Significant Investment Potential In The Fast Growing Metastatic Melanoma Market

by: A. John Hodge

Melanoma is one of the most common cancers in the U.S. in which the best treatment approach has always been early detection followed by surgical removal. Unfortunately, it is not always possible to detect cancer at its earliest stage, which creates a need for effective treatments for the advanced stages of the disease. In the past, late stage melanoma patients faced high recurrence rates, unbearable side effects, and somewhat ineffective treatments that made late stage melanoma a very dangerous cancer. The disease itself is very hard to treat as it spreads to distant lymph nodes and usually results in several tumors.

The good news is that biotechnology companies are now racing with great urgency to find effective treatments. We have already seen recent approvals of drugs that are more effective than treatments of old and a slew of drugs or therapies in clinical trials that look poised to benefit from a multi-billion dollar, violent, and fast-growing space.

For the treatment of late stage melanoma, there are three primary treatments that have controlled the market for many years: chemotherapy, intereukin-2 (IL-2) and interferon (IFN). For the most part, physicians have relied upon these treatments for late-stage melanoma in addition to surgery and radiation. With few options, and a large unmet need, large and small pharmaceuticals have tried many different options over the years with some degree of success in the last few years.

Temozolomide, now marketed by Merck under the name Temodar, is commonly used to treat melanoma in an off-label setting. The only FDA approved chemotherapy agent for the indication, however, is dicarbazine (DTIC) with Bayer owning the rights to the drug back during the 1975 approval. With questionable efficacy and almost intolerable side effects, the healthcare sector has been waiting for quite some time for a better option to be available.

Interleukin-2 in an early immunological therapy approved for stage IV melanoma in 1998 under the name Proleukin. It is effective in about 4% of patients, but due to the high dosages required for efficacy, the safety profile for the therapy is devastating with the treatment being directly associated with fatalities in 1 in every 50 patients treated.

Interferon alpha-2b in an adjuvant setting was approved by the FDA in 1995 to treat patients with a high risk of recurrence of melanoma. The therapy was marketed under the name INTRON(R) and was marketed by Scherling-Plough Corporation (now part of Merck). INTRON(R) improved patients' disease-free progression by an average of about 9 months. However, it did not increase overall survival and often had side effects in flu-like symptoms over the course of the treatment.

Yervoy, marketed by Bristol Myers Squibb (NYSE:BMY) and FDA-approved in 2011, is an immunotherapy treatment that decreases death rates by one-third. With a $120,000 price tag for its three-month regimen, the therapy was touted as the first melanoma treatment to give a meaningful increase in survival time for melanoma. With a solid working mechanism as a monoclonal antibody, it binds CTLA-4, a molecule on T cells that suppresses the immune response. This frees up the T cells to fight the cancer cells. The therapy is believed to have the capabilities of treating a number of different cancers. Yervoy has seen early success, and although its side effects are milder than other advanced melanoma treatments, it has not been able to avoid some of the more severe effects rarely seen in immunotherapy such as intestinal, and immune-related adverse issues in the body. Obviously these are not as severe as what you see with the older melanoma treatments, which is one reason, along with efficiency, that Yervoy has been successful.

Zelboraf is an effective treatment for melanoma's that express the BRAF gene, comprising about one-half of those with the late-stage disease. Also approved in 2011, the drug is marketed by Roche's (OTCQX:RHHBY) Genentech division. The drug works by inhibiting the out-of-control BRAF gene signaling. This slows the growth of cancer with this type of mutation. In late-stage trials, Zelboraf improved progression free survival to 5.3 months versus the 1.6 months for standard of care chemotherapy. A new approach to fighting melanoma, the treatment is not an immunotherapy agent. However, it does show that a targeted approach of focusing on specific genes or proteins may hold promise for fighting the disease. As positive as the efficacy values appear to be, however, the safety profile for the therapy is surprising for an FDA-approved drug. The most common side effect for the treatment is a secondary cancer occurring in about 24% of patients, cutaneous squamous cell carcinoma. These lesions may be surgically removed and the treatment regimen may continue.

For those of you hoping to capitalize on the growth of the space there are a variety of investments that are making progress. Yervoy is a fairly new drug that is seeing strong sales and should continue to grow since it may prove to treat a number of different cancers, therefore exceeding expectations. Then there are others in clinical trials such as OncoVex, which was acquired by Amgen (NASDAQ:AMGN).

With phase 3 results due out at the end of the year, the promising oncolytic virus is modified to replicate in solid tumors and initiate cell death. Additionally, the therapy carries the GM-CSF adjuvant, which is an immune system stimulant. The dual mechanism approach has impressive phase 2 results with about 20% of patients achieving a complete response.

Similar to the already approved IL-2, the effectiveness of the cytokine IL-12 as an adjuvant is being tested with a new technology called OMS ElectroImmunotherapy by OncoSec Medical (NASDAQ:ONCS). The technology utilizes an electrical current to increase the porosity of targeted cancer cells so that the uptake of previously injected DNA IL-12 plasmid into the cells is much amplified, up to a 1,000-fold increase. Once the agent is inside the cells, the electrical current (or field) is removed which locks the IL-12 plasmid inside the cells. One inside the cells, the DNA IL-12 plasmid instructs the cells to produce IL-12. This triggers the patients' immune system to attack the cells expressing the IL-12 protein -- the ones treated with the electroporation device. Like IL-2, IL-12 is toxic at the levels that would be required injected into tumor sites. However, the efficiency of the uptake into the cells as a result of the electroporation process requires much less of the cytokine to be utilized which dramatically increases its safety profile. The CEO of the company recently said that this technology combined with IL-12 is comparable to or exceeds the response rate of newer approaches to melanoma, including Bristol-Myers' (BMY) Yervoy and Genentech's Zelboraf. The exciting news is that this platform is believed to be capable of reducing toxicity and enhancing potency in any approved melanoma treatment due to the nature of its technology -- as a device used to target specific areas.

Vical's (NASDAQ:VICL) late stage candidate, Allovectin, has excelled in clinical trials. The drug fits into the new category of drugs with strong clinical data and improved overall survival of nearly 19 months. The successful immunotherapy approach utilized by Allovectin is novel in that it triggers a systemic response. Allovectin is injected into a cancer tumor where it helps killer T cells recognize and attack it and other tumors throughout the patient's body with the same protein expressions. Phase 2 data were hopeful with a 12% response rate and a median duration of response of about 13.8 months. Phase 3 topline data should be available in late 2012 and could be a strong driver for the company's share price as the catalyst approaches.

At this time the very large market of late stage melanoma is being faced with a transition period in which biotechnology companies are now creating better and more efficient drugs, vaccines, and combinations with new technologies. Meanwhile, older drugs are becoming less relevant as their effectiveness and safety profiles are being surpassed. OncoSec's OMS ElectroImmunotherapy platform IL-12 is able to be used with fewer side effects and with more efficiency, leaving the space wide open for which treatment may or may not control the space five years down the road. In an era in which cost is becoming more important than it should be for disease treatment, the OMS ElectroImmunotherapy, along with their counterpart chemotherapy platform in OMS ElectroChemotherapy, could present viable treatment options as the dramatically-increased uptake efficiency of chemotherapy and immunotherapy agents means much less of these expensive active ingredients would be necessary in order to have the same level of efficacy in treating some cancers.

The upside potential for ONCS.OB could be impressive as the phase 2 trials report their results using the OMS ElectroImmunotherapy in late 2012 and the company's financials should be stable for at least the interim with a recent $7.75 million offering shoring up its financials in March. VICL has an exciting year ahead of it with its phase 3 data on Allovectin being released in the latter part of the year along with its other upcoming catalysts including a likely initiation of a phase 3 trial with partner, Astellas, for TransVax in hematopoietic stem cell transplant (HSCT) recipients. The trial design agreement already triggered a $10 million milestone payment to Vical shoring up its financials as well. Amgen's OncoVex may very well meet the regulatory requirements as well, but share price upside there could be muted for this $62 billion Big Pharma.

Late stage melanoma is characterized as a disease that has spread or metastasized. A successful candidate must be able to treat the spread of the disease, and whatever other manifestation that the melanoma may reveal itself as. As a result, these new candidates may have uses that exceed late stage melanoma. However, the trick is finding a drug that can pass all the tests and is effective enough to capture the market. Melanoma may be a disease that we take for granted. There is no doubt that it is one of the more complex cancers to treat, and once a safe and effective drug is found, that particular drug will profit from a massive market. For investment consideration, investors will need to sort through the data and determine which therapy may own this market, because chances are, it will be one of the treatments mentioned above.

Disclosure: I am long ONCS, AMGN.