The pharmaceutical sector is comprised of companies with a wide range of market capitalizations at different stages of development, ranging from small biotechs in development Phase with only pre-clinical trials, to more advanced biotechs in advanced trials, to Big Pharma with one or more marketed products bringing in huge revenue. Success in clinicals for any of these is a stock price driver as these successes bring the companies one step closer to marketing of their valued product. The stock price may only be marginally affected for the larger multi-billion dollar market cap Big Pharma for drugs with a small area of need, but a larger area of need with more revenue can even drive the price of a large biotech with approvals in many cancers, heart disease, obesity or other "sexy" target groups as often described by pharmaceutical investors. In a typical free-market system, this may stimulate a great deal of research and marketing toward the more "sexy" and profitable target markets, but it may negatively bias money and research time away from smaller drug markets treating less common or rare diseases. Additionally, these rare diseases may be more difficult to treat with unknown disease mechanisms possibly present, and trial enrollment may be slow due to a lower number of patients available.
The FDA (in 1984) and the EMA (European Medicines Agency, in 2000) as well as their Japanese (in 1993) and Australian (in 1998) counterpart agencies decided to be proactive and implemented an "Orphan Drug" designation for therapies and devices intended to treat these smaller markets that may not have been profitable to enter due to the large amount of time and money required to research and develop a drug to treat these smaller indications. There is some variation in the policies of the Orphan Drug designations in these agencies, but the agencies generally give incentives to develop Orphan Drug treatments ranging from market exclusivity, research grants, tax credits, exemption from regulatory registration fees, protocol assistance and fast-track procedures to expedite the regulatory process. These perks help to level the playing field versus drugs meant to address larger markets and provide investors the opportunity to invest their money into companies addressing these areas of need. In this manner, the Orphan Drug designation helped the fledgling small cap biotechs additionally with the investor money that may not have otherwise been invested in some of these companies. Following are some biotechs for investor consideration that have or are candidates for Orphan Drug designation therapies. Investors should consider each company's current market capitalization, financials, pipeline status, and chances at success as well as the potential revenue upon market approval. Additionally, the flexibility of each company's pipeline to change to address other indications, licensing, and most importantly, each company's buyout potential, should be considered.
CEL-SCI's (NYSEMKT:CVM) immunotherapy drug, Multikine, is currently in a Phase III trial for head and neck cancer. The pivotal Phase III trial will compare Multikine (leukocyte interleukin) combined with the SOC (standard of care) of chemotherapy and radiation versus the SOC only. In order to ensure the immune system is at full strength, the Multikine arm of the trial will receive the therapy 5 times a week for three weeks before the Surgery and subsequent radiation treatment regimen. Phase II results ran under the same conditions depicted favorable results with 63.2% survival at 3.5 years versus historical data of about 47.5%. CEL-SCI received Orphan Drug designation for Multikine in June of 2007, and investors are anxiously awaiting interim data for this trial as enrollment progresses.
OncoSec Medical, Inc. (NASDAQ:ONCS) continues to develop its electroporation technology for administration of both chemotherapy and immunotherapy treatments for cancer tissue via its OMS ElectroChemotherapy and OMS ElectroImmunotherapy platforms, respectively. Like Multikine, OncoSec's most advanced clinicals are in head and neck cancers. They have completed one Phase III trial in the U.S. using their ElectroChemotherapy platform with Bleomycin as the chemotherapy agent of choice. The company is currently analyzing the data and intends to present it at the 5th International Head and Neck Cancer Conference on July 21st-25th. Although the company hasn't yet received Orphan Drug designation for its product, this data presentation will likely be a huge catalyst for this $10 million market capitalization biotech. Not only would this offer investors the chance to ascertain marketing approval chances in the U.S. and beyond, but it would also further validate the OMS platform of treatments for not only the obvious in-house clinicals, but also for licensing and acquisition possibilities. Positive Phase IV datafor primary and locally recurrent squamous cell carcinoma of the head and neck were presented on April 23rd of this year with data indicating comparable efficacy of the regimen in both arms (OMS and SOC), with less cost and fewer side effects and much less disfiguration. This data could be construed as a possible preview to the upcoming presentation in July. Share price upside between now and then is likely to be positive as investors anticipate the results.
Medgenics, Inc. (MDGN) chart has been on a tear since December 29th's low of $2.49 and is now trading above $6.70 per share, up over 170%. The chart remains bullish and shows no signs of abatement except for some possible resistance at $7.00. The company filed for Orphan Drug designation on April 23rd this year and expects to hear back from the FDA by the end of June for its INFRADURE treatment for Hepatitis D, a serious liver disease caused by the hepatitis D RNA virus. Although rare in the United States, the disease affects about 15 million people worldwide. INFRADURE is based on the company's proprietary Biopump platform which utilizes the patients' own tissue samples to manufacture and then re-implant back into their bodies the modified cells (biological pump) to produce their own human protein therapy for a sustained period of time. The technology has a broad range of possibilities with treatments possible for anemia, hepatitis C &D, multiple sclerosis, arthritis, obesity, chronic pain, cancer recovery, and more. INFRADURE is the company's lead product and is in Phase I/II for Hepatitis C utilizing the same technology and protein therapy, interferon-alpha. Proof-of-concept trials in mice and humans created therapeutic levels of interferon-alpha and other protein therapies in blood serum. If safety and efficacy data are promising early, the chart growth for this emerging biotech could continue on its uptrend; the current market capitalization of $66 million would be dramatically undervalued if interim data proves to be promising.
Chelsea Therapeutics International's (NASDAQ:CHTP) chart is virtually the inverse of Medgenics'. The company has experienced clinical difficulties in 2012 resulting in the company's stock price falling from its $5 range in early February to the now unbelievable $1.20 as of market close on June 8th, a 76% plummet. Although a devastating blow to existing shareholders, the current share price may mark a good entry price into the company for new shareholders if it can recover from its current clinical doldrums. Chelsea's lead product, Northera (droxidopa) has been given theOrphan Drug designation by the FDA and was given a nod by the FDA advisory panel (by a vote of 7-1 with one non-vote and one abstention) on February 23rd 2012 for symptomatic neurogenic orthostatic hypotension (also known as Neurogenic OH or NOH) in patients with primary autonomic failure (Parkinson's disease, multiple system atrophy, and pure autonomic failure), dopamine beta hydroxylase deficiency and non-diabetic autonomic neuropathy. Essentially, the targeted patient set has a norepinephrine deficiency resulting in lightheadedness, blurred vision, dizziness, fatigue, poor concentration, and/or fainting episodes when attempting to assume a standing position. The company's stock responded with a 65% jump in value and remained elevated until the company received a subsequent complete response letter (NYSE:CRL) from the FDA on March 28th. The CRL stated that the FDA requested an additional positive study to support the efficacy evident in the company's pivotal Study 301 in which efficacy was demonstrated with a highly significant (p=0.003) outcome. A May 22nd update of their End-of-Review meeting with the FDA clarified what exactly the FDA requires for marketing approval, and seems to allude to a likely positive outcome for the drug with an apparent 1-year delay only. Chelsea already had an ongoing "Study 306B" trial in place, and the company proposed to submit the dizziness data from that trial's patient set and a modified primary endpoint to reflect an orthostatic hypotension symptom assessment (OHSA) item #1 score (dizziness, lightheadedness, feeling faint or "feeling like you might black out") at visit 5 (two weeks post-titration). Additionally, the trial's patient enrollment target was increased from 160 to 200 patients. As of publishing date of this article, the company hasn't yet submitted its proposal, nor has the FDA reviewed or commented on the suitability of the company's proposal. The company intends to resubmit the NDA in the first quarter of 2013, pretty much delaying the marketing of the drug by a year if all goes well from here. Acceptance by the FDA of Chelsea's proposal could be a substantial catalyst for the company's share price.
The four companies presented above each offer investors unique opportunities to make the most of a biotech investment. Assuming a wise pick of a therapy that is approved for marketing, the Orphan Drug designation would virtually assure competition-free marketing along with the other incentives of the Orphan Drug status. Typical enrollment for Orphan Drug indications is often slower due to the smaller eligible patient set available. However, enrollment completion, favorable safety and efficacy data, and ultimate marketing approvals may give huge returns on the investment for patient shareholders. The current market capitalization for each of these is likely highly undervalued with huge upside potential possible for successful clinicals. However, the $10 million market cap for OncoSec is absurdly low considering its success up to this point with its electroporation platform. The company has completed a Phase III trial for recurrent head and neck cancer, and will have interim data presentation in less than two months, which could provide a significant catalyst for this small biotech, with multiple indications possible if the platform is validated. Take note, OncoSec has a Phase III trial completed with data unknown and only a $10 million market capitalization to show for its efforts. Chelsea is quite possibly a close runner-up based on current entry price with a substantial run up likely into next year's NDA. The first pivotal study had superior efficacy with a (p=0.003) correlation, and the CRL indicated no real concerns for market approval. However, shareholders are wary of the FDA's acceptance of the company's proposal. If accepted, the proposal will have minimal impact on the company's financials and, truthfully delays marketing of their product by only one year.
When reviewing the above Orphan Drug therapies and candidates, investors should carefully consider the upside potential for each of these. This upside potential should take into consideration the companies' pipelines, the flexibility of the therapies to change, if possible, in the event of failure in one indication or active ingredient, and the companies' future prospects of technology licensing or sale. Ultimately, the financials should also be considered. However, current financials are not the number one consideration as these are each development stage companies. Financing in the form of current shareholder dilution is possible in each of these, however, these are not biotechs with reputations of dilution and reverse splits. Technologies presented above are solid and legitimate. It is up to each company to wisely proceed through clinicals while making good decisions on trial design and valid targeted patient sets to confirm safety and efficacy in each indication. At that point, they would then rely on the Orphan Drug designation to facilitate profitable marketing to assure patients, healthcare providers, the company itself and investors reap the rewards of patience and solid research.
Disclosure: I am long CHTP. I am long ONCS also.