2 Biotech Firms With Significant Upside In The Wake Of Recent Developments

Includes: CRIS, SLS
by: Matt Schilling

The biotech sector revolves around two things, FDA decisions and EPS announcements. In this article, I want to focus on two companies within the sector that have not only demonstrated strong earnings but due to recent developments, should be considered from a long-term perspective.

Galena Biopharma (GALE) which is based in Lake Oswego, Oregon, is "a biotechnology company which engages in discovering, developing, and commercializing innovative therapies addressing unmet medical needs using targeted bio-therapeutics". Its lead drugs are Neuvax (which is in Phase 3 PRESENT trial for the treatment of various cancers) and a Folate Binding Protein-E39 (which is currently being developed for the prevention of recurrence in gynecological cancers, such as ovarian, endometrial, and breast cancers)." (Yahoo! Finance)

On Friday, December 7th, Galena presented the final landmark in its 60-month Phase 1/2 trial of its lead drug candidate, Neuvax. Of those results there are three key variables investors should consider:

  1. The combined SN-33 (Node Positive) and SN-34 (Node Negative) Intent-To-Treat population continued to demonstrate an excellent safety and efficacy profile.
  2. Phase 2 HER2 IHC 1+/2+ patients from SN-33 established the Phase 3 patient population. After establishing statistical significance at the 36-month Landmark Analysis, or the same endpoint as the ongoing Phase 3, the 60-month Landmark Analysis demonstrated a 5.6% recurrence rate with NeuVax vs. a 25.9% recurrence rate in the control arm recurrence reduction of 78.4%.
  3. A Phase 3 PRESENT study is underway with an FDA-approved Special Protocol Assessment. To date, 70 sites are approved globally, with continued expansion to over 100 sites planned.

In an effort to diversify the number of applications of Neuvax, Galena plans on taking part in at least four sets of phase 3 clinical trials of the PRESENT study. PRESENT, which is better known as, Prevention of Recurrence in Early-Stage, Node-Positive Breast Cancer with Low-to-Intermediate HER2 Expression with NeuVax Treatment, has already begun clinical trials and could be considered a candidate for the FDA's expedited drug approval platform, if and when that comes to light. The company's Phase 3 PRESENT study could possess some very positive data and as a result similar deals to the one that Galena signed with a subsidiary of Teva (NYSE:TEVA) could emerge and create some very nice long-term upside potential.

Curis, Inc. (NASDAQ:CRIS) which is based in Lexington, Massachusetts, is "a drug discovery and development company which engages in the research and development of cancer therapeutics. It develops Erivedge (vismodegib) capsule, an orally-administered small molecule Hedgehog pathway inhibitor that has received FDA approval for the treatment of adults with advanced forms of basal cell carcinoma; and is in a phase II clinical trial for the treatment of patients with operable nodular basal cell carcinoma". (Yahoo! Finance)

On Thursday, December 6th, Curis, Inc. announced that one of its licensees, Debiopharm, was issued a patent for a specific group of its compounds, better known as Debio 0932. Debio 0932 is an oral second-generation HSP90 inhibitor, which has shown extended tumor retention, blood-brain-barrier penetration, and promising anti-tumor activity both as monotherapy and in combination against a broad range of tumors in pre-clinical models.

According to the company's President and CEO, Dan Passeri,

We look forward to additional data from this promising molecule, as Debiopharm is currently testing Debio 0932 in a Phase I/II clinical trial in combination with chemotherapy in patients with advanced non-small cell lung cancer (NSCLC) as well as in a Phase Ib clinical study in patients with solid tumors, including NSCLC. Debiopharm also intends to initiate a separate Phase I/II clinical trial with Debio 0932 in combination with Everolimus in patients with renal cell carcinoma in the second half of 2013.

If the company can continue to demonstrate significant progress as a result of its clinical trials regarding Debio 0932, I see no reason why a position should not be established at current levels.

Final Analysis

Are there any negative catalysts potential investors should consider before establishing a position in either company? As is the case with any biotech company, potential investors need to keep in mind some of the negative catalysts that go hand-in-hand with both Galena and Curis. On one hand, any negative indication by the FDA with regard to Galena's NeuVax or Curis's Debio 0932 could result in the sell-off of either stock. On the other hand, weaker than expected earnings at any point over the course of the next 12 months, could also send shares down an unfavorable path.

For potential investors looking to establish a position in either Galena or Curis, I'd take a closer look at each company and keep in mind the primary positive and negative catalysts moving forward. Given the fact that both companies are making considerable strides I'd look to establish a small to medium position at current levels and add to that position as future developments are announced.

Disclosure: I am long GALE. 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.