Oxigene Inc. (OXGN) shares have surged 60% since the company filed two SEC Forms 8-K on Friday, the first being a letter to shareholders from CEO Peter Langecker, and the second regarding termination of a committed financing facility. In the second 8-K filed on Friday, October 14, OXGN indicated that it had notified Kingsbridge Capital Limited of the termination of its Committed Equity Financing Facility (CEFF). The CEFF was entered into with Kingsbridge in February 2008, and subsequently amended in February 2010, and required Kingsbridge, under certain conditions, to purchase up to $40 million of OXGN common stock until May 15, 2012. The CEFF, first negotiated in 2008 at a time when OXGN was trading at a pre-1/20-reverse-split price of over $2, included a stipulation that Kingsbridge was not obligated to purchase shares so long as the closing price was below 75cents (or $15 post-split at current prices). Even after the recent surge, at Wednesday’s closing price in the $1.60s, the stock is far from the $15 threshold. Hence, while the termination of the CEFF has caused speculation on message boards that it signals a new partnership or buyouts, we do not buy into that.
The CEO letter discussed the benefits and need of the restructuring announced last month, and the results of the ZYBRESTAT FACT trial in patients with anaplastic thyroid cancer (ATC) presented at the European Thyroid Association meeting in Poland. Specifically, a large retrospective data analysis on the outcome of ATC patients treated over the last 50 years at the Mayo Clinic and its comparison to the results from the FACT trial indicated that patients treated with ZYBRESTAT essentially had a one-in-four chance of being alive after one year compared with only a one-in-ten chance for the study control group as well as from the analysis of 50 years of patient data from the Mayo Clinic. The CEO indicated that the final overall survival data from the phase 2 trial of ZYBRESTAT (the FALCON study) in non-small cell lung cancer (NSCLC) would be available next month. Based on the stock’s reaction immediately after the release of the 8-K, it seems that investors are expecting positive results from the FALCON study. In addition, OXGN is also conducting a phase two trial of ZYBRESTAT in patients with relapsed ovarian cancer, with the results from the study anticipated to become available sometime in early 2013.
ZYBRESTAT is Oxigene’s lead vascular disrupting agent (VDA) product candidate. VDA technology works by damaging the vasculature or blood vessels of cancer tumors. The blood supply is necessary for tumor growth and survival and by reducing that supply, the VDAs cause oxygen starvation of the tumor cells and eventual tumor cell death. However, the treatment only affects abnormal blood vessels associated with tumors, and has no impact on blood vessels in other areas of the body. While VDA is a promising technology, a number of other companies have been testing it, and the results so far are mixed at best.
Among the front-runners was Australian drug company Antisoma, which in collaboration with Novartis Ag (NVS) was studying its lead drug Vadimezan or ASA404, a VDA in NSCLC. The phase 3 trial of ASA404 showed no benefit over standard therapy in overall survival, and hence further development of the drug was therefore discontinued. Furthermore, Astra-Zeneca Plc (AZN), a developer of branded prescription therapeutics to treat various diseases and conditions, recently tested ZD6126, a VDA, in two phase 2 clinical trials in metastatic renal cell carcinoma and metastatic colorectal cancer. However, both trials were halted, after it became apparent that ZD6126 was too cardio-toxic at the required doses. So, that begs the question, of what makes OXGN and ZYBRESTAT so different.
What is probably most encouraging is that despite the failures of NVS and AZN, a number of other drug companies, including OXGN, are still testing VDAs in tumors. Typically, when one or two biotech companies can’t make a new drug technology work, other biotech companies abandon the idea. The fact that besides OXGN, there are still at least three more biotech companies that are testing VDAs is promising. The list includes Sanofi (SNY), a large French pharmaceutical product and vaccines company with more than $45 billion in annual revenue, which is testing a VDA, Ombrabulin, in its Oncology programs, in a phase 3 trial in patients with advanced-stage soft tissue sarcoma. Synta Pharmaceuticals (SNTA), a developer of small-molecule drugs indicated for the treatment of cancer and chronic inflammatory diseases, is also testing a VDA, STA-9584, currently in pre-clinical trials in advanced prostate cancer. Furthermore, oncology-focused biotech company YM Biosciences Inc. (YMI) is also testing a novel anti-cancer VDA, CYT997. It has completed two phase 1 studies in advanced solid tumors and is currently being studied in a phase 2 clinical trial in combination with chemotherapy in patients with relapsed glioblastoma multiforme (brain cancer). We believe that despite the promise around VDAs, OXGN may have over-reached to the upside, partly based on wild speculation of a buyout and partnerships, and that there is a high risk that the shares could be headed down if the rumors turn out to be untrue, as is often the case.
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