4 Stocks to Consider for a Biotech Turnaround

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    Have we seen an intermediate bottom in biotech? The iShares NASDAQ Biotechnology ETF (NASDAQ:IBB) is showing possible signs of bottoming on February 9th at $240 a share. The IBB fund is a collection of biotechs from big and established to small trial stage, and holdings tend to trade together excluding company-specific developments. If the bottom is not yet in, the next major support zone is about 20% to the downside, with a possible 51% upside to 52 week highs. With that risk/reward ratio, it may be time to start slowly scaling back in to biotech.

    Aside from the strong possibility of a general rebound in the sector, 2016 will be a pivotal year for many smaller biotech companies in particular. Here are 4 that could gain substantially with major catalysts pending.

    Curis, Inc. (NASDAQ:CRIS)

    Curis’s lead candidate is CUDC-907. The drug has two mechanisms of action – the first is PI3K inhibition and the second, HDAC inhibition. PI3K, which stands for phosphoinositide 3-kinase, is an enzyme that plays a role in an intracellular signaling pathway called the PI3K/AKT/mTOR pathway. The pathway is responsible for sending extracellular messages to the nucleus of a cell initiating a cell growth and division. Through the inhibition of this pathway, the drug is designed to halt the reproduction of cancer cells.

    HDAC inhibition is a little more complex and the scientists behind the treatment don’t fully understand how it works. What we do know is that HDAC is responsible for the removal of acetyl groups on histones (histones are the molecules that order DNA). Removing acetyl groups allows for tighter packing of histones, and this changes the way genes are expressed. By inhibiting this tighter packing, the drug again can limit proliferation in cancerous cells.

    The company has two ongoing phase I trials – one in a lymphoma and multiple myeloma indication and the other in a solid tumor indication such as lung cancer or breast cancer. Both have top-line data due this year, giving us some potential upside catalysts to work with. The lymphoma and multiple myeloma trial is set to wrap up in July, so we’re looking at Q3 as a target for a full report. It’s a dosing study, so a positive outcome will essentially be one that doesn’t result in any serious adverse events, but there’s a secondary endpoint of preliminary anti-cancer activity, and this could drive some upside if met.

    The solid tumor trial is set to finish in December, so we will likely get some date before the end of the year. Outcome measures are the same as the first trial, so look for tolerability and some preliminary anti cancer activity as upside catalysts.

    Del Mar Pharmaceuticals Inc. (OTCMKTS:DMPI)

    DelMar is developing VAL-083. In DNA, sometimes we get what are called interstrand crosslinks, which connect the two strands in DNA and inhibit the standard DNA functions of replication and transcription. Crosslinks are very toxic to surrounding cells, and can quickly induce cell death. VAL-083 seeks to induce interstrand crosslinks in the DNA of cancerous cells, and in turn, induce apoptosis and the halting of cancerous cell replication. This type of crosslink induction is at the core of the majority of cancer therapies – primarily chemotherapy drugs – but DelMar’s candidate is a different kind of agent that would allow it to be administered as a single therapy or in combination with some of the most commonly used therapies available – platinum based, or tyrosine kinase based treatments, for example.

    The drug is already approved in an oncology indication in China, which sets it in great stead for a US or European approval, and to date we’ve seen some promising trial results. Mid stage data from an ongoing phase I/II in glioblastoma multiforme brain cancer demonstrated tolerability, low negative side effects, and an improved survival rate at 6, 9 and 12 months following treatment, building on earlier preclinical data that served as proof of concept. GBM is notoriously difficult to treat, and if approved, VAL-083 would be targeting a billion dollar market.

    Full completion is expected at the beginning of December this year, and we should get top-line data shortly after. If we get tumor response that mimics mid stage data, the drug could move into a pivotal trial shortly after, and DelMar could be well on its way towards its first approval.

    Immune Design Corp. (NASDAQ:IMDZ)

    Immune Design has developed a combination of two different agents, LV305 and G305, which it calls CMB305. The drug targets sarcoma, which just means any cancer that forms in soft tissue, through an immunotherapy approach. LV305 binds to a protein expressed by tumor cells called NY-ESO-1. This binding initiates an immune response, which induces apoptosis in the cancerous cells. The G305 part is a drug already used as a cancer vaccine, which works in combination with the CMB305 to form the basis for longer term efficacy.

    The company is trialing the combination in a phase II that sees it pitted against a current standard-of-care cancer drug called atezolizumab, which Roche Holding AG (OTCMKTS:RHHBY) is currently trialing in other indications, as well as a second phase II that just involves CMB305. The first of these kicked off in October, and won’t complete before March 2017, but it has a secondary endpoint of six month PFS, which means we’ll likely get some interim data during Q2 this year. Look for anything that hints at efficacy to boost the company’s market capitalization ahead of the two trials’ completion.

    Peregrine Pharmaceuticals, Inc. (NASDAQ:PPHM)

    Peregrine’s lead candidate is bavituximab, which is a chimeric monoclonal antibody. Essentially, the drug binds to receptors on the surface of cancerous cells and signals the immune system to come and attack endothelial cells. Endothelial cells are cells that line blood vessels, and so through inducing this attack, bavituximab aims to cut off the blood supply to a tumor and halt its growth.

    Data from a phase II trial in lung cancer demonstrated superiority to docetaxel, a multi billion dollar blockbuster currently marketed by Sanofi (NYSE:SNY) – and Peregrine is currently running a large phase III of 600 enrolled patients in the same indication. The trial is again pitching bavituximab against Docetaxel, with a third placebo arm thrown in.

    If the drug can replicate the phase II data in this trial (called SUNRISE – all details here), Peregrine could have a real blockbuster on its hands.

    The trial is expected to complete in December this year, so again look for any interim updates to provide upside catalysts, and end of the year top-line efficacy to form the basis of an early 2017 NDA submission.

     

     

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