Recently, ImmunoCellular Therapeutics Ltd. (NYSE: IMUC) announced the midterm phase II results of their flagship drug ICT-107 showing a median overall survival increase of 2.0 months vs. the company previously hoped for 9 month expected benefit - a conservative bet from the much larger number (23.8 improvement over standard of care) in its phase I trial. This was disappointing to investors who struggle to assess the meaning of the results. Despite this, a few things should be considered for this area, but it should also be understood that cancer immunotherapy or "Immuno-oncology" is here to stay and has become a prioritized area of research and development all the way from large Pharma to the early stage companies who are really responsible for the major innovative push in this area. There has been a continuous effort to develop cancer immunotherapy for decades and it is safe to say that recent key developments and newly acquired knowledge now make immunotherapy a reality as a new drug class. With that said, from the investors' point of view, the questions to ask is what form it will take and who will emerge as winners in the field. For those investing in this area, there are financial, technical and market risks, but it goes without saying that the technical risks are emphasized in this area. It is hard to know how well the different technical approaches will work until they do.
Technical: ICT-107 is based upon 6 tumor markers (antigens) commonly found on tumors and it is believed that by pre-selecting known markers, especially if you choose more than one, you will be deploying sound scientific body of knowledge and data to redirect the immune system against the tumor. This is in contrast to the tumor lysate approach used by Northwest Biotherapeutics (NASDAQ:NWBO) with DCVax®-L where sections of the tumor are ground up and whatever is targeted by the immune system is targeted (what is most immunogenic and/ or most present), with the hope that such markers are important for tumor growth (some may or may not be). See previous summary of the different approaches to cancer vaccines and immunotherapy in this area. In the end, we would love to predict the future but the emerging data will provide a good hint as to which approach is better, no matter how much words are said about it. Having been in the field long enough, data tends to surprise us. It is true that phase I data in many cases is better than phase II data or even phase III data for multiple reasons already discussed, but this was accounted for by IMUC in their hope for a fraction of the phase I results as mentioned above. The truth is, the drug did work but just not as well as hoped for. It was accurately stated that ICT-107 could get approved even with the current numbers.
The decision to proceed from phase II to phase III trials in oncology is more challenging today because of the increasing awareness of the complexity and molecular heterogeneity of tumors; even ones that originate from the same primary site. In addition, drugs typically have been focused to target specific cellular pathways and metastatic sites, but now there is an emerging context for more personalized treatment planning. DCVax®-L appears to have a more personalized approach and therefore, its upcoming release of data will be important to assess the best approach in this race. Agenus (NASDAQ: AGEN), which also relies on using highly personalized treatment in its vaccine by extracting peptides from the tumor with its gp96 dependent Prophage Series G-200 drug recently announced a median overall survival of approximately eleven months in phase II on GBM. In any case, it should also be mentioned that phase II is designed to learn and better design a phase III unless otherwise stated. It is possible IMUC may take notice to biomarkers that correlate with drug efficacy that may improve statistics in the next trial if they collected such information and focus on that population, much as the Herceptin (Genentech/Roche) case. For example, if they checked the tumor for the very markers they target. This is in fact what was indicated in their Form 8-K release last week.
Financial: I think there were some valid concerns addressed by Smith in his article regarding the ability to finance a phase III study and possibly competing to recruit similar patients. According to their Form-10Q, they have total assets of $29,939,033 (as of 9/30/2013) with a recent burn rate of approximately $3 million +/quarter with no outstanding debt. Remaining shares 57.1 million. It is true that they will not know how many patients they will need to enroll if they wish to advance to phase III trials, however, the smaller the delta (difference in treated and non-treated) this may require more numbers and incur larger costs. Even so, I am less concerned about the ability to finance the trials as long as the data remains promising for approval. It is true that at a cost of ~$100,000 per patient at 600 patients, the phase III trial would cost $60 million. However, if the drug is good and no debts incurred for the company, there are several possible avenues to raise the remaining capital through 2018. If there was significant debt, this would be a more challenging possibility.
In addition to what has already been said by others, it is possible that the introduction of ICT-140 for ovarian cancer and ICT-121 targeting cancer stem cells in GBM will likely renew interest in the battered stock. In fact the stock has risen significantly from the introduction of this candidates. IMUC also has a very strong patent portfolio for the dendritic approach and this will serve them in creating value, a point that is often overlooked by investors because it is not as visible. This could be a determining factor in an acquisition if phase III shows promising results, or the other candidates, and if this is a desired strategy for the company. With all that said, the main point is, there are alternate ways to create value for investors if they take advantage of them but above all, they need to demonstrate the technology works and the approach is competitive, hence, I assess that the biggest risk is technical.
Market: One of the most significant factors to be understood is a reality check on what is trying to be attempted here. Market decisions are made when a development campaign is initiated for cancers that are common for larger populations and those cancers are drugable, which include examples like prostate, breast, hematopoietic (Leukemia, Lymphoma), thyroid cancers etc. It is safe to say that most of these programs are mature but regulatory agencies are providing incentives, such as orphan status which provides significant financial upsides on exclusivity as well as development money (IMUC is seeking orphan drug grant funds which can be tens of millions of dollars) to pursue these much harder and smaller market targets. The point here is that with GBM, much like ovarian and other select group of cancers, most people do not live long and much of what we have thrown at it over the decades has not worked. Thus, for the current standard of care, temozolomide (Merck (NYSE:MRK), approved in its phase III (575 participants randomized to standard radiation versus radiation plus temozolomide chemotherapy), showed that the group receiving temozolomide survived a median of 14.6 months as opposed to 12.1 months for the group receiving radiation alone which is just barely over 2 months: See New England Journal of Medicine 352 (10): 987-96.
A second factor is that the future that these drugs are being developed into is changing rapidly. It is likely that the checkpoint inhibitors being developed such as Bristol-Myers Squibb's (NYSE:BMY) anti-CTLA-4 Yervoy (ipilumumab) (Approved 2011) along with anti-PD-1 monoclonal antibodies (mAbs) from Merck , BMS and Roche (OTCQX:RHHBY), not to mention recent targets such as TIM-3, will be used in combination with the dendritic or other immunotherapy drugs. This of course would need separate trials but mechanistically it makes sense; one redirects the immune system to attack cancer and the other prevents the local suppression of the immune by the tumor, the combination of which may impact survival statistics much greater.
In summary, the risk weighs most heavily on the technical area for IMUC, but this is also true for the others in the field at this point. The lack of toxicity for a dendritic base immunotherapy and low cost is a huge upside for this area where patients are making decisions on quality of the remaining months they have vs. doing further harm with highly toxic chemotherapeutic chemical drugs. However, their burden will be to demonstrate that the product works and is competitive with existing therapeutics or complementary to them when deployed in a treatment plan.
Disclosure: I am long IMUC. 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.