The future of cancer therapy appears to be in immunotherapies. Citigroup analyst Andrew Baum sees the potential of immunotherapies managing up to 60% of all cancers and estimates sales of such drugs over the next 10 years could reach $35 billion. One area that immunotherapies have shown to be effective is in treating melanoma. Today there are 68,000 new cases of melanoma diagnosed in the U.S. and an estimated 9,180 people will die from advanced melanoma per year. Below are four companies that are developing what could be the next billion-dollar immunotherapy platform to battle not just melanoma but a number of other indications as well.
LION BIOTECHNOLOGIES POSITIVE RESULTS MAKE IT NO LONGER A SLEEPER STOCK
Lion Biotechnologies, Inc. (OTCQB:LBIO), a small cap biotechnology company, saw a rise of almost 60% in the last month of trading. And I think there's good reason for the stock surge as the company announced positive results from its adoptive cell therapy (ACT) platform, which are engineered T-cells used for the treatment of cancer. ACT involves the isolation and ex vivo expansion of tumor specific T-cells to achieve a greater number of T-cells than what could be obtained by vaccination alone. These engineered T-cells are then infused into the cancer patient to give the immune system the ability to overwhelm the tumor and kill the cancer.
Lion's lead candidate, Cōntego, a ready-to-infuse cell therapy that uses tumor infiltrating lymphocytes (TILs) to treat advanced metastatic melanoma, is in four clinical trials including a just-completed Phase II trial with the National Cancer Institute, and a Phase I trial at the Moffitt Cancer and Research Institute. Cōntego directly targets the cells that have been commandeered by the cancer, and by enhancing the TILs it has shown success in battling and possibly even curing the diseased tumor. TILs therapy produced a 50% response rate including a 22% complete response, making the data some of the most promising to date of any metastatic melanoma therapy. Both studies are testing Cōntego conjunction with Roche's (OTCQX:RHHBY) metastatic melanoma drug, vemurafenib (Zelboraf). An additional Phase I study is being tested in conjunction with Bristol-Myer Squibb's (BMY) immunotherapy drug, Yervoy, and a pilot is underway with Bristol's other immunotherapy drug, nivolumab.
Manish Singh, Ph.D., President and Chief Executive of Lion - who previously helmed ImmunoCellular Therapeutics (IMUC), taking it from a tiny OTC $6 million company to an almost $200 million dollar compan -- commented on the results and what he sees the next step should be:
"We believe the results achieved in the NCI trial warrant moving the program into a Phase III clinical trial for product approval, and we are currently developing the resources to initiate that process."
The company expects Phase III trials to commence in 2015.
SMALL COMPANIES CAN MAKE BILLIONS IN COLLABORATIONS
A collaboration deal could be worth a billion dollars to a small company, as seen last year when Merck (MRK) acquired the rights to develop and commercialize Endocyte's investigational cancer compound, vintafolide, in a deal with milestone payments possibly worth over $1 billion. Sometimes collaborations turn into buyouts. Medarex was a small cap biotech company in collaboration with Bristol on Yervoy. Investors who owned Medarex's stock were well rewarded as Bristol's collaboration turned into a $2.1 billion cash purchase of the company, a 90% premium over the company's value prior to the announcement.
I like the investment potential of Lion. The stock has been on a tear the past few sessions, closing on Friday. Dec. 6th at $11 per share. The company has a market cap of $170 million, and is developing a platform that could be worth billions per year. However, a major concern about any development biotech company is the ability to sustain its existence while developing its product. In November the company completed a private financing with gross proceeds of $23.3 million, netting the company approximately $21.6 million. The money was raised to secure the funds for Cōntego's phase III study as well as sponsor several other studies. Lion estimates a burn rate of $10 million from the 4th quarter 2013 to 4th quarter 2014, giving the company enough working capital to operate for the next two years.
Though any development stage biotech company has risk, and the cash risk has been removed for the next two years, the drug platform still has a long way to go from the start of a phase III to an FDA submission, and there is no guarantee of success. That being stated, given the positive results of the phase II study I see Lion as an interesting play, not only as a longer-term investment, but also as a company that might be of interest to one of the giant pharmaceutical companies looking for collaboration or perhaps a buy-out.
BRISTOL - MYERS SQUIBB: DEVELOPING TWO NOVEL IMMUNOTHERAPIES
Bristol is another company I see as a good investment due to its two potential blockbuster cancer drugs. Ipilimumab (Yervoy), the company's novel immunotherapy drug, has shown to extend the lives of melanoma patients up to 10 years in clinical studies. Tests consisting of 1,800 patients involved in 12 separate trials showed that 22% of the patients who were given Yervoy were alive after 3 years, 17% after 7 years, and no deaths were reported between 7 and 9.9 years. Yervoy works on a molecular level by targeting the CTLA-4 protein receptor on cancer killing T-cells within the immune system, and by blocking the action of CTLA-4, thus boosting the immune response against melanoma cells. While Yervoy has only been effective in shrinking tumors in just over 10% of patients, these patients lived longer as their immune system was able to adapt and keep up with mutations in the tumor.
Nivolumab, a PD-1 monoclonal antibody, is considered a breakthrough melanoma immunotherapy. PDs are programmed death cells, in this case, PD-1. It is a key immune checkpoint receptor expressed on activated T-cells that bind to its ligand -- PD-L1, resulting in suppression of the immune response. Nivolumab blocks the interaction between PD-1 and PD-L1 and allows the T-cells to fight the cancer.
Long-term data from the Phase I trial has shown "unprecedented response rates." Of the 107 melanoma patients, 31% had tumor shrinkage, a higher percentage than Yervoy. In Bristol's testing of a Yervoy and Nivolumab combination, 82% of the patients survived over one year, representing a higher percentage than taking Yervoy alone, but also demonstrating that adding an anti-PD-1 drug almost tripled the survival rate. Nivolumab is in 6 late-stage studies, and has fast-track status for melanoma, lung cancer and kidney cancer. Analysts estimate peak sales of $4 billion.
Bristol has a market cap of $85 billion. Its stock has risen 58% YTD and is just below its 52-week high closing on Friday. Dec. 6th at $50.68 per share. Yervoy's 3rd quarter sales were $238 million, up 33% from the same quarter 2012. Analysts expect yearly sales potential could reach $6 billion as Yervoy is also being tested for other cancers including stomach, lung, ovarian and prostate. Zacks currently has a price target of $54.00 per share, while earlier this month analysts at Leerink Swann raised their price target from $49.00 to $58.00. Though still feeling the effects of its top selling drug Plavix losing patent protection last year, the company saw a 9% growth in the 3rd quarter. What I think will lead the company's future growth is what I expect to be two blockbuster drugs, Yervoy and nivolumab.
MERCK'S ANTI-PD-1 DRUG PLATFORM MAY GIVE INVESTORS ROOM TO SMILE
Merck has had its challenges as it cuts costs and overhauls its disappointing R&D operations, while seeing 1/3 of its drug franchises face or soon to face generic competition. But there is a bright spot for the company, which could be worth billions over the next few years: its investigational anti-PD-1 melanoma drug, lambrolizumab. In early tests, 80% of the 135 patients with advanced and unresectable melanoma treated with lambrolizumab were still alive after one year. In an ongoing Phase IB expansion study, the drug demonstrated significant antitumor activity and achieved a response rate of 38% in advanced melanoma patients, and the response rate rose to 52% with patients on the highest dose tested. After an additional five months of follow-up the overall response rate increased to 41%, with 88% of patients with partial or complete responses showing no evidence of the cancer progressing.
Lambrolizumab received the FDA's Breakthrough Therapy Designation earlier this year and is currently in eight clinical trials for a number of indications including melanoma, non-small cell lung, bladder, colorectal, gastric, head and neck, and triple negative breast, with additional trials planned in combination with other cancer therapies. Merck is adopting a special R&D focus for lambrolizumab as it expects the drug to be one of the key PD-1 drug platforms with estimated sales just under $1 billion by 2018. Bernstein analyst Tim Anderson estimates the drug could generate sales of around $1.5 billion in 2020 with peak sales at $3 billion.
Merck's stock is still up over 20% YTD, closing on Dec. 6th at $49.39 per share, slightly below its 52- week high. I like Merck, it's a $145 billion market cap company, and while it might not make the short term gains of some of the other giant pharmaceutical companies, Merck could be a great stock for the long haul if its restructuring works and its revamped R&D brings blockbuster results.
ROCHE'S IMMUNOTHERAPY DRUG: SUCCESS IN TREATING MELANOMA AND LUNG CANCER
Both Merck and Bristol's melanoma immunotherapies will find competition from Roche's MPDL 3280A. While both lambrolizumab and nivolumab are anti-PD-1s targeting the receptor, MPDL 3280A is an anti-PD-L1 that targets the ligand PD-L1 and inhibits binding to the PD-1 receptor. In early Phase I clinical trials, the drug significantly shrank tumors in 31% of the melanoma patients and the 24-week progression-free survival was 43%. Roche believes the anti-PD-L1 drug is more selective than the PD-1 drugs and may lead to less inflammation of the organs. The study also showed the drug well tolerated and no side effects required limiting the dosing.
While MPDL 3282A has shown its highest success in treating melanoma, Roche chose to target the biomarker population in lung cancer as its lead indication. Data from a Phase I study of 38 patients with advanced non-small-cell lung carcinoma who had been treated with at least 2 prior therapies had a response of 24%, with the median overall survival being 51 weeks. Deutsche Bank analyst Tim Race sees the drug's sales potential greater than $5 billion with potential benefits across multiple cancers, while Bernstein's Tim Anderson puts peak sales at about $3.5 billion.
Roche has a market cap of $241 billion, its stock closed on Wed. Nov. 27th at $69.73 per share. The company will soon feel the pressure of lost sales of its $6 billion a year Herceptin as it comes off patent in the EU in 2014 and in the U.S. in 2019. And while MPDL 3280A may make up for some of the loss, I would not be surprised to see Roche open its checkbook and buy the rights to a future blockbuster drug platform or a smaller company with a strong development portfolio.
Immunotherapy will be worth billions to the companies that develop blockbuster drugs, and the three giant pharmaceutical companies profiled above will be on the forefront of such treatments and should be excellent companies to have in one's portfolio. Lion Biotechnologies is much smaller, but has the potential for large gains if more positive news comes from its future clinical trials.