Cancer Immunotherapy: New Developments and Catalysts Pending

According to Professor Peter Boyle of France's International Prevention Research Institute, the yearly count of cancer cases will rise to around 26.4 million by 2030. He was presenting at the recent European Cancer Congress in Amsterdam. This is an alarming number. Biotechnology companies from all parts of the world are relentlessly engaged in finding ways of bringing this global epidemic under control.

From an investment point of view, the oncology market is heating up. By the end of 2013, it is estimated that it will be around $110 billion in size. The market has more than doubled since 2008. One of the emerging concepts in oncology is immunotherapy and this is slowly catching investor attention despite a round of failures as a number of companies – both big and small – are announcing positive results from preliminary studies. Immunotherapy is a treatment process where cancer is treated by augmenting the patient’s own immunity system so that they are able to combat the cancer cells. Only one immunotherapy is FDA approved as of now, and that is Dendreon’s Provenge, but many more are in late stage development.

Merck’s and Roche’s new drugs

Merck (MRK) and Roche (RHHBY) are both big players in the field of immunotherapy. Merck has recently announced very positive results from its trial of a new experimental immunotherapy cancer drug called MK-3475, which had positive responses in 24% patients with refractory non-small cell lung cancer [NSCLC]. 21% experienced tumor shrinkage. While these are just initial data, prospects look good, as there are 8 studies in total involving MK-3475 including two in phase 2 and even 2 in phase 3. Regarding this particular phase I trial, Merck plans to rapidly push the drug into Phase 2 and 3.

The other seven trials are across other cancer types like bladder, colorectal, head and neck, melanoma, etc. Any success that the company can achieve in this field can prove to be a salvation from the current sales slump that it is facing, though not obviously not in the immediately upcoming quarters. Merck’s sales were down 9% in the first quarter and 11% in the second quarter mostly on account of patent expiration. It has recently announced a $2.5 billion restructuring program that will involved 8,500 job cuts.

Roche is also testing its own immunotherapy drug called MPDL3280A in patients with NSCLC. While it is trailing Merck in development milestones, it has recently presented positive results from its early stage trials. There were positive responses in 23% of the patients tested with this drug. But, Roche has a big scoring point apart from its overall positive results. Its response rate was higher in smokers than non-smokers - 26% vs. 10%.

This is the first time that any similar drug is showing better results in smokers than in non-smokers and can be a complete game-changer for Roche and its investors. The company is also testing MPDL3280A for treating other cancers like melanoma skin cancer and kidney cancer.

Electroporation

One of the main problems faced by immunotherapy is that frequent doses of the drugs are required, which often cause significant side effects. For example, Merck’s MK-3475 is known to cause fatigue, rash, pruritus, and diarrhea in some cases. This does not undermine the future usage of the drug by any means as often such drugs are the only ray of hope for the critically ill patients.

However, this definitely creates an unmet need to come up with new therapy techniques which are equally effective but result in less side effects and better quality of life. Additionally, some immunotherapy drugs are so toxic that to even elicit a clinical response, toxic doses are needed. On this front, some very interesting work is happening in a technique called electroporation.

The process of electroporation involves passing electrical currents to open up cell membranes in the targeted tumors in order to allow higher penetration of the drug. The pores close again once the current is removed with the drug still inside so that they can continue being effective without affecting the rest of the body.

This technique has been earlier deployed in research settings to push molecules into cells but using the technology for clinical purposes is a recent development.

OncoSec

OncoSec is a five year old biopharmaceutical company that is working with electroporation techniques. It is developing two types of therapies to treat solid tumours – ImmunoPulse and NeoPulse. Both therapies use an electroporation delivery device known as OncoSec Medical System (OMS) in combination with either DNA-based immunocytokine (ImmunoPulse), which is a natural immune system activator found in the body, or a chemotherapeutic agent (NeoPulse). The company acquired the electroporation technology from Inovio, a pioneer in the field of electroporation.

OncoSec currently has three clinical programs for its ImmunoPulse therapy in phase 2 clinical trials for treating skin cancers:

a) Melanoma trial with 25 patients for treatment of advanced stage cutaneous and in-transit malignant melanoma with intratumoral pIL-12 electroporation.

b) Merkel Cell Carcinoma (MCC) trial with 15 patients for treatment of this lethal skin cancer with 33% mortality rate.

c) Cutaneous T-Cell Lymphoma (CTCL) trial for treatment of this rare chronic disease which needs lifelong treatment under the current therapies available.

There is lot of optimism around OncoSec’s clinical programs; especially around the metastatic melanoma trial, where in its initial studies the company has achieved an unprecedented 68% and 45% durable response on treated lesions at the end of three and six months, respectively. Some analysts estimate the revenue potential for the melanoma studies to be over $600 million annually.

In June OncoSec completed full enrolment for the Phase 2 melanoma trial and recently it has announced that it will expand the trial to include 10 more patients in the study. The MCC program is also equally important as it is an orphan indication and may not even require phase 3 trials.

Investment proposition

Merck appears to be caught in a downtrend at the moment as it has not followed the market’s recent explosive move up since July, pretty much going in the opposite direction from the S&P since then. This makes it attractive, though I would wait until technical indicators become more favorable. Roche, on the other hand, has been following the general market fairly closely, and is therefore the safest bet in terms of capital preservation at the moment, and is in a lot less recent trouble than Merck.

From a growth point of view, while OncoSec is a very small fry compared to the pharma majors, it can be very attractive for growth oriented investors. It can be a good choice as it has just embarked on its journey comparatively recently and has only good things to report at the moment. Time is ripe for another reason, and that is that OncoSec just had an equity offering that closed on September 18. Now the company is fully funded to continue with its studies, is completely debt free, and has plenty of near-term catalysts, so investors can expect significant upsides without an imminent dilution over the coming months.

The company will be presenting the eagerly awaited interim clinical data from its melanoma Phase 2 trial with the objective response rates that were achieved at the end of 180 days. It will also be providing interim data from the Phase 2 MCC and CTCL trials and subsequently the final data from the melanoma and MCC trials. So far, all the data provided by OncoSec has been positive. If the same trends continue the stock could see huge upside.

Final call

The new areas emerging in the field of oncology can bring exciting opportunities for investors. Merck and Roche’s recent announcements are definitely big developments and the potential is huge. Meanwhile, the studies conducted by new market entrants like OncoSec are also showing lot of promise.