Immunotherapy, a form of therapy that uses the patient's own immune system to fight diseases like cancer, has the potential to become the biggest medical segment in history. So says Dr. Andrew Baum, analyst and group head of healthcare research at Citigroup, highlighting the growing excitement due to what appears to be positive results from clinical trials conducted by companies such as Bristol-Myers Squibb (BMY) with Nivolumab and Roche Holding (OTCQX:RHHBY) testing MPDL3280A. In terms of yearly sales Dr. Baum commented: "We believe this market will generate sales of up to $35 billion (a year) over the next 10 years and be used in some way in the management of up to 60 percent of all cancers."
While those numbers might be rather lofty and are considerably higher than most analysts forecast, the new class of immunotherapy drugs (also called biological therapy) have the potential to make cancer more of a chronic disease similar to how the new HIV drugs have made the HIV virus a chronic yet manageable disease, according to the Citigroup analyst. Below are three highlighted companies developing immunotherapies to battle cancers and that may well develop the next blockbuster therapy.
Roche Continues To Be The Leader In Innovative Cancer Therapies
Genentech, a subsidiary of the Roche Group, has started phase II clinical trials on MPDL3280A, an immunotherapy drug for advanced solid tumors, which was specially engineered to increase safety and efficacy over earlier immunotherapy agents. Phase I studies showed the engineered human monoclonal antibody, which targets a protein called programmed death-ligand 1 (PD-L1) that impairs the immune system's ability to fight the cancer, to be safe and effective for several cancers. PD-L1 is found on the surface of many cancer cells; MPDL3280A binds to PD-L1 and blocks the protein's action, freeing the immune system to do its job.
At the Yale Cancer Center, 140 patients in the phase I study with non-small cell lung cancer, melanoma, kidney cancer, colorectal cancer, and gastric cancer with locally advanced or metastatic solid tumors who had exhausted other means of therapy were observed to have tumor shrinkage. Lead author Roy Herbst, M.D., professor of medicine and chief of medical oncology at Yale Cancer Center and Smilow Cancer Hospital at Yale-New Haven, commented on the results: "We have been very impressed by the response in seriously ill patients whose cancer had metastasized. So far, almost none of those who showed tumor shrinkage have gotten worse, which is extraordinary. Immunotherapy treatment is providing new hope for cancer patients." While MPDL3280A is a long way from an FDA approved treatment, the drug so far appears to show promising results and could be the next billion-dollar drug to join Roche's stable of cancer-fighting therapies.
On September 20th Roche's new breast cancer drug, Kadcyla-- a combination of its blockbuster antibody drug, Herceptin (trastuzumab), linked together with the cancer-killing drug-conjugate technology from ImmunoGen (IMGN) that binds with the HER2-positive cells-- received approval from the Committee for Medicinal Products for Human Use (OTCQB:CHMP) in Europe. Kadcyla targets HER2-positive cells from receiving the nutrients, and in combination with chemotherapy dramatically reduces the recurrence rate of additional cancers while exposing a much smaller area of the body to the chemotherapy.
While Kadcyla does come with a much higher price tag than Herceptin, the drug-- dubbed a "super Herceptin"-- has shown some advantages over Herceptin and, according to forecasts, peak sales could reach an impressive $2 billion to $5 billion annually. Kadcyla has already brought in $69.5 million since its FDA approval in February and is credited with bolstering Roche's financials, as the company reported a 10% rise in profits for the first half of the year. Roche's top-selling cancer drug, Rituxan, brought in $1.87 billion, while its other new breast cancer treatment, Perjeta, had sales of $115 million.
Roche stock is up 31% year-to-date. The company offers a solid dividend at $2.02 per share. Roche, with its subsidiaries, continues to be on the forefront of new drug therapies-- and though touching its 52-week high of $66.77 the stock, should continue to be a safe yet profitable investment and should continue to be an excellent stock to have in one's long-term portfolio.
Compugen Using Computer Technology To Fight Cancers
Compugen (CGEN), a small biotech company out of Tel Aviv, Israel has seen its stock rise 92% year-to-date. The company disclosed experimental data on its platform CGEN-15049 that demonstrated the ability to regulate an impressive array of different types of immune cells, therefore offering a unique potential as a target for monoclonal antibody immunotherapy for numerous types of cancers. In addition to its functional effect on multiple types of immune cells, CGEN-15049 is also expressed on a wide variety of cancers such as lung, ovarian, breast, colorectal, gastric, prostate, and liver cancers. Its expression can be detected both within the tumor epithelium of the cancers as well as on immune cells infiltrating these cancers.
Unlike traditional high throughput trial and error experimental-based drug candidate discovery, Compugen utilizes proprietary scientific understandings and predictive platforms, algorithms, machine learning systems, and other computational biology capabilities via the computer to select an unmet therapeutic or diagnostic need. Then using its algorithms and other tools it narrows down the large number of possibilities to the novel molecules that appear have the highest probability of being successful for a specified need. These molecules are then synthesized and undergo in vitro and/or in vivo validation testing. Selected product candidates are then added in its Pipeline Program to the pre-IND stage.
What I find interesting about Compugen is that unlike many other small biotech companies that try to compete with "the big boys", Compugen's business model primarily involves collaborations with big pharmaceutical companies in development and commercialization of product candidates from its Pipeline Program and various forms of research and discovery agreements. Thus, the company is looking collaborate with the large companies with a goal of collecting milestone payments, royalties, and revenue sharing.
Last month Compugen signed a license agreement with the German pharmaceutical giant, Bayer HealthCare (OTCPK:BAYRY), centering on its discovery of two so-called checkpoint regulators that serve as targets for antibody drugs. These two checkpoint regulators serve as targets for the promising immunotherapies for both Bristol-Myers Squibb's nivolumab and Merck's (MRK) lambrolizumab, which are expected to generate tens of billions of dollars in annual revenue.
Bayer was looking to expand its portfolio in immunotherapy and the company found an avenue via partnering with Compugen-- and it will pay $10 million upfront for global rights to the programs, which are now in preclinical development. And while the deal may be a worth up to $500 million for Compugen, it is loaded with numerous check points along the way as the development continues… and at this point all Bayer has at risk is the $10 million upfront fee.
Compugen has a market cap of $345.78 million, and like so many small developmental companies it has been running at a loss as it develops its product. However, it does have what appears to be a novel product and a solid business plan of working with instead of competing with the giant firms. The stock's big jump in price came on the announcement of the partnership with Bayer where it rose over 45%, and has continued to climb, closing on Friday September 19th at $9.45 per share. The stock has given back a little over 10% due primarily to profit taking, and I would like to see more of a pullback before entering.
Galena Enters Phase III With Its Novel Cancer Therapy NeuVax
Galena Biopharma (GALE) has had a good run this year, up over 30%, though well off its May 1st high of $3.00 per share. The stock's run was due to its lead candidate, NeuVax, receiving the Food and Drug Administration (FDA) Special Protocol Assessment, which sped up the process to enter a phase III clinical trial for an adjuvant therapy for women with breast cancer that are HER2-negative and therefore not eligible for Roche's Herceptin. NeuVax is an E75 peptide derived from HER2 combined with the immune adjuvant granulocyte macrophage colony-stimulating factor that stimulates the CD8+ T cells to target cells that show any level of HER2.
If approved and marketed properly, NeuVax has the potential of being a blockbuster therapy as breast cancer drugs are estimated to grow to $10.9 billion annually by 2018. Herceptin is given to HER2- positive patients-- but HER2-positive candidates only account for 25% of the breast cancer patients; NeuVax is given to HER-negative patients, which account for the other 75%. Herceptin had sales of roughly $6.45 billion in 2012, and while there are a lot more patients with HER2-negative expression, I'm not ready to say that, if NeuVax gains FDA approval, it will double or even come close to matching Herceptin sales numbers. But NeuVax does have the potential to be a billion-dollar plus drug in the breast cancer drug market. NeuVax is also in a phase II study in conjunction with Herceptin, and may extend its reach fighting other cancers as it completed a phase I study for prostate cancer.
Galena's other immunotherapy treatment is a Folate Binding Protein-E39 (FBP), a targeted vaccine designed to prevent the recurrence of ovarian and endometrial cancer, and it has entered phase I trials. FBP is over-expressed (20-80 fold) in more than 90% of ovarian and endometrial cancers, as well as 20%-50% of breast, lung, colorectal, and renal cell carcinomas. FBP has very limited tissue distribution and expression in non-malignant tissue making it a great candidate for immunotherapy targeting. Ovarian cancer occurs in over 22,000 patients per year in the U.S. and the majority of ovarian cancer patients are diagnosed at later stages of the disease. This fact makes it the most lethal gynecologic cancer. Endometrial cancer is the most common gynecologic cancer and occurs in over 46,000 women, with over 8,000 deaths in the U.S. annually.
Though Galena had a net operating loss of $7.9 million for the quarter that ended June 30, 2013, the acquisition of Abstral from Orexo AB (ORX.ST) for sales and distribution in the U.S. should soon bolster the company's bottom line. Abstral is a new treatment option for inadequately controlled pain management caused by cancer and used in opioid tolerant patients. Abstral delivers the analgesic power of fentanyl in a tablet that dissolves under the tongue within seconds, and what makes this drug different than others of its kind is that plasma concentrations of fentanyl are found within 10 minutes.
Abstral, which was approved by the FDA in January 2011, has experienced steady growth in Europe, up 44% in the 4th quarter 2012 compared to the same quarter in 2011. Sales in Europe totaled $54 million in 2012, and the drug continues to gain traction: Japan's Ministry of Health, Labor and Welfare recently approved the drug. Gearing for a 4th quarter launch, marketed properly Abstral could bring in a substantial revenue stream for Galena as the company works toward FDA approval for NeuVax. In 2012 the U.S. market for Transmucosal Immediate Release Fentanyl was $400 million; if Galena can capture 10% of the U.S. market that could generate revenue of $40 million annually.
Galena's announcement on September 13th pricing a public offering of 17,500,000 shares at $2.00 per share did cause dilution of the stock, and the stock dropped almost 15%. However, the stock has begun to work its way back up as investors digest the reasons for the offering, which was for the commercialization of Abstral, its ongoing NeuVax clinical trials, and general corporate purposes. The stock closed on Friday September 20th at $1.99 per share.
While Roche is clearly a leader in developing new cancer therapies, and even though the stock is touching its 52-week high, I see very little on the horizon that will cause the stock to drop, making it an excellent company to have in one's long-term portfolio.
Compugen and Galena are two young and aggressive companies each with novel platforms in the growing immunotherapy field. Compugen's deal with Bayer could be the beginning of other collaborations with giant pharma companies over the next few years, but the stock today is a little pricy and could use more of a pullback before entering.
Galena's NeuVax seems to have the most potential and, if approved by the FDA, I would not be surprised to see a giant pharmaceutical company knocking at its door. Though I like Galena and see it as a buy, there is a caveat: Even with its acquisition of Abstral, Galena's stock price today is based on one product, NeuVax, and if it fails to gain FDA approval the stock would drop considerably from where it sits today.