Three Therapeutic Approaches That Are Worthy of Your Due Diligence

Sherrie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

As a recently retired R&D specialist for both developmental biotech and Big Pharma, I have seen a lot of bright developmental companies over the last 20 years. I always found those with a new therapeutic approach as being the most attractive, many of which flew under-the-radar. In this article, I am looking at three such companies that are worthy of your due diligence.

An up-and-coming approach that targets Cancer

After trading flat for the first four months of 2012, NewLink Genetics (NASDAQ: NLNK) has traded higher by 75% in the last two months. Now, the company has a market capitalization of $500 million – but it could be worth so much more.

NewLink has numerous late-stage clinical programs, all based on its HyperAcute immunotherapy platform. Basically, NewLink uses human cancer cells to target specific tumors via stimulating the immune system. This platform is being tested on four different types of cancers: Pancreas, Melanoma, Prostate, and non-small cell lung cancer,

HyperAcute Pancreas is being tested in a Phase 3 trial of 722 patients. In a previous Phase 2 study of 69 patients, the data showed overall one-year survival of 86%. This compares favorably to the 20% of patients who survive one-year with standard-of-care treatment. Pancreatic cancer is a condition that progresses rapidly and is almost certainly fatal. Yet, during this same Phase 2 study, 39% of patients survived three years and 62% saw no progression in the first year, which is unheard of with this disease.

If NewLink can maintain these results in its Phase 3 trial, or even stay remotely close, then HyperAcute Pancreas will be the preferred treatment for those with pancreatic cancer. The reason: There is nothing on the market that is as good or even close in both increasing survival and slowing the progression of the disease. The sales expectations for this one indication alone is $600-$850 million annually; an estimate that I find highly attainable. 

So far, all data for both the company's melanoma and prostate HyperAcute programs have been just as good as pancreas. This further validates the program as a whole, due to the same approach being used to target each cancer. If all three are successful, and lead to an eventual approval, the combined peak sales are estimated to be north of $2 billion. With a market cap of $500 million, this insinuates significant upside potential.

Changing the face of chemotherapy

Verastem (NASDAQ: VSTM) is made up of a team of who’s who scientists, board members, and executives from prestigious universities and Big Pharma companies around. The company is developing a therapeutic approach to use next generation chemotherapeutics to kill cancer stem cells. If the company is successful, a new approach to chemotherapy will be created, one that also attacks cancer recurrence; a large unmet medical need in cancer.

An investment in Verastem might take a while to appreciate. The company’s most advanced study is VS-6063, which is being used to treat advanced solid tumors. Currently, it is being tested on both mesothelioma and ovarian cancer. According to the company, a regulatory filing could occur as early as early 2015 for this product.

VS-6063 is just the beginning of the company’s pipeline. It then has VS-4718 to target cancer stem cells and a small molecule inhibitor VS-5584. With the chemotherapy market being $15 billion annually, and there being no form to prevent disease recurrence, it seems likely that Verastem's next generation chemotherapy could be very successful in this large market; although no peak sales have been established.

As a result, with Verastem's programs being early stage, I would watch the company closely over the next few years.

Attacking HCV from all angles

The final company is worth $300 million, Enanta Pharmaceuticals (NASDAQ: ENTA). Here’s a company with two Phase 3 and two Phase 2 programs in the treatment of HCV (Hepatitis C Virus) as well as five other products in its pipeline. Not to mention, the company already has partnerships with the likes of AbbVie and Novartis.

So what makes Enanta’s approach as innovative as NewLink’s multi-cancer and Verastem’s second-gen chemotherapy approach? Well, Enanta has specifically developed its late-stage products to be used in conjunction with other HCV drugs. Already, Enanta is targeting the disease from four different approaches, meaning that each of its drugs will build off the other, thus creating larger sales potential.

Over the next 10 years, the HCV market could become a $20 billion industry. Since Enanta’s drugs work in conjunction with both other drugs and its own products, the company looks poised to control a piece of this market; although peak sales are yet to be determined.

Conclusion

I like each of these companies and their therapeutic approaches. If I were still working in the space, these are the exact type of companies that I would recommend Pfizer or Bristol-Myers buy/partner – but for retail investors – I think it depends on your time horizon.

If you seek short-term gains, than NewLink is the most advanced. If you seek the largest long-term gains, then I think Verastem’s approach is most striking, due to chemotherapy being so widely used. If you’re looking for security, then I’d go with Enanta and the protection of having large partners. When it’s all said and done, I think all are great, and will be market leaders in the future.


Sherrie Stone owns shares of NewLink Genetics, Verastem. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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