I've looked at dozens of companies, and I believe that Advaxis (ADXS.OB) has one of the best reward/risk profiles in the healthcare sector. Advaxis is exploring the potential of its bioengineered bacterium, Listeria Monocytogenes, as a robust cancer immunotherapeutic targeting multiple types of cancers. Its attractive reward/risk profile stems from the following trends:
Increasing Prevalence of HPV-Caused CancersHPV - Human Papillomavirus is the most common STD in the U.S.HPV and Cancer - HPV is associated with multiple types of cancers.2. ADXS-HPV Targets HPV-Caused Cancers
Listeria-based Immunotherapy - Novel Bacteria based immunotherapy may hold the key to addressing HPV-caused cancers.ADXS-HPV's Mechanism of Action Implies Significant Benefits - Bioengineered Listeria has the potential to coordinate multiple factors to successfully attack cancer, relative to other immunotherapies3. ADXS-HPV Should Demonstrate Meaningful Efficacy in Current Trials
Current Peak in Cervical Cancer Treatment - The standard of care for cervical cancer has failed to meaningfully improve in the past thirty years.ADXS-HPV Has Promising Survival and Safety Data - Completed trials testing ADXS-HPV has shown encouraging data for efficacy and safety.Results from Prior Studies Represent Significant Advances - In both efficacy and adverse event profile, ADXS-HPV for Cervical Cancer appears to be the clear winner.4. If Prior Results Continue to Hold, ADXS-HPV Should be Approved
Orphan Drug Designation for ADXS-HPV's Anal Cancer Indication - Historically orphan drug designation is a positive indicator for future approval.Comparisons - Most oncology drugs are approved based on marginal improvements in efficacy and/or safety.5. Advaxis's Bioengineered Listeria Platform Has Countless Applications
Bioengineered Listeria - Advaxis's exclusively licensed platform can modify the Listeria bacterium such that any cancers that express genes can be targeted.Robust Patent Protection - Advaxis boasts an extensive patent portfolio covering both methods and compositions of its Listeria-based immunotherapeutics.6. Advaxis is Significantly Undervalued
Risks - As with many dev. stage biotechs, Advaxis carries risks.Strong Management and Board of Directors - The majority of Advaxis's management and board members have track records of developing and selling multi-million/billion dollar companies.Scope - The nature of Advaxis's immunotherapy should allow for continued growth, high premium and margins in the burgeoning cancer immunotherapy market.Valuation - Despite Advaxis's current stage in development, the company remains radically undervalued compared to competing immunotherapeutic companies.Catalysts - Near-term catalysts should result in rising valuation.(Shout out to fellow contributor Joe Springer for the fantastic investment thesis outline)
Let's examine these trends and catalysts in depth:
1) Increasing Prevalence of HPV-Caused Cancers
Recent research in oncology has yielded the consensus that Human Papillomavirus (HPV) plays a causative role in many forms of cancer. The discovery of HPV's role in some forms of cancer has allowed for next-gen therapeutics that capitalizes on the idiosyncrasies of HPV-caused cancers.
HPV
The Center for Disease Control reports that approximately 79 million Americans are currently infected with HPV with roughly 14 million people newly infected each year. HPV has grown to the point where by the age of 50, over 80% of American women will have contracted at least one strain of genital HPV. Although tests and vaccines are widely available, however the two vaccines currently on the market- Gardasil (marketed by Merck (MRK)) and Cervarix (marketed by GlaxoSmithKline (GSK)) are prophylactic measures and fail to treat existing HPV infections. The number of HPV-positive individuals should be expected to continue rising due to HPV's typically asymptomatic nature, lack of awareness in the general public, and lack of a cure.
HPV and Cancer
Unfortunately, certain types of HPV can induce multiple forms of cancer and are designated as "high risk." To clarify the size of HPV's impact on cancer, a report from the University of Oxford's Clinical Trials Service Unit and Epidemiological Studies Unit states that the estimated total of HPV-attributable cancer in 2002 was 561,200 new cases or 5.2% of the global cancer burden. This can be clarified even further by an article published by Kevin Ault in Infectious Diseases in Obstetrics and Gynecology in 2006,
"Human papillomavirus (HPV) is a significant source of morbidity and mortality in the United States and worldwide. High-risk, oncogenic HPV types (including HPV 16 and HPV 18) are associated with 99.7% of all cervical cancers, as well as low-grade squamous intraepithelial lesions (LSIL), high-grade squamous intraepithelial lesions (HSIL), and ab- normal Papanicolaou (Pap) test results, which carry signifi- cant health care costs and psychosocial morbidity."
HPV has been associated with the following cancers:
Cervical Cancer- 99.7% linked to HPVVulvar Cancer- 50% linked to HPVVaginal Cancer- 65% linked to HPVAnal Cancer- 95% linked to HPVOropharyngeal Cancer- 60% linked to HPVHPV is able to cause cancer as a result of its ability to interfere with tumor suppressor proteins such as p53, which allows the virus's DNA to be replicated within the cell. By being able to replicate within cells, the cells begin coding (producing) for two oncoproteins (tumor promoting proteins), E6 and E7, which then interfere with internal regulators, promoting tumor growth and eventual transformation into malignant cells. Because HPV-caused cancer cells will continue to express E6 and E7, these proteins present attractive targets for targeted immunotherapeutics.
2) ADXS-HPV Targets HPV-Caused Cancers
Advaxis has a bacterium-based immunotherapy platform, which is exclusively licensed from the University of Pennsylvania. The platform revolves around bioengineering a bacterium, Listeria Monocytogenes, by adding multiple copies of small DNA molecules called plasmids to a live, but weakened strain of Listeria. These plasmids code for antigens, entities that antibodies track and bind to. For its first run, the company has chosen HPV gene E7 as its antigen of choice, resulting in ADXS-HPV, an immunotherapeutic designed to stimulate a robust immune response against HPV-caused cancers.
Listeria-based Immunotherapy
Cancer targeting immunotherapy has grown by leaps and bounds since the FDA's approval of the first cancer targeting monoclonal antibody, rituximab (marketed by Biogen Idec (BIIB)), in 1997. Both the science and the market size have grown exponentially. An article published in Landes Bioscience's journal states,
"The twenty two monoclonal antibodies (mAbs) currently marketed in the U.S. have captured almost half of the top-20 U.S. therapeutic biotechnology sales for 2007. Eight of these products have annual sales each of more than $1 B, were developed in the relatively short average period of six years, qualified for FDA programs designed to accelerate drug approval, and their cost has been reimbursed liberally by payers. With growth of the product class driven primarily by advancements in protein engineering and the low probability of generic threats, mAbs are now the largest class of biological therapies under development."
Although mAbs are currently still in vogue, cancer vaccines have recently been drawing a significant amount of buzz as the possible next step in oncology research. So far these cancer vaccines have been dendritic cell vaccines, here's a primer cancer.org provides:
"Dendritic cells are special immune cells in the body that help the immune system recognize cancer cells. They break down cancer cells into smaller pieces (including antigens), then hold out these antigens so other immune cells called T cells can see them. This makes it easier for the immune system cells to recognize and attack cancer cells. Dendritic cell vaccines are autologous vaccines (made from the person in whom they will be used), and must be made individually for each patient. The process used to create them is complex and expensive. Doctors remove some immune cells from the blood and expose them in the lab to cancer cells or cancer antigens, as well as to other chemicals that turn them into dendritic cells and help them grow. The dendritic cells are then injected back into the patient, where they should provoke an immune response to cancer cells in the body."
The most prominent dendritic cell vaccine undoubtedly goes to Dendreon's (DNDN) Provenge, which has been a phenomenal flop to date. However, hype has been building around other dendritic cell vaccines candidates such as ImmunoCellular's (IMUC) ICT-107 and Northwest Biotherapeutics' (NWBO) DCVax. The two candidates can be seen as next-gen dendritic cell vaccines, characterized by significantly lowered cost and complexity, which served to render Provenge essentially dead on arrival.
Advaxis, however, takes an entirely different approach. In contrast to the cost and personalized nature of autologous dendritic cell vaccines, Advaxis's bioengineered Listeria bacterium represents a vector-based vaccine. Given that the underlying therapeutic is a strain of bacteria that has been modified to be harmless, the result is an immunotherapy able to pump out antigens that stimulates the immune system without potential toxicities.
ADXS-HPV's Mechanism of Action Offers Significant Benefits
Unmodified or unweakened Listeria is an extremely virulent bacterium, capable of causing the food borne illness, listeriosis, which has a mortality rate of about 20 percent. However, the factors that contribute to Listeria's pronounced virulence are exactly the factors that have exciting uses for immunotherapy.
As mentioned earlier, Advaxis's bioengineered Listeria platform was licensed from the University of Pennsylvania, where it was developed for over 10 years under the guidance of Dr. Yvonne Paterson, a former Professor of Microbiology at Penn and breast cancer survivor. Her bio (as stated on the 10-K) is as follows:
"She is a fellow of the American Academy for the Advancement of Science, and has been an invited speaker at national and international health field conferences and leading academic institutions. She has served on many federal advisory boards, such as the NIH expert panel to review primate centers, the Office of AIDS Research Planning Fiscal Workshop and the Allergy and Immunology NIH Study Section. She has written over one hundred publications in the areas of HIV, AIDS and cancer research. She has trained over forty post-doctoral and doctoral students in the fields of Biochemistry and Immunology."
Listeria's beneficial characteristics are detailed in an article she co-authored, titled Cancer immunotherapy using Listeria monocytogenes and listerial virulence factors. Although the entire paper is quite fascinating, I'd like to draw attention to the following passages
"It has been shown that L. monocytogenes enters the host cell and is taken up in a phagosome. However, unlike most other intracellular bacteria [3], L. monocytogenes escapes from the phagosome into the cytoplasm of the cell by disrupting the phagosomal membrane, primarily through the action of listeriolysin O. The bacteria replicate in the cytoplasm, and then move to the periphery of the cell where they form pseudopod-like structures that are recognized and internalized by adjacent cells where the cycle is repeated [4]. The unusual ability of L. monocytogenes to escape phagolysosomal restriction and live in the cytoplasm explains why this bacterium is particularly effective as a vector for targeting the class I restricted pathway of antigen processing. The localization of bacteria in the lysosomal compartment after invasion ensures that antigens expressed by this bacterium enter the MHC class II pathway for antigen processing since the majority of bacteria are killed and digested in this compartment in vivo [5]." "Phagocytosis of Listeria monocytogenes by a resident macrophage results in the secretion of IL-1, IL-12, and TNF-a and its activation to a state, which is competent to destroy the invading parasite by nitric oxide (NO) production. IL-1 secreted by resident macrophages activates neutrophils and helps to maintain the activated state of macrophages, which have increased MHC expression. IL-12 and TNF-a act on NK cells stimulating them to secrete IFN-?. This facilitates the expansion of Th0 cells which under the influence of IL-12 and IFN-? differentiate to the Th1 phenotype that secrete IL-2, TNF-a, and IFN-?."
In layman's terms, Listeria is able to produce a hemolytic protein, Listeriolysin O (LLO), which allows it to escape from within the digestive portion of the cell into the cytoplasm - the region of the cell where most cellular activities take place. The effect is three-fold. Typically, the majority of vaccines fail to stimulate a robust killer T-cell (Also known as cytotoxic T cell, CD8+, CTL) response, why is this? This results from the differentiation between the two classes of major histocompatibility complex (MHC), class 1 and class 2. Only MHC class 1 activity stimulates a response by CD8+, MHC class 2 interacts exclusively with CD4+ (helper cells). The differentiator between the two lies in how the antigen is processed by the cell. When a foreign entity is consumed or is phagocytosis'ed by an antigen-presenting cell (cells that talk to the immune system, referred to as APC), they are typically digested in the lysosomes and loaded on the MHC-II molecules. However, Listeria's unique ability to escape to the cytosol with LLO allows it to stimulate MHC-I. MHC-I is loaded by protein fragments that were derived from proteins that were in the cytosol. For the case of Listeria, this would be LLO. Therefore by modifying the LLO to also carry the E7 gene, the association with the protein mounts a CD8+ attack against E7 displaying cancer cells. CD4+ is also stimulated by Listeria given that a certain percentage will not be able to escape the lysosome. Research appears to indicate that the immune system's recognition of Listeria as a virulent species, results in a cascade effect stimulating multiple molecules in addition to naïve T-cells (There are multiple small molecules that are attempting to stimulate said molecules) that reinforce the immune response. LLO's third, perhaps most important, but not well understood, effect, is its ability to help antigen-primed CD8+ cells penetrate the tumor body, which can help circumvent many of the anti-immune measures present within tumor cells. Given the holistic immune response, presumably memory of the antigen will remain in the immune system, staving off potential relapse.
3) ADXS-HPV Should Demonstrate Meaningful Efficacy in Current Trials
We believe ADXS-HPV should demonstrate meaningful results in current trials based on both the current landscape for the standard of care for cervical cancer and data reported from prior trials.
Current Peak in Cervical Cancer Treatment
Healio, a leading publication on hematology and oncology wrote on the stagnant standard of care for advanced cervical cancer in 2010. They began with the following,
"Cisplatin-based chemotherapy has been the standard of care for metastatic cervical cancer for about 30 years. Unfortunately, only about one-third od patients with cervical cancer will respond to this treatment, and responses usually last fewer than 12 months. Moreover, cisplatin-based chemotherapy is also used in combination with radiation therapy to treat patents with earlier-stage disease, so recurrent disease may be resistant to additional treatment with platinum drugs. The Gynecologic Oncology Group conducted the GOG 204 tiral to compare several cisplatin doublets, looking to find a superior treatment regimen; however, the trial was stopped early when no combination proved superior to the cisplatin/paclitaxel combination."
This continues to be the case today; the standard of care for even the earliest stage begins with surgery, removing organs in an Agent Orange mentality of treatment, followed by radiation and chemotherapy treatment for more advanced cases. These treatments, quite understandably, come with pronounced side effects.
ADXS-HPV Has Promising Survival and Safety Data
In 2007, Advaxis in conjunction with the National Cancer Research Center initiated the first clinical use study of the company's live-attenuated Listeria vaccine titled: A Phase I Safety Study of Lm-LLO-E7 in patients with advanced carcinoma of the cervix. The study examined both dosing and safety profile of the bacteria-vector-vaccine in 15 patients that already relapsed from previous standard of care treatment.
"Patients received 1 of 3 dose levels of Lm-LLO-E7 (1 × 109 CFU, 3.3 × 109 CFU or 1 × 1010 CFU) as an intravenous infusion, followed by a second dose 3 weeks later. All patients experienced a flu-like syndrome which responded to non-prescription symptomatic treatment. Severe (grade 3) adverse events related to Lm-LLO-E7 were reported in 6 patients (40%), but no grade 4 adverse events were observed. At the highest dose some patients had severe fever and dose limiting hypotension. By the end of the study protocol, 2 patients had died, 5 had progressed, 7 had stable disease and 1 qualified as a partial responder. This study shows for the first time that a live-attenuated Lm is safe to be administered to late stage ICC patients."
These adverse events are actually much milder than the adverse events reported from platinum-based chemotherapy or radiation therapy, moreover the adverse events of fever and hypotension actually fall in line with flu-like symptoms. In other words, the adverse events were consistent with the signs of a robust immune response.
A follow up three and a half years later reported the following:
"Ongoing follow up of the surviving patients from the phase I study of ADXS11-001 for the treatment of cervix cancer failures conducted by Advaxis, Inc., (OTCBB: ADXS), the live, attenuated Listeria monocytogenes (Listeria) immunotherapy company, has shown that two (2) of fifteen (15) treated patients or 13.3% are still alive 1,248 and 1,128 days after receiving their initial dose. This result of 13.3% of treated patients alive at over three (3) years, post dosing, exceeds the-established historical finding that the one-year survival for these patients is approximately 5% irrespective of the treatment regimen administered. The one-year survival in the Advaxis trial was 53%. Similarly, once progression begins following a failure of prior cytotoxic treatment the median survival for these patients is 180 days as compared with 347 days in the Advaxis study."
This points to remarkable efficacy, especially in consideration of the fact that once cytotoxic treatment fails to treat late stage cervical cancer, palliative care is typically the only remaining option. Moreover, the two patients that were still alive over three years since post treatment indicates ADXS-HPV's potential in preventing relapse, perhaps hinting at the immune system being trained to recognize cancerous cells.
This trend appears to have carried through to the second trial being conducted in India.
Results from Recent Study Represent Significant Advances
Following its first study, Advaxis began multiple Phase II studies, one for Cervical Intraepithelial Neoplasia (CIN 2+), another for persistent or recurrent cervical cancer, and a trial in India for ADXS/cisplatin treatment for recurrent Cervical cancer. 12-month data from the trial in India was presented at the 2013 American Society of Clinical Oncology (ASCO) and didn't fail expectations.
The study examined ADXS-HPV's effects on recurrent cervical cancer in 110 patients that were previously treated with chemotherapy and/or radiotherapy with subsequent cancer progression. The patients were split into two groups of 54 (combo) and 56 (mono) patients receiving either ADXS-HPV alone or in combination with chemotherapeutic cisplatin. Dosing regimen was as follows.
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(All images are from the hyperlink in the trial in India above)
Instead of rehashing data, easily visible from the link provided above, I'll provide the main takeaways. The side effect profile was nothing short of incredible, demonstrated by the table below which compares serious adverse event percentage to other clinical tested therapeutics.
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As a monotherapy, ADXS-HPV reported only two grade 3 adverse events, which is incredibly mild compared to platinum based chemotherapy or radiotherapy. The monotherapy arm of the trial consisted of only 3 IV infusions 4 weeks apart, with each dose followed by antibiotic 3 days post-dosing. This implies that the efficacy of ADXS-HPV could be boosted significantly with more frequent treatment cycles. Despite the minimal amount of treatment, Advaxis reported the following conclusion:
-36% (39/110) of patients are alive at 12 months; 22% (16/73) of patients are alive at 18 months-Combination with cisplatin in this trial did not improve survival or tumor response-Prior therapy had no effect on survival or tumor response between treatment groups-Survival and tumor response are not attributable to the inclusion of patients with less aggressive disease-Tumor Responses are Equivalent in Both Treatment Groups-11% objective response rate including CRs and PRs, disease control rate of 41% for =3 months-Average duration of responses ~10.5 months-Tumor response was not affected by prior therapy or aggressiveness of disease-Activity in Patients with Various Different High Risk HPV Strains-A 12-month survival of 36% with an 18-month survival of 22% (preliminary), and an 11% objective response rate with an average 10.5 month duration after 1 cycle of treatment is consistent with an active agent in recurrent cervical cancer.Given that the patient population relapsed on cytotoxic therapeutics, efficacy was quite positive for ADXS-HPV given that median survival is typically under 6 months for said population. I recently had the opportunity to speak to management, and CEO Dan O'Connor confirmed that final 18-month survival and safety data would be presented at the upcoming Society for Immunotherapy of Cancer (SITC) event this November.
4) If Prior Results Continue to Hold, ADXS-HPV Should be Approved
In my opinion current trends in treatment for cervical cancer, let alone most HPV-caused cancers, favor the future approval of ADXS-HPV both as a monotherapy and possible combination therapies. Of course this is contingent on the continued demonstration of efficacy and safety, and future presentations this year should clarify the outlook of the immunotherapeutic.
Orphan Drug Designation for ADXS-HPV's Anal Cancer Indication
As mentioned earlier, Advaxis intends to target multiple indications with its ADXS-HPV immunotherapeutic. In an effort to help jump start pipeline development, in 2013, Advaxis filed for multiple orphan drug designations for ADXS-HPV for cervical cancer, anal, and Head & Neck Cancer. In the past 30 days, the FDA granted Advaxis orphan drug designation to ADXS-HPV for treatment of HPV-associated anal cancer. This bodes positively for the future of ADXS-HPV, the benefits of orphan drug designation are eloquently stated by Joe Springer in his article on IMUC:
"In order to encourage pharmaceutical companies to research and develop drugs for rare conditions, the US passed the Orphan Drug Act in 1983. This law confers grants, tax benefits, and conditional product exclusivity to drugs that target rare conditions - defined as diseases that affect 200,000 or fewer people."
Perhaps the most important benefit that the orphan drug designation offers is FDA flexibility. In 2012, the National Organization for Rare Disorders did a study of every non-cancerous drug granted orphan status, and subsequently approved by the FDA from the time the Orphan Drug Act was enacted until June 30, 2010:
"The intent was to catalogue each of the 135 orphan drugs according to whether its approval had demonstrated any exercise of scientific judgment or flexibility by FDA in reaching its conclusion that the statutory requirement for demonstrating that drug's effectiveness had been met. The study aims to determine, based on an examination of the publicly-available information used to support approval, whether the amount of data presented would have satisfied the conventional requirements for proving the effectiveness of the drug. The examination of 135 orphan drugs found that 90 approvals were based on some exercise of flexibility by FDA. That is, the study supports the FDA assertion that it exercises flexibility when reviewing applications for orphan drugs."
The FDA showed flexibility in a full two-thirds of its non-cancerous orphan drug approvals.
It seems to follow that given the FDA's conferring of orphan drug status to the anal cancer indication, there is the possibility that Advaxis's two other indications might also be conferred orphan drug status as they also meet the <200,000 people category. If granted, this should reflect positively on Advaxis given that the sponsor will be entitled to clinical protocol assistance with the FDA, in addition to federal grants, tax credits, and potential seven-year market exclusivity.
Comparisons
The last approval of a therapeutic for late stage cervical cancer was in 2006. The FDA approved the combination of hycamtin and cisplatin, despite its significant risk profile of anemia, neutropenia, and thrombocytopenia. Hycamtin is marketed by GlaxoSmithKline, and demonstrated median survival of 9.4 months in clinical trials. Based on the desperate need for new therapeutics with improved efficacy and safety profiles, I believe the circumstances favor the approval of ADXS-HPV.
5) Advaxis's Bioengineered Listeria Platform Has Countless Applications
The robustness and strengths of Advaxis's Listeria-based immunotherapy platform lends for multiple applications that will take minimal amounts of cash to continue developing. Success in the approval and subsequent commercialization of ADXS-HPV should allow for strong continued growth of the pipeline for many years to come.
Bioengineered Listeria
Given the large strides in protein and genome sequencing in the past few years with the advent and accelerated adoption of real-time PCR assays and related technologies, the database of potential protein targets is for all intents and purposes, limitless.
During my recent discussion with CEO Dan O'Connor, I asked how long it took to attach target to the LLO protein of the Listeria bacterium. He replied that it took roughly 4 months, a remarkably short period of time to develop a new candidate in the oncology space. The underlying mechanisms of tumors typically revolve around overexpression of certain genes; this gives credibility to the robustness of the platform licensed from the University of Pennsylvania. This is also substantiated by the fact that Advaxis currently has 15 candidates already developed and ready to roll out upon the growth of the company. These include prostate specific antigen and cHER2+, which play integral roles in the development of prostate cancer and breast cancer, respectively.
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(Source: Company Website)
Robust Patent Protection
Advaxis has incredibly robust patent protection. The following is an excerpt from the company's 10-K for the year of 2012, and there may have been more filings and/or issued patents since then:
"We protect our proprietary technology with an extensive portfolio of issued and pending patents. Since 2002, we have maintained, through various agreements, a 20-year exclusive worldwide license and a right to grant sublicenses of Lm-based technology from Penn. As of December 2012, we and Penn have been issued 41 patents and have 34 pending in the U.S. and other countries. Our material patents that cover the use, methods, and compositions of our Lm-LLO immunotherapies for certain constructs including, but not limited to, ADXS-HPV, ADXS-PSA, and ADXS-cHER2, expire at various dates between 2013 and 2024, prior to available patent extensions.
We have also acquired key patents from Penn for the development of preclinical constructs. In 2011, we licensed a patent pertaining to antigen ISG-15 from Penn, which has been investigated as an effective immunological target for the treatment of a number of different cancers in animal models, including ovarian, colon, breast and other cancers. Other licensed patents include Lm-LLO immunotherapies that were found in a number of animal models to have the ability to induce therapeutic Th-1 immune responses, a response that can enhance effectiveness of immunotherapies. We have also been issued patents that protect a new strain of Listeria as an improvement over the strain currently in clinical testing that is more attenuated, more immunogenic and does not contain an antibiotic resistance gene.
Our approach to the intellectual property portfolio is to create significant offensive and defensive patent protection for every immunotherapy and technology platform that we develop. We endeavor to maintain a coherent and aggressive strategic approach to building our patent portfolio with an emphasis in the field of cancer vaccines.
We successfully defended our intellectual property concerning our Lm-based technology by contesting a challenge made by Anza Therapeutics, Inc., which we refer to as Anza, to our patent position in Europe on a claim not available in the U.S. The European Patent Office, which we refer to as the EPO, Board of Appeals in Munich, Germany ruled in favor of the Trustees of Penn and us, Penn's exclusive licensee, and reversed a patent ruling that revoked a technology patent that had resulted from an opposition filed by Anza. The ruling of the EPO Board of Appeals is final and cannot be appealed. The granted claims, the subject matter of which was discovered by Dr. Yvonne Paterson, are directed to the method of preparation and composition of matter of recombinant bacteria expressing tumor antigens for the treatment of patients with cancer. "
With potentially 75 issued and pending patents, I'm sure you'll agree that Advaxis has quite an impressive patent portfolio for an $18 million company. Moreover, the patent battle between Advaxis and Anza, a private spin-off of Cerus Corporation (CERS), indicates the value of Advaxis's IP covering recombinant (bioengineered) bacteria expressing tumor antigens for the treatment of cancer.
7) Advaxis is Significantly Undervalued
Despite the inherent risk of the development stage biotech, the risk reward ratio is asymmetrically skewed towards the high reward given the incredibly low valuation for Advaxis.
Risks
Clinical Trial Risk- Although we have discussed the scientific platform and the efficacy and safety profile of ADXS-HPV at length, and despite the designation of orphan drug status for the anal cancer indication, there is always the risk that the FDA will ultimately decide not to approve ADXS-HPV.
Commercialization Risk- Poor commercialization is always a risk for any new therapeutic. However, given the current landscape of cervical cancer's standard of care, which is dominantly chemotherapeutics and radiotherapies, we believe there will be a meaningful amount of demand given ADXS-HPV's so-far displayed side effect profile.
Financial Risk- Advaxis currently maintains the same burn rate as ImmunoCellular: $1 million a month. Although this may raise some red flags, this is addressed by financial commitments Advaxis has available, namely the equity financing from Magna Group, LLC. Although currently untapped, Advaxis has a piggy bank of $11.4 million ($10 million from Magna + $1.4 million from outside investors) which if necessary should fund the company through multiple inflection points and into a Phase III trial for ADXS-HPV. Of course, if the company appreciates from current level, Advaxis will be able to seek less dilutive financing (relatively speaking) from public markets. But the risk comes from the reverse, if Advaxis is unable to deliver on its assets, this could trigger the death spiral for the biotech company.
Strong Management and Board of Directors
The majority of Advaxis's management and board have demonstrated track records in developing and selling multi-million to multi-billion dollar companies.
Newly appointed CEO and President, Dan O'Connor has done this two times. When he began at PharmaNet, it was still in start-up status with 70 employees, over his time at the company, he grew it to over 1,600 employees by the time he left to join ImClone in 2003. At ImClone, he eventually became Senior Vice President and General Counsel, facilitating the sale of the company to Eli Lilly in 2008 for $6.5 Billion.
Chief Scientific Officer, Robert Petit, has a decorated history- He led programs in discovery, translational development and intellectual property development and the design of clinical evaluation programs from Phase I to IV. He joined Advaxis from Bristol-Myers Squibb, where he was the U.S. Medical Strategy Lead for the Ipilimumab (an immunotherapeutic) program, and director of both medical strategy for new oncology products and global clinical research.
The board of directors boasts an equally impressive history, which I recommend you read here for further insight into the company's backbone.
Scope
Provided ADXS-HPV is able to demonstrate clinical efficacy for Cervical Cancer, then Advaxis should then be able to also shortly address the sizeable anal cancer and head and neck cancer markets. In addition to other potential cancer markets.
Pricing
Based on the current landscape of treatment for cervical cancer, I believe that ADXS-HPV will be able to command a large premium.
The global cervical cancer market is expected to grow to $4.1 billion by 2016 at a CAGR of 11.9% from 2009 to 2016. This figure fails to include drugs, because there is only one FDA approved drug (Hycamtin) for late stage cervical cancer. This highlights the immense opportunity in bringing a drug to an unaddressed market.
The large majority of immunotherapeutics (mAbs and ADCs) are able to command large annual price tags for marginal benefits in survival, discounting safety.
This also fails to account for the large growth power of orphan drugs. Consider the incredible growth of Sarepta (SRPT) for its leading candidate Eteplirsen, although pricing has yet to be discussed in addition to not yet being commercialized, Sarepta has grown to a $1.25 billion company on the sole basis of its orphan drug alone.
Revenue
Globally, cervical cancer is the second most common and fifth deadliest cancer in women. It is estimated that there are over 500,000 cases of cervical cancers with roughly 230,000 deaths a year. Within the US, the addressable market is roughly 12,000 new cases yearly, with 5,000 deaths a year. As mentioned above, there is only one drug approved for cervical cancer, that being hycamtin+cisplatin for late stage cervical cancer, this highlights an opportunity for large premium upon reaching the market, and should be able to command a price in the $100,000-150,000 ballpark. In conjunction with the number of cervical cancer patients in the US, this results in a market opportunity of anywhere between $1.2billion to $1.8 billion. If ADXS-HPV is able to continue demonstrating its extremely mild side effect profile relative to the standard options, patients with cervical cancer should be choosing ADXS-HPV over any other options.
Additionally, FDA approval in the US should translate quite profitably overseas, where the cervical cancer market is considerably larger. This should allow sales to quickly ramp up with the addition of a partnership with a global distributor down the line.
Cost of Goods Sold
This is where Advaxis's bacterium based platform really takes the cake. Unlike mAbs or autologous vaccines, which both take time and a sizeable amount of money to create, the cost of goods sold for Advaxis's immunotherapies should be dirt-cheap. And I mean dirt-cheap. Given Listeria's ability to thrive in almost any condition, once the Listeria is bioengineered to express a certain antigen, it can then be placed in a growth medium- where it will grow itself. This results in an essentially free factory, limited only by growth medium, which is very cheap. The only tangible costs would be the attenuation and the packaging of the grown Listeria bacterium, which should cost less than $1,000 per batch of treatment. Coupled with the price point discussed above, this should result in remarkably high margins in the immunotherapy space.
Valuation
There are multiple ways to value Advaxis, but let's first consider its valuation relative to its immunotherapy competitors. I believe the best comparison would be ImmunoCellular.
IMUC is currently valued at $152 million, where its pipeline consists of 1 Phase II candidate, 1 Phase I candidate, and a preclinical candidate. IMUC is predominantly focused on glioblastoma, which is a sizeable market (roughly twice as large as cervical cancer), but one that is currently addressable by a number of competing drugs.
Advaxis also has one Phase II asset, in addition to two Phase I candidates (of which anal cancer has orphan drug designation), and a preclinical program. Advaxis will most likely not face much competition in the cervical cancer market, given that its competition is chemotherapy.
Both companies have shown remarkable efficacy and safety data on their respective trials, however why is one valued 8.5 times more than the other? Even discounting the cash from both companies, this is a gross disparity and serves to highlight the asymmetric opportunity in Advaxis. Almost any other biotech company I can think of with an immunotherapeutic pipeline as developed as Advaxis would easily be trading well above $100 million.
Without a doubt, Advaxis has risks, the same risks as most any other company in healthcare, but its current valuation highlights significant upside that far and away overshadows the risks. Commercialization of ADXS-HPV could open a large door for the company's bacterium platform, allowing it to address multiple forms of cancers in a short period of time. Continued positive data from future catalysts (to be listed in a moment) should easily bring Advaxis into the forefront of the immunotherapeutic space.
Catalysts
The following is a list of catalysts I have compiled to show inflection points to expect going forward.
Possible orphan drug designations for the remaining indications of HPV-caused cervical cancer and head and neck cancerNovember 8-10 SITC presentation of ADXS-HPV 18-month survival data from the trial in India.Report of Phase II data in the High-Dose cervical intraepithelial Neoplasia dataReport of the initial phase I/II prostate cancer trial dataIND filing for ADXS-PSA for prostate cancerPotential uplisting to NASDAQ or NYSE based on future growthDisclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)
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