In light of a government shutdown and fears of a debt default, stocks have taken a turn for the worse. Historically, biotechnology is an industry that does not respond to the volatility of the market, but rather the release of data, the speculation of an FDA approval, and then growth of sales. Strangely, on Monday and Tuesday, biotech was amongst the biggest losers in the market, including Acadia Pharmaceuticals, Celldex Therapeutics, Regeneron Pharmaceuticals, and Pharmacyclics. Along these high-profile companies include other less-discussed laggards such as Jazz Pharmaceuticals (NASDAQ:JAZZ), BioMarin (NASDAQ:BMRN), and Incyte (NASDAQ:INCY). Overall, it has been very ugly for biotechs. However, with huge data announcements scheduled in the next three months, there are still some investments in biotechnology that could be lucrative, regardless of the market.
NewLink Genetics (NASDAQ:NLNK)
In 2013, shares of NewLink Genetics have rallied almost 50% -- this despite a 10% collapse on Tuesday. For the last year, investors have awaited data to support the impressive findings in years prior, regarding both pancreatic and non-small cell lung cancer (NSCLC). Back in late September, NewLink gave investors a taste of what may come: The company announced that its HyperAcute immunotherapy platform produced a better-than-expected response in the treatment of both diseases.
In treating pancreatic cancer, three patients experienced a complete response. In the most difficult to treat of NSCLC patients, 25% of 16 patients achieved stable disease and 31% achieved a partial response. Overall, this data was strong, but clearly incomplete and based on a small patient population. With that said, investors are anxiously awaiting future interim analyses from larger patient populations in the treatment of pancreatic cancer. So far, data has been robust and, if continued, NewLink could become a Wall Street favorite with an entire platform of HyperAcute products to treat cancer. A large interim look at data is expected in the first quarter of 2014, which will no doubt significantly move NewLink's stock.
When investors talk about Pharmacyclics, the first and only thought is ibrutinib. It is this drug that has produced a five-year 6,000% plus return. And while ibrutinib is all but a certain FDA approval and blockbuster product, I am more interested to know whether or not Pharmacyclics is a one-trick pony, or if research and innovation is the new standard at Pharmacyclics.
Pharmacyclics is a 20-year-old company that had produced nothing up until ibrutinib. Therefore, some have questioned whether or not the company simply stumbled across greatness, or if it was due to a change in culture. With that said, I am anxious about Phase 2 interim data on PCI-27483 for the treatment of pancreatic cancer, which is due later this year.
This is a product that is partnered with Novo Nordisk, but also has low expectations, and has been very slow to progress in clinical trials. In fact, for all the analysts who cover Pharmacyclics, I have yet to ever hear peak sales projections or a valuation model based on any of Pharmacyclics' pipeline, including PCI-27483. As of now, there is no prior data strong enough to draw conclusions about the interim results. Therefore, investors have to simply wait, making it interesting to see whether or not Pharmacyclics is developing a pipeline full of promise, or if it's just a product of promise.
OncoSec Medical (NASDAQ:ONCS)
OncoSec is a tiny company, but one with so many end-of-year catalysts that I can't help but to acknowledge it. First, the company develops an electroporation platform (use of electricity to create temporary pores and increase uptake while decreasing side effects) using immunotherapy products. Currently, OncoSec is developing its platform with IL-12 as a product called ImmunoPulse, which is being tested on metastatic melanoma, Merkel cell carcinoma (NYSE:MCC), and cutaneous T cell lymphoma.
The melanoma study is OncoSec's most advanced trial, and last month the company updated its Phase 2 trial with data from 13 patients. In that update, 73% of targeted lesions demonstrated at least a 30% decline in size by day 90; 49% of targeted lesions had a complete response by day 90; and 85% of patients had a partial response. All data far exceeds that of Yervoy, and is consistent with all data that we've seen to date, but is still small.
With this data in mind, I am very excited to see additional data later this year. On the company's website there is a list of future milestones, too many to name, but these include long-term progression-free survival data on the melanoma study, interim data for MCC, and then the launch of a Phase 2b MCC and melanoma study early next year. These could create large gains if data goes in OncoSec's favor.
Then, there is data from research that the company has been compiling over the last year(s). On Tuesday OncoSec announced positive preliminary data on animal studies using ImmunoPulse with anti-CTLA4 and anti-PD1 antibodies. According to the press release, 100% of the 40 mice saw regression in treated lesions with none dying from toxicity. This is big news, and shows the potential for ImmunoPulse to expand with new therapeutics, which just adds to the list of catalysts in the next few months.
Now, with all things considered, this is a tiny company with a market cap of just $45 million. It is somewhat under-the-radar, but at the same time is endorsed by several contributors. I first learned of OncoSec from a previous SA article; then did my own research; and I found that OncoSec does in fact have good data to date, especially considering its market capitalization. However, investors should note risks such as the possibility of failed clinical studies and volatility. As of now, financing does not seem to be an issue; the company just raised money and only burns $580,000 per month. Therefore, invest wisely and be sure to perform proper due diligence.
Celldex Therapeutics (NASDAQ:CLDX)
Celldex Therapeutics has been one of the best performing biotechs over the last year, seeing gains over 350%. However, its five-day 22.5% loss might present a good opportunity with the company having data for both its glioblastoma multiforme (GBM) drug, CDX-110, and its dense deposit disease drug, CDX-1135 , in the near future.
In the last year, it was data from the company's breast cancer drug, CDX-011, that produced such large gains, after it delayed growth and extended life in the most difficult to treat patients, those with no options. Thus, investors now assume that Celldex's entire platform must work, and that particular theory will be put to the test with future data announcements.
With CDX-110, there is reason to believe that data will be positive. The company has already expanded the study by an additional 75 patients due to early evidence of anti-tumor activity. But still, investors want to know more thorough data from the first 25 patients enrolled, which is expected to be announced in November.
With CDX-1135, Celldex is treating an orphan disease and, if successful, makes Celldex one of the most diversified small biotechs in the market. This particular study will be closely monitored because there is a strong belief that CDX-1135 could expand into additional indications and possibly compete with Alexion's Soliris. Both drugs are complement modulators, but CDX-1135 binds to both the C3 and C5 component whereas Soliris only binds to C5. With Soliris generating over $1 billion in annual sales and supporting a $20 billion market capitalization for Alexion, data from this small pilot study could go a long way in the mind of investors.
The market may tumble in the fourth quarter of this year, but with important data announcements, these four companies might prove resilient. OncoSec clearly has the lowest expectations with the most to gain, yet has nothing except strong data to support ImmunoPulse. NewLink and Celldex have the most to lose with bad data, and with Pharmacyclics, very few are even looking at its pipeline. However, strong data could help in solidifying diversification for each of these companies. Either way, these companies should be watched in the final two months of 2013.
Disclosure: I am long ONCS, CLDX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.