(Editor’s Note: This article covers a stock trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.)
One biotech name that investors should consider for long term investment is Opexa Therapeutics (OPXA). Opexa is engaged in creating novel immunuotherapies specific to patients' needs. One such lead candidate is Tcelna which is being developed specifically for patients with Secondary Progressive Multiple Sclerosis.
Secondary Progressive Multiple Sclerosis
Multiple Sclerosis is an autoimmune disease that affects the brain and spinal cord -- Central Nervous System. This disease forms because the patients' own T-cells attack their own Myelin healthy skin tissues. Myelin is a tissue substance that surrounds all the nerve fibers in the central nervous system. The constant attack from T-cells on the Myelin tissue leads to damaged scar tissue known as -- sclerosis. The disease can become worse than just generating scar tissue. Eventually the Myelin sheath tissue can be destroyed by this disease. The destruction of this Myelin sheath doesn't allow the nerves to function properly anymore causing a set of specific chronic symptoms in patients such as:
- Weakness in the body
- Fatigue in daily activities
- bladder control problems
- bowel control problems
- Balance control problems
- Vision loss
There are 450,000 patients in North America that have Multiple Sclerosis. The amount of patients that have SPMS are around 45% of the 450,000 MS patients. Considering average treatment for SPMS patients would be around $50,000 dollars per year per treatment -source: Opexa Jan 2014 Company Presentation slides page 3 - and the potential value for Tcelna could exceed $7 billion dollars. The MS market is expected to grow to a $21.5 billion dollar market by 2017. If 50% of the patients with MS lead to SPMS then the market value by 2017 for Tcelna can be expected to net around $10.75 billion dollars after it is approved. Given that Opexa is only in a phase 2 trial and is not expected to report these results until the middle of 2016 investors shouldn't expect FDA approval until 2019. As we mentioned before this is a long term investment name, and investors will need a lot of patience in this name.
Biogen Idec (NASDAQ:BIIB) deals with Multiple Sclerosis, and has 3 FDA approved drugs as treatments for these patients. These FDA approved drugs for MS are known as Avonex, Tysabri, and Tecfidera. The only problem though is that these drugs treat primary MS, but are not FDA approved to treat SPMS itself. Those patients who relapse move on to RRMS -- or relapse remitting Multiple Sclerosis. These patients have more brain lesions, and contain more inflammatory cells. The way a patient progresses to SPMS is if they are diagnosed with RRMS for more than 10 years. Avonex, Tysabri, and Tecfidera are used in patients for MS and those patients that progress to SPMS but continue to have relapses. The problem though is that these FDA approved drugs have many side effects. For instance patients taking Tecfidera can have many side effects including: abdominal pain, diarrhea, and nausea. Tysabri carries the side effects of Nausea and abdominal pain as well, but can also cause the patient to feel tired and weak. Avonex causes flu-like symptoms such as headache, fatigue, chills, and fever.
Immunotherapy Technology Tcelna
Opexa has come up with an immunotherapy product known as Tcelna to combat against Secondary Progressive Multiple Sclerosis -- SPMS. The way the disease is developed can be explained in a few simple steps. At first the patient's T-cells break through the blood-brain barrier. This barrier blocks toxic substances from getting in, and allows nutrients that are necessary for neural function. Myelin reactive T-cells enter right through the blood-brain barrier with no problem at all, and bind to antigen presenting cells or APCs. These APCs are connected to the Myelin sheath -- tissue -- that protect the nerves in the central nervous system. The problem though is that these T-cells go wild and start to cause the release of pro-inflammatory cytokines that start to break down the myelin sheath. This destruction leads to two different destructive paths:
- Activation of microglial cells whose main function at that point is to destroy myelin sheath
- Destruction of oliogodendroglial cells that are responsible for producing the myelin sheath
In either case the patient will start to exhibit severe problems with their bodies with a multitude of symptoms as described above. We need T-cells in our bodies to protect us against many various diseases. In the case of SPMS these T-cells start to go wild and damage the central nervous system. It is unclear at this point why this phenomena occurs though. Current treatment options for SPMS rely on blocking all T-cells good or bad from entering the central nervous system. The problem with this though is that it leads to other problems since none of the good T-cells can protect your body. Opexa is leaning towards a better approach, and is achieving this by programming the MRTCs -- Myelin Reactive T-cells -- to be recognized by the immune system as pathogenic. What this means is that patients' bodies will be able to inhibit the destruction of myelin sheath by blocking only the bad T-cells causing the problem, while leaving the good T-cells alone. The blocking of the MRTCs on the myelin sheath then allows the body to perform myelation. Myelation is the rebuilding of the myelin sheath -- tissue -- in the central nervous system which allows patients with SPMS to regain their normal functions. Opexa's drug therefore has the ability to allow patients to not only stop the MRTCs from damaging their central nervous system, but to also rebuild the tissue to regain movement functions.
Tcelna is a unique form of treatment for each patient and as such has the potential to be a huge breakthrough for SPMS patients. Tcelna is manufactured using ImmPath which is Opexa's proprietary method to produce patient specific T-cell immunotherapy. The point at which this specialized treatment works is to first get a blood sample from the patient, and then isolate the peripheral blood mononuclear cells from the original blood sample. The isolation of blood is important, because the patient's autologus -- individual's -- MRTCs are introduced to certain peptides that produce specific proteins against the targeted disease in this case SPMS. These peptides include: Myelin Basic Protein -- MBP, myelin oligodendrocyte glycoprotein -- MOG, and proteolipid protein -- PLP. After these peptides have been intertwined with MRTCs they are then reintroduced back into the immune system to perform a T-cell response. This T-Cell response goes only after the bad T-cells in the body producing the desired efficacy effect for Tclena because it allows re-myelation of the Myelin sheath.
A phase I/II trial was conducted previously with Tcelna in patients with SPMS. The results produced were not only outstanding because of efficacy but because Tcelna proved to have a safety profile much greater than that of any MS treatment under way in clinical trials, and better safety in MS than those currently marketed by other big pharmaceutical companies. This trial had enrolled 36 patients with SPMS, and the efficacy was outstanding as 80% of the patients had shown no disease progression 24 months after starting Tcelna treatment. In other words these results were a 50% improvement compared to patients with disease progression in historical control groups. Dr. Mark Freedman -- Director of the Multiple Sclerosis Research Unit at Ottowa Hospital, and Scientific Advisory board member of Opexa -- had this to say in a quote:
"It is very gratifying to see Opexa's novel T-cell therapy return to the clinic and I am excited to be a part of the ongoing investigation of a potential MS treatment that possesses such an impressive early safety profile. This is an exceedingly important study for the entire MS community as it will go a long way toward demonstrating how effective the therapy may be for the most in need and underserved progressive MS patient population"
The quote above is key because while there are treatment options for patients with MS as the main indication, but the underserved population would be those suffering from SPMS. Those suffering with SPMS have hardly any treatment options since it is a clear unmet need in the MS space. A key therapy for these patients would be welcome, and Opexa could be the first to give these patients some hope for treatment. One option currently available specifically for SPMS patients is an FDA approved chemotherapeutic agent known as Novantrone. The problem again like many chemotherapeutic agents is that it carries a lot of side effects for these patients that are treated with this compound. some of the side effects for Novantrone include:
- Hair Loss
- Mouth Ulcers
- Decreased number of white blood cells (increased infection)
These side effects are a problem to patients, because it reduces their quality of life. There are many other side effects possible as well such as Seizures, and fever. The key point is that Opexa has the ability to achieve equal if not better efficacy than Novantrone yet provide a better safety profile for patients. This increased safety profile would provide a better quality of life for patients that are undergoing treatments against SPMS.
With initial positive results in phase I/II clinical trial Opexa is running a phase IIb clinical trial in patients with SPMS. This clinical trial is known as the Abili-T trial, and the trial is expected to enroll 180 patients with SPMS. There are 30 centers both in U.S. and Canada that will recruit patients for treatment with Tcelna. Patients are expected to receive 5 subcutaneous injections each year for 2 years. The primary endpoint for the study is the percentage of brain volume change -- atrophy-- at 24 months. The key in this primary endpoint of the study would be to observe the ability for Tcelna to reduce atrophy so that the patient's neurons in the brain won't continue to decrease in capacity. It is key for Tcelna to be able to inhibit the SPMS disease in patients to allow for better quality of life in terms of physical and cognitive function.
As of February 27, 2014 Opexa has enrolled 80% of the total patients needed for the phase IIb Abil-T trial. There is still someway to go to recruit the remaining 20% of the patients and Opexa will need some cash to run the clinical trial. Results from the Abil-T phase IIb trial are expected sometime around 2016 which is still a long way to go. Opexa has approximately $23.6 million dollars in cash and cash equivalents according to the 8-k filing. There is some risk of dilution in the near future but for now the company has enough cash to pull itself all the way through until Q4 2015. The problem though is that the results for the Abil-T trial aren't out until the middle of 2016 so there will definitely be a dilution on the company's common stock before the phase 2b results are out for Tcelna in patients with SPMS. The good news though is that if the results are positive for Tcelna then the financial position would improve substantially for Opexa. This is because Opexa and Merck KGaA (OTCPK:MKGAF) made a deal in which Merck KGaA would pay Opexa $225 million dollars if it chose to exercise its option to license this drug. Merck KGaA though has it good, because it can wait to see the results from the phase IIb Abil-T trial before agreeing to exercise its option to license Tcelna. Not only would Opexa receive $225 million in upfront milestone payments, but it would also receive 8% to 15% in royalty fees on sales from Tcelna. Neil K Warma the President and CEO of Opexa has this to say in a quote:
"Opexa is pleased to partner with Merck Serono and given Merck Serono's long-term strategic commitment to, and existing franchise position in the field of multiple sclerosis, we could not ask for a more experienced partner to carry Tcelna (imilecleucel-T) through development and hopefully to the market and to patients. We also are pleased to retain important rights through this transaction, such as certain manufacturing rights, commercialization, rights to the Japanese market and co-funding of development option, as well as rights for all indications outside of MS, all of which are intended to enhance Opexa shareholder value"
There are a few takeaways from this quote. The first thing to note is that Merck Serono in the first sentence was a biotech company that was acquired by Merck KGaA. The other part to note is that Opexa came out with a good deal out of this because it was approached by multiple parties who were interested in making a deal. Opexa probably chose Merck KGaA because of its experience in the area of Multiple Sclerosis, and because Opexa could retain the rights it wanted to. Even with this deal Opexa can use Tcelna to produce other clinical candidates so they are not giving up their entire right to the Tcelna compound to Merck KGaA. The only rights Merck KGaA will obtain is with the MS indications with Tcelna if it chooses the option to license.
There are many types of risks associated with small-cap biotech stocks and investors should be aware of the many risks
- Tcelna may be able to completely inhibit the MRTCs to stop the progression of SPMS but there is no guarantee of this
- Tcelna will need to run a confirmatory Phase III trial, if phase 2 is successful taking a longer time to market
- Even upon a successful phase 2, there is no guarantee that the outcome for phase 3 will be positive
- Tcelna is the only lead compound for Opexa so a failure in the phase 2 study would mean no additional compound in the pipeline
- Once Tcelna is put up for approval there is no guarantee that the FDA will conclude that the treatment is efficacious enough to be given to patients
- Even upon FDA approval Tcelna may or may not face competition from other competing products that also deal with SPMS
- Opexa might be very volatile in the short term thus long term investment consideration should be required
- Whether the investment pans out is dependent on the Tcelna trial therefore investors should understand the risk of losing their entire investment if Tcelna doesn't pan out for patients with SPMS
Given the risk of only having one type of product in the pipeline Opexa is trading rather low at only $1.77 per share. Therefore the risk/reward may be worth taking a look at given the current share price. Although given that everything is riding on Tcelna a possible failure can occur, and in this instance investors may risk losing their entire investment. If the potential for Tcelna achieves proper efficacy in patients with SPMS Opexa will then have a market potential up to possible $7 billion dollars in sales. This could potentially give a future value of $249 per share on the value of Tcelna alone in SPMS. The market cap for Opexa then would be ($249 per share X the # of outstanding shares -- 22.1 million without including further dilution -- and that would net a new market cap around $5.5 billion dollars which is slightly a conservative estimate but should account for possible competition from other biotechs in the SPMS space. We believe that Opexa has the opportunity for long term investors to gain a considerable share price appreciation should the results from the Abil-T trial in phase 2b come out positive. One key note to keep in mind is that the phase 2b Abil-T trial will not report top-line results until sometime in the middle of 2016, so investors should keep a long term perspective in mind.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.