Following the halting launch of Dendreon's (DNDN) immunotherapy Provenge and the failure of that company to meet its own, initial sales forecasts, one is tempted to ask whether or not Vical Incorporated (VICL) could face similar challenges if and when it brings its immunotherapeutic treatment for metastatic melanoma to market. Put another way, is there something about the introduction of immunotherapeutic treatments in a world dominated by chemotherapy that portends trouble in the marketplace?
I would posit that in Vical's case, at least, the answer is a resounding "no."
I last covered Allovectin in my Seeking Alpha report earlier this month. To recap, that paper reviewed, to a large extent, the results of the company's Phase 2 trials of Allovectin, and concluded with the following statements:
"... 11.8% of the patients treated with Allovectin achieved an objective response. (Again, more than 60% of those in the Allovectin arm did not complete more than one treatment cycle.) But what is even more impressive to my mind is the fact that at the time these data were published, the median survival could not be determined for the responders. Put another way, less than half of the responders had died at the time the study was published (80 months from trial inception). At the least, even the most bearish Vical analyst would begrudgingly have to admit that the evidence bodes well for Allovectin prolonging the survival of skin cancer patients.
- Vical has made some key changes in the Phase III trial that should improve the outcome even further:
- Only chemo-naïve patients were enrolled in Phase III, which represented a majority of the responders in Phase II
- RECIST criteria were relaxed to allow patients to stay on the trial through at least two treatment cycles, even with progressive disease, as long as the progression was not clinically significant
- The primary endpoint measures response rate at 24 weeks or more after randomization, by which time chemotherapy responders typically progress."
Some of the data discussed were presented by Vical at the Credit Suisse presentation, which is posted to the Events and Presentations page of Vical's Web site. While not for the squeamish, the slides are instructive.
My article concluded with the following statement: "Whether the Phase II data will be repeated or exceeded in the ongoing, pivotal Phase III Allovectin trial for which the data should be available in mid-2012 is the $64,000 question."
What can not be questioned, to my way of thinking, is whether or not Vical is prepared to launch Allovectin upon FDA approval. Any concerns I might have had in that regard were completely put to bed yesterday afternoon after reviewing the presentation given by Alain Rolland, Pharm.D., Ph.D., Vical's Executive Vice President for Product Development, at Phacilitate Cell & Gene Therapy Forum in Washington, DC.
Specifically, the essence of Vical's launch preparations can be summarized in the following three slides. The first, shown below, presents that manufacturing process to be performed at Vical's own state-of-the-art "good manufacturing process," or GMP, manufacturing facilities. Importantly, the facility has a capacity of up to 500,000 doses/year. Unlike Dendreon, which initially faced production constraints when it launched Provenge, Vical will not incur any production limitations if and when the FDA approves Allovectin. Further, the company's GMP manufacturing plant is so configured as to facilitate expansion to meet expanding needs in the out years. And the low cost of goods portends excellent margins, another problem that Dendreon is only now getting under control.
The preparation of the manufacturing facility, however, is only one aspect of the effort that appears to be underway as the company awaits the locking of the Phase 3 database toward the end of 2H12. Preparation for possible commercial manufacturing involves a host of other activities, including, but not limited to, a suite of validation processes involving equipment, processes and computer hardware and software.
Further, preparation of the biologics licensing application to the FDA's Center for Biologics Evaluation and Research, or CBER - the same Center that approved Provenge - is well underway, as are considerations for partnering in the marketing arena. In this and other areas, Vical has long had the benefit of its partner, AnGes MG, which funded $23 million of the Phase 3 trial cost. Specifically, Vical partnered Allovectin with AnGes in Japan and Asia for which it will receive escalating double-digit royalties, Vical retains all (!) U.S. and EU rights to the treatment. At least in the case of Vical (vs. Dendreon), partnering appears to have been a very good decision.
Knowing what I know about Vical and its president, Vijay Samant, the preparation that has gone into every facet of preparation for the launch of Allovectin reflects a philosophy that only can be described as "Big Pharma Discipline." Which is to say, if the devil is in the details, then nothing can be left to chance.
As seen in the Daily chart below (courtesy StockCharts.com), the shares of Vical had been under distribution since early December, when they peaked at a little over $4.75. The Relative Strength continued to fall throughout that month and into early January, during which time the MACD remained negative. Now, the Daily MACD chart is showing signs of turning positive, suggesting the stock may have formed a base at $3.25, where it last settled in November, 2011. That the pattern from last November to the present appears to form a typical "head and shoulders" pattern should not been overlooked, and any breach of the $3.25 "shoulder" will send the stock lower. (See the discussion below.)
The weekly chart is not as positive. Having broken the 50-week moving average, and with a negative MACD line, the expectation is that the stock will test the 200-week moving average at $3.00.
Additional disclosure: I am long both VICL and DNDN, and I will not alter my position within 72 hours of the time of publication of this article. Material presented here is for informational purposes only. Consult your financial adviser before making investment decisions. Investing includes risks, including loss of principal.