OTC:RHHBY), the largest manufacturer of cancer fighting drugs, recently received approval from the U.S. Food and Drug Administration (FDA) for its targeted breast cancer treatment, Kadcyla. Kadcyla is used for the treatment of HER2-positive metastatic breast cancer patients that have failed to respond with Herceptin (developed by Roche's subsidiary, Genentech) and taxanes, a class of chemotherapy drugs commonly used to treat breast cancer. Kadcyla actually combines Herceptin and a chemotherapy drug along with a third chemical to link the two together until it binds with the HER2-positive cells. Dubbed "a super Herceptin" by Sandra Horning, head of global oncology for Roche, once Herceptin binds to the HER-2 positive cells it blocks these cells from receiving the nutrients to thrive, and in combination with the chemotherapy it dramatically reduces the recurrence rate of additional cancer while limiting exposure of the rest of the body to the chemotherapy.
The FDA approved Kadcyla under its Priority Review Program, allowing for an expedited six-month review of when studies showed the drug cocktail delayed the progression of breast cancer, as patients treated with the drug lived 9.6 months before death or the disease spread, compared with a little more than six months for patients treated with two other standard drugs. HER-2 is a protein involved in normal cell growth. Approximately 20-25% of breast cancers overexpress the HER-2 protein, which contributes to cancer cell growth and survival.
Researchers from the University of Michigan's Comprehensive Cancer Center reported in the journal Cancer Research that Herceptin may be beneficial not just to HER-2 positive, but to the larger group of HER-2 negative breast cancer sufferers. The findings came from a study in which 174 women without HER-2 receptors were miscategorized as having tumors with the protein, and were treated with Herceptin in error; but when the data was analyzed researchers found that the patients benefited more from the Herceptin than the patients whose tumors were HER-2 positive, with a reduction in recurrence of 50%.
Breast cancer therapies are estimated to reach $26.5 billion in 2013, and Herceptin sales reached $5.5 billion in 2011, with estimated sales of $6.8 billion for 2012. Kadcyla, treatments are estimated to cost $9,800 per month-- double that of Herceptin-- and are expected to generate sales between $2 to $5 billion. Kadcyla is the fourth drug from the Swiss company in the past two years to gain FDA approval for people with advanced cancers, and has the five top selling cancer drugs on the market. The company spends half of its R&D budget on oncology drugs, and pipeline of cancer fighting drugs in 19 late-stage clinical trials over the next 18 months. Roche is a $210.7 billion market capitalization company. Year to date its stock has risen over 20%. The company, which expects strong sales in 2013 due to its line of cancer drugs, raised its dividend to $7.35 Swiss Francs per share. The company's PE ratio of 20.43 is in line with its competitors. Roche ADRs closed on Thursday May 2nd at $62.30 per share. Cancer therapies are just one segment of Roche's vast pharmaceutical line, and though the stock is almost at its 52-week high, I still see Roche as a solid long-term investment.
NAVIDEA - DIAGNOSING CANCERS USING RADIOPHARMACEUTICALS
Last month Navidea Biopharmaceuticals Inc. (NAVB), a radiopharmaceutical development company out of Dublin, Ohio, received an approval from the FDA for its Tc-99m injectable breast cancer and melanoma imaging treatment, Lymphoseek. Lymphoseek is a first-in-class mannose receptor (CD206) binding radiopharmaceutical agent for use in external lymph node imaging and intraoperative lymphatic mapping. Lymphoseek works by injecting a radioactive tracing agent at the site of the primary tumor; a gamma detection device is then used to track the drainage pathway of the tracing agent from the tumor to the nearest lymph node, known as the sentinel node. Oncologists have found that if the sentinel nodes show no sign of malignancy, the downstream nodes are likely to be clear of disease, and the removal of other nearby lymph nodes is clinically unnecessary.
Lymphoseek will be distributed exclusively in the U.S. by Cardinal Health's (CAH) Nuclear Pharmacy Services, which is an excellent partnership for Navidea, as Cardinal, with its extensive distribution network, is one of the leading radiopharmaceutical distributors in the U.S. Dr. Reni Benjamin, Managing Director and Senior Biotechnology analyst at Burrill & Co., sees revenues in the U.S. possibly reaching $61.5 million and expects Lymphoseek to garner 46% of the intralymphatic mapping market worldwide by 2016. Mr. Benjamin predicts EU revenues, once approved, could reach $27 million in 2016.
Lymphoseek is currently in a Phase III study for head and neck cancer, and earlier this month Navidea announced top-of-the-line results from its interim analysis that showed Lymphoseek meeting the primary efficacy endpoint of accurately identifying sentinel lymph nodes in patients with squamous cell carcinoma of the head or in the mouth, as compared to the removal of all lymph nodes during multiple level nodal dissection surgery. Due to the positive top-line results, the study's Data Safety Monitoring Committee recommended to Navidea to close the trial early.
Interestingly, when a company receives FDA approval for a product that can positively affect cancer patients, and when the DSMC recommends closing the study early due to positive results for its head and neck cancer study, one would expect the company's stock would rise. However, in the past three months Navidea stock dropped over 6%. The reason has probably more to do with the company's financials than the product. Revenues for 2012 were $79,000, a considerable drop compared to $598,000 for 2011. But the real issue appears to be the sustainability of the company, as it has roughly $11 million in cash, and in 2012 the company burned through $28.1 million. So the concern is: Will Navidea run out of capital before the products can bring in revenue to sustain the company? Brent Larson, Navidea's Senior Vice President and CFO, did address the financial concerns, "Through flexible access to multiple available funding sources, we have maintained a strong financial position in advance of expected revenue from our first radiopharmaceutical product, Lymphoseek. We believe that our cash flow and available financial resources are sufficient to support the ongoing advances in our pipeline programs and operating needs for the foreseeable future." The company has a $50 million equity line from Platinum-Montaur Life Sciences, and is confident that they will be able to secure a European partner for Lymphoseek, which could add an additional $10 million in working capital.
Navidea has a market cap of $297.5 million. Its stock closed on Thursday May 2nd at $2.45 per share. Navidea is still losing money, but that is expected with a development-stage company. However, the company does have a good U.S. partner for Lymphoseek with Cardinal Health to market and distribute the treatment. Though I'm not yet sold on rushing out to buy Navidea due to cash flow concerns, Lymphoseek should have strong sales once on the market, and Navidea does have a number of radiotherapy diagnostic products in development, including indications for Parkinson's, Alzheimer's, and various cancers.
ONCOSEC - DEVELOPING A NOVEL DELIVERY SYSTEM FOR CANCER DRUGS
ONCOSEC MEDICAL INC. (OTC:ONCS) stock has had a good run in the past month, up over 14%. The company is developing both a gene and a drug delivery system that allows for a more targeted and effective treatment for skin cancer, including basal cell carcinoma, squamous cell carcinoma, and melanoma. The delivery system uses the company's proprietary electroporation therapy, the OncoSec Medical System (OMS). The patient is injected with the drug, six needles (electrodes) hooked up to a generator, are inserted into the skin around the tumor, then short pulses of 1,300 volts are administered. The electric field causes the pores of the cancer cells' membranes to open, and the drug enters the pores of the tumor. The applicator is removed, the electrical pulses stop, and the pores close up trapping the cancer drugs within the cells. Because the delivery system is targeted, and because the cells open and retain the agent, the OMS is able to deliver its treatments using a significantly lower drug dose, at a much lower cost.
ONCS's gene therapy, ImmunoPulse, consists of the cancer killing DNA plasmid interleukin-12 (IL-12), which is injected directly into the tumor just prior to the OMS opening the cancer cell pores. It is currently in three Phase II trials for the treatment of metastatic melanoma, Merkel cell carcinoma, and cutaneous T-cell lymphoma. Interim results of the Phase II trial for metastatic melanoma showed all melanoma lesions that demonstrated at least a partial or complete response to treatment were followed, to determine durable response, and sixty-eight percent and forty-five percent of treated lesions demonstrated a durable response at three and six months. Results support the key findings from the previous trial indicating that ImmunoPulse is safe and well tolerated, as well as producing strong objective response rates in patients with metastatic melanomas following a single cycle of treatment. Researchers found an additional benefit they didn't expect with the treatment: Patients' immune systems were attacking cancer cells outside the direct treatment areas, affecting a much larger area than just the targeted cells.
ONCS's drug therapy, NeoPulse, which is in Phase II trials for skin cancer, uses bleomycin, a chemotherapeutic drug that is highly effective in fighting cancer, but is also highly toxic. With the OMS delivery system, the patient receives 1/20 of the traditional dose of bleomycin, and NeoPulse achieved effective results, demonstrating that bleomycin had the ability to kill tumor cells by a factor of as much as 4,000. Since the company is small and has limited resources, it is looking for a partner to license NeoPulse, which would give ONCS a considerable amount of cash to focus its efforts on developing ImmunoPulse.
What may give ONCS the edge in a competitive field is that the company is not developing a new drug, but rather an effective delivery system for the medicines. Therefore, ONCS is not competing with other drug companies, but attempting to create a customer base by enhancing already approved drugs, utilizing OMS. OncoSec has a market cap of $22.2 million. I think this company is quietly making headways in developing its targeted cancer drug delivery system and, if more positive news comes out, this stock should rise.
Sadly, there is big money to be made in cancer, and if a company can develop and bring to market a successful targeted cancer therapy, it could be worth hundreds of millions, if not billions, in sales. I think Roche will slowly continue to make money for investors for many years to come; but for added risk/reward, if Navidea can generate sales before running out of capital, the stock could be a big winner. ONCS is still a development-stage company that is not producing revenue -- and though it has a chance to be a breakout stock, it carries a greater risk. Read up and know your tolerance before investing in any company.