Hammer Stock Blog

Last month at the ASCO meeting, Curagen (CRGN) presented results for its lead drug, CR-011, in breast cancer and melanoma patients. CR011 had activity in both indications, however, most of the drug’s value should be ascribed to the breast cancer program, which represents a huge commercial opportunity and better chances of approval.

As I previously wrote, the significance of the breast cancer trial is not only in the clinical activity of CR-011, but more importantly, the ability to identify patients who are likely to respond to the drug. By defining the right target population, Curagen could substantially improve chances of approval, shorten development time and enjoy high market acceptance. (more…)

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Seattle Genetics – Another step towards approval

Seattle Genetics (SGEN) will present results from a phase I trial of SGN-35 in two rare blood cancers. This agent is important not only because it represents Seattle Genetics’ first opportunity for commercial revenue, but also because it serves as a proof of concept for the company’s antibody- drug conjugate (ADC) technology. The drug already generated impressive data when given every three weeks, and this year it will probably show even stronger activity in a weekly regimen. The company wanted to use a more frequent dosing in order to increase the overall amount of SGN-35 it can give and see whether it leads to higher efficacy without increasing side effects.

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The past 12 months have been anything but boring for Micromet’s shareholders (MITI). Last summer, Micromet’s stock climbed to $7 following excellent clinical data (discussed here) and a landmark publication in Science Magazine (discussed here), but since then the company has lost half of its value. Volatile trading is quite standard for small, cash burning biotechnology companies, however, Micromet’s case was particularly frustrating.

Micromet invented a new class of antibodies it calls BiTE (Bispecific T-Cell Engager) antibodies. Unlike conventional antibodies, BiTE antibodies bind two targets, the first target is presented on a cancer cell and the second is presented on an immune cell. The simultaneous binding of both cells by the BiTE antibody can redirect the immune cell to attack the cancer cell, thus exploiting the body’s natural immune mechanisms to fight cancer. Conceptually, a BiTE antibody is similar to cancer vaccines, which also aim at producing an immune response against tumors. Despite a history of failures in the field of immunostimulating antibodies, it looks like Micromet has found the right formula.

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Earlier today, Roche announced positive results from a phase III study evaluating its breast cancer blockbuster, Herceptin, in gastric cancer. According to Roche, the addition of Herceptin to standard chemotherapy “significantly prolonged” overall survival of gastric cancer patients. From a medical perspective, this trial is a great achievement considering the severe shortage of effective treatments for gastric cancer. This is also the first success Herceptin has outside of breast cancer, where it quickly became a cornerstone treatment.

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In a time when so many biotech companies do not know how they will survive the nuclear winter of 2009, two companies we hold in the biotech portfolio, stand out in the crowd. Immunogen (IMGN) and Exelixis (EXEL) are poised for an exciting year, with plenty of events in the coming twelve months. The two companies have a lot in common: Both are developing innovative  drugs for cancer that rely on remarkable basic science, both can generate an unlimited number of novel agents, that in turn can be licensed to large partners, and perhaps more importantly these days, both can remain independent of the capital markets for at least two years. Above all, the two companies exemplify how good products and good technologies can still generate tremendous value for investors, even during these economic turbulent times. 

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Investing, particularly in biotech, comes with plenty of risks and uncertainties. These uncertainties are usually results of clinical trials, which are very unpredictable and unfortunately do not end up well in most cases.  Once in a while, a company and its stock price diverge in a way that substantially decreases the risk in a particular company without increasing the stock price. We believe what happened yesterday with Immunogen (IMGN) is a classic case of this phenomenon.

Immunogen, similarly to all its peers in the field of drug development for cancer is a high risk investment, and  will surely have more bad news than good news to tell its investors over  the years, simply because in drug development, successes are substantially outnumbered by failures. Yesterday should have been one of the happiest days for Immunogen’s shareholders, as a great uncertainty that has been hovering over the company was resolved, and turned into a great achievement. Genentech’s (DNA) T-DM1 is by far the most important drug for Immunogen currently, for reasons explained here, here and here. Two days ago, Genentech publically stated that by early 2009, T-DM1 will be in two registration trials for indications with blockbuster potential. Of course, there is no way of knowing the final outcomes of either study, but it is important to realize that Genentech based its decision based on much more than the data that was published  from several T-DM1 trials. Consequently, Genentech statement turned Immunogen into a company with a more attractive risk/reward ratio, simply because the risk component is substantially lower today than prior to the announcement.Regardless of the recent news, Immunogen is expected to have additional good news on several fronts in the coming 6-9 months.

 In the coming 9 months, we expect the company to announce whether IMGN242 managed to demonstrate an objective response in a phase II trial in gastric cancer patients. This announcement seems like a classic win/win   situation. Investors have already given up on this agent, which showed disappointing results in the current as well as in its earlier version. The company already stated it would discontinue development of IMGN242 if no responses are shown among the first cohort of 23 patients. This would free up resources and enable the company to focus on other in-house products, so ironically, even a negative announcement would be perceived as a good things by investors, who want to leave that story behind them. We are not expecting great things from this trial, but we do note that a fairly impressive response in one of the first six patients enrolled to the study was reported (bottom right of the poster) at ASCO. Thus, there is still a chance for an objective response.

Also in the coming 9 months, we expect Immunogen to announce several licensing deals with new and present partners. First and foremost, based on management remarks and market trends, we expect the company to announce one broad technology licensing collaboration with a pharmaceutical company. The deal could be either very general such as the 5 year collaboration with Sanofi-Aventis. It can also be more specific, similarly to the collaboration with Genentech which includes specific targets. 

Speaking of Sanofi and Genentech, we expect additional candidates from these collaborations to enter the clinic in the coming 9 months. In a recent investor conference, Immunogen’s CEO revealed that  they had recently met with Genentech and that Genentech is “making progress” with antibody-drug conjugates (ADC) against three additional targets. It will be safe to expect that one of these agents will enter the clinic in the foreseeable future. Sanofi will most likely advance two additional products into the clinic, SAR566658 and SAR650984. SAR566658 is an ADC that targets DS6, a target that can be found on a plethora of solid tumors. SAR650984 is a naked antibody that will be evaluated for the treatment of blood cancers.  

With respect to actual data publication, Immunogen will publish new data on IMGN901, which is currently in a phase I trial in multiple myeloma. Antibodies for the treatment of multiple myeloma are currently one of the hottest topics in hematology, as can be echoed by the very high activity in the field that attracted Genentech, Bristol-Myers Squibb and Biogen-IDEC, just to name a few.  Data from this study will be published at the ASH annual meeting this December. We still remain cautious about the activity of IMGN901 as a single agent, after last year’s disappointing results, nevertheless, Immunogen’s CEO alluded to this data by stating that “…the data look good, we continue to see patients derive clinical benefit…“, so there could be a positive surprise there.

Shortly afterwards, at the  Annual San Antonio Breast Cancer Symposium, Genentech is expected to give an update on an ongoing phase II trial of T-DM1 in 2^nd and 3^rd line metastatic breast cancer, which should be positive given Genentech’s recent decision.  Early next year, Genentech is expected to dose the first patient in the phase III pivotal trial, which will trigger a potentially double digit milestone payment, will announce the receipt of a substantial milestone payment to Immunogen.It is important to note that despite all these positive catalysts down the road, there are likely to be disappointing news as well, as is always the case with drug development. However, at this point of time, with two potentially registration studies underway, Immunogen seems to be cheaper than ever, which is why we decided to increase our holding in the company.

We also added a new company, Santarus (SNTS), on which we hope to elaborate in the future.