Although there are some that may not agree, it is the author's opinion that positive Phase II trial data is typically a bigger share price mover than either successful Phase III data or regulatory approvals. For example, Peregrine Pharmaceuticals' (NASDAQ:PPHM) recent interim data unveiling of its Phase II trial of bavituximab for second-line non-small cell lung cancer (NSCLC) is likely the highlight of the company's existence. The apparently successful trial epitomizes the type of gains seen in early-stage pharmaceuticals for the fortunate shareholders who were lucky enough or wise enough to be part of the phenomenal run up in the company's share price. Peregrine had already released interim data on March 9 of this year for a different trial in which the drug was used for the treatment of front-line NSCLC. Unexpectedly long progression free survival in the control arm that was treated with commonly prescribed carboplatin and paclitaxel caused concern for shareholders with bavituximab only offering a 1.2 month benefit. Shareholders reacted by selling off from the day's closing $0.90 to an April 25 52-week low of $0.39. The May 21release of interim data for second-line NSCLC gave shareholders hope with a doubling of overall response rate versus the control arm with roughly a 50% increase in progression free survival. However, shareholder response was remarkably muted with share price increasing from $0.40 at data release to $0.58 three days later for a 45% gain - impressive but well under the 52-week high of $5.08 experienced less than four months later for comparable results from the same trial.
For those missing out of the remarkable run of over 1200% in just a few short months, there is still money to be made in PPHM. However, the now $470 million market capitalization company doesn't present the value that it did earlier in the year when it was well under $50 million. Peregrine still has more catalysts upcoming with additional Bavituximab data to be presented for its front-line and second-line NSCLC and another Phase II trial with interim data expected before year-end for pancreatic cancer using the same drug. However, gains from current levels would likely be less as the author advises potential new shareholders to adopt the "watch and wait" approach to ascertain where the new support levels will end up being. Also to be taken into consideration, in the company's recently-filed annual report was the statement "Based on our current projections, which include projected revenues under signed contracts with existing customers of Avid, and assuming we do not generate any additional revenues or raise any additional capital from the capital markets or other potential sources, we believe we have sufficient cash on hand combined with amounts expected to be received from Avid customers to meet our obligations as they become due through at least the third quarter of our fiscal year 2013 ending January 31, 2013". Although the dollar amount is unknown, the company seems poised to under some sort of financing in the coming weeks.
Bavituximab may or may not have a promising future ahead of it depending on how the Phase II trials and subsequent Phase III trials pan out. However, investors have made their gains and many may begin their exodus either in part or in full in anticipation of lower share price reentry or moving into other promising companies with exciting new therapies in their pipelines, whether early stage or not. PPHM's year reemphasizes the importance of early-stage entry for maximum gains, although other gains are most likely coming for the company's common stock. However, there are three companies with Phase II trials already well underway with each providing a wealth of possibilities. Following are summaries of the companies proposed that may offer large gains due to currently-suppressed share price, much like PPHM was earlier in the year. Although another 1200% gainer is improbable, huge gains can be made nonetheless. Downside possibilities exist; so potential shareholders are advised to perform their own risk assessment to weigh upside potential versus downside risk.
Catalyst Pharmaceutical Partners (NASDAQ:CPRX) leads off Q4 2012 with Phase II results due out for its lead drug candidate, CPP-109 (vigabatrin), for cocaine addiction. The data is actually due out per the company's revised schedule "around the end of September 2012" versus the previous projection of Q1 2013. Per the press release "After discussions with our collaborators, the National Institute on Drug Abuse (NIDA) and the Department of Veterans Affairs Cooperative Studies Program (VACSP), and our statistical and regulatory consultants, we have been able to work through the complexities of modifying our statistical analysis plan. This will enable us to report top-line trial results about four months earlier than previously expected." Whether this can be construed as positive data to be expected is anybody's guess. However, time is money and earlier completion of the trial and data presentation is money saved for the company and its shareholders. The trial received a "Fast Track" status from the FDA, which can help speed up the regulatory process. The Phase II trial is short for the small pharma world requiring only 24-weeks total for the patient set. The actual treatment phase of the trial is comprised of nine weeks. Clinical investigators are scheduled to evaluate patients at weeks 8-9 to determine how many patients abstain from cocaine use versus the group receiving a placebo.
Earlier trials of CPP-109 for cocaine dependence do point to possible positive data coming from the upcoming Phase II trial. A data set presented in a 2009 American Journal of Psychiatry publication titled "Randomized, Double-Blind, Placebo-Controlled Trial of Vigabatrin for the Treatment of Cocaine Dependence in Mexican Parolees" concluded that the 46 patient arm of the trial receiving CPP-109 that made it through completion of the trial had full abstinence in 14 patients, or 30%. The placebo arm of the trial had 48 patients with only 4, or 8%, of the patient set exhibiting full abstinence. The correlation of CPP-109's effectiveness appears to be unquestionable with this data set. However, shareholders should take into consideration that the trial was not tightly controlled due to the nature of the trial's surroundings and administration as stated on page 7 of the study. Nonetheless, with about 699,000 patients receiving treatment for cocaine abuse in 2010, the unmet need and marketing potential are huge with near-blockbuster potential for this indication only, not to mention the other indications under evaluation including opiate, alcohol and methamphetamine dependence.
With the company announcing data presentation "around the end of September", interest should increase rapidly in the coming days. However, the company's recent press release stating that it would present at the upcoming Rodman and Renshaw global investment conference may provide just such a venue for the data presentation. According to the conference website, CPRX is scheduled to present at 12:05 EST on Monday, September the 10th. Whether or not the company chooses to present this critical data at such a venue is up in the air. However, interest should begin waxing in the very near future starting with at least a mention of the upcoming data from Catalyst Pharmaceutical CEO, Patrick McEnany at Rodman and Renshaw. With a current market capitalization of about $42 million, significant upside could occur with the right news for this small pharma.
OncoSec Medical (NASDAQ:ONCS) has had a tumultuous year as evident from the company's 2012 stock chart. January 1 opening price was $0.25, and the stock touched $0.75 numerous times in February before returning back to earth in mid-March where it has traded in the $0.15 to $0.25 range pretty much every since. The company's novel electroporation platform for cancer treatment has far-reaching implications as it is showing early stage success. Two Phase III trials of OncoSec's NeoPulse therapy (using bleomycin as its chemotherapy agent of choice) for head and neck cancer trial were already complete when the company licensed the platform from Inovio Pharmaceuticals (NASDAQ:INO) in March of 2011. However, the company probably didn't purchase the license due to these trials as it had been discontinued in 2007 after an independent data monitoring committee review citing efficacy and safety concerns. A subsequent data reevaluation by OncoSec as presented on July 23 yielded different results with CEO and president, Punit Dhillon, noting "Interim analysis of these two Phase III studies, and the recently released data from the Phase IV study carried out in Europe, has demonstrated that the primary endpoint of maintaining quality of life was achieved. In addition, OMS ElectroChemotherapy appears to provide a potentially important treatment alternative to surgery that may address hard-to-treat tumors where there exists a particular need to preserve function and quality of life. These data strongly support our partnering efforts for the OMS ElectroChemotherapy program."
Although the presentation garnered a lot of shareholder attention as evident by the 7.29 million shares of the company's common stock that traded hands on that Monday, the company closed in the red to the dismay of many. The author believes that the reevaluation, although likely legitimate, will need to be evaluated by an independent third party entity in order to truly gain shareholder support. The company is currently evaluating its options as to the best regulatory path forward, and additional catalysts via these decisions are likely in the coming weeks. Trading in the low $0.20's with a market capitalization of only $18 million, investors seem to have priced in failure for the Phase III trial already which could be to the benefit of new shareholders as the downside risk certainly seems heavily outweighed by the upside potential.
Pertinent to the scope of the article, OncoSec currently has three Phase II trials underway with two of them set to release interim data in Q4, 2012. These trials, although still utilizing an electroporation administration platform, are being utilized to evaluate the company's ImmunoPulse platform with an IL-12 DNA construct as its immunotherapy agent of choice rather than a chemotherapy agent. Once inside the targeted cancer cells, the construct instructs the cell to produce the IL-12 cytokine. This induces an immune response from the patient's body, which targets and destroys the IL-12 expressed cells via circulating macrophages and cytotoxic T-cells. The company should be presenting Phase II data from its metastatic melanoma (the largest market targeted) and Merkel cell carcinoma trials by the end of the year, either of which could be huge share price movers. Success in these trials would be huge as not only would it indicate success going forward for these indications, but it could also help to validate the company's entire OMS platform and open the door for other indications using IL-12 and other interleukin DNA constructs. Like PPHM earlier in the year, OncoSec is trading at consolidation levels in the low levels and could see similar gains with Phase II trial success. This could particularly be true if the metastatic melanoma trial indicates early stage success, as the market potential is great with over 70,000 new cases of melanoma diagnosed annually with it being the deadliest of the skin cancers.
Earlier dose-escalated Phase I data indicated that the ImmunoPulse administration of the IL-12 DNA construct was safe and well tolerated. In patients with metastatic melanoma, 52% of patients treated had either complete or partial responses. If Phase II data, which is based on trials with optimal levels of IL-12 as determined by the Phase I trial, yield comparable or better results, shareholder value should become evident quickly. Like CPRX, OncoSec is also presenting at Rodman and Renshaw on Monday, September 10th (at 3:15 pm). Although data from either of the phase two trials is unlikely, the company may be better able to give shareholders an idea of exactly when the data might become available. Additionally, the company may be able to shed additional light on the data reevaluation of its two completed Phase III trials for head and neck cancer. A clear regulatory path forward, third party data review or partnership going forward could also be huge catalysts for this fledgling biotech. As mentioned, Phase III failure seems to have been already priced in, so downside risk is minimal but still exists. The bigger catalysts, either upward or downward, rests in the two Phase II trial data presentations sets to be unveiled in Q4.
Zalicius, Inc. (ZLCS) is slated to present topline data for its Phase IIb SYNERGY trial of Synavive for amplified immuno-inflammatory benefits in patients with rheumatoid arthritis in 3Q. At the time of publication of this article, data is still pending for this large market indication therapy. With a 52-week range of $0.71 to $1.62, the upside potential could still be great for this small cap pharma currently valued at $176 million. Recent financing secured the company another $75 million, which should minimize the risk of additional dilution for new shareholders through the next year while the company irons out its finances and further develops its promising pipeline. Synavive's Phase IIa data was promising with statistically significant efficacy of DAS28 and ACR20 (measurements of disease activity and change over time in such activity scores, respectively) relative to a placebo.
Like many small capitalization pharmaceuticals, even those which are at least partly generating revenue with marketed products, Zalicus' true value does not lie in its current financials but rather in its potential growth due to a promising and growing pipeline. The rheumatoid arthritis indication is a huge market potential with up to 1% of the U.S. population being affected. Synavive's mechanism is unique by enhancing the anti-inflammatory benefits of glucocorticoids (steroids) without the associated dose-dependent side effects. Success in this Phase IIb trial is significant not only due to the immediate ramifications of a large market potential indication of rheumatoid arthritis, but it also could also legitimize the drug for many indications in which glucocorticoids are commonly prescribed such as Crohn's disease, lupus, bursitis, allergic rhinitis, asthma or any of many conditions in which these steroids may be part of the long-term treatment regimen.
Presented are three small capitalization pharmaceuticals with significant Phase II catalysts scheduled in late 3Q and 4Q 2012. There is obviously upside potential and downside risks in each of these companies due to their financials and upcoming data. Shareholders are advised to perform additional research to determine which, if any, positions are suitable for their portfolios. Peregrine pharmaceuticals should be commended for their success in second-line NSCLC and its upcoming additional successes. Bavituximab's approval is still not set in stone, as there are additional trials and regulatory barriers coming. However, it is giving the healthcare sector and patients hope for its difficult-to-treat targeted indication. CPRX, ONCS.OB and ZLCS could each offer shareholders, the healthcare sector and most importantly patients hope with their Phase II data coming in the waning days of 2012. Rodman and Renshaw presentations may catalyze CPRX and ONCS.OB on Monday, while ZLCS can also present data via a press release anytime between now and the end of September.
Disclosure: I am long CPRX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.