Among the top winners and losers in the healthcare sector last week, the following four were standouts and bear watching or acting upon, depending, as always, on one’s risk tolerance.
Cleveland BioLabs Inc. (Nasdaq:CBLI) led advancing issues, rocketing $2.44, or 257% over the week, to $4.00. The Buffalo, NY-based company released information on April 17, 2017 that the European authorities had accepted the company’s pediatric investigation plan (PIP) and the company will be able to commercialize its new biodefense/radiation treatment, entolimod.
In a nutshell, that means CBLI’s therapy is now on the fast track toward a Marketing Authorization Application (MAA). Additionally, the company said the FDA had completed its review of a side-by-side analytical comparison of two formulations of entolimod, and has approved the in-vivo biocomparability study of these formulations in nonhuman primates (NHP).
Cleveland BioLabs is a spin-off company from the Cleveland Clinic. It owns several subsidiaries “to best capitalize on our unique ability to leverage financial and clinical development resources in Russia,” according to the last 10-k.
The news that CBLI’s biodefense treatment, entolimod, is now on the fast track toward a Marketing Authorization Application brought joy to the company’s CEO Yakov Kogan, who gushed:
“We are excited to have received a positive opinion from the EMA on our PIP. In addition, we have held a series of encouraging meetings with the EMA concerning our MAA submission. We look forward to continuing our discussions with the agency as we move forward with the MAA.”
If you’re bullish on this upstart for-profit venture of the nonprofit healthcare icon, Cleveland Clinic, you’re probably hoping this confirms your CBLI gamble. But as InvestorPlace aptly points out, let’s get real: Cleveland BioLabs remains a thoroughly speculative play, and as such, entry points are key–those who jumped in at last week’s high point lost more than 25% of their wager in a day.
But there’s good reason for that bet. The market for acute radiation syndrome is, sadly, huge. North America is currently home to the largest market, followed by Europe and Asia-Pacific, but there is plenty of competition as well. Just a few of Cleveland BioLabs’ competitors include Osiris Therapeutics Inc. and Nanotherapeutics Inc., among several others.
What’s the takeaway? CBLI is a $5 stock with a $41 million market cap and no earnings, so it’s going to move somewhere, either up or down, and probably fiercely, like last week.
Don’t throw any chips at this puppy that you can’t afford to see vanish. And I’m talking in a matter of days, potentially. But that’s the high risk/high reward game in a nutshell.
What is clear is that these short-term moves–there was another unexplained one the previous week–have more to do with investor sentiment than ImmunoGen’s fundamentals. That said, investors are clearly hoping that the fundamentals will be different in the future because valuations always revert to a company’s ability to generate revenue and eventually profits. Investors wouldn’t be willing to buy or hold at these higher prices if that weren’t the case.
The next value-creating event will come in the form of data from a Phase 1b/2 trial called FORWARD II, testing ImmunoGen’s lead drug mirvetuximab soravtansine in combination with Avastin, carboplatin, Doxil, or Keytruda. Investors will also get to see pooled data from Phase 1 trials testing mirvetuximab soravtansine in patients with ovarian cancer shortly. Both data sets are expected to be released this quarter.
The results from both these latter trials, even if positive, aren’t likely to be enough to get mirvetuximab soravtansine FDA approved. But the data will help investors more accurately weigh the likelihood that ImmunoGen’s ongoing Phase 3 trial will show that the drug works better than placebo.
However, the trial called FORWARD I, which is testing mirvetuximab soravtansine in patients with platinum-resistant ovarian cancer, probably will be enough to gain FDA marketing approval if such trial is successful.
ImmunoGen lies in the middle of an exceptionally wide and strong rising trend in the short term, and a further ascent within the trend is signaled, says StockInvest. Given the current short-term trend, the brokerage says ImmunoGen is expected to gain 52.8% during the next 3 months–placing it somewhere around $6.10. Still, this stock is considered high risk, so don’t invest money you can’t afford to lose.
But if you’re prepared to gamble, several short-term signals, along with a good trend generally, are positive and point to a buying opportunity. The stock in the short-term, meaning 3-month horizon, could perform well and reach the $6 level. StockInvest has upgraded its recommendation for ImmunoGen since its last evaluation from a Hold/Accumulate to a Buy.
I concur with Motley Fool that long-term investors can ignore these short-term moves that gyrate in either direction, as they’re not germane to the overall investment theory. Here, if mirvetuximab soravtansine helps ovarian cancer patients, last week’s move will have absolutely no influence on the valuation after the FORWARD I data are released. It’s going to move up just as violently. That’s still a big “if” right now.
But XBiotech Inc. (Nasdaq:XBIT) plunged $5.70, or 36%, to $10.08. The setback came after announcing that the European Medicines Agency (EMA) rendered a negative trend vote following a meeting to discuss the “Day 180 List of Outstanding Issues” related to the marketing authorization application (MAA) for the company’s antibody candidate for the treatment of colorectal cancer.
A negative trend vote means it is unlikely that a positive Committee for Medicinal Products for Human Use (CHMP) opinion related to Austin, TX-based XBiotech’s MAA will be attained at the formal decision vote scheduled in May. That means additional steps would need to be taken to potentially gain marketing approval.
Xbiotech didn’t break down what regulators’ concerns were beyond saying that there were “outstanding clinical relevance issues.” Basically the company ignored whether the drug was keeping patients alive or stopping their tumors from growing and just measured whether patients taking Xilonix felt better (or not as worse) than those taking placebo.
XBiotech’s efforts to disguise Xilonix’s clinical failings amounted to little more than clever gesticulating and sleight-of-hand hand when the closing argument for approval was presented. The European regulators simply weren’t fooled.
“The clinical relevance of this rather small difference in favor of treatment with MABp1 is questioned and not considered compelling,” EMA’s review team concluded.
MABp1 is the scientific name of Xilonix. XBiotech used a new brand name for the drug, Hutruo, during Thursday meeting. A second Phase 3 study of Xilonix colon cancer is underway, this one utilizing a much tougher overall survival primary endpoint. The likelihood of failure is high, says TheStreet. It’s just a matter of time.
John Simard, Xbiotech’s president and CEO, indicated in a statement that the company may appeal.
“The EMA marketing authorization application procedure enables the appeal of negative decisions from the oral explanation,” he said. “We may seek access to this process at the appropriate time.”
A better move might be to wait and see how the ongoing Phase 3 trial Xbiotech is running to gain US approval pans out. That trial, which is measuring overall survival as a primary endpoint, is scheduled to have its second interim glance at the data in June. If Xilonix isn’t helping patients live longer than placebo at that point, Xbiotech will get one final chance when the trial wraps up, probably at year-end.
And OncoMed Pharmaceuticals Inc. (Nasdaq:OMED) plummeted $1.09, or 23%, to $3.75 after reporting top-line results from its randomized, 145-patient Phase 2 PINNACLE clinical trial of tarextumab (anti-Notch2/3, OMP-59R5) in combination with etoposide plus either cisplatin or carboplatin chemotherapy (chemotherapy) in previously untreated patients with extensive-stage small cell lung cancer.
Results for the combination of tarextumab plus chemotherapy were undifferentiated from those of chemotherapy plus placebo. The trial therefore did not meet its primary endpoint of progression-free survival or secondary endpoints of overall survival and biomarkers reflective of Notch pathway gene activation.
Waltham, MA-based OncoMed is a clinical development-stage biopharmaceutical company focused on discovering and developing novel anti-cancer stem cell and immuno-oncology product candidates.
Talk about a maelstrom of awfulness. The week prior, OncoMed had a double dose of bad news when it revealed that its Celgene-partnered lead asset demcizumab had failed a Phase 2 pancreatic cancer trial then Bayer walked away from two drugs, prompting a 40% dive in its stock price.
Last week, its shares tumbled as much as 28% at one point as a Phase 2 trial for tarextumab (its anti-Notch2/3 med), in combination with etoposide and chemo in first-line patients with small cell lung cancer, missed its primary endpoint of progression-free survival (PFS), as well as its secondary endpoints of overall survival (OS) and biomarkers showing a Notch pathway gene activation.
The “[top-line] results for the combination of tarextumab plus chemotherapy were undifferentiated from those of chemotherapy plus placebo,” the company said in a brief statement.
Put another way, the company said such combination “was not tolerable in this patient population.” OncoMed ended the first quarter of 2017 with $156.9 million in cash and short-term investments.
Now, drastic action may be required going forward.
Analysts at Leerink didn’t pull any punches, saying in a note to clients:
“We’ve historically been cautious on the probability-of-success of Oncomed’s cancer stem cell targeting agents and see more promise in the company’s recent efforts in building a second area of focus in immuno-oncology. We remain Market Perform-rated in light of the uncertainties around Oncomed’s pipeline and strategy at this point. Going forward, OncoMed management will need to focus on rebuilding the R&D pipeline in a capital-efficient manner, in our view.”
While no company wants to see its stocks hammered into a new 52-week low, opportune investors on the other hand may have reason to rejoice. Bullish investors with a healthy tolerance for risk may view this as a chance to buy stocks at distressed prices before a rebound. With that said, whenever a stock like OncoMed falls into new negative territory, there usually is a compelling reason for it.
Still, OncoMed is a stock to watch. Better right now to wait until management prioritizes its pipeline and re-evaluates its strategy before making any significant move.