The Small-Cap Biotech Stocks Bull Market
Companies / BioTech Oct 29, 2015 - 10:47 AM GMTBy: TLSReport
SeeThruEquity's Ajay Tandon and Jay Albany are riding the biotech bull by harnessing the huge upside potential of micro-cap companies working in multiple subsectors, particularly in the rapidly advancing cancer immunotherapy sector. In this interview with The Life Sciences Report, Tandon and Albany toss the names of several companies into the arena for investors' consideration.
The Life Sciences Report: Given the current healthcare market, how does the future look for small-cap biotechs versus large-cap companies?
Ajay Tandon: There seems to be a pretty robust market for micro caps in the life sciences sector. We currently cover 168 companies, and about a third of our coverage universe is life sciences and biotech-focused. We're seeing a lot of activity in this sector.
TLSR: Do any particular subsectors stand out?
Jay Albany: There's been a lot of excitement around precision immunotherapy recently. It has the potential to harness the immune system in a targeted and personalized way. A lot of people believe this is the future of medicine, particularly in the area of cancer treatment.
Interest in precision immunotherapy increased following the January 2015 State of the Union speech, when the President mentioned precision medicine as an area of medical promise. When something like this is called out specifically in the State of the Union address, you know it's a big deal. After that, many companies indicated this area of oncology therapy was gaining momentum. It's definitely an area that offers lots of promise.
TLSR: Is there a company working in immunotherapy that you particularly like?
JA: Opexa Therapeutics Inc. (OPXA:NASDAQ), one of the companies in our coverage universe, has developed a precision immunotherapy technology platform that has potential application in several indications, including multiple sclerosis (MS) and neuromyelitis optica (NMO). We think that 2016 could be a game-changing year for Opexa Therapeutics.
Opexa's lead candidate, Tcelna, is being developed as a potential treatment for secondary progressive multiple sclerosis (SP-MS). That indication has a $7 billion ($7B) market with limited competition. Tcelna has received fast-track designation from the FDA.
The compound is currently in a Phase 2b clinical trial, with results expected in the second half of 2016. This will be a key event for the company, and it's why I think 2016 could be a game-changing period. The results of that trial will trigger a decision by its partner, Merck-Serono, a biopharmaceutical business of Merck & Co. Inc. (MRK:NYSE), regarding the exercise of its licensing option. If Merck-Serono does license the drug, those payments would fund a Phase 3 trial and could be very lucrative for Opexa Therapeutics.
TLSR: Is there anything particular about Tcelna that sets it apart from other drugs in the space?
JA: One thing that really stands out is the early-stage interest of a quality partner like Merck-Serono. For small-cap companies in particular, it is extremely helpful to have a company of the caliber and with the experience of Merck-Serono help fund development through early licensing milestone payments.
TLSR: Opexa also has a compound at the preclinical stage, OPX-212. How does that figure into your predictions for Opexa?
JA: Tcelna is probably the biggest event to come forward in the next 12 months, but OPX-212 presents a chance for the company to transform itself from a single compound company into a platform company. We're pretty excited about that development.
TLSR: The current buzz is focused on immunotherapy, as you say, but I'm also hearing about a resurgence in small molecule drugs. Can you talk about a company in this space?
AT: We've covered DelMar Pharmaceuticals Inc. (DMPI:OTCQX) for quite some time. It's a platform technology company that's hitting its milestones and putting out a lot of data.
JA: DelMar Pharmaceuticals is based in Canada and also has operations in Menlo Park, California. Its lead compound, VAL-083, is a novel small molecule therapeutic agent targeting glioblastoma multiforme (GBM). VAL-083 has orphan drug status in the U.S. and recently completed Phase 1/2 trials. The company plans to launch a Phase 2/3 trial in 2016.
The data DelMar presented at the American Society of Clinical Oncology (ASCO) conference was encouraging. Patients entering the trial had only about three months to live, but those receiving VAL-083 had a median survival of nine months with doses greater than 30 milligrams. The six-month overall survival rate was 41.4%. That's a statistically significant improvement. This drug has potential alone, or in combination with immunotherapy.
GBM is the most aggressive and common form of brain cancer, and affects 15,000 adults each year. Its five-year survival rate is just 3%. A lot of the current treatments aren't working. The current standard of care for GBM is Merck's Temodar (temozolomide) and Avastin (bevacizumab; Genentech/Roche), used in conjunction with radiation therapy. GBM is a significant unmet need, with a market potential of more than $1B in annual sales. It represents a large opportunity for DelMar Pharmaceuticals.
TLSR: Switching to regenerative medicine, do you have coverage on a company working in that sector?
JA: We initiated coverage of Cynata Therapeutics Ltd. (CYP:ASX) in August 2015. The company's lead medical technology platform has very exciting potential. Called Cymerus, it is a new, validated way to manufacture mesenchymal stem cells (MSCs).
This is particularly intriguing because, historically, the manufacture of MSCs has needed donor-derived cells. Reliance on that source triggered significant supply and cost issues that held back clinical progress. Cymerus, in contrast, develops MSCs from induced pluripotent stem cells (iPSCs) in a unique process that promises nearly infinite scale, robust cells, and development costs that are a fraction of those of donor-derived methods. It stands out because its iPSC development methods were invented by stem cell pioneer Dr. James Thompson and his colleague, Dr. Igor Slukvin, at the University of Wisconsin. Dr. Slukvin is one of Cynata's cofounders. The company is planning Phase 1 trials with Cymerus.
Jay Albany, CFA, has more than a decade's experience conducting equity research and analysis in life sciences and other high tech industries. He is a senior analyst at SeeThruEquity LLC, after a stint as senior vice president of equity research. Previously, Albany served as senior vice president of capital markets at Emissary Capital LLC, after working as a research analyst at Skellig Capital LLC and as a security analyst at Calisto Capital Management Inc. He began his financial services career at kozmo.com as manager of business development. Albany is a member of the New York Society of Securities Analysts and is a CFA charterholder. He earned a bachelor of arts degree from Columbia University.
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DISCLOSURE:
1) Gail Dutton conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report and The Life Sciences Report, and provides services to Streetwise Reports as an independent contractor. She owns, or her family owns, shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of Streetwise Reports: Aethlon Medical Inc., Cynata Therapeutics Ltd., RestorGenex Corp. The companies mentioned in this interview were not involved in any aspect of the interview preparation or post-interview editing so the expert could speak independently about the sector. Streetwise Reports does not accept stock in exchange for its services.
3) Ajay Tandon: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
3) Jay Albany: I own, or my family owns, shares of the following companies mentioned in this interview: None. I personally am, or my family is, paid by the following companies mentioned in this interview: None. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.
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