2 Biotechs Aim To Capitalize On The Treatment Of Melanoma

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 |  Includes: AMGN, ONCS, VICL
by: Amy Baldwin

Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.

Data from key trials of experimental treatments for melanoma brings good news for those affected by this deadly form of cancer. Following the disappointment from Vical's (NASDAQ:VICL) failed Phase 3 study, the development of melanoma treatments offer investors a solid opportunity with two different stocks.

Melanoma is certainly the deadliest form of skin cancer, accounting for 75% of all skin cancer related deaths. If caught early, it is highly treatable. When left too long, however, treatment options, until now, have been few.

Big Pharma's Melanoma Vaccine

There are two new drugs on the market targeting later-stage melanoma which have shown real promise. The first, from Amgen (NASDAQ:AMGN), is TVEC (Talimogene Laherparepvec). The company announced results of its stage 3 clinical trials - an improved survival rate of 16 percent for patients with advanced forms of the disease who were treated with TVEC, compared to 2 percent for those treated with a standard white blood cell-boosting drug. Recent analysis from market observers had indicated the company would need to demonstrate an improved survival rate of 15 percent or higher for the drug to have market viability. Amgen has met that threshold. Final survival rates for the drug trial are not expected until later this year, but this interim report has caught Wall Street's attention.

Amgen's head of global oncology development, David Chang, said the company is currently discussing moving forward with the regulatory approval process with the U.S. Food and Drug Administration. So far, the only side effects reported have been mild, flu-like symptoms.

Amgen's TVEC is injected directly into the tumor where it replicates until the membranes of the cancer cells rupture and die. The drug then activates a systemic immune response to kill tumors throughout the body. This is the first time a virus-based treatment has shown success in treating any form of cancer.

Since the release of trial data, Amgen has traded consistently higher by an average of 6 percent, since this encouraging news was well received by Wall Street. This announcement, plus other cancer drug breakthroughs recently announced by Amgen (Xgeva for bone cancer, Trebananib for ovarian cancer), makes this an undervalued stock poised for growth. Clearly, Amgen is strengthening its oncology pipeline, and is making a strong push to acquire the cancer drug focused company Onyx Pharmaceuticals (NASDAQ:ONXX). According to Bloomberg, Amgen has upped its bid to $130 after being rejected at $120.

Amgen is aggressive in its pursuit of Onyx, and when you consider its pipeline of cancer products, it is easy to see why. Amgen has revenue of $17.66 billion over the last 12 months, but faces substantial growth concerns over the next few years. With the acquisition of Onyx, Amgen could add $3 billion in peak sales over a course of several years. Moreover, Xgeva and Trebananib will also boost the company's fundamentals, and then there's TVEC, a product with peak sales in excess of $1 billion. If Amgen successfully acquires Onyx, the company would have a diverse product offering in oncology, which could boost growth, and drive the stock significantly higher.

Small Biotech's Therapeutic Approach

The second therapy to enter the melanoma market is OncoSec Medical (NASDAQ:ONCS). OncoSec Medical has announced two advanced-stage treatments for melanoma. The company is developing advanced stage ImmunoPulse DNA-based immunotherapy and NeoPulse therapy to treat solid tumor cancers. OncoSec Medical's core technology is based upon its proprietary use of an electroporation platform to dramatically enhance the delivery and uptake of a locally delivered DNA-based immunocytokine (ImmunoPulse) or chemotherapeutic agent (NeoPulse). Early results from its Phase 2 study are promising: 45 percent of treated lesions showed durable response at the six month mark of the study of patients with metastatic melanoma. The secondary marker for this study will evaluate safety and tolerability in addition to local response of the treated lesions at day 90.

ImmunoPulse utilizes the DNA plasmid interleukin-12 (IL-12), which is injected directly into the tumor. After injection, six needle-like electrodes are inserted into the skin around the tumor. Short pulses of 1,300 volts cause the pores of the cancer cell's membranes to temporarily open, allowing the DNA plasmid to enter the cells. Upon entry into the cells, the gene triggers the production and secretion of the IL-12 protein, which in turn identifies and eliminates cancerous cells as part of a natural immune response.

NeoPulse therapy uses the same delivery system as ImmunoPulse to deliver doses of bleomycin, a highly effective and highly toxic anti-cancer treatment. Extensive pre-clinical and clinical data from Phase 1 through Phase 4 clinical trials have demonstrated this delivery system is safe and highly effective in eradicating solid tumors, including those of melanoma, basal cell carcinoma, squamous cell carcinoma and liver and pancreatic cancers. Along with the observable cancer cell destruction, this drug delivery method has also shown better quality of life benefits and swift healing of the wound site.

Normally bleomycin must be administered by intravenous infusion. Because this method targets cells inefficiently, practitioners must administer high doses of the drug to ensure adequate treatment of the cancer. Using NeoPulse to directly target the cancer cells, effective results can be achieved with as little as 1/20th of the traditional chemotherapy dose.

Given these extremely positive interim study results, OncoSec expects to complete the study in calendar 2013. Final analysis is anticipated in Q4 2013.

OncoSec is viewed by market analysts as having a promising future, especially if the company succeeds in getting its NeoPulse product introduced in Europe in 2013, following its signing of a partnering deal. The direction this company is taking into the treatment of various forms of cancer could lead to some major new products. The therapies developed by OncoSec seek to provide a method for less expensive and less invasive therapies for the treatment of some forms of cancer, minimizing detrimental effects such as surgery, systemic chemotherapy and immunotherapies.

However, if the company is unable to close partnership deals for its primary products ImmunoPulse and NeoPulse, it may also have to raise another $15 million later this year. These developments could critically affect the company's future.

Conclusion

Vical's Phase 3 study of Allovectin really puts a bulls-eye on Amgen and OncoSec. All three products were competing with each other in the advanced melanoma space. Now, with Allovectin no longer relevant, investors turn their attention to ImmunoPulse and TVEC. While Amgen is a large and diversified pharma company, TVEC is important in further boosting the company's oncology and growth line of products. With OncoSec, its electroporation technology is its primary driver, and while the company has many programs, late-stage melanoma is its latest and most promising in terms of revenue potential. Therefore, the competition between three companies becomes two, and it will be interesting to follow as a clear leader emerges.

Disclosure: I am long AMGN, ONCS. 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.