Proper positions in companies with upcoming Phase II and III data can prove tremendously profitable with gains in the many hundreds of percentages possible for investors fortunate enough to hold through the many ups and downs of biotech stocks with little or no revenue. Like individual investors, Big Pharma also wades through the mounds of trial data and scientific journals in an attempt to find potential partners and acquisitions to shore up their pipelines. In an attempt to increase future revenue and offset the current revenue that may be lost as competition increases and patents expire, large pharmaceuticals consider themselves to be fortunate to be in positions to acquire drugs or companies producing drugs with solid potential and good early-stage clinical results. While sometimes waiting for Phase II and III interim or final data to prove the drugs' true potential, buyers would then be bidding against other large pharmaceuticals or dealing with shareholders and boards of directors having more confidence in their company's future and thus requiring a premium price for their efforts.
The dream of investors and Big Pharma is to secure early entry (acquisition/deal for the latter entity) into a company with a novel drug with a unique, safe and efficacious mechanism with blockbuster or near blockbuster potential. The recent discovery of cancer stem cells (CSCs) and their implication in the recurrence of many cancers gives investors just such an opportunity. Although discovered about 10 years ago, the sector hasn't yet begun to capitalize on the concept's full potential. GlaxoSmithKline (NYSE:GSK) made its entry into the technology in 2007 with its $1.4 billion milestone payment deal with privately held OncoMed Pharmaceuticals. The agreement gave GlaxoSmithKline option to license four product candidates directed at multiple cancer stem cell targets from OncoMed's pipeline of monoclonal antibodies. More recently, the technology has started to explode with several companies targeting the CSC's with varying degrees of success. Investor/Big Pharma sentiment is obviously bullish with the recent successful initial public offering of Verastem (NASDAQ:VSTM) for $55 million during challenging economic times giving them a total market capitalization of $250 million despite the fact that its pipeline is still in early clinicals with Phase I trials not set to commence until late 2012. This IPO can serve as a benchmark for valuation of other biotechs with similar CSC approaches in their pipelines as it has held its $10 price per share value solidly since the January 26th 2012 IPO with a tight trading range of $10.05 - $11.85, an indicator of stability and confidence in the CSC approach.
Last week's buyout of CSC-focused Boston Biomedical by Japan's Dainippon Sumitomo (OTC:DNPUY) underscores Big Pharma's interest in jumping headfirst into the CSC field. Rather than starting from the very beginning to develop the technology, Dianippon chose to acquire a company with a proven track record and pipeline to enter the field not only averting the "trial and error" risks associated with clinical trials but also saving years of time potentially invested to get to the point that the targeted biotech was already at. In what was portrayed as a $2.6 billion buyout, the details of the acquisition actually consisted of a $200 million payment up front for the company with $540 million in milestone payments for its two clinical stage drugs and about $1.9 billion in commercial milestones, a phenomenal commitment of confidence and resources. Boston Biomedicals' two programs of interest to Dainippon are BBI608, which is being readied for a Phase III clinical trial for colorectal cancer and in Phase Ib and II trials for various solid tumors and BBI503 which is in a Phase I trial for patients with various advanced solid tumors. Dainippon paid a premium for Boston Biomedical due to its latter stage BBI608 program and advancing BBI503 program. A buyout offer by them as late as a year ago before final data were compiled in the Phase II program might have given them a better value for their money, but that's the tradeoff associated with being conservative with their risk assessment. More aggressive companies might have taken the chance at an earlier buyout by perhaps purchasing two early to mid-stage trial companies for the same price as a more validated and less risky latter stage company. In this case the payoff could have been worthwhile.
With a market capitalization of about $100 million, ImmunoCellular Therapeutics (NYSEMKT:IMUC) and its advancing CSC pipeline has been gaining investor and Big Pharma interest the last few months as indicated by its stock run up from January 10th's $1.05 to the current $2.75 at market close on March 2nd. This interest is likely fueled by its impressive ICT-107 Phase I results for treating newly diagnosed glioblastoma. The data were impressive on a 16-patient set of newly diagnosed GBM that received three injections of the vaccine after the standard of care treatment. Median OS for the patient set was 38.4 months with a median PFS of 17 months. The three-year OS for the patient set was 55% with 6 patients having no recurrence of the tumor after three years. 19% were still disease-free after four years with one patient now at 5 years of PFS. These data were amazing considering the current prognosis for GBM is about 3 months median overall survival with no treatment and about 15 months for those receiving current standard of care. A Phase II trial was initiated Q4 2011 and will enroll about 200 patients at roughly 24 sites throughout the U.S. According to the most recent company update, more than 120 patients have already been enrolled, and the company plans to complete enrollment before the end of Q2 2012. Patients will receive at least four vaccinations of ICT-107 in addition to the current standard of care with interim data analysis release during Q1 2013. A Phase I trial on ICT-121 will also initiate this year for recurrent GBM, advancing the company's pipeline and thus depth.
Big Pharma is likely eyeing the company and trying to ascertain if the risk/reward says to buy now or risk waiting for Q1 2013 interim data and the premium they would be forced to pay as investors drive the price up and competitors bid against them. Adding to the value of the company, the company recently announced its patent portfolio expansion to a total of 9 with 18 patents pending, protecting its technology and preserving it for future development and potential licensing. 2012 is well underway, the Phase 2 ICT-107 trial is well underway, 18 addition patents are pending, other catalysts are probable and the share price run up obviously means investor buying is underway; all indicating an advancing price tag for ImmunoCellular Therapeutics.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in IMUC over the next 72 hours.