Finding An Oncology Player That Will Change The Rules Of The Game

 |  About: ImmunoCellular Therapeutics, Ltd. (IMUC), Includes: AMGN, DNDN, GILD
by: The Swiss Trader

If three of the last year's biggest biotech deals are any indication, drug developers are clearly willing to take the risk, through merger and acquisition activity, for drugs with the potential to make a big difference. Gilead (NASDAQ:GILD) shelled out a whopping $11 billion for Pharmasset last year, placing its bets on the success of GS-7977 (formerly known as PSI-7977), an experimental treatment for hepatitis C that is currently in Phase II testing.

Following the announcement, Gilead reaffirmed its goal of developing a hepatitis C drug with significant benefits over current standard of care, including a once-daily oral administration route, manageable side effects and higher cure rates, which are expected to increase the number of patients seeking treatment.

Though only time will tell if GS-7977 will live up to its early promise, the message of this risky decision was loud and clear: big drug developers are looking to deliver not only new products, but also new paradigms in how disease is treated.

Shifting the paradigm in cancer treatment

The two other big biotech deals of the last year reinforce the quest for game-changing treatments, which is perhaps nowhere more evident than in oncology.

In 2011, biotech powerhouse Amgen (NASDAQ:AMGN) paid $1 billion for Massachusetts-based BioVex and early this year shelled out another $1.6 billion for Maryland-based Micromet - two biotechs with lead product candidates that, while not exactly revolutionary, have shown potential to significantly improve standards of care in cancer treatment.

Both OncoVex (BioVex's vaccine for the treatment of melanoma and head and neck cancer) and Micromet's leukemia drug blinatumomab (Bmab) are in Phase II testing, with registration anticipated sometime in the next two to three years. While awaiting the outcome of these trials, however, investors and big drug developers alike are no doubt staying diligently on the lookout for the next hot oncology acquisition; one that has the potential to meaningfully change the game of cancer treatment.

Growing interest in immunotherapy

In hunting down clues for this acquisition target, it is worth noting that both of last year's big oncology deals were with companies developing immune-based cancer therapies.

Once considered the seductive, but treacherous sirens of cancer-drug development, immunotherapy has garnered considerable interest in recent years following the approval of Dendreon's (NASDAQ:DNDN) prostate cancer vaccine, Provenge, and a mounting body of clinical evidence to suggest that stimulating the immune system to attack a variety of cancers works in practice as well as in theory.

Approved in 2010 for the treatment of advanced prostate cancer, Provenge has been a welcome treatment advance for patients who no longer respond to standard of care. There is also evidence to suggest its efficacy in earlier-stage disease, for which its favorable safety profile alone would make the vaccine an attractive treatment alternative. With a median survival benefit increase of only 4.1 months, however, and a cost of $93,000 per patient, immunotherapy clearly has a long way to go before it can lay claim to paradigm shift in oncology.

Complexities of cancer elude magic bullet

True change will entail extending survival not by months, but by years, moving ever closer to the five-year cancer-free mark that is considered a cure. Unfortunately, this remains an elusive goal for many types of cancer due to the near inevitability of recurrence.

The reasons for this are many and controversial, but few dispute that the problem lies in the complexity of cancer, the growth and metastasis of which involve multiple processes, pathways and cell types. Because most drugs target only one of the many factors that give rise to cancer, it is not surprising that the disease so commonly displays an aptitude for evading them.

Given cancer's complexity, most agree that the long-coveted cure will be found not in a magic bullet, but in a combination of bullets aimed simultaneously at several specific targets. Here, immune-based drugs present a number of distinct advantages: their favorable safety profile is conducive to combination therapy, and a number of different immunotherapy candidates have shown promising activity against well-established tumor targets.

However, because the U.S. Food and Drug Administration requires each of these experimental treatments to be tested individually, it is far from clear that any of these products alone could pass the demanding test of significantly improving overall survival - even if there is good reason to believe that they could provide significant benefit together.

A novel vaccine strategy

For both scientific and regulatory reasons then, spotting the next big game changer in oncology is a challenging task. One company, however, has both the technology and the early-stage data to suggest its potential to seriously change the way cancer is treated, and with a Phase II trial in progress and proof-of-concept data just a couple years away, there can be no doubt that prospective acquirers are keeping a close eye on it.

The company is ImmunoCellular Therapeutics (NYSEMKT:IMUC), a Los Angeles-based biotech that, like Dendreon, is focused on developing dendritic cell-based cancer vaccines. Unlike Dendreon, however - and for that matter, unlike any other immunotherapy company - IMUC is utilizing a polyvalent method that, thanks to its proprietary vaccine technology, allows its products to target multiple cancer antigens at once. Not only is IMUC targeting regular tumor cells (also known as "daughter cells"), it is targeting cancer stem cells (CSCs), the particular cancer-cell type that is believed to be the main cause of tumor growth and recurrence.

Delivering a dramatic survival benefit at a fraction of the cost

Early-stage clinical data indicate that this strategy is working. In a Phase I study in 16 patients with the lethal brain cancer, glioblastoma multiforme (GBM), IMUC's lead cancer vaccine candidate ICT-107 demonstrated a 3-year survival rate of 55%. 6 patients have now lived over 3 years and one patient is nearing the 5-year survival point. It was a small Phase I trial, but considering GBM patients have less than a 6% chance of surviving 3 years disease-free with just the current standard of care, these findings are very encouraging.

Currently, a large Phase II trial is ongoing, with completion of enrollment to happen this quarter and final results expected for next year. In the meantime, the company is expected to initiate a second trial in ovarian cancer of another polyvalent vaccine - one for which IMUC recently licensed key patents from Johns Hopkins and the University of Pittsburgh.

IMUC's recent patent acquisitions also include additional intellectual property surrounding a novel vaccine production method, which the company co-developed with leading scientists from the University of Pennsylvania. In a recent press release, the company presented data showing that this process offers significant advantages over current methods of manufacturing dendritic-cell based vaccines in terms of cost, scale, efficiency and convenience for patient and physician alike.

Carol Werther, a long- time biotech analyst at Summer Street Partners, who focuses on life sciences, is bullish on IMUC with a price target of $8.00. As the company plans to be listed on AMEX soon, this would increase company's visibility and demand by mutual fund investors. In the search for oncological revolutionaries- companies pioneering the way in medicine on the their innovative strategies, IMUC stands out on its multivalent vaccine strategy alone. Add to that the compelling evidence of this strategy to provide a dramatic survival benefit - at a significantly reduced cost of production - and there can be no doubt that big drug developers are looking to this little company to usher in the paradigm shift that oncology needs.

Disclosure: I am long AMGN, IMUC.