We all know that cancer affects many of our friends and family, but why don't we all get cancer? We now know that our immune system is continuously fighting and destroying potential cancer cells. What if we could stimulate the immune system in cancer patients and kill the tumor? This is exactly what Heat Biologics (HTBX: NASDAQ) is doing.
Cancer is a devastating disease and the harsh effects of current cancer treatments are well-known to us all. A new way of treating cancer known as immunotherapy is transforming cancer, not in the next 5 or 10 years, but today! And Heat Biologics is playing a significant role in this new and exciting landscape. Very simply put their drug activates a patient's cancer killing T-cells (immune cells) that seek and destroy their tumor.
The way cancer has been treated is essentially barbaric. Patients are injected with poisons known as chemo that kill all cells, but kill cancer cells faster. Patients are bombarded with lethal radiation, or useful organs infested with cancer are removed, leaving patients incapacitated for the rest of their lives.
Driven by its proprietary platform, ImPACT, Heat is developing multiple vaccines for a number of different cancers. Vaccines have transformed polio, tetanus, chicken pox and measles from being deadly diseases, to merely something we take a shot for today. Cancer could become the next disease to be virtually eliminated by a vaccine.
ImPACT genetically modifies human cancer cells to pump out antigens (biological agents that target the immune system) and proteins to create an immune response and attack a specific cancer. Not like competitor's drugs that take days, if not weeks, to work, Heat's therapy takes only a few minutes. Then the vaccine lives at the site of the tumor, continuously targeting and destroying the cancer.
Heat's vaccine platform is easy to make, stays on the shelf until needed, and can be given to anybody, regardless of their blood type or DNA makeup, which is unique in the cancer immunotherapy market. ImPACT is far superior to immunotherapies offered by the global behemoths I will describe below, that need to use the patient's own tissue to make their products work - a costly and inconvenient method.
Currently, Merck & Co. (NYSE:MRK) is in line at the FDA with Keytruda, first approved for skin cancer (with first quarter sales of $83 million) hoping for approval in non-small cell lung cancer (NSCLC) where analysts predict revenues upwards of $5 billion. Not to be shut out by its giant competitor, Bristol-Myers Squibb Co.'s (NYSE:BMY) Opdivo also began on the market for skin cancer and was approved in March for NSCLC; after only three months Opdivo generated sales of $40 million. Both have severe side effects which I will explain below.
Joining the ranks of these larger companies, Heat has an ongoing Phase II trial for its HS-110 vaccine in the treatment of NSCLC. Heat is well positioned to compete for this market expected to be $7 billion globally by 2019, with a high annual growth rate.
In my recent interview with Heat founder and CEO Jeffrey Wolf, I learned that instead of using chemotherapy that destroys all human cells, ImPACT will direct its drugs to kill cancer cells faster with immunotherapy that activates, stimulates, and strengthens a patient's immune system to attack a deadly disease with no known cure. Besides lung cancer, Heat targets bladder cancer with HS-410, now in Phase II at 16 US clinical sites (including Johns Hopkins, known for its extensive urological work) to potentially enter a market estimated at $300 million in the next two years. Expected completion of enrollment for the bladder cancer trial is the third quarter of next year.
One problem I discussed with Mr. Wolf were side effects of the new anti-cancer wonder drugs that have the potential of pneumonia, holes in intestines, hepatitis and kidney failure. Newer companies like Kite Pharma (NASDAQ:KITE) and Juno Therapeutics (NASDAQ:JUNO), two much-watched darlings of the cancer immunotherapy world, trade at a combined valuation of $7.5 billion. Both target blood cancers but Heat is testing patients much later than Juno for lung cancer. Juno and Kite have shown in trials to lead to an overload of the immune system, known as a deadly cytokine storm; high fever; and serious drops in blood pressure. Medical sources claim cancer immunotherapy drugs like those of Merck and Bristol-Myers work in only 40% of patients and we will see how they fare in lung cancer.
The grandfather of cancer immunotherapy, Dendreon Corp's (NASDAQ:DNDN), drug Provenge sales were limited due to the cost to the patient which was approximately $93,000, leading the company to declare bankruptcy. The complexity of customizing the drug for each patient was too expensive. This will not happen to Heat. Heat's drug is an off the shelf product, so the cost per patient is approximately $200 for a far superior product, enabling Heat to generate pharmaceutical grade margins, according to Wolf.
Another major coming on board to battle in the cancer immunotherapy space for NSCLC dollars is Eli Lilly & Co. (NYSE:LLY), but the FDA is wary. Recently, the agency met with Lilly to raise concerns about deadly blood clots. Early data showed an extension of life slightly below Merck's or Bristol-Meyers - a median survival of just under one year. The drug, if approved, is expected to make around $600 million per year but with almost 10% of patients developing what could turn into a heart attack, I'm sure the FDA will be extra cautious.
Regardless, all sales projections discussed above make for a lucrative story for Heat.
Heat's NSCLC trials show excellent safety profiles with good efficacy. HS-110 activated a strong immune response in 70% of patients, including even those far along in their disease, leading to a substantial increase in survival - up to 300% over chemotherapy. The Phase II trial should finish enrolling patients in Q3 2015 and data is expected to be reported later in 2016.
Despite adverse effects from Big (and smaller) Pharma cancer immunotherapy drugs, the industry is projected to generate $35 billion in sales over the next ten years and used to treat 60% of cancers, according to analysts, who believe immunotherapy will cause a tectonic shift in how oncologists view cancer therapy. Experts believe cancer immunotherapy will make current anti-cancer methods primitive (some say barbaric) as we do away with flooding the body with toxic chemotherapy and removing vital organs through surgery.
Primitive is the word Dr. Mark Schoenberg, key opinion leader to Heat also serving on its clinical advisory board uses to describe current methods of treating bladder cancer (which affects over 500,000 Americans and is one of the most expensive cancers to treat). Standard of care is to the attack disease through surgery, not an optimal choice for the patient because bladder tissue does not grow back. I learned from him there are no new drugs for bladder cancer, with most doctors using BCG - a brutal tuberculosis vaccine originating more than 40 years ago. Male patients, as most are, need a catheter inserted directly into the penis with unpleasant effects like pus formation and skin peeling.
Foremost immunologists in the world, Dr. Eckhard Podack, is ImPACT's inventor and serves as chairman of Heat's scientific advisory board. His work is in virtually every immunology textbook; he has a track record of developing drugs that have gained FDA approval. For example, Seattle Genetics, Inc.'s (NASDAQ:SGEN) main drug Adcetris for lymphoma, has driven Seattle's $6 billion market cap. This came out of Dr. Podack's lab.
There are several news-related milestones for Heat coming up in the second half of 2015 I look forward to Phase II data in NSCLC, because many eyes on Wall Street are focused on this indication.
Heat is a promising therapy, and in line with industry trends, where larger drug companies invest a lot of money in cancer immunotherapy. Celgene Corp. (NASDAQ:CELG) just spent $1 billion in a licensing deal with Juno that extends for 10 years, with a possible 30% ownership of Juno's stock, what analysts are calling the largest biotechnology deal ever. After the announcement, Juno's shares popped 66%, underscoring the love investors have for immunotherapy.
Immunotherapy can be the answer to bring cancer treatment into the modern age - from a deadly disease into one open for long-term survival, like what pharma companies did for diabetes. Allied Market Research projects the global cancer drug market to reach $111.9 billion by 2020, with immunotherapy and biological drugs the main driver of growth. This is what's driving cancer immunotherapy drug companies' high values.
As of March 31, Heat had approximately $21.1 million in cash, cash equivalents, and short-term investments, providing a runway to take it through the first quarter of 2016. With a market cap of $53 million, recent trading at a per share price of between $6 to $7, Heat has an unjustifiably low valuation and I believe it is poised to at least double in the short term. I'm not alone in this prognosis, as the two firms covering the stock have price targets of $13 and $22 per share.
Heat is a home-run from an efficacy/safety and economic point of view. The stock offers a phenomenal find for those looking for a lot of upside in cancer immunotherapy, which is now characterized by companies with billion dollar market caps.
RAY DIRKS suggests that Readers/Investors place no more than 1% of the funds they devote to common stocks in any one issue. It's best to diversify.
Disclosure: I am/we are long HTBX.