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Some drug companies are working on a multitude of new drug delivery ideas. From the investor's point of view three of the more promising ones are: Seattle Genetics (SGEN), ImmunoGen (IMGN) and Halozyme (HALO).

SGEN and IMGN are pioneers of ADC-s, otherwise known as Antibody-drug Conjugates.

ADC-s consist of three parts: the cancer antibody, a small but super-strong chemotherapy component, and the linker that attaches the chemo to the antibody. The antibody targets the cancer cell, the chemo gets inside the cell and destroys it from the inside.

Seattle Genetics

Seattle Genetics' auristatins, as their chemo agents are called, are 100- to 1,000-fold more potent than traditional chemotherapy drugs. They have to be that strong, because of the very small volume used. Normally chemos that strong could not be given to patients.

Seattle Genetics has successfully demonstrated its ADC technology in a proprietary, approved drug called Adcetris for Hodgkin's lymphoma. Adcetris is intended for Hodgkin's lymphoma patients who cannot receive a stem cell transplant or for those whose disease has progressed even after two rounds of chemotherapy treatment.

The antibody used in Adcetris binds to a protein on malignant cells called CD30. It showed little clinical effect when tested alone. But when linked to a toxin, it shrank tumors in 73 percent of those with Hodgkin's lymphoma.

The company is trying to extend Adcetris approval for all 6 unique lymphoma types, and especially for front-line therapy. The phase 3 Aethera trial is evaluating Adcetris versus placebo in Hodgkin lymphoma patients at high risk of residual disease following stem cell transplant, to see whether Adcetris can extend progression-free survival.

Of the roughly 25 ADC-s in clinical development in the pharmaceutical industry, about 15 utilize Seattle Genetics' technology. A total of 9 ADC-s are in clinical development by Genentech/Roche (OTCQX:RHHBY) alone.

During the year since its approval, Adcetris had a successful launch and its total net sales have now surpassed $100 million.

In the first half of 2012, net sales reached $69.2 million. The company projects Adcetris sales of $140 million to $150 million for 2012, and additionally collaboration revenues from different partners are projected in the $55 to $65 million range.

SGEN has license and co-development agreements. ADC technology has been licensed to Abbott (ABT), Agensys, Celldex (CLDX), Daiichi-Sankyo, Genentech, GlaxoSmithKline (GSK), Millennium, Pfizer (PFE) and Progenics (PGNX). Seattle Genetics will receive upfront payments, milestones and royalties on net sales of any resulting ADC products. The total potential receipt is more than $3 billion in future milestone payments. Licensees are responsible for all development, manufacturing and commercialization costs.

ADC co-development agreements exist with Agensys and Genmab call for 50:50 co-development and profit-sharing for ADC candidates.

The company has ended the second quarter of 2012 in a strong financial position, with approximately $330 million in cash which has increased from $309 million at the end of the first quarter.

SGEN stock price in the past 52 weeks ranged between $14.61 and 29.83, the market cap is $3.15 billion. In a Thomson/First Call survey of 14 analysts, 6 recommend to buy, 6 to hold and 2 to sell.

ImmunoGen

ImmunoGen's ADC technology is called TAP (Targeted Antibody Payload). ImmunoGen has 10 TAP compounds in clinical development, of which three are wholly owned by the company, and the collaborators include Roche, Sanofi (SNY), Novartis (NVS), Lilly (LLY), and Bayer (OTCPK:BAYRY).

Royalties from collaborations are generally expected in a mid-single digit and the term of the contracts calls for a maximum of 12 years.

The most advanced compound in the partner pipeline is T-DM1 (trastuzumab emtansine). T-DM1 is pitched as a successor to Genentech's hugely successful monoclonal antibody for breast cancer, Herceptin.

Roche recently announced results from its phase 3 Emilia study. The study showed that T-DM1 significantly improved overall survival in people suffering from HER2-positive metastatic breast cancer in comparison to the combination of GlaxoSmithKline's lapatinib and the chemo Xeloda (also made by Roche). Roche now plans to offer patients in the lapatinib and Xeloda arm of the Emilia trial the option to receive T-DM1.

Dan Junius, the CEO of ImmunoGen told FierceBiotech that he expects the FDA to accept the application for the treatment in October 2012, with a PDUFA date in February 2013, although he added that the agency has shown a willingness to accelerate an approval for some cancer drugs. A European OK likely won't arrive for about a year.

The Wall Street Journal is of the opinion that Roche has found a way around the patent cliff problem.

The drug maker's third-best-selling product, Herceptin, which has become the standard treatment for a certain type of breast cancer, will lose patent protection in Europe in 2015 and in the U.S. in 2019. To defend its franchise in the treatment of breast cancer, Roche is betting on products such as Perjeta, which is already on the market, and an experimental drug dubbed T-DM1, which recently reported positive results in clinical trials. Zurich-based analyst Andrew Weiss at Vontobel, who has a "buy" rating on the stock, said:

These are the two agents that are going to shift around the standard of care. Roche is moving away from Herceptin with successors that are not just an inch better, but much, much better.

Roche has five single-target licenses with IMGN for its agents, according to IMGN's 10-K. The T-DM1 contract was signed in 2000, and the remaining four licenses were entered into between 2005 and 2008. The development status of product candidates under each of those licenses is research/preclinical.

ImmunoGen's most advanced proprietary compound is IMGN901 for first line small cell lung cancer in combination with chemos carboplatin and etoposide. Small cell lung cancer is a very difficult disease. Patients respond to the existing therapy, but with no durability. So 901 is trying to extend durability.

ImmunoGen's fiscal year ends at the end of June. The company does not have an approved proprietary drug, so its income comes solely from collaboration fees.

The net loss for the fiscal year 2012 was $73.3 million compared to a net loss $58.3 million for the previous fiscal year. Revenues were $16.4 million as compared to $19.3 million in 2011.

The losses will continue next year. The company is highly confident of T-DM1's approval and success, but only limited sales are expected prior to the next fiscal year end in June 2013.

The 2012 fiscal year ended with approximately $160.9 million in cash and cash equivalents. These don't include the approximately $94 million in net proceeds from a recent stock offering.

The cash will be used to invest in the proprietary pipeline. For example, the wholly-owned IMGN901 compound is advanced into the phase 2 testing in March 2013 and the fully-owned 853 and 529 compounds start Phase 1 testing.

ImmunoGen's 52-week range is $9.76 - 18.10 and the market cap is $1.35 billion. Analysts' opinions are largely positive: out of 11 opinions, 7 Buys and 4 Holds.

Halozyme

Enhanze Technology was developed by San Diego based Halozyme Therapeutics. The technology speeds up injection: some cancer therapies can be given to the patient in minutes instead of hours. It allows the injection of large volumes of a medication under the skin faster. It reversibly breaks down a gel-like substance (hyaluronan) that forms a barrier in the tissues between cells under the skin.

The key is an enzyme called recombinant human hyaluronidase (rHuPH20). The enzyme degrades hyaluronan, a structural component of the subcutaneous space just beneath the surface of the human skin. This degradation creates a temporary window for the improved delivery of injectable biologics such as monoclonal antibodies as well as small molecules and fluids.

This way, large molecules (as large as 200 nanometers) may pass freely through the subcutaneous space. Roche's Herceptin is a very large molecule and is currently infused.

By using Halozyme's enzyme, many therapeutics that can now only be infused could be injected in the future, thereby increasing convenience for the patient, boosting efficacy, and reducing cost.

By the way, the degradation in the skin is temporary, as hyaluronan reconstitutes to normal density within a few days.

HALO experienced a setback earlier this year with the first product expected to be approved using the Enhanze technology.

Cinryze, ViroPharma's (VPHM) FDA-approved best-selling drug to treat hereditary angioedema, is currently being tested with Halozyme's compound rHuPH20 for quicker and more efficient subcutaneous delivery. In early August, the FDA halted the clinical study because of concerns over elevated antibody levels and patient safety. Then in September, another ruling allowed the resumption of the study as long as ViroPharma keeps the FDA informed about elevated levels of antibodies.

Shares of Halozyme reacted accordingly: sharply down first and recovering later. The stock has risen almost 50% since the low on August 2nd, as investors realized that VPHM's product has potential to get back on track, and more importantly, that partnered products with Roche were unaffected.

PEGPH20 is Halozyme's proprietary drug which evaluates a PEGylated form of rHuPH20 for potential use in oncology. A study presented at ASCO assessed PEGPH20 over a range of doses and frequencies, evaluating the safety and tolerability in patients with solid tumor malignancies, including pancreatic cancer.

Separately, a PEGPH20 study in patients with Stage 4 previously untreated pancreatic cancer, in combination with chemotherapy, is being conducted.

The PEGPH20 program has the potential to tackle some very challenging malignancies by rendering tumors more sensitive to therapy. This is especially important in pancreatic cancer, where typical survival rates after diagnosis are still less than 6 months.

The net loss for the 6 months ended June 30, 2012 was $29.1 million compared to a net loss of $6.5 million, in the same period of the previous year.

Revenues for the second quarter of 2012 were $7.8 million compared to $23.2 million for the second quarter of 2011. Research and development expenses were $16.1 million, compared with $15.3 million for the second quarter of 2011.

Cash and cash equivalents were $102 million as of June 30, 2012, and net cash used in the second quarter of 2012 was $14.6 million. The 2012 cash burn guidance is $55 million to $60 million.

Halozyme's 52 week range: $3.86 - 13.50, market cap is $ 883 million. Out of 7 opinions, 5 analysts recommend Buy, 1 Hold and 1 Sell.

Investor's summary

All three companies, individually or together, represent promising investments as they own some pioneering drug delivery technologies that appear to work in the clinic and which have attracted the interest of big pharma.

Clay B. Siegall, CEO of SGEN, stated in August 2012 in an earnings conference call:

We are proud that we are the only company to have successfully completed the development and FDA approval process for a next-generation ADC. This reflects more than a decade of work we have invested in this field and the substantial expertise of our experienced team. Although new companies are emerging with ADC technologies focused on alternative delivery vehicles, drug loading technologies and drug payloads, we know from experience that it takes a long time to develop clinically and commercially viable technology.

All three companies have developed technologies that are unique and not easy to match. They are on the threshold of major success. SGEN has its own approved drug, the other two have theirs in trials.

These companies have made it this far in part because big pharma noticed their efforts and supported them with contracts and upfront payments. Those payments helped them to work on their proprietary drugs where eventually the real money is.

Big pharma's interest is due to the growing recognition that current drug delivery practices are in many ways wasteful and inefficient and if delivery was improved, many existing drugs would be a lot more convenient and efficient.

In some cases using IMGN and SGEN's technology provides a way to get around the patent cliff problem, as the Wall Street Journal article noted using Roche's example. T-DM1 consists of Herceptin, IMGN's chemo charge and a linker to stabilize the chemo. That combination may work more efficiently than Herceptin alone, and gives the old blockbuster a new life after patent expiry.

As with all biotech investing, there are unexpected ups and downs, but these three companies appear to be solid winners in the long run.

Source: Investing In Novel Drug Delivery Ideas