A Scientist Finds Treasure Researching Oncology Drugs
Source: George S. Mack, The Life Sciences Report (3/22/12)
I love finding out how people move from point A to point B in their careers. It was an incremental process for George Zavoico, who is today a senior equity analyst at New York City-based MLV & Co., a boutique investment bank focusing on the small cap space. Armed with his doctorate in physiology, Zavoico loves the research model, in both science and finance, and he wants to get as close as possible to the drugs and their targets inside the companies he covers. His current small company niche seems to suit his trained curiosity just perfectly. "I find that I can approach the science, the investigators and the academic researchers developing innovative drugs mainly through smaller-cap companies," he told me in a telephone conversation. . .
We had a lot of companies to talk about because Zavoico has a huge universe of coverage. He told me that oncology is one of his key focus areas if for no other reason than the fact that there are more cancer-focused companies than any other type in biotech. The first stock he mentions is molecular analysis company Genomic Health Inc. (GHDX:NASDAQ), which is performing a multigene assay to determine how aggressive a breast cancer might be, which can be helpful in designing a treatment plan.
Because cancers love to surmount and skirt around various monotherapies, a more broadly focused targeting approach could be helpful, especially if it could be done with a single molecule. Zavoico likes Threshold Pharmaceuticals (THLD:NASDAQ), which is testing a prodrug that is activated in an oxygen-deprived environment, a common condition in cancerous tissue. TH-302 (precursor to bromo-isophoramide mustard) has shown quite positive results in a phase 2b proof of concept trial in pancreatic cancer. The experimental arm of the study demonstrated a 63% improvement in progression-free-survival. Threshold is up more than 600% in the last three months.
Peregrine Pharmaceuticals Inc. (PPHM:NASDAQ) is taking a novel approach to cancer therapy by targeting the phospholipid, phosphatidylserine (PS), which is normally not present on the outside surface of the cell membrane; however, in tumor cells and their associated vessels, the phospholipid migrates to exterior of the cell surface." That provides a very specific and selective target for antibodies that can then flag the tumor for destruction by the immune system," says Zavoico. Indeed, the company's monoclonal antibody bavituximab may be able to do just that, although phase 2 studies were not conclusive in a very difficult patient population. The share price has reflected that situation as investors have fled, but Zavoico views it as a buying opportunity.
Receptor tyrosine kinases are enzymes that dwell on and in cell membranes, and they conduct signals from outside to inside so that genes inside the cell nucleus finally get the message of what's happening outside. Zavoico looks at companies developing kinase inhibitors, and he has found a twist to the typical approach. ArQule (ARQL:NASDAQ) is targeting the kinase c-Met with an inhibitor that works on the allosteric site away from the active site.
He's found another interesting twist with Curis Inc. (CRIS:NASDAQ), a company developing multi-targeted kinase inhibitors in combination with histone deacetylase (HDAC) inhibitors. Curis's lead product Erivedge was approved in January for basal cell carcinoma. The compound is partnered with Genentech (a unit of Roche Holding AG [RHHBY:OTCPK]). Zavoico believes it could be a blockbuster in the old sense of the word, approaching $1 or $2B in sales.
He talks about Agenus Inc. (AGEN:NASDAQ) with its adjuvant QS-21 (saponin) which is enhancing immune response in multiple GlaxoSmithKline (GSK:NYSE) vaccines. Agenus is up 238% over the past three months.
Pain management is a constant headache for physicians and worse for patients. The clinician is caught between a rock and a hard place when it comes to prescribing medication for severe discomfort. If a patient is not terminally ill, the physician does not want to addict the patient. Now Zalicus Inc. (ZLCS:NASDAQ) is developing specific ion channel blockers that could be taken orally and that could add a valuable non-opiod small molecule analgesic to the physician's bag.
Spectrum Pharmaceuticals Inc. (SPPI:NASDAQ) has created a business and scientific model based on molecules that are off-patent but that could have new life as re-purposed products. "Spectrum is one of the best companies at that," says Zavoico. One of its products, Fusilev (levoleucovorin) for metastatic colorectal cancer and osteosarcoma, saw extraordinary sales volume recently when a severe shortage of generic leucovorin necessitated the use of another product.
Zavoico also has an interest in cell therapy, but the companies involved have not gained traction in the public markets, and they are almost universally down over the past year. Zavoico follows Aastrom Biosciences Inc. (ASTM:NASDAQ), which has a patient-specific therapy completing phase 2 studies for critical limb ischemia. Its product Ixmyelocel-T (mixture of mesenchymal stem cells derived from the patient's own bone marrow) looks very promising to Zavoico, especially since there may be multiple disease indications for this technology at Aastrom.
Asked what his favorite stock might be, Zavoico answered that he puts them into categories. As for companies that are underappreciated and with potential for short-term gains, he picks Peregrine. He also puts two other companies in that bucket: Keryx Biopharmaceuticals Inc (KERX:NASDAQ) and AEterna Zentaris (AEZS:NASDAQ). Zavoico likens Keryx to Spectrum because it licenses drugs relatively inexpensively and then moves to complete their development. KRX-0401 (perifosine) is in phase 3 studies for colorectal cancer and multiple myeloma, and results are expected before summer. Perifosine was licensed from AEterna Zentaris, which has a "very impressive" drug discovery program going on in Germany for a variety of cancers and other indications. Novavax Inc. (NVAX:NASDAQ), a vaccine company is also poised for short-term gains. It has a collaboration going with the Biomedical Advanced Research and Development Authority (BARDA). "I think it will be rising steadily as it executes on the trials and delivers results," says Zavoico.
Then in a second category he has pegged some names that have "potential for steady, increasing value accretion." He says, "I put Threshold and Spectrum in this category. Curis is also in this bucket. It can sit back and collect royalties on Erivedge from Genentech while it develops its own pipeline."
1) George S. Mack of The Life Sciences Report personally and/or his family own shares of the following companies mentioned: None.