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TICKERS: ANIX

Anixa Licenses Another Potential Blockbuster
Contributed Opinion

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Daniel Carlson Daniel Carlson of Tailwinds Research discusses a major collaboration with the Cleveland Clinic for his top pick stock of the year.

In January we proclaimed Anixa Biosciences Inc. (ANIX:NASDAQ) to be Tailwinds' stock of the year. This designation was awarded due to potential major milestones in both the detection and the curing of cancer. With its Cchek prostate diagnostic shooting for CLIA approval in the next few months and with its CAR-T ovarian cancer therapeutic getting closer to an IND (investigational new drug) filing), ANIX is a stock with the possibility of a very rewarding second half in store for investors.

However, as much as we were already eagerly anticipating the next few months, with the announcement of the licensing of a potential breast cancer vaccine, Anixa has taken it one step further. By broadening its platform into cancer prevention, the company has proven the unique value and attractiveness of its platform and given investors another reason to be excited for the future. Dr. Amit Kumar and his team have demonstrated again that the company's model of licensing cancer programs, outsourcing development, and keeping overhead and burn at a low level makes Anixa an attractive partner for clinicians while providing shareholders potential blockbusters without having to bear the typically significant development costs associated with product development.

Why did Angelina Jolie get a double mastectomy?

In a day and age where it seems that physical appearances are more valued than ever, particularly around the Hollywood elite, I remember finding it very interesting that one of the leading beauties of the big screen underwent breast removal…when she didn't have cancer! What would cause someone to undergo voluntary surgery to pro-actively fight breast cancer? Isn't breast cancer an area in which we have made significant strides in terms of both detection and cures?

Indeed, we have come a long way in battling cancer, however, like most diseases, cancer comes in many different forms and varieties. In the case of breast cancer, we have made great strides towards treating most strains. However, there exists a form of breast cancer called Triple Negative Breast Cancer (TNBC) that remains an elusive target to treatments. This cancer is particularly difficult to fight and is the deadliest form of breast cancer. It's also not that uncommon, as 15–25% of breast cancer patients have TNBC. This disease remains a big problem.

TNBC is frequently found in people who carry a mutation in their BRCA1 gene. I guess that's the "good news" about this cancer; it's possible through genetic testing to know if someone has a natural propensity to develop the cancer. Angelina Jolie fell into this category. With an 87% chance of developing TNBC, she opted for the radical move of preemptive surgery. Several members of her family had died from TNBC breast cancer, and most likely they carried the mutations, which were passed on the Ms. Jolie.

Exciting Pre-clinical Data in TNBC Prevention

The bad news is that, despite great efforts, there hasn't been the success in treating TNBC as has been seen in other breast cancers. On the other hand, there has recently been a lot of good news in pre-clinical work on developing a vaccine for TNBC. Most significant here is the work of Dr. Tuohy at the Cleveland Clinic.

In his work, Dr. Tuohy has targeted the α-Lactalbumin protein. Here's an excerpt from an abstract he has published that explains why this represents such a great potential target.

"α-Lactalbumin's expression in normal tissues is confined exclusively to the breast during late pregnancy and lactation, but is also expressed in the vast majority of human triple negative breast cancers (TNBC)—the most aggressive and lethal form of breast cancer and the predominant form that occurs in women at high genetic risk including those with mutated BRCA1 genes."

Dr. Tuohy has been working on a cancer vaccine since 2002. His most recent efforts have culminated in very successful animal studies. By injecting mice with a vaccine, mice that have been bred such that they are guaranteed to develop breast cancer, Dr. Tuohy has shown an astounding success rate in preventing breast cancer. Fully one hundred percent of the mice that would have all normally gotten breast cancer never got the disease. A complete success in any program is virtually unheard of. Of course, the control mice, that were not treated with the vaccine, all contracted breast cancer.

Needless to say, these phenomenal results haven't gone unnoticed. Through a Department of Defense program (believe it or not, the DoD is one of the biggest funders of breast cancer research, having spent $3.3 billion in a program started in 1992), Dr. Tuohy and the Cleveland Clinic have received a $6.2 million grant to develop the vaccine. This is enough funding to take the program through two phase 1 clinical trials.

Why Anixa?

With the addition of a potentially blockbuster vaccine for Triple Negative Breast Cancer, Anixa has pulled off its own triple play: it is working on products in cancer detection, treatment and now prevention. On the surface, this seems like a lot on its plate. When you realize that Anixa has six employees, it begs the questions of why would the Cleveland Clinic partner with Anixa and how does Anixa hope to move all three products forward?

The answer lies in the company's unique business model. Dr. Kumar, Anixa's CEO, has focused his attention on an asset light model since he joined the company just two years ago. In an interview with Tailwinds in late 2018, here's what he had to say about this business model as it relates to its CAR-T program.

"We are working with collaborators at every step…By working with our current collaborators and others in the future we can potentially create an asset that is valued at factors of 100 or even 1000 times as much as we invest. So far, we and our collaborators have taken a really innovative science project almost to the starting line of clinical trials, all in less than one year and for only about $1 million dollars."

That's the Anixa business model in a nutshell. Finding innovative projects, working with partners to leverage their expertise, infrastructure and personnel, and developing these programs with minimal expense to existing shareholders.

While this business model is good for investors as it keeps dilution to a minimum, it is also quite attractive to potential licensors. By not simply taking over, and bringing in-house, development of a project, Anixa allows the initial creators to remain involved. This is attractive to places like the Cleveland Clinic and Dr. Tuohy as it enables them to remain in charge of a project that has been theirs all along. If this breast cancer vaccine is to become a blockbuster hit, Dr. Tuohy and the Cleveland Clinic will forever be associated with the product.

Another Shot on Goal

As we enter the second half of 2019, Anixa stands on the cusp of some major milestones. We can expect to see Cchek on the market, with CLIA approval, in the next few months. Additionally, its CAR-T program should be filing an IND with the FDA near the end of the year.

By licensing this vaccine from the Cleveland Clinic, Anixa has brought in house a third potential blockbuster product. Admittedly, a vaccine may be a few years from being approved by the FDA. Clinical trials to prove a vaccine is safe is a big step; to prove it prevents cancer in a large number of patients over a long period of time will require years of studies. That's the negative to this story; it's going to take a while. However, Dr. Kumar hopes after the early phase 1 studies or early phase 2, big commercial partners will be interested in licensing the technology and funding the downstream studies needed to understand long-term effectiveness. It's important to note that while the phase 1 studies will be focused on safety, there are some specific measurements and analyses designed to provide indicators of long-term effectiveness.

On the positive side, Anixa has just brought in house a vaccine with a huge potential market and the potential to change women's health forever. The pre-clinical results have been outstanding. With recent advances in immunology, the market is incredibly receptive to vaccines and Anixa and Cleveland Clinic's timing couldn't be better.

Meanwhile, this product comes at a minimal expense to Anixa. With the DoD grant of $6.2 million, the project is funded through the phase 1 human studies. Anixa and the Cleveland Clinic could file an IND, run a trial, receive positive results, and apply for a phase 2 trial without it costing the company much money at all. With the clinical fees all paid for, the total expense to Anixa is going to run around $250,000 per annum. That is a pittance for a potential multi-billion dollar product.

At Tailwinds, we continue to be impressed with the work done by Dr. Kumar and his team. Their ability to cost-effectively build out a cancer platform is impressive. With now three shots on goal, their stable is full of interesting product candidates. And, with their unique business model, they have the bandwidth to continue bringing in new products. We remain convinced that Anixa is a great risk/reward stock and it remains our top pick of the year.

Daniel Carlson is the founder and managing member of Tailwinds Research Group and its parent company DFC Advisory Services, which is a licensed registered investment advisor (CRD # 297209). Tailwinds is a microcap focused research company that provides research on and consults to over 20 emerging growth companies in the technology and life sciences arenas. DFC Advisory Services is an RIA that manages money dedicated to investing in the companies covered by Tailwinds. For more information on these two companies and their track record, please see www.tailwindsresearch.com. Prior to founding these two entities, Dan spent many years working with small public companies, having been CFO of two public companies and helping finance many others. A 1989 graduate from Tufts University with a degree in Economics, Dan’s formative years in business were spent as an equity trader, first on the Pacific Coast Stock Exchange then on the buyside at several multi-billion dollar firms.

This article was submitted by Tailwinds Research. For more information on Tailwinds Research or on Anixa Biosciences, please visit www.tailwindsresearch.com.

Tailwinds is engaged by Anixa Biosciences and owns stock in the company. For a complete list of disclosures, please click here.

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Disclosure:
1) Daniel Carlson: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Anixa Biosciences. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies referred to in this article: Anixa Biosciences. Additional disclosures and disclaimers are above. I determined which companies would be included in this article based on my research and understanding of the sector.
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