This article was published in Genetic Engineering News in the section “Wall Street Biobeat” on April 1, 2011.
Monoclonal antibody therapies remain the dominant technology with immunotherapy and stem cell therapies on the horizon.
GEN | Articles: Innovations Continue to Drive Market Gains
Emerging Technologies in Biomedicine-Continuing Series
Published in Genetic Engineering News April 1
Innovations Continue To Drive Market Gains
Biotechnology stocks (NBI index) were up about 12% over the past 12 months through February 2011 underperforming the NASDAQ (QQQQ) which is up 29%. The NYSE Arca Biotech ETF (FBT) did better up 23%. Since the recent market bottom in August the NASDAQ composite outperformed biotech by more than 12%. Biotech stocks can catch up in 2011 as many new products are expected to launch. Moreover the clinical pipeline is robust with more than 2000 products in Phase II or later and almost 5000 in Phase 1 and later WW (pharmaprojects.com). Also M&A activity should continue as larger cap companies with strong balance sheets acquire technology and pipeline. One major issue is whether new technologies can address therapeutic needs in a cost effective manner and obtain HHS and CMS reimbursement.
Over the past 20 years breakthrough technologies in the life sciences resulted in over $50B in new product sales. Monoclonal antibody technology still accounts for most of the multi-billion dollar biological products such as Avastin for cancer and Remicade and Humira for rheumatoid arthritis. Data provided by Kalorama Information for 2009 shows that among the Top Ten drug products Biotechnology Product revenue of $51.3B (see Chart I ) is catching up with Pharmaceutical Product revenue of $64.6B.Of the top ten biotechnology products 80% are indicated for cancer and autoimmune diseases. Over 60 late stage biotech products have revenue potential of $13B in 2015. Recombinant engineered (rDNA) cell lines offer a vast portfolio of products for new vaccines, gene therapy and monoclonal antibodies with potentially 25 major products expected in the 2011 launch cycle such as belimumab for Lupus -Human Genome Sciences (HGSI)- and denosumab for oncology-Amgen (AMGN) –each with multi-$billion potential.
Scientific themes and clinical milestones drive investors’ interest in addition to top line revenue growth. Many emerging technologies are coming on the market in 2011 and will make a major market impact in the intermediate term. Here is a brief overview:
Two very promising technologies that have excited both Wall Street and scientists are “antisense” and RNA Interference (RNAi). After more than ten years and billions of dollars in development these technologies have had a number of clinical and business setbacks but are still being aggressively funded at the $250M+ level /year. Two companies that are highly focused in these areas are Isis (ISIS) Pharmaceuticals for antisense and Alnylam (ALNY) for RNAi.
Immunotherapy – A New Treatment Modality Is Available for Cancer
A major breakthrough in the treatment of prostate cancer was the FDA approval of Provenge from Dendreon (DNDN) after more than 10 years of R&D and $1B in funding. The product is on the market with forecasts in the $375M range for 2011 with potential peak revenues at $4B. Provenge is active cellular immunotherapy (ACI) utilizing the patient’s own cells to elicit an immune response to destroy cancer cells. Additional products are in the Phase I pipeline to treat breast, ovarian and colon cancers targeting the HER2/neu receptor. The Company recently completed $500M in funding through a convertible debt offering and is expanding their manufacturing in the U.S and Europe. Cost for treatment in the U.S. is $93k per year but reimbursement in Europe may be lower. EU approval is expected in early 2012. One big cost advantage of Provenge over other cancer treatments such as chemotherapy is that it requires less supportive care to treat side effects. As the drug gains acceptance the focus will shift to cost effectiveness and life extension now pegged as much as 10 months longer than patients not treated.
A September 2010 Kalorama Information Report estimates that the “cancer vaccine” market for 2011 at $2.2B and will grow to $7.7B in 2015 driven by the approval of Provenge. Prior to Dendreon there were many failed companies in the space. The major indications for cancer vaccines will be for Prostate and Cervical cancer with Dendreon expected to dominate the prostate market with 93% share or $5.9B in 2015. Cervical cancer vaccines to prevent HPV infection currently on the market- Cervarix (GSL) and Gardasil (Merck)- are preventative not therapeutic and are forecasted at $1.8B in 2015; but with a higher incidence of HPV in males, this forecast may be low.
Some of the emerging immunotherapy companies at the clinical stage are:
OncoThyreon (ONTY) has a therapeutic vaccine called Stimuvax that utilizes a cancer-associated marker called MUC-1 in a liposomal formulation (BLP25) to create an immune response. Two Phase III trials are underway initially for non-small cell lung cancer (NSCLC). The product is being funded and developed by Merck KgaA (Germany) under a license from OncoThyreon. Geron (GERN). Geron is in a Phase II trial with an autologous dendritic cell vaccine targeting Telomerase in patients with acute myelogenous leukemia(AML). Vaccinogen has four products in Fast Track designated clinical trials with their OncoVAX platform for indications in colon cancer, melanoma and renal carcinoma. A Phase IIIa trial in the Netherlands with OncoVAX demonstrated efficacy with Stage II colon cancer patients.OncoVAX utilizes the patients own tumor cells patient (autologous) to create an immune T-cell response capable of destroying cancer cells. Oxford BioMedica has technologies in gene delivery and immunotherapy. The 5T4 Tumour Antigen is a unique protein found in many cancers and is utilized in their therapeutic vaccine TroVax currently a Phase II trial for prostate cancer. An antibody program is also under development. Merck (MRK) and Glaxo (GSK) are also funding cancer vaccine programs.
Stem Cell Therapy-A Long Road Ahead But At The Clinical Stage
Stem cell technologies are of great interest to investors and scientists because of their huge potential to offer therapies for many diseases. In 2004 California voters recently gave the go ahead to provide $3B in funding for embryonic stem cell research. Seven years later after $1B in project funding through the California Institute for Regenerative Medicine California Institute for Regenerative Medicine , no major milestones nor clinical trials have been initiated. Many companies have significant funding and several have reached the clinical stage using adult stem cells. Deals and collaborations are very active for example Cephalon announced in January that they were acquiring a 20% stake in the Australian stem cell company Mesoblast to develop treatments for cardiovascular and central nervous system disorders. Mesoblast is an a Phase II clinical trial in Australia for congestive heart failure using a proprietary adult stem cell product called Revascor. Cephalon (CEPH) plans to invest $350M including licensing, equity and R&D milestones.
Henry McCusker who covers the sector sees strong investment in R&D estimated at $2.4B with potential clinical breakthroughs within 3 years.Adult Stem Cell research is forecasted at $2.4B | Scimitar Equity Blog Mr. McCusker believes the companies to watch are Geron (GERN), Cytori (CYTX), Biotime (BTX), Pluristem (PSTI) and Osirus( OSIR). Geron is in the first only U.S. human stem cell (hESC’s) clinical trial, a Phase 1 trial for spinal cord injury using pluripotent human embryonic stem cells. Another Geron product candidate is in the pre-clinical stage utilizing cardiomyocytes for heart disease. The Company has spent over $600M since inception developing IP and its anti-cancer Telomerase technology. 2010 financial results showed over $175M in cash but losses of over $100M ($35M for Angiochem in-license for proprietary peptide technology that crosses blood-brain barrier). In the stem cell sector cash is king as exhibited by the flurry of financings over the last 4 months. Check balance sheet and burn rate before investing.
Pluristem recently completed at $38M public offering and has a platform technology PluriX (placental expanded cells) for growing adherent stromal cells (ASC’s) that mimics a bone marrow environment and is proceeding to a Phase II/II trial for Critical Limb ischemia (CLI). Biotime sells stem cell products for bioresearch in regenerative medicine and has a good cash position of about $20M. Cytori (CYTX) that utilizes adipose derived and regenerative cells (ADRC’s) focused on heart disease and regenerative medicine, raised $20M in October 2010 and has $60M in cash (minus Q4 burn) including a $10M partnership with Astellas focused on liver. Revenues are expected to be in the $12-$15M range in 2011. Osirus Therapeutics (OSIR) lead biologic product Prochymal utilizes mesenchymal stem cells (MSC’s) from healthy adult donors, and is in Phase III trials for acute and steroid refractory graft vs host disease (GvHD) on an FDA Fast Track. Prochymal is also in Phase III trials for Crohn’s Disease and Acute Radiation Syndrome. Another product, Chondrogen is in Phase II trials for osteoarthritis of the knee. The Company has a strong balance sheet with about $75M in cash.
( Note: if space available I can do chart with 5 Companies ,ticker, market cap and cash)
Advanced Cell Culture for Vaccines and Biologicals
Vaccines are a growth market and more important than ever due to cost effectiveness and prevention of epidemic infectious diseases. Immunostimulants (adjuvants) and improved delivery systems such as nanoparticles can boost the immune response making vaccines more potent. Production of vaccines is moving away from ancient chicken egg production to faster techniques of mammalian cell culture such as Vero cells. Baxter (BAX) and Novartis (NVS) are scaling up manufacturing and expect to get FDA approval for influenza this year. Crucell has a proprietary cell line called PER.C6 that can facilitate large scale manufacturing of antibodies and vaccines. Crucell (CRXL) was sold to JNJ through a $2.4B tender offer in February.
Next Generation Protease Inhibitors for HCV
Hepatitis C virus (HCV) is a major health problem affecting 180M WW and 4.1M in the U.S. Medical costs are in the $30B range WW. HCV is a chronic but curable disease. Protease inhibitors that block viral replication such as Vertex Telaprevir and Merck’s Boceprevir are in the final stages of FDA approval and products should roll-out by mid-2011 with WW revenue potential of $4B+. Next generation protease and polymerase inhibitors are also in the pipeline by several companies.
Beyond the next five years we should look at major markets with unmet medical needs where technology is lagging. In a recent report J.P.Morgan, highlighted 20 indications that have a high unmet medical need. The top two –Obesity and Alzheimer Disease (AD)– have a combined market potential in excess of $20B with no significant drugs on the market. Obesity has been a “holy grail” of drug development for many years with a long history of disappointments due to safety and efficacy issues. There are at least 10 late stage clinical trials underway for AD but it continues to be a difficult disease due lack of scientific and medical understanding regarding the mechanisms and the need for biomarkers.
A “megatheme” that is gaining interest at the research stage is synthetic
biology Synthetic Biology. The technology involves creating new organisms through manipulation of DNA and the “convergence” of engineering with molecular biology on an industrial scale. While the subject is way beyond the scope of this article we should mention that investor interest is picking up. Two private companies with substantial funding are Intrexon and Synthetic Genomics.
Chart I Top Ten Biotech Drugs
Table 7-2
Top 10 Biotechnology and Pharmaceutical Products, by 2009 Revenues
(millions)
Product Type (Name) $ Value Primary
Developer/Marketer Year of
Approval/Launch
Biotechnology
Enbrel $7.6 Pfizer/Amgen 1998
Remicade 7.3 Johnson & Johnson/
Schering-Plough 1998
Rituxan/MabThera 6.9 Roche 1997
Avastin 6.0 Roche 2004
Humira 5.5 Abbott Laboratories 2002
Herceptin 5.2 Roche 1998
Neulasta 4.6 Amgen 2002
Lantus 4.3 Sanofi-Aventis 2000
Gleevec/Glivec 3.9 Novartis 2001
Total 51.3