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OncoGenex Pharmaceuticals (NASDAQ:OGXI) is certainly shaping up to be one of this year’s success stories, on the stock market at least. And, by all accounts, the company’s stratospheric journey is not over yet.

Startling results from a phase II trial of its lead product, OGX-011 for advanced prostate cancer, have prompted the stock to surge from $3 to $37 this year, marking one of the best returns seen across the sector. The company has promised a licensing deal by the end of the year so the drug can move swiftly into pivotal trials, and investors are clearly betting on big bucks, possibly even a take out. With a market value of $220 million, OncoGenex could still have some way to run.

Breaking down the walls

OncoGenex describes its product as a second-generation antisense molecule, generically called custirsen sodium. It blocks the production of clusterin, a protein produced in large quantities by many cancers in response to treatments such as chemotherapy and radiation, which help tumour cells to survive and proliferate.

By blocking clusterin production, cancer cells should, theoretically, become more sensitive to the drugs or therapies designed to kill them. The work completed so far by OncoGenex suggests that this is exactly the case. The study that caused all the excitement was presented in full at this year’s ASCO, following top line data released last December.

In a trial of 82 patients with hormone resistant prostate cancer (HRPC) that was no longer responding to therapy, OGX-011 in combination with docetaxel helped patients live an average of 23.8 months, compared to 16.9 months in patients given the chemotherapy alone.

Survival benefit

A 6.9-month survival benefit is certainly an eye catching result in advanced prostate cancer. To put this into context, Sanofi-Aventis’ (NYSE:SNY) blockbuster chemotherapy Taxotere (docetaxel) was approved in this setting in 2004 based on a 2.4-month survival advantage. Dendreon’s (NASDAQ:DNDN) much vaunted prostate therapy Provenge is due to be filed for approval next month on the basis of a 4.1-month survival benefit, over placebo.

This optimism must be tempered, however, by the fact that the phase II trial was small and the other two therapies achieved their results in much bigger and more robust studies. However, if OGX-011 can replicate that readout, or something close, in a larger trial, it would certainly be hailed as a significant breakthrough for these patients.

OncoGenex has agreed two phase III trials with the FDA under a special protocol agreement. The first of the phase III trials is designed to measure overall survival in a first line setting, and will recruit 800 patients. The second is looking at pain palliation benefit in a second line setting, and will recruit 300 patients. The company announced Wednesday that the first line setting had also received fast track designation, as well as the second line setting, prompting yet another jump in OncoGenex’s share price.

What next?

The company has made it clear that pivotal trials will not start without a partner on board. When announcing quarterly results at the beginning of August the company said there were many interested parties at the table, including those not already in the antisense space.

Considering the huge interest in antisense-based therapies over the last few years, it is hard to believe that there remains a big pharma company not yet dipping its toes into the field. Few antisense products have actually advanced very far in the clinic, however, with the notable exception being Genzyme and Isis Pharmaceutical’s mipomersen. The drug is currently the subject of a huge licensing deal and is in phase III, but it's unlikely to reach the market until 2011 at the earliest.

Whether the fact that much antisense work remains early stage will cap the value OncoGenex can achieve for OGX-011 remains to be seen. On the upside, recent deals in the prostate cancer space and oncology more widely give cause for optimism. Think Johnson & Johnson’s (NYSE:JNJ) $1 billion acquisition of Cougar (CGRB) and Bayer’s (OTCPK:BAYRY) $800 million deal with Algeta, albeit struck over phase III products.

However, OncoGenex currently has market value of only $220m. This opportunity could easily be valued significantly higher by a keen buyer.

Source: OncoGenex: Room for Further Growth?