The Dog Days Of Summer For Some Biotechs, While Another Moves Forward

Includes: DNDN, IMUC, NWBO
by: Kyle Rankin

It has been tough going of late for some big pharma companies and small biotech firms. For one, Pfizer's (PFE) Bapineuzumab, an experimental drug designed to improve symptoms of dementia, failed a clinical trial recently, while others such as Dendreon (NASDAQ:DNDN) have consolidated due to sales declines.

The pattern continued as LA based ImmunoCellular Therapeutics (NYSEMKT:IMUC) announced that Manish Singh resigned as CEO, president and director. He had been CEO since 2008 and essentially led the business operations and financial aspects of the company. The biotechnology company's founder and chairman, neurosurgeon John S. Yu, will serve as interim CEO. The company is expected to search for a replacement. Shares in the company drastically fell 12-15% percent in a two-day period following the announcement and closed Tuesday at $2.46. Through the close of regular trading, shares had fallen 27 percent since hitting a 52-week high of $4 on May 31. The reason for Mr. Singh's abrupt departure remains unknown. IMUC is in clinical trials to develop immune-based treatments for cancers such as glioblastoma multiforme and ovarian cancer.

The news of Singh's abrupt departure follows the recent financial disclosure from ImmunoCellular that its second-quarter loss widened to $6.5 million from $1.6 million a year earlier. The company's income statement reported no revenue in either period but did report $11.3 million in cash, apparently sufficient to fund 12 months of operations. What effect the loss of the CEO will have on IMUC is not yet known, but a rudderless ship in a small biotech is not a positive catalyst.

One-time darling of the biotech's Dendreon recently announced its restructuring plans that include cutting over than 600 jobs, totaling a 41% reduction of employees. Also included in that plan was a reconfiguration of its manufacturing model, and the closing of a Morris Plains, N.J. plant, in an effort to reduce costs by $150 million annually. The culprit was very slow sales of the firm's one time blockbuster potential prostate-cancer treatment Provenge (launched in 2010), a new class of drug to fight cancer using a patient's own cells to stimulate the body's immune system and fight the disease. In the latest period, Dendreon reported a loss of $96.1 million, or 65 cents a share, compared with a year-earlier loss of $116 million, or 79 cents a share. Revenue rose 66% to $80 million. The company's investors did not appear to be pleased as their stock slid. The firm's 52 week range is 4.17 - 17.04, now trading at $5.09. Reportedly, Provenge is a difficult and complicated drug to administer, and the company also had reimbursement issues for payment. It is hard to look at Dendreon with a positive investment view in its current condition.

One firm has had a positive summer, and that is Northwest Biotherapeutics (OTC:NWBO). Its flagship product is DCVax-L, for glioblastoma multiforme (GBM). Results for its Phase III trial are expected in late 2013 or early 2014. DCVax Prostate is another mainstream product for the company and is waiting for funding to begin a Phase III trial.

So far, the firm's technology platform and products seem to be holding true (and management has kept the lights on through prior tough times). An important note to consider is that reportedly, NWBO's manufacturing process and patient administration process is much less complex than the Provenge product. This could make it much more widely accepted in the medical community for prescription, use, and reimbursement. Earlier this month, the company announced that it is entering into amended agreements to double the production capacity in the U.S. for the manufacture of DCVax®-L immune therapy. Manufacturing is also commencing in Europe, with production already fully operational in Germany, and in the final stages of preparation in the U.K. That is three countries on two continents, a good sign that their product has substance and has legs to grow on as it makes it way through the regulatory approval process. Smart management has enabled this production capacity to be obtained without major capital cost to the company.

The company states that the doubling of U.S. production capacity for DCVax®-L is in response to growing demand from clinical trial sites in the Company's 300-patient, Phase III clinical trial in GBM, which is under way at 41 sites across the U.S. The expansion is being undertaken on an expedited basis, with completion expected in eight to ten weeks. This is positive news. This initial doubling of capacity will involve adding more production lines in the cGMP (clean room) facilities of Cognate BioServices (NWBO's contract manufacturer) that are already dedicated to other programs.

The firm's partner in Germany, Fraunhofer IZI, has reported that it has received all necessary regulatory approvals and certification for manufacturing of DCVax®-L, and is fully operational for such manufacturing. In terms of the U.K., it was also reported that King's College London (the Company's partner), already has all of the necessary regulatory approvals as well, and is in the final stages of preparations for manufacturing.

Both Fraunhofer and King's College will produce DCVax®-L for the company's ongoing Phase III clinical trial in GBM, as well as for compassionate treatment programs. The Phase III trial is expected to involve up to 30 sites across Germany, and 8 sites across the U.K., in addition to the 41 sites already in operation in the U.S. The end result is that a strong, globally-based manufacturing network in the U.S. and Europe will be in place for their products.

As clinical trial data continues to emerge, NWBO should be in a great place to service and deliver supply for its products, an accomplishment that has come to fruition this summer but has been long in the making by management. A low cost entry point to this biotech firm is available as their market cap is small.

While Dendreon has current sales problems with Provenge, the firm should recover in time as Provenge is recognized as a mainstay by healthcare industry professionals and sales could recover.

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.